Transparency of Grassroots Organizations in China: Does Transparency Affect Donation and Grants?

Background: Grassroots human service organizations in China are experiencing fast development yet facing inadequate public trust. This highlights the importance of improving organizational transparency and credibility. In this study, we analyze Chinese grassroots organizations’ level of transparency with respect to four aspects: basic information, governance, finance, and activity transparency. We examine factors that may influence transparency and test the effects of transparency on organizations’ donation and grant income.

Method:

Data: Our data came from the 2013 Survey of Transparency on Grassroots Organizations in China. Our final sample size is 821 grassroots human service organizations that actively operated in mainland China in 2012.

Measures: Grassroots Organizations’ Transparency Index (GTI) was used to measure the degree to which an organization discloses its key information to the public, namely, the degree of transparency. The index is composed of four sub-indices: disclosure of the organization’s basic information, governance, finance, and activities. Our independent variables include organization’s program area (e.g. people with disabilities, health, and education), type of registration (e.g. private non-enterprise unit, social organization, and unregistered), location (e.g. metropolitan cities, East, Middle, and West regions), and organizational age. In addition, organizations’ revenues that come from individuals or groups were used to measure donation income; organizations’ revenues that come from governments’ appropriation or subsidy were used to measure grant income.

 

Analytic Strategy: Our analysis starts with descriptive statistics to examine the distribution of main variables. This is followed by bivariate analysis between characteristics of the organization and dependent variables, including transparency, donation, and grant incomes. Last, regression analysis of dependent variables was conducted.

Results: Overall, grassroots organizations in China had low transparency in 2012. Although most organizations disclosed their basic information, there was a lower probability of disclosing governance and activity information, and the lowest probability of disclosing financial information. Grassroots organizations’ transparency significantly differed by their program area and type of registration, which suggests a great variation within the grassroots organizations. We also found that grassroots organizations’ donation income was positively related to their level of transparency, especially financial transparency.

Implications: Through an objective transparency measure specifically designed for grassroots organizations, this study innovatively examined Chinese grassroots organizations’ transparency in a national scope. Among the few studies of nonprofit disclosure in developing nations today (Zainon et al., 2012), our study is the first national research on grassroots organizations’ transparency in China, where grassroots organizations are quickly emerging, yet face great challenges. The findings suggest that the Chinese government should work on regulations and laws that mandate information disclosure, especially financial transparency. Grassroots organizations, at the same time, should place more efforts on self-regulation and information disclosure to build credibility, which will benefit the healthy growth of the sector.