Who’s earning what in the charity sector

by Johannes Tjendro

SAY voluntary welfare organisation (VWO) and a certain image comes to mind: volunteers giving out bags of rice to people in need, students with donation tins, and the carnival or lucky draw to raise funds. Eight in 10 charities want the label dropped, according to a survey cited by the National Council for Social Service (NCSS) recently (Jul 6)**.

They prefer “social service organisations**” which would give them a glint of professionalism, as well as greater public acceptance to operate more like businesses. Nominated Member of Parliament (NMP) Chia Yong Yong agreed that the charity tag “has become a burden to us”. “We are shy to make money. There is nothing wrong with increasing income because it helps us to run our programmes and serve our clients better,” she added. Ms Chia also holds positions in a few charities.

But just how business-like should charities be? What are people’s expectations of the work of VWOs? How much should people be paid for running a charity? What are they being paid now anyway?

On Jun 4, news broke that the Bone Marrow Donation Programme (BMDP) was being audited for “excessive” use of donations on marketing and entertainment. The audit also cast doubt on BMDP’s “charitable” nature since the cost of the services offered to patients was recovered from patients, with a “mark-up”.

BMDP denied this, saying that: “The administrative fee is designed to cover all the costs of running the programme on a break-even basis.” The charity also defends its marketing investment, saying that it is necessary to address “one of the main challenges for the BMDP [that] is educating the public to understand that bone marrow donation is a safe and straightforward procedure with no long-term side effects”. It believes that “the more people understand this fact, the more people we [it] can add to the local volunteer donor register and the more lives we [it] can save in Singapore”.

Two weeks later (Jun 18), three people linked to the Bone Marrow Donation Programme (BMDP) were reported to the police for falsifying records, said to be about salary increments, to deceive officers from the Ministry of Health and the Commissioner of Charities.

Charity executives’ salaries: A look at the numbers

TMG looked up the salaries of the chief executives of charities in Singapore, in particular Institutes of Public Character (IPCs) that received more than $10 million in annual income. IPCs are charities that are held to a higher governance standard and whose donors qualify for tax exemptions. We focused on charities in the social and welfare, and health sectors which are more well-known to the layman as charitable organisations, although we also looked at those which deal with the arts and heritage, education and others.

The salaries are stated in their annual reports, but most fight shy of giving specific numbers. Under the Code of Governance for Charities and IPCs by the Commissioner of Charities, such IPCs are required to disclose the salaries of three highest paid staff in bands of $100,000. For the purpose of our research, we take the midpoints of the given salary bands. For example, if the salary is declared to be between $250,000 and $300,000, we state it as $275,000.

At the top of the table is the NCSS Charitable Fund with its chief executive, Mr Sim Gim Guan, earning about $550,000. NCSS is a statutory board under the Ministry of Social and Family Development.

But it is the health charities which dominate the top of the table.

Only second to NCSS is the National Kidney Foundation (NKF), infamously known for paying its chief back in 2004, Mr T.T. Durai, a whopping $600,000 in annual compensation, prompting the public to cry foul. More than a decade after Mr Durai stepped down from the management, the NKF is now the second highest paying charity with its highest-paid staff* earning about $475,000.

The next five highest-paying charities are all community hospitals: St Luke’s Hospital, St Andrew’s Mission Hospital, Ren Ci Hospital, Bright Vision Hospital, and Ang Mo Kio – Thye Hua Kwan Hospital, all of which pay their highest-paid staff* upwards $300,000.

Higher revenue equals higher pay – is it justified?

We used the data we had collected to generate the chart below. From the chart, we can see that the top executive’s salary is strongly correlated to the charity’s income, that is, the bigger the charity, the more it pays its top executive. The two highest-paying charities, NCSS and the NKF, are also the two biggest charities – the only ones with annual incomes surpassing $100 million dollar.

We also estimate statistically that for every additional $1 million in annual income of a charity, its chief executive can expect to earn about $2,700 more in annual salary.

A regression analysis indicates a strong positive correlation between salary and income with r = 0.76. A figure of r = 1 denotes a perfect correlation, while r = 0 means there is no correlation. The 2004 NKF number is omitted from the analysis.

So does higher revenue, that is, more effective fundraising justify higher salaries?

When the controversy over Durai’s $600,000 paycheque first erupted in 2005, the wife of then Senior Minister Goh Chok Tong defended it: “For a person who runs a million-dollar charitable organisation, S$600,000 is peanuts as it [NKF] has a few hundred millions in reserves.” While Mr Goh later explained that the point that his wife was trying to make was that “the right person must be paid the right wage”, the public would not have any of it. Indeed, Singaporeans were “generally quite critical of her remarks,” Mr Goh would later admit. He also intimated that “she regretted what she said”. Two days after she made the remark, Mrs Goh, who was then NKF patron, stepped down from her position.

At the parliamentary debate over the scandal, the then Health Minister Khaw Boon Wan listed four points which should be considered before jumping the gun on whether Mr Durai’s salary was in fact too large: the size of the job, how the pay package was determined, if there were any salary benchmarks, and the measured performance of the chief executive.

Mr Khaw also reckoned that some charities needed professional fundraisers, so that they could focus on providing services to their beneficiaries. “Under such a model, it may not be wrong to incentivise performance of fundraisers based on funds raised,” he said.

In response to TMG’s query on how active charities should be in raising money and speaking in her capacity as NMP, Ms Chia Yong Yong said: “While it is important for charities to remain prudent, they also need to set their sights on being able to serve more effectively the people they are helping, and to consciously develop appropriately.” But the cost, she said, should be balanced against the fundamental principle of serving vulnerable members of the community well.

Executive remuneration should depend on meeting KPIs set by management and directors, but even so “the key deliverables may not be as straightforward as that of profits for commercial companies”. What’s needed is “a composite set of results that include reach and impact on the clients served”.

But are Singaporeans ready to accept that charities need to pay competitively in the name of professionalism?

There are those who believe that one should only work in charities for noble reasons rather than being “in it for the money”.

But there are also some who advocate paying charity workers decently.

What about charities paying professional fundraisers?

Some still consider engaging professional fundraisers “a luxury in charity industry”, reinforcing the idea that charities must be run in austerity.

But there are also others who support charities getting professionals to raise funds.

The Code of Governance for Charities and IPCs does, in fact, talk about the use of professional fundraisers. It advises charities to be cautious about “how the public may view its use of third party fundraisers”. Furthermore, it stipulates that: “The use of a third party fundraiser, its rationale and fee arrangements should be approved by the [charity’s governing] Board and disclosed to potential donors.”

It also discourages paying third party fundraisers “based on the value of donations raised”. Yet, charities are expected to follow a 30/70 rule that prescribes charities keeping their total fundraising expenses below 30 per cent of total gross receipts originating from fundraising and sponsorship.

The Code also has something to say about tying remuneration with performance. It mandates that charities ensure that its remuneration system links “any performance-related element in the remuneration package” with the fulfillment of “measurable and clearly defined targets in line with the charity’s objectives”. While it does not specify revenue as an example of such targets, it is not unreasonable to say that revenue affects a charity’s ability to fulfill its objectives.

The other “charities” – double standards?

To be clear, the chiefs of these charities in the social and welfare, and health sectors still don’t make as much as some of those in other sectors. Under the arts and heritage sector, National Gallery Singapore (NGS) pays its chief Ms Chong Siak Ching about $850,000 a year, while Mr Benson Puah of The Esplanade rakes in about $650,000. Gardens by the Bay, a charity under the “others” sector, pays its chief Dr Kiat W. Tan about $675,000. Football Association of Singapore, a sports charity that was recently investigated for financial impropriety, pays its chief Mr Winston Lee about $450,000.

The Charities Act exempts certain educational institutions from the Charities Accounting Standard, which means they are not even required to disclose their chief executives’ salaries. These include G schools, G-aided schools, independent schools, and five of the six public universities – Singapore Institute of Management being the exception. The universities are among the biggest charities, earning much more in annual incomes than regular charities: National University of Singapore (NUS), being the largest, has more than $2.5 billion in its annual revenue.

Every year, charities are required to submit a Governance Evaluation Checklist, in which they declare their compliance with the Code of Governance for Charities and IPCs, or explain their non-compliance otherwise. In their latest submissions, all five of the non-compliant varsities simply noted as an explanation that this is “in accordance with the requirements of the Companies Act and Financial Reporting Standards”.

But what they do declare is the total amount paid to all of its key executives. For example, in 2016 NUS declared that it paid 22 key executives a total of $14.6 million. That’s a whopping average of $660,000 per person.

Despite the pay gap, all charities are of the same institutional species. The Commissioner of Charities define them as “organisations which: operate on a not-for-profit basis; are set up exclusively for charitable purposes; and carry out activities to achieve these purposes”. Here, “charitable purposes” encompass a broad range of interests that are deemed to “benefit the public”: from those more identifiable to the layman, such as poverty, youth, age, ill-health, and disability; to others like education, religion, citizenship, community development, arts and heritage, science, the environment, animal welfare, and sport.

Moreover, charities regardless of sector employ the same modus operandi and are subject to the same Code of Governance. They all rely on donated funds to finance operations and programmes directed towards achieving their respective “charitable purposes”, different though they may be. And if the BMDP seeks to recover its costs “on a break-even basis”, The Esplanade barely recouped 54 per cent of its expenditure in 2016.

Perhaps the difference is that charities in these other sectors face greater pressure or need to be more business-like than those in social and welfare, and health.

The various grants from the G and the Singapore Totalisator Board that helped The Esplanade to plug its deficit “are awarded under strict conditions and increasing emphasis on Esplanade’s earned income”. There’s even a suggestion by former NMP Calvin Cheng to pull the plug on arts funding because “one person’s art is another person’s garbage“.

So raising funds effectively, using business-like methods or otherwise, and attracting talents who can do just that become all the more important. Likewise, our public universities may justify their high pay with their need to attract the brightest talents both locally and internationally.

But shouldn’t charities helping our poor be run by the best talents too?

The issue might lie in the differing perceptions the public attaches to charities of different stripes. Presumably, it is easier for these other charities to get away with paying higher salaries because the public doesn’t recognise them as charities in the first place.

In a country, where “the road to success… has always been focused on academic credentials”, working in a university may be viewed with prestige. Likewise for arts and heritage charities since art tends to be viewed as elitist – something that is only appreciated by a select, wealthy, few.

In other words, people don’t expect those working in NUS, The Esplanade, and the likes to work solely for noble reasons and be content with less than average pay, as much as they do with those working in the social and welfare, and health charities. Don’t even mention Gardens by the Bay – one of the biggest tourist attractions islandwide.

If anything, the BMDP case goes to show that the biased public perception of social and welfare, and health charities being “charity cases” themselves may need to change.

Editor’s notes:

*The salary numbers are those of the highest-paid staff in the respective charities, who is not necessarily the chief executive as originally stated.

^Colonel Lyndon Vernon Wayne Buckingham is the top staff at The Salvation Army, but not the highest-paid.

**”Social service enterprises” from Mr Hsieh Fu Hua (NCSS president)’s statement last year was previously stated instead of “social service organisations”.

^^Mr Edmund Kwok was the CEO during the period corresponding to the salary report, not Ms Eunice Tan Beng Neo as earlier stated.

We apologise for the errors.

Additional reporting by Sharanya Pillai and Danielle Goh.

Featured image by Google user Nick Youngson. CC BY-SA 3.0.

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