	Paragraph
Foreword

Introduction
Objective	1
Scope	2 - 3
Purpose of Annual Report and Accounts	4 - 5
Interpretation of Accounts	6 - 7
Statutory and Other Requirements	8 - 9
Accounts Structure	10 - 12

Content of Annual Report
The Charity’s Annual Report	13 - 18
Structure, Governance and Management	19 - 20
Objectives and Activities	21 - 25
Achievements And Performance	26
Funds Held as Custodian Trustee on Behalf of Others	27
Intangible Income	28

General Principles
Fundamental Accounting Concepts	29
Accounting Standards	30 - 31
Accounting for Separate Funds	32 - 33
Unrestricted Income Funds (Including Designated Funds) (see also Appendix 3)	34 - 35
Restricted Funds (see also Appendix 3)	36
Endowment Funds (see also Appendix 3)	37 - 39
Gains and Losses	40
Reconciliation of Funds	41
Particulars of Individual Funds and Notes to the Accounts	42
Branches	43

Statement of Financial Activities
Structure of the Statement	44 – 45
Incoming Resources	46 – 49
Analysis and Apportionment	50 – 52
Voluntary Income	53
Legacies	54
Gifts in Kind	55 – 56
Investment Income	57
Incoming Resources from Charitable Activities	58
Expenditure and Costs	59 – 75
Other Matters to be Covered in Notes to the Accounts	76 – 83

Balance Sheet
Structure of the Balance Sheet	84 – 85
Content of the Balance Sheet	86 – 104
Other Balance Sheet Matters to be Covered in the Notes to the Accounts	105 – 109

Cash Flow Statement	110

Disclosure of Accounting Policies	111 – 112

Appendix 1: Glossary
Appendix 2: Application of Financial Reporting Standards
Appendix 3: The Funds of a Charity
Appendix 4: Illustration – Statement of Income and Expenditure
Appendix 5: Detailed Guidance for Charities with Gross Annual Income or Expenditure of more than $1,000,000

RECOMMENDED

ACCOUNTING

PRACTICE

RAP 6

Accounting and Reporting by Charities

Foreword

This statement of Recommended Accounting Practice is based on the Statement of Recommended Practice (“SORP”) on Accounting and Reporting by Charities issued by the Charity Commission for England and Wales. The Institute acknowledges its gratitude to the Charity Commission. The Statement of Recommended Practice “Accounting and Reporting by Charities” is Crown Copyright material.

This statement sets out recommendations on the way in which a charity should account for and report on the resources entrusted to it and the activities, which it undertakes. This statement is intended to be applicable to all charities in the Republic of Singapore, regardless of their constitution, size or complexity. It is recognised that some of the recommendations may be inapplicable to some charities because of the nature of the charity or the limited classes or size of the transactions or assets involved. However, the full recommendations are given, leaving discretion to the trustees/office bearers of each charity to apply them according to the character of the charity and the significance of the figures concerned. Charities with gross annual income or expenditure of $1,000,000 or less should comply with this statement while those with gross annual income or expenditure of more than $1,000,000 should additionally refer to the detailed guidance contained in Appendix 5. Charitable entities, projects, activities or events with a gross income or expenditure of $250,000 or less should, as a minimum, prepare a statement of income and expenditure, which is illustrated in Appendix 4.

The main obligation of trustees/office bearers in preparing accounts and reports is to give a true and fair view of the charity’s incoming resources and application of resources during the financial period and of its state of affairs at the end of the period. To achieve this, the trustees’/office bearers’ judgement may dictate the disclosure of more information than specifically recommended in this statement. Occasionally, trustees/office bearers may find that following a recommendation is incompatible with the obligation to give a true and fair view. Subject to concurrence with their external auditors, they may then use the alternative accounting treatment, which gives a true and fair view, and disclose any departure from the recommendations and the reasons for it. A departure from the statement is not justified simply because it gives the reader a more appealing picture of the financial position or results of the charity.

A charity shall apply this statement for annual periods beginning on or after 1 July 2005. Earlier application is permitted. If a charity applies this statement for an earlier period, it shall disclose that fact. A charity need not apply the requirements in this statement to comparative information that relates to annual periods beginning before 1 July 2005 or for a prior period for which it was not required if it is impracticable to do so. In such a case, the charity shall disclose that fact.

Although the provisions for this statement are not mandatory, charities falling within their scope are encouraged to comply with the recommendations set out in this statement. The provisions of this statement need not apply to items that are not material.

Introduction

Objective

1. The objective of setting out these recommendations is to improve the quality of financial reporting by charities and to assist those who are responsible for the preparation of charities’ annual reports and accounts. The intention is that these recommendations will reduce diversity in accounting practice and presentation. In all but exceptional circumstances, charities preparing accrual accounts should follow this statement in order for their accounts to give a true and fair view. Accounting polices should generally comply with the measurement principles of the Financial Reporting Standards (FRSs). Appropriate disclosure of the accounting policies should be made in the notes to the financial statements.

Scope

2. This RAP is intended to apply to all charities in Singapore regardless of their size, constitution or complexity. It provides the basis for the preparation of accounts to give a true and fair view. No guidance is provided on cash-based receipts and payments accounts, though these accounts could adopt the activity approach to analysis provided in this RAP. Charities with gross annual income or expenditure of $1,000,000 or less should comply with this statement while those with gross annual income or expenditure of more than $1,000,000 should additionally refer to the detailed guidance contained in Appendix 5. Charitable entities, projects, activities or events with a gross income or expenditure of $250,000 or less should, as a minimum, prepare a statement of income and expenditure, which is illustrated in Appendix 4.

3. Each recommendation should be considered in the context of what is material (Refer to Glossary) to the particular charity.

Purpose of Annual Report and Accounts

4. The purpose of preparing a Charity’s Annual Report and Accounts is to discharge the charity trustees’/office bearers’ duty of public accountability and stewardship. This RAP sets out recommended practice for this purpose but charity trustees/office bearers should consider providing such additional information as is needed to give donors, beneficiaries and the general public a greater insight into the charity’s activities and achievements. Accounts prepared on the basis of this RAP are not a substitute for management accounts required to run the charity on a daily basis

5. The report and accounts should therefore:

(a) provide timely and regular information on the charity and its funds;

(b) enable the reader to understand the charity’s objectives, structure, activities and achievements; and

(c) enable the reader to gain a full and proper appreciation of the charity’s financial transactions during the accounting period and of the position of its funds at the end of the period.

Interpretation of Accounts

6. Charities are highly disparate in character, so any comparison of the financial information they produce must be undertaken with care, even if the charities involved seem to be similar. Essentially the accounts should include all the money and other assets entrusted to the charity for whatever purpose, and show how they have been expended during the accounting period and how the balance of each fund is deployed at the end of the period.

7. The Statement of Financial Activities of a charity is intended to show how a charity receives and applies its resources to meet its objectives. The balance sheet is not necessarily a measure of the wealth of the charity but does show the resources available, what form those resources take, and how they are held in different funds.

Statutory and Other Requirements

8. All charities in the Republic of Singapore except for “exempt charities” must comply with the requirements of the Charities Act (Cap. 37) regarding the preparation, audit and general obligations to keep accounts. Many charities are also, by virtue of their constitution, subject to other statutory requirements and may have to comply with separate financial reporting requirements [e.g. foundations registered under the Companies Act (Cap 50)]. Additionally, some charities may be conferred “Institution of Public Character” or “IPC” status. IPCs are required to comply with certain conditions stipulated by the Minster for Finance.

9. Although the recommendations contained in this statement are intended to represent best practice, there may be circumstances in which they conflict with, or omit, some of the statutory requirements imposed on the charity. This statement cannot overrule such requirements.

Accounts Structure

10. Charity accounts should comprise:

(a) a Statement of Financial Activities for the accounting period that shows all incoming resources and all resources expended by it and reconciles all changes in its funds. The statement should consists of a single set of accounting statements and be presented in columnar form if the charity operates more than one class of fund;

(b) an income and expenditure account where this is a legal requirement. This applies to charitable companies. In certain circumstances the Statement of Financial Activities will also meet the legal requirements for an Income and Expenditure Account. Where the two statements are combined this should be identified in the heading of the statement;

(c) a Balance Sheet that shows the recognised assets, the liabilities and the different categories of funds of the charities;

(d) a Cash-flow Statement, in accordance with Financial Reporting Standard (FRS) 7 Cash Flow Statement; and

(e) notes explaining the accounting policies adopted and other notes, which explain or expand upon the information contained in the accounting statements referred to above or which provide further useful information. This will include notes analysing the figures in the accounts and explaining the relationships between them.

11. The corresponding figures for the previous accounting period should be provided in accounts in accordance with FRSs. The duration of the current and previous accounting periods should also be shown.

12. The Statement of Financial Activities, the income and expenditure account, balance sheet, and cash-flow statement are all considered to be “primary statements”, and should therefore be given equal prominence in the accounts and should not be relegated to the notes to the accounts.

Content of Annual Report

The Charity’s Annual Report

13. The Annual Report and Accounts should be approved by the trustees as a body in accordance with their usual procedures and both documents should be signed on behalf of the trustees by two of their number authorised to do so. The date of approval should be stated.

14. The Annual Report should be attached to the accounts whenever a full set of accounts is distributed. Any audit, independent examination for other statutory report on the accounts should also be attached.

15. Charitable companies must also prepare a Directors’ Report in order to meet the requirement of Section 201 of the Companies Act (Cap. 50). A separate Annual Report is not required provided that any statutory Directors’ Report prepared also contains all the information required to be provided in the Trustees’ Annual Report. Where relevant information is provided in the Directors’ Report, the title of the report should indicate that the report includes the Charity’s Annual Report.

16. Trustees/office bearers should include any additional information which they are required by law to report and in order for the accounts to comply with current statutory requirements, the requirements of the charity’s governing document and the requirements of this RAP.

17. The Annual Report should be a coherent document that meets the requirements of law and regulation and provides a fair review of the charity’s structure, aims, objectives, activities and performance. Charities may additionally use other means of providing information about who they are and what they do. Such information is often tailored for the needs of particular audiences and presented through annual reviews, newsletters and websites. Whilst trustees/office bearers might usefully refer to these other sources of information within their Annual Report, such additional information should not be seen as a substitute for good statutory annual reporting.

18. The report should provide the following reference and administrative information about the charity, its trustees and advisers:

(a) The name of the charity, which in the case of a registered charity means the name by which it is registered. Any other name by which a charity makes itself known should also be provided;

(b) The charity registration number and, if applicable, the company registration number;

(d) The names of all of those who were the charity’s trustees and office bearers on the date the report was approved; where the charity trustees are incorporated this should include the name of the corporate body;

(e) The name of any other persons who served as charity trustees or custodian trustees and office bearers in the financial year in question; where the charity trustee is a company or corporate body, the names of its current directors or other persons managing it;

(f) The name of any Chief Executive Officer or other senior staff member(s) to whom day to day management of the charity is delegated by the charity trustees;

(g) The names and addresses of any other relevant organisations or persons. This should include the names and addresses of those acting as bankers, solicitors, auditors and investment or other principal advisers.

Structure, Governance and Management

19. The report should provide the reader with an understanding of how the charity is constituted, how its trustees are recruited and trained and how the charity’s decision-making processes operate. In particular, the report should explain:

(a) The nature of the governing document (e.g. trust deed; memorandum and articles of association; constitution; bye-laws; etc) and how the charity is (or its trustees are) constituted (e.g. limited; unincorporated association; trustees incorporated as a body; etc).

(b) The methods adopted for the recruitment and appointment of new trustees, including details of any constitutional provisions relating to appointments, for example, election to post. Where any other person or body external to the charity is entitled to appoint one or more of the charity trustees this should be explained together with the name of that person or body.

(d) The organisational structure of the charity and how decisions are made. For example, which types of decisions are taken by the trustees/office bearers and which are delegated to staff.

(e) Where the charity is part of a wider network then the relationship involved should also be explained where this impacts on the operating policies adopted by the charity.

(f) The relationships between the charity and related parties and with any other charities and organisations with which it co-operates in the pursuit of its charitable objectives.

20. A statement should be provided confirming that the major risks to which the charity is exposed, as identified by the trustees/office bearers, have been reviewed and systems or procedures have been established to manage those risks.

Objectives and Activities

21. The report should help the reader understand the charity’s objectives, strategies and activities undertaken to achieve them. Where activities are undertaken through subsidiary undertakings, details should be provided in the report. In particular, the report should provide;

(a) A summary of the objects of the charity as set our in its governing document.

(b) An explanation of the charity’s aims including the changes or differences it seeks to make through its activities.

(d) An explanation of the charity’s strategies for achieving its stated objectives.

(e) Details of significant activities (including significant programmes, projects, or services provided) that contribute to the achievement of the stated objectives.

22. The details of significant activities provided should focus on those activities that the charity trustees/office bearers consider to be significant in the circumstances of the charity as a whole. The details of activities, should as a minimum, explain the objectives, activities, projects or services identified within the analysis note accompanying charitable activities in the Statement of Financial Activities.

23. Where the charity conducts a material part of its activities through grant making, a statement should be provided setting out its grant making policies.

24. Where social or programme related investment activities are material in the context of charitable activities undertaken, the policies adopted in selecting such investments should be explained.

25. Where a charity makes significant use of volunteers in the course of undertaking its charitable or income generating activities this should be explained. Whilst measurement issues, including attributing an economic value to such unpaid voluntary contributions, prevents the inclusion of such contributions within the Statement of Financial Activities, it is nevertheless important for readers to be provided with sufficient information to understand the role and contribution of volunteers. Such information may, for example, explain the activities that volunteers help to provide, quantify the contribution in terms of hours or staff equivalents, and may present an indicative value of this contribution.

Achievements And Performance

26. The report should contain information that enables the readers to understand and assess the achievements of the charity and its subsidiary undertakings in the year. It should provide a fair review of its performance against objectives that have been set. The report is likely to provide both qualitative and quantitative information that helps explain achievement and performance. It will often be helpful to identify any indicators, milestones and benchmarks against which the achievement of objectives is assessed by the charity. In particular, the report should contain:

(a) A review of charitable activities undertaken that explains the performance achieved against objectives set. Where qualitative or quantitative information is used to assess the outcome of activities, a summary of the measures or indicators used to assess achievement should be included.

(b) Where material fundraising activities are undertaken, details of the performance achieved against fundraising objectives set, commenting on any significant expenditure for future income generation and explaining the effect on the current period's fundraising return and anticipated income generation in future periods.

(c) Where material investments are held, details of the investment performance achieved against the investment objectives set.

(d) Comment on those factors within and outside the charity's control which are relevant to the achievement of its objectives; these might include relationship with employees, users, beneficiaries, donors and the charity's position in the wider community.

Funds Held as Custodian Trustee on Behalf of Others

27. Where a charity is, or its trustees are, acting as custodian trustees, the following matters should be disclosed in the report:

(a) A description of the assets, which they hold in this capacity.

(b) The name and objects of the charity (or charities) on whose behalf the assets are held and how this activity falls within their own objects.

Intangible Income

28. A charity may receive assistance in the form of donated facilities, beneficial loan arrangements, donated services or services from volunteers. Such assistance is generally referred to as “intangible income”. Material intangible incoming resources (e.g. volunteers) should be commented on in the Charity’s Annual Report.

General Principles

Fundamental Accounting Concepts

29. Accounts intending to show a true and fair view must be prepared on the going concern assumption and the accruals concept and provide information that is relevant, reliable, comparable and understandable (see Appendix 2: Application of Financial Reporting Standards).

Accounting Standards

30. In meeting the obligation to prepare accounts showing a true and fair view (see Foreword) accounts should follow the standards and principles issued by the Council on Corporate Disclosure and Governance. This statement provides guidance and recommendations that supplement interpretation of the most suitable application of accounting standards for charities in the light of the special factors prevailing or transactions undertaken with the charity sector, but it is supplementary to those standards and, as with the law, does not seek to repeat all of their requirements (see Appendix 2).

31. The Singapore Financial Reporting Standards provide the financial reporting framework under which this statement has been developed. In Singapore, compliance with companies' legislation presently requires compliance with Singapore Financial Reporting Standards.

Accounting for Separate Funds

32. The main purpose of the accounts is to give an overall view of the total incoming resources during the year and how they have been expended, with a balance sheet to show the overall financial position at the year-end. There are additional requirements for charities that have to account for more than one fund under their control. The accounts should provide a summary of the main funds, differentiating in particular between the unrestricted income funds, restricted income funds and endowment funds. The columnar format of the Statement of Financial Activities and Balance Sheet, which also allows for a columnar presentation of funds, is designed to achieve this. Depending on the materiality (Refer to Glossary) of each, the notes to the accounts should group the restricted funds under one or more heads.

33. Charities need to account for the proper administration of the individual funds in accordance with their respective terms of trust and accounting records must be kept in a way, which will adequately separate transactions between different funds. Some charities may hold one or more restricted funds, some of which may be permanent or expendable endowment funds. The position is summarised in the following paragraphs.

Unrestricted Income Funds (Including Designated Funds) (see also Appendix 3)

34. Nearly all charities have a fund, which is available to the trustees/office bearers to apply for the general purposes of the charity as set out in its governing document. This is the charity’s “unrestricted” fund (sometimes called a “general” fund) because the trustees are free to use it for any of the charity’s purposes. Income generated from assets held in an unrestricted fund will be unrestricted income.

35. The trustees/office bearers may earmark part of the charity’s unrestricted funds to be used for particular purposes in the future. Such sums are described as “designated funds” and should be accounted for as part of the charity’s unrestricted funds. The trustees/office bearers have the power to re-designate such funds within unrestricted funds.

Restricted Funds (see also Appendix 3)

36. Many charities hold funds that can only be applied for particular purposes within their objects. These are restricted funds and have to be separately accounted for. The restriction may apply to the use of income or capital or both. Income generated from assets held in a restricted fund will be subject to the same restriction as the original fund unless either:

(a) the terms of the original restriction specifically say otherwise (for example, the expressed wishes of a donor or the terms of an appeal), or

(b) the restricted fund is an endowment fund, the income of which is expendable at the discretion of the trustees/office bearers.

Endowment Funds (see also Appendix 3)

37. One form of restricted fund is an “endowment”, which is held on trust to be retained for the benefit of the charity as a capital fund. Where the trustees/office bearers must permanently maintain the whole of the fund it is known as permanent endowment. Such a fund cannot normally be spent as if it were income. Such a fund may consist of investment assets and/or assets that are used for the purposes of the charity.

38. In some instances the trustees/office bearers may have a power of discretion to convert endowed capital into income in which case the fund is known as expendable endowment.

39. The initial gift and subsequent increases and decreases in the amount of any endowment funds should be shown in the Statement of Financial Activities as part of those funds.

Gains and Losses

40. Realised and unrealised gains and losses on assets held in a particular fund form part of that fund. Similarly, provisions for depreciation, or for an impairment of assets form part of the fund in which the asset is held.

Reconciliation of Funds

41. The Statement of Financial Activities should reflect the principal movements between the opening and closing balances on all the funds of the charity. It should be analysed between unrestricted income funds, restricted income funds and endowment funds (permanent and expendable combined).

Particulars of Individual Funds and Notes to the Accounts

42. The notes to the accounts should provide information on the structure of the charity’s funds so as to disclose the fund balances and the reasons for them, differentiating between unrestricted income funds (both general and designated), restricted income funds, permanent endowment and expendable endowment as well as identifying any material individual funds among them. In particular:

(a) The assets and liabilities representing each type of fund of the charity should be clearly summarized and analysed (e.g. investments, property, plant and equipment, net current assets) between those funds unless this information is presented in a columnar balance sheet.

(b) Disclosure of how each of the funds has arisen (including designated funds), the restrictions imposed and the purpose of each fund should be provided. An indication should also be given as to whether or not sufficient resources are held in an appropriate form to enable each fund to be applied in accordance with any restrictions. For example, if a charity has a fund, which is to be spent in the near future, it should be made clear in the notes whether or not the assets held (or expected to be received) in the fund are liquid assets.

(c) Any funds in deficit should always be separately disclosed. An explanation should be given in the Annual Report. Designated funds should never be in deficit.

(d) Material transfers between different funds and allocations to designated funds should be separately disclosed, without netting off, and should be accompanied by an explanation of the nature of the transfers or allocations and the reasons for them.

(e) Where a total return approach to investments has been adopted, the notes to the accounts should give particulars of the movements in the value of the unapplied total return for the financial year. The note should reconcile the balance held as unapplied total return at the beginning with that at the end of the financial year. (See Appendix 3)

Branches

43. Before preparing accounts, trustees/office bearers must be clear as to the legal structure of the charity. A charity may operate through “branches” to raise funds and/or carry out its charitable purposes. Branches as defined in the Glossary will be accounted for as part of the whole charity. Further details on accounting for branches are in Appendix 5.

Statement of Financial Activities

Structure of the Statement

44. The Statement of Financial Activities is a single accounting statement with the objective of showing all incoming resources and resources expended by the charity in the year on all its funds. It is designed to show how the charity has used its resources in furtherance of its objects for the provision of benefit to its beneficiaries. It shows whether there has been a net inflow or outflow of resources, including capital gains and losses on assets, and provides a reconciliation of all movements in the charity’s funds.

45. In the Statement of Financial Activities the charity’s incoming resources and resources expended must be analysed so that the reader can see where its resources came from and what it spent its resources on during the year. As a minimum it must also distinguish between unrestricted income funds, restricted income funds and the endowment funds of the charity. All of the charity’s incoming resources and resources expended can be categorised between these funds, but a charity will not necessarily have funds of all three types.

Incoming Resources

General Rules on the Recognition of Incoming Resources

46.

RECOMMENDED

Contents

Incoming Resources

Fundamental Accounting Concepts