SEC to conduct on-the-spot audit of foundations

The Securities and Exchange Commission (SEC) is planning to conduct on-the-spot audits on foundations to check if their business activities are legitimate.

Hubert Guevara, head of the SEC’s Compliance and Enforcement Department, said the move is intended to curb fraudulent fund-raising activities and money laundering.

He said the SEC will conduct a more comprehensive investigation and implement sanctions against the erring foundations which include the revocation of their certificate of incorporation.

While he admitted that the SEC lacks the manpower to monitor the activities of the country’s nearly 200,000 foundations, Guevara said the agency is now addressing this problem.

He said the conduct of on-site audits is an offshoot of the guidelines recently crafted by the SEC to curb fly-by-night foundations that have been making a killing in their solicitation activities.

He said the SEC is looking into the operations of seven to eight non-profit organizations posing as legitimate foundations. Some of these foundations, he said, use the name of politicians to get on with their solicitation activities.

In 2004, the SEC issued additional requirements for the registration of non-stock, non-profit organizations to ensure that donations are utilized according to the foundation’s purpose as stated in the articles of incorporation.

A foundation is defined by the SEC as a non-stock, non-profit corporation with funds established to maintain and aid charitable, religious, educational, athletic, cultural, literary, scientific, social welfare or similar activities primarily through extending grants or endowments.

Foundations applying for registration with the SEC are required to submit their plan of operations, executed under oath, by the president of such organization, specifying their mode of operations and source of funds. Applicants are also required to submit a certificate of bank deposit in the amount of not less than P1 million representing the funds to be used for extending grants or endowments.

Apart from these, foundations shall submit to the SEC, together with the financial statements, a statement of funds application, how much funds were raised, the names of beneficiaries and the corresponding amounts of funds granted or endowed. The corporate name should also contain the word Foundation.

The proliferation of foundations in the Philippines in the past several years have put into serious question their true motives. Observers point out that some foundations are being put up to accept bribes from political leaders and businessmen.