MISUSED FUNDS BY NGO

Charity comes under fire again for overspending

By Li Yao (China Daily) Updated: 2011-06-28 07:47

BEIJING - The improper allocation of funds by the Red Cross Society of China and its overspending problems, which were revealed on Monday, have added fuel to the public's anger at the organization.

The Red Cross Society's credibility had already plummeted after a recent scandal involving the misuse of donations, when it was found to have overspent 4.2 million yuan ($647,500), exceeding by 34 percent the accepted budget for equipment procurement in December 2009, according to a report released by the National Audit Office on the implementation of the government's budget.

Other spending irregularities included 300,000 yuan supposedly spent on web management training that has not yet taken place, and 224, 800 yuan of administrative expenses in the construction of a stem cell donor database run by an affiliate organization under the Red Cross.

Yu Jianrong, a professor at the Chinese Academy of Social Sciences, said the disclosed amounts were probably just the tip of the iceberg, and more misuse of funds would probably be discovered.

Many Internet users agreed with Yu's view. In a survey by 21cn.com that began on Monday, 62 percent of the 770 participants as of Monday evening said they no longer believed in any philanthropic organization, another 23 percent said they would donate only via personal contacts, and only five people still considered the Red Cross a trustworthy channel for donations.

Just last week, the Red Cross was embroiled in another scandal that hurt its image and shattered public trust, when a 20-year-old woman, Guo Meimei, claimed to have a link to the organization and boasted online about her lavish lifestyle, although the Red Cross quickly denied having any connection with Guo.

Yu said the incident has triggered a collective outburst of long-time frustration about the Red Cross's murky bureaucracy and questionable governance, and claims that reforms are needed to bring the Red Cross back on track with higher moral standards and more transparency in its allocation of funds.

The Red Cross came under heavy criticism in April when an invoice appeared online showing an office of its Shanghai branch had spent 9,859 yuan on a meal, almost 500 yuan for each attendee.

Hu Xingdou, an economics professor at the Beijing Institute of Technology, said the public's reaction was understandable because the Red Cross has continually demonstrated a lack of financial transparency and weakness in organizational governance.

"The intended effects of donations are compromised when the Red Cross buys things at higher prices, because with backing from the State, it is less sensitive to cost concerns and public accountability," he said.

Hu called for more diversity and innovation in China's philanthropic field, including support for the development of emerging charity organizations in the private sector.

Huang Zhen, a law professor at the Central University of Finance and Economics in Beijing, said the organization's recent credibility crisis was in line with a deep-seated culture of distrust, where people believe all businessmen are dishonest and all politicians are corrupt.

"The organization should be more open about its budgets and allocation of funds to restore public confidence," Huang said.

China Daily