Audit report reflects crippled Shen Yun finances

Kaiwind By Chen Jingyuan
Shen Yun, although personally administered by Li Hongzhi and, highly anticipated by him a cash cow, contrary to his wishes, turns out to be a money-losing business. During a discussion on the New Tang Dynasty Television in 2009, Li complained to his followers: “Deducting the expenses for touring around and giving show, the income of Shen Yun performance is not enough to pay the salary of several hundred staff in the Troupe. I’ve tried hard to call for sponsorship from the government and the entrepreneurs by setting up a specialized office, just as other art groups have done. As we all know, it’s difficult to let other people foot the bill. We’ve managed to get some, but it is far from enough.” At the 2010 New York Fa Conference, he bemoaned: “Some of us here feel delighted, and they think Shen Yun has got a bumper harvest this year. But actually it’s not the case. I’ll tell you the truth: it’s run at a loss. Over several-million-dollar expenses each year, where does the money come from?” At the 2011 “Talking about What You Have Gained from Cultivation” Conference held in Washington D.C., Li made a slip of the tongue which totally uncovered Shen Yun’s lie of “filling the stadium to bursting point in every performance”, Li lamented: “Do you know how I feel upon seeing those empty seats in the stadium?”
Let us look into Shen Yun’s fiscal situation from its audit reports of the Year 2008 and Year 2009 (hereinafter referred to as “audit report”) that Falun Gong handed to the IRS.
First sight: sources of revenue – Donations and selling entrance tickets
It is claimed in the audit report that “the sources of revenue are received contributions and the proceeds of performance service”. The “received contributions” include the received donations (money), gifts and the obligatory services, while the obligatory services refer to the services of the Shen Yun actors. And that is to say, the revenue of Shen Yun consists of three parts: the entrance ticket fees, the received donations plus gifts, and the obligatory services provided by Shen Yun staff members.
Firstly, let’s compare separately the three parts of income with the revenues in these two years: The performance income in 2008 is $1,183,779, consisting 17.6% of the revenue the same year; while that of the 2009 is $4,489,278, consisting 40.7% of the revenue. The received donations and gifts in 2008 amount to $2,423,092, accounting for 36% of the revenue; while the amount of 2009 is $1,697,250, which amounts to 15.4%. The received obligatory services in 2008 equal to $3,104,980, which is 46.2% of the total income; while that of the 2009 equals to $4,826,700, accounts for 43.7% of the revenue.
Judging from these figures we can see that, the equivalent value of obligatory services offered by the actors is greater than the income of Shen Yun performances. The “received contributions” account for 82.2% of 2008’s revenue and for 59.1% of 2009’s revenue, respectively, which suggests that it has become a major means of earning money rather than selling tickets. In another word, Shen Yun’s “sustainable development” depends to a great extent on a sustained provision of contributions and obligatory services from its staff members. But the fact is, its received contributions in 2009 have decreased by $725,842 compared with that of the 2008.
Second sight: payments situation – Actual losses and unreliable figures
It is known to all that, profit is the difference between revenue and expenses. Shen Yun’s financial statement appears to be profitable. But the fact is, its received obligatory services have no cash support or liquidity. In 2008, the revenue despite the obligatory services is $3,617,444, $72,142 less than the total expenses, which is $3,689,586. In 2009, the income despite the obligatory services amounts to $6,211,627, which is $80,715 less than the total expenses of $6,292,342. That is to say, the performance income and the received contributions cannot mend its expense. Furthermore, its received contributions contain restricted donations, which are “long-term assets donations and cash donations that have explicit restrictions or assets donations that must be used to purchase long-term assets”, or “assets appointed to be donated afterwards”. Although Shen Yun has gained some net cash flow and profit, it has only created statement income, and still loses money in reality. The “audit report”, when comes to explain the use of rough calculations, can not but admit that: “the financial estimate requires administrative levels to make assumptions that will be estimated to influence some report figures and disclosure, but the actual achievements may differ from these assumptions.”
The net cash inflow of Shen Yun in 2008 is increased by nearly one million dollars, which in 2009 totals to $457 million. Its deposit is only several hundred thousand dollars, and its investment income is less than twenty thousand dollars, which accounts only for 0.2% of its annual revenue. All this suggests that the current assets of Shen Yun are fake numbers. The profit, cash and cash equivalent, net cash inflow and the total value of obligatory services on its statement can only “flow” among its statements as cash flow generated from management, but cannot go into savings account and investments. Besides, thirty million dollars of receivables including performance income and promised donations, whether uncollected or vanished later on, are counted into the total assets, increasing the exaggeration of the statement.
Third sight: operating methods – Exploiting and skimping
In the “audit report”, services “offered on the basis of obligation” by Shen Yun actors are regarded as received contributions and are taken into the net cash flow as “the increasing part of net assets”generated from operating activities. However, these net cash flow and net assets are just “calculated according to the affirmed fair value”, no actual cash inflow exists. In these two years, Shen Yun has only “paid the salaries of the fourth quarter of the Year 2009”, the other seven quarters’ including the whole 2008 are all “obligated”. We can easily figure out that the growth of net assets on the statement is realized to a great extent by exploiting and skimping on the salaries of Shen Yun staff members.
Shen Yun’s operating methods also include possessing the unpaid labors of its followers— asking them to market tickets for free. The “audit report” stipulates, “services that do not require taking part in performances or professional skills are not regarded as obligatory but as voluntary.” Thuswise, followers responsible for contacting stadiums and marketing tickets on the streets are all “volunteered”. Another thing worth mentioning is that part of ticket sales revenue is contributed by Falun Gong followers. Apart from selling tickets for Shen Yun, they have to buy tickets at their own expense and ask family members to watch the show so as to increase the revenue.
Here is an example. On July 28, 2009, an article published on the Falun Gong website, affixed as “a follower in Washington D.C.”, said that: “I heard an experience from another follower that, once the tickets does not sell well in a city, so followers from other cities near by are asked to watch the show.” Another example: On January 30, 2010, the author of another article from Falun Gong website talked about her “tickets-marketing experience” in 2007 “The program started late that year, thus only 70 percent of the tickets were sold out. With my family, I watched the last show and saw the half-empty stadium. We could see that even the best seats in the front rows remain empty.”
Fourth sight: operating background—Fawning on its master and asking for support
Many of the Shen Yun’s fixed assets are invested by the Longquan Temple under Falun Gong headquarters. The “audit report” reveals: “In 2008 and 2009, Shen Yun had received materials worth respectively $418,912 and $313,146 from Longquan Temple. Shen Yun operates under the circumstances of using Longquan Temple’s site for free and receiving other assistance from it. Therefore, advantages such as utility bills and depreciation expenses of relative facilities are recorded as donated materials. In the beginning of 2008, when the administrative functions of Shen Yun are not fully completed, Longquan Temple had bought performance equipment and musical instrument for Shen Yun in the name of Shen Yun Troupe, and the depreciation expenses are owned by Shen Yun.”
Li claimed at the 2009 New York International Fa Conference: “Various programs such as telling the truth and saving people, engaged by our DaFa disciples, are done by followers voluntarily to verify the Fa.” However, it is odd that these “self-engaged programs” have gained “tax-free treatments” in the US under the cover of “NPO (Non-Profit Organization)”. And Shen Yun too, has gained such advantages. The “audit report” claims that “Shen Yun is an NPO, whose revenue comes from donations and incomes of its performance, thus has gained tax-free treatments from IRS in accordance with the Provision 501(c)(3) of the IRC (Internal Revenue Code), and shall not pay federal or state taxes.” With these advantages, Falun Gong media including Shen Yun exert their strength to publicize anti-China or Falun Gong fallacies, so as to make their foreign masters happy.
To sum up, Shen Yun, in the name of “rejuvenating five-thousand-year traditional orthodox Chinese arts”, with the help of Falun Gong headquarters and western anti-China forces, has obtained from IRS the “tax-free treatments”; being promoted by free advertisements on the Falun Gong website, Shen Yun has been “using the man-power of all followers” to sell its tickets “voluntarily” and receiving huge amount of donations from Falun Gong members. However, these measures have so far failed to achieve ideal economic results. Shen Yun has lived beyond the income for years and its financial crisis is likely continuing to worsen.