Archived: Interserve Australia Inc, charity review

N.B.  Upon learning that the charity was disappointed that I did not wait until the return from holidays of the owner of the Charity Address for Service email address before publishing, I immediately offered to incorporate their comments.  I am now waiting for those comments.

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

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 Interserve.

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 8 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.
• Interserve website.
• Social media: according to the website, only Facebook (as Interserve Australia).
• Not on LinkedIn.
• State government fundraising licence registers.
• No reviews on Glassdoor.

REGISTRATION DETAILS

Entity Subtype

• The first subtype is one that is consistent with sharing the Gospel.
• Sharing the Gospel is required by the company’s first object:
  • To work in partnership with Australian churches to recruit suitably qualified people to make Christ known by word and action throughout the world, especially in Asia and the Middle East.

CHARITY DETAILS

Legal Name

• Interserve is a Victorian incorporated association (No. A0025704J).

Other Name(s)

• Interserve does not have any name registered other than its legal name (above). It therefore cannot use a name other than this in anything official. Therefore it’s use of ‘Interserve’, on Facebook for instance, is questionable, especially as there is another entity called Interserve Pty Ltd.

Charity ABN

• Tax deductibility: No, you cannot claim a tax deduction for a donation to Interserve itself. However, you can for a donation to its fund, Interserve Overseas Aid Fund.
• This is recognised in the answer to a ‘Giving FAQ’ on the website:
  • In Australia, a tax deduction can be claimed for donations to certain types of work only. Donations supporting Interserve Partners working in community aid and development are paid into our Overseas Aid Fund and are tax-deductible. Donations supporting Partners doing non-development work (such as theological education, classroom teaching or pastoral work) are not tax-deductible. Other income received by Interserve – including unallocated donations, income from special appeals and bequests – is paid into the Overseas Aid Fund and is tax-deductible for the giver.
    • However, it isn’t possible to tell which workers do work that is eligible for a tax deduction when you give via the website.

Charity Address for Service

• I have no reason to believe that this does not work.

Charity Street Address

• From the website: PO Box 231 Bayswater VIC 3153.

Phone

• A free one, from the website: 1800 067 100.

Email

• I have no reason to believe that this does not work.

ANNUAL REPORTING

• AIS 2015
  • This is Interserve’s compulsory Annual Information Statement 2015 (AIS 2015).
  • It gives basic financial information. If you think that this might be sufficient for you,
    • The financial statements are not the general purpose ones declared here, but the ones drawn up to a lesser standard, special purpose financial statements.
    • The financial statements show $2.98 m ‘Funds to international programs’ and their support costs, yet no grants are shown here.
    • ‘Employee expenses’ is $43K larger than ‘Staff benefits’ in the financial statements.
    • ‘Total current liabilities’ is much larger in the financial statements ($597K).
    • ‘Non-current loans’ are actually current loans.
• Financial Report 2015
  • The Report was signed three and a half 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 much longer than the one in the constitution.
    • I have not checked whether the content matches.

Date Established

• There is no history on the website. (The history here, is of Interserve internationally.)

Who the Charity Benefits

• Vision
  • ‘Lives and communities transformed through encounter with Jesus Christ.’
• Mission
  • ‘to make Jesus Christ known through wholistic ministry, in partnership with the global church, amongst the neediest peoples of Asia and the Arab World.’
• Goals
  • A search of the website shows a number of incidental references to Interserve’s goals, but nowhere are they given.
• Activities (What did Interserve do?)
  • In the AIS 2015:
    • Our personnel serve in a broad range of organisations throughout Asia and the Arab world. Working to promote child protection, training local workers in conflict resolution in nations without peace. They fill broad roles including engineers, educators, medical research, counselling, agronomy and community development, IT and administration, traiing and Media (sic) professionals.
      • At this level of generality, each year the AIS is going to say the same. What was different about 2015?
      • No mention of the Gospel.
• Outcomes/Impact (How were people’s lives improved?)
  • Unfortunately Interserve did not respond to the ACNC’s request, in the AIS, to describe its outcomes.
  • Nothing found on the website.

Size of Charity

• With revenue of $4.84 m, Interserve easily qualifies for this category.

Financial Year End

• This means that the next financial report is due by 30 June 2017. Before that the financial information on the Register will be up to 18 months out-of-date.
  • You may therefore need to ask for more up-to-date information.

WHERE THE CHARITY OPERATES

Operating State(s)^[1]

• Interserve has the necessary registration (an ARBN) to allow it to legally trade interstate.
• It has a fundraising licence in the two of the three states in which it has a physical office. Why not the third?
• And, given it operates in the other four states that have a licensing regime, why not in them too?
• Interserve makes a prominent call for donations from the public on its website. It may be that one or more state fundraising authorities believe that this means that a licence is necessary.

Operates in (Countries)

• There is no listing of countries on the website.
• Five countries, but only four ‘partners’.

CHARITY’S DOCUMENT (SIC)

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

RESPONSIBLE PERSONS

No. of Australian ‘responsible person’ positions^[2]

Ricky Campbell-Allen                1

Joel Erkkila                                  1

Greg Horth                                  1

Allan Mathews                           1

Alison Morgan                            1

Lorraine Taylor                          2

Ruth Thorne                                1

Kim Vanden Hengel                  1

Pamela Winstanley                   1

• • Is Ricky Campbell-Allen this one?
  • Is Joel Erkkila this one?
  • Is Allan Mathews this one?
  • Is Kim Vanden Hengel this one?
  • Campbell-Allen and Winstanley are new since the Director’s Report (see below).
  • There is no listing of the directors on the website.

(End of review of the ACNC Register information)

Latest financial report – detail^[3]

• For a $5m charity supported principally by donors, and operating all over Australia, the directors’ decision that Interserve is not a reporting entity is highly questionable. Do they realise that they are saying that any donor or potential donor is able to get from Interserve a financial report that is tailored to their needs?

The Director’s (sic) Report – the first page of the Financial Report

• This is not required by the ACNC. (Nor is the Statement by National Director & Operations Manager to the Board on the fourth page.)
• Compared to good practice:
  • Some sections are missing:
    • Objectives
    • Strategy, and
    • Performance measures.
  • ‘Principal activities’
    • is too general to be very helpful, and
    • says that Interserve works in 20+ countries yet only five are listed on the ACNC Register.
  • Contrary to what is stated under ‘Board Members’, two directors were not on the board at the date of the report.
  • Three of the six sections are unnecessary.

Where the directors put their name to the report – the Director’s (sic) Declaration – the third page of the Financial Report

• Given that Interserve has been reporting under the ACNC Act for a few years now, that Act should at least be mentioned.

An independent opinion on the financial statements – the Independent Auditor’s Report…– the fifth 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.
• The auditor says that Interserve is reporting under the ‘Accounting Standards – Reduced Disclosure Requirements’, but these apply to general purpose financial statements, not the special purpose statements that the directors said they have followed. Confusing.

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

• Where’s the GST liability/asset?
• Total Cash $3.19 m
  • This should be, as acknowledged in the Notes, ‘Cash and cash equivalents’.
  • It equals 7.5 months of revenue.
• Debtors $37K
  • What is sold on credit?
• Staff Loan $5K
  • It’s not much, but not typical. Why lend to staff?
• Available for Sale Financial Assets – Shares at Market Value $779K
  • What is the justification for holding shares, a relatively risky asset class?
• Furniture, Office Equipment and Vehicles at Cost $312K
• Freehold Land & Buildings at Cost $654K
  • The above two classes (line items) should be combined under ‘Property, Plant and Equipment’.
  • In Note 2, there is no explanation of the ‘Improvements after adjustment of Re-class (sic) to Renovations of $10200’ or the ‘Reclassification of assets’.
• CURRENT LIABILITIES
  • No total is shown.
• Provision for Resettlement $248K (current) and $699K (non-current)
  • Why is this not included in ‘Provision for Employee Entitlement?
• Unsecured Borrowings
  • Why borrow when there is surplus cash? Especially at interest.
• Provision for Employee Entitlement (sic) $110K
  • Are there really no non-current employee entitlements?
• Total Current Liabilities
  • This figure is for liabilities, not current liabilities.
• Accumulated Funds
  • This has a different name, Retained Earnings, in the Statement of Changes in Equity.
• Provisions
  • Provisions are not reserves; they are liabilities.
• International Expense Reserve (USA Special Donation)
  • There is no explanation of this unusual item.

What was earned, what was consumed during the year – the Statement of Comprehensive Income – the eighth page of the Financial Report

• The # in the heading: the ‘ACFID Code of Conduct’ cannot overrule what is required by the Accounting Standards.
• This statement is not particularly easy to read.
• It is not possible to tell how much was received for the Overseas Aid Fund (see Charity ABN, above).
• There is a graphic on the ninth page of the Financial Report that allows one to see how much was donated in most of the giving categories on the website.
• Support for Volunteers $2.53 m
  • How is it right to call them ‘volunteers’? The ‘workers’ are paid a living wage.
  • If ‘All donations are placed into a pool from which all allowances and costs are paid’, why is the worker’s name asked for when one is donating to the category ‘Interserve Worker’ on the website?
    • And doesn’t this make them employees just like the Australian staff?
• Other Income $104K
  • This is not revenue, but gains, a separate component of income.

‘Expenditure’ (should be ‘expenses’), including Note 5

• Disclosures missing:
  • Superannuation expense
  • Finance costs
  • Administration (in total), and perhaps fundraising too (in total).
• Staff benefits $924K
  • Using the number of employees shown in the AIS 2015 (10 full-time, 11 part-time, and two casuals), and assuming that part-timers work 50% of full-time hours, and casuals 10%, this represents average benefits of $59K p.a.
  • Why is this $967K under ‘Employee expenses’ in the AIS 2015?
  • Why ‘Staff benefits’ when the provision is ‘Employee entitlement’?
• Partner benefits $2.03m
  • Why call the workers ‘partners’ when the industry commonly uses this term to refer to donors?
  • Interserve says that it is responsible for supporting its ‘partners’:
    • Interserve Australia carries responsibility for partners’ financial needs whilst on the field, as well as providing general administrative support and pastoral care particularly whilst partners are on home assignment. In all its actions Interserve seeks to encourage the sending church(es) to participate fully in the ministry and care of their missionaries.
      • What, therefore, is the distinction between those working in Australia versus those working overseas that allows Interserve to exclude the latter from disclosures about employees?
        • Does this exclusion extend to the legal obligations of employers, for instance, superannuation?
• Funds to international programs $1.97 m
  • The revenue is called ‘Support for Volunteers’ (see above). Why is there no mention of this when the money is spent?
    • How much of this is for the ‘partners”?
  • Why is the money that is sent to the ‘partners’ not classified as employee expenses?
  • Together with the other program expense item (‘International Theology and Education Programs’), this represents 70% of revenue.
  • Why doesn’t this appear as grants in the AIS 2015?
• Program support costs $1.00 m
  • This represents 20% of income.
  • If the program consists of supporting individual workers, what is needed outside paying them?
  • Why is the cost of supporting the workers outside their entitlements another 51% of those entitlements?
  • Why isn’t domestic programs expenditure similarly split between funds disbursed and support costs?
  • There is no disclosure of where this money goes.
• Community Education $189K
  • This represents 4% of income.
  • There is no description of what is being taught.
  • One would think that much community education serves the fundraising effort as well. How therefore are the expenses distinguished?
  • How is the impact of this expenditure measured?
• Fundraising Costs – Public $93K
  • This represents 2% of income.
• Accountability & Administration expenses $243K
  • This represents 5% of income.
  • What’s the dividing line between this item, and the costs to administer the programs included in ‘Program support expenses’ (above)?
• International Theology and Education Programs
  • Programs Expenditure $1.44 m
  • Domestic Programs Expenditure $163K
    • Why don’t these show as grants in the AIS 2015?

The two charts on the 5^th last page

• Where’s the asterisk for the footnote ‘*Excluding designated gifts’?
  • Why should either chart exclude such a large component of the total?
• What is done overseas that is ‘Non Developmental’ (sic)?

Essential information to go with the figures – the Notes to the financial statements – the third last page of the Financial Report)

• Note 1 Statement of Accounting Policies
  • (a) Basis of Preparation
    • If Interserve, as the directors say here, is not a reporting entity, reduced disclosure requirements do not apply.
    • The Accounting Standards that have been followed are not specified.
    • The directors do not say why they think that Interserve is not a reporting entity.
    • The governing Act is the ACNC Act. It is under that Act that Interserve is allowed to continue to submit its accounts prepared for the state associations authority.
  • (b) The Statement of Comprehensive Income
    • There are no ‘Welfare Funds’ shown.
  • (c) Available for sale financial assets
    • What ‘other financial instrument assets’?
  • (e) The policies on reviewing depreciation factors and derecognition of assets are missing.
  • (f) There is no evidence of any leases.
  • (g) Why wait six years before accruing long service leave? How is it estimated?
  • (k) Why include deposits of up to one year when the norm is three months?
  • (i) The policies for receivables/payables, cash flows and commitments and contingencies are missing.
  • Policy Notes normally included but not in these accounts:
    • New, revised or amending Accounting Standards and Interpretations adopted
    • Current and non-current classification
    • Trade and other receivables
    • Trade and other payables
    • Fair value measurement
    • New Accounting Standards and Interpretations not yet mandatory or early adopted
• Missing Notes:
  • Critical accounting judgements, estimates and assumptions
  • Trade and other receivables – the provision
  • Contingent liabilities
  • Commitments
  • Events after the reporting period
  • Reconciliation of surplus after income tax to net cash from operating activities

Membership of accountability organisations claimed

• In part answer to the FAQ ‘Who is Interserve accountable to?’, on the website, Interserve says that it is
  • registered with and accountable to the Australian Charities and Not-for-Profits Commission (ACNC). Interserve is a member of Missions Interlink and the international Micah Network.
    • The accountability provided by the ACNC is at a high-level, and mostly not particularly timely.
    • Missions Interlink membership confirmed. Missions Interlink provides very limited accountability.
    • The Micah Network provides no accountability.

(End of review)

1. 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.’ ↑
2. 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. ↑
3. I use 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. ↑