Mercy Ships Australia Limited

.We have been asked to do a review of Mercy Ships for a potential donor. Mercy Ships is a well-known organisation, collecting millions in Australia, and with endorsement from several former heads of state, including our own John Howard:

But let’s look at the facts:

COVID-19 message

Donors

The ACNC, in their article, Donating to Legitimate Charities, gives “some things to consider to help you make sure your donation is going where it is intended”:

Here’s the results for ‘Mercy Ships’, with #5 supplemented by the essentials of the ACNC’s What should I consider when deciding which charity to support?^[1]

The website linked from the Register has an invitation to donate:

Does Mercy Australia operates hospital ships? See #5 below for the answer.

_________________________________________________________

2.  Mercy Australia may use door-to-door and street collectors:

______________________________________________________

3.  The web address begins with a closed padlock symbol, so the website is secure [the ACNC article above^[3]].

This message appears at the bottom of the first page in the donation process, so your personal information should be secure:

_________________________________________________________

4.  Mercy Australia’s ABN record says that it is not entitled to receive tax-deductible gifts as an organisation, but it can receive them to a fund that it operates, the Mercy Ships Australia Relief Fund^[4].  

________________________________________________________

5.  The use of your donations

Faith-based, or not?

The organisation described on the above website says that is a ‘Christian’ organisation. But from the description there it doesn’t share the Gospel.

Context -what does Mercy Australia do?

Most of the information on the website is not about Mercy Australia, but about Mercy globally, controlled from Texas USA^[5]. For instance, this panel on the home page:

Only the last two of the ten items under ‘About us’ on the main menu, Our Corporate Partners’ and ‘Our Organisation’, are about Mercy Australia.

You give your money to Mercy Australia, so what do they do?

The answer should be available from their entry in the ACNC Register, and from their Annual Information Statement (AIS) 2019. But both the ‘Summary of Activities’ on the Register entry, and the ‘Description of charity’s activities and outcomes’ in its AIS 2019 are about the global effort, not Mercy Australia^[6].

To be accountable to donors (and other stakeholders), charities often publish, in the Financial Report they must lodge with the ACNC, their ‘Directors’ Report’ (or similar). The Australian objectives, activities, and other useful information would be in that. It’s not compulsory, and Mercy Australia has chosen not to include it in their Financial Report 2019.

The only avenue left to us is to see what it does from what has been included in the Financial Report 2019.

But right from the start, there is a significant issue with this Report.

Directors have a choice between two kinds of reports, special purpose or general purpose. The requirements of the former are less onerous than the latter.  And are not designed for people who can’t ring up the charity and get financial reports tailored to answer the questions they have. (If you are reading this, it is highly likely you are one of those people.)

.

The choice made by the directors, part of the ‘basis of preparation’, is required to be reported in the notes that must accompany the financial statements^[7]:

.

.

.

The auditor, Stephen J Shirley (sps audit), implies in his report that the Mercy Australia directors chose special purpose statements. Which for a charity that received $5.34 million in donations, and has eight employees and 140 volunteers (AIS 2019), is not a credible choice^[8].

.

There are some other significant things about the reporting that are reasonable for you to consider:

.

Who’s responsible?

Because there is no Directors’ Report (see above), we don’t know the exact composition of the board that approved the Financial Report 2019. As it happened in early March, it is likely to be most, if not all, of the current directors^[10]:

It is best to have a majority of non-executive directors, second best to have the Chair and Deputy Chair independent of the charity. Australian Mercy have neither. Deleted 25 August 2020.  We miscalculated the proportion of non-executive directors (our apologies), and the description for the Deputy Chair has been changed since publication.

.

The board is responsible to the members. This type of charity normally discloses the number of members. Australian Mercy doesn’t, so accountability can’t be assessed.

.

Back to finding out about Mercy Australia

.

If you are still interested in donating, and still happy to rely on the financial statements, we return to trying to find out, from the financial statements, what Mercy Australia does.

.

Here are the expenses (with last year in the second column):

.

.

Although they don’t explain it anywhere, it is likely that the $2.51 million for ‘Donations made – contributed services’ is the price they have put on the work of their volunteers. The same amount is included under revenue. So, excluding this expense the total is $5.44 million.

.

What this list tells us then is that Mercy Australia’s major activity is to donate money to ‘Mercy Ships projects’. 73% of the expenses go on this. The other 27%, at least from this list, is the cost of the effort to raise the money to send.

  You might ask them why it would not be better to send your donation direct to the Mercy Ships operation that needed the money.

.

Mercy Australia, say, on their website, that the percentages are 87 and 13 (not 73 and 27):

Apart from a Note on two small amounts, Mercy Australia give no further information on any of the expenses^[11].

Which ‘Mercy Ships projects’ benefited? How did the money get there? How did they ensure that the money was used for the purpose for which it was given?

Impact

Looking at overhead percentages (see above) is irrelevant without information on the impact of the charity. There is nothing in Mercy Australia’s material about the impact of the donations.

Even for the global organisation, they define impacts as the things they delivered:

All ‘good works’ are not necessarily the best thing to do for particular beneficiaries, or the best use of scarce resources.

Charity response

We sent the member a draft of this review. They did not respond.

.

1. A section in the article, Donating and Volunteering: ↑

   ◦ Focus on the nature of the charity’s work, its beneficiaries and the impact the charity is having in the community.

   ◦ Is it clear what the charity is trying to achieve and how its activities work towards its objectives?

   ◦ Would you like to spend your money, or time if volunteering, to support these objectives?

   ◦ Is the charity being transparent about its activities?

2. The ACNC implies, therefore, that it is a ‘legitimate’ charity. But this is not correct – as the ACNC itself points out, registration is voluntary. ↑

3. The ACNC’s information (in its article above) is not correct for the Chrome browser; it does not have ‘https’. ↑

4. The donation page, however, says that all donations are tax-deductible. As does the website footer:

   

   They get it right in the FAQs though:

   .

   ↑

   .

5. Try and go to their website, and you are immediately redirected to the Australia website! ↑

6. There’s also an annual report on the Register, but it too, at least in its glossy part, is all about the global effort. ↑

7. Australian Accounting Standard AASB 101, www.aasb.gov.au ↑

8. This is what one of the professional accounting bodies, Chartered Accountants Australia & New Zealand, has to say about the choice between the two types of reports:

   .

   

   Enhancing Not-for-Profit Annual and Financial Reporting, March 2013, accessed from their website March 2020. ↑

9. Defined in the Australian Accounting Standards as ‘A present obligation of the entity arising from past

   events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits [AASB 137.10, www.aasb.gov.au]. ↑

10. On the ACNC Register they have included the patron of Australian Mercy, Margo Hartley. Her position is ‘Other’ rather than ‘Director’, so is this a mistake? ↑

11. This is a contravention of the Accounting Standards (specifically AASB 101). ↑