Archived: Praxeis: charity review

This is a charity review of Praxeis, an organisation that seeks donations online, and is a member of Missions Interlink. (Including the answers to the questions that the Australian charity regulator, the ACNC, suggests that you ask.)

For the previous review, see here.

Are they responsive to feedback?

• I sent them a draft of the review. Like the last two years, they did not respond.

Is Praxeis registered?

• Yes, as a charity.
• Also as a public company (a company limited by guarantee).
  • It is permitted to omit ‘Ltd/Limited’ at the end of its name.
• Praxeis was ‘Birthed and commissioned by’ Crossway Baptist Church Inc., and there is nothing to indicate on either website that the connection has been severed^[1].
• Praxeis operates, per the ACNC Register, in seven states (up from five last year). It says in the AIS 2017 that it intends to fundraise in four of those states, and seeks money online, but doesn’t explain why it has no fundraising licences.

What do they do?

• These are their ‘core activities’:
  • continual, passionate and persevering prayer,
    always sharing the good news of Jesus with lots of people,
    inviting people to the exciting and challenging journey of following Jesus (making disciples),
    creating simple and reproducible communities that live out the message of Jesus (simple Church),
    creating a movement of people that virally spread the message and multiply.
    These are the things we focus on and do again and again.
    • Sounds like what an evangelical church, like Crossway, should be doing. So why is it being done by a para-church organization?
• Although not mentioned under ‘About’, and therefore easy to miss, more specific information can be found under the main menu item ‘hubs’.
• The ACNC Register says that they operate in eight countries overseas. For only three of them is there information on the website.

Do they pay their directors?

• There is insufficient public information to say.

Do they share the Gospel^[2]?

• Yes

What impact are they having?

• Nothing found.

What do they spend outside the costs directly incurred in delivering the above impact, that is, on administration?

• All the expenses may include some administration, so there is no clear way to even estimate the figure as defined above.

Can you get a tax deduction?

• No

Is their online giving secure?

• PayPal is used, so yes.

Where were your (net) donations sent?

• Although the AIS 2017 reports that no grants or donations were made, there is an $8K ‘Giving and donation expense’. The destination of this money is not disclosed.

Is their reporting up-to-date?

• Yes (seven months after their year-end, on the last day allowed, and about the same time as the previous two years).
  • But if you are considering a large donation, I would ask for more up-to-date financial information – the accounts are for a year end that is now nearly 11 months ago.

Does their reporting comply with the regulator’s requirements?

• AIS 2017: No
  • ‘Donations and bequests includes ‘Grants’ and ‘Other Income’, yet zero is shown for ‘Grants and donations…’
  • The description of activities is the same as for the previous two years.
  • Praxeis says that it does not intend to fundraise, then lists four states where it is going to do it.
  • ‘Online’ is missing as a place where they are going to fundraise.
  • There is an item ‘Giving and donation expense’ in the Financial Report The financial statements are not an ‘Annual Report’ as that term is meant by the ACNC.
  • 2017, yet nothing is reported for ‘Grants and donations made…’
  • Outcomes are not reported.
• Financial Report 2017: No, a true and fair view is not shown^[3].
  • Like last year,
    • The directors’ belief that ‘there are no users who are dependent of its general purpose financial statements’, that is, that all its users, present and prospective can ask for a report tailored to their needs, is not plausible. This is a charity with 35 staff, a turnover a little less than a million dollars, and operating in seven states and eight overseas countries.
    • Some of the figures in the 2016 column, without explanation, are not the same as they were when reported in last year’s Financial Report.
    • The relationship between Praxeis and Crossway is more than landlord and tenant, yet that’s all that is disclosed.
    • ‘Employee benefits’, ‘including wages and salaries’ are (correctly) classified as a liability, yet ‘staff support donations made to ministry staff from which salaries have not been paid at year end’ are classified as a contingent liability. Are not liabilities therefore understated by $219K?
    • Using only three lines to classify the $1.92 m of cash flows is insufficient disclosure.
    • The second largest expense (after ‘Employee benefits expense’) is the unexplained ‘Ministry expense’ (the entire charity is a ‘ministry’).
    • There are other things that support my disagreement with the directors that a true and fair view is shown^[4].

What was the financial situation shown by that Report?

• The surplus as a percentage of revenue declined sharply from 8% to negative 1%.
  • ‘Employee benefits’ increased 8% and ‘Ministry expense’ (whatever that is) increased 56% (or 71% if last year’s figures are used).
• Note 1 (i) reports that some of the cash given to ‘ministry staff’ may not have made it into the company’s bank account.
• Gifts and donation expense is <1% of revenue.
• The combination of term deposits and ‘Cash and cash equivalents’ represents eight months of revenue (the same as last year).

What did the auditor say about the last financial statements?

• The auditor, Peter Shields, of Saward Dawson, Chartered Accountants, issued a ‘clean’ opinion.
• Before deciding how much comfort to take from this
  • Read here and here to draw the right conclusions from such an opinion.
  • Re-read the ‘Financial Report 2017’ section above.
• The potential understatement of revenue (see Financial Report 2017, above), was again thought by the auditor to be ‘of such importance that it is fundamental to users’ understanding of the financial report’ [AAS 706, paragraph 6, www.auasb.gov.au], as to warrant a separate paragraph in his report (‘Completeness of Income’).

If a charity, is their information on the ACNC Register complete/correct?

• No
  • ‘Who the Charity Benefits’ is blank.
  • The financial statements are not an ‘Annual Report’ as that term is meant by the ACNC.
  • ‘Phone’ and ‘Website’ are blank (but neither is compulsory).

What choices do you have in how your donation is used?

• The ‘Give’ page implies that there are different purposes and different ‘workers’ that you can give to, but these are not listed anywhere on the website.

Who are the people controlling the organisation?

• Not shown on the website, but from the ACNC Register:
  • Hiew Siong Chang
  • James Hall
  • Francis Hoe
  • David Lawton
  • Daniel Muggeridge
  • Dale Stephenson
• There has been no change since the last review.
• Dale Stephenson is also a director of Crossway (and the other two Crossway charities).
• David Lawton is also a director of Aussies Responding to Kids (ARK) Limited.
• Unless Hiew Chang, the Secretary, is a member of the board, he should not be included on the Register.
• There are 10 directorships in the name ‘James Hall’. And the register only covers charities, not all not-for-profits, and of course doesn’t include for-profit organisations.  Therefore, if after eliminating the charities for which Praxeis’ James Hall is not a director, you are left with the total being more than a handful, it would be legitimate for you to question whether his ability to discharge his fiduciary responsibilities is threatened.
• The directors are answerable to the members of the company. But if the number of members is similar to last year (the Directors’ Report has been omitted this year), and with directors required to be members (the constitution), there is no accountability via the membership.

To whom is Praxeis accountable?

• On most of the main menu pages, for instance here, these two logos are shown:

• As a charity, Praxeis is accountable to the ACNC.
  • The ACNC’s ‘Charity Tick’, above, is used in support of you giving to them. And rightly so, because it would be unwise to give to a charity that is unregistered. The ‘tick’ also means Praxeis’ AIS is not overdue, and no compliance action has been take against it.
    • But it means no more than this.
• Praxeis is, as they claim above, also in support of you giving, a Member of Missions Interlink.
  • See the section Activities in this review for one opinion on the strength of this accountability.
• As a company, Praxeis is still also accountable to ASIC for some things.

1. Praxeis nominates Crossway as a ‘related party’, but says that the only relationship is the payment of ‘nominal rent amounts’ paid to Crossway [Note 12, Financial Report 2017]. Crossway does not consolidate Praxeis’ accounts with its own. ↑
2. “Good living and social concern are important [to the cause of evangelism], but they are not uniquely Christian graces…I’ve met a lot of fine Hindus, Muslims and atheists. Just living the life is not going to bring someone to Christ. There is much more to it than that. We must help people, certainly, but we must also share with them why we are motivated to do so. We must stand against injustice, poverty and need, but we must at the same time point to the One who brings justice and who can meet the deepest need. Until they know our reasons, how can they come to know our Lord?” [Dan Armstrong, the Fifth Gospel: The Gospel According to You, Anzea Books, pp. 13-14.  ↑
3. 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. ↑
4. ‘Other comprehensive income’ is missing from the Statement of Changes in Equity.   

There is no explanation for why the name of the audit firm is the most prominent name on the cover of a report that is both about Praxeis and belongs to Praxeis.

The expenses are a mixed classification.

For a charity with 20 employees (one more than last year), why is ‘Property, plant and equipment’ just $3K of computers? Is it because of cross-subsidisation by Crossway?

A Crossway director serves on the board of the charity from which Praxeis earned $23K in fees, Aussies Responding to Kids (ARK) Limited, yet it is not mentioned the under ‘Related Parties’.

Some employee benefits are shown under ‘Provisions – Employee Provisions’, some under ‘Other liabilities’. ↑