Government Accepts Most of Council's Recommendations on IPC Standards20 May 2005
The Council on Governance of Institutions of a Public Character (IPCs) has submitted 19 recommendations to raise the minimum standards of governance, fund-raising practices and financial reporting for IPCs. The Second Minister for Finance, Mr Raymond Lim, in his reply to the Chairman of the Council, Ms Lim Soo Hoon, accepted 15 of the recommendations in full, another three with modification, and the remaining for adoption as best practice rather than mandatory observance. This was done in consultation with the Ministry of Community Development, Youth and Sports, taking into account feedback received by the Council.
2. The recommendations accepted for mandatory observance will be incorporated into the Income Tax (Central Fund Administrators) Regulations and the Income Tax (Approved IPCs) Regulations. They will take effect from the financial period starting on or after 1 January 2007. This will give IPCs sufficient lead time to adapt their systems to the new requirements.
Key recommendations accepted for mandatory observance
3. Disclosure of information during fund-raising. IPCs shall disclose, when making a public fund-raising appeal, the name of their organisation and the intended use of funds raised. This will facilitate informed giving by donors. The Council also recommended disclosure of the IPC's legal status (e.g. society or company limited by guarantee), any affiliations to umbrella organisations or professional bodies, the cause and/or beneficiaries, and any use of commercial third party fund-raisers. The Government has decided not to require such disclosure as the legal status of the IPC is not relevant to donation decisions, disclosure of affiliations to umbrella organisations or professional bodies should be left to the IPCs as it is in their interest to do so, and all IPCs today are prohibited from spending more than 30 cents to raise each dollar, regardless of whether a commercial third party fund-raiser is used. The intended use of funds will be defined broadly to include the IPC's cause and/or beneficiaries.
4. Disclosure of information after fund-raising. IPCs shall disclose the total funds raised, fund-raising expenses incurred and planned use of funds raised, for each public fund-raising exercise which raises $1 million or more. The disclosure is to be done online at the end of the financial year. This regulation will ensure proper accountability for major fund-raising exercises. The information need not be audited separately from the consolidated financial statements for the year. The Council recommended a detailed breakdown of funds raised and expenses incurred for each major exercise. It also recommended a similar breakdown of the aggregate funds raised from and fund-raising expenses incurred on all fund-raising exercises held in the year for large IPCs with total annual income of $5 million or more and which solicit donations and/or receive unsolicited donations from more than 50 donors. The Government has decided not to require a detailed breakdown in both cases, as all IPCs today are required to post their key consolidated financial information online at the end of each year, with detailed breakdown (see Annex A for the existing disclosure template).
5. Commercial third party fund-raisers. All donations shall be made directly to IPCs; IPCs shall pay commissions to the commercial third party fund-raisers separately.
6. Financial reporting standards. Large IPCs with total annual income of $10 million or more shall comply with the Financial Reporting Standards (FRS). The Council recommended that all IPCs with total annual income of $5 million or more and which solicit donations and/or receive unsolicited donations from more than 50 donors be required to comply with the FRS. The Government has decided to raise the threshold to $10 million, to minimise compliance costs for the smaller IPCs. Instead, the Government will encourage the smaller IPCs to adopt the FRS as a best practice. The Government has also decided not to adopt the 50-donor threshold; all IPCs with total annual income of $10 million or more should comply with the FRS, regardless of how many donors they have. The Council also recommended that large IPCs comply with the Recommended Accounting Practice (RAP) 6 for Charities issued by the Institute of Certified Public Accountants of Singapore (ICPAS). The Government has decided to accept the RAP6 only as a best practice, to minimise compliance costs for IPCs.
7. Related party transactions. IPCs shall disclose their related party transactions (as defined in the FRS) in their audited notes to accounts. This will encourage IPCs to exercise caution when entering into related party transactions.
8. Central Fund Administrators (CFAs). CFAs shall grant IPC status to new applicants for no more than two years. This will allow CFAs to review the progress of the IPCs after their start-up. Subsequent renewal of IPC status shall be from
MINISTRY OF FINANCE