I have linked this article to a very detailed 422 pages report by KPMG which is a public document which described the happenings in Singapore Kidney Foundation.

In the KPMG’s report, Section 7 delved on the following subject-matter:
“Whether there had been any accounting and/ or fund raising irregularities:
KPMG found repeated instances of fund raising accounts being manipulated by irregular accounting treatments to comply with the 30/70 rule. In its report, KMPG also illustrated the accounting irregularities by reviewing the three events organized by third parties where NKF was named the designated beneficiary.

Before we proceed, we need to understand what is 30/70 Rule?
This Rule requires expenses incurred for each fund raising event to be capped at 30% of the gross amount of funds expected to be raised (otherwise known as the donation income). Also, NKF is required to account not only for direct expense but also for estimated indirect expenses such as staff costs and utilities. All funds raised must be reported gross in the NKF’s financial statement.
The following summarized the manipulation of the 30/70 rule:

(a) Omission Of Expenses from Specific Project Account:

• Omission of expenses from the specific project account like for example the cost of an apartment which is supposed to be the grand prize of the charity show and others like expenditure incurred on the purchase of donation bags and pens which remained unused was charged to general project account and not to the specific project account,

• Events-specific bonuses and CPF paid to certain staff of NKF involved in the charity show were not accounted as an expenses in the specific project account,

(b) Transfer To General Project Code instead of Specific Project Account:

• Transfer of expenditure like radio packages expenses, production charges and printing envelopes to general project code instead of the specific project,

© Manipulation of Rebates received

• Using media rebates from supplier to offset against advertising and promotion expenses,

• Rebates wrongly accounted for as sponsorship income and subsequently recorded by setting off against project expenses –gifts and rewards of the specific project,

• Amount pledged by suppliers or so called donations are not offset against the cost of purchase as trade discounts and offsetting these rebates against the cost of supplies, which significantly artificially inflated the clinical costs of the NKF in treating its patients and inflating the donation income,

(d) Revenue Being Wrongly Recognized Ahead of Its Realisation

• Proceeds from holding event was wrongly recognized in year 2003 even though the event or conference was actually held in year 2004,

• Revenue recognized ahead of realization whereby SKF’s service obligation has not

yet being fulfilled, ( accounting standard requires such incomes to be recognized as and when services are rendered by NKF and not when NKF is paid,

(e) Wrong Treatment of Sponsorship Income Received

• Sponsorship income received was not recorded on a consistent basis. Various inconsistent treatments were made like accounted for as income, offset against specific expenses, deferred in general sponsorship account and not even accounted for at all. Though there is no specific accounting standard to account directly for sponsorship income, the Singapore Financial Reporting Standards require as a minimum that any accounting treatment be applied consistently within and across accounting periods.

(f) Not Complying With Proper Matching Concept

• Bonuses for clinical foreign staff were not accrued in the financial statements,

• Long outstanding amounts included in recoverable accounts ( balance sheet item) was not monitored at all. ( If not able to recover, needs to write off into the Income statement)

(g) Others

• Incorrect reversal of GST on donation income,

There are similarities of NKF’s case compared to other accounting fraud wherein rebates were not been offset against cost of purchases but treated as incomes or offset against expenses in the Income Statement. It seems that there is blatant disregard for the correct way to recognize revenue. Revenue is recognized ahead of its proper realization thereby inflating revenue

Beside the aforesaid accounting fraud, we have many clear instances of disclosure issues on director’s interest. Corporate governance and the necessary corporate transparency are also inadequate within Singapore Kidney Foundation.