Earlier this month the Office of the Scottish Charity Regulator released its review of the operation of arms length external organisations, or charities that are subject to council control or influence.
Although the report was initiated in response to concerns about potential risks to Aleos, it actually has a positive conclusion – namely that this type of charity has a lot to offer the sector, local councils, and the general public.
The issue of a council having sole membership of a charity might appear controversial, as it means the council is effectively in full control of the organisation, and can do things like change the Aleo’s articles of association and appoint and remove trustees through these membership powers.
However, the report reveals a much more nuanced and sophisticated way in which sole membership can be used to protect charitable assets and activities, as well as the public services. The report finds that councils would only consider using their sole member powers as a last resort, to be taken only where the viability or stability of an Aleo was at risk.
The report found that Aleos generally had the appropriate skills on their boards, most of which had appointed a blend of councillors and independent trustees. However, the OSCR reminded councils of the need for robust induction and training processes.
The report also concluded that a developed relationship between Aleo and council can mean that a councillor acting as a trustee can succeed in acting independently of the council, while having an understanding and appreciation of the ultimate public service aims.
The OSCR looked into whether the Aleos only carried out charitable activities. It found that they did, and so highlights the breadth of activities that can support charitable objectives: CCTV, incident rooms and Shopmobility among them. It is clear that Aleos provide a platform to explore a wider range of new activities and ideas than might be carried out by the council alone. Aleos are a good example of charities thinking expansively and entrepreneurially about what activities they can undertake to further their purposes.
The recommendations set out by the OSCR in its report appear to be focused on maintaining and improving the governance standards that would apply to any charity, rather than addressing flaws in the general concept of Aleos or of their governance per se. As such, it would be of interest to all charity trustees, not just the boards and management of Aleos. Those interested in the specific issue of conditions attached to funding could also look at the 2001 guidance Who’s In Charge: Control and Independence in Scottish Charities.
While the OSCR did say it would continue to monitor Aleos – and in the case of one of the 11 featured in the report, had undertaken significant action to return it to good governance – its findings are positive. There are clear messages that these charities are well-run and have appropriate, and in some cases quite smart, approaches to governance in order to provide the important services they undertake. The outlook for current and future Aleo use is bright.
Alan Eccles is a partner at law firm Brodies