Opening the Window To Philanthropy in China Starts With Transparency

Lijun He shares with us the recent calls for greater transparency in China’s philanthropic sector. This article is part of Asian Philanthropy Forum’s “Exploring the Impact of Asian philanthropy” series.

“Transparency” was the buzzword for Chinese philanthropy in 2012. The China Foundation Center last year released a transparency report rating more than 2,000 Chinese foundations with an elaborate transparency index. For the first time, Chinese foundations voluntarily opened themselves up to the public for supervision. Suffering from the China Red Cross scandal, the whole foundation sector‘s donation level declined. “For the sake of long-term development, foundations realize that they have to do something to defend the sector’s reputation and the people they serve. The publication of a transparency index is the result of a call for self-regulation from foundation members,” said Gang Cheng, the President of the China Foundation Center.

The transparency index is an evaluation of foundations’ basic information disclosures, which are required annually by the Chinese Ministry of Civil Affairs. An additional key piece of information is the foundation’s expenditure percentage. A foundation with a publicly disclosed annual report on its official website and that meets the required regulated program expenditure percentage will receive a “passing” grade. A disappointing 63 percent of Chinese foundations have failed to meet these two minimum standards. Even more shockingly, some foundations that passed the government’s annual inspection were found to have program expenditures much lower than government regulations. The inconsistent evaluation results between the China Foundation Center and government regulators reveal the need for CFC’s transparency index.

First, with the additional transparency rating system promoted by the foundation industry, Chinese foundations have more motivation to strive for transparency. Chinese government evaluations of charitable organizations have increasingly lost their credibility due to a lack of neutrality in evaluating quasi-governmental charitable foundations and a lack of responsive measures to correct state-controlled charities following corruption scandals. “Chinese foundations favor a fair game,” remarked Mr. Cheng.

Second, foundations’ self-regulatory behavior challenges government regulators to take evaluation more seriously. The China Foundation Center publicizes its transparency index widely and actively engages the public through major media (including CCTV), popular online forums, and twitter-like micro blogs. Therefore, pressure for transparency in philanthropy places an expectation on the Chinese government to be just as responsive.

Third, transparency requires Chinese foundations to develop professional management.  Recently, the China Charities Aid Foundation for Children (CCAFC) was under public attack for an accounting mistake that triggered money laundering allegations.  Prior to this incident, CCAFC was also found to be overspending on travel for overseas work.  Professional management practice areas, such as finance, public relations, and program management, are the next items that Chinese foundations need to address.

Transparency opens a window that allows the public to see into philanthropy and that builds public confidence. It also provides an opportunity for donors to better understand charitable organizations and to make informed decisions about their donations. In the future, donors should be able to ask, “How is the foundation doing?” and know that foundations in China are professional and effective.

LijunHe

Lijun He is currently a Ph.D. student in Philanthropic Studies with a minor in Nonprofit Management at the Indiana University School of Philanthropy.  Lijun also holds a MA degree in Philanthropic Studies from the Center on Philanthropy and a MA degree in English Literature from Sun Yat-sen University in Guangzhou, China. While pursuing her degree in the United States, Lijun completed graduate assistantships and internships at various nonprofit organizations, including the Department of Planned Giving and Major Gifts at the American Red Cross of Greater Indianapolis, the Grants Program Department at Nina Mason Pulliam Charitable Trust Indianapolis Office, and the Global Philanthropy Department at the Council on Foundations in Arlington, Virginia.  She also managed a project on Burmese refugees at the International Center and was an ambassador for Nexus Beijing in 2012.  Her research interests are social enterprise, community grant-making, and philanthropic behavior of small and medium Chinese business entrepreneurs. Lijun writes occasionally about philanthropy for the Southern China Daily, China Fortune, and the Chronicle of Philanthropy. Email: lijhe@iupui.edu.

Posts in this series:

A New Year for Asian Philanthropy to Make an Impact, Victor Kuo

New Trends in Philanthropy in China, Karla Simon

Rise of the Middle Class Donor in Hong Kong, Edwin Lee

Lessons Learned in Philanthropic Impact Investment, Sono Aibe

Evaluation of the Committee of 100 Teaching Scholar Program 2012, Wenjie Tang

The Next Wave of Philanthropy in China, Dien Yuen