After a series of complaints about its work, the charity Eilean Eisdeal has been told by the Office of the Scottish Charity Regulator to set out policies to address conflicts of interest and to make sure it is "perceived as community-led".
The charity organises community development projects on Easdale Island in the Inner Hebrides, which has a permanent population of about 70 people and covers an area of less than 10 hectares.
Eilean Eisdeal carries out regeneration work on the island and renovates community buildings. It is working on the regeneration and repair of the local harbour.
The OSCR opened an inquiry into the charity after receiving a series of complaints about it in November 2009. Its report on the inquiry, published this week, concludes there was "no evidence of serious misconduct" at the charity, but recommends a series of improvements to its governance.
At a meeting in September 2009, says the report, the charity set out new proposals for visitor accommodation that said kitchen facilities should not be included so as to encourage the established bar on the island to be used as the main eating facility.
It says a charity trustee who would benefit privately from this did not declare it as a conflict of interest until February 2010.
Keren Cafferty, chair of the charity, told Third Sector she was the trustee that owned the island's bar and restaurant. "I have apologised for not declaring my conflict of interest at an earlier stage, but the fact is that I declared it as soon as it was time to make a decision on the plans," she said. "Before that, there was only informal chat about the visitor accommodation."
The report says complainants alleged that, by ignoring opposition to the charity’s proposals, Eilean Eisdeal was not acting in the interests of the island community. But the OSCR says the charity provided evidence that it had consulted the local community about proposals to build visitor accommodation, social housing and business premises and that it had revised its plans as a result.
Cafferty said: "We carry out enough community consultations to sink a battleship. The last time we worked on a new development we sent questionnaires to every house on the island asking for their views, and we listened to the responses.
"Of course there is some opposition to development, but this is outweighed by those in favour of it," she said. "That is how democracy works."
Cafferty said she thought the complaints were from a small number of "serial complainers" who objected to a community plan set out by the charity. She said the community plan included proposals to build new social housing and small business units, but there was opposition to this from people who did not want any new development to take place on the island.
The OSCR report says trustees should implement a code of conduct and a register of interests and ensure these are applied consistently.
It also says trustees should "take all reasonable steps to ensure that the charity is perceived as community-led within the community" and "ensure appropriate policies are in place to address disputes and external complaints".
It says: "While we appreciate that in a small community individuals are likely to have overlapping roles and conflicts may perhaps be more likely to arise, trustees should be alert to the damage to public confidence that a conflict of interest may cause."
The report says this is the second time the regulator has opened an inquiry into the charity. It says the first took place in 2005 and "some of the matters reported to OSCR at that time are also features of this inquiry". After the 2005 inquiry, the OSCR provided compliance advice and received assurances from the charity, the report says.