Developing a well-governed and thriving charity sector

1. Mr Deputy Speaker, Sir, allow me to thank Members who have spoken on this Bill for their broad support and comments. Let me now address some of the comments raised.
   

Regulation of fund-raising appeals

2. Members, Mr Louis Ng, Mr Dennis Tan, have raised several points on the scope of the regulation of fund-raising appeals. The amendments that we have proposed in this Bill serve to clarify the definition, not extend its scope.

All fund-raising appeals are regulated

3. All fund-raising appeals, whether online or offline, whether for local or foreign purposes have been and continue to be subject to the Act. The Act also imposes obligations on persons and organisations raising funds or receiving the funds raised.

4.  A person raising funds via an online fund-raising platform for a needy family will contravene the law if the funds raised are not applied to the said cause. A charity that is in the service of providing nursing care for the elderly has an obligation under the law to ensure that any unsolicited donation it receives is applied to the said object. The examples that Mr Louis Ng has raised and the point made by Mr Dennis Tan on small-scale private fund-raising activities, and unsolicited donations are therefore bound by the Act.

Being nimble by scoping requirements through regulations

3. However, we are mindful not to stifle giving while safeguarding public interest. We recognise that fund-raising appeals come in a wide range of scale and complexity, from bake sales to nation-wide campaigns. As explained in my earlier speech, we regulate fund-raising activities through the Charities (Fund-raising Appeals for Local and Foreign Charitable Purposes) Regulations 2012 in a risk-adjusted approach. In practice, we have exempted all appeals for local causes from the requirement to apply for permits. This exemption has also been extended to appeals for donations-in-kind for foreign causes.

4. We are revising our Regulations to keep up with the needs of the charity sector. We intend to exempt small-scale and private fund-raising appeals from certain requirements.  We will review the administrative requirements on fund-raising, including for foreign-causes, an issue that was raised by Mr Ng. This framework of scoping the regulatory requirements through the Regulations allow us to be nimble and responsive to the needs of the sector and the public.

Rationale for 80:20 fund-raising rule

5. Mr Ng referred to the 80:20 rule as a barrier to fund-raising for foreign causes. The 80:20 Rule stipulates that with regard to fundraising for foreign charitable purposes, at least 80% of funds collected by the fund-raiser must go towards charitable purposes in Singapore. This ensures that resources are not collected from the public for overseas causes, at expense of local needs. Mr Dennis Tan also asked for my views on the matter. We have reviewed this and the 80:20 rule will remain for now. I would also like to point out that the Commissioner of Charities can and does, on a case-by-case basis, waive this rule to support, for example, appeals in aid of providing immediate humanitarian and disaster relief.

Regulating online fund-raising

8. Many Members, Mr. Gan Thiam Poh, Mr. Louis Ng, Ms Denise Phua, Mr. Melvin Yong, Ms. Joan Pereira, Ms Tanaletchimi, spoke on the proliferation of online fund-raising appeals and asked how we regulate these appeals. Allow me to explain that the Act is not of extra-territorial application. If the appeal is conducted by an individual residing overseas and it is not targeted at residents in Singapore, the appeal may not be deemed to be carried out in Singapore. Such appeals are not regulated by the Commissioner as we do not have extra-territorial jurisdiction. The same applies to crowdfunding intermediaries.

9. Where a fund-raising appeal falls under our purview, the Commissioner will investigate if contravention of our regulations is suspected. This includes investigating cases of alleged misrepresentation or half-truths that Members spoke about. Members of the public should report suspicious fund-raising appeals to the Commissioner. Where irregularities are found, the Commissioner can stop the appeal and direct a fund-raiser to refund donations collected, a point that Mr Melvin Yong has asked.

Co-regulation of online fund-raising appeals

10. Members have called for greater regulation in the online sphere.

11. We recognise that online platforms bring convenience to donors and have the potential to expand the reach and impact of fund-raising campaigns. Given the ease of conducting online fund-raising appeals, and the speed with which funds are raised, the online channels are proliferating. Coupled with the anonymity of the internet, regulating the online fund-raising sector is a complex and difficult task.

12. Our approach is one of co-regulation, where a safe online giving environment is a shared responsibility. We are collaborating with the sector, specifically the crowdfunding intermediaries. By co-developing a practical and workable Code of Practice, we aim to set an industry standard of good practices that will instill transparency and accountability in the sector. We will create greater awareness and nudge both intermediaries and fund-raisers in the online sphere towards complying with the Code of Practice. The best practices in the Code include conducting due diligence to ensure the legitimacy of appeals, providing up-to date information on funds raised and fees charged, and maintaining proper records of donations received and disbursed. Under the Code, crowdfunding platforms will require fund-raisers to declare their awareness and compliance with key regulatory requirements when using their platforms. This serves to remind fund-raisers of their duties and obligations of providing information that is complete and true, and ensure that funds raised are used only for the declared objectives.

13. While the Code of Practice will not be made mandatory, the Commissioner will lend weight to promote its adoption. The Commissioner will publish the list of compliant platforms and encourage the public to donate through these intermediaries.

Stepping up public education efforts

14. While we put in place regulations and guidelines on the fund-raisers, donors have a part to play in practising safe giving, both in the online and offline spheres. We are stepping up public education efforts to empower the public with the knowledge and skills to better differentiate legitimate appeals from those that are not. We will customise our safe giving guidance for different segments of the population to ensure effective communication. This could range from hardcopy infographics for the elderly, to posts and references on social media.

Ensuring governance, transparency and accountability of charities

15. Members have raised several suggestions on enhancing governance, transparency and accountability of charities. We agree that these attributes are key to gaining the trust of donors. However, we are mindful of the compliance costs that are imposed on charities, a point that Ms Denise Phua has raised. We are therefore constantly weighing the benefits and costs of regulations to be imposed and seeking to strike the right balance that she has talked about.

Risk-adjusted approach for charities and IPCs

16. About 50% of charities in Singapore have annual receipts of less than S$250,000. The majority of our charities conduct their activities responsibly.

17. Given the profile of our charities, we have assessed that an annual reporting requirement is adequate for the sector. This is in response to Mr Gan’s point. Charities are required to submit an annual report containing a review of their activities as well as their financial statements which are published for public access. For IPCs and larger charities, they are subject to more stringent requirements such as audits by a public accountant and disclosure requirements in line with accounting standards. This includes disclosures in the charity’s financial statements on related party transactions as well as explanatory notes on the use of funds.

18. If there is a reason, such as in the case of a charity being investigated, the Commissioner will require more frequent updates on its activities and financials.

Clarifying the reporting requirements for registered charities and exempt charities

19. As part of the review of the Act, the Commissioner also took the opportunity to clarify the regulatory requirements that would apply to registered charities and exempt charities which enjoy tax benefits. In response to Ms Chia Yong Yong’s query, we do have charities which are not successful in their application for registration as they do not meet certain requirements, such as having a purpose that is substantially beneficial to the community in Singapore so there are certain requirements that do not apply to these charities.

Compliance with the Code of Governance

20. In addition to regulatory requirements, the Code of Governance for Charities and IPCs apply. The Code of Governance serves as a best practices guide in key areas of governance and management, and comprises tiered guidelines depending on the status and size of the charity.

21. To accommodate the diversity in governance structures across charities, we believe that the current “Comply or Explain” principle is relevant. Charities’ reasons for non-compliance with the Code will be published. The Commissioner takes into account the reasons for non-compliance with the Code in assessing a charity’s application for IPC status and in selecting charities for review.

Ensuring proper use of funds raised

22. On Members’ concerns about controls on the use of funds raised, points raised by Mr Gan Thiam Poh and Ms Thanaletchimi, charities are currently required to cap their fund-raising expenses in any given year to not more than 30% of total funds raised. The board members of a charity have a fiduciary duty to ensure that the charity is governed and managed responsibly by ensuring that funds are used prudently and in accordance with the intended purposes.

23. Nevertheless, we agree with the Members that more can be done so that stakeholders have greater clarity on how a charity’s funds are used. The Commissioner will be developing a guide to help all charities, big and small, put out key information, both financial and non-financial, in a manner that will help donors and other stakeholders understand the financial position, use of donations and activities of a charity.

Protecting charities, donors and charitable assets

24. Several Members have raised points on the powers and provisions relating to the protection of charities, donors and charitable assets. Ms Chia Yong Yong, Mr Melvin Yong, Ms Joan Pereira, Ms Thanaletchimi, Mr Alex Yam, Ms Denise Phua have raised. In proposing amendments to the Act, due consideration has been given to ensure that the powers given to the Commissioner are fair, reasonable and essential with sufficient safeguards in place.

Checks and balance in the Commissioner’s powers

25. The Bill proposes to allow the Commissioner to extend the suspension of persons from their positions in a charity, and suspend improper fund-raising appeals. The total period of such suspensions, including any extensions of the suspensions, are proposed to be capped at 24 months. Ms Chia has asked whether such suspensions should be extended to 24 months in the first instance; while Mr. Yong is concerned with the potential disruption to the charity during the suspension.

26. We have assessed the proposed increase from 12 months to 24 months to be fair and reasonable. It should be noted that when the Commissioner orders a charity to suspend an improper fund-raising appeal, the suspension does not prohibit the charity from conducting other fund-raising appeals. During any period of suspension, as with any serious situation requiring the Commissioner’s intervention, the Commissioner will work closely with the governing board of the charity to ensure the continuity of its operations and services. We may review the necessity to extend the suspension period further later.

Protecting charities against emerging risks

27. On the disqualification and removal regimes, our objective is to ensure that charities are managed by fit and proper persons who will help maintain public trust and confidence in the sector. Hence, to strengthen the regime, the Bill proposes to explicitly provide that persons convicted of terrorism, terrorism financing or money laundering will be disqualified.

28. Ms K Thanaletchimi asked if the risk is real. The Financial Action Task Force (FATF)1, which is an inter-governmental standard-setting body for combating money laundering and terrorism financing, has in recent years, noted the increasing role of non-profit organisations in terrorism financing. FATF has recorded over 100 cases worldwide of alleged abuse of charities for terrorism financing. The risk is therefore real and increasing and that is the reason for us to strengthen our legislation in this regard.

29. Mr Alex Yam queried about the number of money laundering or terrorism financing cases that the Commissioner has investigated. While we have not taken action under the Act against charities for money laundering or terrorism financing related offences, the Commissioner has carried out targeted reviews and worked closely with the law enforcement agencies to monitor the vulnerabilities that the charity sector may be exposed to. It would only take one case of a charity in Singapore being involved in money laundering or terrorism financing to shake public confidence in the charity sector, as well as in the financial sector. The proposed amendment therefore seeks to strengthen our regulatory regime in light of emerging risks and signals our commitment to ensure that charities are not misused to provide a front for such unlawful activities.

Effect of disqualifications and removals

30. Member has also asked about the permanence of disqualifications where spent convictions are involved.

31. As mentioned in my earlier speech, where a person is disqualified under the Act on the ground of a criminal conviction, such as for an offence involving dishonesty, the disqualification ceases once the conviction becomes spent, or the person receives a pardon for the offence.

32. Removals under the Act, on the other hand are permanent. If a person is removed on the ground of a criminal conviction of an offence involving moral turpitude, he will be permanently barred from returning to that charity as a board member or key officer. The permanence is intended as the cause for removal is serious in respect of the charity that he is serving, and it is a result of deliberate consideration. In the case of removal after inquiry for mismanagement or misconduct, the removed person is barred from key positions in the rest of the sector.

Protecting governing board members

33. On the protection of charities’ governing board members, as raised by Ms Denise Phua, we acknowledge the responsibility placed on the governing board members of our charities. As trustees of public funds, they must act with reasonable care and skill to lead charities to do good work well. The law protects those who have acted honestly and reasonably from personal liability.

Support for charities

34. We echo Members’ call for greater support for charities. The Commissioner supports charities on three fronts.

Three-pronged approach to support charities

35. First, on capability building, we are working closely with the Centre for Non-profit Leadership to reach out to professionals with the heart to serve and pair them up with charities who need help. Ms Chia Yong Yong and Ms Denise Phua made a very strong case to professionalise the sector. We totally agree with them. The Commissioner will work with partners, including professional bodies, to engage charities and share know-how. Townhall sessions and the annual Charity Governance Conference are examples of capability building efforts. In 2017, more than 1,600 participants attended our learning events.

36. Second, on processes, the Commissioner is looking at simplifying regulatory reporting, with a focus on effective reporting. This will be of particularly helpful to smaller charities.

37. Third, on cost, the Commissioner is working with partners, such as the apex organisations, to set up shared services that charities can tap on. These shared services may explore the suggestions brought up by Members to assist charities which are experiencing temporary problems, as well as to help strengthen their compliance, governance and effectiveness. Charities can also tap on the VWOs-Charities Capability Fund to support their efforts in improving their governance and management capabilities.

38. On electronic filing, in response to Mr Melvin Yong’s questions, fewer than 100 of our registered charities are still filing hardcopy submissions. To assist these charities, we provide support via the VWOs-Charities Capability Fund for the purchase of computers. They may also tap on the shared services facilities mentioned earlier.

Working with our stakeholders

Customising our regulatory approach

39. Ms Phua made a wonderful speech and called for greater customisation of our regulatory approach. We recognise that the charity sector is diverse and reaches out to different parts of the society. To this end, the Commissioner works closely with different stakeholders to achieve our shared vision. The Commissioner is assisted by the 5 Sector Administrators2 (SAs) in various Ministries, agencies who best understand the needs of their respective sectors. They serve as points of contact for the charities in their sector and work closely with the Commissioner to ensure consistency in the regulatory stance and effective regulation.

40. Many of our capability building initiatives are also tailored based on the needs of the respective sectors. For instance, following the launch of the refined Code of Governance in April 2017, we worked with different partners, including apex organisations for different sectors to conduct sharing sessions on the Code for their respective sectors. We will continue to assess how to better customise in our future reviews.

Suggestions by Members

41. Members have raised good suggestions, including on powers of the Commissioner to better protect charities, the specifics on the electronic transactions service, the regulatory approach towards charities and the industry transformation map. We accept and will consider them for the next round of the review.

Conclusion

42. Mr Deputy Speaker, I would like to conclude by thanking Members once again for their support and valuable comments.

43. Sir, as fellow Members have rightly expressed, trust is key to the charity sector. The underlying objective of our proposed legislative amendments is to enhance this trust. In proposing the amendments, we have also held fast to our commitment of a balanced regulatory framework. We want to have a charity sector that not only has the trust and confidence of the public, but also one that is healthy and thriving. It is also our goal to nurture a charity sector that remains driven by the community. We continue to encourage co-regulation and a culture of transparency, and our regulatory approach will reflect this.

44. Sir, everyone has a role to play in achieving this goal. We will continue to work with partners such as the Charity Council and professional bodies to help charities strengthen their capabilities and governance. We are encouraged by this vision. We will step up public education efforts to empower donors to give wisely – to donate with both the head and heart. Charities, too, need to ensure that they are well-governed and accountable, to win the trust of the public, especially their donors and volunteers. Together, our efforts will help the charity sector flourish. A healthy and vibrant charity sector is the bedrock to a caring and cohesive Singapore.

45. Mr Deputy Speaker, Sir, I beg to move.

Notes:

1. The FATF was founded in 1989 on the initiative of the G7 to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the financial system. Singapore is a member of the FATF since 1992 and as a member, we are subject to mutual evaluation which was last carried out in 2015.

2. The 5 Sector Administrators are Ministry of Education, Ministry of Health, Ministry of Social and Family Development, People’s Association and Sport Singapore.