New auditing mechanism to vet charities

PUBLISHED : Sunday, 10 July, 2011, 12:00am
UPDATED : Sunday, 10 July, 2011, 12:00am


The central government plans to introduce independent auditing of charities following a scandal involving the Red Cross Society of China. The scandal has caused suspicions about philanthropic and non-governmental organisations working on the mainland.

The Ministry of Civil Affairs will roll out the auditing system in the next five years in a bid to make charities more transparent about their work.

Professor Yang Tuan of the Chinese Academy of Social Sciences said the initative was a step in the right direction. 'As the public becomes more aware of philanthropy, they will raise the bar on how their donations are spent,' Yang said. 'A third-party evaluation mechanism will make sure public donations are spent effectively and efficiently.'

The ministry unveiled its plan for public consultation on Friday. It would make the oversight of information disclosure, accounting reports and major donation operations at charities a top priority. The initiative is part of a move to draw up guidelines for the development of charities from 2011 to 2015.

The rush to carry out the five-day consultation follows a highly publicised online campaign targeting the Red Cross Society of China, after a young microblogger named Guo Meimei claimed to be general manager of the 'Red Cross Chamber of Commerce', a purported RCSC subsidiary, while showing off luxury cars and designer handbags.

Although the RCSC is a member of the International Red Cross Society, the RCSC and its 95,000 subsidiaries on the mainland are not registered as NGOs. That made public scrutiny of their operations impossible, Yang said.

'Even the RCSC has no idea of what its subsidiaries are up to every day,' she said. The dearth of information about charities' operations, Yang said, was underscored by controversy surrounding flamboyant philanthropist Chen Guangbiao . Chen claimed to have donated more than 1.3 billion yuan (HK$1.56 billion) in 13 years. Some of his donations, including 300 million yuan Chen claimed to have disbursed last year, could not be substantiated due to a lack of records.

Official statistics showed 440,000 NGOs registered with the ministry received 70 billion yuan in donations last year. Yang, who advises the ministry on the guidelines, said charity organisations would have no choice but to become more transparent in the next five years.

She said charities should get the public involved in their operations instead of working within their small circles. Likewise, the authorities could no longer make unilateral decisions about what information should be disclosed, because the public had been empowered by new media such as Weibo, a popular microblogging platform.

However, Yang said independent checks and balances would not be possible without a consensus among charities about long-term sources of funding that could be evaluated by a third party. On top of funding, such a mechanism would also need legal safeguards, particularly in a world of vested interests.

However, Yang noted that the guidelines would not be legally binding and would have little enforcement powers.

'We might have to wait until charity legislation is in place to enforce much of what would be suggested in the guidelines.'


The amount, in yuan, that was incurred for a dinner bill in April by members of a Shanghai branch of the Red Cross. It caused a scandal.'