Archived: Global Recordings Network Australia: mini charity review

Mini charity review of Global Recordings Network Australia (GRN) as an organisation that seeks donations online, and is exempt from Australian income tax via its membership of Missions Interlink. (Including the answers to the questions that the Australian charity regulator, the ACNC, suggests that you ask.)

For the previous review, see here.

Is it responsive to feedback?

• I sent them a draft of this review on 17 August 2017. Two days before the publication date, the Business Manager sent a few comments and implied that I’d have to wait until after next regular board meeting, nearly a month away, for an official response. I did not hear again from them after I told him that them that I preferred not to wait that long.

Is GRN registered?

• As a charity, yes.
• Other registrations:
  • As a public company (a company limited by guarantee).
    • It is permitted to omit ‘Limited/Ltd’ at the end of its name.
  • The business name ‘Gospel Recordings’.
    • But ‘Language Recordings’, under Other Name(s) on the ACNC Register, is registered to their previous name, Language Recordings Inc.
  • Operating in NSW but not licensed to fundraise there. GRN, in the Directors’ Report (Financial Report 2016, below) say that
    • Under the Charitable Fundraising Act 1991, unsolicited donations, members’ donations and bequests are not treated as fundraising income when determining information required under the Act.
      • But the exemption (s 5(3)) does not include an exemption for ‘unsolicited donations’, and
      • S 5(1) not only includes soliciting but also receiving.
    • Nor is GRN licensed to fundraise in any of the other five states that have a licensing regime.
      • The law in this area is not straightforward – is an internet invitation ‘fundraising’ for instance? – and advice varies, so check with the charity before drawing any conclusions.

What do they do?

• The ‘About Us’ in the GRN section of the international organisation’s website makes no distinction between what is done in Australia and what is done by other members of the network overseas. But presumably the ‘Principal Activities’ in the Directors’ Report (see ‘Financial Report 2016 on the ACNC Register) is talking about GRN:
  • The principal activities during the year were the production and distribution of recordings, visual materials and Saber players, ‘for the teaching of non-literate and minimally reached people groups. Further to this end were research (sic) into languages and dialects, processing of recordings, training of recordists, development of software, publication of online content, servicing of equipment, promotion of the ministry, and funding of GRN operations in other countries.

Do they share the Gospel ^[1]?

• Via their recordings, yes.
• Which is what their objects require:
  • …the Company’s Principal Object is to communicate the Good News of Jesus Christ and the teachings of the Scriptures in audio and audio-visual formats in every spoken language so that all people, especially those who are oral communicators and those who speak minority languages might hear the message in their heart language and in a culturally appropriate way and be able to respond to the message.

What impact are they having?

• Nothing systematic found.

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

• I am unable to match the information under ‘What do they do’ (above) with the expenses to isolate administration.

Do they pay their directors?

• No (Directors’ Report).

Can you get a tax deduction?

• No

Is their online giving secure?

• The ‘Donate’ page says, ‘Donate securely online by credit card’, but the security is not described, or on the page where you enter your information.
  • ‘We do not ask for funds’ is one of GRN’s six ‘financial principles’. I think that a large green button saying ‘Donate’ on the main page for Australia would be seen by most people as a request for funds.

Where were your (net) donations sent?

• To Global Recordings Network ‘overseas centres’ (Note 13 to the accounts). But more than that is not disclosed.

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

• ‘Give Now Online’
  • ‘Donate securely online by credit card’
    • ‘Where Most Needed’,
    • ‘Staff Members’, and
    • ‘Special Purpose’.
      • The ‘special purpose’ can be specified, but not the staff member.
• ‘Support for Staff’
  • ‘specific staff member’
    • 26 individuals/couples
  • ‘general staff support’
    • ‘Where Most Needed’
    • ‘Staff Members’
    • ‘Special Purpose (details below)’
• ‘Adopt a Recording Project’
  • ‘Projects for Individuals’
    • ‘auadopt’
  • ‘Projects for Churches’
    • ‘Where Most Needed’
    • ‘Staff Members’
    • ‘Special Purpose (details below)’

Is their reporting up-to-date?

• Yes (five and a half months after year end, two and a half months later than last year.)

Does their reporting comply with the regulator’s requirements?

• AIS 2016: No
  • All the figures under ‘Gross Income’ are incorrect.
    • The figure for ‘Employee expenses’ includes volunteer expenses.
  • The ‘Description of charity’s activities and outcomes’
    • Is not particularly about what was done in 2016.
    • Includes no outcomes.
  • ‘Language Recordings’ is not a business or trading name.
• Financial Report 2016: No.
  • The ‘Gain on sale of property’, $339K, has been incorrectly excluded from the calculation of the surplus.
  • The directors have again
    • Chosen to produce the lower-standard special purpose financial statements, statements that are only applicable if GRN’s users, present or prospective, don’t have to rely on those statements that follow all the Accounting Standards in order to make decisions, but can order their own. And that’s exactly what the directors say:
      • ‘there are unlikely to exist users of the financial report who are not able to command the preparation of reports tailored to satisfy specifically all of their information needs.’
      • With 118 members, professional management, $828K of donations, and 72 staff, this is implausible.
    • Not recorded a liability for employee benefits. They have 32 employees (AIS 2016), to which they paid $754K (less volunteer expenses). And their ‘Employee Benefits’ Note doesn’t not give a satisfactory explanation of this policy:
      • Due to the mission nature of the entity and the way employee support is funded, Employee Benefits are charged as expense when incurred. As at balance date there is no liability for Employee Benefits….
        • Charging them as incurred is what produces a liability, not the other way around.
        • What is it about the ‘nature’ of GRN and the funding of employees that warrants a departure from the usual accounting for benefits?
          • Donations are sought online for the employees, and when received they are classified as revenue. Then those employees are paid by GRN.
        • There is a liability if there is a present obligation to pay out in the future.
    • Recorded donations and bequests that are ‘designated for a specific purpose’ [Note 1(a)] as a liability rather than as revenue. Therefore, revenue is understated and liabilities overstated.
    • Given that all bar one of the giving options (see above) are for a specific purpose, how is it that the balance of the liability is only 10% of donations and bequests this year?
    • Shown different figures in the Statement of Comprehensive Income to those in the Statement of Changes in Equity. 
    • Not disclosed related parties (an ACNC expectation).
    • Mixed investment properties, a substantial part of GRN’s equity, with property, plant and equipment (on the Statement of Financial Position).
    • Classified, without explanation, $90K of inventories as non-current (that is, to be used beyond 12 months).
    • Adopted the cost model for some property and the revaluation model for the rest.

What financial situation was shown in that Report?

• Last year’s deficit of 14% of revenue was turned into a surplus of 3% – but only because they sold some property (otherwise it would have been -21%).
• ‘Staff and Volunteers’ expense’ (sic) rose from 38% of expenses to 44%, whereas ‘Gifts to overseas centres…’ declined from 27% to 23%.
• GRN say that
  • Approximately half of the mission’s income (other than that designated for members) is used for the ministry of Global Recordings centres overseas, primarily in the Pacific, Asia and Africa…
    • Assuming that ‘Donations – staff support’ is the money ‘designated for members’, only 39% of this year’s revenue was sent overseas.
• They hold over 14 months’ worth of donations in ‘Cash and cash equivalents’.
• The substantial holding of property means that long term financial structure is sound.

What did the auditor say about the last financial statements?

• Despite the accounting choices made by the directors (see above), the auditor, Jeffrey Edward McKee, of PMK Partners, Certified Practising Accountants, gave a ‘clean’ opinion. A questionable decision.
• At one place in his report he says that ‘No opinion is expressed as to whether the accounting policies used, as described in Note 1, are appropriate to meet the needs of the members’. However, under the Auditing Standards, this doesn’t absolve him from deciding, before he accepts the engagement, whether the directors’ choice of special purpose financial statements is correct. Later in the report, he contradicts his earlier statement by saying that ‘An audit also includes evaluating the appropriateness of accounting policies used…’. Which is it?
• McKee not only audited the financial statements, but from the Compilation Report that is included in the Financial Report 2016, we know that he was also the accountant who drew up the two extra (unaudited) financial statements that are included in the Financial Report.

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

• Yes

Who are the people controlling the organisation?

• The employees are shown on the website, but not the directors.
• Here they are, from the ACNC Register:
  • Glenn Baker
  • Gregory Cooper
  • Karl Hochstetter
  • Robert Love
  • Francis Mackaway
  • Mark Neace
  • Ranjit Thambyrajah
  • Bernard Wong
• There are 118 members (Directors’ Report, ‘Financial Report 2016’) to hold the board accountable.

To whom is GRN accountable?

• Because of its income tax exemption, GRN is accountable to Missions Interlink.
  • For one view on the strength of this accountability, see the section Activities in this review.
• As a registered charity, GRN is accountable to the ACNC.
• And to ASIC as a company.

1. “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. ↑ ↑