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April 8, 2015

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China’s charities confront public trust crisis

WHAT projects are you working on? How did you spend the money I donated? Can I see the financial statements? These are questions that spring to mind when people donate their hard-earned money to charities.

A recent report by the Center for Public Participation Studies and Supports (CPPSS), a non-government, non-profit institute affiliated to Peking University Law School, ranked the transparency of China’s charity organizations by giving an average score of 35 (out of 100).

It marked the first time an independent, third-party institute assessed the country’s major charity organizations.

The 93 organizations included provincial-level Red Cross groups, charity associations and public funds.

Shanghai Charity Foundation ranked first with a score of 83. Four earned zero, including Red Cross Society Tibet, Anhui Province Charity Association and Tibet Charity Foundation. If 60 was a passing grade, only eight made it.

According to the report, 61 charity organizations, or 65 percent of the total, scored between 20 and 50 points. Sixteen scored less than 20, including 11 public funds and three Red Cross organizations.

The Red Cross has been in the spotlight since 2011, when the Guo Meimei scandal broke. At the time, the 20-year-old woman boasted of a lavish lifestyle while falsely claiming to be the head of an organization linked to the Red Cross Society.

While the Red Cross was eventually cleared, the scandal created negative publicity and more people began to question what charities do with all donations.

“We chose these 93 charity organizations because they are in the public spotlight, receive a great deal of donations and have a duty to share their financial information based on the government’s regulations,” says Li Yuanyuan, deputy executive director of CPPSS. “We designed the survey from the perspective of a donator, a beneficiary and what the public wants to know most.”

By the end of 2013, there were more than 540,000 charity institutions, 286,000 social groups and almost 3,500 foundations — the three main types of charity organizations in the country.

The survey was broken down into different categories including fund-raising information and financial statements.

The CPPSS found charity groups/associations were the most transparent, followed by public funds. The Red Cross societies were the least transparent, according to the survey.

However, the Red Cross outperformed in terms of basic information, while public foundations had the best transparency when it comes to social supervision.

The charity organizations in eastern China were more transparent than those in central and western China. Those in Shanghai performed the best, scoring 68 on average, 15 points more than the runner-up Jiangsu Province.

The China Charity Information Center of the China Ministry of Civil Affairs, the China Foundation Center and the China Grassroots Transparency Index supported by One Foundation (Shenzhen office, Guangdong Province), Dunhe Charity Foundation, Narada Foundation and some other organizations all previously ranked the transparency of charities.

“Now we’ve got four transparency reports, but they don’t differ much,” Deng Guosheng told China Youth Daily. The professor from the School of Public Management at Tsinghua University participated in the design of the three previous transparency rankings.

Of all the different types of charities, foundations scored the best, which was expected, since they are required to publicize information under three administrative regulations by the China Ministry of Civil Affairs.

“The three surveys focused on financial information transparency, which is always the public’s biggest concern,” Deng was quoted as saying.

In recent years a host of foundations and charity organizations had been rigorously questioned about how donations were being spent.

The Smile Angel Foundation, established by celebrity couple Li Yapeng and Faye Wong — who are now divorced — for children with cleft lips, made headlines in 2013 when 70 million yuan (US$11.3 million) allegedly went missing.

The Ministry of Civil Affairs investigated the case and concluded last August that the money was used properly.

The Red Cross Society of China repeatedly made headlines in the last decade. In the aftermath of the 2008 Wenchuan earthquake, the organization said it donated 1,000 tents worth 13 million yuan to disaster victims. However, the public quickly expressed doubt about the claim because that worked out to 13,000 yuan per tent.

In 2011, a receipt posted online cast the spotlight on the Red Cross again. It showed that one of its branches in Shanghai had spent almost 10,000 yuan on a meal in an upscale restaurant.

These scandals, to a large extent, have destroyed public trust, which makes people extremely wary about their financial statements and audit reports.

There is no legal definition of a charity organization, which means there is a gaping whole that allows charity organizations to operate without proper oversight.

Shanghai Hemophilia Patients’ Friendship Club is a non-government organization aimed at offering help to patients with the blood disorder. The organization ranked low on the CPPSS survey.

Club director Kong Linde defended the organization, saying it shouldn’t have been included in the survey because it’s too small.

“We only organize several events every year,” he says. “We don’t accept donations from the public. All our money is donated by my entrepreneur friends.”

Each event only costs about 5,000 yuan and Kong sends receipts to each individual or company that donates money, he says.

“It’s a place where patients can sit around and encourage each other,” Kong says.

“I don’t have any ambitions to make it bigger, so financial transparency is not necessary for an organization like us.”


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