Archived: Barnabas Fund (Australia) Limited: mini-charity review

Mini-charity review of Barnabas Fund (Australia) Limited (BFA), an organisation that seeks donations online [5.03.19: this link may have been wrong; see here to donate now] 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?

• I sent them a draft of this review. Like last year, they did not respond.  [5.03.19: As the result of an inquiry by a donor, the current BFA CEO discovered this review and sent a comprehensive response.  Only a few of his many objections warranted a change to what I wrote.  In a couple of cases they identified something about which I could have made a comment but didn’t.  The changes are identified by the date and square brackets.]

Is BFA registered?

• As a charity, yes.
  • BFA controls is [edited 5.03.19] the trustee of another charity, The Trustee For The Barnabas Relief Education And Development Fund.
    • BFA does not consolidate the Fund with their own figures – they don’t even mention the relationship in their Financial Report 2016^[1].
• Registered as a public company, a company limited by guarantee.
  • BFA does not have the necessary provisions in its constitution to allow it to omit ‘Ltd/Limited’ from its name.
  • BFA operates in Australia, per the ACNC Register, in all eight states. And has an internet invitation to donate. However, it does not have a fundraising licence in any of the six states that have a fundraising licensing regime applicable to charities^[2].

What do they do?

• ‘What we do’ on the website is not about Australia, but the international organisation generally. For what they did in Australia in 2016, see the AIS 2016:
  • We raise funds from Christians within Australia which will be directed to Barnabas Aid International, a UK registered charity. The funds will be then directed to over 160 countries where Christians are being persecuted for their faith. We work with Church leaders in the foreign countries which are mainly Islamic to ensure Christians receive aid. Recently we have been working with the Australian Government in assisting refugees arriving from the Middle East by paying for their airfares to get to Australia.
    • Your donation for overseas projects goes through three organisations before it reaches the beneficiaries. You might therefore legitimately ask BFA why it would not be more efficient for you to send your money to at least the UK company.
• BFA operates overseas, per the ACNC Register, in the ‘Korea (Republic), United Kingdom’. If ‘operate’ includes ‘send money to’, that explains the UK, but Korea?

Does BFA share the Gospel?^[3]

• Unless it does it as part of its ‘Charitable projects Australia’ (a minor part of its work), then no it doesn’t.

What impact are they having?

• In the link above, the ACNC explains ‘charity impact’ this way:
  • Every charity has a mission that is associated with producing a public benefit. As this mission is pursued, the changes produced in individuals and their communities can be referred to as the charity’s ‘impact’.
  • BFA’s ‘Principal Object’ is ‘to relieve poverty, suffering and distress especially among Christians who are persecuted, oppressed, discriminated against or otherwise suffering for their faith and in so doing proclaim, preach teach, and spread the good news of Jesus Christ throughout the world’ [their constitution]. But they don’t do this themselves. Contrary to the description of their largest expense, ‘Charitable projects worldwide’, BFA is not directly involved in any projects overseas – it merely collects money for ‘Barnabas Aid International. Even there, it is still one organisation removed from ‘impact’.
  • So, even though BFA, via cross directorships with the UK organisation, has a say in the selection of countries and projects, any impact from the use of your money is outside their control.
• No evidence was found to suggest that BFA is even measuring the impact of its fundraising efforts.

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

• The cost of raising and sending the money for projects is 23% of expenses.

Do they pay their directors?

• This is prohibited by their constitution.
• The expenses are not sufficiently disclosed to say if there is a directors’ fee expense.

Can you get a tax deduction?

• No, not to BFA.
  • It also has, [5.03.19: via Barnabas Relief and Development Fund,] a public ancillary fund, another charity, The Trustee For The Barnabas Relief Education and Development Fund. This can accept tax deductible deductions. However, there is no mention of this fund either on the website or in the Financial Report 2016.

Is their online giving secure?

• Security is not mentioned on either the first or second page of the giving process.  [5.03.19:On the giving page it says ‘Donate securely’ but doesn’t give the basis for that claim.]

Is their reporting up-to-date?

• Yes (but lodged six months and a half months after their year-end, about the same time as 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 15 months ago.

Does their reporting comply with the regulator’s requirements?

• AIS 2016: No
  • ‘Non-current loans payable’ are $1.17 m, not zero.
  • No outcomes are reported.
• Financial Report 2016: No. Again this year
  • BFA produced the type of financial statements that do not have to comply fully with the Accounting Standards (special purpose statements). This is based on the directors’ belief that ‘there are no users who are dependent on its general purpose financial reports’. The corollary of this belief is that BFA is saying that any of its ‘stakeholders’, including the thousands of people from all over Australia who together contribute over $5.5 m, are able to command the preparation of a financial report tailored to their needs. This stretches credulity.
  • The charity they control, The Trustee For The Barnabas Relief Education and Development Fund, is not mentioned, let alone consolidated.
  • 11% of the revenue comes from the (unexplained) item ‘Reimbursements from BAI’. The UK company calls this item ‘operation grants’, but if they are actually reimbursements, as described by BFA, then they should be classified as a reduction of expenses, not revenue. Revenue would then be considerably overstated.
  • Despite saying in Note 1 that they depreciate buildings, they don’t. This contravenes the Accounting Standards.
    • Note 6 says that this is because it is too hard, but our first review gave them a simple solution.
  • Borrowings are $1.17 m, which is 69% of assets. They are classified as not being repayable within the next 12 months (non-current liabilities), but the repayment arrangement – ‘not due to be called within the next 12 months’ – does not justify this classification.
    • Our first review pointed out to them that the current-non-current distinction is not about what the lender says; the liability has to be classified as non-current if BFA ‘does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period’ [AASB 101.69, www.aasb.gov.au.]
  • The disclosure of related parties, both the relationships and the transactions, is required for general purpose financial statements, and is an ACNC expectation for special purpose statements. BFA does not disclose them. For instance, the borrowings (see above) are from a related party.
    • This is the disclosure in the UK charity’s accounts:
      • A loan in the sum of A$568,000 (F280,628 when translated)(2014 – 2298,141) to Barnabas Fund (Australia) Ltd is secured on a property occupied by Barnabas Fund (Australia) Ltd. In the event of this property being sold there is an agreement that the sale proceeds will be paid to Servants Fellowship International.
      • During the year a further loan of A$600, 000 (f282,973)was advanced to Barnabas Fund (Australia) Ltd. [Note 9 b) 31.12.15 accounts].
  • ‘Resources’ are sold but there are no inventories in the Statement of Financial Position.
  • The policy for designated donations and bequests is that they are recognised as ‘prepaid income’ (Note 1), but there is no such item in the Statement of Financial Position.
  • [Deleted 5.03.19] A ‘Gain on revaluation of property’ is incorrectly classified as ‘Other income’. It thus affects the surplus when it shouldn’t.
    • It is also incorrectly described as ‘an impairment write up (sic) in Note 6.
      • And such an increase is inconsistent with the policy on impairment in Note 1. 
  • [Deleted 5.03.19] It is arguable that all the expenses necessary to raise the money for the ‘Charitable projects’ should be classified as ‘Fundraising expenses’, not just $219K.
    • At a minimum, ‘Travel and deputation’ should be classified this way. [5.03.19: Why ‘Travel and deputation’ are not included in ‘Fundraising expenses’ is not explained.]

What financial situation was shown by that Report?

• Last year’s deficit of 1% of revenue was turned into a 2% surplus.
  • This was helped by a (unexplained) 60% increase in the expense ‘Reimbursements from BAI’.
• But it was not enough though to get ‘Cash and cash equivalents’ to anywhere near the desired three months’ ‘cash operating expenses’ ($330K versus $1.55 m).
  • Given that the policy (Directors’ Report) is to remit to the UK only after this buffer is reached, why wasn’t less remitted?
• Long-term assets exceed long-term liabilities by only 6%.
• If the borrowings should be reclassified as current liabilities (see above), the long-term financial structure will be greatly improved, but at the expense of the short-term position. Current liabilities would then be over three times current assets, and the going concern assumption would need to be addressed.

What did the auditor say about the last financial statements?

• He gave a ‘clean’ opinion.
• Before deciding how much comfort to take from this finding, I suggest you
  • re-read the section ‘Financial Report 2016, above, and
  • the explanation of an audit here and here.

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

• Yes
  • ‘Phone’ and ‘Website’ are still blank, but they are not compulsory.

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

• The drop-down menu gives a choice between ‘Barnabas General Fund’, and then many, many, projects. You can see a description of each, within 12 categories, here.
  • I would think that such a confusing array of potential projects may increase the chances of donations to ‘Barnabas General Fund’, presumably the fund which allows the charity to choose where to spend the donation.
    • 56% of the donations from Australia were classified as ‘unrestricted’ by the UK charity [UK Charity Commission].

Where were your (net) donations sent?

• BFA records $4.71 m for the expense ‘Charitable projects worldwide. This money was sent to ‘Barnabas Aid International, a UK registered charity’ [AIS 2016].
  • The latest accounts for this charity are for the year ended 30 April 2016. They show Stg2.49 m coming from BFA. At the mid-point of the year this translates to AUD$5.40 m.
  • Note 7 of the same accounts shows the ‘institutions’ to whom the UK made grants.

Who are the people controlling the organisation?

• Not shown on the website, but the ACNC Register (under ‘Responsible Persons’), says that it is these people:
  • John Arnold
  • Ian Clarkson
  • Colin Johnston
  • Caroline Kerslake
  • Rosemary Soohkdeo
  • Kakha Tsagareli
  • Anne Willett
  • There are 13 directorships recorded for ‘Colin Johnston’.  The Register only covers charities, not all not-for-profits, and of course doesn’t include for-profit organisations.  Therefore, if after eliminating the charities for which BFA’s Colin Johnston is not a director, you are left with the total being more than a handful, it would be legitimate for you to question whether his ability to discharge his fiduciary responsibilities is threatened.  Especially if he also has a full-time job.
• Three of the UK directors are also directors of BFA (Johnston, Kerslake and Sookhdeo).
  • Kerslake is also a director of Servants Fellowship International, the UK charity that has lent money to BFA.

To whom are BFA accountable?

• To the ACNC.
• And, as a company, to ASIC.
• Although not claimed on their website, they are accountable as a Member of Missions Interlink.
  • For one opinion on the strength of this accountability, see the section Activities in this review.

1. The Trust is only ‘maintaining web site and potential credit card facilities in preparation of supporting aid projects overseas’ [AIS 2016], so currently the addition would not make a material difference to the picture. ↑
2. The law in this area is not straightforward – for instance, is an internet invitation ‘fundraising’ – and advice varies, so check with the charity before drawing any conclusions. ↑
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. ↑