In late imperial China, public goods like basic education or bridge construction were mostly enabled with voluntary contributions of local notable individuals. They helped fill the gap in social needs and strengthened the spirit of charity among the locals through actions of giving. Philanthropy played an important role in ensuring the sustained functioning of society.
Conducting Policy Experimentation
Modern day researchers also recognise the non-profit sector’s role in providing public goods and conducting policy experimentation.
Rob Reich, Professor of Political Science at Stanford University, pointed out that foundations can take risks in “social policy experimentation and innovation that we should not routinely expect to see in the commercial or state sector” in his online article, ‘What Are Foundations For’, published in Boston Review in 2013. To put it simply, foundations are able to accomplish objectives that businesses and governments might not be able to achieve.
Singapore abounds in cases where the needs of under-supported social strata are met through the efforts of non-profit organisations. One such example is the Safe Home Scheme by the Community Foundation of Singapore (CFS), a registered charity organisation with Institution of Public Character status.
Seniors recovering from strokes or injuries need a safe environment conducive to their recuperation. However, they are often crippled by the need to make functional changes to their homes. The Safe Home Scheme provides a one-stop home modification service for financially disadvantaged elderly or persons with disabilities, and enables them to regain independence.
“The Safe Home Scheme is currently the only community-funded initiative for home modification in Singapore. It was a precursor to the basic home modification scheme now offered by the Housing Development Board (HDB), and continues to supplement needs by providing greater flexibility and customisation,” says Ms Catherine Loh, Chief Executive Officer of CFS.
Partnering with occupational therapists from TOUCH Community Services, more than 90% of applicants have shown functional improvements after receiving home modification. “The scheme helps about 90 financially disadvantaged individuals yearly, and has the potential to scale nationally,” says Ms Loh.
Enabling Individuals to Act Independently
‘The state should not do everything,” Mr Laurence Lien suggests in an opinion article published on Civil Service College website. Mr Lien is the co-founder and CEO of the Asia Philanthropy Circle and the Chairman of Lien Foundation.
The main consideration is that the government should let the community, family and individuals take on activities that they can, and only step in if the activities exceed the capacity of these individuals or small private groups.
“This approach recognises the autonomy and dignity of each human individual,” he comments.
It is actually an interesting point that is worth pondering. The ability to take care of oneself and act independently as individuals or small private groups is important, as it helps reduce stress on the whole economy and also increases individuals’ self-esteem and sense of actualisation.
While governments should refrain from doing too much, the non-profit sector – including religious organisations and voluntary associations, as well as smaller communities and the family – can serve as “mediating structures that empower individual actions and link the individual to the society as a whole”, according to Mr Lien.
Further Considerations for the Non-Profit Sector
In his article, Professor Rob Reich also raised some concerns about foundations, with one questioning whether the tax reduction benefits that foundations enjoy are justifiable. According to him, “the minority-supported, experimental, or controversial public goods funded by foundations will represent the diverse preferences of the wealthy, not of the wider citizenry”.
In general, foundations in the US enjoy generous tax subsidies. Not only are donations made by donors to the foundations more or less tax-free, but the assets which are part of a foundation’s endowment are also usually tax-free when invested in the market place.
Professor Reich expressed his concern that as foundations enjoy tax subsidies, people are actually paying in the form of lost tax revenues. This might be a valid concern, in the context of the US.
The Safe Home Scheme is currently the only community-funded initiative for home modification in Singapore.
When asked if there are tax incentives encouraging wealthier individuals to set up foundations in Singapore, Gerard Ee shares that “there are no tax incentives for the establishment of a Foundation in Singapore”. Gerard Ee is Chairman of the Charity Council, which advises the Commissioner of Charities on key regulatory issues.
“Quite unlike some other countries where there is an inheritance tax, Singapore does not have estate duty. Thus, today, Foundations are established out of altruism, continuing the vision of the patriarch, continuing a legacy such as preservation of Patriarch’s name, etc.,” he indicated.
Is Professor Reich’s concern of foundations enjoying tax benefits relevant to Singapore?
“Wealthy or not, every individual upholds their own values moulded from life experiences and upbringing. As such, causes supported would always be diverse,” shares Mr Ee. However, he also cautioned that though diversity is welcome in Singapore, there must be necessary OB (out-of-bound) markers in Singapore due to its unique racial and religious mix and its desire to uphold harmony and peace.
Dr Justin Lee, Research Fellow from the Institute of Policy Studies at the National University of Singapore, offers a different approach to the issue: one that questions the efficiency of the amount of resources used by non-profit organisations.
“Is it good enough that foundations do some good? Should we expect them to consider the universe of possible causes to support and provide some rationale for their decisions? In this case, I think they can do more,” Dr Lee comments.
According to Dr Lee, savvier donors and investors now demand greater accountability and ask harder questions about the larger or longer-term social impact of their donations to non-profit organisations. It is difficult to determine whether resources are allocated to the most critical needs as a whole though, due to less public scrutiny in this respect.
However, he also pointed out that with foundations diligently assessing the merits of each cause they are funding and routinely reassessing their own investment strategies and priorities, taking into account what the government and their peers are supporting, the risk of disproportionate allocation will be mitigated as a whole.
“Some foundations even play the role of ‘last resort’ funders that focus on causes that nobody else supports, ensuring some coverage of lesser known issues,” says Dr Lee.