Archived: International Justice Mission Australia, charity review

This is a review, for donors, of the Australian charity IJM Australia Ltd (IJMA).

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

Prior to publishing this review, I sent my observations to the charity, on 7 August 2015, and invited them to comment. Melinda Harvey, the Operations Manager, responded with some observations on 20 August 2015. These, where relevant, have been included in the review.

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 the names below.
• IJMA website, and Facebook. Not on LinkedIn but the US organisation is. (IJMA is a ‘Partner Office’ of that organisation.)
• State government fundraising licence registers.
• Email response, on 20 August 2015, from Melinda Harvey, IJMA Operations Manager, to an invitation to IJMA to comment on my observations in preparation for this post.
• Glassdoor (US organisation reviewed)
• Great Nonprofits (for the US organisation)
• GuideStar (for the US organisation)
• Charity Commission (for the UK organisation)
• Canadian Council of Christian Charities (for the Canadian organisation)

 REGISTRATION DETAILS

Entity Subtype (‘charitable purposes’)

• ‘Advancing religion’ is not one of the subtypes nominated by IJMA.
  • The US organisation is evangelical; for IJMA Christianity – God’s call to love all people and to seek justice for the oppressed” – just provides the inspiration for the good works[ii].

CHARITY DETAILS

Legal Name

• IJMA is a company limited by guarantee. It had 17 members at the end of the reporting period.
• There is also a separate charity, IJM Australia Programs Fund.
  • This is a public ancillary trust, a fixed trust, established six months before IJMA.
  • It is endorsed as a Deductible Gift Recipient (see Charity ABN, below).
  • IJMA is the trustee. (The two charities therefore share an office.)
  • The ACNC Register says, without explanation, that the Fund doesn’t have to report.

Other Name(s)

• The first of these is a registered business name, but it is not clear why the second is included.

Charity ABN

• Tax deductibility: You can claim a tax deduction for a donation to IJMA.

Charity Street Address

• There’s no postal address on the website[iv].

Email

• For an alternative to this address (the same one as the Charity Address for Service), you could use the web contact form.

Phone

• From the website: 02 9219 8019.
  • Although not yet on the website, IJM  told me that their new ‘main contact number’ is 1300 045 669.

Website

• Also accessible via ‘Partner offices’ at the bottom of every page at the parent organisation site.

ANNUAL REPORTING

• Basic financial information is shown in the Annual Information Statement 2014 (AIS 2014). If you think that’s all you need then note that the Financial Report suggests that Other Income should be moved to revenue.
  • The distinction is important because revenue comes from a charity’s ordinary activities, other income doesn’t.
• The coverage of finances in this review is left until the financial report proper (below).

ABOUT THE CHARITY

Who the Charity Benefits

Vision

• None found.
• For the US organisation:

Our vision is to rescue thousands, protect millions, and prove that justice for the poor is possible.

Mission

• None found.
• But read The Locust Effect, by IJM President Gary Haugen, to see the thinking behind what IJM does. (And therefore what IJMA funds.)

Activities (What does IJMA do?)

• From the AIS 2014:

Funds raised and directed to IJM’s anti-trafficking programs supported:

 .  social workers providing ongoing care and holistic restoration services for the victims of violent crime in Cebu, the Philippines;

.   access to legal representation so that clients are supported to effectively seek justice for crimes committed against them through their local criminal justice system in the Philippines; and

.  the training and support of local authorities, legal practitioners and law enforcement to increase the rule of law and protect local communities, particularly the poor and vulnerable, from violence.

IJM Australia actively conducted speaking engagements in various forums including conferences, churches and civic engagements as well as connecting with government to contribute to raising the profile of, and Australia’s contribution to, addressing these issues.

Outcomes (What was delivered?)

• Unfortunately, although a description of ‘activities and outcomes’ is called for in the AIS 2014, no outcomes are given (see above)..
• The US organisation publication 2014 Year in Review, describes two outcomes in the Philippines, the country in which IJMA ‘operates’.
  • The same publication documents the worldwide results of IJM’s work.

Impacts (How were people’s lives improved?)

• For the US organisation, see GuideStar’s Charting Impact Report.

Size of Charity

• ‘Revenue’ for this extended reporting period was $717K, easily exceeding the $250K threshold for the smallest size of charity.

Financial Year End

• This means that the next financial report is due by 30 June 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) [v]

• With an office in only one state (NSW) the listing here is correct only if ‘operating’ is defined as fundraising.
  • A licence to fundraise is held in all seven states that have a system of licensing.

Operates in (Countries)

• A listing here can be a consequence of a charity following the ACNC’s advice to include any country to which a grant or donation has been made.

CHARITY’S DOCUMENTS

• The two Financial Reports – only one is required – appear to be identical, distinguished only by the date that they were lodged.
• This report can also be opened from within AIS 2014 under Annual Reporting (above).
• The report was completed in just under four months after the year end, but not lodged until two months later (on the last day it was due).
• The ACNC allows charities to put their Annual Report or similar on the Register. IJMA has not taken advantage of this.
  • There is no Australian report on the website[vi]. However, a little hidden under ‘Financials’, you can find the parent organisation’s 2014 Year in Review.

RESPONSIBLE PERSONS

• To see all their positions in Australia, search here.

No. of Australian governing body memberships

Andrew ELLIS                          5[vii] (including IJM Australia Programs Fund)

Andrew HILSON                      2 (including IJM Australia Programs Fund)

Norman LEE                             2 (including IJM Australia Programs Fund)

Nicole MUNNS                         3 (including IJM Australia Programs Fund)

Gary VEURINK                         1

• A majority of these directors, because IJMA is the trustee of the Programs Fund, must be a ‘Responsible Person’ as defined by the Fund’s Trust Deed[viii].
• The directors identified above as the directors of IJM Australia Programs Fund are the only directors of that charity.
  • A Chairman and a Vice-Chairman are required by the Trust Deed. These should be shown under ‘Position’.
• The Constitution provides,
  • atypically, that a majority of the directors must be ‘persons who are not employed by, or, an officer of, government, local government, or a government department or authority.’ [clause 10.1].
  • that directors’ fees cannot be paid [clause 10.7].0
• A Chairperson and a Treasurer are required by the IJMA constitution. They should be shown under ‘Position’.

(End of review of the ACNC Register information)

Latest financial report – detail

Cover page

• Although financial statements are normally for a year, these ones, despite what is says on the cover, are not. They are from the date that IJMA started until 31 December 2014, a period just over 18 months[ix].

Auditors Independence Declaration (page 1 of the Financial Report)

• No Directors’ Report has been included in the Financial Report, presumably because the ACNC doesn’t require one. But nor does it require an auditor’s independence declaration to be included.

What was earned, what was consumed during the year – the Statement of Profit or Loss and Other Comprehensive Income (page 2 of the Financial Report)

• There is no explanation for the absence of figures for the previous year.

Revenue $717K (including Note 2)

• 49% of the revenue comes from ‘seed funding’ yet there is no explanation of this item. If revenue rather than debt or equity, then how is it different from a donation? 
  • IJMA’s comment: ‘Seed funding is distinct from donations and this breakdown was endorsed by the auditors.’
    • Reviewer’s response: Did they ‘endorse’ the classification and lack of explanation as auditors, or as advisers to management? Different standards are involved. Either way, the directors are still responsible for showing a true and fair view.
• ‘Other income’ does not match the same item in AIS 2014.
• From Note 1(k) – see below – we know that 46% of these donations attracted a tax deduction.
  • However, since the Fund’s Deductible Gift Recipient status only began on 6 December 2013, five months after IJMA began, these donations must have been received in the last 13 months of the 18 month reporting period.
  • There are only these two donation options on the website.
• There is no explanation why, if interest is accrued, the revenue is the same as the cash received (Statement of Cash Flows).

Expenses

• Neither fundraising nor administration expenses are shown, nor is it possible to calculate them.

Employee benefits expense $292K

• Staffing in June 2015 was four full-time and two part-time [AIS 2014]. It appears therefore that staffing has increased since the period of the Report.
• The US organisation has been criticised for paying its senior executives too much. If the above figure is accurate then IJMA doesn’t appear to be laying itself open to the same charge.

Field Program Expenses $148K

• There is no explanation of this item. (IJMA ‘operates’ in ‘two fields’.)
• The same figure is shown for ‘Grants and donations…for use outside Australia’ in the AIS 2014.
• The destination of the money is not disclosed.

Essential information to go with the figures: the Notes to the Financial Statements (page 6 of the Financial Report)

1 Summary of Significant Accounting Policies

• (a)   Basis of Preparation
  • It is not clear how these statements differ from the statements usually produced when one entity, IJMA, controls another, the Programs Fund. That is, consolidated statements.
  • With an organisation that received hundreds of thousands of dollars in donations, and which prominently seeks donations from the public on its website, it is not clear how the directors concluded that ‘there are no users who are dependent on general purpose financial statements’, the type of statements that are designed for those people who rely on IJMA’s financial statements as their major source of financial information.
  • A corollary to this conclusion is that the directors believe that all users, including donors, both current and prospective, have the capacity to command IJMA to prepare for them financial statements tailored to their needs.
  • This decision to produce special purpose financial statements meant that IJMA could produce financial statements that did not need to comply with all the Australian Accounting Standards, and therefore produce statements that the Australian standard setters have deemed not suitable for those people who depend on those financial statements to make decisions.
    • IJMA’s comment: ‘IJM Australia Ltd has recently completed in its first 18 months of operations and reports were produced relevant to our size and simplicity of operations and structure. Basis of preparation will be reviewed prior to each annual audit according to our growth and according to professional advice.’
      • Reviewer response: Size, simplicity and structure are not the criteria for this decision.
  • An example of the information that you might not get as a consequence is the relationship that IJMA has with the other IJM organisations around the world.
• (k)   Public Ancillary Fund (including Note 9)
  • There is no explanation for the change of name from the one in the governing document, IJM Australia’s Overseas Aid Fund, to the current name.
  • The Fund’s ABN record shows that the Fund did not have an income tax exemption until 16 July 2015, well after the end of the reporting period. A mistake by the government?
  • From the Trust Deed:
    • The Fund’s assets must be held at ‘market value’. It appears that the Fund does not have any non-current assets.
    • The Fund is allowed to pay the trustee, IJMA. There is no such payment disclosed.
    • Full audited accounts are required. These are not required by the ACNC, and are not published there or elsewhere.
      • IJMA’s comment: ‘Fund accounts have been audited by Saward Dawson and will be uploaded upon endorsement by the Board.’
  • The year end is 30 June, not 31 December.
    • IJMA’s comment: ‘Operate to a calendar year and have substituted accounting period endorsed by ATO.’

Missing Notes

• New, revised or amending Accounting Standards and Interpretations adopted
• Critical accounting judgements, estimates and assumptions
• Current and non-current classification
• Trade and other receivables (policy note)
• New Accounting Standards and Interpretations not yet mandatory or early adopted
• Contingent liabilities
• Commitments
• Events after reporting period
  • IJMA’s comment: ‘These relate to general purpose reports and were largely irrelevant due to the simplicity of our accounts in our first 18 months of operation.’
    • Reviewer’s response: The accounts still have to comply with the ACNC’s requirements for special purpose reports, including the requirement to show a true and fair view.           

An independent opinion on the financial statements: Independent Auditor’s Report (page 14 of the Financial Report)

• The auditor, in accepting the engagement, has implicitly agreed with the directors’ decision to produce special purpose rather than general purpose financial statements.
• This is a ‘clean’ opinion. Read here and here to draw the right conclusions from this.

Membership of accountability organisations, claimed

• None claimed.
• The US organisation, however, is a member of the ECFA, and also has the badges of Charity Navigator, and GuideStar in the footer of each web page[x].

(End of review)

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

[ii] The section ‘Objectives’ in the constitution begins “IJM Australia is established to work from a basis of Christian belief and values for the charitable purpose of providing relief to people suffering from poverty, distress and helplessness…”

[iii] IJMA said that they would look into doing this.

[iv] IJMA implied that their street address is also their postal address.

[v] 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.’

[vi] IJMA said that they were currently finalising their first Annual Report.

[vii] 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.

[viii] That is, “an individual who:

• performs a significant public function;
• is a member of a professional body having a code of ethics or rules of conduct;
• is officially charged with spiritual functions by a religious institution;
• is a director of a company whose shares are listed on the Australian Securities Exchange;
• has received formal recognition from government for services to the community;
• is an individual before whom a statutory declaration may be made; or
• is approved as a Responsible Person by the Commissioner [clause 2.1].

[ix] The period that is covered is a few days longer than the maximum allowed by Sect 323D(1).

[x] And on the back of the 2014 Year in Review, also BBB (Better Business Bureau).