Addressing misuse of funds: Enacting a comprehensive Charities Act will curb abuse of power and leakage in donation fund management, and also enhance public confidence.
PETALING JAYA: Putrajaya should no longer delay the tabling of a law to regulate charities to curb any misappropriation of funds and maintain the public’s faith in such charitable and welfare associations, says an anti-corruption watchdog.
Malaysia Corruption Watch (MCW) president Jais Abdul Karim believed that enacting a comprehensive Charities Act will curb abuse of power and leakage in donation fund management, and also enhance public confidence.
“This will mark a significant step in institutional reform towards building a culture of governance based on integrity and accountability,” he said.
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In July last year, Minister in the Prime Minister’s Department (Law and Institutional Reform) Datuk Seri Azalina Othman Said announced that the government is conducting a study to enact a Charities Act that will pave the way for the setting up of a Charities Commission.
This is intended to address any misuse of funds donated to charities.
Despite security checks by the police and the Malaysian Anti-Corruption Commission (MACC), there were concerns that funds might still be used for money laundering and in certain cases, the sources of these funds were unclear, she told the Dewan Negara then.
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Jais, when contacted yesterday, said MCW is ready to provide further input and recommendations to the government in drafting the Bill to ensure that it is effective without burdening legitimate and honest charitable organisations.
The law, he said, should have provisions on registration and annual reporting.
“All bodies or organisations collecting charity funds must be officially registered under a designated entity; for example, the Registrar of Societies, Companies Commission or a special regulatory body.”
“They must also submit independently audited annual financial reports,” he said.
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Aside from that, he also proposed provisions that would enable transparency and access to information.
“Charitable organisations should publicly display information on fund management, the percentage distributed to target recipients and administrative costs on public platforms regularly, so the public can assess their level of transparency,” he said.
The law must stipulate punishments for those who misuse donations, including criminal and civil actions such as account freezing, fundraising ban and court prosecution, he added.
MCW believed that this step is an urgent necessity following several high-profile cases which have undermined public confidence in the transparency of donation management, he said.
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“Donors, whether individuals or corporations, must be assured that their contributions are managed with integrity, transparency and reach the intended beneficiaries,” he added.
MACC chief commissioner Tan Sri Azam Baki said that a dedicated commission would help regulate and monitor NGOs, which collect donations, more closely.
At present, he said, there is no regulator on charities and their usage of funds.
He said the existence of a Charities Commission would help ease the burden of MACC.
“It would provide a more structured oversight mechanism and help ensure transparency and accountability in charity work,” he said when contacted.
Azam said that MACC would investigate complaints received about funds of such charity groups.
“We will verify and assess the information, especially in cases involving significant sums or matters of public interest,” he added.
Federation of Malaysian Consumers Associations (Fomca) vice-president Datuk Indrani Thuraisingham said if the proposed Act is rooted on best practices globally, it can prevent abuse of charitable funds, enhance public confidence and empower responsible civic action.
“However, this legislation should not compromise the independence of civil society organisations and their civic space to operate.
“A balanced enabling regulatory environment encourages innovation, allows flexibility in service delivery and safeguards freedom of association and expression,” she said.
She proposed that the commission be independent and function as a non-partisan commission to register, monitor and investigate charitable organisations.
“All charitable bodies receiving public donations above a threshold must be registered,” she said.
In terms of governance and accountability standards, she said there must be provisions requiring proper board governance, addressing conflict of interest declarations and risk management frameworks.
Audits must be mandated for organisations exceeding a funding threshold, in addition to annual financial and narrative reporting requirements.
There must also be an open-access public register of charities with key financial and programmatic data.
She said fundraising methods, including social media and third-party collectors, must be regulated.
For this, she proposed a Donor Bill of Rights to be established to ensure transparency, data privacy and accountability.
The commission must also have power to investigate suspected misuse, issue directives, freeze assets and remove trustees or directors while whistleblower protection must be provided to employees, volunteers and beneficiaries reporting unethical or illegal practices, she added.
Pushpan Murugiah, CEO of the Centre to Combat Corruption and Cronyism (C4), said there is no law that explicitly regulates these groups, with there being ambiguity on the legal definition of what constitutes an “NGO” or “charitable body”.
This had allowed “bad actors” to escape accountability, he said.
“It is critical that the government pursues reform that improves the governance of these bodies.
“A possible proposal could be the establishment of a singularly responsible oversight body to govern the activities of charitable bodies.
“This, alongside other reforms – such as a Political Financing Act, transparent beneficial ownership regulations and a Procurement Act – would ensure that charitable bodies are not abused for corrupt purposes.”
“It must be emphasised, however, that increased regulation and oversight must not be used as an excuse to unfairly discriminate against NGOs.
“In the past, the Registrar of Societies has been accused of disproportionately targeting organisations that oppose the government of the day – with the withholding of registration being a key example,” he added.
Pushpan said sufficient safeguards must be in place to ensure that the body acts impartially and independently.
