New regulations on the annual management expenditure of charitable organizations were released on the website of the Ministry of Civil Affairs (MCA) on October 20th. These regulation were formulated by the MCA, the Ministry of Finance and the State Administration of Taxation.
According to the new Charity Law, which passed into effect in September, charitable organizations should actively conduct charitable activities, using their funds properly and effectively. They should reduce unnecessary expenses and keep management expenditure to the minimum.
More specifically, for charitable foundations with the qualification for raising donations from the public, the proportion of annual expenditure must be higher than 70% of the general income of the previous year or the average income of the past three years, and the proportion of annual management expenditure cannot be higher than 10% of the total expenditure of the same year. When it comes to other social organizations, the Charity Law specifies that the standard should be set in detail by the related departments of the MCA, the Ministry of Finance and State Administration of Taxation.
The newly released regulations specify the sphere of expenditure for both charitable activities and for organizational management. Expenditure for charitable activities includes rewards for all the staff working on the activities, the allowances and insurance for volunteers, the fees for using property such as houses and equipment, as well as fees for traveling, transportation, conferences, training, auditing and assessment. On the other hand, the expenditure for organizational management includes the funds that guarantee the normal operations and decision-making of organizational councils, administrative staff’s salaries and subsidies, office expenses, telecommunication fees, property management fees and so on.
Moreover, while the annual management expenditure of foundations with the qualifications for raising donations from the public is still supposed to account for less than 10% of total annual expenditure, the new regulations specify that for social organizations and service institutions it cannot account for more than 13%. Furthermore, the details of expenditure for both charitable activities and organizational management should be recorded in their annual work reports and be open to the public.