China Development Brief, No.55 (Fall 2012)
…Transparency is one of the big buzzwords in China. It is seen by many as important for improving efficacy and accountability in government, business, and civil society organizations such as foundations and NGOs. Indexes ranking the transparency of foundations, NGOs and public welfare projects are all the rage in China’s third sector. But what does transparency really mean in a country where large parts of the government and business sector are not transparent, where civil society organizations are vulnerable to reprisals if they reveal too much, and where the public, long used to not being informed, is still grappling with how to interpret the information they are being exposed to? This article brings out some of the concerns and challenges that need to be recognized and addressed by transparency advocates.
As of September 10, 2012, 28 organizations had disclosed their financial records in accordance with the “USDO Financial Information Disclosure Template.” [Editor’s Note: USDO stands for the Union of Self-Discplinary Organizations and was established in 2009 by a group of charitable organizations and NGOs to promote self-discipline and greater transparency in the sector.] This marked the first-phase of the “Hundred Public Interest Organizations Disclose Their Accounts” event. This model project has been supported by the One Foundation (壹基金) for several years. This year, the project theme was to award “Models in Organizational Transparency.” Up until September 10, the project had received more than 50 applications.
In March 2012, NGO Friends (恩友财务), a member of The Union of Self-Disciplinary Organizations (USDO,自律吧 ), developed the “USDO Financial Information Disclosure Template” and the “USDO Transparency Index.” It held financial training seminars in a number of cities. On July 13, the One Foundation announced the release of these two financial tools that it funded at the Shenzhen Charity Fair. It set up a transparent umbrella in the exhibition as a type of performance art to draw public attention to transparency issues in the public interest sector.
In August, the One Foundation and USDO launched a “Self-Discipline for the Public Interest” event. They urged public interest organizations to join the transparency movement by disclosing their financial records through their official websites or microblogs. USDO sent out event proposals to all its members on August 20 in order to invite more organizations to participate. In addition, it started to collect information that had previously already been disclosed by its members. The One Foundation and Recende CSR (瑞森德) worked to urge 93 non-USDO members to participate in the event. USDO also sent notifications by email and QQ to the participants of its 3A financial training seminars. On August 21, the “Self-Discipline in Public Interest” event was officially launched. Organizers published the “2012 Self-Discipline in Public Interest” proposal in the form of a long microblog message. Shortly after, the Shenzhen Civil Affairs Bureau (深圳民政局) published a microblog message “Disclose Financial Records, Make Public Interest Transparent” with a link to a featured report by Shenzhen Economic Daily (深圳商报). On the same day, Handa Rehabilitation and Welfare Association (汉达康福协会) in Guangdong Province took the lead in disclosing its financial records. In order to attract public attention and lead the event in the right direction, the One Foundation invited 18 experts and scholars to participate and comment on the event. It came to a successful close on September 7, marking an important collective action of civil society organizations in the movement for self-discipline and transparency.
After the credibility crisis [brought on by scandals that rocked Chinese charities such as the Chinese Red Cross] last year, the public interest sector had reached a consensus that transparency should serve as “the cornerstone of China’s public interest sector.” The notion of self-discipline was brought up within the sector 10 years ago. and USDO was established in 2009 to promote it.
Strikingly, even though the event was “A Hundred Public Interest Organizations Disclose Their Accounts,” only 28 organizations took the initiative to disclose their financial records. When an organization considers whether to disclose, inevitably it has to weigh the pros and cons. This process relies heavily upon the organization’s capacity to manage and report on its finances, and is further constrained by the external environment. There is a large gap between the reality of the public interest sector and the public’s understanding of it. When an organization decides to disclose its finances, it needs to consider its fund-raising needs and the demands of an informed public, while addressing the potential for public misunderstanding. In addition, it needs to consider the attitude and expectations of the government and its sponsors. Therefore, promoting transparency requires efforts from both inside and outside the public interest sector. In addition to promoting transparency and self-discipline, the “Self-Discipline for the Public Interest” event also promoted public advocacy and education. By addressing these diverse aims, it seeks to inform the public about the role of financial data in the development of public interest organizations to create a helpful external environment. This advocacy approach differs from advocacy that is directed only toward the sector rather than the general public.
[Some reservations about financial disclosure were raised] at the “Transparency Movement Sharing Salon” held in the One Foundation’s Beijing Office on September 4. There, representatives of two organizations which participated in the initial implementation of the “USDO Financial Information Disclosure Template” shared their experiences and answered questions raised by the audience. One person noted, “if you look carefully, public interest organizations will always have problems. For example, how can a public interest organization properly disclose its accounts when some project expenses do not come with official receipts? One organization on the panel answered that they would communicate with their sponsors beforehand. Sponsors usually will permit the use of informal invoices first, then replacing them with official receipts obtained elsewhere. Since project auditors are usually retained by sponsors, they understand the process and could handle this discrepancy between regulations and the actual practice. Nonetheless, this process itself will not be disclosed. Disclosure may be more difficult for those organizations that are not yet registered and those affiliated with another registered organization or foundation. These organizations hesitate to disclose because they worry that their disclosure would cause troubles for their sponsoring organizations if their financial records turned out to be inconsistent.
[Another concern] is that promoters also see the “USDO Transparency Index” as a tool to evaluate public interest organizations, rather than simply as a self-evaluation reference tool for the organizations themselves. Even though there has not been a detailed plan to strengthen public support of NGOs by promoting the index, the promoters of USDO have already started to clarify some fallacious rumors concerning the public interest sector through microblog and other channels. For example, one popular yet confusing topic is the issue of “zero cost” for public interest activities. In response to some foundations that state their costs are close to zero, Wu Xuebing, one of the experts attending the “Self-Discipline in Public Interest” event, commented in his microblog that the high regard for “zero-costs” charities in China reflects the low level of public understanding about charity, the lack of effective supervision over charitable organizations, and the inadequacy of tax incentives for donations. In his view, the “zero cost” claimed by some charities does not mean that there were no administrative costs incurred, but rather that such costs were covered not by charitable donations but by other financial sources. Tang Yilei, the Director of Philanthropy Support at the One Foundation, posted a message at her microblog to challenge those organizations claiming “zero costs.” She urged them to join the USDO “Self-Discipline in Public Interest” and to clarify their financial information, rather than playing with confusing concepts!
At the Shenzhen Charity Fair, Wang Yang, the Guangdong Party Secretary, Li Liguo, the Minister of Civil Affairs, Xu Qin, the Mayor of Shenzhen, and other leaders stopped by the One Foundation’s booth. They accepted a transparent butterfly trophy from Wang Shi, the Executive Board Member of the One Foundation. This gift symbolizes a “transparent” charity and its “butterfly effects.”
The understanding and attitude of government agencies towards financial transparency is crucial to the survival of public interest organizations. Hong Bo, Director of the NGO, Qinghai Gesanghua Education Aid (青海格桑花教育救助会), posted a blog article “Is the organization doomed whether or not it discloses its finances? !” She wrote about a disability organization that had applied for government funding: “She (a staff at the disability organization) invited some officials to inspect the organization’s rehabilitation center. At the beginning they applauded the organization’s work. However, the leaders lost interest the moment she told them that the organization discloses its finances according to the rules. The leaders gave her the cold shoulder when she visited them afterwards. A staff member at the government agency grew sympathetic when seeing her trying to apply again and again with no success. The staff told her in private that the agency’s refusal was due to the financial transparency of her organization.”
In her blog article, Hong Bo expressed concerns about the omission of an important issue at the Shenzhen Charity Fair: how to promote a law-abiding, open, and transparent government procurement process: “I hope public interest organizations with real capacity to serve will not be squeezed out due to government procurement policies, otherwise, it will be really sad for all of us.” [Editor’s Note: Government procurement of services from NGOs has grown rapidly in the past few years, yet there are concerns that most of the government funding goes to NGOs with close ties to the government and is not being carried out transparently or fairly.]