Archived: Compassion Australia, charity review

This is a charity review, a review for those with an interest in the Australian charity Compassion Australia (Compassion).

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 Compassion.

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 5 August 2016, and invited them to comment. They did not respond.

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 names.
• Compassion website.
• Social media at the top of the website home page.
  • And one missing from there: Vimeo.
• LinkedIn.
• State government fundraising licence registers.
• The reviews on Glassdoor.

REGISTRATION DETAILS

Entity Subtype

• Not a subtype consistent with sharing the Gospel.
• The company’s objects – clause 2.2 of the constitution – say nothing about sharing the Gospel.
• Although the website doesn’t actually say that they share the Gospel with the sponsored children, the Annual Report – a little hidden under ‘Financials’ – does:
  • Compassion’s holistic child development model has three key distinctives:
    • Christ-centered. Every child has an opportunity to hear and respond to the life-changing gospel message in a culturally relevant way.

CHARITY DETAILS

Legal Name

• Compassion is a public company limited by guarantee.
  • It is permitted to omit ‘Limited/Ltd’ at the end of its name.

Other Name(s)

• Two business names are missing here^[1]: Compassion Child Sponsorship and Partners of Compassion.

Charity ABN

• Tax deductibility: Yes, the ABN record shows that you can claim a tax deduction for a donation to Compassion. And also to its two funds, Compassion Australia Necessitous Circumstances Fund and The Compassion Overseas Aid and Development Fund.
  • This is not what Compassion says in answer to a FAQ on its website:
    • Compassion Australia has Deductible Gift Recipient (DGR) status for its Overseas Aid and Development Fund, as listed on the Australian Business Register under our ABN 67 001 692 566. Donations of $2…
      • Why the difference?

Charity Address for Service

• I have no reason to believe that this doesn’t work.

Charity Street Address

• Postal address, from the website: PO Box 1 Hunter Region Mail Centre NSW 2310.

Email

• I have no reason to believe that this doesn’t work.

Phone

• From the website: 1300 22 44 53 and 02 4935 5000.

Website

• From the Google search: www.compassion.com.au.

ANNUAL REPORTING

• AIS 2015
  • This is Compassion’s compulsory Annual Information Statement 2015 (AIS 2015).
  • It gives basic financial information. If you think that this might be sufficient for you
    • ‘Grants…for use in Australia’ has no comparable item in the financial statements; ‘Local program expenses’ are $2.21 m, considerably short of the amount here.
    • ‘Grants…for use outside Australia’ compares with $48.45 m ‘Program expenses’ in the financial statements, again considerably short of the amount here.
• Financial Report 2015
  • The Report was signed four months after the year end.
  • It was nearly two months after that before it was lodged.
  • 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
  • This is effectively identical to the one in the constitution.

Date Established

• There is no history on the website.
• There’s a short one on Wikapedia.

Who the Charity Benefits

• Vision
  • Not on the website – why? – but in the Annual Report:
    • Transformation of lives, communities and nations through releasing children from poverty in Jesus’ name.
• Mission
  • Again, surprisingly, not on the website, but again, in the Annual Report:
    • Compassion exists as an advocate for children – to partner with, equip and inspire the Church to release children from poverty in Jesus’ name.
• Goals
  • A search of the website shows a number of incidental references to Compassion’s goals, but nowhere are they given.
  • The Annual Report has a chapter ‘Ministry Goals’, but these are ‘overarching goals’ applying to a three-year period, motherhood statements that need definition and quantification:
    • ‘Acquiring and engaging new supporters’
    • ‘Delighting and retaining existing supporters’
    • ‘Revolutionising systems and processes’
    • ‘Developing staff and culture’
• Activities (What did Compassion do?)
  • In the AIS 2015:
    • All activities conducted during this period were targeted at achieving our purpose of assisting children in poverty in developing countries around the world. Our work has been primarily raising funds via child sponsorship, church engagement and other campaigns to generate funds for distribution in countries where we work. These funds go toward operating child development centres that aim to assist children in poverty.
      • At this level of generality, each year the AIS is going to say the same. What was different about 2015?
• There’s more than one way of doing child sponsorship. This is Compassions’ way.
  • Make up your own mind. Start with this article. (For instance, did the authors consider the negative consequences of sponsoring the child rather than the family/community?)
• Outcomes/Impact (How were people’s lives improved?)
  • Unfortunately Compassion did not respond to the ACNC’s request, in the AIS, to describe its outcomes.
  • Other than a report of the 2013 study mentioned above, in the Annual Report, nothing systematic found.

Size of Charity

• Compared to the majority of charities in this group, Compassion is a mega-charity. In fact it is – or at least was in 2014 – Australia’s fourth-largest fundraiser.

Financial Year End

• This means that the next financial report is due, following a repeat of the ACNC’s generous extension for all charities, by 31 January 2017. Before that the financial information on the Register will be up to 19 months out-of-date.
  • You may therefore need to ask for more up-to-date information.

WHERE THE CHARITY OPERATES

Operating State(s)^[2]

• Apart from Victoria, Compassion has a fundraising licence in all the seven states that have a licensing regime. Why the exception?

Operates in (Countries)

• For an easier to read list, see the website.

CHARITY’S DOCUMENT (SIC)

• An Annual Report/Review can be lodged on the ACNC Register, but Compassion hasn’t done this.
• There is one on the website though.

RESPONSIBLE PERSONS

• The lack of names here, a legislative requirement, three and a half years after the Register began, is surprising.
• From the website:                No. of responsible person positions
  • John Bond                               4
  • Mike Jeffs                                1
  • Isaac Moody                            2
  • Amanda Jackson                    1
  • Mabel Chua                             1
  • Kent Medwin                          2

(End of review of the ACNC Register information)

Latest financial report – detail^[3]

The Directors’ Report – page 1 of the Financial Report

• This is not required by the ACNC. (Nor is the Auditor’s Independence Declaration on page 6.)
• Compared to good practice:
  • Some sections are missing:
    • Performance measures, and
    • the identification of the company secretary.
  • ‘Principal activities’ is too general.
  • ‘Objectives’ should be divided into short-term and long-term objectives.
  • Six sections are included unnecessarily.

The Contents page – page 7 of the Financial Report

• Missing are the identification of the functional and presentation currency and the company as a not-for-profit.

What was earned, what was consumed during the year – the Statement of profit and loss and other comprehensive income – page 8 of the Financial Report

• Revenue from continuing operations $75.80 m, including Note 2
  • What operations are non-continuing?
    • Do they mean ‘ordinary operations? That would fit with the definition of revenue in the accounting standards.
• There is no disclosure of the source of these donations. For instance, Compassion raises money via mycause, goodcompany, gofundraise, Karma Currency, and everydayhero.
• There is a classification of income in Note 15 (‘Funds movement schedule’). However, with the possible exception of one, none of the donation options on the website match the categories, so it is not possible to see how much was raised for each option.
• Other income $226K, including Note 2
  • By definition these arose outside Compassion’s ordinary activities. Not a material amount, but it would be interesting to know what they were.

Expenses, including Notes 3 and 4

• Program expenses $48.45 m
  • This represents 64% of income.
  • What is the distinction between this item and ‘Local program expenses’ below?
  • There is no disclosure of where this money goes.
  • Given that overseas local churches are responsible for spending the bulk of the donations, and given that they would often not have well-developed governance (including internal control), what gives the donor comfort that the money is spent for the purpose for which it was given in Australia?
• Program support expenses $8.26 m
  • This represents 11% of income.
  • How is overhead divided between this item and the last three expenses below?
  • How much of this is spent by Compassion here compared to Compassion overseas and to the overseas church?
  • Assuming that ‘Local program expenses’ (below) does not include any ‘program support expenses (which I suspect is not the case), donations delivered to the children represent only 68% of expenses.
• Local program expenses $2.21 m
  • This represents 3% of income.
  • There is no disclosure of where this money goes.
  • How do we know that it is spent for the purpose for which it was given?
• Administration expenses $4.69 m
  • This represents 6% of income.
  • What’s the dividing line between this item, and the costs to administer the programs included in ‘Program support expenses’ (above)?
• Fundraising expenses $10.04 m
  • This represents 13% of income.
  • If most of the money comes from the members of local churches, why is this so high?
• Advocacy expenses $1.10 m
  • This represents 1% of income.
  • There is no explanation of this term.
  • One would think that much advocacy serves the fundraising effort as well.
    • Note 14, by including ‘Advocates under ‘Fundraising appeals’, confirms this.
    • How therefore are these two expenses distinguished?
  • How is the impact of this expenditure measured?
• Employee benefits expense (Note 3) $11.12 m
  • Why the 8% increase over last year?
  • The 19 ‘key management personnel’ (see Note 17) account for $1.98 m of this $11.12 m.
    • Their average employee benefits are therefore $104K p.a.
  • Using the figures for employees declared in the AIS 2015 (124 full-time, 29 part-time, and 8 casuals), and assuming that part-timers work 50% and casuals 10% of full-time hours, the non-key personnel average $66K p.a. in benefits.
  • Superannuation expense is not disclosed.
• Depreciation expense
  • Given that there are intangibles, why no amortisation expense?

What’s left at the end of the year – the Statement of financial position – page 9 of the Financial Report

• Other Receivables $1.07 m, including Note 6
  • This is too large amount for their nature to be left unexplained – especially given the 161% increase over last year.
• Property, plant and equipment $10.56 m, including Note 7
  • $1.10 m ($1.25 m last year) of ‘Office furniture and equipment’ seems relatively large (especially as it doesn’t include the $894K of ‘computer equipment’).
  • Fundraising equipment’ is an unusual term not explained.
• Investment properties $1.53 m, including Note 8
  • Why is a charity holding investment properties?
  • What and where are they?
  • Why are they not earning any rent?
  • How did an investment property have a written down value of only $3K?
• Trade and other payables $10.93 m
  • Why are there some employee benefits included here rather than under provisions?

Movements in the net wealth of the charity – the Statement of changes in equity – page 10 of the Financial Report

• The components of other comprehensive income should be shown.

Where the cash came from and where it went – the Statement of cash flows – page 11 of the Financial Report

• Lack of disclosure in the operating activities section means that the purpose of a cash flow statement is thwarted somewhat; for instance, the figures cannot be compared to those in the profit or loss statement.

Essential information to go with the figures – the Notes to the financial statements – page 12 of the Financial Report

• Note 1 Summary of significant accounting policies
  • (q) Intangibles: The classification decision – plant and equipment versus intangibles – is not mentioned.
  • Policy Notes normally included but not in these accounts:
    • New, revised or amending Accounting Standards and Interpretations adopted
    • Current and non-current classification
    • Fair value measurement
• Note 14 Additional disclosures…
  • This is confusing set of numbers: (a) “’Net surplus.. plus ‘Other income’ does not equal ‘Gross income’, and (b) the ‘Statement showing how…’ does not explain ‘Gross income’.
  • ‘Total cost of services’ includes ‘Program support expenses’. On what basis are some costs of service delivery included yet others excluded?
• Note 16 Related party transactions
  • It is good practice to also disclose whether there are any loans or receivables between the related parties.

An independent opinion on the financial statements – the Independent Auditor’s Report…– page 29 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.

Membership of accountability organisations claimed

• In answer to the FAQ ‘How do I know I can trust you with my money?, Compassion says that
  • As an organisational partner of the Fundraising Institute of Australia, we comply with the standards of Missions Interlink (sic)…
    • The Fundraising Institute’s code is principally about fundraising, that is, the practices that Compassion uses to get your donation, not what they do with your donation once they’ve got it. So not really relevant here.
      • Compassion membership confirmed.
    • Missions Interlink has some standards about post-fundraising behaviour. But read here for how much comfort you should take from this accountability.
      • Compassion membership confirmed.

(End of review)

1. There’s also a trading name, but trading names are of little importance nowadays. ↑
2. 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.’ ↑
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. ↑