Replies to LegCo questions
LCQ2: Monitoring fund-raising activities
Following is a question by the Hon Lau Kong-wah (in the absence of the Hon Chan
Kam-lam) and a reply by the Secretary for Health, Welfare and Food, Dr York
Chow, in the Legislative Council today (March 9):
Question:
Regarding the monitoring of fund-raising activities, will the Government inform
this Council:
(a) of the respective numbers of applications for organising flag days and other
fund-raising activities received in each of the past three years and, among
them, the number of applications which were unsuccessful and the reasons for
their being so; and the criteria adopted by the authorities for granting
charitable institutions permits for organising such activities; whether they
have regularly assessed the performance of these institutions after granting
them the permits so as to ensure that their reputation and management capacity
are satisfactory; if they have, of the assessment results; if not, the reasons
for that;
(b) whether it has assessed the effectiveness of the existing measures adopted
for monitoring the fund-raising activities organised by charitable institutions
on streets and via the Internet and the usage of such funds; if it has, of the
assessment results; if not, the reasons for that; and
(c) as the Reference Guide on Best Practices for Charitable Fund-raising
Activities published by the Social Welfare Department in November last year
contains no restrictions on the ratio of the administration fees in the donation
proceeds nor stipulates any penalties on charitable institutions for
non-compliance with the Guide, and the Guide itself is not legally binding,
whether the authorities will consider enacting legislation to impose such
restrictions and drawing up prosecution measures for non-compliance with the
Guide; if they will, of the details; if not, the reasons for that?
Reply:
Madam President,
(a) Between 2002 and 2004, the number of applications for Public Subscription
Permit (PSP) for flag-selling and other charitable fund-raising activities
received by the Social Welfare Department (SWD) were 596, 766 and 756
respectively and among them, 94, 108 and 107 applications were unsuccessful. The
main reasons for the unsuccessful application were that the number of
applications for flag selling far exceeded the quotas allowed for the activity
and that the applicant organisations in question had violated the conditions of
PSP in their previous fund-raising activities.
SWD will evaluate the applications for PSP for flag-selling and other charitable
fund-raising activities against certain criteria, such as the fund-raising
activity must be charitable in nature; the applicant organisation must possess a
valid registration under the relevant ordinances or it is an organisation
exempted from tax under Section 88 of the Inland Revenue Ordinance; the previous
performance of the organisation and the capability of the applicant organisation
in holding the fund-raising activity.
DSD will lay down in PSP a number of requirements to augment the transparency of
the fund-raising activity, including that the activity should not be
profit-making; within 90 days after the activity, the gross proceeds raised
after the deduction of any expenses incurred should be deposited in the relevant
bank account and that the verified copy of the audited account should be
submitted.
Besides, between 2002 and 2004, the number of applications for Lottery Licence
received by Television and Entertainment Licensing Authority (TELA) were 127,
118 and 122 respectively. Among them, only one application submitted in 2004 was
unsuccessful. TELA rejected the application on the ground that it was a late
submission.
Anyone who wishes to conduct a lottery activity has to apply for a licence from
the Commissioner for Television and Entertainment Licensing (CTEL), under the
Gambling Ordinance (Cap. 148). The licensing conditions prescribe the maximum
duration of a lottery sale. The conditions also specify that lottery proceeds
should not be appropriated to any individual(s) for private gain purpose. If the
sales or peddling of lotteries are to be conducted in public streets, prior
written approval from CTEL is required. In order to ensure that the organisation
for holding the lottery activity will use the proceeds on the claimed purpose,
the licencee must submit to CTEL within a specified period a financial statement
audited by a public accountant. The statement must set out the proceeds and
expenses arising from the lottery activity.
In short, the present regulating measures on charitable organisations are mainly
based on the criteria for issuing PSP or Lottery Licence, including the previous
performance of the institutions. For those institutions who have violated the
conditions, their names will be put in a sanction list. We will review the
present administrative measures over those institutions who fail to observe the
conditions.
(b) In the interest of public order, section 4(17)(i) of Summary Offences
Ordinance (Cap 228) states that any person who organises, provides equipment
for, or participates in any collection of money or exchange for donation of
badges, token or similar articles in a public place for charitable purpose, is
required to apply for PSP from DSW. Besides, CTEL is empowered to issue Lottery
Licence to those who wish to organise lottery activities under the Gambling
Ordinance (Cap148). The Ordinance also specifies the conditions which the
applicants and holders of the Lottery Licence must observe. CTEL also sets out
additional conditions for regulating lottery sale to be conducted in public
streets. For those who fail to observe the conditions of PSP and the Lottery
Licence, SWD and CTEL may not accept their future application. On the other
hand, the public may inspect the financial statement of the Lottery Licence
holders and the information relating to the PSP charitable activities on the
Internet.
Under the existing law, we do not have any regulating measures over the public
fund-raising activities through the Internet or held in other forms.
Public views have been divided on the proposal for the Government to impose
legislative controls over fund-raising activities. Indeed, the Government has
conducted a full-scale review and assessment of the existing regulating
mechanism and come to view that a full control through legislation is not
practical. Alternatively, we may strengthen the existing measures and come up
with a voluntary self-regulation system. After extensive consultation with the
public, and the relevant panels/committees, SWD has issued the Reference Guide
on Best Practices for Charitable Fund-raising Activities (Reference Guide) for
voluntary adoption of charitable organisations. The Government will review the
Reference Guide one year after its issue.
The Government has reminded the public through the mass media of the need to
fully understand the background and operation of the organisations concerned as
well as the purpose of their fund-raising activities before making donation. If
they have any doubt, members of the public may wish to contact SWD or TELA or
report the cases to the Police. The Theft Ordinance (Cap210) regulates those
fraudulent or deceptive fund-raising activities. When there is any alleged
breach of the law in the conduct of flag-selling, fund-raising or lottery
activities, we will normally refer the case to the Police for further follow-up.
(c) The Reference Guide was issued by SWD in November 2004. It has laid down 21
guidelines, covering the best practices regarding three areas, namely donors'
right, fund-raising practices and financial accountability. One of the
guidelines specifies that no more will be spent on administration and
fund-raising than is required to ensure effective management and resource
development. SWD also encourages a charity organisation to disclose the ratio of
its return and expenses for donor's reference. The aim of the guideline is to
ensure that the amounts of fund-raising expenses and administrative expenses are
maintained at an appropriate level to allow the maximum possible resources to be
used for charitable purposes. The guideline has not set any ceiling on the
administrative costs as a percentage of the donation proceeds incurred. As a
matter of fact, the appropriate level of the amount of fund-raising expenses
would vary subject to the following factors: the size of the charity
organisation, its history background and reputation, networking of donor, the
assistance of voluntary workers, networking of enterprises, management
expertise, financial management and the professional experience of the
fund-raisers etc.
The Reference Guide is for voluntary adoption by charity organisations. It
serves to strengthen the accountability and transparency of the organisation
while assisting the public to make an informed decision about making donation.
At present, the Government has no intention to implement compulsory adoption of
the Reference Guide. If it is to be implemented, stringent vetting and review
procedures will have to be put in place which would have considerable resource
implications both for the Government and the charity organisations. Such a
system may also inadvertently discourage fund-raising activities. In view of the
large number of organisations and the broad scope of activities involved, it is
doubtful whether the establishment of a regulatory system to cover all
charitable fund-raising activities will be effective. We, therefore, do not see
the need at this stage to have compulsory adoption of the Reference Guide.
Ends/Wednesday, March 9, 2005
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