[VIEWPOINT]When charity stays at home

Various charitable events take place at the end of each year to help less fortunate people around us. A lot of people look back on the year and feel remorse that perhaps “I’ve lived too much for myself,” and donate money to charities. But how many people know how much of the money donated is actually used on those who really need it?
In this regard, an unprecedented scandal that took place in Singapore recently caught our attention. The scandal started when the contents of the expenditure of the National Kidney Foundation (NKF), the biggest charity in Singapore, were exposed. The NKF started out dealing with kidney related projects only, but then expanded into other fields, such as medical examinations, children’s diseases and cancer. They successfully raised large funds through diverse “marketing” methods such as presenting charity shows on television.
The problem started when a local English-language newspaper, The Straits Times, questioned the salary of NKF’s chief executive officer. Mr. Thambirajah Tharmadurai, known as TT Durai, was receiving 25,000 Singapore dollars a month ($15,000). It is a sum that can be seen as large or not so large here, but Mr. Durai also collected a 1,000 percent to 1,200 percent bonus each year on the justification that he raised large amounts for the foundation.
An annual salary of 600,000 Singapore dollars is enough to compare to a well-to-do CEO of a private corporation. The Singaporean government got involved when the dispute between The Strait Times and Mr. Durai spread and led to a lawsuit. The international accounting firm KPMG was brought in to audit the accounts of the NKF.
KPMG announced shocking results last week: That only 10 percent of the funds raised went directly to benefit patients. The rest went into administration, events or building construction costs, and the remainder was saved as a surplus fund. The surplus fund alone was 189 million Singapore dollars.
The foundation had even developed an “innovative” way to increase the amount of funds they raised. It asked the medical equipment supply and building construction companies it dealt with to inflate their prices. It then paid the companies the amounts billed for and had them donate the difference to the NKF. That way, the companies obtained tax benefits for the donations they made and the NKF gathered more funds, making it a sweet deal for both sides.
The executives of the NKF visited Las Vegas, ostensibly to learn better charity show administration methods. The rules of the foundation state that executives can only fly up to business class, but they traveled first class. During the period of one year and four months, from February, 2004, to June of this year, 322,000 Singapore dollars were spent on first class plane tickets. Mr. Durai defended himself, saying that the executives took first class for the price of business class tickets, thanks to the help of travel agencies, but could not answer the question, “Wouldn’t it have been more reasonable to use the money leftover from purchasing cheap tickets for the NKF?”
It is hard to believe that this happened in Singapore, a country that is famous for its transparency. The Singaporean people themselves are wondering how such a thing could occur.
The biggest reason was a lack of real transparency. Of course there was a board of directors. For formality’s sake, transparency is secured. But the board was little more than names. Mr. Durai’s salary was raised continuously because he was good at raising funds, but the board was negligent in its supervision. In addition, there was no way for people to know the flow of funds in the NKF.
A majority of people who work at charities work in the spirit of service to the community and receive poor salaries. It seems that we need a system that can enhance the transparency of charities so that the efforts of these people and the heart-felt gifts of donors are not in vain. For example, a rule could be established to reveal the contents of expenditure when the funds exceed certain amounts, and the government could decide on the organizations that should reveal their expenditures. Charity work is something the government encourages with tax benefits, so a social “eye” needs to be watching to see how the donated funds are spent.
Increasing the transparency of charities is also the obligation of people who donate to these charities. Otherwise, we may just end up comforting ourselves, whilst saying that we are trying to comfort those in need.

* The writer is an economics professor at the National University of Singapore. Translation by the JoongAng Daily staff.

by Shin Jang-sup