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SINGAPORE: Those keeping the books for charities may play by rules that are different from their corporate counterparts, when the new Accounting Standards Council (ASC) gets up and running in September.
These can range from a smaller list of accounting criteria for charities to follow, depending on the nature of their set-up, to exemptions from disclosing the market value of their investments, said some industry observers.
The ASC will replace the five-year-old Council on Corporate Disclosure and Governance, to be dissolved on Sept 1. Second Finance Minister Tharman Shanmugaratnam said last month that the new entity would, among other things, "enhance the credibility of financial reporting".
It will "plug the gap and look into issuing accounting standards that are more applicable and appropriate for charities and co-operative societies", a Ministry of Finance spokesperson told TODAY.
About 1,900 registered charities and Institutions of a Public Character (IPCs), as well as 90 registered co-operatives, are likely to be affected by such possible rule changes.
A spate of woes in the past two years had much to do with financial irregularities and lapses. They include the National Kidney Foundation (NKF), Kidney Fund Organisation, Children's Leukaemia Foundation, Singapore Association of the Visually Handicapped, Youth Challenge and the Singapore Logistics Multipurpose Co-operative.
Last week, $3.88 million was reportedly withdrawn from the bank accounts of the St John's Home for Elderly Persons, allegedly by its superintendent who has gone missing.
Dr Ernest Kan, vice-president of the Institute of Certified Public Accountants of Singapore, believes that having separate accounting standards for non-corporate entities will "definitely improve clarity" and "mitigate the impact of recent scandals in the charity sector".
Associate Professor Mak Yuen Teen, who heads the National University of Singapore's Corporate Governance and Financial Reporting Centre, noted that smaller charities — most of which run on tight budgets — tend to be registered as a society.
"This council (ASC) may impose a limited set of rules for these organisations to follow … so it'll be easier for them to comply with. My guess is that charities registered as a company, like the NKF, will still have to follow accounting standards for companies."
Dr Vivian Balakrishnan, Minister for Community Development, Youth and Sports, had also floated the idea of making the financial year for charities different from that for the commercial sector, thus relieving the workload of auditors during busy periods.
When contacted, NKF chairman and former president of the National Council of Social Service, Mr Gerard Ee, offered another suggestion: To exempt charities from marking their investments to the market in their yearly annual reports.
"Even if charities buy investments like bonds, they generally hold it to maturity and get back the principal sum. They don't invest for speculation; they buy for savings and better returns," he said.
"When the market is having a downturn, you mark the market and have to take out an accounting loss. It causes alarm unnecessarily. Donors may not understand fully and think the charity has lost money."
The ASC will comprise key regulators and senior accounting professionals, the Finance Ministry spokesperson said. More details will be announced later.
- TODAY/so
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