Accounting life. Give a little bit

Transcription

1 Give a little bit Pro bono services won t add to your bottom line, but giving back to the community will leave you feeling warm and fuzzy. Cameron Dueck talks to accountants who use their financial expertise to help Hong Kong charities Illustrations by Cameron Law

2 Owen Chan, in his spectacles and conservative grey suit, looks every bit the senior accountant focused on the company s bottom line. But underneath that solemn appearance lies a big heart concerned with more than financial profits. The Ernst & Young tax and business advisory partner is one of many Hong Kong accountants who provide pro bono accounting services to charities and nongovernmental organizations by serving on their boards, offering advice or auditing their annual reports. Chan is keen to make a difference: He wants to interact with the people he helps and see what impact his work has on their lives. That s why he became the chairman of Hong Chi Association, which serves Hong Kong s mentally handicapped, using his financial expertise to help improve the efficiency of its work. In business, your whole purpose is to make money for the organization. In an NGO, your purpose is to make the people it serves happy. Accountants can help align the mission and vision of the association more closely with the actual execution. And the more you learn about the clients, the more you grow in your compassion for them. Without this, I d be a very different person. I d probably be less approachable. It makes me feel happy, and I m satisfied by the work, Chan says. And Chan s skills are in high demand because smallto medium-sized charities in Hong Kong often don t have access to the professional business services that their larger counterparts do, according to Nancy Yang, the executive director of Asia Charity Services, which helps NGOs find business professionals to provide pro bono services. Skill-based volunteering is generally more established in the U.S. and the U.K., Yang says, adding that there are about 6,000 charities registered in Hong Kong, of which at least 80 percent are small- to medium-sized. Not having these skills can keep charities from reaching the next level, Yang says. Most donors want to give towards a project, such as a new library or school or 10 bags of rice. But to build that library or deliver that food, you need operational capacity and business capacity. Management gap Strengthening the organizational structure of Hong Chi Association has been a key focus for Chan, who commits an average of 1.5 hours per day to the mission, considerably more than most pro bono professionals. They had no accountant, so they asked if I could help look after the budget. Then they said they didn t have an accounting procedure, and if I could develop one, so I did those things. Then they asked if I could help with treasury functions, because they had some money and didn t know what to do with it. We moved into internal controls, and they asked if their capital structure was okay, Chan explains. He went on to review Hong Chi s memorandum of association, its tax-exempt status and corporate governance policy. He also helped create an audit committee, which he says is uncommon among charities. Chan says all of these meant that Hong Chi s 1,500 staff became more efficient in serving their 7,000 mentally handicapped clients with education, job training, residential services, recreational programmes and professional therapy. Charities are often founded by caring people who are experts in their sectors but do not have the business skills to run a large organization, says Nick Debnam, a partner at KPMG China who provides pro bono audits for Hong Kong Youth Arts Foundation, which organizes art projects, exhibitions and performances for young people. If they don t have the financial side, they need to bring in someone who does. So there is May

3 When I started working with NGOs 15 years ago, most had no idea about financial reporting and accounting standards. We can help make their presentation more understandable and highlight their features and needs, as well as make sure they comply with accounting standards. 28 May 2011

4 a role for accountants in Hong Kong s charities, he says. Debnam looks at the foundation s financial controls, accounts, balance sheet and overall structure. He gives them guidance and advice when they ask for it, although his role as auditor means he must maintain a degree of independence from the organization. He also works with the Royal Society of St. George, which supports the English community and funds a variety of local charities. Charities often seek more funds from donors when their coffers run dry instead of reducing their costs and generating a better return on investment for their donors. Accountants can help charities make more efficient use of their money and raise more funds. From these pro bono positions, you get involved in advising them on running events and making sure we are making money for the charity. That is an area where an accountant can really help, Debnam says. Wong Kai-man is a retired PwC partner and the honorary treasurer of Breakthrough, a police-run Christian organization that uses sports and positive role models to help troubled teenagers and first-time offenders. He is also on the board of Haven of Hope Christian Service, which runs clinics and elderly nursing homes across Hong Kong. Wong says his accounting expertise helps these organizations in three ways. Firstly, he can offer financial management advice when they need to raise funds. Whether they rely on government funding, private donors or are self-financed, each model has its own management requirements. Secondly, an experienced accountant can offer guidance on an organization s strategic development and help it understand the financial implications of expanding new activities. Lastly, and most importantly, an accountant can help the charity present its financial information to the public that finances them. When I started working with NGOs 15 years ago, most had no idea about financial reporting and accounting standards. We can help make their presentation more understandable and highlight their features and needs, as well as make sure they comply with accounting standards, Wong says. In the 1980s and 90s, the Hong Kong government began paying an increasing share of charity budgets. However, the funding terms included government control over pay scales, job descriptions and staffing levels, allowing charities very little management flexibility. The introduction of the Lump Sum Grant Initiative in 2001 gave charities control over their own spending. NGOs are increasingly in demand of financial management expertise with the Lump Sum Grant method, and because the government is encouraging them to find other financial resources. So there s a need to present the financial information to potential donors and supporters, Wong says. The need to be accountable to your donors creates a considerable amount of accounting work. Daniel Lin, managing partner at Grant Thornton Jingdu Tianhua, says some of the larger Hong Kong charities he has worked with become overwhelmed by their elaborate system of internal controls and accounting. Some of them need to streamline internal systems, Lin says. They have a lot of stakeholders to please, from the government to the private sector, and a big NGO can have many schools and hospitals, each of which has fundraising events that have separate accounts. All of that needs to be audited. Choosing your charity Accountants say choosing a charity to serve often comes down to personal relationships, although more personal motivations such as religion or one s own experience with illness can also play a role. Lin says in the past, he provided honorary audits for Yan Oi Tong, the WWF, various Hong Kong sports federations and others. His firm is expanding its pro bono clientele and Lin says they are more likely to take on a new charity client if its year-end coincides with his firm s slower season, an important tip for charities seeking accounting assistance. Then there are the risks that come with a new client. Lin says whether you are auditing a paying client or a charity on a pro bono basis, the key is to treat the work with the same due diligence you would give other clients. We really need to make sure, even more than on jobs where they are paying fees, that we put the right resources into it or the risks would only increase, Lin says. When an accountant decides to donate time to an organization, they are putting their own reputation at risk. The risks of each such relationship need to be carefully considered, and often the best method is to work with charities run by people you trust, says KPMG s Debnam. There are plenty of scandals around the world, and the last thing you want is to commit time and have your name on something like that, he says. You have to May

5 trust the management team at the charity and believe in what they are doing. The Institute has published a guide on corporate governance for public bodies to assist charities with their governance issues and reduce risks. We have been advising members to insure that the risk of professional liability be minimized if possible, says Philip Tsai, president of the Institute. Make sure there is some kind of indemnification, disclaimer or that your professional insurance will cover this work. Another risk is that the CPAs expertise may not be embraced. Charities operating in a comfortable rut may not welcome a financial professional brimming with ideas on how to restructure and become more efficient. Just as with any client, E&Y's Chan says a CPA needs to suggest changes and improvements to a charity with tact and consideration for the founders and longterm volunteers who have poured their hearts into the organization. More than material gains Chan says in the past Hong Kongers who entered the accounting profession were often trying to lift their family out of poverty and therefore may not have had spare time for charity. Today, financial gain is not the only consideration for young accountants: They are keen to achieve a good work-life balance and are therefore more likely to consider pro bono work. Chan tries to recruit other E&Y staff to join his cause. He invites them to events, gets them involved in fundraisers and enters teams of young associates in charity races. While the returns of providing pro bono services cannot be tallied on a balance sheet, Chan says he feels happy seeing mentally handicapped people gain the skills to enter the workforce. KPMG s Debnam says he gets his warm feeling when he attends Youth Arts Foundation productions, where young people always impress him with their theatrical talents. Wong says Breakthrough s work with troubled teenagers has shown him there is more to life than the sums and balances of the accounting world. Working with NGOs expands my horizons, he says. Grant Thornton s Lin says being able to apply his skills is simply a good feeling. It s not something you measure or consider when you take on this kind of work. It s like donating money. You don t expect anything back. You do it because you feel it s a good cause. We could go paint a house, but we re not painters. It s about utilization of our time, making a better contribution and making sure the recipient of our services gets the maximum benefit. And the best way of doing that is to provide pro bono audit services to charitable organization, he says. Institute initiatives The Institute runs several programmes that help accountants get involved in our communities Rich Kid, Poor Kid is a corporate social responsibility programme that teaches children about why money is important, but not too important. Accountants visit schools and speak to the students about their money habits and choices. Each session takes about 1.5 hours. There are storytelling sessions for primary school students and road shows for secondary school students. Free Public Advisory Service Scheme brings accountants face-to-face with the public to advise them on their financial management, taxation and other accounting-related issues. More than 300 members volunteer for the service, with sessions held every Thursday from 6 to 8 p.m. at the Institute s office. Smart Way Forward is another educational programme using accountant ambassadors to help secondary school students better understand the profession and the business world. The Institute is also introducing a new programme called Computer Provisioning Aid, which will provide free, refurbished computers to low-income primary and secondary school students. The Institute has committed HK$150,000 to refurbishing computers donated by its members for the programme. The Institute also supports local and international charities by raising money for their social services and emergency relief projects. 30 May 2011