Charity Law Anticipated

By+Wang+Hairong

Charity in China has been put under scrutiny again after a recent investigation by Zhou Xiaoyun， a netizen famous for exposing scandals in the field.

From January to February， Zhou posted several messages on his microblog， alleging that the Smile Angel Foundation （SAF） had embezzled more than 50 million yuan （$8.09 million） of its donations and that its co-founder， actor-turned-businessman Li Yapeng， had failed to donate 1 million yuan （$161，000） of funding capital as he promised.

On March 9， Minister of Civil Affairs Li Liguo said that authorities will give a full and concrete response to the public about the accusations. He made the remarks while attending the annual full session of the 12th National Peoples Congress， Chinas top legislature.

Zhou said that he hopes his findings will prompt lawmakers to make laws requiring charitable organizations to publish their financial information. He also revealed that his recent questioning has caused the Ministry of Civil Affairs （MCA） to issue new standards for the annual inspection of charitable organizations.

The SAF was founded in 2006 by famous singer Faye Wong and her ex-husband Li to help children born with cleft palates. Their own daughter was born with a cleft palate， which was later corrected with surgery. Wong and Li divorced in 2013.

The foundation is affiliated with the Red Cross Society of China （RCSC）. According to an audit report published on the SAF website， it had received more than 130 million yuan （$21.02 million） in donations by the end of 2012.

In 2012， the SAF set up the non-profit Beijing Smile Angel Childrens Hospital （SACH）， which promised to offer free surgery to 600 children with cleft palates each year.

In response to Zhous accusations， the SAF issued a statement on January 20， denying the claims. It added that the 53.22 million yuan（$8.61 million） in question has been spent on establishing the SACH.

As to whether Li and his ex-wife had donat- ed the 1 million yuan of funding capital， SAFs public relations officer Qi Xin told Beijing-based Legal Weekly， “The money has definitely been donated.”

As to why it was not recorded， Qi explained that it was because of ignorance at the foundations inception， when it had neither an expert consultant， nor a professional manager experienced in managing a non-governmental organization.

On February 26， the RCSC had an independent auditing team come and audit the SAF. The audit results are expected to come out later this year.endprint

Inconsistent requirements

Zhou argued that the SAF and the SACH had not disclosed information properly.

For instance， he said that in 2013， the hospital released a work report， but failed to make a financial statement or audit report.

On January 8， Zhou requested Beijing Chaoyang Districts Civil Affairs Bureau and Health Bureau to disclose information about the SACH， including the hospitals capital verification report and the sources of its registered capital.

Zhou made the request based on Beijing Municipal Governments Decisions on Promoting Philanthropy， which went into effect on January 1. Article 15 of the document requires charities to publish information such as fund-raising activities， the source， type and value of donation， the usage of donations， as well as annual work reports and audit reports.

On February 27， Chaoyang Districts Civil Affairs Bureau said that it had required the SACH to disclose relevant information.

But Li claimed that the foundation and the hospital had disclosed information according to government requirements.

The Provisional Regulations for the Registration Administration of People-Run NonEnterprise Units， promulgated by the State Council， Chinas cabinet， in October 1998， stipulate that non-governmental organizations are to report information on donations and their us- age to supervising organizations and publicize that information in a proper manner. However， the document does not specify what the proper manner is.

The statement released by the SAF on January 20 said that the 53.22 million yuan spent in establishing the SACH was explained in the footnotes of the RCSCs annual audit reports in 2010， 2011 and 2012.

According to the SAF， it is not an independent legal entity， but a program under the RCSC， hence its audit information was included in the RCSCs annual audit reports， and was made open according to the Foundation Information Disclosure Methods released by the MCA.

The Foundation Information Disclosure Methods， which became effective in January 2006， states that foundations are to submit their annual reports， fund-raising information and charitable project information to supervising government departments， and publish the information in a format designated by the supervising government departments.

On February 18， the SAF posted a message on its official microblog on Sina Weibo， a twitterlike microblogging service， saying that all funds raised by the foundation had gone into the account of its supervising organization according to government regulations.endprint

“From 2009 onward， we have published annual audit reports on our official website. Largesum financial support to the SACH in 2012 was also listed，” said Liu Xuanguo， Vice President of the RCSC， on February 26.

Liu went on to say that more than 53 million yuan （$8.57 million） has been allocated to construct the hospital， and so far， the RCSC has already audited the fund used twice. “Our supervision over the SAF was adequate，” Liu said.

Legal experts attribute the controversy over the SAFs financial transparency to the fact that several regulations promulgated by the State Council， the MCA and local governments have varied the requirements on information disclosure of non-governmental organizations including foundations.

“These regulations are not consistent，” said Jin Jinping， a legal professor of Peking University. She said that the transparency required by some local rules is higher than requirements in laws and state regulations.

Legal intervention needed

The 2014 Blue Book on the Rule of Law published by the Chinese Academy of Social Sciences on February 24 pointed out that a lack of financial transparency is a major issue for Chinas charity management.

Tian He and Zhao Qianling， two researchers with the Institute of Law at the Chinese Academy of Social Sciences， penned the charity section of the blue book. During the process， they randomly checked information disclosures by 15 charitable organizations.

Their study showed that only five of the 15 charities published audit reports in 2012， and only two disclosed the total number of donations received.

In 2010， the China Charity and Donation Information Center under the MCA surveyed 99 charitable organizations， and found that around 75 percent of them disclosed little or no information at all. One fifth of them did not have official websites， and 43 percent of them did not update their websites regularly. About 40 percent did not release annual reports or financial statements.

In 2013， the center again surveyed 1，000 charitable organizations to score their transparency， and found that charities had become more transparent than they used to be. Nonetheless， nearly half of the public surveyed by the center was not satisfied with the degree of transparency of charitable organizations.

A lack of an overarching charity law is one reason that charities do not attach much importance to disclosing their financial information， according to the 2013 China Charity Transparency Report published by the center.

The report suggests that the government publish a binding information disclosure standard as soon as possible， and charitable organizations should be required to disclose information of their stakeholders including donors， recipients and service providers.

The MCA proposed enacting a charity law in 2005， and began to draft the law in 2006. In November 2013， the law was listed in the legislation plan of the Standing Committee of the 12th National Peoples Congress.

While commenting on the probing of the SAF， Zhan Chengfu， head of the MCAs Social Welfare and Charity Promotion Department， said that charitable organizations should disclose information and the public should have the right to know.endprint