Red Cross Faces Credibility Crisis

A few days after the 8.0-magnitude Wenchuan earthquake struck in May 2008, Li Wenyu donated money to the Red Cross Society of China. She expected her donation would help relieve the suffering of victims, help them overcome perhaps the hardest time of their lives.

She asked for a receipt and later found a record of the donation on her online bank account. The Red Cross never told her how the money was spent, she said, but she trusted the largest emergency aid foundation in China - until late June.

A woman calling herself "Guo Meimei Baby" claimed on her micro blog to be the "commercial general manager" of the Red Cross, boasted of her fortune and posted pictures of her Hermes handbags and white Maserati. The photos plunged the Red Cross into a credibility crisis over its use of donations.

"Guo" later admitted that she had made it all up, but the damage was done. The Red Cross could only disavow any association with her; it did not provide accounting data as evidence.

"I felt like I had been cheated," said Li, 36 and a software engineer. "The scandal changed my attitude toward public foundations. Next time I will choose more transparent organizations in Hong Kong and Taiwan or send the money directly to the target recipients."

To pacify the angry public, the Red Cross rushed a donation information platform onto its website on July 31, but various mistakes drew harsh criticism.

For example, Web users found that two health centers for women and children built in earthquake-stricken Yushu, Qinghai Province received equal allocations of donations, although one was five times larger than the other. The Red Cross Society of Qinghai apologized, blaming a staff worker for sending wrong data to the Red Cross Society of China without having it examined by the supervisor.

"The platform is an important step toward transparency, which the Red Cross promoted. It is still in a trial period and will probably come up with more problems," the national society said in a written statement sent to China Daily.

"We will collect complaints and suggestions from all sides, take the rational part of the opinions, and make improvements to better satisfy the information-searching demands of our donors."

The public didn't buy it. Li did not even bother to go to the platform to check where her money went, after she had learned that only those who donated at least 100,000 yuan (US$15,550) could find their names.

'Please give us time'

"How could the Red Cross set such a bar for searching individual donations? About 95 percent of the donations are below 100,000 yuan," said Cheng Gang, president of the China Foundation Center.

He also criticized the society for offering too little information about how donations are spent.

"Now people can look on the platform for how much a person donated and when, but what's the meaning of it? The public cares most about to which projects their money has gone, what the details of the projects are, and whether their benefits have been evaluated."

To similar challenges brought by other experts, the society responded in its statement, "We will expand the scope of inquiries, make the items of inquiry more specific, and keep the public truly informed about how their money is spent and about the latest progress of our projects. During the process, please give us more time."

Cheng suggested that the Red Cross set a timetable and tell the public clearly what progress to expect each month. Statistics on the platform also need to be updated daily.

"The society should adopt a more open and tolerant attitude by inviting all capable organizations, such as the Big Four accounting firms and large international IT companies, to join the information-releasing project and find a solution together," he said. "In this way, the society still has a chance to rebuild its credibility."

Big picture, details

In China, public foundations and other charities have long been criticized as murky. Nine out of 10 people are unsatisfied with their information disclosure, according to a survey conducted by the China Charity & Donation Information Center. The survey collected responses from 988 people and 65 charity organizations.

"More than half of the respondents donate on a regular basis, but 90 percent said they have never heard any feedback from the charity organizations," reads the report, dated December 2010.

About 79 percent of donors want to know the organization's operational activities, and 73 percent want financial information. The public has a strong interest in getting a more complete picture of charities, the report concluded. They also want to know how donations are used and what results have been achieved.

"Today's charity industry is like the country's market economy in the 1990s. Practitioners are testing each step before taking it, and therefore imperfection exists," said Liu Youping, deputy director of the center.

Liu emphasized the costs and technology required for information disclosure. For example, the donations made to the Red Cross after the Wenchuan earthquake required 3 million data entries, and the Yushu earthquake donations more than 300,000.

"Information disclosure is an easy job for an organization with dozens of data entries, but it becomes quite complicated for one with millions of them."