The Office of the Scottish Charity Regulator ("OSCR") has released the initial findings of its research into its monitoring regime for cross-border charities. The report, titled "Monitoring of Cross Border Charities: An Initial Evaluation", looks at the regime with particular focus on its structure, design and the role of OSCR as regulator.

Under the Charities and Trustee Investment (Scotland) Act 2005 ("the 2005 Act"), OSCR is charged with maintaining a public register of charities in Scotland, as well as facilitating and monitoring charities' compliance with the 2005 Act. All charities operating within Scotland require to register with OSCR – including cross-border charities. Broadly-speaking, cross-border charities are those based in England & Wales, but which are also registered in Scotland, either as a result of provisions of the 2005 Act, or because they have voluntarily chosen to dual register.

After the coming into force of the 2005 Act in early 2006, an initial period of 12 months was agreed between OSCR and the Charities Commission for England & Wales for the duration of which the formal monitoring of cross-border charities would be deferred - allowing time for both regulators to more closely align their respective requirements and reduce regulatory burden. After much planning, the current monitoring regime for cross-border charities was formulated in May 2009.

Under the current regime, cross-border charities are required to complete both an Annual Return and an Information Return each year. The Annual Return requirement includes, amongst other things, submission of the primary financial statements of the charity, including gross annual income.

The Information Return developed for cross-border charities is designed to be equivalent to the Supplementary Monitoring Return that all Scottish charities with an annual income of at least £25,000 are required to complete. The Information Return focuses upon the objectives and activities of cross-border charities specific to their operations in Scotland. This includes the provision, where possible, of separate financial information relating specifically to Scottish operations. If this is not feasible, cross-border charities must only provide the estimated percentage of their activities that relate solely to Scotland.

OSCR's current report on this new regime is based upon the returns of 351 cross-border charities. While this figure represents only 60% of cross-border charities in Scotland, this is largely due to the number of such charities whose return forms are still within their filing period. Indeed, the report notes that less that 8% of cross-border charities failed to submit the required returns - a failure rate broadly proportionate to that of the non-cross-border charities in Scotland.

The OSCR report provides other interesting statistical data. The study notes that, while 65% of cross-border charities are set up as incorporated companies, in comparison, the most prevalent constitutional form of Scottish charities is that of an unincorporated association - making up 55% of all charities in Scotland. This is perhaps not surprising given the general disparity in scale between cross-border charities, of which 60% have been identified as having annual income in excess of £1million, and Scottish charities, approximately two-thirds of which have an annual income of less than £25,000.

Interestingly, of the 11% of cross-border charities that identified risks on their return form specifically relating to their activities in Scotland, many noted the need for cross-border charity trustees to make themselves more familiar with Scottish charity legislation in order to ensure compliance.

In the current climate, we are seeing ever-increasing cross-border activity, largely as a result of charities bidding for contracts in geographical areas they might not previously have been active in. This activity is being driven, at least in part, by actual and looming cuts to grant funding. This activity is very much going both ways, with Scottish charities bidding for work elsewhere in the UK, in addition to charities from outwith Scotland bidding for contracts within Scotland,