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Financial transparency, accountability critical to charity work

IN May 2021, Malaysian philanthropist Kuan Chee Heng, popularly known as Uncle Kentang, earned the Commonwealth Points of Light award for his outstanding volunteerism and community involvement.


He volunteered his services to the community, assisting the poor, needy and disadvantaged. Uncle Kentang is named after the Malay word kentang, which refers to the giving of potatoes to the underprivileged.
 
In order to relieve the financial burden of the poor and needy, he has also provided ambulance service, taxi service and the sale of products at a symbolic cost of 10 sen.

Some of Uncle Kentang's philanthropic efforts include a food bank, 12-hour suicide hotline, assisting abused women and children in finding shelter and organising community police teams to keep crime at bay.
 
His attempts to serve the community have recently been aided by Prasarana, which has offered him one of its corporate social responsibility spaces in one of its LRT stations to put up a 10 sen store.

Issues surrounding Uncle Kentang's mishandling of public donations have recently gained public notice and raised concern. His organisation may be in jeopardy after a snafu earlier this month.
 
When Uncle Kentang allegedly offered a car for RM1 to a woman who had branded items, netizens questioned his sense of compassion. Netizens have begun to worry where their contributions are actually going.

Uncle Kentang recently held a news conference but was unable to offer credible answers to netizens' inquiries.

With all of the philanthropic efforts done, Uncle Kentang must be accountable to the stakeholders in order to maintain public trust and confidence. Good governance practices must be adopted and implemented by charities to guarantee that charity assets and funds are effectively protected, managed and accounted for.

Mismanagement can have major repercussions for a charity's sustainability, therefore corporate governance and public accountability are crucial.

It is essential to equip charities with ethics, sound governance, as well as resilient structures, procedures and positive behaviour in order to provide effective service to their beneficiaries.

Securing effective management accounting processes, as well as the capacity to analyse and plan programmes will aid in the stakeholder value creation.

Donors will have trust in the monies they have donated if there is transparency and accountability along with strong disclosure procedures in financial management.

To stay afloat in the long run, charities must follow strong accounting and financial standards as components of good governance. Because they rely so heavily on donations, charities must be accountable and give accurate financial reporting information.

If charities use fund accounting, they can produce high quality financial reports. Fund accounting is a type of accounting that any charity can use, regardless of the financial reporting framework they use or the size of their organisation.

The foundation of fund accounting is the creation of a number of distinct funds for accounting purposes. Each fund has its own incoming resources, or income and expenditures, as well as its own assets and liabilities.

Each fund is also handled separately from the others. Fund accounting allows a charity to account for and track the revenue, spending and balance of each fund independently.

This is particularly critical for operational reasons. A charity may specify which precise fund each item of revenue and expenditure should be entered into when several funds are formed, each with a different designation and function.

This allows the charity to keep track of the quantity of money it receives, how that money is spent and how much is left over.

We recognise the critical role of the community, such as Uncle Kentang, in providing charity services in our neighbourhoods, as well as the challenge of giving aid to people in need, particularly in rural areas, and we praise philanthropic efforts to address such needs.

Nevertheless, strong financial reporting and controls are desirable to avoid financial abuse and misuse of resources and funds.

Public confidence may be gained by financial transparency and accountability, which leads to long-term charity efforts.

The writer is associate professor at the School of Business and Economics, Universiti Putra Malaysia
 
Source: New Straits Times, 16 March 2022

Tarikh Input: 28/03/2022 | Kemaskini: 04/04/2022 | syazmer

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