DECEMBER TRULY befits its title as “the month of giving.” The sounds of hand bells resonate in the streets of Seoul as volunteers from various non-profit organizations (NPOs) promote a range of charity works. Donating is an annual ritual for many of us as we share our love and compassion with those in need during the holidays, and these donations add up to make a considerable impact. According to a report from Guidestar Korea, the total amount of donations collected by 8,993 NPOs amounted to a net sum of 1.3 trillion KRW in December 2016 alone. This was more than three times the monthly average sum of donations, which was $390 million. Considering that there are approximately 33,890 officially registered NPOs in South Korea, the question then becomes, “Which organization is best to donate to?” Especially with donors having limited knowledge on organizations’ fund usage, how can you ensure that your money is going into the right hands?
The information wall
While the current trend of donation demonstrates that our hearts are in right places, we typically lack awareness when it comes to selecting an NPO to donate to and tracking where the donations end up going to. A report by the Korean Institute for Health and Social Affairs (KIHASA) in 2016 indicated that out of 2,038 people surveyed, 61.7% were unaware of how their donations were used by NPOs. Even among the 64% who claimed to have knowledge of NPOs’ fund usage, a significant portion was found to rely on the independent publications by the respective NPOs in doing so.With a large portion of donors uninformed of where their money is going and another large portion relying only on NPO’s own publications, it is no surprise that some NPOs have taken advantage of this blind side.
The lack of awareness has brought about several incidents of fund misappropriation by NPOs. One of the most notable cases was by Fly Hope Seeds in the World (Sae Hui Mang Ssi At), an NPO that claimed to carry out nation-wide missions to support the education of children from single parent families under financial difficulties. In 2017, the organization was charged with fraud and embezzlement for using most of the donations on personal expenses, such as luxury holidays and branded cars. It was reported that they had devoted only 1.7% ($176,000) of the net donations of $11 million to charity works. Donors were completely unaware of this blatant misappropriation of funds, since the organization refused to release their financial reports for donor reference. While this case may be seen as extreme, it does, however, exemplify how donors can easily be made unaware of how their contributions are being used.
Exploitation of the information gap between the donors and NPOs has brought about concerns among the public to demand more accountability and transparency of NPOs. This has led to the creation of several charity evaluators that assess the credibility and transparency of NPOs according to a set of objective indicators. Charity Navigator is one of such evaluators in the U.S. Established in 2001 by Pet Dugan and Marion Dugan, past victims of a charity fraud, Charity Navigator currently offers comprehensive information and evaluation on approximately 8,000 NPOs across the U.S.
Seeking transparency among NPOs
In 2008, Guidestar Korea, a foundation established to tackle the issue of transparency in South Korea’s donation system, initiated its efforts to bring changes to the situation of limited transparency. In an exclusive interview with the The Yonsei Annals, Park Du-jun, Research Advisor of Guidestar Korea, explained how Guidestar Korea might be the starting point of the slow but steady progress in South Korean charity movements. He expressed his hopes that it would eventually bridge the information gap between the Korean donors and NPOs. “The primary duty of our organization is to increase the accessibility of corporate information of NPOs to the public. We fulfill this by restructuring, reorganizing and assessing the corporate data of approximately 9,000 NPOs provided from the National Tax System (NTS).” said advisor Park.
However, the initiative of Guidestar Korea was faced with considerable obstacles from the beginning. The organization was not able to carry out evaluations from 2008 to 2015 due to several administrative challenges. “There was inadequate data from the NTS’s disclosure of NPO’s financial records to carry out a complete assessment of the NPOs,” explained Park. “Even after a revision of the standard disclosure form under the NTS in 2013, there were frequent cases of incorrect data inputs among the NPOs that hindered proper evaluation of their organizations.” Despite the setback, Guidestar Korea spent two years in offering relevant data-input trainings to NPOs to raise the overall quality of the declared corporate information.
Its efforts finally paid off in 2015, when the foundation first released its assessment results to the public. The results contained detailed but simple information on the individual NPOs, and they were categorized under four categories: organization introduction, finances, evaluation and reviews. Such evaluation was based on Guidestar’s self-developed system of assessment, the GSK 2.0. The GSK 2.0 offers a comprehensive review of the NPOs across a broad spectrum that ranges from transparency, corporate responsibility to organizational efficiency. The GSK 2.0 contains a total of 24 indicators—12 to evaluate the transparency and corporate responsibility, and 12 to investigate the financial sustainability and efficiency of an NPO. From this, the combined result from these indicators will give an overall star rating out of three stars, with three being the highest. Under such system, NPOs with exemplary performance are given a higher star rating that indicates a higher level of overall transparency and efficiency in their management and utilization of donations. Guidestar’s initiative brought about a significant change in how NPOs viewed the need for organizational transparency; with a new platform available for donors to openly search and compare different organizations, transparency became an important factor of comparison among NPOs who compete for donors and their contribution.
Since Guidestar’s initiative, there has been a gradual improvement in the transparency among Korean NPOs. “Ever since the release of the first assessment results, we have been seeing a steady rise in the number of NPOs displaying an excellent level of transparency. In 2017, there were 131 NPOs that received a three-star rating (the highest rating based on GSK 2.0). This is a 39% increase from the previous year, where 94 NPOs received this rating,” commented advisor Park. Additionally, the aforementioned instances of NPOs’ mishandling of funds have raised public consciousness on the need for NPOs’ transparency. Charitable Giving Report 2016, a report by the KIHASA in October 2017, reaffirmed this trend in a survey, in which 60% of the respondents acknowledged the significance of having transparency in the financial transaction of NPOs.
Gone are the days when donors were blindly donating to charity. As information on the transparency of NPOs is being increasingly accessible by the donors with the help of charity evaluators, the donation culture in South Korea is gradually becoming wiser and healthier.
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The emergence of charity evaluators such as Guidestar Korea only signals the beginning of South Korea’s baby step to abolish the persistent information gap between the donors and the NPOs. The nation has just reached that stage of growth in the level of awareness among donors on the significance of NPOs’ transparency, and there is a need for sustained cooperation and efforts from the government to support this positive trend. However, as citizens as well as potential donors, we can also join the movement to cultivate a healthy culture of donation; by spending just few more minutes to look up the organizations of your interests on the charity evaluators, you are already one step closer to making a wiser donation—the donation that put our donation in the right hands.
For the interest of many who are willing to engage in meaningful act of donation in this season of love, Guidestar Korea has offered some useful tips to take note before you make your donations to ensure that your donations are used for charitable purposes.
1. Look up the information pertaining to the NPOs on a charity evaluator.
2. When doubtful, do not hesitate to contact the NPOs to seek clarifications on details of their charity acts and financial details.
3. When making donations via online or electronic transactions, the recipient account must be registered under the official organization’s name and never under an individual.
4. Beware of the NPOs that are unable or reluctant to issue donation receipts, this is one of primary traits of organizations that lack transparency.
5. Reconsider donating to NPOs that offer goodies; it suggests that your donation is not efficiently used for charitable purposes as gifts are prepared with the income from the donation.