SINGAPORE - Many small charities in Singapore still rely on manual accounting systems to keep track of their finances.

This involves recording donations using pen and paper, said Professor Ang Hak Seng, chairman of the Institute of Singapore Chartered Accountants’ (ISCA) charity accounting committee.

The former Commissioner of Charities (COC) was speaking with The Straits Times on Friday in an online interview about a new programme by ISCA, the COC and the National Council of Social Service, to help charities digitalise their accounting and finance processes.

The issue of charities accepting tainted donations has been in the news lately after ST reported last week that several had received money from some of the 10 people charged in Singapore’s largest money laundering case.

Several charities had said it was difficult for them to monitor every donation or donor, as they did not have the manpower or resources to do so.

Although ISCA’s programme was not conceived because of the case, it is hoped it would address some challenges smaller charities face.

Prof Ang, who was the COC between 2017 and 2020, said: “Small charities by nature would not have the economies of scale to have digital accounting systems. So they resort to pen and paper.”

The former senior assistant commissioner of the Singapore Police Force, and chief executive director of the People’s Association, said trust is at the core of charities, and it is important for them to have a proper accounting system, so members of the public will feel there is proper accountability when they make donations.

He added: “An example of ensuring good trust is when a charity receives donations, it has to do due diligence. Any time when the charity is not sure regarding the source or the legitimacy of the funds, it should immediately alert the COC.

“Only then can we ensure the whole system is trustworthy.”

ISCA said the new programme started with a pilot involving four charities that used pen and paper to keep their accounts.

It will be expanded in early 2024, with plans to reach over 2,000 charities, especially smaller ones – they form the bulk of charities here – with limited resources.

Four accounting firms – Helmi Talib Accounting & Advisory, Nexia Singapore, Singapore Corporate Services, and Unity Assurance – will offer their services for free.

Xero, an online accounting-software company, will offer a discounted accounting-software package to help charities digitalise their operations.

ISCA said charities faced challenges in resources, particularly the ability to hire qualified chartered accountants.

It said: “There is also little awareness on the importance of having a proper governance framework and little knowledge about the digitalisation of the finance function.”

According to the COC’s 2020 report, smaller charities with annual receipts of less than $500,000 formed the bulk of the total number of charities.

ISCA said the planning for its programme started in the first quarter of 2023 and is not related to Singapore’s worst money laundering case, which has seen the authorities seize $2.8 billion in cash and assets.

Nine men and one woman, originally from China, were charged on Aug 16 with offences including money laundering, forgery and resisting arrest.

Over the past week, ST reported how several charities received donations from some of the 10 accused.

Rainbow Centre said it had received $72,450 from three of the 10 people, and will be reviewing its policies. Lions Befrienders, a social service agency that aids the elderly, said it received $5,000 from one of the 10 in 2022 and has lodged a police report.

The name of one of the 10 also appeared in the National Kidney Foundation’s annual reports from 2020 to 2022, in a list of people who donated at least $5,000 annually to the organisation.

The Community Chest received $30,000 and the President’s Challenge got more than $350,000 from individuals whose names are similar to those of the people charged.

ISCA said the review of processes and digitalisation of accounting systems can help charities spot red flags and improve existing finance policies and governance structures.

It added: “For example, with the linkage of accounting solutions with banks, charities would be able to track incoming donations in a timelier manner, so appropriate due-diligence checks can be performed as needed, for example, on large one-time donations from unknown sources.”

ISCA said charities should consider using anti-money laundering screening tools to help identify suspicious identities or transactions.

Ms Victoria Ting, associate director at Setia Law, said it was not so much a question of charities’ accounting systems, but rather how alive they are to the risk of illicit proceeds and how well equipped they are to counter the risk.

The former deputy public prosecutor, who specialised in white-collar crime, said one simple check even small charities can do, when receiving a large donation from a new donor, is to conduct an Internet search to see if the individual has been implicated in any financial crime.

Ms Ting added: “Charities can also be vigilant with large donations which appear to be broken up into smaller amounts over a short period of time for no apparent reason, as this may suggest the donor is attempting to circumvent reporting requirements. This is also known as smurfing.”

Ms Nichol Ng, co-founder of Food Bank Singapore, said smaller charities may not have the framework or regulatory know-how to ensure there are checks and balances in place.

On tracking suspicious donations, she said: “From the charity standpoint, most of us feel like this is beyond us. How do we check where the money comes from?

“Even if you took it from a legitimate businessman, you’ll never know if the money is clean or not.”

While ISCA’s new programme would be helpful, she said it would need to be easy for charities to understand and adopt.

A spokeswoman for the Singapore Red Cross said it did not receive donations from the 10 persons in the case.

She said it records the particulars of walk-in cash donors, but most donations come through the banking system, and this is a major source of assurance that donations are legitimate.

In May 2015, the COC published a guide for charities about money laundering and terrorism financing.

It said: “Such abuse cannot be tolerated, and the impact of even one proven case will corrode public confidence in the affected charity and the entire sector.”