Archived: Ridley College, charity review

This is a charity review, a review for those with an interest in the Australian charity Ridley College (RC).

It is structured according to the charity’s entry on the ACNC[i]Register, and its purpose is to supply some information extra to what is there, information that may be helpful in your decision about RC.

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 13 January 2016, and invited them to comment. This was their comment for publication: “Ridley College will give consideration to your observations.”

Organisation of this review

• The first part of this review is organised according to the headings in the Register entry. 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 Financial Report.)
• There is then a more detailed comment on the Financial Report.
• Lastly, there is a section Membership of accountability organisations claimed.

Sources

• ACNC Register (including links)
• Google search on the charity’s name.
• RC website.
• RC on FaceBook, Twitter, Vimeo, and a news feed, all on the top right of each web page.
• RC on LinkedIn.
• State government fundraising licence registers.
• www.glassdoor.com.au

REGISTRATION DETAILS

Entity Subtype

• The first subtype is consistent with sharing the Gospel. (Even so, RC has deductible gift recipient status (see Charity ABN, below).
• The ‘Objects’ in the constitution parallel these two subtypes, but with a narrowing to the Anglican way:
  • To provide Theological training in accordance with the Constructive and Evangelical Principles of the Reformation Settlement of the Church of England (sic) for students who are seeking Holy Orders or preparing for Mission Work (sic) or other Christian ministry [paragraph 4.1].
    • There is no one document with this title, so paragraph 5.2 spells out what is meant:
      • For the removal of doubt it is declared that the Constructive and Evangelical Principles of the Reformation Settlement of the Church of England are embodied in the Book of Common Prayer of 1662 together with the form and manner of making, ordaining and consecrating Bishops, Priests and Deacons and in the Articles of Religion.

CHARITY DETAILS

Legal Name

• Between 2007 and December 2015 its name was Ridley Melbourne.
  • This name, or a variation of it, is still being used on the website of one of RC’s ministries, Marketplace Institute (see just below).
• RC is a public company, a company limited by guarantee.
• It is entitled to omit ‘Ltd’ (or ‘Limited’) on the end of its name.

Other Name(s)

• They do not need the first of these names (see Legal Name, above).
• RC has another name that it presents to the public: Marketplace Institute.
  • Whether it needs to register this name depends on whether RC is entitled to an ABN for this activity (Regulatory Guide 235, www.asic.gov.au). Apart from having its own website, the fact that it calls RC a ‘partner’ and conducts events in its own name is evidence that it is so entitled.

Charity ABN

• Tax deductibility: Despite the fact that RC is about advancing Christianity, you can claim a tax deduction for your donation.

Charity Street Address

• No separate postal address on the website.

Phone

• From the website (below the white space on the contact form): 03 9207 4800.

Website

• From a Google search: www.ridley.edu.au

ANNUAL REPORTING

• AIS 2014
  • This is RC’s compulsory Annual Information Statement 2014 (AIS 2014).
  • It gives basic financial information. However,
    • None of the income figures match the income statement, and the total is slightly overstated (by $100K).
    • ‘Employee expenses’ is slightly understated (by $31K).
    • The zero interest cannot be confirmed because the mandatory ‘Finance costs’ is not shown in the income statement.
    • Total expenses is overstated by the same amount as Total Gross Income.
    • The Balance Sheet Extract matches the balance sheet except for a $30 transcription error.
  • There is also basic income statement information in the Community Report 2014 (see Charity’s Document (sic), below). However
    • It reports the income statement’s $263K ‘Surplus for the year’ as a ‘profit’ of only $2,491.
    • Only one of the nine figures explaining that surplus matches what is shown in the income statement.
• Financial Report 2014
  • The report was signed three and a half months after the year end.
  • It was then lodged 10 weeks after that.
  • The coverage of finances in this review is left until the financial report proper (see Latest financial report – detail, below).

ABOUT THE CHARITY

• Statement of Faith
  • Called their ‘Theological Framework’:
    • Ridley College is committed to academically rigorous theological training in the Anglican, Reformed and Evangelical tradition that engages seriously with contemporary culture.
  • See Entity Subtype, above.

Date Established

• A history has recently been published.

Who the Charity Benefits

• Vision
  • ‘To be a leading centre of mission and ministry training delivered in supportive communities through flexible study modes.
• Mission
  • ‘Equipping men and women for God’s mission in a rapidly changing and increasingly complex world.’
• Activities (What did RC do?)
  • From the Description of charity’s activities and outcomes in the AIS 2014:
    • Provides Theological Education.
      • Although there is nothing in the AIS 2014 (nor on the Register) to tell the reader the source of this theology, the constitution shows that RC is effectively controlled by the Anglican church (see Entity Subtype, above). And the Christian community knows that it is Anglican.
• Outcomes (What did RC deliver?)
  • RC did not respond to the request in the AIS 2014 for a description of its outcomes.
  • None found on the website.
• Impact (How were people’s lives improved?)
  • Nothing found.

Size of Charity

• With a revenue of $3.92 m, RC easily qualifies in the largest of the ACNC three size categories (‘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.

WHERE THE CHARITY OPERATES

Operating State(s)[ii]

• It does not hold a fundraising licence in this state. Tertiary education institutions are exempt.
• Nor does it have a licence in any of the other six that have a licencing regime.
  • Whether it needs these licences depends on, other than an exemption, whether those states think that RC, by calling for donations publicly (on its website), are ‘fundraising’ in their State.

CHARITY’S DOCUMENT (SIC)

• There is no Annual Report/Review available on the ACNC Register.
• But there is one on the website (bottom half, here).

RESPONSIBLE PERSONS

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

Geoffrey Buchanan                 1

Mark Chew                               2

Ian Harper                                1

Sandra Jones                            4

Moana Overton                        1

Brian Rosner                            2

David Williams                        30

Claire Rogers                            1

Jonathan Kuan                        1

Timothy Johnson                    3

Stephen Hale                            10 (with one duplicate)

Andrew Canobi                        1

Gregory Baxter                        1

• With the exception of the Principal, Brian Rosner, this listing matches the one on the website.
• The Board are the members, and the members are the Board. The Board is therefore effectively appointed by the Board.
• The constitution requires the Board to ‘use its best endeavours to ensure that the Board, excluding the Principal, contains 8.4.1 five persons who are Clergy of the Anglican Church [8.4]. Assuming that those with the title ‘Rev’ on the website are Anglican, the website shows four, not five.
• From the Directors’ report, and reported here, Buchanan, Kuan, and Chew joined the board since the beginning of the year, and nobody left.
• The constitution requires that the Principal be an Anglican priest [10.2.1].

(End of review of the ACNC Register information)

Latest financial report – detail

• The directors’ belief that RC is not a ‘reporting entity’, a choice that allows them to make less than a full disclosure about RC’s finances and operations, seems to be a clear contravention of their claim that the accounts show a ‘true and fair view’.
  • Given that industry expert Carmen Ridley says that it is difficult for a NFP to be other than a reporting entity[iv] the directors’ give insufficient evidence to support their claim, the claim, effectively, that a large tertiary college that seeks donations from the public is willing to tailor a financial report for anybody who requested one.
  • What, for instance, is the difference between RC’s situation and that of Morling College?

Directors’ report (page 1 of the Financial Report)

• Despite the claim in the preamble, no such report is required by the ACNC.
• Missing sections:
  • Objectives (split between short-term and long-term)
  • Strategies for achieving the objectives
  • Performance measures
• Incomplete sections
  • Information on directors: no experience and expertise.
• Sections not required:
  • Mission
  • Values
  • Change of Name
  • Review of operations
  • Supporters
  • Change in state of affairs
  • Subsequent events (should be in the Notes)
  • Future developments
  • Environmental regulations
  • Dividends
  • Indemnification of officers and auditors
  • Proceedings on behalf of the company
  • Auditor’s independence declaration

Auditor’s Independence Declaration… (page 5 of the Financial Report)

• The ACNC does not require this to be lodged.

An independent opinion on the financial statements – the Independent Auditor’s Report (page 6 of the Financial Report)

• This is a ‘clean’ opinion.  Read here and here to draw the right conclusions from this.

Where the directors put their name to the report – the Directors’ (page 8 of the Financial Report)

• See Latest financial report – detail, above.

What was earned, what was consumed during the year – the Statement of comprehensive income (page 9 of the Financial Report)

• The inclusion of three columns in addition to the statement figures for RC is non-standard.
• And it would be more helpful to have the statement figures first, not last.
• As the meaning of the three columns, ‘Operations’, ‘Foundation’ and ‘Other’, is far from obvious, an explanation is needed on the first page.
  • It is not until the Notes that you will see such an explanation. (And then it’s confusing.)
  • The explanation of ‘Operations’ also applies to the figures in the ‘Foundation’ column [Note 3(o)]. There is no definition of ‘Operations’.
  • Despite the inclusion of ‘Ridley’, and use of the term ‘Foundation’, the ‘Ridley Foundation Fund’ is not an entity separate to Ridley, not a foundation as the term is usually used. It is just a separation of some of RC’s own money.
  • With the explanation of ‘Other’, it is not obvious what adjustments were ‘required to comply with the Australian Accounting Standards in relation to revenue and expenses incurred in the period’?
• The third item in the calculation of surplus, ‘Distribution’, is not consistent with the Accounting Standards, distributions normally occurring post-surplus.
  • The term is unexplained here.
  • And could still be clearer after being described as ‘Contribution to the principal activities’ later in Note 17 (‘Ridley Foundation Fund’).
• The other comprehensive income item is not classified as to whether it will subsequently be transferred to profit or loss.
• The expenses are, contrary to the Accounting Standards, a mixture of the two permissible classifications.
• The following expenses are not disclosed:

• ‘Finance costs’
• Fundraising
• Administration
• Superannuation expense
• Cost of sales (for the ‘Hire of facilities & Catering’ revenue)

Where the earnings came from – Revenue (including Note 4, reordered for size)

• Theological fees $2.00 m
  • an unusual term that presumably refers to fees from students;
  • 51% of ‘Revenue’.
• Donations: $619K, Appeal Donations $130K, Bequests $11K, Trusts and scholarships $208K = $969K
  • The last item is not explained, but RC have included it in ‘Donations and bequests’ in their AIS 2014
  • Were all donors aware that RC had $11.04 m invested?
• Dividends and managed fund distributions $530K
  • Presumably the return on the $8.2 m ‘Investment funds’ held (Note 7).
• Interest $115K
  • Presumably the return on the $2.84 m held in term deposits.
• Rental income $114K
  • What is being rented is not stated. There is no investment property on the balance sheet.
• Ordinand grant $90K
  • There is no explanation of this unusual term.
    • An ordinand is a candidate for ordination, where ordination, for Ridley, is the Anglican process that makes someone a bishop, priest or deacon.
  • It appears that it is something received each year. But from whom?

• Event revenue $32K
  • Presumably this is from things similar to these.

What was consumed during the period (reordered by size)

• Employees $2.21
  • Presumably this matches the Accounting Standards definition of ‘employee benefits expense’.
  • Assuming that the part-time and casual employees identified in the AIS 2014 work 50% and 10% of full-time respectively, this represents average benefits per employee of $116K p.a.
• Property & utilities $237K
  • Despite the Note 3(o), it is not obvious why the figure for ‘Operations’ needed to be increased by $15K to get the figure to be reported.
    • The same applies to the other items with figures in the ‘Other’ column.
• Tours $191K
  • There is no explanation of this item.
• ACT administration fees $178
  • There is no explanation of this unusual term.
  • A search of the website shows that it is a fee paid to the Australian College of Theology.
• Impairment $118
  • See Note 1(h) for an explanation of ‘impairment’.
  • In this case it was because of a decline in the value of the Ridley Certificate.
• Catering $105K
  • Presumably this is for the events (see above).
• Events $49K
  • Adding this to Catering (above) means that RC’s events ran at a loss, before any other direct expenses and a share of overhead, of $122K.

What’s left at the end of the year – the Statement of financial position (page 10 of the Financial Report)

• Other financial assets $2.84K (current), $8.20 m (non-current) (including Note 7)
  • There is no explanation for why, with this much invested, there is a call for donations.
• Property, plant and equipment $1.44m (including Note 8)
  • There is no explanation of ‘Improvements’.
  • Why is the library not included?
  • There are neither leased motor vehicles or those that are owned.
  • The usual reconciliations are missing.
• Reserves $11.83 m (including Note 14
  • There is no distinction between restricted and unrestricted reserves.
  • ‘Financial instrument reserves’ has a different name in Note 3.

Movements in the net wealth of the charity – the Statement of changes in equity (page 11 of the Financial Report)

• Although not obvious here, the third column, ‘Financial instrument reserve’, is the same thing as the ‘investments revaluation reserve” described in Note 3(f) ‘AFS financial assets’.

Where the cash came from and went to – the Statement of cash flows (page 12 of the Financial Report)

• There was a reduction in borrowings. Why then is there no Cash flows from financing activities section?
• Cash flows from operating activities
  • Receipts from student fees $2.08 m: a different name is used in the income statement.
  • Receipts from donations, bequests and other sources $1.29 m
    • This does not match the grouping elsewhere
• Cash flows from investing activities
  • Proceeds from investments $500K
    • This terminology does not match the policy note on financial assets (Note 3(f)).
  • Net amounts withdrawn from term deposits
    • The figure represents an addition to term deposits, not a withdrawal.
    • This terminology does not match the policy note on financial assets (Note 3(f)).

Essential information to go with the figures – the Notes to the financial statements (see the header) (page 13 of the Financial Report)

• 1. General Information
  • Missing: the date of issue of the report and whether the directors have the power to amend and reissue the financial statements.
• 3. Significant accounting policies
  • The directors say the company is a ‘not a reporting entity’ because ‘there are unlikely to exist users of the financial statements who are unable to command the preparation of reports tailored so as to satisfy specifically all of their information needs’.
    • It is very hard to believe that the 800+ Ridley Certificate users for instance can each order a financial report from RC. But that is what the directors are saying.
    • The result of the decision is that the accounts don’t comply with the Australian Accounting Standards, and can disclose considerably less than that required for a general purpose report, a report designed for those people who are dependent on the charity’s report for the information they need.
    • You can compare the directors’ decision to this advice from the ACNC:
      • If people use and rely on your charity’s financial statements to help them make decisions (for example, about how to spend money) then your charity is most likely a reporting entity.
        • Although not clear from this, the directors should also consider prospective users.
  • Some of the Accounting Standards required by the ACNC have not been followed.
  • Is it really the case that there are no accounting estimates, judgements and assumptions that have a significant risk of causing a material adjustment to the figures in the next year?
  • (a) Borrowing costs
    • With no major construction underway, and millions in the bank, why would ‘borrowing costs’ be relevant?
  • (b) Cash and cash equivalents
    • What deposits for a term fit within this definition?
    • A policy on bank overdrafts is not relevant.
  • (f) Financial assets
    • ‘Financial assets at FVTPL’ is not the accepted term
    • ‘Held-to-maturity investments’: this information does not match what RC holds.
    • ‘AFS financial assets’ is not the accepted term.
    • The ‘investments revaluation reserve’ has a different name in the balance sheet.
  • (j) Leasing
    • The policy on finance lease accounting is not relevant.
  • (k) Property, plant and equipment
    • The depreciation method is not disclosed.
    • ‘Improvements’ to what?
  • (n) Revenue recognition
    • What goods are sold?
    • What services are rendered?
    • The policy for rental income is not disclosed.
    • What is the policy for fees paid in advance?
  • (o) Revenue & Expense Analysis
    • See the third point under What was earned…, above.
• Missing policy Notes
  • Current and non-current classification
  • New, revised or amending Accounting Standards and Interpretations adopted
  • Trade and other payables
  • Trade and other receivables
  • Fair value measurement
• Note 16 Remuneration of auditors
  • The fact that the auditor assisted in the preparation of the financial report is a threat to his independence
• Note 19 Contingent liabilities and capital commitments
  • Don’t student fees have to be repaid under certain circumstances?

Membership of accountability organisations claimed

• RC claims Missions Interlink as a partner, but not as an organisation offering accountability. RC is, however, a member (with its attendant responsibilities).

(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.

[iv] FastClass: Annual financial statements for NFP – Online, www.cpaaustralia.com.au, accessed December 2015.