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Archived: African Enterprise Ltd, charity review

Care:  At least some of the information about this charity is no longer current.  Use the ‘Search charity names’ box to see if there is a later review.  If the latest review has a message like this, you are welcome to make your case for an updated review via email to ted@businessbythebook.com.au.

This is a review, for donors, of the Australian charity African Enterprise Ltd (AEA).

It is structured according to the charity’s entry on the ACNC[i] Register, and its purpose is to supply some information extra to what is there, information that may be helpful in your giving decision.

It is up to you to decide whether any or all of the information presented here is what you need in order to make that decision, and whether you should seek any other information, either from the charity itself or from other sources.

Ministry response

Prior to publishing this review, I sent my observations to the charity and invited them to comment. Richard Eggington, CEO Australia, offered the following by email on 19 August 2015:

Thank you for corresponding with Kathy and Helga regarding content for your new website.

We appreciate your efforts to encourage best practice reporting compliance among Christian charities.  In response to your questions and interest in AE’s public reporting we have liaised with our auditors who have assured us that AE’s reporting is well in order.  We therefore have no further comment to make at this time. 

We pray that your endeavours to serve our Lord will be fruitful for the advancement of His Kingdom on earth.

Organisation of this review

  • The first part of this review is organised according to the headings in the register entry. This is how to use this section of the review:
      1. For each heading in the register entry, first read the information under that heading.
      2. Then check if that heading is included below. (Headings for which there is no comment are not included.)
  • There is then a more detailed comment on the Financial Report.
  • Lastly, there is a section Membership of accountability organisations claimed.

Sources

  • ACNC Register (including links)
  • Google search on the charity’s names (see Charity Details, below), and its ‘controlled entity’ African Enterprise New Zealand Limited.
  • AEA website, Facebook, LinkedIn. (The other social media sites at the bottom of any website page are for AE internationally.)
  • AEA blog.
  • State government fundraising licence registers.
  • Email response, on 19 August, from Richard Eggington, CEO Australia.
  • www.glassdoor.com
  • GreatNonprofits (for the US organisation)
  • Guidestar (for the US organisation)
  • Charity Commission (for the UK organisation)
  • The NZ register of charities (for the NZ organisation)

CHARITY DETAILS

Charity ABN

  • Tax deductibility: A tax deduction can be claimed for a donation to a fund run by AE, the African Enterprise Aid and Development Fund, but not to AE’s main activity of spreading the Gospel.
  • The Fund is not mentioned by name in the Annual Report[ii]; however, it is what the Report (page 2) is talking about when it says that AEA ‘has been endorsed by the Australian Taxation Office as a Deductible Gift Recipient (DGR) to operate an Overseas Aid DGR’.
    • It then lists seven of the eight states/territories and a registration/licence number for each. However, these are licences for fundraising, not tax deductible donations.
  • The Fund is not mentioned in the Financial Report, and it is not possible to tell from the information given for revenue, how much was given to it.
  • The Fund is not mentioned on the website, but presumably it is the right hand side giving option on the website here.

Charity Street Address

  • From the website it appears that this is also the postal address.

Other Name(s)

  • The registered business name does not have the descriptor ‘Newsletter’.
    • African Harvest, the title of a book about AE’s founder, is, since 2015, and as the Register entry here suggests, the title of the worldwide Newsletter.
  • Update Out Of Africa should also be here.
    • Update Out Of Africa is the former title of the Newsletter.

Website[iii]

  • If you go to the international site, make sure that ‘Australia’ shows in the upper left hand corner.

ANNUAL REPORTING

  • Basic financial information is shown in the Annual Information Statement 2014 (AIS 2014). If you think that’s all you might need then there’s a couple of small changes to note:
  • swap $20K from ‘Other Income’ to ‘All other revenue’, and
  • swap $20K from ‘All other expenses’ to ‘Employee expenses’.
  • The coverage of finances in this review is left until the financial report proper (below).

ABOUT THE CHARITY

Who the Charity Benefits

  • A banner on the Home page: “We exist to see the continent of Africa saved by the love of Jesus, Africans discipled by the church and transformed for good works.”

Vision

  • None found.
  • For AE, from the Annual Report:  “To become the most faithful and effective evangelistic catalyst for holistic urban evangelism in Africa.”

Mission

  • None found

Activities (What does AEA do?)

  • Here’s the website description of what AEA does.
  • However, the AIS 2014 description is more applicable to AE generally:

To evangelise the cities of Africa, in word and deed, in partnership the (sic) church. This includes peace building, reconciliation and training. Also assist communities in the relief of poverty and helplessness by training and other aid and development projects. Refer to our website www.africanenterprise.com.au.

  • This is described more fully here.

Outcomes (What was delivered?)

  • Unfortunately in the AIS 2014, in response to the request to describe activities and outcomes, there are only activities (see above).
  • There are some stories and reports in the Newsletters here.
  • AE appears, at least in 2012, to understand the danger of a partial Gospel in Africa. And here.

Impacts (How were people’s lives improved?)

  • Nothing found.
  • AE said for Guidestar that it knows that it is making progress by “The number of people we see come to the Lord, government leaders ruling justly and the change in communities that we witness.”

Size of Charity

  • 2013-14 ‘Revenue’ was $2.4 m, easily exceeding the $1 m threshold for the ACNC’s top size of charity.

Financial Year End

  • This means that the next financial report is due by 30 June 2016. Before that the financial information on the Register will be up to 18 months out-of-date.

WHERE THE CHARITY OPERATES

Operating State(s)[iv]

  • Since it appears that AEA has only one office in Australia, this information is only correct if one defines fundraising as an activity.
    • A licence to fundraise is held in all these seven states.

Operates in (Countries)

  • A listing here can be a consequence of a charity following the ACNC’s advice to include any country to which a grant or donation has been made [2014 Annual Information Guide, page 18].
  • If the Register is meant to be about the Australian legal entity, then this is only correct if one treats AE’s Register entry as information about the group, i.e. AE plus African Enterprise New Zealand Limited.

CHARITY’S DOCUMENTS

Financial Report

  • This report can be opened either from this section or from within AIS 2014 under Annual Reporting (above).
  • Although the Financial Report was completed a little more than two months after the year end, it was not put on the ACNC Register until three and a half months later. (This was still within the six month period normally allowed.)
  • An Annual Report can be read on, or downloaded from Issuu.

RESPONSIBLE PERSONS

  • To see all a director’s positions in Australia, search here.

No. of Australian directorships

Jeffrey COLLETT                                            1

Robert CLAXTON                                           4[v]

John HANNE                                                   1

Benjamin HENSHALL                                   1

Matthew STEDMAN                                      1

Judy WONG-SEE                                           1

Michael WOODALL                                       2

  • The Directors’ Report says that Note 14 gives details of changes in the board since the end of the financial year, but unfortunately that Note only repeats what’s in the Report.)
  • AE New Zealand: The directors are Collett, Woodall and Hanne[vi] (above).

 

 

(End of review of the ACNC Register information)

 

Latest financial report – detail

  • The four financial statements are incorrectly titled: as explained in Note 1(b), the Report is about the group of charities consisting of AEA and African Enterprise New Zealand[vii], and therefore they all should have ‘Consolidated’ at the beginning.

Where the directors put their name to the report – the Directors’ Report (page 1 of the Financial Report)

  • No Directors’ Report is required by the ACNC.
  • But since one has been offered, compared to the requirements of the Corporations Act
  • Information about the directors joining since the year end is missing, and
  • There are the following more minor omissions:
    • The special responsibilities, apart from Committee membership, of the directors.
    • The total liability of the members.
    • The distinction between short and long-term objectives.

What was earned, what was consumed during the year – the Statement of Profit or Loss and Comprehensive Income (page 5 of the Financial Report)

  • Total revenue $2.4 m
    • It is not possible to tell how much was given to get a tax deduction.
    • Nor is it possible to tell how much each of the six donation options on the website raised.
      • Two are under You Can/Give, and
      • The other four a little hidden under News and Media/Campaigns. (Why a separate website is used is not explained.
  • Total disbursements[viii] $2.2 m
    • To get a total for administration costs, combine ‘Other project costs – Management in Australia’ and ‘Administration’. $216K. 
    • Total costs excluding what was sent to projects is $676K.
    • The relationship between these two figures and the claim in the Prospectus that it the annual ‘operating costs’ are $350K is not obvious.
  • Disbursements – Overseas projects $1.6 m
    • We are not told to whom this money was sent.
  • Fundraising costs – Public $311K
    • This is 14% of total expenses.
    • Presumably this is where ‘Ministry tour costs $10,000’ and ‘Media trips to Africa $10,000’ – from the Prospectus – are included.
  • Surplus/(deficit) for the year $206K (including Note 2[ix])
    • ‘Investment income’ in the body of the report is called interest income in Note 2 and the Statement of Cash Flows. Because of the investment in shares, presumably the former term is correct.
    • ‘Contributions to employee superannuation’ should be included in ‘Employee benefits expense’.

What’s left at the end of the year – Statement of Financial Position (page 6 of the Financial Report)

  • Cash and cash equivalents $1.0 m (including Note 5)
    • No reason is given for such a large holding (an average of $898K over the last two years.
  • Receivables $25K (including Note 6)
    • Two of the three items are with related parties.
    • No explanation is given for lending to board members – especially unsecured
  • Available for sale financial assets $135K (including Note 8)
    • No reason is given for holding $132K in shares, a relatively risky asset class
  • Property, plant and equipment (including Note 9)
    • Computer software is an intangible asset, so is incorrectly included here.
  • Trade & other payables $385K (including Note 10)
    • The loans are financial liabilities, and therefore incorrectly included here.
  • Accumulated Funds $223K (including Note 12)
    • There is no Note explaining the restricted-unrestricted distinction
  • Reserves $562K (including Note 13)
    • There is no Note explaining these.

Where the cash came from, where the cash went – Statement of Cash Flows (page 7 of the Financial Report)

  • Given the interest recognition policy, it is surprising that the interest, both this year and last, is identical to the cash flow.

Essential information to go with the figures: Notes to Financial Statements (page 9 of the Financial Report

  • Note 1 Statement of Significant Accounting Policies
    • There is no ‘foreign currency translation reserve’ under Reserves.
    • There is no explanation why the valuation basis differs from the usual ‘lower of cost or net realizable value’.
  • (a)   Basis of consolidation
    • An out-of-date definition of control is used.
    • The extent of the ownership is not disclosed.
  • (c)    Foreign currency
  • (j)   Inventories
  • (q)   Accounting estimates and judgments
    • It is unusual not to have made any critical judgements or significant accounting estimates in the course of preparing accounts such as these.
  • Missing policy Notes (not already mentioned)
    • New and revised Standards
    • Accounting Standards issued but not yet adopted
    • Financial instruments
    • Fair value measurement
    • Leases
    • Financial liabilities
    • Reserves
    • Provisions, contingent liabilities and contingent assets
  • Missing Notes
    •  Related party transactions

‘Declaration by Chairman’

  • Only one of the seven states in which a fundraising licence is held is mentioned.

An independent opinion on the financial statements: Independent Auditor’s Report (page 18 of the Financial Report)

  • This is a ‘clean’ opinion. Read here and here to draw the right conclusions from this.

Membership of accountability organisations claimed

  • None claimed in the Financial Report, on the website, or in the Annual Report.
  • Not a member of the Australian Council for International Development.
  • A charter member of the ECFA (US).

 

(End of review)

 

[i] Australian Charities and Not-for-profits Commission, Australia’s national regulator of charities.

[ii] Presumably this is the ‘Tax deductible J831N Mongolia’ option in the Gift Allocation drop-down on the website.

[iii] At the time of the review, the search function on the website did not appear to be working. AEA are aware of the issue.

[iv] This is how the ACNC explains ‘operating locations’ in their application guide: ‘You need to give details about where in Australia your organisation conducts (or plans to conduct) its activities.’

[v] Because of the possibility of two (or more) directors having the same name on the register of responsible persons, it is not possible to be definitive about the number of directorships held.

[vi] Hanne is registered as Anthony in New Zealand, as John in Australia.

[vii] And maybe, if Helga’ss signature block is anything to go by, African Enterprise Hong Kong too.

[viii] ‘Disbursements’ is a cash basis term; the accrual accounting term is ‘expenses’.

[ix] There is nothing in the first third of Note 2 that is not already disclosed in the Profit and Loss Statement.

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BY: Ted Sherwood IN : ,
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