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The Regulatory Framework of Charities (Part 1)

By ISCA (republished) On 01 Jul 2016

This article was first published in the IS Chartered Accountant, July 2016. Re-published with permission from the Institute of Singapore Chartered Accountants (ISCA).

In the first of a series of articles themed “Accounting for Good”, the article “Helping Charities Do Good Better”, published in the May issue of this journal, provided an overview of the local charity landscape. It also highlighted the importance of financial accountability and the challenges faced by charities to keep proper financial records. To better understand the regulatory framework, this second article will cover the legislations and Code of Governance pertaining to Charities and Institutions of a Public Character (IPCs). We extend our discussion, in the next article, to look at their accounting reporting process and the challenges that they may face.


Charities rely largely on donations and grants from individuals, government entities and other organisations to carry out their charitable activities and are expected to utilise their funding in an accountable manner while maximising benefits to their targeted beneficiaries. In Singapore, the Office of the Commissioner of Charities (COC) oversees the charity sector, assisted by five Sector Administrators, while the Charity Council acts as an advisor to the COC on key regulatory issues, and is also a promoter and enabler of good governance in the charity sector (Figure 1). The COC office periodically reviews the legislations relating to Charities to ensure their relevance, and to strengthen the sector and build public trust.

Figure 1. The Charity Governance Framework. Adapted with permission from Commissioner of Charities Annual Report 2014.



 To register as a Charity, an organisation has to be one of the following legal entities (Figure 2) and comply with the following conditions[1]:

  • Purposes or objects of the organization must be exclusively charitable;
  • Organisation must have at least three governing board members, of whom at least two must be Singapore citizens or Permanent Residents, and
  • Purposes or objects of the organization must either be wholly or substantially beneficial to the community in Singapore.



Figure 2. Types of legal entities[2]

The following table shows some additional features relating to registered Charities:

A registered Charity can apply for IPC status if its activities are exclusively beneficial to the community in Singapore as a whole and not confined to sectional interests or groups of persons based on race, belief or religion. While IPCs can issue tax-deductible receipts to donors for qualifying donations, they are held to a higher standard of regulatory compliance and governance.

The Charities Act and other legislations also govern, besides the registration of Charities, matters relating to deregistration, submission of accounts and fund-raising, among others. The key legislations are listed in Box Story 1.


Besides the above legislations, Charities are also encouraged to comply with the key principles and guidelines established in the “Code of Governance for Charities and Institutions of a Public Character[4]introduced by the Charity Council in 2007 (and revised in 2011). The Code serves to provide guidance to board members on best governance and management practices that Charities could adopt to boost public confidence.

Figure 3 lists the nine areas highlighted in the Code:

 Figure 3. Nine Key Areas of Good Governance

 The Code is not mandatory and operates on the principle of “comply or explain”. Smaller Charities, given resource constraints, face only a core set of guidelines while larger Charities and IPCs are encouraged to comply with a higher tier of governance principles.[5] The Governance Evaluation Checklist (GEC) has to be submitted via the Charity Portal annually since August 2014.

According to Ang Hao Yao, Chairman of SATA CommHealth, adhering to the Code should not be seen just as a box-ticking exercise. He believes that the Code could serve as a useful guide when Charities set up governance structures and processes. It also serves to assist the boards in maintaining the highest standards of governance and, in turn, ensures that the community it serves will receive the greatest benefit from the Charity (see Box Story 2).

The board is central to the Charity’s governance. As such, the board members will have to be aware of their responsibilities outlined in the Code, such as when dealing with issues relating to conflicts of interest, and disclosure and transparency (See Box Story 3).


Charities engage in programmes and activities to provide services to individuals and the communities, and depend largely on donations, government grants and other sources of income to support their mission. In turn, the funders and government would demand that the Charities are accountable to the way they obtain and use these resources. The most common mechanism of accountability is the formal reports. As noted earlier, the Charities (Accounts and Annual Report) Regulations 2011 outline the provisions regarding the statement of accounts, annual report and annual audit. Such formal reporting is an important function for Charities to preserve the public trust. We will extend our discussion, in the next article, to look at Charities accounting reporting process and the challenges that they may face.



Dr Isabel Sim is Senior Research Fellow, Department of Social Work, Faculty of Arts and Social Sciences, NUS, as well as Director (Projects), Centre for Social Development (Asia). Associate Professor Alfred Loh and Professor Teo Chee Khiang are both from the Department of Accounting, NUS Business School. The writers gratefully acknowledge the contributions of Tan Shi Hui and Gong Yuan, Research Interns, NUS.

[2]The types of legal entities and benefits and drawbacks associated with each type are discussed in:

[3] Readapted from Anand, P., & Hayling, C. (2014). Levers for change – Philanthropy in Select South East Asian Countries. Social Insight Research Series. Singapore: Lien Centre for Social Innovation, Singapore Management University.

[4]Charity Council. (2011). Code of Governance for Charities and IPCs. Retrieved from: 

[5] The different tiers are: Basic I, Basic II, Enhanced and Advanced.

[6] This is an initiative by the Charity Council to recognise Charities that have adopted the highest standards of governance.