Archived: Far East Broadcasting Co (Australia) review

This is a review, for donors, of the Australian charity Far East Broadcasting Co (Australia) (FEBC).   It is structured according to the charity’s entry on the ACNC^[i] Register, and its purpose is to supply some information extra to what is there, information that may be helpful in your giving decision.

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:

In addition to comments on particular observations, included after the relevant observation below, the CEO made the following general comments:

• We will trust the Government department in this and sector wide compliance code and peak body authorities who affirm our diligence and transparency.
• …as CEO of FEBC I can affirm our staff and Board strive far beyond compliance.

• Our desire is to utilise the funds we are entrusted with in the best possible way. My own benchmarking for a recent MBA course indicated that we exceed far beyond most (nearly all) in our giving to mission purpose and how admin/fundraising costs.

Organisation of this review:

1. This review is organised according to the headings in the register entry. This is how to use this section of the review:
   • For each heading in the register entry, first read the information under that heading.
   • Then check if that heading is included below. (Headings for which there is no comment are not included.)
2. There is then a more detailed comment on the Financial Report.
3. Lastly, there is a section Membership of accountability organisations claimed.

Sources:

• ACNC Register (including links)
• Internet search on ‘Far East Broadcasting Co’, ‘FEBC’, ‘FEBC Overseas Fund‘, ‘FEBC Custodian Limited’, and ‘5 loaves 2 fish’.
• Far East Broadcasting Co (Australia) website, and Facebook. (Not on LinkedIn.)
• 5 loaves 2 fish website.
• State government fundraising licence registers.
• Email response, on
  • 22 June 2015, from the CEO, to my request for the Auditor’s Report and an Annual Report/Review.
  • 6 July 2015, from the CEO to an invitation to them to comment on my observations in preparation for this post.
• www.glassdoor.com (two favourable reviews of the US organisation)
• www.greatnonprofits.org (for the US organisation)
• www.guidestar.org (for the US organisation)
• http://apps.charitycommission.gov.uk/showcharity/registerofcharities/RegisterHomePage.aspx (for the UK organisation)
• https://www.register.charities.govt.nz/CharitiesRegister/Search (for the NZ organisation)

CHARITY DETAILS

Legal Name

• They also have another registered charity, FEBC Overseas Fund. See the next section.
• And another ministry, 5 Loaves 2 Fish, which is not a separate charity (nor a business name, and doesn’t have its own ABN).

Charity ABN

Tax deductibility: A tax deduction can be claimed for a donation to FEBC Overseas Fund[ii], but not to FEBC (nor to 5 Loaves 2 Fishes).

• The FEBC Overseas Fund is a public ancillary fund. Although the FEBC Constitution (see Governing document on the ACNC Register) requires FEBC to establish such a fund, FEBC was not the settlor nor was the named trustee.
  • The named trustee is FEBC Custodian Limited, a separate public company (but not a charity).
    • The CEO (second email) says that ‘FEBC is trustee of FEBC overseas fund’, so there must have been a change in trusteeship since 1.01.2013.
    • This would then explain why FEBC is receiving donations for a fund for which it is not the named trustee.

Charity Street Address

Postal address: PO Box 183 Caringbah NSW 1495

Phone

To fill in the blank, try this one, from the website: 1300 720 017

Website

To fill in the blank, try here: http://www.febc.org.au/.

ANNUAL REPORTING

• Basic financial information is shown in the AIS 2014. If you think that’s all you might need then this page on the website has the same information but with two helpful charts.
•  The coverage of finances in this review is left until the financial report proper (below).

CHARITY’S DOCUMENTS

Financial Report

• This report can be opened either from this section or from within AIS 2014 under Annual Reporting (above).
• The Financial Report is missing the required Auditor’s Report.
  • In his second email the CEO said that ‘All documents as required by the ACNC are in place.’
• Although the Financial Report was completed within two months of year end, it was not put on the ACNC Register for another three months. (This was still within the six month period normally allowed.)
• There is no Annual Report or similar on the ACNC Register. Nor is there one on the website or an invitation to request one.
  • There was no response from the ministry to my request for one.

ABOUT THE CHARITY

Who the Charity Benefits

Mission/vision

From the website:

To bring Christ to the world by media.

We raise prayer, financial, and personnel resources from within Australia to help develop and deliver communications infrastructure and programming so that listeners in communities of need can know the love of God and become followers of Jesus.

Activities

From the AIS 2014:

In the last financial year, FEBC Australia office has worked hard to effectively communicate needs, relay stories, share prayer points and write up project submissions to raise financial support for overseas projects. (The remainder of their description is about the worldwide FEBC ministry rather than Australian activities.)

Results/outcomes/impacts:

• Unfortunately in the AIS 2014, in response to the request to describe activities and outcomes, there are only activities (see above).
• I could not find an Annual Report/Review, nor an offer to send one, on the website.
  • There was no response from the ministry to my request for one.
• This section has some limited information on impacts.

Size of Charity

• 2013-14 ‘Revenue’ was $1.8 m, easily exceeding the $1 m threshold for the top size of charity.

Financial Year End

• This means that the next financial report is due by 31 March 2016. Before that the financial information on the Register will be up to 18 months out-of-date.

WHERE THE CHARITY OPERATES

Operating State(s) [iii]

• No licence to fundraise is held in three of the seven states that have a system of licensing.
  • CEO comment (second email): ‘Charity licence compliant – licence in all states/territories where required or exemption letters from governing bodies where not.’

Operates in (Countries)

• The Australian FEBC doesn’t actually operate in all these countries, just the two where it has ‘field staff’.
  • The CEO (second email) defended the listing on the grounds that FEBC, as a member of an international association, works in all those countries where the members of that association work.

RESPONSIBLE PERSONS

• Hall, Johnson and Keegan have been appointed, and Ridge and Leaver have left, since the Directors’ Report was signed on 20.11.2014.
• Leaver, however, is still a ‘responsible person’ for FEBC Overseas Fund (see first section above and below).
• To see all a director’s positions in Australia, search here.

FEBC               

• No. of Australian directorships

Peter ELLIOTT                                                 1?[iv]

Vanessa HALL                                                  1?

Kuet Qeun HO                                                  2

Martin JOHNSON                                           1

Kevin KEEGAN                                                 3

Kenneth KINGWELL                                       1

Rodney TANT                                                    1

FEBC Overseas Fund

Kuet Qeun HO                                                   2

Kevin KEEGAN                                                 3

Richard LEAVER                                              2

David ZHENG                                                    2?

• How this disclosure relates to the fact that the named trustee of the Fund is a separate company, FEBC Custodian Limited, is not disclosed anywhere.
  • The CEO’s second email said that FEBC is the trustee.

(End of review of the ACNC Register information)

Latest financial report – detail

• The presentation is a little confusing because (a) the statements are not presented in the customary order, (b) there are two additional statements.
  • There’s also no audit report and the Notes are not included in the Table of Contents.

Directors’ Report (page 2 of the Financial Report)

• The following sections, required by law, are missing:
  • Short-term objectives
  • Long-term objectives
  • The strategies to achieve these objectives
  • How the charity measures its performance.
• The section on the directors is absent the required description of their experience.

What was earned, what was consumed during the year – the Statement of Financial Performance (page 5 of the Financial Report)

• There is no explanation given for why, given that a Statement of Comprehensive Income is also included (see next), this Statement is included.

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

• No Notes explaining these figures was thought necessary by the company.
• There is no ‘Other Comprehensive Income’ section.

Income $1.8 m

• There is no comment in the report on the 23% reduction in ‘Donations and sundry income’.
• There is no distinction between revenue and other income.
• Courtesy of the three footnotes, we learn that, because of transfers between line items,
  • Undesignated Donations were actually $672K
  • Project Support was actually $646K
  • Field Staff Support was actually $202K
• Zero for Project DGR Support implies that nobody wanted a tax deduction.
• Comparing the income accounts with the 18 donation choices on the website:
  • It is not clear where 5 Loaves 2 Fishes fits
  • Nor ‘Tax deductible J831N Mongolia’ (presumably collecting for the FEBC Overseas Fund.)
  • The FIA code, to which FEBC subscribes, requires a separate account for 5 Loaves 2 Fishes. (And one or more of the other projects?)
• CEO’s comment on tax deductible projects: “Last year we had no tax deductible projects – as only specific projects qualify and we treat that very seriously – and some things like 5 loaves 2 fish are still in trial phase.’

Interest Received $80K

• Given the interest recognition policy, it is surprising that this amount, both this year and last, is identical to the cash flow.

 Expenditure $1.9 m

• If there are ‘office administration’ expenses within the other functional categories, i.e. the sub-totals, then
• the Notes are absent the required disclosures when using that way of categorising expenses, and
• there is no single figure for ‘Administration costs’.

• ‘Fundraising costs’ are not disclosed.

Office Admin Expenses $266K

• There are two items that are a classification by function rather than the classification ‘by nature’ of the others.

Overseas Project Support $1.2 m

• Despite this being 65% of the expenses, there is no Note. We are not told where this money went.

Employment expenses $210K

• This seems a little lean for two full-time and seven part-time employees (the figures at the end of September 2014 according to the AIS 2014). Unless the numbers include the field staff, and then the total would be $444 K.

Surplus/(deficit) for the year $(136K)

• There is no comment in the report on this deficit.

Where the cash came from, where the cash went – Statement of Cash Flows (page 15 of the Financial Report)

• Note that last year, financed by donations not passed on to the field, they invested $435K, and that this year they reduced this portfolio by $46K.
• However, despite a small policy Note with standard wording, investments are not identified in the Statement of Financial Position (see next).

What’s left at the end of the year – Statement of Financial Position (page 7 of the Financial Report)

Receivables $0.5K (including Note 5)

• There is no explanation why FEBC lent money.
• Is it to a related party?

Term Deposit $941K (including Note 6)

Financial Assets $818K (including Note 7)

• No reason is given for holding such a large amount of savings.
• The same three banks appear under each of these headings, so presumably the only distinction is the maturity of the deposits.
• The connection between the investments mentioned in the Notes and the Statement of Cash Flows is unstated.

Property, plant and equipment $35K (including Note 8)

• This is the written down value of two suites in Crusade House. One is the address of the charity; is the other an investment?

Trade & Other Payables $102K (including Note 9)

• There is no explanation for the very large increase in this liability. (Which is actually $14K larger than this figure – see Employee Benefit Provisions below).

Interest Free Loan $7K (including Note 10)

• There is no explanation why the charity
  • Lent money
  • Interest free, and
  • Unsecured.
• Or whether it is to a related party.

Employee Benefit Provisions $43K (including Note 11)

• This incorrectly includes $14K of deductions from employees not yet handed on.

Settlement Sum for O/S Funds

• There is no Note explaining this item. (It shouldn’t be the amount required to start the FEBC Overseas Trust because this was paid by someone else.)

Field Staff Provisions $62K (including Note 13)

• There is no Note explaining these. For instance,
  • Why, given that these are staff of FEBC, the provisions are not included with Employee Benefit Provisions,
  • Why an Emergency Fund is a liability, and
  • How these amounts are calculated.

 Accumulated Funds $1.8 m (including Note 14)

• There is no Note explaining how these differ from reserves.

Essential information to go with the figures: Notes to and forming part of the Accounts (page 8 of the Financial Report)

• Note 1 Statement of Significant Accounting Policies 

Basis of Preparation

• There is no explanation for the decision – a decision that has significant influence on the content of the financial statements – to prepare a special purpose report rather than the expected general purpose one. What the directors are implicitly saying is that ‘there are no users who are dependent on its general purpose reports’, that is, no users who rely, or might in the future rely, on BFA’s financial statements as their major source of financial information. With what must be thousands and thousands of supporters in Australia it is hard to see how the directors could conclude this. (The directors, by their decision, are effectively saying that these supporters have the ability to ask BFA to tailor a report specifically to their needs. This isn’t plausible.)
• An example of the information that you might not get as a consequence is the relationship that FEBC has with the other FEBC organisations around the world.
• As FEBC is a not-for-profit entity, and if the directors, as they say they did, followed the Australian Accounting Standards, then their statement that the statements comply with International Reporting Standards is unlikely to be correct.

Missing Notes (in addition to the ones mentioned above)

• New and revised Standards
• Accounting Standards issued but not yet adopted
• Cash and cash equivalents
• Significant management judgement in applying accounting policies
• Financial instruments
• Fair value measurement
• Related party transactions

FEBC Overseas Fund

•  Although the FEBC Overseas Fund is required, under its governing document, to produce audited/reviewed accounts, its size of the Fund (‘Small’) means that the only financial information that is available is what the Fund reports in its AIS 2014.   And even though it reported activities for the year, the Fund reports neither revenue nor expenses.

An independent opinion on the financial statements: Independent Auditor’s Report

• No audit report is included in the financial report. I requested one from the company on 22 June 2015 but after an initial exchange to clear up their misunderstanding, the CEO told me that ‘All documents as required by the ACNC are in place’ (second email).

The ‘Directors’ Declaration’

• The statements and Notes do not ‘Comply with Accounting Standards’, as the directors assert.

An extra statement, ‘Abridged Accounts’

• There is no explanation for the inclusion of this statement.

Membership of accountability organisations claimed

• Missions Interlink Accredited Member.
  • Unfortunately the standards to which they have agreed to adhere are only available by emailing admin@missionsinterlink.org.au.
  • As the membership list is not publicly available, it is not possible to confirm FEBC’s membership.
• Fundraising Institute of Australia Organisational Member
  • The link goes instead to EA Foundation, the parent of Missions Interlink. It should go to here, which is where you can check the standards with which they must comply.
  • Membership is current.

(End of review)

[i] Australian Charities and Not-for-profits Commission, Australia’s national regulator of charities.

[ii] Presumably this is the ‘Tax deductible J831N Mongolia’ option in the Gift Allocation drop-down on the website.

[iii] 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.’

[iv] 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.