Press Room

The transparency of Chinese foundations disputed

 

A spate of negative events for Chinese charitable organizations have occurred in recent years, resulting in a crisis of public trust.

 

In order to promote the transparency of foundations in China, the first domestic transparency evaluation system, the Foundation Transparency Index (FTI), was officially launched in August.

 

According to the first annual review list “FTI Charts Ranking List 2012,” published on Wednesday, more than 60 percent of domestic foundations are unqualified.

 

 

Professor Cheng Wenhao gives the FTI report. Photos provided by CFC

 

The latest data

At the press conference for the “FTI Chart Ranking List 2012” held by the China Foundation Center (CFC), an information service platform for foundations in China, the average transparency score for Chinese foundations was 45.8 points, which is lower than the passing score. 63 percent of foundations have been deemed unqualified as of December 26, 2012.

 

The FTI consists of 60 objective evaluation indexes including 40 qualified indexes and 20 advocacy indexes. The content of the indexes includes basic information, financial information, project information and donation information. In the full mark of 129.4 and the qualifying mark of 48.8, the first three kinds of information account for most of the score.

 

The data sources for the list mainly consist of annual inspection documents that foundations filed according to requests from the Civil Affairs Department in 2011, as well as their official websites.

 

Background

Since 2004, four laws and regulations have been enacted.

 

Foundations in China develop fast. According to CFC’s statistics, as of last month, the total number of domestic foundations has reached 2,912 with an average annual growth rate of 20 percent. The total assets, annual donation income and annual public expenditure have reached 60.4 billion yuan, 33.7 billion yuan and 25.6 billion yuan, respectively.

 

But some foundations ignored the desire for transparency and even committed crimes such as embezzlement. After being exposed, these behaviors have seriously damaged Chinese philanthropy’s social credibility and hindered its healthy development, which has led to a crisis of public trust.

 

The FTI, initiated by CFC, was launched in 2010 by 35 Chinese foundations. Experts from the School of Public Policy and Management at Tsinghua University provided consultation to the FTI.

 

“For public donors, the establishment of the FTI can be a reference. Highly transparent foundations can be more reliable than those with low transparency, and will reduce less moral and legal risks for the public. For the government, it can learn the transparency of domestic foundations and find out blind spots so as to strengthen management. For domestic foundations, they can understand their level and find out gaps to improve,” said Cheng Wenhao, professor of the School of Public Policy and Management, Tsinghua University.

 


Professor Li Chengyan offers comments on the current transparency of domestic foundations.


Problems

“But more than 60 percent of foundations haven’t publish their information according to the regulations, while they were all able to pass the annual inspection.” Cheng Wenhao said, suggesting problems in his report on the “FTI Chart Ranking List 2012.”

 

“More than 40 foundations exist without any contact details, more than 20 of which only had a name. Authorities didn’t implement the supervision system strictly stipulated in regulations and laws, which pampered them to an extent.”

 

But even some of the largest foundation systems with official backgrounds were also unqualified.


There are 276 foundations in the system of the People’s Education Foundation in different areas of China. The system’s average score is 43 points, which is worth considering as total donation income accounts for over 10 percent of all domestic foundations, and most of that income is generated from the public.

 


CFC's CEO Cheng Gang answers reporters' questions.

 

“Domestic foundations should learn management from enterprises if they want to create a good image, because enterprises are always in the pursuit of innovation, otherwise they will be eliminated. Competitive mechanisms should also be established. Foundations are growing rapidly every year. If some foundations have been ranked in the bottom 30 for over three consecutive years, they should be eliminated so that the FTI is not only a ranking list but also has some effect. At the same time, for outstanding foundations, we should give good rewards,” said Li Chengyan, professor of the School of Government at Peking University.

 

Trust should not replace supervision. “Supervision through the Internet is the most influential method today. We should pay more attention to it,” he said.

 

Cheng Wenhao agreed.“Excessive trust equals indulgence. Real trust can be guaranteed only by supervision,” he said. “FTI is the minimum requirement. If a foundation cannot get full marks in the FTI, it is not transparent.”

 

But not all foundations have problems with the new system, as some passed with relative ease.

 

“We are in accordance with the information disclosure standards of the FTI, including arranging and presenting the program. It is a kind of inspection on our own work. If the internal management is good enough, we cannot finish it,” said a staff member of One Foundation, ranked first, from Shenzhen. “We believe that we don’t need to report in our own previous way, because the requirements of the FTI are detailed enough for us to use this as the new standard.”