Archived: Australian Relief & Mercy Services Limited: mini-charity review

Mini-charity review of Australian Relief & Mercy Services Limited (ARMS), an organisation that seeks donations online, and is a member of Missions Interlink. (Including the answers to the questions that the Australian charity regulator, the ACNC, suggests that you ask.)

(To see the situation last year, read this review.)

Are they responsive to feedback?

• They welcome feedback. I can’t see it on the website, but it is invited on page seven of the Annual Reports (sic) 2015-2016.
• I sent them a draft of this review. The National Director, David Skeat, replied promptly by email, an email which he described as a ‘courtesy response to you to inform you as to how we have actioned your concerns’. However, he did not want any of his comments published. The email also contained a suggestion that I did not understand something; there was no need to change the review because of that suggestion.

Is ARMS registered?

• As a charity, yes.
  • Its subtype is ‘public benevolent institution’ (PBI).
  • It controls two other charities:
    • Arms (sic) Aid & Relief Fund (AARF).
      • This is a public ancillary fund.
      • ARMS is the trustee.
      • AARF changed its name from ARMS Overseas Aid Fund in June 2016, but the necessary change has not yet been made on the ABN register.
      • There is no mention of this fund on the website, or in the Financial Report 2016.
    • Arms (sic) Gift Fund (AGF)
      • This is a second public ancillary fund.
      • ARMS is the trustee.
      • There is no mention of this fund on the website, and the only reference in the Financial Report 2016 is a very small balance in a bank account.
    • It continues to choose to not take advantage of the ACNC’s group reporting concessions.
• ARMS is a public company, a company limited by guarantee.
• It has two registered business names, Australian Mercy and RESCUENET.
  • This means that two of the three names it uses (see ‘Common Questions, here), Australian Relief & Mercy Service and ARMS, are unregistered.
  • The first cannot be used because ARMS does not have the provisions in its governing document that would allow it to omit ‘Ltd/Limited’ at the end of its name.
  • RescueNet is the Australian arm of RescueNet International.
    • I could find no explanation of this activity on the website^[1].
• ARMS also uses several different names overseas (for example, Kids Ark in Timor-Leste.)
• ARMS uses five word trademarks – see page 85 of the Annual Reports (sic) 2015-2016 – that are held by another entity and used under licence. (You can verify them here.).
• Although operating, per the ACNC Register, all over Australia, and calling for donations via multiple websites (its own plus Donations.com.au), ARMS doesn’t have a fundraising licence in its home state, New South Wales^[2].
• AARF is an unincorporated entity.
• AGF is an ‘discretionary investment trust’ (misclassified I think).

What do they do?

• “Australian Mercy is an Aid and Development Agency that partners with people from all walks of life.” [half way down the Home page].
• The 20 current projects are shown here.
  • See the Annual Reports (sic) 2015-16 for the previous year’s activity in each.
• ARMS has operations in several other names:
  • It has a tax-deductible fund with the same name as the former name of AARF, ARMS Overseas Aid Fund:
    • The ARMS Overseas Aid Fund (item 9.1.1) is a public fund established by Australian Relief & Mercy Services Ltd that is used solely for the relief of people in countries that have been declared by the Minister for Foreign Affairs to be Developing Countries [‘Common Questions’].
    • Apart from a reference to ARMS being the trustee, I can find no other mention of this fund on the website. In the Financial Report 2016 the only references are to two bank accounts.
  • It has another entity with an ABN, The trustee for ARMS Overseas Aid Fund.
    • This is not a registered charity.
    • Apart from a statement that ARMS is “the trustee of ARMS Overseas Aid Fund“, I can find no other mention of this fund on the website. The entity is not mentioned in the Financial Report 2016.
  • It runs Buzzoff, a venture without an ABN or a business name.
    • I can find no description of this ministry on the website. (There are some News items.) In the Financial Report 2016 the only references are to a PayPal account.
  • www.myanmar.buzzoff.org
    • I can find no description of this ministry on the website. (Three of the references to Buzz Off in the News section mention Myanmar.) There is no reference to this activity in the Financial Report 2016.
  • The Donna McDermid Memorial Fund, an unregistered charity without an ABN.
    • There doesn’t appear to be a description of this charity on the website, or in the Financial Report 2016.
  • And a website in the (unregistered) name Gold Coin Giving that redirects to ARM.
    • This name is mentioned in neither on the website or in the Financial Report 2016.
• It operates, per the ACNC Register, all over Australia.
• And in thirteen (other) countries.
• The list for AARF and AGF omits Fiji.

Does ARMS share the Gospel?^[3]

• No

What impact are they having?

• The Annual Reports (sic) 2015-2016 said that ‘impact studies’ are performed, but it appears that the results are not published.

What do they spend outside the costs directly incurred in delivering the above impact, that is, administration?

• In answer to their ‘Common Question’, ‘What proportion of funds donated to Australian Mercy is absorbed into administration costs?’, ARMS say
  • Very little – As a volunteer organisation Australian Mercy pays no wages to its staff or volunteers.

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.

• This 5% and 10% appears to be insufficient to cover administration though – expenses other than ‘Funds to International Programs’ and ‘Domestic Programs Expenditure’ are 25% of revenue.

Do they pay their directors?

• The ARMS governing document does not permit this. (This is a requirement for participation in the Overseas Aid Gift Deduction Scheme.)
• From the (unaudited) Income and Expenditure Statement, it appears that ARMS is complying.

Can you get a tax deduction?

• Yes, both to ARMS itself, and to the fund it operates, ARMS Overseas Aid Fund.
• AARF: Yes
• AGF: Yes
• The website does not distinguish between the three charities.
• This page says that you can for some projects, not for others.
  • The donations page shows only one that is not eligible, and that is a fund, not a project^[4].

Is their online giving secure?

• Security is not mentioned until the second page, and then only indirectly by the inclusion of the PayPal logo.
• In answer to their ‘Common Question’, ‘Are financial transactions on this website secure’, ARMS say
  • We use SSL Certificates to offer secure communications by encrypting all financial data to and from the site.
  • They don’t specify the type of SSL security^[5].

Is their reporting up-to-date?

• Yes (lodged five and a half months after their year-end, but one and half months earlier than last year).
  • If you are considering a large donation, I would ask for more up-to-date financial information – the accounts are for a year end that is now over 16 months ago.
• AARF: Yes (five months after their year-end, but six months earlier than last year).
• AGF: Yes (six months after their year-end, the same as last year).

Does their reporting comply with the regulator’s requirements?

• AIS 2016: No
  • ‘Other income’ does not match what is in the Statement of Financial Performance.
  • The ‘Description of charity’s activities and outcomes’ has nothing that is specifically about 2016, and no outcomes.
  • One business name is missing.
  • AARF: No
    • The ‘Description of charity’s activities and outcomes’ has only a link to ARMS’s Annual Reports (sic) 2015-2016, a report that does not mention AARF.
    • ARMS’s statements are attached.
    • With no revenue and only $40K of expenses, does it really
      • have 51 volunteers?
      • operate in 11 overseas countries?
  • AGF: No
    • The ‘Description of charity’s activities and outcomes’ contains a description of what ARMS does, not AGF.
    • ARMS’s statements are attached.
    • With no revenue and expenses of only $130K, does it really
      • have 51 volunteers?
      • operate in 11 overseas countries?
• Financial Report 2016^[6]: No.
  • The AIS 2016 says that the Financial Report 2016 is ‘consolidated with more than one entity’. But again this year, although the figures appear to include more than those of ARMS, there is no mention of consolidation and, other than incidentally via bank account names, no mention of other entities.
  • The income statement still doesn’t comply with the Accounting Standards.
  • The Directors’ Declaration still doesn’t comply with the ACNC’s requirements.
  • Last year’s long list of missing Notes is still applicable.
  • There is still no disclosure of related parties.
    • The auditor refers to ‘donations and sales to related parties’.
    • There is a very strong relationship with Youth With A Mission (YWAM):
      • Australian Mercy is affiliated with Youth With A Mission Australia (YWAM) and serves as one of its Mercy Ministry (sic) arms. Although Australian Mercy is a separately constituted body, sme members of its Board also serve as members of Youth With A Mission Australia [Annual Reports (sic) 2015-2016].
      • You can see how this ‘affiliation’ works in practice by looking at the websites of individual YWAM centres. For example, Perth, Darwin, and Canberra.
  • An extra two statements are still included without explanation, and without warning that they are unaudited.
  • The Statement of Changes in Equity still doesn’t comply with the Accounting Standards.
  • Once again, the cash balance in the Table of Cash Movements for Designated Purposes’ does not match the balance in the Statement of Financial Position.
  • The constitution (clause 4.(a)) makes two ‘separate and distinct funds’ compulsory, the’ International Fund’ and the ‘National Fund’. There continues to be no mention of either fund in the Financial Report.
  • All the other issues identified last year – see ‘Latest financial report – detail’, here – are still applicable.
• If ARMS followed through on the promise they made in response to last year’s review – The Australian Mercy Board will look further into the findings of your review to consider any that are in need of attention – then ARMS do not think that any of the above comments are correct (or are taking a very long time to implement changes).

What financial situation was shown by that Report?

• Last year’s surplus of 3% of revenue was decreased to 1%.
• The lack of ‘Employee expenses’, in the AIS 2016, matches the declaration, elsewhere in the AIS, that they don’t have any employees.
• There are no finance costs (a compulsory disclosure) because there is no debt.
• The unrecognised value of voluntary work is $7.13 m. Based on the declaration in the AIS, this is $140K per volunteer.
  • Last year this figure was considerably less, $78K, largely due to an (unexplained) halving of the number of volunteers (100 to 51).
• Working capital (current assets less current liabilities) is healthy.
• Although non-current assets are only 28K, there are no non-current liabilities, so long-term financial structure is sound.
• These accounts got a qualified audit – and for the same reason as last year.

What did the auditor say about the last financial statements?

• Again this year, the auditor, Tony Khoury (T A Khoury & Co, Chartered Accountants), has had to qualify his opinion (so no ‘clean’ opinion again). And for the same reason as last year.
• Given the constraints on comfort from a clean opinion (read here and here), and the other issues in the financial statements (see above), 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’, ARMS 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 again
  • allowed non-compliant financial statements without comment.
  • omitted one of the four compulsory financial statements from the scope of his audit.
  • allowed, without comment, and unmarked, two non-audited statements in the Report.
  • not headed his opinion paragraph ‘Qualified opinion’.
  • not mentioned the ACNC Act.

If a charity, is their information on the ACNC Register correct?

• ARMS: One business name, RESCUENET, is missing.
• AARF: No
  • The selection of a charity subtype is long overdue.
  • The Financial Report 2016 they’ve lodged is not theirs.
• AGF: No
  • The selection of a charity subtype is long overdue.
  • The Financial Report 2016 they’ve lodged is not theirs.

What choices do you have in how your donation is used?

• ARMS’s governing document requires that “All solicitations for donations by the Company shall clearly indicate whether the amount is solicited for the International Fund or the National Fund” [clause 4(b)].
• But this is no longer followed. The options are now
  • ‘As Needed’
  • Six Australian offices
  • Six funds
  • 14 staff (singles/couples)
  • 19 overseas projects
• All options are said to be tax-deductible except for one fund. Even donations to the staff.

Where were your (net) donations sent?

• This is not disclosed.
  • Even in the unaudited Income and Expenditure Statement, a statement with considerably more detail than the Statement of Financial Performance, the description is ‘National Office’ (84%) or one of the other offices.

Who are the people controlling the organisation?

• The people shown here.
• And on the ACNC Register (under ‘Responsible Persons’):
  • Dianne Clark
  • Kevin Clark
  • Christopher Harrison
  • Jennifer Keatch
  • Nicholas Matthews
  • Rodney Richards
  • David Skeat
  • Bruce Skinner
  • Kris Thomson
• AARF: The same nine people are the responsible persons.
• AGF: The same nine people are the responsible persons.

To whom is ARMS accountable?

• In answer to their FAQ ‘What kind of accountability is there for funds handled by ARMS?’ ARMS 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 to the Australian Government.
    • It is not its PBI status that means that ARMS must be audited, but its status as an ACNC registered charity of a certain size.
    • The ACNC does not routinely check the Financial Reports submitted to it.
    • It does though have ongoing obligations to the ACNC.
    • The ACNC’s ‘Charity Tick’ is used on the website in support of you giving to them.  And rightly so, because it would be unwise to give to a charity that is unregistered.   The ‘tick’ also means ARMS’ AIS is not overdue, and no compliance action has been take against it.
      • But it means no more than this.
    • On the same page as the ‘charity tick’, ARMS shows the ACNC logo. This is not permitted. (Nor, probably, is the display of the Australian Government logo.)
  • 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 code.
    • The Code merely requires a ‘qualified independent auditor’. The ACNC 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.
    • As a charity, ARMS submits, and has done for the last few years now, its financial report to the ACNC, not ASIC.
      • As a company, it is still accountable to ASIC for some things though.
    • Membership of ACFID confirmed.
      • There is no annual assessment by the ACFID of the submission.
    • Membership of Missions Interlink confirmed.
      • 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. See also the section Activities in this review.
    • What other ‘peak bodies’?
  • A synopsis of our audit is published online as part of our Annual Reports.
    • The Annual Reports (sic) 2015-2016 includes the Financial Report 2016. This includes the full audit report, not a synopsis.
• Omitted from their list is the accountability to their prime regulator, the ACNC.
  • Elsewhere on the site they display the ACNC’s ‘charity tick’.
    • This is used on the website in support of you giving to them.  And rightly so, because it would be unwise to give to a charity that is unregistered.   The ‘tick’ also means ARMS’s AIS is not overdue, and no compliance action has been take against it.
    • But it means no more than this.

1. The website doesn’t have a search function, and for some reason Google’s ‘site: australianmercy.org.au xxxxx’ function was not working properly. ↑
2. It had one, but it expired in 2009. ↑
3. “Good living and social concern are important [to the cause of evangelism], but they are not uniquely Christian graces…I’ve met a lot of fine Hindus, Muslims and atheists. Just living the life is not going to bring someone to Christ. There is much more to it than that. We must help people, certainly, but we must also share with them why we are motivated to do so. We must stand against injustice, poverty and need, but we must at the same time point to the One who brings justice and who can meet the deepest need. Until they know our reasons, how can they come to know our Lord?” [Dan Armstrong, the Fifth Gospel: The Gospel According to You, Anzea Books, pp. 13-14. ↑
4. Although this statement, made in the annual report last year, is made again this year, it was no longer accurate:  “During some of the time that these reports 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… The  red  and  blue  TD  symbol,  as  seen  on  this  page,  at  the  end  of  the  report  of  an  international  project  indicates  it  is  an   Australian  Mercy  project  that  attracted  tax  deductibility  for  the  year  2014  -­  2015 [Annual Reports (sic) 2015-2016, page 89].
5. This link is for education, not as a recommendation of a particular company or product. ↑
6. 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. ↑