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Mercy Ships

Care: At least some of the information about this charity is no longer current. Use the ‘Search charity names’ box to see if there is a later review. If the latest review has a message like this, you are welcome to make your case for an updated review via email to ted@businessbythebook.com.au.

This review was first published on 27 July 2020. On 25 August 2020 the charity said that, because of the email address we used, the draft review did not get to them. We immediately put a warning on the review while the charity prepared its comments. These were received on 1 September, and are included below.

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”:

1. Check the charity’s name.

2. Ask for identification from anyone seeking a donation.

3. Be careful of online requests for donations.

4. No tax deduction doesn’t mean the charity is not a legitimate one, and

5. Find out more about how the charity says it uses donations.

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]

1. A search on the ACNC Register for ‘Mercy Ships’ leads to a registered^[2]charity in the name Mercy Ships Australia Limited (Mercy Australia).

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:

Charity response: “We are not operating any door-to-door or street collection activities.”

______________________________________________________

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].

Charity response: “Yes donations of $2 or more, to our Relief Fund are tax deductible. Read more:

https://mercyships.org.au/how-to-help/faqs/; https://mercyships.org.au/give/save-lives/; www.asic.gov.au; www.acnc.gov.au

________________________________________________________

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^[5].

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^[6]. 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^[7].

Charity response: “We provide volunteers for each field mission, raise funds and materials and generate awareness for this important work. We also generate awareness about the important Lancet Commission’s Report on Global Surgery which found that 5 billion people are unable to access safe affordable and timely surgery resulting in the deaths of more than 18 million people each year.

The ACNC register provides a summary of activities noting what we provided volunteers, funding, and materials towards during 2019. A breakdown of those activities can be seen in the Financial Report 2019 and our Australian contribution to those activities can be seen here: https://mercyships.org.au/about/#our-impact. Read more:

https://mercyships.org.au/about/#about; https://mercyships.org.au/about/#our-organisation; https://mercyships.org.au/about/#our-impact

Download the 2019/20 Senegal Field Service Report.

https://mercyships.org.au/wp-content/uploads/2020/08/Senegal-Report-2020_LO.pdf
Download the 2019 Annual Programs Report.https://mercyships.org.au/wp-content/uploads/2020/08/MSAU-Annual-Programs-Review-2019.pdf

www.acnc.gov.au”

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.

Charity response: “See the ‘Chairman’s Report’ and the ‘Managing Directors Report’ in the Annual Report 2019 pages 2 and 3, and the ‘Directors Declaration’ in the Financial Report 2019 page 16.

Additionally, our ‘objects’ as noted in our constitution are as follows:

OBJECTS

The object of Mercy Australia is to provide relief of sickness and the promotion of health of the poor and disadvantaged in those countries the Minister for Foreign Affairs has declared to be developing countries by raising funds from the public in Australia and applying those funds towards:

1. the purchase of medical, optical and dental supplies to be dispensed from:

i. a ship(s) which acts as a floating hospital; and

ii. a floating hospital and/or its associated land-based project(s);

1. the cost of forwarding to a ship(s) and/or its associated land-based project(s) medical, optical and dental goods in kind;
2. the provision of medical staff to work on the ship(s) and in the developing countries;
3. the acquisition of ship(s);
4. the provision of staff to operate the ship(s);
5. the provision of volunteers to educate and work with indigenous people in developing countries on matters relating to health and sanitation; and
6. the provision of an office(s) in Australia to co-ordinate fund raising programs and the activities of the ship(s).

In furtherance of these purposes, Mercy Australia will work in partnership with indigenous organisations which are effective in conducting their activities in countries declared by the Minister for Foreign Affairs to be developing countries.

Reviewer’s comment: None of this makes up for the change this year of omitting the Directors’ Report.

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^[8]:

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^[9].

Charity response: “Extract from the Auditor’s Report in the Financial Report 2019, page 17

“In our opinion, the accompanying financial report of the Registered Entity is in accordance with Division 60 of the Australian Charities and Not-for-profits Commission Act 2012 (the ACNC Act), including:

1. giving a true and fair view of the Registered Entity’s financial position as at 31 December 2019 and of its financial performance for the year then ended; and
2. complying with Australian Accounting Standards to the extent described in Note 1 and Division 60 of the Australian Charities and Not-for-profits Commission Regulation 2013.”

Additionally, the impact of moving to a general-purpose report format is not expected to be material to implement, and indeed that is what we are moving to this year.”

Read more: www.acnc.gov.au Financial Report 2019, page 17”

Reviewer’s comment:

1. 1. The fact that the auditor gave a ‘clean’ opinion is irrelevant: his continuation of the audit after discovering that the directors had selected special purpose statements gave his agreement to their decision.
  2. Whether or not the change to general purpose reports will make a material difference has yet to be seen; even if it didn’t, this does not take away from the fact that the directors are effectively acknowledging that the statement they signed this year was incorrect.

More on the reporting

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

• Working capital, the excess of short-term assets over short-term liabilities, is only 12%; that is, current assets are only 112% of current liabilities.

• The long-term financial position is not strong: debt (liabilities) is 8.3 times equity.

Charity response: “Financial Report 2019 by the auditor, pages 17 and 18 note no issues relating to us continuing as a going concern.

- As a charity collecting money to provide relief of sickness and the promotion of health of the poor and disadvantaged, we believe that those monies should be spent and not accumulated.
- Each year we undertake an annual strategic review, to ensure long-term financial sustainability including maintaining our minimum working capital.
- Our working capital/reserves policy is under periodic review and reserves levels are adjusted as risks and other factors change.

Read more: www.acnc.gov.au Financial Report 2019, pages 17 and 18”

• 93% of the liabilities are in a single unexplained item: ‘Payable to Mercy Ships Projects’.

◦ Who is ‘Mercy Ships Projects’?

◦ Is this really a liability^[10]?

Charity response:

- “The projects are those the Australian entity has approved for funding, which occur in-field or on ship, relating to health care services, capacity building and sustainable development aid to those without access in developing nations.
- Funds are sent and used directly in country and the Australian board have a monitoring and oversight role.
- Because these funds are expected to be liquidated within a year (or the period of a field service), we classify them as (current) liabilities.”

Reviewer’s comment: The comment was not about the current non-current distinction, but whether the item was even a liability.

• The directors signed the accounts on 15 March 2020, well after COVID-19 had begun. Yet there is no mention of it in the accounts.

Charity response:

- - “The Australian Government declared the novel coronavirus (COVID-19) outbreak a global pandemic 12 March 2020
  - Our website is regularly updated with how we are responding to COVID-19.”

Reviewer’s comment:

1. 1. The accounts were signed after the declaration.
  2. And the directors’ did not need to wait until the formal declaration by the Australian Government – the first warning in Australia occurred nearly two months earlier.)
  3. The directors say, in Note 15 in the accounts, that they ‘are not aware of any significant events since the end of the reporting period.’ To any reasonable person, COVID-19 was a ‘significant event’.

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^[11]:

Charity response:

- “Yes all directors for the 2019 calendar year approved the Financial Report 2019, and the report was subsequently signed by the Chair 15^th March 2020.
- The composition of the board at the time was correctly noted on ACNC and ASIC websites and on our website.

Reviewer’s comment: The comment was not about the approval of the Report, nor about whether the board was correctly shown on the website and the Register, but about the fact that we can’t see who approved the accounts.

Charity response: “Two persons and roles are cached together in the above”

Reviewer’s comment: We did not ‘cache’ this information. It was a direct capture (‘snip’) of what was on the screen at the time.

Charity response 1 September: “The majority of our directors are non-executive directors. Also, both the Chair and Deputy Chair are both non-executives. Read more:

https://mercyships.org.au/about/#our-organisation”

Reviewer comment: 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.

Charity response: “Yes the board, is responsible to 114 Australian members. Read more: https://mercyships.org.au/about/#our-organisation”

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.

Charity response: “Yes Mercy Ships is reliably able to measure the fair value of volunteers services, and in recognition of the Australian volunteer actual hours worked, Mercy Australia has elected to recognise these services of Australian volunteers within our accounts as noted $2,513,765 during the 2019 year.”

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^[12].

Charity response: “Additional information presented to members during AGM 2019 included the following income expenses and percentages for the year ended 31 December 2019:

Reviewer: Sorry, but the picture supplied by the charity is not displaying properly. However, you can see it here: Download: 2019 Summary Statement of Income and Expenses https://mercyships.org.au/wp-content/uploads/2020/08/summary-Statement-of-Profit-or-Loss-and-Other-Comprehensive-Income-for-the-year-ended-31-December-2019.pdf

Reviewer’s comment: This is information that was available to the 114 members, not the thousands of donors.

Which ‘Mercy Ships projects’ benefited?

Charity response: Additional information presented to members during AGM 2019 included the following:

Projects that directly benefited from our Australian funding during the 2019 calendar year in Guinea and Senegal are as follows:

Reviewer: Sorry, but the diagram did not transfer properly. However, you can see it under the heading ‘Impact 2019’ here: Read more: https://mercyships.org.au/about/#our-impact

Download the 2019/20 Senegal Field Service Report.

https://mercyships.org.au/wp-content/uploads/2020/08/Senegal-Report-2020_LO.pdf

Download the 2019 Annual Programs Report.

https://mercyships.org.au/wp-content/uploads/2020/08/MSAU-Annual-Programs-Review-2019.pdf

Reviewer’s comment: This information does not make up for the lack of information in the Financial Report 2019.

How did the money get there? How did they ensure that the money was used for the purpose for which it was given?

Charity response: “We send funds direct to our hospital ship’s account in country in Africa, and the Australian board exercises oversight and monitoring of how the Australian funds are spent and accompanying impact.

Operationally in Australia we adhere to the External Conduct Standards (ACNC) which are a set of standards that govern how a registered charity manages its activities and resources outside Australia.

Reviewer’s comment: This information does not make up for the lack of information in the Financial Report 2019.

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: “2019 impact from project outputs and immediate outcomes are as follow, and the downloadable reports below will provide further insights:

Hospital | Surgical Medical Services
1,819 surgeries were performed across the following specialities:

• 481 Maxillofacial, Head and Neck surgeries
• 158 Reconstructive Plastic surgeries
• 556 Ophthalmic surgeries
• 478 General surgeries
• 85 Orthopaedic surgeries
• 61 Women’s Health surgeries

Hospital | Non-Surgical Medical Services
• 28,556 Dental Care procedures
• 203 Palliative Care encounters

Medical Capacity Building Mentoring
• Paediatric General Partner Unit Mentoring Program (PUMP)
• 15 Burns PUMP participants
• 10 Maxillofacial PUMP participants
• 12 Surgeon Mentoring participants
• 7 Anaesthesia Provider Mentoring participants
• 44 Surgical Nurse Mentoring participants
• 8 Clubfoot Project participants
• 51 Dental Students Mentoring participants

Medical Capacity Building Courses
1,227 course participants and 150 mentoring participants across the following specialities:

• 93 ‘SAFE’ Obstetric Anaesthesia Course participants
• 50 ‘SAFE’ Paediatric Anaesthesia Course participants
• 137 Primary Trauma Care Course participants
• 92 Essential Pain Management Course participants
• 44 Essential Surgical Skills Course participants
• 175 Safe Surgery Course participants
• 37 Palliative Care Course participants
• 14 Clubfoot Ponseti Method Course participants
• 63 Ophthalmic Course participants
• 23 Biomedical Technician Training Course participants
• 21 Sterile Processing Course participants
• 35 Nutritional Agriculture Course participants

Infrastructure Projects
• HOPE (Hospital Outpatients Extension Centre) in Guinea and Senegal
• Dental Clinic in Guinea and Senegal

Hospital Chaplaincy

• 1,009 One on one Hospital Chaplaincy Sessions

Impact and update reports are sent to donors at least twice each year, to keep them informed.

Download the 2019/20 Senegal Field Service Report.

Reviewer’s comment: We invite the reader to compare this information with the industry-accepted explanation of ‘impact’ that we provide above.

Charity response

We sent the member a draft of this review. Their responses have been included above.

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? ↑
The ACNC implies, therefore, that it is a ‘legitimate’ charity. But this is not correct – as the ACNC itself points out, registration is voluntary. ↑
The ACNC’s information (in its article above) is not correct for the Chrome browser; it does not have ‘https’. ↑
The donation page, however, says that all donations are tax-deductible. As does the website footer:They get it right in the FAQs though:. ↑
‘When Helping Hurts by Brian Fikkert and Steve Corbett says this about sharing the Gospel: ‘A host of contextual issues determine the best manner and the appropriate time to present the gospel verbally, particularly in militant Muslim or Hindu settings. But without such a presentation, it is not possible for people to be personally transformed in all their relationships, which is what poverty alleviation is all about [Kindle Locations 1262-1264, Moody Publishers]. ↑
Try and go to their website, and you are immediately redirected to the Australia website! ↑
There’s also an annual report on the Register, but it too, at least in its glossy part, is all about the global effort. ↑
Australian Accounting Standard AASB 101, www.aasb.gov.au ↑
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. ↑
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]. ↑
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? ↑
This is a contravention of the Accounting Standards (specifically AASB 101). ↑

PUBLISHED: 01/09/2020 BY: Ted Sherwood IN : Charities, Charity reviews
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Mercy Ships

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