Charity foundations demands more transparency

BEIJING - China's government put a draft regulation asking charities to regularly publish financial reports and tighten internal management up for public review on Tuesday.

The document, drafted by the Ministry of Civil Affairs, requires charity foundations to regularly publish detailed reports on donations and expenditure after a charity project starts.

If the project is operated longer than three months, financial reports should be published quarterly and, after it concludes, a comprehensive report should be released for public scrutiny, according to the draft.

The proposed regulation acknowledges donors' rights to inquire how their money will be spent and makes clear that foundations must "give truthful answers in time."

The proposed regulation is an effort to regulate the practices of charity foundations, improve transparency and tighten supervision.

According to the document, foundations should establish effective internal management policies, put them under scrutiny of donors and government supervision departments, and publish them on their own websites and mass media designated by authorities.

Their operational expenses should not be paid by donations unless it is written in fund raising policies and agreed by donors. And operational expense should not exceed 10 percent of the annual expense of the organization.

Foundations should not use their name, image or charity projects for commercial purposes, the draft said.

China had about 2,500 registered foundations in 2011, twice the number it had in 2005. Their total assets reached more than 60 billion yuan ($9.52 billion) and donations received totaled 33.7 billion in 2011, according to the ministry.

However, over the past few years, there has been increasing public concerns about the transparency and conduct of charity groups, following a string of scandals concerning embezzlement.

The most famous case revolved around a young women named Guo Meimei, who claimed to work for an organization under the Red Cross Society of China (RCSC) and boasted of a lavish lifestyle on her microblog.

Although Guo was later found to not be employed by the RCSC, the incident prompted worries of charity fund embezzlement and triggered calls for stricter scrutiny.

The draft regulation is open for public opinions till May 3.