--- Address by Vice President He Daofeng at the meeting of all staff and members
Sept. 13, 2007

Editor’s note:

The 25th Issue of Phoenix Weekly (published on Sept. 5, 2007) carried three articles titled: Romance of Internal Chaos of China Association of Poverty Alleviation and Development, Development First and Poverty Alleviation Second, and The Current Situation of Governmental Charity Organizations in Mainland China, which, in part, do not in conform with the historical facts of China Foundation for Poverty Alleviation (CFPA) and have had some negative effect on the reputation of CFPA in society.
 The article Past and Present: China Foundation for Poverty Alleviation is an address by Vice President He Daofeng at the meeting of all staff and members on Sept. 13, 2007. It is published here to clarify and correct misleading information for readers.

China Foundation for Poverty Alleviation

Sept. 30, 2007

The 25th Issue of Phoenix Weekly (published on Sept. 5, 2007) carried three articles titled: Romance of Internal Chaos of China Association of Poverty Alleviation and Development, Development First and Poverty Alleviation Second, and The Current Situation of Governmental Charity Organizations in Mainland China, which had immense influence in Hong Kong, posing a credit crisis to all governmental charity organizations in the Mainland. In the concluding remarks of the three articles, the authors cited the comment on the present China’s charity organizations by the well-known international consulting institution McKinsey Corporation: “There is no lack of charity in China’s society, but lack of hope from charity organizations.” What a comment!
This report poses a crisis to our foundation, which mustn’t be thought lightly of and is powerful enough to cause a lot of misunderstanding and negative effects, though it was also mentioned in the third article: among the present governmental NGOs in the Mainland, several larger ones are which are believed to be standardized, including China Charity Association, China Youth Development Foundation, China Women Development Foundation, etc.
After the articles were published, our foundation personnel frequently met and was asked about it by people, so we need to confront it head on and deal with the crisis. It’s natural for a public organization to have difficulties and crisis over the course of development; it is our challenge to face it and properly handle it. The core culture of China Foundation for Poverty Alleviation is a sunshine culture, the nature of which means each of the staff and members of the foundation have the right to be in the know of his/her organization and know the historical facts of the foundation. Although this report touched upon the distant history, now that it has been reported, we need to make these matters clear to public.
1. The historical background of the China NGO establishment
First of all, all the events listed in the articles did happen, but there are mistakes in the details, e.g. selling cars to pay the foundation’s salaries, the 30 million RMB investment of Hong Kong Xintongda Company, Fujian Province Jinqiao Plaza Project etc. However, I am not going to talk about these events first, but the historical background behind them.
What is this great historical background that lead to the social conditions which China’s foundations, associations, and federations, especially the earliest ones, were established under? And what was the legal basis for them? One of the earliest public organizations, China Foundation for Poverty Alleviation was established in 1989 according to the Regulations of Foundation Administration (hereafter referred to as RFA) set down by the State Council on Sept. 27, 1988. The RFA is not really complex, as it consists of only 14 articles, and is in fact the simplest legal document for establishment of public organization like foundations in the world. The level of roughness can be a Guinness record. Why does this regulation show our improper interpretation of charity organizations? Because it stipulated, to set up a foundation, application must be first submitted to The People’s Bank of China (PBOC) for approval before handling the registration with Department of Civil Affairs. Then each year, a financial report must be submitted to PBOC and Department of Civil Affairs for direct supervision, which leads to the confusion between funds and foundation. In fact, as you know, funds and foundation are two different things. At present, when we talk about funds, it means a mode of financial investment by acting on a clients’ behalf or a type of financial investment, all for the purpose of making money for clients, for example, Common Funds, Counter Settlement Funds, and so forth. A foundation is, generally speaking, an organization for public welfare. The source of funds for a foundation can be two: one is funds/donations raised from the public, other public welfare funds from value-added operations with lump sum of private donation, so obviously the funds of foundation are to be used for welfare purposes. Therefore, the funds of a foundation have nothing to do with those of the financial market. However, the Chinese government and society at that time had that interpretation, linking anything related to funds with the PBOC. So history must be looked at in the context of the time, but not commented by the current day thinking and understanding. There is nothing shameful to be simply and immature in the past, because as people we develop from children into adults, so a social organization also matures gradually from the simple and primitive stage.
According to this regulation, it was stipulated, for example, foundations must not engage in business operations. However, is this always true? Suppose Gates couldn't use his funds in business operations, then he’d be great trouble! If the fund could only be deposited in the bank, and the interest he earned was only 2%, how would he be able to undertake welfare endeavors? In fact, the economic return of Bill Gates last year was be over 10%, which means he must have been engaged in fund management. But, he can’t use the money from operations as his own, rather he choose to use it for social good. This is the core of the matter. If he keeps the money in his own pocket, then he breaks the law; if he put the money back to the account for the cause of the foundation, then he is a philanthropist. When Ford Foundation was established, the foundation donation was not a big one, but now what are Ford Foundation’s total assets? USD13.6 billion. Each year countless amounts have been donated from it’s earnings, so if without investment activities, how can they reach such this scale of accumulated investments? Admittedly, the funds supervision capacity of society then was not strong enough, so the then stipulation was justified, and you can’t say that’s was a sheer mistake.
It was stipulated in Article 7 of this regulation: foundations are allowed to deposit capital in financial institutions to obtain interests, buy securities like bonds and shares, but the total amount of shares bought of enterprises must not exceed 20% of the total shares. Article 9: the salary and office expenses of foundation staff and members will be paid from interests and other income of  the funds. In fact, this article had a lot of problems in it, and caused many of the complicated situations that China’s charity organizations have been facing since then. Suppose 10 million RMB of a fund is deposited into the bank, with an interest rate of 2% -3%, the total interest for one year will be 200-300 thousand RMB. What can this meager amount of income be used for? Is it enough to pay the staff and members of a foundation? If it is to donate 10% of the total, then there is only 9 million RMB left. And if you have to pay a dozen staff salaries, the foundation’s fund will disappear in less than ten years time.
While CFPA was established, the Ministry of Agriculture donated 100 thousand RMB for opening expenses. How much interest does this 100 thousand RMB earn? So, when an article in the South Weekly criticized the China Youth Development Foundation (CYDF), I pointed out during an address at a meeting that for this and many problems, China’s legal framework was to blame. For a foundation like CYDF, which, each year, aids many students through the implementation of Project Hope, how much does annual mailing budget cost? The total cost for envelopes each year amounts to 1-2 million RMB. If only counting on the meager bank interest, the foundation cannot survive. For the scale of CYDF, annual operating expenses amount to over 12 million RMB. Where can this money come from? Xu Yongguang is a native of Zhengjiang, where people are talented in business, so he found a way out -- If you take 400 RMB donated for students, it can be distributed to them over 5 years. For the first year, give them 80 RMB, and there is 320 RMB remaining. And in the year, there is 240 left, third year 160, fourth 80, fifth year it is used up. And during these five years, cannot you not make use of the money and earn operational income to keep the foundation afloat? In fact, this is marvelous idea. If there is criticism towards such practice, then tell us what better ways there are to keep such an organization going so as to play such a great role as Project Hope?
So, all the problems sited are related to the laws at that time. CFPA, as well as other most foundations, were founded and began to grow under such legal environment, so we need to look at it from a historical and objective perspective, and should not attempt to fee the earth by pulling our own ears.

2. China Foundation for Poverty Alleviation under the great historical background
CFPA was created under the same historical backdrop as CYDF, with the only difference that then our foundation did not have a project that could be called a brand. Admittedly, we have also done a lot, but miscellaneous and in disorder, so later we have called this period “broad poverty alleviation”.
How did CFPA solve the problem of administrative and management expenses? According to some Hong Kong donor’s suggestion, a company named Xintongda was registered and established in Hong Kong, and meanwhile an upstanding Party member of Fujian, a Mr. Huang was invited to be the General Manager, with the aim of increasing the funds of poverty alleviation through the income earned by this company. Later on, Xintongda Company engaged in lots of economic activities, but failed to achieve the goal of making money for the foundation. On the contrary, great loss were occured. As the worldly matters go, a good dream doesn’t necessarily bring good results.
In the article Development First and Poverty Alleviation Second, it was mentioned that the investment by China Poverty Alleviation and Development Association into Xintongda Plaza (later renamed into Jinqiao Plaza) was RMB 30 million shares, which was not really true. The real capital fund was RMB 6.4 million while the total registered capital of Xintongda Plaza was over RMB64 million RMB, accounting for only 10%. This is because when we signed the agreement with them, RMB 25 million was loaned to them along with the RMB 6.4 million share purchase. This was the most stupid investment in the world. If the amount of over RMB 30 million had been counted as capital fund, the share of stock was much greater. We would have held 50% of shares, and had a greater voice in the management. But given the loan agreement had already been signed, can we count on this action to bring gains to the foundation? The final result could only be a great loss! Mess in, mess out!
In 1999, I came to work in this foundation, and began to consult all the documents, which is a key. You can’t know the present unless you know the past, let alone the future. I had do this for a long time before I could get a clear picture of the details mentioned above.
   Then, how shall we comment on the decisions of the early leaders of this foundation? Their aim was to increase funds for poverty alleviation through business earnings, they did not transfer the money to their names, and they also desired to see China’s charity cause prosper, so how can we find fault with them? In terms of morality, there are no holes to pick, but good wishes don’t necessarily bring good results. With a great goal, one also needs to engage the proper methods. In those days, all the foundations, more or less, followed such a method, as they had to solve their basic problem of operating expenses, and they either went into business operations, or they didn’t survive. If they couldn’t even feed the staff and members, how could they continue with welfare work? They were not allowed to use donations to cover expenses! Now we are more fortunate, as after much efforts we have earned a legal status. Today we are allowed to use no more than 10% of donations to cover salary and benefits of staff, administrative and office expenditures. Suppose you did so under the old law? Under the old conditions, the decision of the foundation leaders was to establish an association of poverty alleviation and development, an association for business operations, and a foundation for charity.
The point of departure for this decision was “earning money with money, buy hens with earned money, let hens lay eggs, let eggs hatch to have chickens, give chickens for sheep, have sheep bear sheep”, so we finally have a grassland of sheep, don't we? Then these sheep could be given to the poor and needy. Unfortunately, nobody thought hens may die, and eggs rot. There were too many complicated problems as well as much uncertainty. The final result was hens died, eggs were broken and the dream of a grassland of sheep vanished. This is the oldest fable, and these stories were the past episodes of the poverty alleviation association mentioned in the article in Phoenix Weekly. Except for a few inaccuracies, the majority reflects the situation and facts of that time. If you dig into the history of each foundation established in the 1980’s, you’ll read the same thing. We can’t avoid our past. Otherwise, we are not honest or objective.

3. The historical conclusion about CFPA in the mid-1990’s by the Central Government
In 1996, the State Administration of Audit published Document No. 45 ---Audit Report of China Foundation for Poverty Alleviation, in which all the events and matters mentioned in Phoenix Weekly were clearly listed except typing mistakes. Then, there was a conclusion from the State Council, made at the meeting of Leading Group of Poverty Alleviation and Development called by the State Council. The then head of State Council Leading Group of Poverty Alleviation and Development, Comrade Chen Junsheng communicated the conclusion to participants by speaking at the third Meeting of Directors on behalf of the State Council on Sept. 9, 1996.
Here I think it necessary to read you the important part of the Comrade Chen’s speech. He said, “The third Meeting of Directors of CFPA is a meeting of importance.” In fact, the third Meeting of Directors was a routine meeting of member election. The second President Yang Rudai took office in the stead of first President Xiang Nan. The life of Comrade Xiang Nan is full of development and innovation and when he left his post from Secretary of CPC Fujian Province Committee, he began to embark on poverty alleviation and charity. Then he left the post of poverty alleviation and charity. The State Administration of Audit was involved, though there was nothing wrong with him or his work, there was still varied public opinion about it so that he actually had a bit of misgivings. So it was not easy for him, far from easy. Sometimes when thinking of him, I also feel a little sad about it, for he had been working fully out of a good heart. The address of comrade Chen also reflected on the then decision-making level of State Council. He, first of all, expressed hearty thanks to the last Meeting of Directors for their hard work and great achievements on behalf of the State Council, and congratulated the new leaders of the foundation upon election. As there was nothing wrong with Comrade Xiang Nan regarding his work, he said that was a meeting of leadership change as well as a summary of past experience and arranging the work of next session.
He remarked, “Honestly speaking, CFPA has made achievements since it was established in 1989. Despite the difficulties and meager opening expenses, the comrades of CFPA engaged in hard work, bold development, and raised funds of over RMB 100 million, and did a lot of good deeds, practical deeds and charity deeds for the poverty-stricken areas. Many comrades, senior ones in particular, thought very little about pay, fame or gain, but worked hard and devoted themselves to the cause, which deserves our appreciation. This fully demonstrates the noble ideal and fine tradition of making selfless sacrifice, sharing in the worries of the state and serving the people of the comrades of older generation. After 8 years of continuous efforts, the foundation has developed preliminary channels for raising funds for poverty alleviation, and opened the new situation of non-governmental organizations participating in poverty relief by government. This is new start with far-reaching impact, and at once the most outstanding achievement of this foundation.”
Comrade Chen was very cautious and weighed over words. He continued, “as you know, poverty relief concerns the problem of social and economic development of the whole country and is a matter that has an impact on the long-term stability of the country. Therefore, the CPC Central Committee and the State Council have always been concerned with and supports the work of poverty alleviation, not only making a series of favorable policies that will benefit the development of poor areas and increasing gradually input in poverty relief efforts, but also taking many effective measures and methods in light of the concrete condition of the poverty-stricken areas. However, as a developing country, China still has a lot to do. And although she has tried her best with her limited finances, it’s also hard for her to quickly solve the problems of poverty-stricken areas left over from hundreds of years. This calls for the effort of government, aid of the international community, and also support of the whole society, especially non-governmental forces. It is out of this consideration, and the approval of leaders of the State Council that China Foundation for Poverty Alleviation was established. Judged from the past few years, the foundation has been providing the poor areas with practical, material support, and also has played an exemplary role in initiating all social circles, especially promoting NGOs to carrying out poverty alleviation efforts.
“Saying CFPA has made achievements does not mean everything is perfect. Problems did occur during these years of development of CFPA, for example, the problem of Hong Kong Xintongda Company and the withdrawal of money loaned out, both causing certain loss. Maybe the intension had been good, but outcome not as desired. I believe it has to do with the management system, lack of experience and update and perfection of systems. Here we are not to criticize or blame anyone, but to mainly remember to learn from this, that we keep alert, and warn ourselves against it during the course of development and progress, so as to do a job in the future.” “Draw a lesson, keep alert, and warn ourselves against it”, these words are equally applicable to us today.
A number of comrades failed to grasp the key element, because Comrade Chen did not say there had been any fault with Comrade Xiang Nan himself, but said it was a mere summary of routine leadership change. So when I came to work in CFPA, a couple of senior comrades of CFPA also mentioned this or that about Xiang Nan to me, to which I said, “please don’t talk about Comrade Xiang Nan before me and I don't want to hear it again.” Why? Because for all his competence, social reputation as well as morality, I’m no match of Comrade Xiang Nan, whom I respect and look up to. Were there indeed any problem with him, let the Sate Council talk about it, and it’s not for us to talk about or comment on it. The conclusion of the State Council on the foundation and its leaders at that time was rather objective indeed.

4. The essence and great significance of 3rd Meeting of Directors Transformation of CFPA
Having finished the conclusion about the history of CFPA, Comrade Chen continued, “This session of Meeting of Directors is held on the basis of a proper and comprehensive summary of experience and lesson of the foundation. The main task of this meeting is, one, routine leadership change, two, management system transformation.”
Regarding the above two tasks, Comrade Chen said, “Upon establishment, mainly some senior comrades who just left their posts acted as the president, vice presidents and consultants of the foundation. Eight years later, some comrades are now aging or in poor health, so in order to keep the foundation going, these senior comrades expressed repeatedly that they won’t continue to hold office after leadership change. Therefore, considering the wishes of senior comrades and a careful study, the Leading Group of Poverty Alleviation and Development of the State Council approved the suggestion of CFPA that those above 70 will no longer hold the post of vice president. Regarding the major leaders of the new Meeting of Directors, they were decided through discussion among leaders of the State Council and chief leader of the Leading Group and out of consideration for the further development of the foundation. It was generally believed the honorary president and president were to be held by comrades who hold a deep sense of morality and reputation, are world renown, broad communication, have familiarity with poor areas, concern for poverty alleviation and who could have time and energy for leading this organization in operation. In light of these considerations, we suggested Comrade Rong Yiren be the Honorary President, and Comrade Yang Rudai President. As you know, Vice Chairman of the People’s Republic of China Comrade Rong Yiren and Vice Chairman of CPPCC Comrade Yang Rudai both have a tight work schedule, but for the sake of the people of the poverty-stricken areas, for the common prosperity of the whole nation, they both gladly accepted our suggestion, which came to us as a powerful support for our work of poverty alleviation. I believe under the leadership of His Excellency, Comrade Rong, and Comrade Rudai, China Foundation for Poverty Alleviation will be sure to make new headway and greater achievements.”
“Transformation is a very important adjustment to promote the development of CFPA. This necessary measure of reform is taken by drawing on the general practice and experience of successful foundations, home and broad. The president and vice presidents of the foundation are state leaders and respected senior comrades of high morality who boasts of international renown and influence, but given their tight work schedule, it will be indeed inconvenient for them to undertake detailed work and execute leadership in the front of the foundation. The president responsibility system is therefore changed into secretary general responsibility system with the secretary general acting as legal person, so as mainly to allow younger people to take over the more detailed routine work, and give full display to their initiative -- daring to think, to say, to do and cultivate creativeness. The senior leadership including the president and vice presidents and the Meeting of Directors are to set the general policy and decide on the matters of significance and orientation of work, leaving the execution and implementation of concrete work to younger people. With senior and junior comrades thus combined, it is both good for taking advantage of the influence and wisdom as well as experience and capacity of the former and for tapping talents of the latter. With people leading, people piloting, people in charge, and people executing, job responsibilities are clear cut, and each goes about his own work. This system of combing young and old will be sure to promote the foundation in creating the new future.”
Have you understood the weight of Comrade Chen’s transformation plan? Comrade Chen is a senior member of the Central leadership and what he did will have a great significance on the long-term stability of the foundation. Lastly, he concluded, “We should possess a spirit of forging head and work with a more open attitude and in a more flexible manner. As I mentioned earlier, in the past few years of working of CFPA there have occurred a few problems and flaws, so lessons should be learnt from them. However, it does not mean that in the future we may become timid and have too many worries and cares. In that case, there will be no future or hope for the foundation. The undertaking of foundation is one of innovation and reform in nature, which entails boldness in exploitation and resourcefulness in work for development. We should try to establish connections with all sorts of people, and be good at dealing with various organizations, NGOs in particular, to have broad communication at home and abroad. A sew situation won’t be created unless our minds are set free. Mistakes are unavoidable, but we should strive to prevent them from happening and correct and learn from mistakes that are made. So long as it is out of consideration for the people, and we are working hard for the country and are bold in forging ahead, the lesson from past fault or mistakes can translate into the basis for development and success. Therefore, I sincerely hope the comrades of CFPA will not be bothered and frightened by the past problems, but fully take advantage of your wisdom and intelligence, assimilate extensively the successful experience and practice of foundations, Chinese or foreign, in poverty alleviation, and be more bold and more open-minded in making exploitation and explorations. All in all, it’s a very promising and highly potential undertaking to mobilizing non-governmental forces and all social circles to alleviate poverty and aid the poor. So long as we remain in the same boat, be united and whole-hearted, we shall be sure to make still greater contributions.”
This address by Comrade Chen Junsheng at the third session of Meeting of Directors was no casual speech, but one of far-reaching importance from a high perspective. For the transformation he mentioned, you can understand it as changing the presidential responsibility system into secretary general responsibility system, and you can also interpret it as setting up two teams of leaders in one organization. A successful foundation generally has two teams: one is influential and making sacrifice, but does not necessarily know much specialty knowledge. But first of all they must be good, warm-hearted and not power-minded. This team of people is the directors of the foundation and the president and vice presidents. Generally speaking, it’s not so easy to have a new director to join: you never know how much inspection, talk and communication the top management of the foundation will go through before the contract is finally signed, and there will be the formality of swearing in. Suppose one of the top management seeks for personal gain, then it’ll be a mess. Other people are now in charge of daily operations, people with have a caring heart and professionals of the needed specialization. They are experts in their fields, such as project planning, project design, project management and so forth. A PhD recipient is not necessarily qualified to be a master of foundation operations, and a number of comrades in our foundation have long surpassed the level of PhD. For example, the foundation needs funds raising experts, and this is just one area of specialization. Besides, there must be monitoring and management for finance as well as human resources, and laws and regulations, all of which are rather specialized. For this part of work, it won’t do to have state leaders transferred here who are to leave their posts at an old age. That’s why it is said this address suggested the structure of foundation would be complete and perfect if there are two different teams in organizing the foundation. This address of Comrade Chen has not outdated over the years, so you’d better bear it in your mind, too. Although Comrade Chen has since passed away, his address and decisions of that time are absolutely correct, of far-reaching importance, and has stood the precious wealth of this foundation.
Then there were new stipulations from the State Council, after the issue of which Comrade Rudai, who helds post as state leader, couldn’t be the president any longer. So at the 4th session of the Third Meeting of Directors, Comrade Wang Yuzhao was invited to be the president. This was in 1999, when 4th session was under way, it was result of the transformation idea of Comrade Chen Junsheng at the third Meeting of Directors that I came to the foundation to work in cooperation with senior comrades, in charge of building the young and professional team of charity, to develop the foundation in collaboration with leading team of the president, so as to realize the long-term goal of the third Meeting of Directors.

5. Reform and Development History of CFPA since 4th session of the third Meeting of Directors.
The first session of the third Meeting of Directors in 1996 was an important one, as in terms of transformation, it preliminarily resolved the problem of the power, functions and roles of the decision making and executive levels. For example, it clarified the roles of the president and secretary general in the foundation’s organizational structure, but did not solve the problem of what the foundation should do and how? This problem was put forward at the 4th session of the third Meeting of Directors in 1999, and was gradually settled over the following 5 years. From 1999 till today, the history of China Foundation for Poverty Alleviation has been one of reform and development, and one of a government-sponsored NGO transforming into a civilian NGO.
The policy set at the 4th session of the third Meeting of Directors clearly demonstrate its core aim for the foundation is charity. As charitable institution, what else can it engage in other than charity undertakings? But the then legal environment was still mainly under the Regulations for Foundation Administration (RFA) and the legal situation really didn’t improve until five years later, in 2004, when the State Council created the updated Regulations for Foundation Administration (RFA). Some of the key changes included stating that the expenditure of salary, benefits and administrative expenses of foundation personnel must not exceed 10% of the total of that year, which, though a bit vague, I think also very necessary. With this stipulation, inspection can be clearly done. For some of the overseas foundations, their administrative costs can be as high as 40%. But such foundations won’t live on, because as soon as they show people their Financial Statements, the donors won’t fund to you any more. You spend as soon as I donate, so why continue to do so? In the updated RFA, it is also stipulated that “foundations should follow the principle of being legal, sound and effective in retaining or increasing the value of funds”, so it does not deny business operation and management.
    In 1999, when there wasn’t such a legal environment, I was really wondering: What did I join CFPA for?. I said, neither did I come to donate, nor did I come to raise funds. So what role could I really play? I came to teach methodology. What methods? First, have a clear picture of the finance. It took me a couple of months to look through the accounting books. As I now recall, at that time, the finances hadn’t yet been computerized, so all was hand-prepared and one couldn’t know where the accounting books were after the preparation. When looking for any of them, people kept on digging like the Duck in the cartoon. The financial management was quite a mess. For example, for operating items, why not simply keep in the account of the association? Since the foundation was denied business operations, put them under the name of the association instead. Then let the association sign contracts as it was engaged in business operation. After signing the contract, you deposit the money from it into the account of the association. And the donation to the foundation can be just deposited into its revenue account, each independent of the other. In case the foundation wants to put money into the association, then adopt a resolution and let the money be transferred. All these were actually very simple, but due to the management disorder, the accounting records and systems were very unclear. What is called an entity? The owner of goods, Jack’s belongs to Jack. To keep journal is not to do it at will, and if accounting can be made at random, I’d then put the Tiananmen Square in our financial statements as soon as I’ m back to office, and isn’t it the property of the foundation? It is the legal entity that engages in business transactions with people according to law, and then you keep account according to its activities. But even this wasn’t understood and so the accounting a mess. I do not mean the financial personnel were not qualified, the same personnel have made it organized and straightforward nowadays! But the account of the foundation before 1999 was really a big mess. Then, I thought if accounts couldn’t be made clear, and the vouchers and certificates do not follow any sort of uniformity, how can we prepare the financial statements? There was no way to publish the information. As the financial personnel were often needed to collect the money, many of the comrades worked very hard, but in vain; it was impossible to make clear reports. Why? Because on the day the contract was signed, it meant the money would never return. But if you can’t publish financial statements, how can you continue asking people for donations?
To settle this problem, I looked for a solution and method. After studing, we found a way out, i.e. to act according to the Regulation on Registration and Management of Social Organizations promulgated by the State Council in October 1998. The core problem, among other things, was that all social organizations should be subject to this regulation. Since our foundation fell into the category of social organizations, our operations should also abide by this regulation.
Now, please let me talk a bit about social organizations. In the final analysis, a social organization is one of volunteers. What is a volunteer? First, it doesn’t matter how large the donor  contributions are, it is the actions of volunteer, namely, the people who undertake to engage in certain public causes through their actions, time or financial donations out of their free will, such as, assisting rural handicapped people access necessary health care, lobbying for legal reform to defend migrant workers’ interests and so forth. In short, countless social causes can be accomplished in the form of volunteering through personal action, time or financial donations. Such people are volunteers. How should volunteers be managed? They can be bound by charter and controlled by government registration. Then come the activities of social organizations, which can be monitored by society, including audit and media.
Suppose you wish to form a social organization. First, you must find several people to serve as sponsors, then look for the source of funds. After that you make the organizational chart, set the goal, form the rules and systems such as finance, etc. Also it needs to be specified as the selection, election and removal of personnel, and properties management, protection of social properties, and so forth. All of these things must be settled first. Then, as a rule, you go to register with the Department of Civil Affairs. Upon examination and approval, the Department of Civil Affairs will issue the license, with which you can begin operational activities according to your set goal. There is no control over these activities, but the social monitoring should begin to work.
Second, you are subject to audit. In developed countries, it is required that every auditing or accounting firm must spend 10% of their time on pro bono audits, which is a sacrifice to serve society. You have to undergo supervision by audit, and publish a financial report. Also you have to cope with the questions and inquiry of the media and, if any scandal is found and disclosed, you are in deep trouble.
In China, the government instituted dual management system for societies and associations: system of registration plus supervision by administrative authorities, which were stipulated in the Regulation on Registration and Management of Social Organizations, and which is still enforceable today. This is the present situation of China’s NGOs. What’s good about this dual management? Surely there is something good - the Central Government has less worries, for other departments share its duties of management. At same time there is also something bad. What’s the bad about it? With personnel to be decided by the administrative authorities, and some of the financial budgets submitted for approval, it becomes a real mess! Why? Because personnel selection and recruitment according to system of registration is contrary to the mechanism of being appointed by administrative authorities. So many social organizations have gradually become a place for the direct administrative authorities to transfer superfluous cadres to. These two totally different systems are in strong conflict with each other and create many contradictions. There is no smoothness to speak of.
As the state stipulated that for each social organization there must be a government department as direct authority, given that there is an association for poverty alleviation and development under CFPA, CFPA is then a direct authority. But the foundation for poverty alleviation is a social organization, how can it become a direct authority? So it is in violation of law for CFPA to control the association, namely, in violation of the Regulation on Registration and Management of Social Organizations of the state. Since it is illegal, the accounts of the foundation and the association should be separated and the latter be upgraded to be directly under the State Council Leading Group Office of Poverty Alleviation and Development and become the “son or brother” of the foundation. Thus is how history came into being. This both conforms with the state laws, and solves the problem of publishing the financial statements and financial transparency. The problem of accounting is simple, all the operational accounts should go to that of the association and the non-business operation to the foundation.
Therefore, at that time there were just these two points: one, financial transparency must be first practiced if the foundation is positioned as a charitable organization. Without it, it’s almost a mission impossible. If you can’t explain clearly to people where the money has gone to, you have problems there. When people demand to read your accounts, you wouldn’t be able to show them because there is dirty work there, let alone whether people will donate or not. Two, it will be in line with state laws only when the foundation and the association are separated to be both directly under the Office of Poverty Alleviation and Development, or it’s only illicit. We made these two decisions. After the two decisions were submitted to and approved by the State Council Leading Group Office of Poverty Alleviation and Development, the agreement of financial separation had to be submitted to the Dept. of Finance and Ministry of Agriculture for filing purposes. All these have just been done in conformity with the new policy and laws and regulations. In the middle of 2000, we submitted to the Ministry of Agriculture the Resolution of Meeting of Presidents, Report of Assets Separation, and Agreement on Assets Separation and Transfer. By now, all the legal procedures for separation of China Foundation for Poverty Alleviation and China Association for Poverty Alleviation and Development had been accomplished. The so-called fact that “the capital of Shaotong Cigarettes Factory was abruptly credited into the foundation account in 2005” in the report of Phoenix Weekly is groundless and sheer nonsense.
The event that Shaotong Cigarettes Factory donated RMB10 million to the foundation was a historical one. At that time, the foundation helped the factory apply to the state for a cigarette trade mark named Fishing Terrace and it got approved. The factory had an annual production quota of 10 thousand large boxes. Then the factory donated RMB 10 million to CFPA, but only RMB 3 million was credited into the bank account of the foundation and the remaining RMB 7 million was used to establish a company of poverty alleviation and development in that area. According to law, if the established company has donated to the foundation, the money must be recorded in the accounting book and the recycling capital out of the accounting book must not be counted into account. In today’s foundation, everybody knows it’s illegal and in breach of financial regulations. However, the comrades then didn’t understand these regulations. When they were setting up the company, the foundation became a shareholder. In today’s flow of management, even our personnel at the lowest level won’t be likely to agree to it, yet alone report it to the president to make a decision? Soon after the company had been established, the 7 million quickly disappeared. In 1999, application was filed to the foundation for the company declaring bankruptcy, but, given so many deserving undertakings of the foundation, we were so busy with the normal business. Who cared about the bankruptcy? And wouldn’t we be foolish to accept and record the 7 million RMB in our account as account receivables after 5 years of separation with the association? Where, in the world, can we trace the money back?
Comrades, it’ll in your best interest not to argue about whatever happened before 1999, but rather to be honest and face it calmly. Since 2000, the finances of CFPA have been completely standardized and transparent and you may tell anybody that if they can find problems in it, we’ll give them a treat. Comrades, we have been preparing so that there will not be such a crisis today. For each thing we do, we do it in reflection and correction of those mistakes and faults from the early days. For this point, from the last generation of staff and members down to present frontline personnel, everybody knows it well. We spent 5-6 years establishing of management system. And this systemic management method and operation rules is what each staff and member present know and have mastered. This is our real wealth. Suppose we have nothing in the foundation’s financial accounts today, we won’t be worried, not a bit worried, because we can start all over again! If you are a well-organized team with competitive system design, then what is there for you to worry about? But without it, even if you have millions of pounds, you are sure to lose it. In summary, the nephew of Zeng Guofan on the maternal side, Master Nie Yuntai composed a Song of Wealth:
People all long to be wealthy,
But water, fire, and robbers,
A corrupted king, and an unfaithful son who squanders
Are truly five masters of money!
Water, fire, robbers, a corrupted king and an unfaithful son who squanders are the true masters of money.

6. The stand and attitude of China Foundation for Poverty Alleviation regarding this event
Now I have done a thorough narration of the history of this foundation. That is, when someone reads the reports and asks you about it, you know how to answer him or her. This is the first point I’d like to stress today.
The second point I’d emphasize is we need not comment on the merits or faults of the association, for we do not know specific details or the root cause. President Hu, our former leader, enjoys a high reputation of morality and has been giving great care and support to the foundation throughout its operation. Comrade Dachao, the former leader of the past secretariat of the foundation, is like kin to us. We don't want to hurt the association. Regarding our peer organizations, we should avoid saying anything unfavorable about them. We should mind our own business and not gossip like loquacious women taken to commenting on others affairs. But we have to be fully mindful not to get involved in internal quarrels and arguments. A charity organization is about doing good deeds for the people, what’s to argue about? Late poet Bai Juyi wrote:
What’s to quarrel about on the horn of a snail?
Life lasts merely as long as a stone sparkle.
Rich or poor, you can yourself enjoy.
Only fools don’t laugh to their joy.
This shows us that people are just like the little germs and a life is but short and transient like lightening or sparkle of stones. So follows the argument of fortune: be united when fortune is still there, and be parted when fortune is gone. Given that an unhappy husband and wife can get divorced, why bother to create chaos for people to laugh at? It’s not really worth it.
That Phoenix Weekly carried these reports about us to be destructive. This reminds us to always keep alert, and serves as a warning for the actions of each department and each comrade. For every thing we do, we should do it with a good wish. As the saying goes, a thousand Li of dam can begin to be destroyed from an ant nest. For each thing we do, we should have a criterion for judgment and reflection. If one thing is not properly dealt with, it can create great mistakes. To empty the pot full of water, you don't need to pound off the whole bottom, you just need to bore a very small hole in it, for time will do the rest of the work for you. Although there is pressure for the work and fundraising, we all must bear in mind: A gentleman may desire wealth, but he must seek it properly; we desire donation, but we should seek it more properly. We must guard against all improper means!
Therefore, the third point is always keep alert and cherish the reputation of CFPA as you do your face; cherish our public credibility as you do your eyes! Don't think much about the future, but seize the day!