Fashioning new government-mandated charity policies for accountability and transparency


Karla Simon

Karla Simon

Karla Simon

At the present time the Chinese Ministry of Civil Affairs (MoCA) has a very robust web portal for civil society, both nationally and for the local bureaus. The national web portal has online application and filing mechanisms for acquiring registration or changing registration and for filing annual reports. On the basis of such reports, all CSOs are awarded ‘grades’ and they are required to prominently display the plaques showing the grades awarded in the annual inspection. These processes are obviously designed to enhance accountability and transparency for CSOs.

Nonetheless, as previous posts have made clear, reliability of CSOs – in particular the GONGO-type foundations such as the Red Cross Society – has been called into question in recent months. Donations to CSOs of all types have plummeted as a result.

After a report unveiled by a subdivision of the Ministry of Civil Affairs showed that about 75 percent of charitable organizations in China either lack or have no guidelines on the disclosure of information, MoCA has taken these facts into account and has responded in important ways.

First, in the Five Year Plan for the Development of Charity published in July 2011, MoCA pledged to adopt ‘rules that allow for an organized and regulated system that will encourage further charitable initiatives from various enterprises’. Specifically these will be:

i) the implementation of the charity law;

ii) regulations pertaining to community fund raising and volunteerism; and

iii) new regulations for the management of social organizations (including foundations and non-profit social enterprises).

As the document makes clear, it is hoped that better tax incentives for donations and other policies will encourage the community to further participate in charitable activities. And to address the prolific problems facing charities, ‘such as the complexities of registration; lack of transparency; inaccurate accounting figures [it states that] a well-regulated system with targeted policy measures will be created to ensure a healthy and ideal environment within which charitable enterprises may grow and thrive’.

Second, in pursuance of the goals stated in the Five Year Plan, MoCA issued a discussion draft of ‘China Charity Donation Guidelines’ on 23 August 2011 (not yet published in final form). They are designed to give registered charities in China broad guiding principles for the sector’s development over the next five years. The guidelines cover:

• methods to improve the information publicity system;

• requirements to standardize the management of donated funds and uses of donated materials; and

• measures to maintain the legitimate rights and interests of donors and recipients in accordance with relevant regulations and policies.

As to the disclosure guidelines, one article says that information disclosure should be timely and accurate and that complete disclosure of information must be made to ensure true reporting. Another states that information disclosure should endeavour to report to donors, the public and relevant government authorities in a timely, and provide convenient access and access to the full disclosure of information.

There have been criticisms of the documents issued by MoCA because they are lacking in specificity. For example (and in addition to the criticisms I discussed in my last blog post), Business for Social Responsibility China has come out for more specificity with regard to the Five Year Plan, noting that while the principles represent a step in the right direction, more guidance and clarity will be needed for effective and lasting changes. In addition, BSR has urged MoCA to step up its efforts to create a ‘Corporate Giving Guide’ that will help companies effectively use resources for social and environmental challenges, which necessitates greater accountability and transparency on the part of CSOs.

In assessing the degree of disclosure specificity that might be sufficient, I have suggested elsewhere that China look to the model of Singapore, whose 15-member Charity Council oversees the sector there. The Council is made up of a five-person representing government agencies that work on social welfare agendas as well as 10 public representatives, including some from the sector itself. This model of charity oversight reflects the model of the Charity Commission for England and Wales, and a similar entity created by recent legislation in Japan (the Public Benefit Operations Council).

One of the aspects of Singapore’s charity oversight is that it includes a Code of Governance (available in both English and Chinese). There is also a Governance Evaluation Checklist for charities to use to assess their own progress in meeting the governance standards promulgated by the Council. The checklists must be filled out by a board member annually to allow the charity to self-evaluate its own progress toward meeting the goals of the Code – but the filing is with the Charity Council, which means that the staff will also see the document and can use it to ‘audit’ the performance of the charity.

The Code has different tiers, one set of basic rules for very small charities (up to Sing$50,000 in annual income), but they grow into a very complex set of rules for larger charities (the advanced set of guidelines). For example, the rule with regard to smaller charities is that they should have a conflict of interest policy, while the more stringent rules elaborate how such a policy should apply in specific instances, what charities must require of managers and board members, etc. In each case, of course, the more stringent rules allow smaller charities to see how they might fashion their policies for e.g. ethical and transparent fundraising, financial management and other operational controls, accountability to members and donors, etc.

It is important to note that the guidance given with regard to what is required in charity governing instruments addresses these issues as well. For example, as to the required Conflict of Interest Policy, the guidance states: ‘There should be proper procedures in place to mange conflict of interest. Whenever a member of the Management Board in any way, has an interest (either directly or indirectly) in a transaction, project or other matter to be discussed at a meeting, the member should disclose the nature of his interest before the discussion on the matter begins. In addition, the member concerned should not participate in the discussion or vote on the matter, and should also offer to withdraw from the meeting. The Management Board shall then decide if this should be accepted.’

Some of the areas addressed in detail by Singapore’s code are the very areas where China’s charities have had difficulties in the recent past. Therefore, because the Code of Governance is available in Chinese, it is easily accessible to policymakers in China and can serve as a useful guide for them as they fashion new legislation that will require greater transparency and accountability.

Another area to focus on is self-regulation. While it seems that this fertile subject should have been given a bit more attention after the initial attempts to create such a code were made by the China NPO Network in the early 2000s, little more has been done until very recently. This matter will be discussed in the next blog.

Individual charities can also make some efforts to develop strict standards on their own. For example, it was recently announced that the government-linked Beijing Charity Association is setting up an online service for everyone to use to track their donations to the charity. Although details about the system and time of the launch are yet to be decided, the association promised that residents can look up details of their donations regardless of the amount.

By the way – you can read about civil society developments and find discussions of relevant issues on a ChinaCivilSoc listserv, established last November, which I manage. Instructions for signing up can be found on the homepage of the International Center for Civil Society Law (ICCSL).

Karla Simon (西 门 雅)  is professor of law and director of faculty development at the Catholic University of America and has worked in China for over 16 years

Tagged in: Accountability China Foundations social enterprise Transparency

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