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The 30/70 rule, as it is commonly known, states that fund-raising expenses cannot exceed 30 per cent of donations collected through such events in a year.
Though the rule keeps charities on their feet - ensuring that the bulk of donations collected goes to beneficiaries, instead of paying off fund-raising bills - many groups say it puts a crimp in their efforts.
For instance, under the old rule, the cost of a gift donated for a charity auction - a car, for example - had to be added to the cost of staging the event.
This meant that the auction had to raise a huge amount of money to fall within the 30/70 rule. As a result, some charities have turned down such offers of expensive gifts for fear of flouting the rule, which can lead to penalties such as a fine, suspension or revocation of a charity's Institution of a Public Character (IPC) status.
The IPC status allows a charity to collect tax-exempt donations.
In the past year, some groups took their concerns about the rule to the Charity Council, the panel of experts advising the Commissioner of Charities.
Yesterday, council chairman Fang Ai Lian said the 30/70 rule has been changed to make it 'fairer' for charities.
The changes mean:
This is a big boon for charities.
In the past, if a charity wanted to, say, sell cookies to raise funds, the cost of the cookies would be counted as a fund-raising expense.
This means that if a box of cookies costs the charity $10 to buy, it would have to sell it for at least $34 to meet the 30/70 rule.
'Nobody would want to buy a $35 bag of cookies,' said Mrs Fang.
Yesterday, the Commissioner's Office said the change is not a relaxation in governance standards for charities, but a move to address feedback from charities on the practical difficulties they face in fund-raising.
To ensure transparency and accountability, charities have to declare all the sponsorships they receive in their financial statements.
Charities cheered the change as they now would not have to turn away donors and can approach more firms for in-kind sponsorship, for items such as television sets.
Mr Ho Sun Yee, chief executive of the Singapore Heart Foundation, said: 'Previously, the more in-kind sponsorship you get, the more likely you are to bust the 30/70 rule.
'And it's hard to reject sponsors. They may think we don't want to accept their gifts.'
Phew, thank goodness no one hit a hole-in-one
Here's how the rule change will help charities
EACH year, sponsors give the Singapore Heart Foundation a luxury car costing up to $200,000 for its annual golf event.
The car is offered as a prize for hitting a hole-in-one.
So far, no one has won the prize, and the Foundation is relieved.
Its chief executive officer, Mr Ho Sun Yee, explained: 'Although the car is sponsored, if someone did win, we would have to include the cost of the car to the total cost of staging the event. And that would have busted the ratio.'
Mr Ho said the previous ruling put the charity in a very difficult position: It would have bust the ratio if someone had won the car, but without it as a prize, 'it's difficult to attract people to play'.
TO RAISE funds, the Make-A-Wish Foundation is currently selling magnetic photo frames at $5 - more than three times the cost.
The charity is selling 10,000 frames, which cost about $12,000. To meet the rule, it has to sell the frames for at least $40,000.
The foundation's CEO, Ms Debbie Seah, said that the rule change means the selling price of the frames can be lowered.
This would mean it could sell more of the frames, and thus raise more money.
IN 2003, Yong En Care Centre was one of the beneficiaries of the Great Singapore Duck Race.
Yong En paid $1.50 for each duck and, to meet the 30/70 rule, it had to sell each for $5.
The charity sold under 10,000 ducks.
The centre's executive director, Mr Benjamin Chen, said that if the new rule had been in effect then, 'we could have pitched it according to market affordability instead of marking up the price by 70 per cent, and sold more'.
MELISSA SIM
