Archived: Mukti Australia Inc, charity review

This is a charity review, a review for those with an interest in the Australian charity Mukti Australia Inc (MA). Also reviewed is MA’s fund, The Trustee For Mukti Australia Overseas Aid Fund (MAOAF).

They are reviewed together because they form an ACNC ‘reporting group’ the Mukti Australia_ACNC Group. This means that they are subject to ‘joint reporting’: one Annual Information Statement (AIS) and one Financial Report.

The review is structured according to the charities’ entry on the ACNC[i]Register (MA and MAOAF), and its purpose is to supply some information extra to what is there, information that may be helpful in your decision about MA and its fund.

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 12 April 2016, and invited them to comment. They responded quickly, and the ensuing discussion led to their comments here and throughout the review:

Dear Ted,

Thank-you for continuing the conversation with us about your review of Mukti Australia Inc and its subsidiary, the Mukti Overseas Aid Fund.  We particularly appreciate that our feedback has been welcomed during this process and that the content of the review has improved as a result.    

We too are continually seeking to improve, and will be addressing some of the matters you have raised such as business names and fundraising registration in more states shortly.  

The largest part of the review is dedicated to the content of our financial statements.  We take this opportunity to make some more general comments here about our approach to their preparation to also assist those interested in our financial statements and in the financial statements of other charities.  We have prepared special purpose financial statements.  We will continue to assess the needs of our users (including potential users) and prepare special or general purpose financial statements accordingly.  

We have prepared our special purpose financial statements in accordance with a select number of accounting standards (AASBs).  These accounting standards are clearly disclosed in note 2 and are consistent with our reporting requirements.  We have also applied the AASB Framework for the Preparation and Presentation of Financial Statements which stipulates that the financial statements need to be relevant to users, where relevance of information is affected by its nature and materiality. 

When we determine whether or not something should be disclosed in the financial statements, the decision is usually about materiality; about whether its omission would influence the economic decisions that users of the financial statements make.   We will continue to assess this each time we report and will vary our disclosures accordingly.  Each and every disclosure takes time and therefore costs money (both at an organisational level, but a cost that is also reflected in our auditor fees).  As encouraged by the International Accounting Standards Board, if particular level of detail is immaterial, we tend to lean towards non-disclosure.  Similarly, we avoid the costs of voluntarily adopting the reporting requirements of legislation that does not apply to us, such as the Corporations Act. 

While you have been reviewing Mukti Australia Inc, we have completed our 2015 financial statements.  We have not adopted many of your suggested inclusions.  This is not because we were seeking to avoid transparency or accountability but simply because that level detail is not required of us.   We are a small organisation, reliant on the generosity of our donors, employees and volunteers.  We could spend hours upon hours going over and above what the regulators require of us, perfecting our financial statements.  We choose not to.  Financial statements are not why we exist.  We prioritise using the time and the resources under our stewardship on activities that create opportunities for disadvantaged women and children in India and Sri Lanka to have real hope and meaningful lives that realise their God-given potential.

We are also conscious that even the most perfect financial statements, with best practice disclosures can be very difficult to read and so easily misunderstood.  Arguably this is largely a product of the accounting standards but behind them also sit legal structures and tax concessions, creating legal requirements that compel organisations to act in specific ways.  There may also be additional requirements of strategic partnerships, significant donors or the realities of the places in which they work.  These are the types of nuances that are generally not readily apparent within financial statements or other publicly available information – as your reviews reveal from time to time.  So we would always encourage those particularly interested to contact charities directly to understand who they are, what they do, why they do it and what difference they are making.  It should lead to a much better understanding. 

Yours faithfully,

Claire Harris, Treasurer

On behalf of the Committee

Reviewer comment:  It is not only ‘the content of the review’ that has improved, but the accuracy and completeness of the MA (and MAOAF) entries on the ACNC Register.

Organisation of this review

• The first part of this review is organised according to the headings in the Register entries (MA, MAOAF). 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.)
     • MAOAF is only included where it differs from MA.
• 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 name.
• MA website. (No separate site for MAOAF.)
• Facebook.  (For some reason they have left the old page)
• YouTube, and Twitter.
• State government fundraising licence registers.
• No reviews on Glassdoor

REGISTRATION DETAILS

Entity Subtype

• A subtype that doesn’t suggest that the charity shares the Gospel.
  • Is the message under the type an ACNC mistake?
• The primary purpose in the constitution is similarly quiet on Christianity:
  • To provide aid and relief in a holistic manner to needy persons in India and elsewhere which will result in the relief of poverty, suffering, distress and misfortune.

CHARITY DETAILS

Legal Name

• MA is a Victorian incorporated association (No. A0040914J).
• Not to be confused with Mukti for Social Development Incorporated, a not-for-profit that appears to be a charity that but has not registered as one (and is therefore not eligible for any tax concessions.)
• MA is a representative of Mukti Mission in India.
  • Ministry response: “Not in a legal sense. We are independent organisations that cooperate, with a memorandum of understanding in place.  The mission in India appreciates our support and allows us to contribute to an International Council.”
• What is the relationship between the ‘international offices’ and MA?
  • Ministry response: “Agreement of cooperation.”

Other Name(s)

• Missing here is the trading name Mutki Australia. However, this does not entitle MA to do business under this name.
  • On the internet, MA uses the names Mutki Australia and Mutki. This would seem to contravene section 23 of its enabling legislation (the Associations Incorporation Reform Act 2012), a section that requires the full name to be used ‘in all its notices, advertisements and other official publications’.
• MAOAF: Missing here is the trading name Ramabai Mukti Mission Australia. See comment above.

Charity ABN

• Tax deductibility: Yes, you can claim a tax deduction for a donation to MA.

Charity Street Address

• Postal address, from the website:  the same.

Phone

• If calling from outside Victoria, you will need to put 03 in front of this number.

ANNUAL REPORTING

• AIS 2014
  • What is here is a bit misleading: indeed, no AIS 2014 is required from MA; however, the information is still to be provided, but just as part of a Group AIS – see the opening paragraph.
  • The Group AIS gives basic financial information about the group.
• Financial Report 2014
  • Again, what is here is misleading: although no Report is required for MA, the information is provided, but as part of a Group Financial Report.
  • The Report was signed four months after the year end.
  • It was then lodged three months after that, one month late.
  • 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
  • Not on the website.
  • But in the constitution. (See Charity’s Document (sic), below.)
  • MA also has explicit values.

 Date Established

• The History is under ‘Our Story’ tab, here.

Who the Charity Benefits

• Vision
  • Hope and a brighter future for women and children in India and Sri Lanka
    • No evidence of anything done in Sri Lanka.
      • Ministry response: “Our work in Sri Lanka started February 2016.  Evidence will be forthcoming.
• Mission
  • Our mission is to create opportunities for disadvantaged women and children in India and Sri Lanka to have real hope and meaningful lives that realise their God-given potential
• Activities (What did MA do?
  • In answer to the question ‘Describe how your reporting group’s activities and outcomes helped achieve the members of your reporting group’s charitable purpose(s) in the Group AIS 2014:
    • We supported the work and objectives of the Ramabai Mukti Mission of Kedgaon, Pune District, Maharashtra, India by funding and working with Australian based overseas aid development funds and their projects.
      • Nothing particularly about 2014.
      • On the Victorian fundraising licence register the beneficiary is recorded as Pandita Ramabai Mukti Mission India.
  • See ‘Our Work’ on the main menu.
• Outcomes (What did MA deliver?)
  • Nothing systematic found.
  • See the ‘Achievements’ tab here, and ‘News’ and the blog on the home page, for some evidence of outcomes.
• Impact (How were people’s lives improved?)
  • Nothing systematic found.
  • See the ‘Achievements’ tab here, and ‘News’ and the blog on the home page, for some evidence of impact.

Size of Charity

• Although MA is ‘Small’, MAOAF is ‘Medium’, therefore defining the Group as ‘Medium’. Total Group revenue is $647K, well under the threshold for ‘Large’.

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.
  • You may therefore need to ask for more up-to-date information.

WHERE THE CHARITY OPERATES

Operating State(s)[ii]

• Given that it operates interstate, there is a strong argument that MA, as a registrable Australian body, needs an ARBN. It doesn’t have one.
• A representative for WA and the NT (Peter Warren in Perth) is the reason that WA is shown.
  • No fundraising licence is held in WA though.
• Although the WA/NT representative is the only one on the website, there are (or were), according to page 10 of the Annual Report (see above), also representatives in Tasmania, SA and Queensland. Why are they not included with Victoria and WA?
• MA prominently displays both ‘Donate’ and a ‘Sponsor’ buttons at the top of each webpage.
  • It doesn’t have a licence in the other five states that have a licensing regime.
    • Apart from exemptions, whether it needs one depends on whether those states think that MA, by calling for donations publicly, is ‘fundraising’ in their territory.

Operates in (Countries)

• Why isn’t India shown here? The Treasurer describes the Australian office as ‘Local Operations’ in her report in the Annual Report, a staff member worked in India for several months, MA have included India in the ‘Country listing’ in the AIS 2014, and the charity receiving MA money has recorded that it was MAOAF that sent money to India.
  • Ministry response: “This is a consequence of the tax structure that was in place at the time.  MAOAF is a public ancillary fund and is required to make distributions to other Australian based charities only.  In the 2014, it worked through another Australian charity (a 9.1.1 registered overseas aid fund) to fund the programs in India.  Technically it was the partnering charity who conducted the activities in India, not MAOAF.  At the time MA was the Australian based administrative arm that conducted all of its activities in Australia.  In 2015, MA was endorsed as a deductible gift recipient in its own right.  As a result we no longer need to work through another charity (MAOAF can make distributions back to MA) and now fund and manage the Indian (and now Sri Lankan) projects directly through MA.
    • Reviewer comments: (1) If neither MA or MAOAF conducted activities in India then why, in the comparable section in the AIS 2014, ‘Country listing’, did MA include India? (2) Page 3 of the Annual Report (see above) names the ‘partnering charity’ as being Global Development Group. There is nothing on its Register entry or on its website to indicate this recipient of MA/MAOAF money is a Christ-centred organisation.

CHARITY’S DOCUMENT (SIC)

• An Annual Report/Review can be lodged on the ACNC Register, but MA hasn’t done this.
• It does have one though: see the right hand side here.
• MAOAF:
  • The trustee changed its name from Ramabai Mukti Mission Australia Inc to MA on 1 July 2011.

RESPONSIBLE PERSONS

No. of Australian ‘responsible person’ positions[iii]

Louise Blakston        This function was not working at the time of publication

Glenda Cresswick

Glenda De Jager

Glenda De Jager

Claire Harris

Ross Hohl

Rowland Ward

• De Jager is duplicated.
• But is omitted from the list on page 7 of the Annual Report.
• If Claire Harris was a director when the Officers’ report was signed on 30 April 2015 she has been omitted from that report.
  • Ministry response: “Claire’s name was inadvertently omitted from the report.  She has actually been on the committee for a number of years.
• Under ‘Position’, the Chairman should be ‘President’, and there should be a Vice-President [the constitution, clause 44].
  • Ministry response: “The information was provided to the ACNC when an earlier version of our association rules, with different titles, were in place.   We will correct this in due course.”

(End of review of the ACNC Register information)

 Latest financial report – detail

(I use the 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.)

• The directors’ belief that MA is not a ‘reporting entity’, a choice that allows them to make less than a full disclosure about MA’s finances and operations, is implicitly a statement that any user is able to command the preparation of a financial report tailored to their needs. That’s all the current donors ($557K and 86% of revenue), and all prospective donors. Do the directors realise they are saying this?
• Nowhere is it disclosed which entities are controlled by MA.

Officers’ report (page 1 of the Financial Report)

• Sections included in an industry standard report (see the last footnote), but absent here:
  • Objectives (short-term and long-term)
  • Strategy for achieving the objectives
  • Performance measures
    • Ministry response: “The industry-standard report referred to is based on requirements for companies limited by guarantee when reporting under the Corporations Act.  This is a common structure for charitable companies, and many charitable companies have continued to prepare this report even though it is no longer required under the ACNC.  This was particularly common for the 2014 year because it was the first year charitable companies started reporting under the ACNC Act instead of the Corporations Act.  At the time there was considerable doubt that the ACNC would continue so many charitable companies only made minimal changes to the structure of their financial reports, assuming that they would be preparing reports under the Corporations Act again for the 2015 year.  It will be interesting to see how many will continue to report this level of detail now that the ACNC’s future is more secure.

It has never been required of Incorporated Associations in Victoria (and other states and territories, as far as we are aware) and so it is far less common to see comments about objectives, strategy and performance measures amongst associations like MA.”

What was earned, what was consumed during the year – the Statement of profit or loss and other comprehensive income (page 3 of the Financial Report)

Revenue

• ‘Investment income’: There are no ‘Investments’ in the Statement of financial position.
  • Ministry response: “Our statement of financial position refers to available for sale financial assets (the term used in the accounting standards) which Note 8 shows are investments in shares and managed funds.”
• ‘Short-term visitor fees should be explained.
  • Ministry response: “The mission in India receives visitors from Australia, including some organised group trips.  When MA facilitates those visits, we charge a fee which shows as income to the organisation.” 
• ‘Merchandise sales’: why then is there no inventory in the Statement of financial position?
  • Ministry response: “The inventory held at year end is insignificant in value – due to cost and timing – and has been omitted from the financial statements because it is immaterial (in our assessment and in the assessment of our auditor).  We participate in a conference between Christmas and New Year, that means that most of our inventory is sold before the end of the financial year.  A typical accounting policy for inventory is to value it at the lower of cost and net realisable value.  We only pay for the raw materials, and have a fantastic team of volunteers who make bags and other items for MA to sell.  This keeps the cost of our inventory very low (maybe $100-200) at year end.”   

Expenses

• Expense classification is partly functional, mostly by nature.
• ‘Employee benefits expense’ $203K:
  • This is 31% of revenue.
  • Assuming part-timers work 50%, the expense represents $58K pa per employee.
• ‘Overseas project distributions’ $237K:
  • This is 37% of revenue, or 43% of ‘Donations’. The first figure is calculated and reported by MA themselves in the Annual Report (see above).
    • Ministry response: “In the 2013 year, ‘Overseas project distributions’ were $410k.  This was 73% of revenue or 97% of donations.  The percentages from year to year are affected by the timing of expenses and should not be considered in isolation.  We recognise gifts when received and the associated “overseas project distributions” as an expense when we have no control over those funds – prior to the 2015 year this was typically when distributed to the 9.1.1 Overseas Aid fund who then sends them on to India.  This is consistent with the requirements of the accounting standards.  We only send funds when India is ready for them at the other end, which leads to timing differences that could cause users such as yourself to misunderstand the proportion of donations that gets through to the ultimate beneficiaries over a period of time.  The Tax Deductible reserve tracks how much we have set aside to go to India (after allowing for our administration costs), so the movement in that reserve indicates additional funds  (2014: $136,757) set aside from donations in the 2014 year that will be sent on in the future.  If this timing difference is taken into account, the actual percentage of donations given and to be given to India was closer to 74% in the 2014 and typically sits around that 75% mark.
  • You might consider sending your donation direct to the Indian organisation
  • These are the amounts received in India (at historical exchange rates):
    • February 2014: $1250
    • Sometime between 1 April 2014 and 31 March 2015:
      • $327,284 (assuming 30 September 2014 receipt)
      • $246,801 (ditto)
  • Although MAOAF was the ‘donor’, their address was ‘4^th Floor, 343 Little Collins Street’. Why is this?
    • Ministry response: “As indicated above, this is the 9.1.1 Overseas Aid fund organisation we worked with.  We now (from July 2015) directly fund the work from MA.”
    • Six of the 15 individual Australian donors also sent donations from this address.
  • The Indian organisation held $70K in cash (presumably in a bank) at 31 March 2014. This is a sizeable amount in India.
• A new Christian – and some not so new – may well not know the meaning of ‘deputation’.
• Expenses disclosure that are usually expected by donors, but absent here:
  • Fundraising
  • Administration
    • Both these expenses are included in the Financial Report included in the Annual Report (page 26):
      • Fundraising Costs   3%     $17K
      • Administration       27%   $169K
        • Ministry response: “These expense lines are not required by the accounting standards and so represent your view of an industry standard, not a legal requirement.   We have deliberately steered away from using the terms “fundraising” and “administration” because they are loaded terms.  There is no Australian standard for what they include, and so in our opinion, are very easily manipulated to present any particular picture the organisation wants.  We wanted to avoid this and the associated temptation for users to compare “fundraising” with “fundraising” from organisation to organisation, blissfully unaware that they are not comparing apples with apples, but with oranges. 

Users of charity financial statements might be interested in this related ACNC Factsheet: http://acnc.gov.au/ACNC/FTS/Fact_administration.aspx

Reviewer comment:  The avoidance of the terms “fundraising” and “administration” in the Financial Report is not supported by their undefined use in the Annual Report.

What’s left at the end of the year – the Statement of financial position (page 4 of the Financial Report)

• Note 5 (Cash and cash equivalents): where’s the required Gift Fund?
  • Ministry response: “We maintain a gift fund, and disclose the balance of it in Note 19 where we disclose the activities of the fund in more detail.”
• Note 8 (Available-for-sale financial assets): why invest, and then why invest in high-risk assets?
  • Ministry response: “We invest because we think it irresponsible to hold long term non-committed funds in cash (such as proceeds from bequests), losing capital value over time.  We have a considered investment policy appropriate for our long-range investment position and review our position on a regular basis.” 
• Note 9 (Property, plant and equipment): It is unusual, irrespective of the amount, not to identify the nature of plant and equipment.
  • Ministry response: “Computers, office equipment etc.  This level of disclosure is immaterial (insignificant in both nature and value) and not required by the accounting standards.”
• Note 12 (Provisions):
  • Why is annual leave not an employee benefit?
    • Ministry response: “Agree, it should have been.”
  • What are ‘international transfers’? And what are they that they are provisions?
    • Ministry response: “The partner 9.1.1 fund facilitated the projects in India at a cost (set percentage of funds).  The provision allowed for the cost of sending funds set aside for India but not yet sent, via that organisation.  As indicated above, this is no longer necessary because we no longer work through that organisation.”
• Note 13 (Provisions): The heading should be ‘…- employee benefits’.
  • Ministry response: “Agree, it should have been.”

Essential information to go with the figures – the Notes to the financial statements (page 7 of the Financial Report)

• Note 1   General information
  • It would be helpful if the entities controlled by MA were identified.
• Note 2   Significant accounting policies
  • ‘Basis of presentation’
    • There is no mention of the ACNC Act. (It is the ACNC that allows associations to submit the report they have prepared for the state regulator.)
      • Ministry response: “The financial statements have not been prepared with the special purpose of complying with the ACNC ACT.   Note 2, therefore, is correct. The reason for the preparation of the accounts is a key disclosure and it is important that users are aware of this distinction, because there are some slight differences in the requirements of the Victorian and ACNC legislation.  Under transitional provisions, though, the ACNC does not require Victorian Incorporated Associations to also prepare another set of financial statements to meet the ACNC requirements.  Instead the ACNC accepts and publishes our financial statements as is and deem them to be sufficient to meet our financial report obligations under the ACNC.   This is a welcome concession on their part, designed to reduce unnecessary red-tape and associated cost to charities.
    • Is it really the case that all donors and potential donors, for instance, can get a financial report tailored to their particular needs? (This is the implication of not producing general purpose financial statements.)
    • ‘Historical cost convention’: MA doesn’t have any assets of the last three types.
  • ‘Revenue recognition’:
    • ‘Sale of goods’ is ‘Merchandise sales’ in MA.
    • ‘Distribution income’ is ‘Investment income’ in MA.
  • ‘Income tax’: The Group is not a charitable entity.
    • Ministry response: “Agreed. However all entities within the group are charitable entities and so the intent of the note is correct.
• Note 19 Mukti Australia Overseas Aid Fund
  • Why don’t the line items match those of MA?
    • Ministry response: “The disclosures in this note are to meet the requirements of the Associations Incorporate Reform Act 2012.  It requires disclosure of income, expenditure, assets and liabilities of any trusts or funds under the trusteeship of the Association.  We tailored the expenditure lines to match more closely the activities on the fund in isolation because we felt it would be more useful to users.”
• Notes normally included in industry-standard reports, but absent:
  • Contingent liabilities (including, if there were none, a statement to that effect)
    • Ministry response: “This is required under AASB 137 which has not been applied.  At any rate, there were none.”
  • Commitments (including, if there were none, a statement to that effect)
    • Ministry response: “This is required by AASB 116 and 117, neither of which has been applied.  Again there were none.”

An independent opinion on the financial statements – the Independent Audit Report… (the last page of the Financial Report)

• Although this is a ‘clean’ opinion (read here and here to draw the right conclusions from this), the auditor has mistakenly reported on MA’s statements, not those of the consolidated entity.

Membership of accountability organisations claimed

• Mission Interlink’s ‘Accredited Member’ logo is in the footer of each webpage.
• Membership is also claimed on page 3 of the Annual Report (see above).
  • Membership confirmed.
• The Annual Report also claims that the charity ‘is certified as complying with the Missions Interlink Standards’.  On what grounds can they make this statement? Members get their membership renewed if they complete a ‘Member Declaration’ – there is no positive certification.

(End of review)

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

[ii] 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.’

[iii] 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.