Charity Council conducts public consultation on proposed simplified Code of Governance for Charities and Institutions of a Public Character and Governance Evaluation Checklist
30 May 2022
On 17 May 2022, the Ministry of Culture, Community and Youth announced that the Charity Council is conducting a public consultation on a proposed simplified Code of Governance for Charities and Institutions of a Public Character (“IPCs”) (“Code”) and Governance Evaluation Checklist (“GEC”). The consultation closes on 16 June 2022.
The Code serves three main objectives:
- enhance charities’ effectiveness by sharing recommended good governance and management practices;
- provide guidance to Board members to help them carry out their duties as fiduciaries (representatives entrusted to act in the interests of the charity); and
- boost public confidence in the charity sector by setting the standards of good governance for charities to aspire towards.
Some of the key proposed revisions to the Code are set out below.
Simplifying the Code
The Code of Governance Sub-Committee (“Sub-Committee”) was formed in July 2021 and now seeks to simplify the Code to adopt a principle-based approach to:
- allow different sectors to exercise greater flexibility in applying the Code and to address their sector specific needs; and
- encourage the charities to undertake a more thorough review of their governance standards by a deeper understanding of the underlying principles, instead of it being just a “ticking the guidelines” exercise.
The Sub-Committee will also review the GEC to be aligned with the simplified Code and identify the most appropriate way to capture charities’ adherence.
The Code sets out six principles, accompanied with best practices in key areas of governance that charities should adopt to achieve high standards of governance and attain long-term sustainable success.
Proposed revision of charity tiers
The consultation paper notes that the simplified Code guidelines will be applicable depending on the IPC status and size of the charity. Instead of the current four Tiers, the consultation paper proposes two tiers as set out in the table below:
Small and medium non-IPC charities
Large non-IPC charities
The consultation paper notes that Tier 2 charities will be subject to prescriptive guidelines in addition to the principle-based approach as IPCs are able to issue tax deductible receipts and should be held to higher standards of accountability and large non-IPC charities are charities with gross annual receipts or expenditure of S$10 million or more and should have sufficient resources to put in place the necessary measures to comply with the Code.
The reporting requirements of this Code will be applicable for the charities’/IPCs’ financial years beginning on or after 1 January 2024.
Number of principles to be revised
The nine principles from the current Code are proposed to be simplified to six principles. The corresponding number of total guidelines in the Code will decrease for most charities.
GEC compliance and scoring
The Code will continue to operate on the principle of “comply or explain”. Charities and IPCs should follow these disclosure guidelines:
- All charities are required to submit a Governance Evaluation Checklist on the Charity Portal (www.charities.gov.sg);
- Should explain why it cannot comply or partially comply with certain Code guidelines;
- Should indicate the steps it plans to take to comply, or explain why if it decides not to comply;
- Disclosure of this checklist is made available for public viewing on the Charity Portal for their information; and
- For IPCs, their respective Sector Administrators would consider the IPC’s extent of Code compliance, and the reasons for partial compliance and/or non-compliance, when assessing an IPC’s application to renew its IPC status, as well as the length of IPC renewal.
Some charities may not be able to comply with certain guidelines because they are in the process of working towards compliance. This could be an explanation for non-compliance. It may also be that some Code guidelines do not easily relate to the circumstances of a particular charity. The charity should explain these circumstances in the checklist.
The submission of GEC is a legislative requirement. Where it is not submitted, non-IPCs may be subject to enforcement actions and have their application of the Charities Capability Fund rejected. In addition to this, IPCs may also have their IPC application and extension rejected or their IPC period shortened.
The following materials are available from the REACH website www.reach.gov.sg: