Accountability of Public and Charity Organisations

The Barracuda SG

Who are they accoutable to ? Are public allow to exanine their accounts and find out how our money has been spent ?

skyfoo SG

i dunno but i know some organisation pay the ‘volunteers’ to sell tickets, often paid by . i heard one organisation let the ‘volunteers’ have 20 of the amount sold. ‘volunteers’ = not refering to the real volunteers

Qitai SG

Good Question. Rolling Eyes

paperchicken SG

Who has the answer ? Rolling Eyes

[ Neo ] SG

Well... If memory serves me correct, charity organizations have to spent out a percentage of their collected donation or fund raising proceeds in a Financial Year. Think this percentage is 50% or something.

For the remainant proceed collected in say, FY2003 and not utilized in charity related areas, there is also a limited timeframe for these sums to be used in the following FYs.

Failure of fund utilization on the stipulated percentage amount for under both current collected proceeds and carried forward balances would then render an organization on the loss of their charitable organization status. Any remaining amounts will then be subjected to tax.

I'm not too sure if public auditors are mandatory. But one thing for sure, the board of directors and the Internal Audit Committee are ususally the frontline check for guard against discrepencies.

It is however important to note that the term 'public organizations' would also be subjected to differences in procedures, dependent on whether an organization is classified under business or associate organization.

At the most extreme end of the scenario, the Commercial Affairs Dept (CAD) or CPIB could also get involved in the event of suspected fraud cases or mismanagement complaints.

The above are based from many donkey years ago lectures. If there are any mistakes/inaccuracy, someone please kindly point them out. Thanks.

skyfoo SG

i dunno but hope these will help:
http://www.iras.gov.sg/charities/char_faq.htm
http://www.ncss.org.sg/ncss/social_services/vwo.html

The Barracuda SG

But how abt they way money is raised and how it is spent ? I think the public has the right to know since these organisations runs on public funds.

[ Neo ] SG

Ok. Let me just break up the series of questions that you have just asked.

First, concerning the way monies are raised.

All public donation activities have to acquire a CID permit before a fund raising activity is legal. In the process, a proposal detailing with the required information would be reviewed. Hence, there is at least one check on the manner in which fund raising activities can be monitored.

Your second question concerns how the funds are spent. The answer for this will be the standard management answer - 'It Depends'.

Different charitable organizations operate under different circumstances, size, and with different financial backing, resource avalibility as well as level for a start. Their target receipients and the type of attention and care required will also vary very significantly, and a treatment/welfare offered by one charitable organization may also differ widely from another charitable organization focusing on another segment of the population. Most importantly, the vision and direction from the steering Directors and Management team will play the ultimate crucial factor in determining how best limited resources should be spent.

The complexity of actual operations vs environmental vs resource and organizational aims, direction and manner of achieving is simply too big to be governed by a rigid set of protocols or doctrines.

However, this will result in exploitable loopholes especially for organizations with weak or inadequet financial controls - which is why the Board of Directors and the Internal Audit Committee would have come into the picture again playing a very major role in a somewhat self-defending sequence should we ever have a case of mismanagement taking place.

I share the view that the general public has and should be entitled to their rights to have a transparent understanding on the areas and ways that their donated monies have or would be spent out later.

A member of the public has in fact written in to the Straits Times with the suggestion that to best balance between a charitable organization's concern with the cost of printing out thick volume of audited annual reports against the rights of doners to understand where and how their monies have been utilized, an online version of the finacial statements should be posted online in the organization website for public scrutiny.

Sad to say, we have seen very little number, or prehaps even zero figures from the charitable organizations to take up this call.

If the general voice from society intends to urge the government to move away from a draconian style of commanding and regulatory dictations, then I express my diappointment in their lack of proactiveness in their actions to increase public awareness on fund utilization which can be achieved both effectively and efficiently throught the adoption of the Straits Times contributor's suggestion.

Maybe we should even go one step further, and that is to have a senior journalist, editor or executive personnel from a news reporting media / organization to sit in on the Board of Directors or Executive Committee as well.

This way, at least we would be able to have better assurance on the level of transparency through the presence of a supposed ethical and professional tasked with the role of a knowledge and news disseminating figure.

The Barracuda SG

New checks proposed for charities

Stricter rules for greater transparency demand more details of income and expenses and salaries of top three execs
By Theresa Tan

DONORS can rest assured that the money they give to charities and other non-profit groups will be well used and accounted for under stricter rules proposed to keep charities in check.

A council set up to look into the governance of Institutions of a Public Character (IPCs) yesterday released its recommendations on what these groups should observe in their administration, fund-raising practices and financial management.

It wants checks at every level of the fund-raising process, especially for large-scale fund-raisers that bring in $1 million or more.

It also wants IPCs to make more of their finances transparent, including disclosing what their top three executives earn in 'bands', and their ratio of reserves to annual expenses.

The 10-member council, headed by Ms Lim Soo Hoon, permanent secretary of the Ministry of Community Development, Youth and Sports (MCYS), is now seeking public feedback on its proposals, which it hopes to incorporate into the Income Tax Act.

There are over 800 organisations here with IPC status, which allows them to receive tax-deductible donations. They range from small ones such as The Breadline Group to big organisations like the Renci Hospital & Medicare Centre.

Last year, IPCs raised $512 million, up from $382 million in 2002.

Charities hit the headlines this year when questions were raised about the National Kidney Foundation's (NKF) reserves and the Independent Society of the Blind's fund-raising practices.

Many of the proposed new rules are geared at preserving public confidence and encouraging transparency in the fund-raising process.

The council wants more information given to the public when donations are being solicited, including the intended use of funds and the use of third party fund-raisers.

After each fund-raising event, all IPCs will be required to update their donors on the amounts raised, the expenses incurred and how the money will be used.

It even provided a template for the disclosure of fund-raising donations, sponsorships and expenses so that the 'fund-raising efficiency' of the IPC is made clear.

One immediate result of the council's recommendations to ensure transparency is more book-keeping, auditing and public updating work for IPCs.

They have to make available online an annual report containing its balance sheet as well as corporate governance report stating whether they had complied with the 'good practices in governance and fund-raising'.

The council is hoping that a three-tier level of compliance would ease the burden on small groups, while imposing greater accountability on the 10 per cent of IPCs here which rake in $5 million or more a year.

Small IPCs, for example, may prepare their accounts on a cash basis while medium and large IPCs should use existing Financial Reporting Standards for companies as a basis.

Large IPCs also have 'enhanced' good practices to follow, such as recruitment and staffing guidelines.

The council also addressed the roles of the 12 central bodies, such as the Health and Education ministries and the National Council of Social Service, which accord groups in their sector IPC status.

They should review new IPCs after two years, it suggested, while those which fall short of standards should have one year to buck up or have their IPC status publicly revoked.

Mr John Tan, of Children-At-Risk Empowerment, is all for greater transparency to increase professionalism and encourage informed giving.

But he baulked at putting salary information online.

Said Mr Tan: 'Would you like to tell the whole world your salary? To increase the quality of your services, you need to hire quality people, who don't come cheap.

'But we will put up our salaries as recommended anyway. If you don't do it, this will raise doubts.'

The Barracuda SG

TRANSPARENT FUND-RAISING

We'll stand up to scrutiny, say charities
They welcome disclosure of key information recommended by IPC council last week, but some worry it could be burdensome

By Theresa Tan and Vivi Zainol

CHARITIES and other non-profit organisations say they are confident of standing up to the greater scrutiny that is likely to be brought about by a slew of recommendations made by a national panel of experts last week.

The mandatory recommendations of the Council on Governance of Institutions of a Public Character (IPCs) call for greater disclosure of 'key information' during the fund-raising process to boost transparency and accountability in the growing non-profit sector.

This includes giving donors information, such as where the money is going, an estimate of the fund-raising expenditure, whether they are using third-party fund-raisers, and how much of every dollar raised will go to these third-party fund-raisers when they ask for donations.

And within six months of each fund-raising event, IPCs will be required to update their donors on the amounts raised, expenses incurred, the intended use of the donations and planned use of excess funds, if any.

Charities contacted by The Straits Times were all for the measures from the 10-member council, which was appointed by the Finance Minister in January.

The executive officer of the Society for the Prevention of Cruelty to Animals (SPCA), Ms Deirdre Moss, for example, said she was all for transparency. 'The bottom line is that transparency can never work against you,' she said.

As an example, Ms Moss said that during the SPCA's recent Flag Day, she stated the items needed for the event on its website and found sponsors for items such as bottled water and tentage.

The Renci Hospital and Medicare Centre, meanwhile, said it fully endorses the checks and measures proposed as they are all 'practical and necessary'.

Some, like the Singapore Red Cross Society, are ready to comply sooner rather than later.

It already has such information at hand and complying with the recommendations is mainly a matter of going public with what it already has for 'internal purposes', said a spokesman.

The Singapore Children's Society also said it is ready to meet most, if not all, of the council's recommendations.

One concern raised is that the recommendations may result in an extra administrative burden.

The National Kidney Foundation's (NKF) deputy director of communications, Ms Michelle Ang, said: 'At first glance, the recommendations will increase administration costs for IPCs.'

The NKF said it is looking into the recommendations and will provide feedback to the council in due course.

Action for Aids, however, asked why such recommendations were necessary.

Saying that it was already accountable to the National Council of Social Service and the Inland Revenue Authority of Singapore, executive director Benedict Jacob-Thambiah said: 'Don't let the leash around charities now become a noose.

'The feeling I get is that we are not trusted.'

Some others which were contacted said they had yet to digest the recommendations and declined comment.

Donors, meanwhile, cheered the move.

Many say they want more information before parting with their money, especially with so many fund-raising events going on now.

Said undergraduate Cindy Tan, 20: 'With all the news about fund-raising practices recently, I am beginning to wonder if our donations are put to good use.

'At present, I have a vague idea how my donations are used. It will be good to know exactly how they are spent.'

The council is now seeking public feedback on the recommendations. Those interested in giving their views can do so at www.feedback.gov.sg until Oct 22.

The mandatory recommendations which are accepted by the Government will be made compulsory for all IPCs later in the year.

These mandatory recommendations will be teamed with a voluntary code of governance for IPCs, which will help them put strong internal systems in place.

goh meng seng SG

Dear Neo,

A slight correction, the percentage that the organization needs to spend is 80%, not 50%.

This rule is setup to prevent individual funds of being utilized as a way for companies to evade taxes.

For example, one company could claim that it has put X thousands into one charity funds, run by the company directors. These X thousands are tax deductible.

But instead of utilizing all these funds for charities, most of it has been used in "investment"; they deliberately declare that Y% of the funds are "investment holding" funds, used to invest in business entities to generate more funds for charity. At the same time, the directors of these funds and investments, start to earn director fees, payrolls and such. For every investment made by these funds, there must be directors and payrolls. In the end, this has become some sort like a "tax free piggy banks" for some of the rich people! At the same time, they could "boast" about how charitable they are!

These practices have come to an unacceptable level and all these activities have been put to a stop by this ruling; 80% of the funds must be utilized in charity related activities. No more hanky panky on tax free piggy banks!

Goh Meng Seng

Originally posted by [ Neo ]:
[b]Well... If memory serves me correct, charity organizations have to spent out a percentage of their collected donation or fund raising proceeds in a Financial Year. Think this percentage is 50% or something.

[ Neo ] SG

Hi Goh Meng San, thanks for your correction. Wink

The Barracuda SG

EDITORIAL
Charity and public trust

THE move to make charities more open in their fund-raising and expenditures recognises the fact that charitable giving is a growth industry. Any voluntary public undertaking that can raise $512 million in a year from individuals and companies, which charities collectively did last year, will require fiduciary controls to match so as to preserve donors' confidence in the proper use of goodwill monies raised. Stringent controls must ultimately work to the advantage of charitable organisations. The $512 million raised was remarkable for a year rendered lean by Sars, and an impressive increase over the 2002 total of $382 million. The number of registered charities has also grown to some 800, according to government figures. Quite a few of these are inactive. But the number is still large for a nation that lacks state welfarism, a condition which tends to see a compensating proliferation of charitable social services. The minimal control exercised over Institutions of a Public Character (IPCs), to give charities their statutory name, is no longer adequate. It comes under catch-all income tax regulations, more of a housekeeping nature. Now, proposals up for public consultation call for more extensive disclosure of funds raised and spent on beneficiaries, as well as internal expenditures and controls. Donors can also demand access to fairly sensitive information, such as the role of professional fund-raisers and how much they are paid by IPCs which use their services.

In no way should IPCs demur that some of the changes sought are intrusive. None is more sensitive than the recommendation that the pay of an IPC's three top executives be reported as a matter of public record. The government-sanctioned panel that published its proposals last week would have assessed the public mood as desiring complete disclosure. It asks that annual pay be reported in $50,000 bands after the first $100,000. The tight band is about right; a broader band of, say, $100,000 can disadvantage IPCs on the presumption that the public would be inclined to think that actual pay would fall on the higher rather than the lower end of a band. But disclosure of executive compensation could go further than basic pay, to include the monetary value of any allowances and expenses that may be paid (say, for travel, car, entertainment) as well as performance bonuses, if any. Perks can be generous where pay is modest. These should be reported as a separate item to be of use to donors in understanding responsible spending. One more item that would merit some thinking is the 30 per cent permitted for fund-raising expenditure as a portion of annual total donations and sponsorships received. This has been a longstanding guideline; now it is about to be codified. This newspaper urges that a serious effort be made by IPCs to justify the generous deduction; otherwise, 20-25 per cent would be more reasonable. If lowered, IPCs would be less inclined to use the services of commercial fund-raisers.

Giving to charity is an act of faith. Givers are grateful they are able to help needy people or a worthy cause, and thankful there are benevolent people who take the trouble to organise the fund-raising and disbursements. Faith is no different from confidence that the public trust is not abused. IPCs should be the first to welcome the proposals if they feel that the deep reserves of Singaporeans' compassion have not been plumbed yet. As well, lesser-known charities which do good work could receive a welcome boost once givers have a better comparative idea of how IPCs manage their money and governance.

The Barracuda SG

Focus on charities a good move

I REFER to the articles, 'We'll stand up to scrutiny, say charities' and 'Divided views over salary disclosures for top three executives' (ST, Sept 27). I for one am happy that charities will be made more accountable to the public.

In recent times, local charities, especially the high-profile ones, have put on bigger and more dazzling fund-raising shows. While I do not doubt that their ultimate aim is to help the less fortunate, I do question how much of my donation goes to the intended beneficiaries and how much is used to defray the cost of putting on such shows, among other things.

If an organisation is well-run and has made proper plans, its cause can only be helped when it discloses its books, as doing so provides reassurance to the public that its money is being put to good use. In the long run, it creates a 'brand name' that donors can trust.

A case in point: Many people, myself included, were shocked at the revelation that the National Kidney Foundation had millions in reserves. If NKF had, at the outset, disclosed its reasons for putting away a large sum of money, it might well have avoided the public outcry that ensued.

As for the disclosure of executives' salaries, I do not see the reason for the hang-up. Such disclosures are mandatory for listed companies. No doubt it is a 'sensitive matter', but just as listed companies must be accountable to their shareholders, so, too, should charities be accountable to their donors.

I believe that Singaporeans are mature enough to understand that, to run an organisation well, it is necessary to pay competitive salaries to attract good people.

As long as the remuneration is competitive and not excessive or unreasonable, I don't think most donors would have a problem with that.

I look forward to more transparency among our charities and, with that, more donations to their causes.

YU WOON CHI (MS)

The Barracuda SG

Divided views over salary disclosures for top three executives

CHARITIES might be all for transparency when it comes to administration, fund-raising practices and financial management, but when it comes to disclosing the salaries of their top three executives, it is a different story.

They are split down the middle on the question.

Those who are against the move feel that it is a 'sensitive' matter which infringes on privacy and could cause unhealthy comparisons in the social services sector which, they say, is largely lowly paid.

Said Action for Aids executive director Benedict Jacob-Thambiah: 'It's fine to reveal our pay to the authorities, but why do we need to tell it to any Tom, Dick or Harry?'

Some, like the executive director for the Movement for the Intellectually Disabled of Singapore (Minds), Mr Aaron Ng, felt that this should be made to apply to some, but not all, charities.

He said: 'Many charities are members of the National Council of Social Service and follow its guidelines, even the pay scale it sets... It's more relevant to larger charities which operate differently and may give cause for suspicion.'

Those that have no problem with revealing salaries say there are benefits to doing this. Miss Florence Ng, the director of The Turning Point, a halfway house for women drug addicts, felt the disclosures would encourage people to give the social services sector the help it needs.

Spokesmen for the Society for the Prevention of Cruelty to Animals, the Consumers Association of Singapore and the Singapore Red Cross Society were among those who said they have no problems revealing their top honchos' pay cheque.

Donors like Madam Linda Mohamed, 34, a freelance writer, may have the last word, since charities depend on them for support.

They say that the man in the street has a right to know how much these charities' top executives are taking home.

She said: 'If donors were to see that their dollars go towards causes rather than the pockets of the top executives, they'd be more inclined to give.'

robertteh SG

For years, we have heard people asking for accountability and transparency in governance.

Just set up tasks in doable component processes as posted in "Practical guide to efficiency and productivity" in market place. It can be done. Just do it. Laughing