Fund tracking

PUBLISHED : Thursday, 06 October, 2011, 12:00am
UPDATED : Thursday, 06 October, 2011, 12:00am


Public consultation on the proposed new law to oversee charities ends this month and it has prompted a certain amount of controversy. Quite a few civil society organisations have raised strong objections to the idea of a government-appointed charities commission. For them, such an institution would wield too much power and pose a threat to the autonomy of charities.

This is understandable. Charitable organisations, being drivers of civil society, may sometimes find themselves advocating for policy changes and challenging injustices practised by government bodies. It worries them that the government may be given the power to bar them from seeking public support, should their advocacy work be defined as political.

Should the government take on the role of monitoring such organisations?

For decades, charitable organisations have been loosely regulated. Many charities were set up by faith-based and clanship groups to provide diversified services and assistance to those in need, well before the government started to provide social welfare. It is part of Hong Kong history that these charitable organisations have played a key and active role in mobilising the community for public good. Involvement of community-trusted figures and organisations, instead of government regulation, has been the mechanism to build public trust in the vibrant charity sector.

But the charity scene has changed. Hong Kong now has over 6,300 tax-exempt charities that are allowed to raise funds, and tax-deductible donations reached HK$8 billion in 2009.

The public is clearly concerned about the trustworthiness of these charitable organisations, whose causes have now expanded from helping the poor and needy to advocating for animal welfare and environmental protection, among other things. People walking along the streets complain about being stopped by the many fund-raising and charity sale activities and they are concerned about how charitable groups use the funds raised. There are reports of people being defrauded. If the various loopholes are not closed, the public's trust in charitable activities as a whole could be damaged.

To redress this precarious situation, charities should be the first to come forward with proactive measures to increase the transparency and accountability of their operations. Charities should ensure that there is a legal and voluntary system of oversight, that is, good corporate governance, to be accountable to the public. This includes the maintenance and disclosure of proper accounts, a commitment to service standards and mechanisms for complaints and redress.

Public trust is fragile. There is an ever-present risk that the goodwill and reputation of charitable organisations may be tarnished by scandals involving fraud and the abuse of clients. Greater transparency is the essential step forward. Donors who are better informed may be more ready to help.

Does the government have a role to play? Despite the concerns of charitable organisations, the government is needed to set rules and weed out foul play. It has to safeguard and nurture public trust towards charities. At the least, we need to empower existing government departments, such as the social welfare and inland revenue departments, to perform gate-keeping functions effectively.

Two measures would make a real difference. First, we need a unified system to regulate public fund-raising activities and to set a standard reporting requirement on the use of funds raised. It should provide a one-stop centre for information - including the date, type, the result of fund-raising activities and the use of funds raised - for easy checking by the people.

This would empower donors to understand not only their rights, but also the operations of charitable organisations, which in turn would allow donors to more effectively engage in charitable work. Only direct action against illegal fund-raising activities will alleviate the public's worries.

Second, with a moderate revision of tax laws, we could grant the Inland Revenue Department the power to collect and publicly disclose annual work and financial reports from charitable organisations that enjoy tax exemption. This would help charitable organisations improve their transparency and help the public decide whether to support a charity.

It should be a criminal offence for a charitable organisation to intentionally defraud or conceal the truth in its work and financial report. The department could simply compile a register of charitable organisations and put up their reports for public review. Presence on this register could be a prerequisite for an organisation's application to carry out a public fund-raising activity.

Hong Kong is known for its philanthropy and vibrant civil organisations. Non-governmental organisations, including charities, social enterprises and charitable foundations, are unique and invaluable social capital that contribute to the development of society.

Conditions may not be ripe for a charity law, but the consultation process has been a lesson for all. Better understanding and collaboration within the sector are needed to gain public support and push for social progress.

Cliff Choi Kim-wah is business director at The Hong Kong Council of Social Service