Gradual payouts 'made room for investments'
Project Hope head Xu Yongguang told the Sunday Morning Post that in order to make investments he had taken advantage of not needing to use all of a donation at once.
Mr Xu, who denies any wrongdoing, said if a donor gave 400 yuan (HK$372) to help a poor student, 320 yuan would be left in the China Youth Development Foundation's account at the end of the first year, as the funds would be gradually given to the student.
By the end of 1994, an audit found that 'donations pending allocation' amounted to 107 million yuan. In the meantime, the foundation used 105 million yuan to invest in various projects, the audit report found.
But if one investment produced no return or proved to be non-recoverable, the deficit had to be made up sooner or later. Usually it was covered by 'other income' not reported in the foundation's audited account, one of its former auditors said.
Although Beijing provided little in the way of operating expenses for the foundation, the charity had other ways of making money.
Liu Wenhua, director of the foundation's fund-management department, said the group had sold more than 10 million Project Hope souvenirs at a profit. 'The total revenue [from souvenirs] could reach 200 million yuan or more,' Mr Liu was quoted as saying in a book on Project Hope.
The foundation also produces a magazine, Hope Monthly Report. The extra revenue was allegedly put into 'hidden accounts' not under the scrutiny of independent or government audits.