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Thursday, April 27, 2017, 00:16

Auditor slams lax oversight of charitable fundraising

By Shadow Li

Auditor slams lax oversight of charitable fundraising
International singer Coco lee (R) and The chairman of the Hong Kong Committee for UNICEF, Dr. Robert Fung (L) lead a group of children lead a group of children as they place cut out hands on a board during the UNICEF and UNAIDS launch of their global campaign in Hong Kong, 25 October 2005. (AFP PHOTO/Samantha SIN)

HONG KONG - The city’s auditing watchdog on Wednesday blasted the government’s lax supervision of the city’s burgeoning charitable fundraising activities, which leaves the public’s kindness open to abuse.

The director of audit’s report, released on Wednesday, revealed that HK$282 million ($36 million) – just 2.4 percent of the HK$11.84 billion donations by the public – was directly reported to the regulator.

Under current regulation, charitable fundraising activities such as flag days and on-street charity sales or raffle ticket sales need a license from the government.

However, no regulation or permit is needed for other charitable fundraising activities such as charity auctions, balls, concerts, dinners or requests for donations by mail or through advertisements or even online crowdfunding.

By September last year the city had a total of 8,923 charity organizations that enjoy tax exemption under the Inland Revenue Ordinance, more than double the 4,435 in 2006.

Donors can obtain a tax deduction for donations of more than HK$100. The Inland Revenue Department records showed that HK$11.84 billion in donations had been made and declared by the public.

But the government’s regulated charitable fundraising activities showed that only HK$282 million donations were received from those activities.

Under the current regulation, the permit for flag days carries a ceiling of 10 percent on fundraising expenses. For other general charitable fundraising activities, there was no similar requirement, leading to expenses at some consuming as much as 76 percent of the gross proceeds of the charitable fundraising activities. In other words, most of the donations made by the public didn’t go to the needy.

But regulation on charity groups has been a long-standing issue. Last month management teams of non-government organizations, some funded by the government, were revealed to have pocketed fat checks as bonuses. In several cases, with cash bonus, the annual salary of an NGO chief executive director could exceed HK$2 million.

Similar misuse of money was mentioned in the audit report which found some charity groups had paid excessive wages to their management. In one case, HK$13 million was paid to nine directors in such a practice from 2012 to 2014, which was against the regulation.

But the relevant charity organization was allowed to enjoy its tax-exemption status as a charity group after it said it had stopped such practices, despite making no refund.

In other irregularities found by the auditing authority, 11 pieces of land granted for charity use had commercial hotels built on them.

Earlier in December 2013, the Law Reform Commission made 18 suggestions to beef up charity group regulations, including tightening requirements on permits for public fundraising activities and setting up a centralized hotline for public inquiries on charitable fundraising activities.

But the government’s response to the suggestions was slow, leading to further abuse.

The watchdog suggested the government should set a cap for expenditures in the permit for charitable activities, and implement tighter supervision over charity groups.

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