Thursday, Apr 24, 2014, 9:23 PM CST – China

Society

Something’s Gotta Give

Despite their free-falling credibility, scandal-hit Chinese charities, especially those with connections to the government, are still trying to find willing donors

Pedestrians turn a blind eye to a Red Cross donation box, Shenzhen, April 21, 2013 Photo by CFP

Under increasing public pressure to increase transparency, Chinese charitable organizations have this year boosted their rating on the China Charity & Donation Information Center (CCDIC). Transparency Index to 43.11 out of 100, a 33.1 percent improvement on last year.

According to the CCDIC, a non-profit organization which has for five years independently delivered annual reports on the transparency of Chinese charities, their survey of 1,000 organizations found wildly fluctuating levels of openness, with 23 mostly private foundations ranking higher than 95 on the scale, while 552 others, mostly government-run charitable societies, including the Red Cross Society of China, fell way below average.

The same report found a public approval rating of 20 percent for China’s charities, which, while low, is 11 percent higher than that recorded last year. “This year’s appraisal once again indicated that the public is concerned about the operations and business of charitable organizations, including where donations come from and where they go, information often absent from the public records maintained by charitable organizations,” said CCDIC vice director Liu Youping.

Crisis

The Chinese public paid little attention to the country’s charities until June 2011, when Guo Meimei, who claimed to be an employee of a branch company affiliated with China’s Red Cross, showed off a luxurious villa and car on her microblog account. Although the Red Cross immediately denied any direct relationship with Guo, the government-sponsored investigation into the allegations failed to convince the public, and saw public donations to this previously well-funded organization collapse almost overnight.

This catastrophic loss of credibility, according to statistics released by the CCDIC, meant that China’s charitable organizations received only 8.4 million yuan (US$1.3m) in donations between June and August 2011, a nearly 90 percent drop on the period March to May.

For the first time, the Chinese Ministry of Civil Affairs, the department in charge of the country’s charitable organizations, successively issued two official guidelines to promote the transparency of charities as well as stating that it would prioritize an all-round supervision system in its 12th Five-year Plan (2011-2015). 

“The Guo Meimei case has proven that public trust is too valuable to be ignored. People will immediately abandon any organization which they believe has cheated them,” Liu Youping told NewsChina. “The earlier a charitable organization values information release, the more public trust it will enjoy.”

Struggle

As the main target of the Guo Meimei scandal, the Red Cross was the first charity to face an effective boycott. According to a report by Insight China magazine, the Red Cross received only 140,000 yuan (US$22,000) on April 20, 2013, the first day that Lushan, a county in Sichuan Province, was hit by a magnitude-7 earthquake. By contrast, the One Foundation, a well-known private charity founded by movie star Jet Li, received 22.4 million yuan (US$3.5m) in donations in the same period of time, 159 times more than that received by the Red Cross, formerly China’s leading disaster relief charity.

A county-level branch of the Red Cross told media that they received only several hundred yuan during the Lushan earthquake. Following the disastrous Wenchuan earthquake in 2008, the same branch received 180,000 yuan (US$29,000) in donations.

On July 30, 2011, just one month after the Guo Meimei scandal, the Red Cross launched an information release platform on its website and publicized details of public donations received during another earthquake, which hit Yushu, Qinghai Province in 2010. The public were not impressed with the platform’s perceived lack of detail. “We want to know the details of every penny we have donated, not just a few vague numbers,” claimed a post on baidu.com, China’s largest online forum.

Two years later, and the Red Cross online platform is still under testing, with information pertaining to donations received after the Zhouqu landslides in Gansu Province (2010), the Yingjiang earthquake in Yunnan Province (2011) and the Fukushima disaster in Japan (2012) remaining inaccessible.

This May, the Chinese Red Cross found itself once again under fire after a microblogger revealed that he could not find any information on the organization’s public platform relating to a 100,000-yuan (US$16,400) donation given by a 100-year-old man from Shenyang, capital of Liaoning Province, which was widely covered in the media.

“A district-level branch would transfer donations to a city-level branch at regular intervals and record a net figure only, so details of individual donations are not publicized,” Su Lu, vice-director of the Red Cross Shenyang branch, told the Beijing News, in a statement which critics saw as an attempt to fudge the issue.

“Given the down-top structure of the Red Cross, under which only the headquarters has the right to utilize donations, it is actually impossible to track down individual donations unless we have a nationwide platform to release information covering every local charitable organization,” he continued.

Moves to create such a platform were actually initiated by the China Charity Federation, another government-backed charitable organization. “Despite growing concerns over transparency within the industry, [creating] this platform bristles with difficulty in [securing] both funding and talent,” Peng Jianmei, chief architect behind the platform, told NewsChina. “Without professional management of the inner structure, and sufficient information [about a charitable organization], we cannot offer a comprehensive release,” she added.

In early 2013, this long-awaited platform finally began to take shape in Jiangsu Province and the provincial capitals of Henan and Hunan, with over 1,000 local charitable organizations joining. The released balance sheets, however, were no more detailed than previous releases.

Fees

All these factors explain why the CCDIC’s annual transparency report has for two successive years warned of a widening gap between transparency in charitable organizations and the perceived public demand for information.

At the end of 2009, the One Foundation published its customary fiscal report, a report much more detailed than those released by other Chinese charitable organizations. However, the foundation found itself heavily criticized for “overspending” on two major online campaigns, as well as on administration in Q3. The controversy did not die down until the One Foundation attached detailed explanations of the expenditures.

As Chinese charitable organizations are essentially wings of the government, the public are particularly sensitive about how they spend their money – particularly on “administration fees” which critics equate with unnecessary bureaucracy. Although national regulations on charitable organizations state that such fees should never exceed 10 percent of total expenditure, this is rarely adhered to, and the popular view is that almost all administration fees listed on charities’ books are simply converted into profit for their directors.

In March 2010, renowned Chinese philanthropist Cao Dewang drew public attention to unpopular administration fees once more by refusing to give a pledged 200 million yuan (US$31.7m) donation to the China Foundation for Poverty Alleviation (CFPA) until the latter agreed to reduce the deducted administration fee to 3.5 percent of the donation.

Following the Guo Meimei scandal, a policy abolishing administration fees was championed by private foundations funded by the rich or celebrities. For example, the philanthropists behind the Beijing-based Ai You Foundation pledged to operate the foundation at the expense of the board of directors. Shanghai’s Adream Foundation, meanwhile, invested in various projects to cover its management fee.

When 100 percent of a charity’s revenue is spent on its work, this is seen as minimizing the risk of corruption, a problem endemic throughout the official charity network. However, this approach is not without its detractors.

“It is a game for the rich,” Liang Shuxin, the founder of the private Micro-Foundation, told China Fortune magazine. “How can small charities survive on zero revenue?”

“This model will mislead the public into thinking that charitable organizations can operate with minimal expenditure, which is not conducive to their long-term development,” he added.

“A 10 percent administration fee is actually much lower than the international level (15-20 percent),” said Wang Zhenyao, director of China Philanthropy Research Institute under Beijing Normal University, in an interview with Oriental Morning. “The way to enhance credibility is to reform the information release and supervision system.”

Deadlock

However, as scandals concerning the misuse and misappropriation of donations continue to be exposed by the media, the fight to regain public trust has continues to favor the rumor mill. Only recently, members of Shanghai’s Red Cross Society were exposed blowing donation money on a luxurious dinner, while the China Charity Federation was exposed to having allegedly sold off donated solar cells for profit. Talk of reform increasingly seems like so much hot air. As a result, requests for public donations are commonly met with scorn, aggression and even foul language, particularly when solicited online.

Shi Xiaoli, who attempted to establish a rescue home for stray cats and dogs, has experienced first-hand the difficulties in satisfying potential donors that her operation is both legitimate and uncorrupt.

“Our project was warmly welcomed, but also put under heavy pressure to satisfy donors,” she told NewsChina, adding that much of her budget had to be allocated to the itemization of every expenditure and the publication of detailed financial reports, down to the total cost of the animals’ feed.

“In order to avoid any controversy, we couldn’t incur any expense if we couldn’t get a receipt,” she continued. “In the end, we couldn’t pay trained personnel or equip our operation. That was my first and last time organizing an online donation drive.”

Strictly speaking, Chinese laws do not allow any individual or organization to collect public donations without government approval. During the Wenchuan earthquake, countless ad hoc fundraising projects were shut down, popular blogger Luo Yonghao’s website, despite having received thousands of yuan in pledges from the public.

Charities across China, regardless of size, have found themselves in a Catch-22. Big government-sponsored organizations have lost public trust, while small-scale operations struggling to acquire funding and personnel are pursued and shut down by cautious State officials.

While in much of the rest of the world charities are regulated – but not controlled – by governments and NGO watchdogs, in China, the government presence makes it difficult for charitable organizations to shake the negative image associated with other arms of government.

As early as 2006, the State Council put legislation relating to charitable organizations on its official agenda, pledging to standardize the registration, operation and public accountability of charitable organizations while improving supervision. However, critics claim that myriad special interests, competition between conflicting departments and an overall lack of political will effectively guarantees that charities in China will continue to fruitlessly cry for help.

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