Calls have arisen for greater transparency on the part of charity NGOs regarding their audits and cash flow, as activists warn of unscrupulous organisations taking advantage of donation drives to turn a profit for themselves.
Ahmad Aliff AS Ahmad Shariffuddin, co-founder of SCRUT and Interepo, an online database service provider, said Bank Negara Malaysia allows 30% of NGO collections to be used for administrative costs including the salary of the founder or chairman of the group.
“This means some NGOs are used as a cash cow for certain irresponsible quarters,” he told MalaysiaNow.
“This is why we see some organisations going all out in collecting donations, including forking out money for online ads, billboards and media advertisements.”
There are also several other ways in which NGOs can gouge a profit, including by turning supplier.
“For example, you announce that you want to give face masks to B40 families at low-cost flats. You look for people to donate. Your NGO buys the face masks from yourself at full price,” Aliff said, adding that this can also be done through a proxy supplier.
Another method is by running a business programme alongside a waqaf or charitable initiative. Through this method, organisations declare that 100% of the profit from the company sales will be donated to the NGO run by a particular person.
“In truth, the person has already set his or her own salary in the company, which can be up to tens of thousands.
“The proceeds can even cover the cost,” he said. “Even if they profit RM10 and give RM10, it is considered 100%.”
He advised those looking to give donations to check the audit reports of NGOs as well as their management accounts, bank and even EPF statements.
“The audit report is to validate their income, profit and loss. The management account is to validate their expenses in detail, and the bank statement is to validate the cash flow,” he said.
“The public should be aware of how their money is being used, and organisations made accountable for every sen that enters their accounts.”
“The EPF statement is to ensure how much salary their staff and management receive monthly.”
Calls for donations have been rising of late in light of the situation in Gaza where hundreds have been killed with many others displaced.
Teo Ann Siang from Humanitarian Care Malaysia (MyCARE), a local group with a focus on Palestinian issues, said organisations registered with the Companies Commission of Malaysia (SSM) are compelled to submit regular audit reports.
Citing the example of MyCARE itself, he said it submits its audit report to SSM every year.
“Although the government allows 30% of collections for operation costs, we have capped it at 15%. Since 2010, though, we have never gone past 10% yearly.”
He said in Malaysia there is a lack of regulation regarding NGOs involved in donation drives, and agreed that stricter government oversight is needed of their financial activities.
Aliff meanwhile proposed that government agencies such as the Registrar of Societies develop a portal to allow members of the public to access information on registered NGOs, similar to the initiative by the SSM.
He said such data should be made public. “If we want to be a real developed nation, we have to promote transparency for integrity.
“Obscurity should be a thing of the past,” he added. “The public should be aware of how their money is being used, and organisations made accountable for every sen that enters their accounts.”