Hong Kong’s Lax Rules on Charities

In recent weeks, thousands of Hong Kong households received individually addressed envelopes from a charity called the World Children’s Fund Hong Kong asking for donations to help poor children in China. The envelopes usually included a cover letter featuring a small girl (“Little Xiaoling is destined to a life of hopelessness.unless…”), a payment slip, a prepaid return envelope and a “complimentary” pair of chopsticks.

What’s particularly unusual about this particular charity is its claim to “double the value of my donation to Help the Chinese Children. If you give HK$350, the amount will be matched and doubled in value to equal HK$700.” Doubling your money is a strong claim, and no mention is made of how the charity performs this feat.

That is partly because it doesn’t have to. The Hong Kong government lacks the administrative structures and laws that would allow its public to make informed choices on charities. Doubtless there are many who have already given their money to this particular cause in good faith; but they do so with little way of knowing exactly where it ends up.

Certainly the sector is open to declining credibility and donor inflows. The Social Welfare Department lists 175 charitable non-governmental organizations which at the 2006 financial year end received HK$6.34 billion in funding. In a region and market where increasing wealth meets increasing inequality, philanthropy has major potential to become big business –a good thing for all those involved.

At present, charities are under no legal obligation to disclose their accounts either publicly or to the government, which has instead published a “Reference Guide on Best Practices” that charities are merely “encouraged” to follow. While this document outlines the legal and accounting standards to which one would expect charities be legally bound, there is no mechanism to discourage organizations from ignoring them. Charities are free to simply choose whether to obey the rules while being guaranteed tax exemptions.

This is because the social welfare department deems such regulations to be –citing a 2003 Public Consultation document – “unrealistic…[this would] incur substantial manpower.for government...[and] additional administrative costs and onerous bureaucratic requirements on fund-raisers.”

Onerous perhaps, but such views miss the most salient point: that the hidden benefits of credibility arising from financial transparency and better administration are likely to far outweigh their visible costs.

The World Children’s Fund is one such example, as attempting to unravel their spending history and asset multiplication claims are nearly impossible. No publicly available financial records exist for the organization, either with the welfare department or Inland Revenue. The Community Chest has never heard of them.

Speaking to the charity’s office reveals only that their Hong Kong donations are “matched” by their branch in the US, although they could [or would] not explain the intricacies of this generosity. However, no charity under the World Children’s Fund name exists in America, according to Charity Navigator, America’s largest evaluation website. Although they could operate under a different name there, the Hong Kong office described this finding as “strange.” The only global WCF financial record Asia Sentinel could find online was from the UK Charity Commission, where their accounts for the last two years are overdue. The 2004 records indicated a small deficit.

The Hong Kong arm of the charity’s website is confusing, alternating unashamedly between a virtual shrine to its founder, Joseph Lam, and the sort of goal-driven rhetoric that would be in cosier context in a political election campaign.

The comparison is neither too far-fetched nor surprising. The organisation’s credibility seems to contingent on Lam’s meeting with Mother Teresa and his “honorary PhD” from Liberty University, the Lynchburg, Virginia educational incarnation of the late American televangelist and arch-conservative Jerry Falwell. Liberty University ranks in the bottom 25 percent of “Southern Master’s Universities.” The school’s motto is “Knowledge Aflame.”

World Children’s Fund Hong Kong could very well do a lot of good, and maybe a donor’s money really does double at some point. But there is no good way of knowing what this place does or how little Xiaoling benefits even after investing time talking with their office, reading their website, and checking with various government departments.

It is interesting to note that the Hong Kong government regulates quite tightly the activities of financial sector companies and individuals seeking funds from investors. But when it comes to the taxless flow of money from the rich to charities, it is all too inconvenient.

If people are going to give away the fruits of their toils, knowing how that money is spent is important. The less they know, the more open to fraud they will feel and the less they are likely to contribute to any but the best known charities.

It is likely that tightening the rules might make for looser wallets.