Following more than a decade of legislative proposals, the Cabinet yesterday approved a draft law on nonprofit foundations to place government-funded foundations under strict supervision and prevent them from misappropriating national assets.
The draft act divides foundations into two categories — private and government-funded — each with their own regulatory criteria, Deputy Minister of Justice Chen Ming-tang (陳明堂) said.
Stricter regulations are to be imposed on government-sponsored foundations, such as the Chiang Ching-kuo Foundation for International Scholarly Exchange, and those funded with public properties taken over from the Japanese colonial government, including the Taiwan Telecommunication Industry Development Association, the Postal Association and the Taiwan Sugar Association, which control billions of New Taiwan dollars in assets, but operate outside government control.
Photo: Chien Jung-fong, Taipei Times
Foundations are to be required to disclose their financial and operational data, as well as establish accounting and auditing systems, and would be subject to financial penalties if they fail to comply with government inspections or supervision.
The draft act authorizes the government to merge or dissolve foundations that can no longer meet their founding purpose, with property to be returned to the state.
The bill stipulates that a certain number of board members of government-funded foundations would have to be appointed by the government, with the number to be decided by the state’s stake in an organization’s assets.
Under the proposed act, in a bid to eliminate “fat cats,” government-appointed positions are to generally be unpaid, while holders of salaried positions would be required to give up any pension benefits while in office.
More lenient criteria would be applied to private foundations to ensure their autonomy, Chen said.
There are 165 government-sponsored foundations, 43 of which receive less than 50 percent of their funding from the state, while there are more than 600 private foundations.
“Nonprofit foundations are often criticized as being tools for tax evasion. The existing legal framework is not quite sufficient for regulation, so the draft act was proposed to ensure government supervision,” Chen said.
Transparency in the financial and personnel management of nonprofit organizations is key to ensuring their proper operation, but many organizations have shed government control, Premier Lin Chuan (林全) said.
“The draft act is progressive and will improve the legal environment of nonprofit foundations and their operations,” Lin said.
At present there are no regulations governing nonprofit foundations except for a set of general provisions in the Civil Code.
In September 2000, the Ministry of Justice began drafting legislation to regulate nonprofit foundations, with the Executive Yuan submitting four drafts since 2007 to the Legislative Yuan, none of which passed.
The Ministry of the Interior is to draft a special bill on religious and medical foundations, which have considerable real-estate holdings and are often criticized for a lack of financial transparency.
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