China to boost charity transparency through intensified auditing

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The Chinese government believes its newly introduced auditing protocol for domestic foundations may help the country's charity organizations regain public trust through enhanced transparency.

Donors and the public have experienced increasing anxiety over the transparency of charity foundations in recent years, according to a press release posted on the central government's official website on Thursday.

However, the previous rule was unclear on several issues, including the scope of auditing, publication of reports, qualification of auditing agencies and the payment of auditing fees, the report said.

The absence of such provisions led to shortcomings in the auditing system, it added.

The new rule, jointly promoted by the the Ministry of Finance and the Ministry of Civil Affairs, went into effect on Jan. 1 this year.

It stated that domestic foundations' annual financial reports and the details of foundations' financial situations during management reshuffling periods must be subjected to an audit by an accounting firm and be made public.

Previously, audits were required only for foundations' annual financial reports.

It also introduced a new auditing requirement for certain donation programs, such as those accounting for more than 10 percent of the foundation's received annual donations or those pertaining to natural disaster relief.

A series of embezzlement scandals hit the country's charity sector last year, leading to a decline in public donations.

Earlier in 2011, a young woman calling herself "Guo Meimei" claimed online that she was the general manager of "Red Cross Commerce" -- a group the Red Cross Society of China has said does not exist. She posted pictures on her microblog detailing her lavish lifestyle, provoking the ire of netizens who speculated that she might have funded her purchases by embezzling money from the Red Cross.

Last September, media outlets reported that the Soong Ching Ling Foundation in central Henan province had embezzled charitable donations and lent large amounts of money to real estate companies for the construction of luxury apartments.

During the January to October period of 2011, the country's civil affairs authorities received a total of 4.36 billion yuan (685.53 million U.S. dollars) in public donations, less than one-third of that for the same period of 2010, according to statistics from the Ministry of Civil Affairs.

Statistics on donations collected by domestic foundations are not available.