Smaller charities to benefit under new accounting rules
Monday August 4 2008
By Hoe Yeen Nie, Channel NewsAsia
SINGAPORE: Singapore's accounting body for companies and charities has drawn up new guidelines to bring all charities, co-operatives and societies here under one common set of accounting benchmarks for the first time.
The changes are aimed at improving financial reporting standards in the charity sector.
The draft proposals by the Accounting Standards Council (ASC) prescribe a more stringent control over large organisations and those that do public fundraising, while relieving the cost burden on smaller charities which do not enjoy tax-exempt status on donations given to them.
Currently, organisations that receive over S$250,000 a year need to be audited by an external auditor. But under the proposed changes, only those that receive over S$500,000 annually have to comply by that rule.
This means some 200 small charities will not have to be externally audited, but they will still need to have their books checked by an independent qualified accountant.
Engaging an external auditor could cost a few hundred to a few thousand dollars a year, and that is not a cost all organisations can afford.
Given the amount of time and resources involved in an audit, there is also the issue of whether they are necessary, especially if the charities only see a few transactions a year.
All in, observers noted that there is a fairly large amount of flexibility built into the new guidelines, which is what the ASC wants to achieve.
Those in the charities sector said the move will pave the way for greater professionalism in the long run.
Professor Ho Yew Kee, chairman of the audit committee, Singapore Anti-Tuberculosis Association, said: "It allows the small charities to see what they need to do and report when they grow into larger charities.
"For the large charities, they are told very clearly what they need to do in order to satisfy the legal requirements. There is no longer a guessing game as to what is enough."
It is also recommended that the annual income or expenditure – whichever is higher – of a charity or an Institution of a Public Character (IPC) be taken into account when defining the organisation's size so as to better reflect the scale of its operations.
The guidelines also specify the definition of 'income' and 'expenditure', including only those gains and losses that have been realised.
The proposals also lay out certain reporting formats which the organisations have to adopt, while mandating that all charities and IPCs have to prepare their accounts using the accrual basis.
Under the proposed rules, charities will have to disclose information such as how much they spend organising fundraisers.
With a common set of benchmarks, members of the public can now compare the different charities before deciding which organisation they want to donate to.
The public can give feedback on these new proposals online from Monday till September 7 at www.asc.gov.sg, www.charities.gov.sg and www.reach.gov.sg.