Karla Simon

As mentioned in an earlier blog, China’s ‘private’ foundations have endeavoured to establish self-regulatory guidelines, which were adopted at the second annual private foundation forum. The principles are based on previously developed self-regulation guidelines of the China NPO Network and others. They are, however, not enforceable. 

Another attempt to develop guidelines for CSOs in general is a book published by the Beijing Charity Federation titled Guidelines of NPO Project Management. While not a code of conduct per se, this detailed guide aims to create a uniform system for organizations to follow with flow charts for such things as project design, financial management, procedures for identifying beneficiaries, and reporting. Again, this is not intended to be an enforceable set of rules, but it will undoubtedly help with governance, transparency and accountability. The book is only available in Chinese.

The Ministry of Civil Affairs (MCA) has also begun a series of trainings for foundation managers, and the first one, held in November 2011, was on a Foundation Code of Conduct. The Ministry is beginning to fashion a set of self-regulatory guidelines for CSOs, and a draft prepared by MCA with assistance from Business for Social Responsibility (which provided comparative codes for MCA to look at) is being considered for release in draft form later this year. Unfortunately the broader draft was shelved after the summer 2011 charity scandals, in favour of a more targeted draft aimed at setting donation disclosure rules. (This is discussed in an earlier blog.)

Most recently the Ministry released the final text of the Donation Disclosure Guidelines on 16 December 2011. These guidelines are very detailed and require full and correct disclosure of amounts contributed and what funds were spent for. They are available in Chinese and are currently being translated; they will be made available on the website of the International Center for Civil Society Law.

The Ministry also announced that 112 charities in China have agreed to sign up for a government sponsored information disclosure platform. According to Caixin Online, the purpose of this is to restore public trust in charities. In the wake of the immense public backlash against China’s charities over millions in misused funds, these organizations have pledged to promote information transparency through the China Charity & Donation Information Center’s (CCDIC) forthcoming online platform. The 112 charities said they will publish their accounting records according to a new set of information disclosure guidelines. The announcement was made at an annual philanthropy conference sponsored by the MCA – which oversees the CCDIC – came just three weeks after 24 foundations publicly pledged to ensure the integrity of philanthropy in China. The new standards will also clarify how and when third parties should audit charities although there was no clarification of what the exact requirements will look like. The joint effort includes such important organizations as the China Charity Federation, as well as the China Youth Development Federation and the Red Cross Society of China.

Going further than the others, the China Charity Federation (CCF), the leading charity organization in the country, has said it will take various measures such as establishing a donation disclosure platform to increase its transparency in 2012. Liu Guolin, secretary-general of the federation, made the announcement at the launching conference of its official newspaper, China Charity News, on 28 December.
The CCF, which is an entity established under the umbrella of MCA, will publish the tri-weekly 12-page newspaper on starting on 1 January, both home and abroad.
Liu said that CCF and more than 300 member organizations will disclose information such as donation amounts and the usage of the donations in the China Charity News twice a year, in the middle of and at the end of each year, respectively.

In addition to assisting the sector with the development of tools to help it govern itself, MCA also announced that all foundations in China must have their books audited by CPAs. The new audit guidelines, available in Chinese, for the first time require that financials of foundations be reviewed by certified public accountants.  They are effective as of 1 January 2012. An in-depth analysis of the issues and how the government is responding to them can be found in the English-language service of China’s Xinhua news agency (this story only refers to the November announcement that the audit guidelines would be promulgated, not to the policy itself). Prior to the new requirement, financials had only to adhere to the Chinese Accounting System for NPOs.

In addition in early 2012, Guangdong Province, a leader in reforms for the sector, promulgated ‘Guidelines on Foundation Behaviour’, which are quite far ranging. They address such issues as general management, investments, dealings with foreign funders, etc.

For many people in the West and elsewhere (such as the Philippines), where self-regulation codes are generated by the sector itself, this may all seem a bit strange – why is the government so involved with setting standards for the sector? When I raised this issue at a seminar I co-hosted at the Beijing Normal University Philanthropy Center in December, Chinese participants made it clear that government guidance is not only welcome but also highly desirable. The reason for this is the general lack of training in proper conduct for the governance of CSOs. Perhaps the scandals I have discussed in prior blogs are proof enough of this, but I was told that CSO experts fear the lack of knowledge about such things as the proper roles of management and board, why it is necessary to have a conflict of interest policy, what fiduciary responsibilities are, etc. This means that without access to more knowledge and training, along with a clear set of standards, the scandals are bound to recur.

Such state-driven models of CSO governance standards exist in other parts of East Asia. For example, the Independent Commission on Corruption (ICAC) in Hong Kong has issued Guidance and a Best Practice Checklist. It is supposed to be filled out by a knowledgeable person at a CSO and submitted to the ICAC on an annual basis. Singapore’s Charity Commission issued an updated Code of Governance in 2011, which has levels of compliance and best practice depending on revenues. The Singapore National Council of Social Services has also issued a Record-keeping Guide. Each of these documents is available in Mandarin Chinese and should be looked to for guidance as MCA creates its own set of rules.

It is important also that MCA work with the large charities and the Foundation Center, along with qualified academics such as those at Tsinghua University’s NPO Research Center and BNU’s Philanthropy Institute to create the guidelines. Many of those people mentioned have benefited from training in Japan, the US, Germany, and elsewhere and are knowledgeable about what self-regulation guides should contain.

Happy Chinese New Year!  新年快樂!

Karla Simon (奚文雅)  is professor of law and director of faculty development at the Catholic University of America and has worked in China for over 16 years