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Australian Relief & Mercy Services Limited, charity review

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This is a charity review, a review for those with an interest in the Australian charity Australian Relief & Mercy Services Limited (ARM), and the charity that it controls, Arms (sic) Overseas Aid Fund (AOAF).

They are reviewed together, for although they do not, although entitled to do so, form a group, it appears that ARM makes no distinction between the two entities.

It is structured according to ARM’s entry on the ACNC Register, with those for AOAF only mentioned when they are different.

Its purpose is to supply some information extra to what is there, information that may be helpful in your decision about ARM (and AOAF).

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, on 11 May 2016, and invited them to comment. They sent the following for publication:

…thank you for your previous email and the points listed.  The Australian Mercy Board will look further into the findings of your review to consider any that are in need of attention.

Organisation of this review

  • The first part of this review is organised according to the headings in the Register entry for ARM. 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. This also applies to the information in the Financial Report.)
  • There is then a more detailed comment on the Financial Report.
  • Lastly, there is a section Membership of accountability organisations

Sources

REGISTRATION DETAILS

Entity Subtype

  • Not a subtype that suggests that the Gospel is shared.
  • Likewise, with the objects in the governing document:
    • (a)   Direct relief to persons in Australia suffering from poverty, sickness…
    • (b) Direct relief to persons in countries designated as developing countries…
  • AOAF: this selection has been overdue since 30 June 2015.

CHARITY DETAILS

Legal Name

  • ARM is a company limited by guarantee.
  • It appears not have the provisions in its governing document that would allow it to omit ‘Ltd/Limited’ at the end of its name.
  • AOAF is an unincorporated entity.

Other Name(s)

  • Under a heading Why Three Names (the 7th FAQ here), ARM says that
    • Australian Relief & Mercy Services is the registered business name, ARMS is simply an abreviation (sic) and Australian Mercy is a trading name. In fact they are all one in the same organisation!
      • However, the only business name they have registered is RescueNet. This is therefore the only name, other than the legal name (above), under which they can, legally, trade.
        • See Sources, above.
        • Their ACFID membership (see below) is also in the name of Australian Mercy.
      • ARM has many trading names that, technically, should be here. Australian Mercy is not one of them. That still wouldn’t allow them to trade under that name though.
  • ARM also uses a number of different names overseas (for example, Kids Ark in Timor-Leste.)
  • ARM has the following word trademarks (claimed on page 86 of the Annual Reports 2014-15 and verified here):
    • Australian Relief and Mercy Services
    • Australian Mercy (x 2 for some reason)
    • Buzz Off (it is actually Buzz Off)
    • RescueNet (including a logo)
    • Some of ARM’s activities (see below) are therefore not covered by a trademark.

Charity ABN

  • Tax deductibility: Yes, you can claim a tax deduction for a donation to ARM.
  • You can also claim one for a donation to the ARMS Overseas Aid Fund (established 15 August 2012).
    • It is this Fund to which they are seeking donations, not the charity controlled by ARM of the same name (see above).
    • However, the statement here is contradicted in the 4th FAQ: there is no tax deduction for ARM’s overseas projects that are not run by the Overseas Aid Fund.
  • AOAF: a donation has attracted a tax deduction since its inception in 2003.
    • Note that this Fund, although having the same name as the Fund that is within ARM (see the second point above), is, somewhat confusingly a different kind of Fund, a public ancillary fund.

Charity Address for Service

  • AOAF: Different address but probably the same result.

Charity Street Address

  • Postal address, from the website:  PO Box 132 Port Kembla, NSW, 2505. ·       The National Director, though, is in Burnie, Tasmania:  PO Box 878 Burnie, TAS, 7320 (from the website).

Email

  • The National Director works in Burnie, Tasmania: natdir@australianmercy.org (from the website).

Phone

  • The National Director, though, is in Burnie, Tasmania:  03 6431 1218.

Website

ANNUAL REPORTING

  • AIS 2015
    • This is ARM’s compulsory Annual Information Statement 2015 (AIS 2015).It gives basic financial information. If you think that this might be sufficient for you
      • The lack of Employee expenses’ matches the declaration, elsewhere in the AIS, that they don’t have any employees.
      • The figure for ‘Grants…outside Australia’ includes $43K of Program Support Costs.
    • AOAF: This is well overdue.
  • Financial Report 2015
    • The Report was signed four and a half months after the year end.
    • It was then lodged two and a half months after that, three days before the (extended) due date.
    • The coverage of finances in this review is left until the financial report proper (see Latest financial report – detail, below). (Go straight there.)
    • AOAF: This is well overdue.
      • Last year, they just lodged the ARM Financial Report.

ABOUT THE CHARITY

  • Statement of Faith
    • None found.
    • Nor in the governing document.

Date Established

  • No history found.

Who the Charity Benefits

  • Vision
    • None found.
    • However, a Google search on ‘site:australianmercy vision’ will lead you to the vision for individual ministries within ARM.
  • Mission
    • Not on the website.
    • There is a ‘Mission Statement’ on page 10 of the Annual Report.
  • Activities (What did ARM do?)
    • In the AIS 2015:
      • During the last year Australian Mercy has been involved directly, or through project partners, to (sic) provide direct relief and development opportunities to persons both in Australian(sic) and overseas who are suffering distress, misfortune, destitution, helplessness and necessitous circumstances.
    • See the Annual Reports 2014-15 for a report on ARM’s projects.
    • The current projects can be seen on the website via ‘Projects’ on the main menu.
  • Outcomes (What did ARM deliver?)
    • Nothing systematic found.
    • See the Annual Reports 2014-15.
  • Impact (How were people’s lives improved?)
    • Nothing systematic found.
    • The Annual Reports 2014-15 said that impact studies are performed, but it appears that the results are not published.

Size of Charity

  • ARM is $590K over the threshold for this, the largest, size.
  • AOAF: With no AIS yet, and no mention of AOAF in the ARM Financial Report, the revenue has not been disclosed.

Financial Year End

  • This means that the next financial report is due by 31 December 2016 – or 31 January if the ACNC is generous again. Before that the financial information on the Register will be up to 18 months out-of-date.
    • You may therefore need to ask for more up-to-date information.

WHERE THE CHARITY OPERATES

Operating State(s)[i]

  • ARM has offices in all these states except Victoria.
  • It has ‘Giving’ in its main menu. And a separate site: goldcoingiving.com.
  • It also fundraises via Donations.com.au.
  • However, has a fundraising licence in only four of the seven states that have a licensing regime (Qld, SA, Tas, and WA).

Operates in (Countries)

  • Although not listed under Our Offices, the Annual Reports 2014-15 says that ARM has an office in five of these 12 countries: Timor-Leste, Cambodia, China Myanmar, and Thailand.
  • AOAF: Why is Philippines omitted compared to ARM’s list?

CHARITY’S DOCUMENT (SIC)

  • This document consists of a Memorandum of Association and an Articles of Association, the two documents that were long ago replaced by a constitution for new companies and companies who had these documents but wanted to amend their rules.
  • An Annual Report/Review can be lodged on the ACNC Register, but ARM hasn’t done this.
  • One is available on the website though.
  • AOAF: This is not the governing document for AOAF, but that of ARM.

RESPONSIBLE PERSONS

No. of Australian ‘responsible person’ positions[ii]

Dianne Clark               This function was not working at the time of publication

Kevin Clark

Christopher Harrison

Jennifer Keatch

Nicholas Matthews

Georgina Pettigrove

Rodney Richards

David Skeat

Bruce Skinner

  • AOAF: The same ten people are the responsible persons.
  • The list on the website does not include Georgina Pettigrove. (Nor does the one in the Directors’ Report – although that was produced in November 2015.)
  • Under ‘Position’, the constitution requires a Treasurer and a Deputy Chairman.

(End of review of the ACNC Register information)

Latest financial report – detail[iii]

  • These accounts got a qualified audit.
  • There is no warning in each statement that the current period is two months longer than the previous period.
  • The inclusion of cents in the figures, especially in a $1.59 m company, makes the information harder to digest.
  • Other than two bank accounts, there is no mention of either overseas aid fund.
  • ARM has much overseas activity, yet foreign currency is not mentioned.

Contents – the first page of the Financial Report

  • Without page numbers, this page is of little value.
  • One has to read the Notes to know that the two columns of figures are not comparable: the column for this year is not 12 months but 14.

Directors’ Report

  • Not required by the ACNC.
  • Although 11 sections are included, only two of them are required; and seven are missing.

What was earned, what was consumed during the year – the Statement of Financial Performance (the 5th page of the Financial Report)

  • There is no warning that this year covers 14 months, not 12.
  • This is a long-superseded format: there is no Other comprehensive income section.

Revenue

  • Donations and Gifts $1.55 m, including Notes 1 and 2
    • Why the reference to Note 1, the policies Note?
    • Note 2 is a very confusing list:
      • Five of the descriptors are duplicated;
      • For the remaining ten unique descriptors, there are three classifications used: geographical, by nature, and by organisation.
    • It is not possible to see how much was received for Australian projects as opposed to international projects (see ‘Projects’ in the main menu), let alone individual projects.
  • Other Income $32K
    • With only three revenue items, this is the second largest. What’s in it?

‘Expenditure’

  • If accrual accounting has been followed, these are ‘expenses’, not expenditure.
  • This classification of expenses mixes the two permissible methods.
  • International Programs: Funds…$1.17 m, and Program Support Costs 43K
    • Much of this money went via another charity:
      • During some of the time that these reports [Annual Reports 2014-15] cover all our tax deductible international projects were done in partnership with World Relief Australia and only some of our projects were registered as Tax Deductible (sic) with them. With the coming of our own 9.1.1 fund we were able to extend tax deductibility to more of our projects [page 90].
    • Fundraising Costs $197K
      • Why is ‘Accountability and Administration ($197K) included under fundraising?
        • This is 12.7% of all the revenue excluding interest and ‘Other income’.
          • Compare this with what it should be (in the 4th FAQ):
            • …Australian Mercy does take 5% from all project donations and 10% from all grants and sponsorships in order to help cover the costs of its administration.
          • What is ‘public’ fundraising? Alternatively, what is private fundraising, the other item that it implies?
        • Domestic Programs Expenditure $128K
          • Why is there not the same split between ‘Funds to…’ and ‘Program Support Costs’ as there is for overseas expenditure?
        • There is no Employee benefits expense’ and superannuation expense because, ‘As a volunteer organization Australian Mercy pays no wages to its workers. Everyone is a full time volunteer’ (the 4th FAQ).
        • There are no finance costs (a compulsory disclosure) because there is no debt.
        • But depreciation expense is missing.

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

  • There is no warning that this year covers 14 months, not 12.
  • The constitution (clause 4.(a)) makes two ‘separate and distinct funds’ compulsory, the International Fund and the National Fund. Although ARM says in the Annual Report that they exist, there’s no mention of either fund in the Financial Report.
  • The Annual Reports 2014-15 reports that ARM has four ‘trust accounts’:
  • Cash and cash equivalents $458K, including Note 3
    • Why is so much held?
  • Other financial assets $8K
    • ‘Financial assets’ do not include trade and other receivables, so what is included here?
  • Property, plant and equipment $35K, including Note 4
    • What is the plant and equipment?
    • Similarly, why not identify the ‘Other property, plant and equipment’?
    • The reconciliations to written down value are missing.

Table of Cash Movements for Designated Purposes – the 7th page of the Financial Report

  • This is not one of the standard financial statements included in a set of financial statements. It is a requirement of the ACFID’s Code of Conduct.
  • It is not audited.

Movements in the net wealth of the charity – the Statement of Changes in Equity (the 8th page of the Financial Report)

  • The omission of comprehensive income in the Statement of Financial Performance flows through to here – ‘Other comprehensive income for the year’ and ‘Total comprehensive income for the year’ are missing.
  • There is no warning that this year covers 14 months, not 12.
  • There is no comparative information (2013-14).

Where the cash came from and where it went – the Statement of Cash Flows (the 9th page of the Financial Report)

  • There is no warning that this year covers 14 months, not 12.
  • ‘Cash at the end of the year (Note 1)’ does not agree with the amount in the Statement of Financial Position.
    • Nor does it agree with its own Note (Note 1).
  • Why, when accrual accounting is used, are the figures for interest the same in the accrual statement (the Statement of Financial Performance) as in the cash statement (the Statement of Cash Flows)?

Another statement of what was earned, what was consumed during the year – the Income and Expenditure Statement

  • No explanation is given for this addition. Confusing.
  • It is not audited.
  • There is no warning that this year covers 14 months, not 12.

Essential information to go with the figures – the Notes to the Financial Statements (the 15th page of the Financial Report)

  • Note 1: Statement of Significant Accounting Policies
    • There is no reference to the ACNC Act, the Act under which they are reporting.
    • Missing:
      • The type of company
      • Functional and presentation currency
      • Registered office and principal place of business
      • The date the directors authorised the issue of the statements
    • Fixed assets:
      • The correct descriptor has for a long time been ‘property plant and equipment’.
      • This Note is incomplete.
    • Investments:
      • There are no investments in the Statement of Financial Position.
      • Why, with the use of accrual accounting, are ‘dividends and interests’ (sic) brought to account on a cash basis?
    • Cash: Why has the usual term of three months been reduced to two?
    • Non-monetary items
      • This $7.8 m of unpaid work represents, based on the declaration in the AIS, $78K per staff member.
    • Missing policy Notes:
      • New, revised or amending Accounting Standards and Interpretations adopted
      • Revenue recognition
      • Current and non-current classification
      • Impairment of non-financial assets
      • Trade and other receivables
      • Trade and other payables
      • Fair value measurement
      • GST and other similar taxes
      • Employee benefits
      • New Accounting Standards and Interpretations not yet mandatory or early adopted
  • Missing Notes:
    • Critical accounting judgements and estimates
    • Financial instruments
    • Key management personnel
    • Remuneration of auditors
    • Contingent liabilities
    • Commitments
    • Events after the reporting period
    • Related party transactions
      • There are multiple and, as acknowledged in the audit report, financially significant, relationships with related parties. For example,
        • Australian Mercy is affiliated with Youth With A Mission Australia (YWAM) and serves as one of its Mercy Ministry arms. Although Australian Mercy is a separately constituted body, some members of its Board also serve as members of Youth With A Mission Australia [Annual Reports 2014-15, 2].
          • You can see how this ‘affiliation’ translates ‘in the field’ by looking at the websites of individual YWAM centres. For example, Perth, Darwin, and Canberra.

Where the directors put their name to the Report – the Directors’ Declaration

  • With no reference to the fact that ARM is reporting under the ACNC Act, the ‘responsible persons declaration’ does not comply with the ACNC Act.

An independent opinion on the financial statements – the Independent Audit Report to the Members (the third last page of the Financial Report)

  • This report is not an unqualified or ‘clean’ opinion. Given the constraints on comfort from a clean opinion (read here and here), and the other issues in the financial statements, you might question how much comfort is left.
    • The auditor has said that he had to qualify his opinion because for two sources of revenue, ‘cash donations’ and ‘donations and sales to related parties’,
      • AFM had decided not to establish controls to ensure that all that had been given or earned by the company made it into the bank account.
      • Why is it not practicable for the company to control this cash and ‘donations and sales’? Most other companies can – directors please read this.
    • The auditor has omitted one of the four compulsory financial statements from the scope of his audit.
    • He has allowed, without comment, the inclusion of two non-audited statements in the Report.
    • The opinion paragraph should be headed ‘Qualified opinion’.
    • The auditor has not mentioned the ACNC Act.

Membership of accountability organisations claimed

  • In answer to their FAQ ‘What kind of accountability is there for funds handled by ARMS?’ ARM claim that
    • As a Public Benevolent Institution Australian Mercy is required by Australian law to submit to a yearly audit of all its financial dealings (continued below)
      • It is not its PBI status that means that ARM must be audited, but its status as an ACNC registered charity of a certain size (see above).
    • As a signatory to the ACFID Code of Conduct, Australian Mercy has all its books audited once a year to the standard laid out in the ACFID Code Of Conduct.
      • The Code is now here.
      • The Code merely requires a professional audit (page 31). The ACNC actually requires a higher standard of auditor.
    • All audits are submitted to the Australian Securities and Investment Commission (ASIC) and other peak bodies such as ACFID and Missions Interlink for their perusal and comment. A synopsis of our audit is published online as part of our Annual Reports.
      • As a charity, ARM now, and for the last few years now, submitted its financial report to the ACNC, not ASIC.
      • What other ‘peak bodies’?
      • There is no annual assessment of the submission by the ACFID.
      • The condition of some of the financial reports produced by Missions Interlink members suggests that little or effective compliance work is done by Missions Interlink.
      • It is an audit that should be published in the Annual Report, not a synopsis.
  • Membership of Missions Interlink confirmed.
  • Membership of ACFID confirmed.

(End of review)

 

 

[i] 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.’

[ii] 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.

[iii] I use the Pinnacle Financial Statements, respected in the profession as providing a very sound basis for producing compliant financial reports.  To this I add an assessment of materiality (both quantitative and qualitative), where the users being considered are donors.

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