The CFPA and the Third Anniversary of the Wenchuan Earthquake

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This is one of several articles on NGO responses to disasters that we are making available in commemoration of the May 12, 2008 Wenchuan earthquake in Sichuan. This article profiles the work of the China Foundation for Poverty Alleviation (CFPA), one of the few Chinese public foundations that have in the last few years transformed themselves into a professional philanthropic organization. The large majority of public foundations are GONGOs established with close ties to and support from government agencies.

To their critics, GONGOs are mere bureaucratic extensions of the agencies they are tied to, and lack the commitment to professionalism, transparency and grassroots civil society organizations. They point to the string of scandals in China’s philanthropic sector in 2011, all of which involved major GONGOs such as the Chinese Red Cross, the Soong Ching Ling Foundation, the China Charity Federation, and the China Youth Development Foundation, among others. The running joke is that GONGOs are little more than “retirement homes” established to create positions for retired officials. More optimistic observers, however, see some GONGOs becoming more professional and independent, and developing their own organizational ethos separate from the bureaucratic system that created them. (This view is expressed in Wu Fengshi’s essay.) The CFPA, under He Daofeng’s leadership, would exemplify such a GONGO.

On May 10th, in time for the third anniversary of the Wenchuan Earthquake, the China Foundation for Poverty Alleviation (中国扶贫基金会, hereafter the CFPA) held a conference detailing its disaster relief efforts and, for the first time, made public comprehensive records covering its finances and resource allocation. As it wraps up its three years of relief efforts—the largest project in the its history—administrators decided to submit full records of their relief programs to the scrutiny of the public and third party evaluators as a way of making good on their commitment to good governance, professionalism, and transparency.

“We’re not lacking money, rather we’re lacking compelling reasons for people to donate.”

The 42-page report, titled “China Foundation for Poverty Alleviation Wenchuan Earthquake Relief Work Report,” sets forth a detailed account of the CFPA’s fundraising and expenditures across more than 20 projects. It details the services and goods provided, the recipients of this aid, and the hard numbers to back it all up. Moreover, in addition to bolstering the CFPA’s accountability, the data gathered for the report has proven useful as it seeks to improve its own fundraising procedures, its funding of projects, and its internal management practices.

According to the third-party evaluation carried out by Beijing Normal University Professor Han Junkui, overhead and management costs at the CFPA absorb just 6.27 percent of the donations it receives. This percentage falls to just 4.59 percent when looking solely at past expenditures, and a scant 1.88 percent when restricted to personnel costs. These figures are exceptionally low in the non-profit field.

The proffering of such enviable statistics, however, did not preclude the media from aggressively fulfilling its watchdog function. Even so, He Daofeng, the CFPA’s vice-president of operations and lead spokesperson at the conference, was equal to the challenge and engaged in a spirited dialogue with media reporters.

A reporter from China Youth Daily questioned him on the CFPA’s management expenses, wondering whether it could control its overhead outlays better, given that it had only spent 3 percent of the 200 million yuan provided by Cao Dewang for drought relief in China’s southwest on management expenses in that project ((Editor’s Note: Cao Dewang is the CEO of Fuyao Glass Group in Fujian and founder of the Heren Charity Foundation. In May of 2010, Cao donated 200 million yuan to the CFPA for the drought relief, but under the condition that the CFPA keep administrative costs low and guarantee that 100,000 households received 2000 yuan each.)).

He responded that disaster relief donations typically include a mixture of cash and goods. Not only must overhead be taken solely from the cash donations, cash also has to be spent to transport donated goods to the site of the disaster. Comparing the CFPA, which accepts a broad range of donations for a broad range of projects, with organizations that deal solely in monetary donations fails to capture these distinctions. Moreover, differences in size, in management capabilities, and numerous other factors can skew one’s perspective when applying a single standard across organizations. Among international NGOs, overhead expenses accounting for 10 percent of the budget is already considered excellent.

According to the third-party evaluation, the tireless and professional efforts of the CFPA’s staff, as well as the active participation of volunteers, helped keep costs low during the earthquake relief efforts.

In truth, the three percent overhead-expense cap on Cao Dewang’s 200 million yuan donation was a loss-making proposition for CFPA from the very start. The driving force behind that agreement was the media coverage accorded to a high-profile donor demanding accountability. “A businessman can’t always make a media event out of a donation then go home and sleep. Cao’s purpose was to carry the banner for donors seeking accountability. If we had to run every program on a three percent overhead budget we’d have closed our doors a long time ago,” He explained.

Wang Xingzui, host of the conference as well as both secretary and vice-president of the CFPA, further explained the three components of overhead expenses. He pointed out that other organizations’ claims that they don’t pay overhead costs from donations may well be false. Either they do not administer programs themselves, or they distribute funds directly to government entities or related subordinate organizations, or their administrative fees are paid for from the government’s budget. In any event, the majority of NGOs necessarily must use donations to cover administrative costs.

Another reporter asked how the CFPA covered the shortfall in administering Cao Dewang’s donation. He responded that they were able to reallocate surpluses from some of the CFPA’s other programs. Of course, in his interview with China Philanthropy Times several months prior, Kang Xiaoguang, the head of Renmin University’s Non-Profit Research Center, indicated that the network of local Poverty Alleviation offices local poverty alleviation networkshared the burden of these administrative costs ((Editor’s Note: The CFPA’s official sponsor is the State Council’s Poverty Alleviation Office which has national network of offices at the local level.)).

Against a societal backdrop of corruption, the media plays an important oversight role, encouraging accountability and honest dealings in the nonprofit sector. He’s direct engagement with reporters not only allowed the media to fulfill this duty, it has also given the media greater insight into the workings of the nonprofit sector.

“We’re not lacking money, rather we’re lacking compelling reasons for people to donate,” He explained, openly expressing the CFPA’s “guiding principle.”

Accountability Engenders Trust

After the earthquake, Nokia immediately contacted the designated, state-run relief organizations, expressing a desire to donate on the condition that it could direct the funds and understand how they were being used. This approach led nowhere—either no one answered the phone, or the organizations said they were unable to comply with the conditions, or even demanded minimum donations. It was then that the CFPA acted on its own to contact Nokia with a promise: they would produce a weekly report on relief efforts, and a monthly or seasonal progress report on the overall project. This satisfied Nokia, and they agreed to work with the foundation.

Fu Lei, Nokia China’s director of corporate social responsibility, explained the drama that ensued in the wake of her department’s decision. At the time, Nokia had 4 million RMB of corporate funds and 2 million RMB of employee donations designated for the earthquake relief efforts. Employees questioned the decision of Fu’s department to give funds to this little-known organization, and not one of the “top-ranked foundations.” Ultimately, the corporate funds were donated to the CFPA while the employee union opted to withhold its donation. In the ensuing weeks, the corporate social responsibility department passed along the CFPA’s reports to the employee union and, two months later, just as reports of problems with the management of public donations became a hot topic in the media, the employees reconsidered their decision and donated their funds to the foundation.

Although the relationship began on the basis of mutual trust, Nokia’s exacting standards quickly became apparent, and the two sides went through five or six rounds of negotiations. Nokia repeatedly raised doubts and questions, while the CFPA unflaggingly sought to assuage the company’s fears with detailed reports and on-site inspections. In the end, Nokia approved the program.

“Nokia was extremely critical,” Wang explained. “But negotiating with such a sophisticated party, and ultimately winning their support, was a tremendous learning opportunity for us.”

Competing With the Public Interest Monopoly

On the evening of May 12, 2008, within hours of the earthquake, the CFPA had already begun working to publicize relief efforts on Sina, and it was the third organization to make its donation hotline available to the public via CCTV’s news ticker.

Historically, the State Council had always designated the Red Cross Society of China (红十字总会) and the China Charity Federation (慈善总会) as official relief organizations. This led CCTV to pull the CFPA’s information from its ticker, only to reinstate it after pleas from the organization. Ultimately, though, the government elected to relax restrictions on relief efforts, and the Foundation finally received official government recognition, allowing it to join the ranks of approved disaster relief foundations ((Editor’s Note: Prior to the 2008 earthquake, only the Red Cross and China Charity Federation – both GONGOs with close ties to the government – were authorized by the State Council to accept public donations for disaster relief. After the earthquake, the government expanded the number of foundations that could accept public donations for the earthquake relief to include a number of public fund-raising foundations – again all GONGOs — including the CFPA.)).

Setting up operations at the scene of the disaster presented its own challenges. He revealed that, initially, the CFPA had planned to set up its headquarters in Chengdu. However, when the city government demanded that relief organizations deposit all of their funds in government bank accounts, the foundation elected to change their plan, instead setting up north of Chengdu in Deyang on the 18th of May.

“In 2008 there were 76 billion RMB donated to earthquake relief efforts—together with donations for the blizzards earlier in the year, that came to 100 billion RMB, 75-80 percent of which went into government accounts. They might as well make it an official tax. He repeatedly criticized the monopolistic tendencies of the non-profit sector for sanctioning this forced requisitioning of funds ((Editor’s Note: After the earthquake, this complaint was heard frequently in the philanthropy sector. If most public donations were going to government coffers, rather than to foundations or NGOs chosen by individual donors, then the donations were not much different from a tax imposed by the government.)).

After May 12th, tension continued between the government and the NGO sector. He put forth a second example, this time in the aftermath of the Yushu earthquake. This time the government asked a dozen or so organizations who were collecting donations and leading relief efforts to pool their funds and give them over to the Qinghai provincial government for management. The organizations resisted and nothing ever came of it, but cooperation on relief efforts between the government and NGOs has remained plagued by communication issues and a lack of cooperative mechanisms ((Editor’s Note: The Yushu earthquake struck a remote area of Qinghai on April 14, 2010. The response from civil society organizations to the Yushu quake was controlled much more tightly than in the 2008 Sichuan (or Wenchuan) earthquake because Yushu is a Tibetan ethnic minority area. NGOs were told not to engage in fundraising for the earthquake, and GONGOs such as public foundations, which are authorized to accept public donations for disasters, were ordered to transfer their donations to the Qinghai provincial government.)).

“We have to raise questions critically, to really get at problems, before we can achieve a democratic, just, and transparent society.” He expounded in response to the continued questions of journalists.

The Wenchuan Earthquake also played a significant role in encouraging society-wide support for disaster relief efforts. Han explained how the government appeared to have a change of heart, and how many local governments promulgated regulations governing volunteers. According to He, this was the first time the government allowed media coverage of a natural disaster, which in turn prompted a nation-wide wave of soul searching. “This was huge progress, and a huge moment of public awareness, the full extent of which won’t be clear for another 20 years.”

In order to improve relations with the government, on May 22, 2008, the Foundation, along with a number of other NGOs, made a public pledge of transparency in an effort to assuage governmental worries, reduce the government’s burden in overseeing NGO’s, as well as to increase public confidence in the non-profit sector. On the one-year anniversary of this pledge, the same organizations supported the publication of a seven-volume case study, and as part of a consortium of 21 NGOs, organized a panel discussion on disaster relief efforts as part of an NGO conference of unprecedented scale. All of these efforts were aimed at improving cooperation between civic organizations and the government, as well as to encourage a freer, more active role for civil society.

The Findings of the Third-party Evaluation

Since the 10 million yuan fundraising goal set 10 years ago, the CFPA has made great strides. The money raised and spent on the execution of disaster relief programs and large-scale disaster area coverage to Wenchuan alone exceeded 400 million yuan.

Third-party evaluators believe that the foundation went to great lengths to meet the demands of the disaster areas, in addition to operating flexibly and adjusting programs as needed. The objectives of donors also were being met. At the same time, governmental credibility and competitiveness was improving.

Han Junkui discovered the following problems while performing research in the disaster areas: the government left after they finished constructing the buildings, and the school buildings that were rebuilt, while luxurious and equipped with state-of-the-art multimedia technologies, were left unused because locals couldn’t afford the electricity fees to run them. In responding to disasters, the government’s attention remains at the rescue stage and has yet to invest significant resources into disaster prevention. This is an area where NGOs, which can mobilize communities, enjoy an advantage. In the report, Han recommends that the CFPA continue to enlarge its exploration of different types of rural development models, while gradually including community-developed disaster prevention programs into their work. He also recommends that the foundation support training of local NGOs and establish a dynamic local network.

These recommendations also reflect the objectives adopted by the CFPA in 2010 when it formally decided on a strategy to transform itself from an operational foundation into a grant-making foundation ((Editor’s Note: The CFPA’s effort to transform itself into a grant-making foundation is notable given that Chinese public foundations tend to be operational foundations that both raise funds and spend them to implement their own projects. Very few Chinese foundations actually seek to fund other organizations, but such a transformation is essential if China’s NGOs are to receive support from the foundation sector.)).

Five Million Yuan Assistance to Grassroots NGOs for Post-Disaster Reconstruction

“In order to guarantee fairness within the first three years of post-disaster reconstruction, some officials were not very receptive to public interest groups. In maintaining unwelcoming attitudes towards NGOs that are more responsive to the needs of specific communities, they gave grassroots organizations a difficult time.” ((Editor’s Note: In other words, local officials, which emphasize a one-size-fits-all approach to distributing resources equally among communities, were not receptive to NGOs which tend to be partial to certain communities.)). Beijing Normal University Professor Junkui Han’s discovery and several grassroots organizations experience agree on this point. However, the findings of the third-party evaluation were made within the first three years following the earthquake. In the wake of reductions in the government’s budgetary allocation, local officials’ attitudes are undergoing positive changes. Due to continuing needs in disaster areas concerning rural development, psychological counseling, education, and other areas, the government’s demands for NGO resources, programs, and innovation models continue to grow. This is good news for grassroots organizations’ programs which are still under development in disaster areas.

To date, while the CFPA’s disaster relief programs in Wenchuan have basically ended, the foundation’s presence is still felt in the region. It has already invested 5 million yuan and continues to accept applications from and provide financial aid to grass roots organizations working on post-disaster reconstruction. The foundation’s objective is to improve the capacity of grassroots NGOs and promote a healthy, functioning and effective public interest sector.

In Brief

This is one of several articles on NGO responses to disasters that we are making available in commemoration of the May 12, 2008 Wenchuan earthquake in Sichuan.
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