Think Before You Donate

When we walk down the street and encounter a smiley volunteer asking us to donate money to charity, our reaction is often to throw in some change, grab a sticker and walk away feeling like we’ve done our good deed for the day. But do we actually know where our dollars are going? Whether it’s a charity sticker, or someone on the street raising funds selling fortune cookies, tea leaves or rice, many of us simply assume the money we donate goes directly to the cause.
But the truth is—we cannot be sure. At present, there is no legislation that requires charities to publicly reveal their audit reports, or a single piece of coherent law monitoring them. So, for example, if we donate $200 to a child welfare group, we may never know how much of that money actually goes to the kids.
Donors often naturally assume their money will be used properly—from the people donating $10 on the street to the thousands of people who helped raise $50 million within a day after the Sichuan earthquake, or the Hong Kong residents who had $7 million deducted from their government income taxes and donated to charity. But who is responsible for monitoring where our money goes? The lack of legislation means the monitoring of charities by the government is minimal. This is mainly due to the confusing network of government departments that split the responsibility of registering an NGO’s charitable status and overseeing fund-raising activities.
The current procedure for groups to become charitable organizations is to first set up a governing body. They can do this by either going to the Company Registry to register as a new company, to the Police Licensing Office to register a society, or setting up a trust. Next they will have to go to the Inland Revenue Department to apply for the tax-exempt charity status, if they can prove to be non-profit making with the purpose of relieving poverty, advancing education or religion, or other purposes of a charitable nature beneficial to the Hong Kong community. However, the department is not responsible for monitoring the conduct of charities, but can request to check their audit reports and review whether their charitable status is justified.
Monitoring the fund-raising activities of those charities is another matter. In order to fund-raise, charities have to apply for a permit from the Social Welfare Department. But some types of fund-raising activities, for example a charity cake sale, may not need a permit and may instead require the organizers to go to the Food and Environmental Hygiene Department to get a temporary hawker license. This is because the fund-raising activity involves trade (the buying and selling of cakes) and not donations from the public. If this isn’t confusing enough, there is a different department again for charities wanting to raise money through the sale of lottery tickets—they have to go to the Television and Licensing Authority. With so many different organizations overseeing the fund-raising activities of Hong Kong charities, it’s no wonder there’s so much confusion about where our donation actually goes. Cliff Choi is the business director of Hong Kong Council of Social Services (HKCSS) and he is concerned this confusion may result in a decline in public donations. After all, will people be so happy to donate when they don’t know where their money is going?
The Christian Zhensheng Association controversy last year also raised concerns about the transparency of charitable organizations. The organization, which runs a rehab-boarding school for teen drug addicts in Mui Wo, was accused of using donation money for private investment in the mainland. Over the past three years, the Independent Commission Against Corruption (ICAC) has received seven cases of charity-related corruption—one notorious example is a charity that sold 20,000 fund-raising lottery tickets, but staff only submitted half of the receipts for auditing and stole the difference which was $250,000.
In fact, the Law Reform Commission set up a subcommittee on charities back in 2007 to review laws and regulations, but so far, there have been no conclusions. In order to increase their credibility and boost public confidence in charities, the HKCSS has set up a website called “Wisegiver” which lists 150 charitable organizations that will publish their audit report to the public. But this is only a small number considering there are currently more than 5,000 institutions registered as tax-exempted charitable organizations under the IRD. Ultimately, Choi would welcome a statutory body and charitable law to handle all charity-related matters. “There’s clearly public demand for a better monitoring system on the accountability and transparency of charities,” he says.
The findings of the Law Reform Commission’s review will not be published until the end of this year, but Bernard Chan, the chairman of the charities subcommittee, agrees that the establishment of a charity law is a growing trend in other countries, such as Ireland and Singapore. But whether similar legislation is applicable to Hong Kong is still a delicate matter. Chan says: “We don’t want to stifle the operation of charities. It’s impossible for us to monitor them like we do to the banks.” So right now, all we can do is be mindful and pay attention to which charities we donate. But in the end, Choi thinks the charity community should bear responsibility in developing an open and self-disciplined culture, to clear the public’s doubt and strengthen trust.