Mainland charities must respect transparency, or suffer

The media spotlight again swung back to the mainland's transparency challenged charitable institutions last week after a citizen journalist exposed a multibillion yuan accounting gap at a government-backed children's foundation.

Citing research by the citizen journalist, Zhou Xiaoyun, The Beijing News reported on Tuesday that the China Charities Aid Foundation for Children (CCAFC) paid out a whopping 4.84 billion yuan (HK$5.96 billion) last year even though it reported receiving only 80 million in donations.

In fact, the organisation has raised just 231 million yuan since its founding in 2009 - half of that from individual donors. Zhou even accused the group, which is affiliated with the Ministry of Civil Affairs, of money laundering.

The charity moved quickly to play down the revelations, blaming much of the accounting gap on a misplaced decimal point that mistakenly inflated the costs of its bank investments schemes tenfold from 475 million yuan to 4.75 billion yuan.

But the admission did little to quiet criticism about the CCAFC and the lack of transparency and accountability in general in the mainland's scandal-scarred charitable sector. For one, a decimal shift would still leave the organisation with a huge donation-to-expenditure gap.

Moreover, As Zhou told the Legal Evening News, the disclosure did not explain how CCAFC's management, regulators and external accounting firms failed to catch such a simple error.