New regulations on charity information disclosure released

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This is an abridged translation of an explanation of the new Charity Information Disclosure Method by the Ministry of Civil Affairs. You can find the original here.

The Civil Affairs Department recently released the “Charities Information Disclosure Method”, creating a universal set of regulations for the information disclosure of charitable organisations.

Information needs to be disclosed by charitable organisations, as a basic requirement of philanthropy is transparency and it is accountable to the society as a whole. This new method is in accordance with the Charity Law, further emphasising the duty of charitable organisations to disclose information with administrative, social, judicial and industry supervision. The Charity Law states that the Ministry of Civil Affairs should have a unified information platform to release information to the public, and as such in September 2017 the information platform “Charity in China” was created.

The information needed to be disclosed by charities is decided by the charity supervision groups, dependant on the organisation and their activities. This new method highlights disclosure of asset information and public donation information.

The supervision of asset activities is highly important, and previous regulations and methods have regulated the management and requirement of such information. To aid the cooperation of charitable organisations’ asset activity management the new method clarifies the requirements for charitable organisations’ information disclosure from the two perspectives of importance and relevance. In regards to importance, there are three main situations that need to be made public: major asset changes, major investments and major transactions/capital exchanges.

Regarding what constitutes “major” asset changes, the threshold is set by the charities themselves as to what to make public, allowing social supervision and the organisations’ self-monitoring to work together (article 3 and article 12). In regards to relevance, there is an emphasis on the information of relevant parties such as sponsors, major donors and investors and their transactions, donations, funding and investments (article 4 and article 13). This disclosure will prevent embezzlement, misappropriation and misuse of assets, yet not restrict further contributions or the development of the charity.

For the disclosure of information on public donations there are regulations already in place. Under the Charity Law, ordinary individuals and organisations cannot call for public donations, while charities without fundraising permits can only conduct directed fundraising, and only charities with fundraising permits have the right to publicly fundraise. In regards to fundraising status and activity management, the Ministry of Civil Affairs has already produced the “Methods of Management of Public Fundraising of Charitable Organisations”, which require the disclosure of fundraising information. As such, in comparison to those without fundraising permits, the charities with fundraising permits should undergo stricter supervision, with higher transparency requirements.

Due to this the new method makes three requirements of charities with fundraising permits. Firstly, organisations are required to announce the monetary value of the five people within the organisation who are remunerated with the highest amounts, and to publish the standard fees for “official business” activities (article 5). Secondly, they are required to provide full disclosure to the public of all fundraising activities, before, during and after the event. Following the event the relevant information must be disclosed in order to meet the requirements of social supervision (article 7 and article 8). Thirdly, it is required that reports on the situation of charitable projects are published at least once every three months, and after the projects all information must be disclosed (article 10).

Charities are using the internet and social media to fundraise, publicise and raise awareness, with great positive impacts. Online fundraising both raises funds and automatically discloses information. Article 23 of the Charity Law stipulates that charities who carry out online fundraising will issue all the information to the Ministry of Civil Affairs through the online public fundraising platform. Corresponding to this regulation, the Ministry of Civil Affairs has designated 20 official online public fundraising platforms. With the growth of online fundraising, illegal acts need to be clearly defined in law. To this end, the new method fills the gaps left by the Charity Law (article 7).