Archived: Praxeis: mini-charity review

Mini-charity review of Praxeis, an organisation that seeks donations on the internet, 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?

• Before publication, I sent them the review for comment. Like last year, 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.
• Although they don’t mention it, either on their website or in the Financial Report 2016, Praxeis is a ‘mission arm’ of Crossway Baptist Church Inc.
  • The church controls Praxeis but has, without explanation, chosen not to consolidate Praxeis.
• Praxeis operates, per the ACNC Register, in five states (but not overseas). It appeals for money on its website. It still has no fundraising licences in states that have a licensing regime that is applicable to charities^[1].

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.
• Although not mentioned under ‘About’, and therefore easy to miss, more specific information can be found under the main menu item ‘hubs’.
• The description of ‘activities and outcomes’ in the Annual Information Statement (AIS) 2016 is identical to last year, so not very helpful in telling us what they did in 2016:
  • The principal activities of the company during the financial year were sharing the Christian message of Jesus Christ in order to make disciples of Jesus Christ, training Christians to plant churches throughout Australia and the world, assisting the leaders of planted churches to run and grow the church and providing ongoing ministry training, mentoring and support for church ministers and leaders.

Do they pay their directors?

• There is insufficient public information to say.

Do they share the Gospel ^[2]?

• Yes

What impact are they having?

• There is one incidental mention of ‘impact’ on the website, and nothing in the Financial Report 2016. (There is no mention of the Crossway Annual Report.)

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

• There is no expense item ‘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?

• The AIS 2016 reports that no grants or donations were made.

Is their reporting up-to-date?

• Yes (seven months after their year-end, four days before the (extended) deadline, and four days earlier than last year).
  • 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 over 15 months ago.

Does their reporting comply with the regulator’s requirements?

• AIS 2016: No
  • The financial statements are not general purpose financial statements, as stated here, but those where the assumption is that anybody interested in the charity can request a financial report tailored to their needs.
  • Outcomes are not reported.
  • There is an item ‘Giving and donation expense’ in the Financial Report 2016, yet nothing is reported for ‘Grants and donations made…’
  • The figure for ‘Other income…’ does not match the same figure in the Financial Report 2016.
• Financial Report 2016: Questionable^[3].
  • The directors’ belief that ‘a special purpose financial report’ is acceptable, a choice that allows them to make less than a full disclosure about Praxeis’ 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 people who they speak to around Australia and all the donors and potential donors who read the website material. Do the directors realise they are saying this?
  • The relationship between Praxeis and Crossway Baptist Church is close, and Praxeis acknowledges that the church is a related party, but the nature of the relationship is not identified.
  • The note in Note 10 (‘Other liabilities’) says that donations are received and passed on to ‘staff’. This suggests that revenue is overstated by the amount received for these staff (money received for a third party is not revenue).
  • The money yet to be paid to staff is treated in three different ways:
    • Note 10 says that the liability ‘General support’, ‘relates to staff support donations to be paid to exiting staff.’
    • The ‘Staff Support Reserve’ ‘are funds donated to the ministry from which salaries have not been paid at year end.’
    • Note 12 says that there is a contingent liability for ‘staff support donations made to ministry staff from which salaries have not been paid at year end.’
    • The relationship between the employees (19 in the AIS 2016) and workers to whom you can give is not explained.
  • 93% of the revenue is in three items the meaning of which is not explained.
  • The second largest expense (after ‘Employee benefits expense’) is the unexplained ‘Ministry expense’ (the entire charity is a ‘ministry’).
  • The ‘Provisions’ Note just repeats what is in the statement. Are these employee benefits?
    • If so, why are there more employee benefits separated in ‘Other liabilities’?
  • ‘Other comprehensive income’ is missing from the Statement of Changes in Equity.

What was the financial situation shown by that Report?

• Revenue increased this year by 19%; however, ‘Employee benefits expense’ increased by 30% (rising from 82% of expenses to 86%).
• This contributed to a decline in the surplus as a percentage of revenue from 11% to 7%.
• 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 (up from seven last year).
• For a charity with nineteen employees, and revenue of $925K, why is ‘Property, plant and equipment’ only $3K?

What did the auditor say about the last financial statements?

• The auditor, Peter Shields, Chartered Accountant, of Saward Dawson, 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 2016’ section above.
• The potential understatement of revenue (see ‘Financial Report 2016’, above), was 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 correct?

• Yes

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
• Two of these directors are also directors of Crossway Baptist Church, a related party.
• Unless Hiew Siong, 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 with only six members, and directors required to be members (the constitution), there is no accountability via the membership.

To whom is Praxeis accountable?

• To the ACNC.
  • Its ‘Charity Tick’ is used on the website 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, also in support of you giving, a Member of Missions Interlink.
  • Confirmed.
  • See the section Activities in this review for one opinion on the strength of this accountability.
• As a company, Praxeis is also accountable to ASIC.

1. The law in this area is not straightforward – is an internet invitation ‘fundraising’ for instance? – and advice varies, so check with the charity before drawing any conclusions. ↑
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. ↑