Standards for Annual Expenditures and Administration Costs for the Charitable Activities of Charitable Organizations (Draft for Public Comment)

Standards for Annual Expenditures and Administration Costs for the Charitable Activities of Charitable Organizations (Draft for Public Comment)

On the basis of article 60 of the "Charity Law of the People's Republic of China" (hereinafter "Charity Law") provisions that "The standards for charitable organizations other than charitable foundations with public fundraising credentials' annual spending on charitable activities and management costs are to be formulated by the civil affairs departments of the State Council, in consultation with the finance, taxation and other departments of the State Council, based on the principles of the preceding paragraph", the Ministry of Civil Affairs has deeply researched and investigated, and on the basis quantitative analysis by retained experts, has drafted the "Standards for Annual Expenditures and Administration Costs for the Charitable Activities of Charitable Organizations (Draft for Public Comment)" and broadly heard the opinions of relevant scholars and all types of social organizations, and heard the opinions of the finance and taxation departments under the State Council.

To broadly hear the public's comments and further increase the quality of normative documents, the "Standards for Annual Expenditures and Administration Costs for the Charitable Activities of Charitable Organizations (Draft for Public Comment)" are hereby published in full, relevant units and persons from all walks may give feedback through the following measures:

1. Submit your comments via email to: zhuhuohong@mca.gov.cn

2. Submit your comments via post to: State Bureau for the Administration of Civil Organizations, 147 North Heyan Street, Dongcheng District Beijing, China 100721. Please clearly indicate "Standards for Annual Expenditures and Administration Costs for the Charitable Activities of Charitable Organizations" on the envelope.

The period for feedback and comments end August 31, 2016.

State Bureau for the Administration of Civil Organizations

August 25, 2016

Standards For Annual Expenditures And Administrative Costs For The Charitable Activities Of Charitable Organizations

Article 1: These standards are formulated on the basis of the "Charity Law of the People's Republic of China" so as to further clarify charitable organizations' annual expenditures and for charitable activities and administrative costs.

Article 2: Charitable organizations shall actively carry out charitable activities, fully and efficiently utilizing charitable assets, and obey the principle of greatest necessity in administrative costs, acting frugally and reducing unnecessary expenses.

Article 3: Charitable organizations shall strengthen accounting of costs related to charitable activities, on the basis of the "Civil Non-profit Organization Accounting System".

Article 4: Business activity costs of charitable organizations include expenses for charitable activities and costs for other business activities.

Charitable organizations' expenditures for charitable activities refers to the following costs occurring when donating assets or providing free services to beneficiaries, based on their charitable purpose and within the operational scope provided for in their charter:

(1) Funding given to beneficiaries either directly or through another organization.

(2) Costs related to staff compensation, housing, equipment and supplies, incurred for the purpose of providing charitable services or carrying out charitable programs.

(3) Costs such as travel, transport, communications, meetings, accounting, and assessments, incurred for the administration of charitable programs.

Article 5: Charitable organizations' administration costs refer to the following costs incurred by charitable organizations following the "Civil Non-profit Organization Accounting System", to ensure the normal operations of that organization:

(1) Work expenses for the board of directors and other decision-making bodies.

(2) The salary, bonuses, housing funds, housing allowances, and social security costs for administrative management personnel.

(3) Office expenses, utilities, telecommunications fees, property management fees, travel fees, depreciation costs, repair costs, rent, amortization of intangible assets, inventory loss, asset losses, losses resulting from estimated liabilities, fees for hiring intermediary organizations, and so forth.

Article 6: Where some of charitable organizations' expenses are incurred jointly as partly charitable activities, other business activities, and administration activities, and cannot be directly attributed to a particular type of activity, these expenses shall be reasonably distributed among all activities, and separately included as expenses for charitable activities, costs for other business activities, and administration costs.

Article 7: Among charitable organizations, foundations with public fundraising credentials' annual expenses for charitable activities must not be less than 70% of the preceding year's total income, and annual administration costs must not be higher than 10% of the current year's total expenditures.

Among charitable organizations, social groups and social service organizations with public fundraising credentials' annual expenses for charitable activities must not be less than 70% of the preceding year's total income, and annual administrative costs must not be higher than 13% of the current year's total expenditures.

Article 8: Among charitable organizations, foundations that do not have public fundraising credentials follow the following standards on annual expenses for charitable activities and annual administration costs.

(1) Where the previous year's year-end net assets are more than 60,000,000 yuan, the annual expenditures on charitable activities must not be less than 6% of the previous year's year-end net assets; and the annual administration costs must not be more than 12% of that year's total expenses.

(2) Where the previous year's year-end net assets are less than 60,000,000 yuan but more than 8,000,000 yuan, the annual expenditures on charitable activities must not be less than 6% of the previous year's year-end net assets; and the annual administration costs must not be more than 13% of that year's total expenses.

(3) Where the previous year's year-end net assets are less than 8,000,000 yuan but more than 4,000,000 yuan, the annual expenditures on charitable activities must not be less than 7% of the previous year's year-end net assets; and the annual administration costs must not be more than 15% of that year's total expenses.

(4) Where the previous year's year-end net assets are less than 4,000,000 yuan, the annual expenditures on charitable activities must not be less than 8% of the previous year's year-end net assets; and the annual administration costs must not be more than 20% of that year's total expenses.

Article 9: Among charitable organizations, social groups and social service organizations that do not have public fundraising credentials follow the following standards on annual expenses for charitable activities and annual administration costs:

(1) Where the previous year's year-end net assets are more than 10,000,000 yuan, the annual expenditures on charitable activities must not be less than 6% of the previous year's year-end net assets; and the annual administration costs must not be more than 13% of that year's total expenses.

(2) Where the previous year's year-end net assets are less than 10,000,000 yuan but more than 5,000,000 yuan, the annual expenditures on charitable activities must not be less than 7% of the previous year's year-end net assets; and the annual administration costs must not be more than 14% of that year's total expenses.

(3) Where the previous year's year-end net assets are less than 5,000,000 yuan but more than 1,000,000 yuan, the annual expenditures on charitable activities must not be less than 8% of the previous year's year-end net assets; and the annual administration costs must not be more than 15% of that year's total expenses.

(4) Where the previous year's year-end net assets are less than 1,000,000 yuan, the annual expenditures on charitable activities must not be less than 8% of the previous year's year-end net assets and must not be less than 50% of the previous year's total income; and the annual administration costs must not be more than 20% of that year's total expenses.

Article 10: When calculating the ration of annual expenses for charitable activities, the average income for the previous three years may be used in place of the previous year's total income, and the average year-end net assets may be used in place of the previous year's year-end net assets.

The previous year's total income is the income of the previous year minus restricted income that was earned in the preceding year but restricted from use in the preceding year, plus restricted income that became available in the preceding year.

Article 11: Where charitable organizations' annual administration costs are less than 200,000 yuan, they are not subject to the percentage restrictions provided for in article 7, 8 and 9 of these Standards.

Article 12: Where the following circumstances make it difficult for annual administration costs to comply with the provisions of these Measures, it shall be promptly reported to the civil affairs department where they are registered and a public explanation of the situation made:

(1) Has been registered or designated as a charitable organization for less than one year, and charitable activities are not yet being fully carried out;

(2) A sudden increase occurred in the charitable organization's depreciation, amortization of intangible assets, inventory losses, or asset devaluation costs;

(3) Sudden increase of charitable organizations' losses arising from anticipated liability due to pending litigation, mergers or divisions;

Article 13: Where charitable organizations sign donation agreements stipulating expenditure for charitable activities and administration costs for individual donated assets, follow those stipulations, but the annual expenditures for charitable activities and administration costs must not contradict the standards provided by these Measures.

Article 14: Charitable organizations' annual expenditures on charitable activities and management costs shall be disclosed in detail in annual work reports, and be reported to the public in accordance with law.

Article 15: The civil affairs departments lawfully give punishments and notify the relevant departments such as for finance and tax where charitable organizations' expenditures on charitable activities or management costs violate the provisions of these Measures.

Article 16: These Measures take effect on September 1, 2016. The Ministry of Civil Affairs is responsible for interpreting these Measures.