Archived: Empart Inc: mini charity review for donors

Mini charity review of Empart Inc (Empart) as an organisation that seeks donations online. (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^[1]?

• When sent a draft of this review, they…did not respond.

Is Empart registered?

• As a charity, yes.
• Other registrations:
  • As a Victorian incorporated association (A0034935L).
  • It is using the name Empart, but this is not registered in Australia.
  • Empart operates in all states.
    • It doesn’t have registration necessary to carry on business interstate (an ARBN).
    • It doesn’t have any fundraising licences^[2].

What do they do?

• Contrary to the impression given by the website (‘What we do’ in the main menu) and their Annual Information Statement (AIS) 2015^[3], Empart is not itself involved in good works; it is a fundraiser for two (maybe more) Empart organisations in India. (Not Nepal as they continue to report to the ACNC.)

Do they share the Gospel?

• No.

What impact are they having?

• Nothing systematic found. (Nor on the work in India.)
  • An ‘impact report’ comes up twice in a site search using Google (site:empart.org), but both give a 404 error.

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

• The functional (except for ‘Employee benefits expense’) classification of expenses in the Financial Report does not allow this calculation.
• However, from the disclosure of ‘Grants and donations made…’ in the AIS 2015, and defining ‘direct’ as 100% of that money^[4], we can see that it cost $1.18 m to raise and send $1.03 m to India.

Can you get a tax deduction?

• The ABN register says no.
  • Which is contradicted under ‘What we do/Sustainable solutions’ on the website:
    • Empart has specific projects that qualify for tax deductible giving. These projects all provide ongoing sustainable solutions to long term problems…. For more information please phone the office on 03 9723 9989 or use the Contact menu.
      • The reconciliation is at the bottom of that page:
        • NB: While Empart is unable to give tax deductibility, we partner with Empower Australia Overseas Aid Fund Inc. to provide tax deductible giving opportunities within our network.

This means that you will be giving your money to Empower, not Empart.

Is their online giving secure?

• Stripe is used, so yes.

Is their reporting up-to-date?

• Yes (two months before the deadline, four months after their year-end).
  • But 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 ten months ago.

Does their reporting comply with the regulator’s requirements?

• AIS 2015: No
  • No outcomes are given.
  • The financial statements are again described incorrectly.
  • None of the ‘Gross Income’ figures match the accounts. Nor the ‘Non-current loans’ figure.
• Financial Report 2015: No
  • There is no disclosure of the money sent to India.
    • From my internet research last year, I found the following organisations associated with Empart, and therefore organisations who could be recipients of the money:
      • Compassion for India
      • CFI Ministries^[5]
      • CFI Charitable Trust
    • From the returns lodged with the Indian Government, we can see that Australian donors’ money was received by the last two of these.: CFI Ministries in Chandigarh and CFI Charitable Trust in Orissa.
      • The returns submitted by these two organisations, when combined, show that approximately $770K was received in the year ended 31 March 2014, and $644K in the year ended 31 March 2015. This compares to $1.22 m and $1.04 m recorded by Empart for ‘Grants and donations made…for use outside Australia’. You might ask them why there is such a difference.
      • Whatever the amounts, it is a concern that, per the auditor [his ‘management letter], ‘no formal reconciliations were received from the India office regarding how the monies received were disbursed.’
  • There is no disclosure of related parties. (Arguably on the grounds of a ‘true and fair view’, but if not that, then because the ACNC expects it.)
    • Even though Empart collects donations on behalf of Empower, they share an office, and that five out of Empower’s six directors are directors of Empart, there is no mention of the relationship.
      • It appears that Empart controls Empower, so why no consolidation of the accounts?
    • What is the relationship to the Indian organisations?
  • The Statement by Members of the Committee is again undated.
  • In the Income Statement
    • There is still no disclosure of ‘Other comprehensive income’. (They are using a long out-of-date format.)
    • If the donations collected for Empower are included, revenue is overstated.
    • $758 K ‘Other Income’ in a total of $2.22 m (34%) is too much to be left without explanation.
    • $721K ‘Other Expenses from ordinary activities’ in a total of $2.22 m is too much to be left without explanation.
    • Empart has not restarted depreciation of ‘fixed assets’ after being told that they needed to. Their explanation in Note 1 shows a misunderstanding of the applicable Accounting Standard. The auditor again didn’t agree, but let it pass.
    • Contrary to the Accounting Standards, buildings have never been depreciated.
  • In the Balance Sheet
    • The $829K in ‘Cash Assets’ is modest compared to the amount of cash that is held by the two recipients of the Australian donations in India: $1.81 m. (It was almost double this last year.)
      • With an organisation that is required to model Jesus as Lord and Saviour to the poor and oppressed of India, it would be legitimate for you to ask Empart why they hold this much.
    • The auditor couldn’t check the Fixed Assets figure against the asset register because it was still not up-to-date.
    • Despite the auditor pointing out last year that a valuation of the buildings was at least two years overdue, one was still not performed.
    • The recording of $976K ‘Designated Giving’ as a liability does not match the recognition policy for donations.
    • The repayment terms for the loans are not disclosed. No part is shown as current, implying that no repayments are due within the next year. Yet repayments were made last year.
      • The auditor again noted that the documentation for the Private Loans was still deficient.
  • In the Notes to the Financial Statements
    • Several of the usual ones are missing.
    • The directors again state that the Report is ‘prepared on a cash basis’. The contents of the financial statements do not support this assertion.
    • The directors, with the agreement of the auditor, have elected to prepare special purpose rather than general purpose financial statements. This choice, a choice that means that not all the Accounting Standards have to be followed, is only correct if no user, present or prospective, is dependent on standard financial statements to make decisions. For an organisation that operates all over Australia, had a turnover of $2.22 m, has nine employees, and calls for donations on its website, this is stretching plausibility.
      • The directors do not give a reason for their choice.
  • In the Statement of Cash Flows
    • The non-interest operating cash flows ($2.49 m) are still described incorrectly as being from people to whom credit sales have been made.
    • ‘Amounts written back equity’ is included without explanation.
  • The directors have again included a copy of the audit ‘management letter’. The letter includes the suggestion not to include it.

What financial situation was shown by that Report?

• The surplus as a percentage of revenue declined from 3% to just over zero%.
  • And the surplus is overstated due to the omission of depreciation on buildings.
• Current (short-term) assets are only 92% of current liabilities.
  • This negative working capital position was worthy of a comment by the auditor in his ‘management letter’, but by neither the directors nor the auditor in the Financial Report.
  • The calculation assumes that the ‘Loans’ and ‘Private Loans’ totalling $695K are correctly classified as non-current rather than current. But we know from the auditor’s ‘management letter’ that he was unable to check the terms of the ‘Private Loans’.
• Retained earnings are low.
• Empart again says that no employee entitlements or other provisions are due beyond 12 months.

What did the auditor say about the last financial statements?

• He gave a ‘clean’^[6] opinion. But
  • in continuing with the engagement, he again implicitly agreed with the directors’ decision to produce special purpose rather than general purpose financial statements (see above).
  • See ‘Financial Report 2015’ above.
  • You might wonder how, with him identifying so many gaps and lax procedures, as disclosed in the ‘management letter’, the auditor could still give a clean audit opinion. Here is one explanation.
  • The amounts paid to the auditor are not disclosed so we can’t check whether he again prepared and reviewed the Financial Report^[7].

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

• Yes

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

• ‘General support’
• ‘Transforming Communities’
• Transformation Centres’
• ‘Field Worker’s Support’
• ‘Field Worker’s Kit’
• ‘Bike for a Worker’
• ‘Schools and literacy programs’
• ‘Women’s ministry’
• ‘Sewing Centres’
• ‘Children’s ministry’
• ‘Children’s Homes’
• ‘Mercy Homes’
• ‘Wells’
• ‘Community Public Toilets’

Who are the people controlling the organisation?

• Not shown on the website, but they listed under ‘Responsible Persons’ on the ACNC Register.
  • Including the founder, Jossy Chacko. Who has his own ministry.
• In having eight (seven last year) Committee members rather than six, Empart is contravening its constitution.

To whom are Empart accountable?

• Membership of Missions Interlink, an organisation that has standards with which members must comply^[8], is claimed. Membership confirmed.
• Plus Empart is also accountable to the ACNC.

1. ‘About us/Management policy’ on the website: Empart is a non-profit organisation that is committed to maintaining a high level of accountability and transparency. ↑
2. The law in this area is not straightforward and advice varies, so check with the charity before drawing any conclusions. ↑
3. Which description is unchanged from last year, right down to, for example, the number of women who have graduated:
   • Indigenous church planters, pastors and leaders are trained to have a holistic approach to ministry by providing social development programs that meet spiritual and practical needs. THE HOW: Establish Education Centres and Schools Education Centres and Schools provide literacy and numeracy programs to disadvantaged children to break the cycle of illiteracy, poverty and despair. Under Indian law it is required that every child under the age of five attend school. In practice, this is impossible to enforce by the government, and many children work to help provide for their families. Currently Empart has six Education Centres and sixteen Schools. The schools range from kindergarten to equivalent Year 10 Vocational Skills Training Program Empart’s vocational skill training is presently centred on the ‘Sew & Sow’ Project. Currently there are 17 training venues, with 801 women having graduated, and a further 216 in training. Empart estimates that further 5,000-7,000 women will graduate over the next 15 years. The program provides a 6-month diploma course where poor women are taught to make traditional Indian clothes as well as embroidery and soft toys. At the end of the course, each woman is presented with a treadle or hand operated sewing machine (locally made) at a graduation service. With the ability to generate an income, these women gain dignity and status in the community, along with the security of knowing that they can provide nourishing food, a good education and (sic).
4. That is, ignoring the fact that there would some costs of administration after it arrived in India. ↑
5. Is it this CFI Ministries, this US one operating in India, or some other organisation? ↑
6. To take the right amount of comfort from a ‘clean opinion’, please read here and here. ↑
7. The independence of the auditor is crucial to donor confidence, so the auditor can only legitimately do this work if two conditions are met: (a) it is ‘routine and mechanical in nature’, and (b) he reduces the self-review threat to an acceptable level [APES 110.290]. ↑
8. For one opinion on the strength of this accountability, see the section Activities in this review. ↑