Government too charitable to charities

After being rounded on for the lax supervision of publicly subsidised charities and welfare NGOs, the home affairs chief has promised a government website that will carry audited accounts and a good practice guideline that is entirely voluntary. How reassuring

PUBLISHED : Thursday, 02 August, 2018, 7:49pm
UPDATED : Thursday, 02 August, 2018, 10:19pm

When pressed to act, the government often does a bit of window-dressing and then claims mission accomplished.

After being rounded on by the director of audit and a Legislative Council committee for the lax supervision of publicly subsidised charities and welfare NGOs, home affairs chief Lau Kong-wah promised to do something about it.

The results: soon you will be able to look up the audited accounts of charities on a government website; and a good practice guideline that is entirely voluntary. What if a charity doesn’t adopt the new guideline? The bureau says it doesn’t necessarily indicate a problem. How reassuring!

Why would anyone bother looking up a charity’s financial accounts? Isn’t that the job of regulators? We don’t have such officials, of course, even though it was proposed years ago by the Law Reform Commission to set up a statutory monitoring body.

The only ones with some responsibility are the bureau, the Social Welfare Department, Inland Revenue as well as the Lands Department, which grants land to some charities. But they are part of the problem.

Charities forced to reveal finances – but critics say new rules are too mild

Last year, it was disclosed that two long-standing welfare groups – the Neighbourhood Advice-Action Council and the Richmond Fellowship of Hong Kong – faced financial distress and had to reduce services and staff. Both groups, which receive tens of millions in direct public subsidies each year, had previously reported robust financial health.

Meanwhile, Legco’s Public Accounts Committee warned in a report early this year that some charities were exploiting loopholes to claim tax-exemption status. It noted that tax forgone amounted to HK$1.5 billion between 2005 and 2016. During this time, the number of tax-exempt charities jumped from 4,435 to 8,923 while donations eligible for tax deductions soared from HK$5.25 billion to HK$11.84 billion.

Some of those charities are able to run hotels, rental apartments and commercial offices at a huge profit while offering senior directors handsome fees and perks. Last year, the government auditor identified 15 sites granted to non-profit charities that had been used to operate hotels, hostels and/or serviced apartments.

But Lands said there was nothing to be done if they didn’t violate land grant conditions, likewise Inland Revenue, which said it had no power to revoke their tax-exemption status.

Given the magnitude of the problem and bearing in mind that welfare spending is the second largest government expenditure after education, the bureau has responded with a voluntary code of conduct and a website link.

Well done!