How Far Is a Support Organization’s Information Disclosed? — Japanese and Ukrainian Corporate Systems

Since Russia’s full-scale invasion of Ukraine on 24 February 2022, the names of organizations soliciting support have become a more common sight in Japan too. When choosing whom to trust, most people start by reading the organization’s own website. But what is there is an explanation the organization wrote about itself. Separate from that, there is information the law requires to be disclosed, and how much of it there is depends considerably on the organization’s legal form.

This article does not judge which organization is good. It sets out, based on the text of Japanese and Ukrainian statutes, what to look at when checking, and where in the disclosed information to look.

1. Start With the Legal Form. That Is What Determines the Duty to Disclose

The right-hand column is the one most often overlooked. Article 28, paragraph 3 of the NPO Act says “from its members and other interested parties,” and does not allow just anyone to request inspection. Once certified, Article 54, paragraph 4 removes that restriction on who may request; for a public interest corporation, Article 21, paragraph 5 opens it to “anyone.” For a general incorporated association or foundation, it narrows back to “members and creditors,” and someone who has merely donated is not included. Even among “nonprofit organizations,” whether you are in a position to be shown the documents changes with the legal form.

It is also worth noting that a certified NPO corporation’s donor list is excluded from the duty of inspection. Who donated is, even where it must be kept on file, not something that must be disclosed. As for a voluntary association, this does not mean it cannot be trusted — it means there is no part the law confirms on your behalf.

There are two entry points for disclosed information. An NPO corporation can be searched on the Cabinet Office’s “NPO Corporation Portal Site,” where you can view its articles of incorporation, activity reports, balance sheets, and more. The basis for this is Article 72, paragraph 1, which requires the Prime Minister and the competent authorities to develop a database. Paragraph 2 of the same article, however, states only that the competent authority and the corporation shall “endeavor to” record information there and actively disclose it — recording it is not itself an obligation. Not finding something on the portal does not, by itself, mean something illegal is happening. For public interest corporations, the Cabinet Office’s “Koeki Houjin Information” site carries corporate search and disclosed information such as business reports.

2. What “Eligible for a Deduction on Donations” Actually Guarantees

Article 78, paragraph 2 of the Income Tax Act defines a “specified donation” as a donation to the national government or a local public entity, a donation designated by the Minister of Finance, a donation to a corporation listed in Appended Table 1 or another corporation that significantly contributes to the promotion of the public interest, or a donation of property held in trust for a public interest trust. To this are added the special deductions of Article 41-18-2 (for certified NPO corporations and others) and Article 41-18-3 (for public interest incorporated associations and others) of the Act on Special Measures Concerning Taxation. Put the other way around, donations to a general incorporated association or foundation, or to a voluntary association, are in principle not eligible. Whether a deduction is available is decided by legal form and certification status, not by a grading of the quality of the organization’s activities.

What the certification criteria (Act on Promotion of Specified Nonprofit Activities, Art. 45, para. 1) look at is whether the organization receives broad support from citizens (item 1), its operating structure and accounting (item 3), whether it responds to requests for inspection (item 5), whether it has submitted its activity reports and other documents to the competent authority (item 6), and whether more than one year has passed since its founding (item 8). These are criteria that look at the shape of the organization and its stance on disclosure, not at whether an individual remittance was of practical use on the ground. The certification is valid for five years from the date of certification (Art. 51). Certification is the fact that certain criteria were met at a certain point in time, not a guarantee of the results of an ongoing project.

3. Look at Accounting’s Structure, Not Its Ratios

The view that “the higher the ratio of program expenses, the better the organization” has its limits. Article 16, paragraph 3 of Ukraine’s “Law on Charitable Activity and Charitable Organizations” (2012, No. 5073-VI) provides that a charitable organization’s administrative expenses may not exceed 20 percent of its income for the year. Here, the ratio is a statutory ceiling to be observed, not a scale designed for ranking organizations against one another.

The same holds on the Japanese side. Article 27 of the NPO Act (principles of accounting) requires conformity with generally accepted principles of bookkeeping, that the financial statements (statement of activities and balance sheet) and inventory of property present the organization’s performance and financial condition truly and clearly, and that the standards and methods adopted be applied consistently across fiscal years. It does not prescribe how to draw the line between program expenses and administrative expenses. Which side the same personnel cost is allocated to depends on the standard the organization has adopted, so the ratio is not a figure that can simply be compared across organizations.

What can be looked at instead is structure. Article 7, paragraph 1 of Ukraine’s same act defines public fundraising as “voluntarily raising, among an unspecified number of people, support designated for a purpose.” Funds raised for a designated purpose remain bound to that purpose, so a balance remaining at year’s end does not, by itself, mean inefficiency — it may reflect a multi-year project or a donation with a restricted use. Conversely, a single year’s figures cannot measure the degree of completion of a multi-year project. Since activity reports and the like are produced fiscal year by fiscal year (Art. 28, para. 1), multiple years need to be read side by side.

4. In an Activity Report, Look at the Subject

In an activity report, what carries the most information is the subject of the sentence. “We provided support” states that the organization spent money; “it arrived” states that something was confirmed on the receiving end. These are different facts, and the evidence for each is different. This distinction itself was addressed, in terms of amounts and construction stages, in this site’s article on how to verify recovery-project results. Here the focus is narrowed to the side of looking at an organization.

Ukrainian law requires a person conducting public fundraising to set out a reporting channel in writing in advance. A person raising funds in the name of a charitable organization must act under a notarized power of attorney from its representative, and that power of attorney must set out the purpose, place, period, procedure for use of the funds, and the procedure for general access to the charitable organization’s financial reporting (Art. 7, para. 2). Where a person raises funds in their own name, this is set out in a contract with the organization; where raising for a beneficiary other than the organization, in a contract with that beneficiary, on the same matters (paras. 3 and 4). If an entity is soliciting funds lawfully, where its financial report can be seen should already be settled in advance. “Where can I see your financial report?” is the very question the system anticipates being asked.

The basis for pushing back when this is withheld is in the same law. Article 17, paragraph 3 states that a charitable organization’s income and expenditure structure and scale, and the conditions on the use of its assets, are neither confidential information nor a trade secret. Paragraph 1 of the same article, however, only states that the report is to be prepared and submitted “in accordance with the procedure established by law,” so this is not a system under which every organization’s financial report is automatically posted somewhere.

5. When Checking an Organization on the Ukrainian Side

Ukraine has a Unified State Register (єдиний державний ре֮стр, YeDR) based on its “Law on State Registration of Legal Entities, Individual Entrepreneurs and Public Formations” (No. 755-IV). Article 11, paragraph 1 provides that information in the register is “open and accessible to anyone” (excluding taxpayer registration card numbers and passport data). Article 11, paragraph 2, item 1 lists, as available for free access through the electronic services portal, such items as the address, type of activity, persons authorized to act on the entity’s behalf, whether there are restrictions on their authority to represent, and whether the entity is undergoing dissolution, and states that these can be viewed and printed by searching by name or identification code. What is registered is set out in Article 9: name, identification code, organizational-legal form, for public formations the type and purpose of activity, and the list of founders, among others. This is a register of registration information, not a place for the disclosure of financial statements.

However, the actual screen of this free search has not been checked. This article has not confirmed what items actually appear on the Ukrainian Ministry of Justice’s free search page (usr.minjust.gov.ua), or whether there are restrictions on access from Japan. What is stated above is, strictly, the fact that this is what the law provides. Whether there are wartime access restrictions has likewise not been confirmed.

6. A Procedure for Not Deciding in a Hurry

By the design of the system, a newly formed organization will not yet have any submitted reports. An NPO corporation submits once each fiscal year (Art. 29), and the certification criteria require that more than one year has passed since founding (Art. 45, para. 1, item 8). Until the first fiscal year ends, there is, in principle, no publicly available record to look at from outside. This is not a fault of the organization — it is simply how the system works, and it also means you need not decide in a hurry when the material is thin.

• What is its legal form? Do not take its own claim at face value; verify it against the corporate number publication site or information from the competent authority
• How far does the statutory duty of disclosure extend for that legal form? Are you in a position to request inspection?
• Actually open the documents that are disclosed. Until you open and read them, “it is disclosed” is not yet confirmed
• Are the funds being raised designated for a purpose? If so, in which document does their use for that purpose appear?
• What is the subject of the activity report’s sentences? Is it a report of the organization’s own spending, or a report of confirmation on the receiving end?
• If there is a counterpart on the ground, does it actually exist on the register? The YeDR can confirm registration information only; ask about accounting separately
• Is a reason given for urgency? If not, there is the option of waiting for the next annual report

These are not points meant to cast doubt on an organization. It is easier to mistake “an organization with little disclosed information” without knowing that the scope of disclosed information depends on legal form. Not mistaking a difference in system for a difference in an organization’s attitude is the first step.

Finally, a word about this outlet itself. Having said “check the other party’s accounting,” the same applies to us. If this site handles the intermediation of readers’ donations or fundraising, it will state clearly in the article the receiving entity, the use of funds, how the accounting is disclosed, and whether any fee is charged. A solicitation that does not state this is, by this article’s own standard, a solicitation readers have no way to verify.