The Genesis and Impact of Poor NGO Transparency in China

Through the recently released China Charity Donation Report 2010, released by the China Charity & Donation Information Center, the issues of NGO transparency were once again highlighted.

An ongoing issue for many, the main data point that was highlighted almost all the coverage was that 90% of the public was not satisfied with the current levels of information being released. Something that I will touch on again later. However, something that should come as no surprise, was that the larger, national level, groups (GONGOs) and those located closer to the East coast, had the highest levels of transparency. While smaller groups in the center and west of the country had the lowest. Something I will touch on in a bit as well.

The survey comes at an interesting time as I have recently been speaking about how philanthropy has changed over the last few years, how perceptions have changed as well, and why improving transparency will be a critical step should the recent trend of engaged philanthropy be continued.

That if you go back 10-15 years, into the era I call “Philanthropy on Demand”, donor were largely corporate and government agencies whose need for transparency were actually very low. they were engaged in quid pro quo donations that (regardless of amount) were tied to a specific reward. Media hits. Meetings with a mayor. Rewards that essentially were laid out up front, and remove any real interest in knowing where the money was ultimately going. In the words of one executive I spoke with, they were going to give 100 times across China to ensure their name was in the paper 100 times across China. It was a marketing expense, and as long as the media hits occurred, no questions were asked later about the “impact” their donation had.

However that all changed following the 5.12 Wenchuan Earthquake as tens of millions of average Chinese citizens donated their money to support the relief efforts. Largely channeled into 10-12 GONGOs, this was a turning point for China, where philanthropy moved to a system of engaged philanthropy where donors were no longer receiving a predetermined reward for their money, but were in fact giving to a cause they believed in, chose to support, and ultimately wanted to have a positive impact. It was the first time many of these organizations were being expected to be transparent to the masses, and they were not ready. Something that under the old system would not be a problem as large donors would, through predetermined rewards, always find their way back to the podium, however under the new system where individuals are being encouraged to engage, this proved to be an issue that ultimately threatened to undermine the long term sustainability of these new donors.

For some groups though, primarily the larger GONGOs, advances were being made, particularly if the group had worked with international NGOs and donor agencies in the past (China Youth Development Foundation, Women’s Federation, etc) or if they were located in the major cities and were frequently interacting with large donors (donors who typically have higher expectations). On the one hand, this was really an issue of experience in that these organizations simply have the resources and support to install accounting systems, have been given training on report writing, and have worked with enough external groups to know what is needed. On the other, it is a story about grassroots organizations who are still small in size, and lack the capacity to report out to their donors because they are too busy, there is no in-house accountant, or they have simply no experience with donors to understand what is expected.

Either way, and I will wrap it up with this thought, now that China has entered into a period of “engaged philanthropy”, the bar has risen. NGOs who are accepting public donations (legally or otherwise) are going to be held to a higher standard overall, with some standards conflicting, and for these groups to survive they will have to learn how to develop a level of transparency that meets expectations.

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