Archived: Church Missionary Society – Australia Limited, charity review

This is a charity review, a review for those with an interest in the Australian charity Church Missionary Society – Australia Limited (CMS-A)

It is structured according to the charity’s entry on the ACNC Register, and its purpose is to supply some information extra to what is there, information that may be helpful in your decision about CMS-A.

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 June 2016, and invited them to comment. An email exchange with the ‘Business Manager & Company Secretary’ resulted in an extension of the time to reply until the new financial year. It is now over a week after the agreed date, and I have heard nothing.

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. 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

• ACNC Register (including links)
• Google search on the charity’s name.
• CMS-A website.
• Only Twitter on their social media list. (The other organisations are separate charities.)
• LinkedIn.
• State government fundraising licence registers.
• No reviews yet on Glassdoor.

REGISTRATION DETAILS

Entity Subtype

• A subtype consistent with sharing the Gospel.
• Sharing the Gospel is integral to the objects in the constitution:
  • The objects of CMS-A are to facilitate the work of the Church Missionary Society through its Branches for the coming of God’s Kingdom through the proclamation of the Gospel of Christ throughout the world in fellowship with local churches…

CHARITY DETAILS

Legal Name

• CMS-A is a company limited by guarantee. It is permitted to omit ‘Limited/Ltd’ at the end of its name.
• The situation is confused somewhat by the existence of another charity, Church Missionary Society Trust Limited:
  • CMS-A’s constitution (clause 38.1) says that this trust is the trustee of CMS-A. But CMS-A is not a trust.
  • The same clause says that the trust ‘shall act in accordance with such direction as shall be given from time to time by CMS-A, yet the trust is controlled by a separate charity, Church Missionary Society NSW & Act Limited. A charity that does not have the same directors as CMS-A.
  • The trust holds CMS-A’s properties, yet CMS-A’s Financial Report includes the properties in its balance sheet and doesn’t mention the ownership.
• CMS-A also
  • controls another charity, Church Missionary Society – Australia as the operator of a PBI, and
  • is the trustee of a third charity, CMS Australia Ancillary Fund.
• CMS-A’s members are branches (or CMS-A) and 24 (originally at least) people by virtue of their office (in CMS-A and the branches).
• Although called ‘branches’, these entities are separate legal entities that do not appear to be controlled by CMS-A. However, the CMS-A website gives the impression that it is all one organisation; for instance, it shows NSW/Act’s conference centre as its own.

Other Name(s)

• The sub-entity is a separate charity. This is an automatic consequence of CMS-A having a Public Benevolent Institution (PBI) when the ACNC came into being.   It can continue to avoid having to report separately by CMS-A applying to the ACNC to report as a group. At the moment the Register is showing that its AIS 2015 is overdue.
• The second name, CMS Aboriginal Work in North Australia (Deductible Gift Recipient Fund) is the PBI above, not another CMS-A entity.
• The third name St Andrew’s Hall, is CMS-A’s business name – its only one.
  • This means that its use of for instance, CMS Australia on Twitter, and CMS plus CMS Australia on LinkedIn is questionable.
  • It has a trading name, Church Missionary Society Australia, but this is of no practical effect.
• The fourth, and last, name, MENTAC, is a program of two organisations, CMS-A and Queensland Theological College. It is not a registered name, and therefore neither organisation can legally trade under this name.
• The constitution (clause 3.2) says that one of the ways that CMS-A fulfils its objects is ‘by owning and controlling the use of the names ‘CMS’ and ‘Church Missionary Society’ and related logos, trade marks and other intellectual property…’. But neither of these names is registered to CMS-A.

Charity ABN

• Tax deductibility: No, you cannot claim a tax deduction for a donation to CMS-A.
  • But you can to its funds, CMS Overseas Aid Fund, St Andrew’s Hall Building Fund Parkville D (sic), and CMS Aboriginal Missionary Work in North Australia.

Charity Street Address

• Postal address, fron the website: PO Box 20095 World Square NSW 2002.

ANNUAL REPORTING

• AIS 2015
  • This is CMS-A’s compulsory Annual Information Statement 2015 (AIS 2015).
  • It gives basic financial information. If you think that this might be sufficient for you
    • The statements are the type that don’t require compliance with all the Australian Accounting Standards.
    • ‘Donations and bequests’ includes $7.20 m ‘Contributions from Branch members’ (whatever they are), and $660K ‘Contributions from CMS-A Ancilliary Fund’ (see Legal Name, above).
    • There is insufficient information in the Financial Report to check any of the ‘Expenses/Payments’.
    • The ‘Net surplus/deficit’ is not $148K, but $403K.
    • ‘Non-current loans’ are not zero, but $238K (unsecured loans to missionaries).
• Financial Report 2015
  • The Report was signed two and a half months after the year end.
  • It was then lodged four and a half months after that, two days before the last day permissible (and that was after a generous extension by the ACNC).
  • The coverage of finances in this review is left until the financial report proper (see Latest financial report – detail, below). (Go straight there.)

ABOUT THE CHARITY

• Statement of Faith
  • There is no conventional ‘statement of faith’ on the website, but there’s a short statement of what they believe under ‘Our Foundations’.
  • The Apostles’ Creed is the ‘Statement of Faith’ in the constitution (Schedule 2).
  • The Declaration of Principles and Commitments in the constitution (Schedule 1), and its use in that document, makes it clear that CMS-A is an Anglican organisation.
  • CMS-A has made its values explicit.

Date Established

• The website has a history of CMS-A.
• And here’s a book with the history to 1971.

Who the Charity Benefits

• Vision
  • Our vision is for a world that knows Jesus!
  • There’s another one in their ‘complete Vision statement’:
    • In response to these truths, our Vision is – to reach gospel-poor peoples for Christ – to equip Christian leaders for church and society – to engage churches in cross-cultural mission
• Mission
  • None found.
• Activities (What did CMS-A do?)
  • In the AIS 2015:
    • CMS workers have continued to serve as co-labourers with over 100 international partners, including churches, schools, universities and Christian organisations, in more than 40 countries around the world. Our partners are involved in ministries that fit with our gospel vision and purpose. Our partners have welcomed CMS workers into their programs and ministries to share the lasting hope of Jesus Christ with people. We have continued to encourage people to get involved in cross-cultural mission through our six branches across Australia. The CMS-Australia office, based in Sydney, works for and on behalf of the branches to train cross-cultural workers, place them with international partners and provide pastoral care for them. CMS is a deductible gift recipient for provision of overseas aid in several countries, for aboriginal work in North Australia and in support of St Andrews Hall, the CMS training college in Victoria.
      • Apart from a change from 35 countries to 40, this is identical to what appeared in last year’s AIS. So nothing specific about 2015’s activities, as requested.
• Outcomes (What did CMS-A deliver?)
  • CMS-A did not respond to the request in the AIS for its outcomes.
  • Nothing systematic found.
  • I’m sure there would be some anecdotal information under ‘Resources’ in the main menu.
• Impact (How were people’s lives improved?)
  • Nothing systematic found.
  • I’m sure there would be some anecdotal information under ‘Resources’ in the main menu.

Size of Charity

• CMS-A easily qualifies in this category.

Financial Year End

• This means that the next financial report is due by 31 December 2016 – or 31 January if the ACNC give their usual extension (to all charities). 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)^[1]

• Why only these two states? Apart from branches in other states, CMS-A says that it has a Queensland conference centre. (The fact that the Queensland Baptists say that it belongs to them is not explained.)
• CMS-A doesn’t have a fundraising licence in either of these states.
• It doesn’t have a fundraising licence in any of the five others that have a licensing regime.
• CMS-A has a general appeal for donations under ‘Give’ in its website footer, under ‘Get involved’ in the main menu, and sometimes specific requests in the website banner.
  • Apart from exemptions, whether it needs a licence depends on whether it is ‘fundraising’ in those states in which it operates, and whether those states, and the others, think that CMS-A, by calling for donations publicly, is ‘fundraising’ in their territory.

Operates in (Countries)

• There is considerable difference, even allowing for the use of regions (presumably for security), between this listing and the one on the website.

CHARITY’S DOCUMENT (SIC)

• An Annual Report/Review can be lodged on the ACNC Register, but CMS-A hasn’t done this.
• Nor is there one on the website. (There’s an AGM report, but it is password-protected.)

RESPONSIBLE PERSONS

No. of Australian ‘responsible person’ positions^[2]

Kirsty Brown                                7 (but one duplicate)

Jeremy Gehrmann                      4

Geoffrey Girvan                           3

Colin Grundy                               3

Khim Harris                                4

Christine McComb                     5

Robert McPaul                            6

Malcolm Richards                      5

Darren Russ                                5

Howard Spencer                        4

John Sugars                                7

Pam Thyer                                  6

• You would be right to question whether those directors with a large number of directorships – and remember, this is only the number for charities, not all organisations – have enough time to satisfactorily discharge their responsibility under the law for each one.
• Is Rob this one?
• Six of the 16 directors in the Financial Report are no longer on the Board according to the above list, and Brown is additional to that list.
  • The reduction in the number of directors has meant that CMS-A is now one short of the number required by its constitution (clause 10.1).
• Some information on each of the directors – at least those serving on 14 September 2015 – is on the website.
• Under ‘Position’, there should be some office-bearers; for instance, Colin Grundy is identified as the Treasurer, and Martin Bleby as the Chairman in the Directors’ Report.

(End of review of the ACNC Register information)

Latest financial report – detail^[3]

• The directors’ belief that ‘a special purpose financial report’ is acceptable, a choice that allows them to make less than a full disclosure about CMS-A’s finances and operations, is implicitly a statement that any user is able to command the preparation of a financial report tailored to their needs. That’s all the people who they speak to here and overseas, and all the donors and potential donors who read the website material. Do the directors realise they are saying this?
• There is no explanation as to why CMS-A doesn’t
  • produce consolidated financial statements, or
  • take advantage of the ACNC’s group reporting provisions.
  • To get a full picture of CMS-A you therefore need to look also at CMS Australia Ancillary Fund.

The Directors’ Report – page 3 of the Financial Report

• This is not required by the ACNC. (Nor is the Auditor’s Independence Declaration on page 12 of the Financial Report.)
• ‘Objectives & Strategies’:
  • No distinction between short-term and long-term objectives.
  • The same since 2012, so not specific to the year being reported on.
• ‘Principal activities’:
  • the level of generality means that this is not a helpful report on 2015’s activities.
  • However, the content in sections 3 and 4, sections that are not required, provide the missing description for 2015.
• ‘Information on the Directors’:
  • Is the information for the year or the period to the date of the report? It should be the latter.
  • There isn’t an answer to title, qualifications, experience and expertise, and special responsibilities for each director.
• Missing section: ‘Performance measures’.
• Sections 7 and 9 are not required.
• The Members’ liability on winding up should show the total liability (or at least allow it to be calculated.)

What’s left at the end of the year – the Statement of Financial Position – page 13 of the Financial Report)

• Cash and cash equivalents $2.27 m, including Note 7
  • Foreign currency cash but no foreign currency bank accounts?
• Receivables $851K, including Note 8
  • No trade debtors?
  • Why would the Ancillary Fund owe CMS-A money?
  • Why no allowance for uncollectible accounts?
• Financial assets $5.76 m (current), $1.02 m (non-current), including Note 9
  • Combined with the first item, this represents over 10 months’ worth of revenue.
  • Investments have not been classified according to the Accounting Standards.
• Property, furniture and equipment $3.25 m, including Note 10
  • Property, furniture and equipment in the balance sheet, compared to Property and Equipment in the Note, compared to Property, Plant and Equipment in the Accounting Standards.
  • The deduction for depreciation is not a provision.
  • Why the distinction between Land & Buildings and Property?
  • What and where are the properties?
  • There is no defence of the decision to include the properties even though they are not owned by CMS-A.
  • The first two sections are a confusing presentation.
  • Land & Buildings
    • What kind of valuation?
    • No depreciation last year. Has this change in policy been handled according to AASB 1008?
  • Property
    • Where is the Accumulated Depreciation?
    • An Asset Revaluation Reserve is not an asset.
    • Why is undeveloped land held?
  • Equipment
    • What is ‘Property Equipment’?
  • Office furniture and equipment
    • Why so little depreciation charged this year?

Liabilities

• Set-off account $5.11 m, including Note 18(b)
  • There is no explanation of this very significant figure.
• Payables $1.45 m, including Note 11
  • Why would $800K or so be owed to the Ancillary Fund?
• Loans $400K, including Note 12
  • Why would an organisation that is not short of cash need to borrow $400K?
  • Why has it not, for two years, been repaid?
• Accumulated funds and reserves
  • Trust funds and Tax deductible funds are also both reserves.

What was earned, what was consumed during the year – the Statement of Comprehensive Income – page 14 of the Financial Report)

Revenue

• Sales revenue is not disclosed.
• Where is the income from the services provided to the branches?
• Revenue $9.67 m, including Note 2(a)
  • Donations received by tax deductible funds $1.81 m
    • This needs a direction to Note 4.
    • On what basis are these accrued?
  • Contributions from Branch Members $7.20 m
    • Contributions for what?
    • How are these calculated?
    • Is this a legal obligation?
  • Contributions from CMS-A Ancillary Fund $669K
    • CMS-A is not entitled to receive this money under the Fund’s Trust Deed – it has to go to one of its ‘tax deductible funds’.
• Other Income $359K, including Note 2(b)
  • There is no explanation for the item Centre for Biblical Preaching.
  • Who makes the ‘Contributions for training’?
  • Rent received appears to be a continuing source of income. How then is it that there is no asset ‘Investment property’?
• Finance Income $410K, including Note 2(c)
  • Where is the income from the other reserves?
  • Why are gains on the Property Replacement Portfolio (whatever that is) ‘financial income’?

Expenses

• This list mixes the two permissible classifications of expenses.
• Administration expenses are not disclosed.
• Fund raising (sic) expenses, $453K, including Note 4
  • What kind of fundraising?
  • The Note at the end says that
    • these expenses have been limited to 25%. How much more did they exceed 25% (25 cents in every dollar raised)?
    • Branches are the ‘sole funding raising agencies’. Why then the call for funds on the CMS-A website?
• Field grants for missionary support, $5.76 m
  • How does this relate to
    • the $1.72 m ‘Employee expenses’ in the AIS 2015?
    • the $824K of ‘Missionary support’, also included in the expenses?
• Training $671K
  • Isn’t this for the training of missionaries, and therefore ‘missionary support’?
• Operations $741K
  • How are most of the other line items also not ‘operations’?
• Governance $109K
  • What kind of payments are included in this relatively sizeable sum?

Surplus/(Deficit) for the year, including Note 3

• How does this $135K of employee benefits relate to the $1.72 m ‘Employee expenses’ in the AIS 2015?
  • Based on the information about number of employees in the AIS 2105, and asuming that part-timers work 50% and casuals 10% of full-time hours, the ‘Employee expenses’ represent $66K per employee.
  • And 17% of expenses.

Other comprehensive income

• Why is ‘Trust Fund income’ included here?

Movements in the net wealth of the charity – the Statement of Changes in Equity – page 15 of the Financial Report)

• This doesn’t flow well from the Statement of Comprehensive Income, as it is meant to:
  • ‘Other Comprehensive Income’ is negative there, but positive here.
  • The surplus is not shown.

Where the cash came from and where it went – the Statement of Cash Flows – page 16 of the Financial Report

• Due to the lack of detail in the first section, it is not possible to see why there is such a difference between the accrual (Statement of Comprehensive Income) and cash figures for revenue.
• Why is rent paid a financial activity?

Essential information to go with the figures – the Notes to the Financial Statements – page 17 of the Financial Report)

• Note 1 – Significant Accounting Policies Statement
  • (a) Statement of Compliance:
    • Which standards have been complied with?
  • (d) Economic Dependency
    • How are the contributions due by branches calculated?
    • Are they legally enforceable?
  • (h) Property and Equipment
    • The immediate expensing of all overseas purchases means that assets are understated. What is the magnitude of this misstatement?
    • What useful lives are used?
  • (m) Revenue and Other Income
    • Branch contributions are a debt due?
    • How can donations be recognised other than on cash basis?
  • (n) Goods and Services Tax (GST)
    • The GST on commitments and contingencies?
  • (o) and (p) are not required.
  • (q) Critical Accounting Estimates and Judgements
    • There is no estimation or judgement involved in valuing listed shares.
  • Policy Notes normally included but not in these accounts:
    • New, revised or amending Accounting Standards and Interpretations adopted
    • Current and non-current classification
    • Trade and other payables
    • Trade and other receivables
    • Fair value measurement
• Note 5 – Related Parties
  • ‘services…the value of which is not possible to quantify’: But aren’t there quantified transactions and balances with the branches shown in these accounts?
  • What about the trust associated with one of the branches, included the fact that it owns the CMS-A properties?
  • And the Anglican Evangelical Trust?
• Note 14 – Equity
  • The equation here of equity with share capital is incorrect. And contradicted by the presence of the Statement of Changes in Equity (see above).
• Note 16 – Capital and Leasing Commitments
  • What is a lease ‘for domestic purposes’?
  • The leased properties are not identified in the Property, furniture and equipment Note.
  • Why are these properties not in a separate asset Investment properties?
• Note 18 – Cash Flow Information
  • (a) Reconciliation of operating surplus to…
    • What is ‘Premium on motor vehicle purchases’?
    • How does the ‘Realised gains on sale of shares’ relate to Other comprehensive income?
  • (b) Reconciliation of cash
    • The ‘treasury deposit’ cannot be both jointly held with the NSW/ACT branch and held on its behalf.
• Notes normally included, but not in these accounts: Events after the reporting period

An independent opinion on the financial statements – the Independent Audit Report…- page 32 of the Financial Report)

• This report is a ‘clean’ opinion. To take the right amount of comfort for this finding, please read here and here.
• It is difficult to see how the auditor could reasonably agree that such a large and complex organisation was not a reporting entity (and therefore could produce statements not compliant with all the Australian Accounting Standards).
• Why include the extra disclaimer Our audit did not involve an analysis of the prudence of business decisions made by directors of (sic) management?

Membership of accountability organisations claimed

• None claimed on the website.
• However, CMS-A is a member of Missions Interlink.

(End of review)

1. 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.’ ↑
2. 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. ↑
3. 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. ↑