It has emerged that public interest incorporated foundation Japan Life Association, which offers services for elderly clients without family -- such as being a guarantor when an individual rents an apartment and organizing a funeral when a client dies -- had diverted some 270 million yen in deposits paid by elderly clients to cover staff wages and other expenses.
The number of nonprofit organizations and private corporations providing similar services is growing quickly across the country, and there's a possibility that the fraudulent practices that were exposed in the latest case are just the tip of the iceberg. The central government must move quickly to gain a comprehensive picture of the industry and come up with preventative measures.
Public interest incorporated organizations are certified through an evaluation process carried out by the Cabinet Office's Public Interest Corporation Commission based on the Act on Authorization of Public Interest Incorporated Associations and Public Interest Incorporated Foundations. Japan Life received certification after it pledged to implement three-party contracts, in which client deposits would be put under the charge of a lawyer or another third party. However, lawyers were not involved in actual contracts made by Japan Life, and the association instead entered into two-party contracts with its clients, putting the association directly in charge of client deposits. When the association found itself in deep financial trouble, it misappropriated its clients' deposits as working capital.
The Public Interest Corporation Commission advised the association to take corrective action, and all eight members of the Japan Life board resigned. However, it remains unclear if and how the misappropriated funds can be recovered. Japan Life bears a heavy responsibility, since as a public interest incorporated organization it was given tax breaks, and yet it abused the system to betray the trust of elderly clients.
Public interest incorporated organizations are required to submit annual business reports to their supervising government agency, and are subject to on-site inspections once every three years. There were 2,334 such organizations under the jurisdiction of the Cabinet Office as of the end of 2014, but the corrective action advisory given to Japan Life was only the sixth issued since 2008. To promote the independent public interest activities of private entities, excessive government regulations should be eliminated. But in order to protect elderly individuals without family who are at a disadvantage when making major decisions, government checks must be beefed up.
The number of elderly people living alone stood at 4.98 million in 2010, but is expected to balloon to 7.62 million by the year 2035. The expected rapid increase is especially pronounced in urban areas. The elderly are asked for guarantors not only when they apply to rent an apartment, but also when being hospitalized or entering nursing homes -- despite the fact that there is no such legal requirement. Services by public interest incorporated organizations and other entities that support elderly individuals have expanded quickly within this context.
A system of adult guardianship exists to protect the rights of elderly individuals. In such cases, however, guardians are not permitted to provide consent for medical processes such as hospitalization, nor are they given the authority to take care of funeral-related paperwork or open up mail on behalf of elderly wards. Furthermore, because guardians must be paid around 20,000 to 30,000 yen per month and there have been a great number of cases in which guardians have stolen their wards' assets, the number of elderly individuals signing contracts with adult guardians has plateaued in recent years.
Illicit activity is widespread even within the adult guardianship system, which is under the jurisdiction of the family court. Because public interest incorporated organizations and nonprofits are currently subject to even more lenient checks, their management of client assets must be put to more scrutiny. The central government must do its utmost to protect elderly individuals who are vulnerable both cognitively and physically, and are not able to fully protect themselves.