SCMP - Charities multiply in a legal vacuum

南華早報
Daniel Sin and Phyllis Tsang2009-10-04
headline

Charities multiply in a legal vacuum

ICAC, law body act on groups' fund-raising

The number of charities in Hong Kong has ballooned to nearly 6,000 and charitable donations appear to be rising, yet few rules govern such groups' activities.

Now authorities are to propose more guidance for them, while legal scholars and lawyers are suggesting a thorough overhaul of laws.

The Independent Commission Against Corruption will this week announce guidelines for charities on how to plug fund-raising loopholes that could facilitate corruption. They focus on how charities manage their accounts and encourage them to disclose their accounts to donors in a fair and just manner.

The ICAC's corruption prevention department began a study of charitable fund-raising at the end of last year after several complaints.

The Law Reform Commission will release for discussion early next year a report suggesting a new law be passed to regulate charities. Commission members studying the issue said their initial findings were that a charity commission or similar body should oversee such groups and that all charities should be registered.

The moves follow controversies this summer over the accounts of charities running a school in Yau Tong and a drug rehabilitation centre on Lantau Island.

Pegasus Social Service Christian Organisation - sponsoring body of the Pegasus Philip Wong Kin Hang Christian Primary School cum Junior Secondary School - gave up running it with accounts overdue and amid accusations of maladministration, allegations over the school's outsourcing of services to the organisation and claims parents had loaned the school HK$10 million.

Carmen Leung, the school's supervisor and also the organisation's chairwoman, said the outsourcing was lawful and that "some money is lent to us".

The Christian Zheng Sheng Association was accused of using government money to fund businesses on the mainland and in Japan and Hong Kong. The association said it used its investments to fund its operations, including subsidising the Christian Zheng Sheng College drug facility on Lantau when necessary.

Bernard Chan, the chairman of a Law Reform Commission subcommittee on charities, said the city needed a proper law to regulate charities. "There is not even a [legal] definition of what constitutes a charity or a charitable purpose," he said.

An organisation may apply to the Inland Revenue Department for registration as a charity to get exemption from paying tax. Taxpayers can ask for donations to such bodies to be tax-deductible. The number of charities registered with the department rose from 3,819 in 2003 to 5,898 this year. Tax-deductible donations to charities rose from HK$2.99 billion to HK$7.03 billion over the same period. The department says it has no role to play in regulating charities or their activities.

Chan said defining which groups are charities and what activities need regulating are basic issues.

"For example, if there is a charitable ball held in a hotel, should such activities be regulated? Should a church be registered because it puts a box in a meeting place to collect offerings from the congregation?"

Chan said the panel was studying how other jurisdictions, such as Britain, regulate charities.
The United Kingdom Charities Act, enacted in 2006, defines a charity as a body or trust that is for one or more of 13 charitable purposes that provide benefit to the public. These purposes include poverty relief and the advancement of education, health or religion. A charities commission regulates charities. Those with annual income of ?,000 (HK$61,900) or more must register with the commission.

The commission is empowered to check whether organisations are "fit and proper" to carry out public fund-raising, which must be licensed.