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Raising Funds for Charity: Dos & Don'ts
Despite the gloomy economic outlook, Singaporeans remain generous when informed about the heart-rending circumstances of others in need. However, the authorities regulating fund-raising in Singapore have stressed the importance of accountability and transparency when conducting such campaigns.
Types of Fund-Raising Appeals and Their Requirements
Fund-raising for charitable purposes is commonly conducted in three main capacities – as a/an:
- Charity;
- Institution of Public Character (IPC); or
- Commercial fund-raiser or participator.
The legal requirements differ depending on which capacity a fund-raising appeal is made in. Here are several applicable requirements for charities and commercial fund-raisers/participators acting for charities. Here are 7 things you should take note of when engaging in such fund-raising activities.
1. Apply for a Permit with the Authorities
All public fund-raising activities in Singapore – for whatever causes – are governed by the Charities Act. The general rule of the Act is that no person (except for certain individuals/organisations) is allowed to conduct or participate in any fund-raising campaign without a valid permit granted by the relevant authority.
For example, under the House to House and Street Collections (HHSC) Act, a fund-raising via public collection from house to house or soliciting in streets can only be conducted if a HHSC licence is granted by the Commissioner of Police.
2. Take Note of the 30:70 Fund-raising Expenses Ratio
All charities must keep their fund-raising expenses ratio below 30%. This refers to proportion of the organisation's total fund-raising expenses to its total gross fund-raising receipts and sponsorships received for that financial year.
3. Get a Written Agreement from the Charity You are Aiding
It is mandatory for all organisations wishing to raise funds for a charity to have a written agreement with the charitable institution concerned. Such written agreement must contain the following:
- Location and date of fund-raising activities;
- Method of fund-raising appeal;
- Percentage of proceeds to the charitable institution;
- Timeframe within which proceeds must be distributed to the charitable institution; and
- Remuneration of the fundraiser
Additionally, in the case of commercial fundraisers, donations collected by the commercial fundraiser must be paid in gross directly to the charity without deducting or setting off any remuneration due to the commercial fundraiser. This is in accordance with the Code for Commercial Fund-Raisers.
4. Uphold Your Duty to Donors
A charity or IPC, commercial fund-raiser or participator is under the obligation to donors to ensure that:
- It discloses the following information to every donor:
- The name of the charity or the person to which the donation will benefit;
- The purpose for which the donation will be used (including the cause and/or beneficiaries); and
- Whether any commercial fund-raiser has been engaged in soliciting the donation;
- All information which it provides is accurate and not misleading;
- Any information relating to donors is kept confidential and not given to any other organisation or individual except with the donor's consent under the Personal Data Protection Act; and
- Proper measures are in place to ensure accountability and to prevent any loss or theft of donations.
5. Use the Donations Received Appropriately
Needless to say, the use of donations acquired is strictly regulated by the Charities Act. The donations received must be used for the specific lawful purpose declared by the donor, or if no such intention was stated, for the purpose communicated to the donor during solicitation.
If there are no such purposes or intentions specified, then the donation may be used to fund any activity carried out by the charity that meets its purposes under its governing instruments, or in the case of an IPC, the donations may be used to fund the activities carried out by the IPC.
If none of these options are possible, there donation amount must be refunded to the donor, or otherwise be used as may be approved by the Commissioner of Charities or Sector Administrators.
6. Maintain Accounting Records
Additionally, a charity or IPC, commercial fund-raiser or participator has a duty to maintain accounting records containing entries of all the donations received and disbursed. It also needs to disclose details of all the income received and the expenses incurred.
In particular, all accounting records relating to the fund-raising appeal must be maintained for a minimum period of 5 years from the end of the financial year.
7. Disclose Relevant Information
To ensure greater transparency and accountability, charities, commercial fund-raisers or participators must also disclose the consolidated amount of donations received from their fund-raising appeals in their public financial statements for a particular financial year.
If funds raised exceed $1 million, organisations must, at the end of the financial year, disclose the following information on its website:
- The total gross receipts from the fund-raising appeal;
- The total expenses incurred in the fund-raising appeal; and
- The purposes for which the funds raised have been used and will be used.
Fund-Raising for Foreign Charitable Purposes
A permit is also required to conduct fund-raising for foreign charitable purposes. An organisation carrying out such fund-raising must apply to the Commissioner of Charities for the permit at least 30 days before the date on which the fund-raising appeal is to be held.
Similarly, organisations granted a permit to conduct fund-raising for foreign charitable purposes must maintain records and proper accounts of each fund-raising exercise.
The granting of a permit may also be conditional on the 80:20 fund-raising rule being heeded.
Public fund-raising for foreign charitable purposes
If the fund-raising is a public appeal (i.e funds raised from members of the public), an 80:20 rule will apply. This means that 80% of the funds raised have to be applied for charitable purposes within Singapore.
The remaining 20% of the funds may be remitted for overseas charitable purposes.
Donations may be considered to be public where it includes:
- House-to-house and street donations
- Use of media publicity (e.g news coverage/internet advertising)
- Use of outdoor display that is accessible to the general public
- Collection instrument (i.e donation box) that is accessible to the public
- Targeting members of the public who have no relationship with the fund-raising organisation (e.g through flyers)
Private fund-raising for foreign charitable purposes
The 80:20 rule is *waived for private donations to foreign charitable causes.
Donations may be determined private if there is:
- Defined donor relationship. Meaning, the individuals belong to a unique (e.g members of the organisation) and exclusive (e.g high-net-worth-individuals) category who would not constitute the general public.
- No advertisement of the fund-raising
- Bequest of private properties (donation of assets to a charity via a will).
If any of these 3 are contravened, the fund-raising appeal would be considered as targeting the public donations and the 80:20 rule will be imposed.
Note that the 30:70 fund-raising expenses also applies (as mentioned above). In the event that the expenses exceed 30%, the organisation should bear the excess expenses.
*The 80:20 rule will also be waived for appeals in aid of providing immediate disaster relief.
Crowdfunding
The raising of funds through an online platform, commonly known as crowdfunding, is a phenomenon which is becoming increasingly popular as the preferred mode of soliciting donations for any cause, whether charitable or otherwise.
You may wish to refer to our other article on crowdfunding to find out more.