Charities to come under closer scrutiny

The country's top watchdog for charity organizations plans to keep a closer eye on foundations given a series of charity scandals in the previous year that greatly damaged the public's trust.

The Ministry of Civil Affairs on Tuesday released draft regulations on its website setting out strict dos and don'ts for foundations in terms of fundraising, information disclosure and their cooperation with commercial organizations.

The ministry is soliciting public opinion on its draft regulations until May 3.

The regulations, once enacted, will mainly apply to domestic foundations and international foundations' offices on the Chinese mainland.

Ma Xin, the head of the division of foundation management in the Bureau of Civil Organization Administration under the ministry, told China Daily that the regulations will act as a legal basis for officials in civil affairs departments to monitor foundations' daily work.

The draft requires foundations to inform donors of detailed project planning and an outline of budgeted costs during fundraising activities.

Foundations should make public in a timely manner any change in spending plans, it said.

Moreover, it will be mandatory for foundations to disclose information about donations received and spent every three months via Internet or media.

Ma stressed that the information disclosure requirement for public foundations is stricter than private foundations, as only the former have the authority to engage in public fundraising.

Statistics from the ministry show there were 2,500 foundations with assets totaling 60 billion yuan (US$9.54 billion) on the mainland by the end of 2011.

Last year alone, foundations raised more than 33.7 billion yuan and spent 25.6 billion yuan for public welfare including education, disaster relief and health, based on official figures.

The draft also said a foundation's administrative cost should not exceed 10 percent of its annual spending, unless there is an agreed number between the organization and its donors.

Xu Yongguang, secretary-general of the Narada Foundation in Beijing, a private charity focusing on supporting grassroots NGOs, said the proposed principle is too rigid for small foundations. "Assuming a small foundation with a yearly expenditure of 1 million yuan, this requirement will restrict its administrative costs to 100,000 yuan. That's not even enough to pay two employees' annual salaries in Beijing."

Numbers from the Beijing Municipal Bureau of Statistics show that the average monthly salary for a local resident was about 4,600 yuan in 2011.

The regulations also ban foundations from getting involved in helping companies or commercial products do advertisements, sales promotions or brand building.

Wang Ming, director of the NGO Research Center at Tsinghua University in Beijing, welcomed this rule. "It's necessary to regulate charity organizations' involvement in business, which was vaguely defined in previous regulations and laws," he said, adding that it also depends on charity organizations' self-discipline to abide by their nonprofit mission.

In 2011, charity organizations in China were discredited by several scandals. The Red Cross Society of China shut down its subordinate organization in the commercial sector after an investigation showed it allowed a company to make a profit from running a charity project. Also, the Henan Soong Ching Ling Foundation embezzled donations to invest in real estate companies.