Archived: The Bush Church Aid Society, charity review

This is a review, for donors, of the Australian charity The Bush Church Aid Society of Australia (BCA).   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 giving decision.

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 to seek any other information, either from the charity itself or from other sources.

Ministry response

Prior to publishing this review, I sent, on 3 July 2015, my observations to the charity and invited them to comment.  On 26 August they provided comments for publication, which are included where relevant throughout the review. Two days later they provided the following statement:

As a Christian mission organisation BCA recognises its obligation to faithfully steward the resources entrusted to it by God’s people.  Consistent with this obligation BCA is committed to full compliance with all statutory requirements and the provision of timely and accurate information to current and potential supporters.  We believe this commitment to open communication is demonstrated by the feedback we have provided below and the extensive access to officers granted to Mr Sherwood, including a phone hook-up with members of our Finance and Property Committee.  In any communication process there is a necessary balance between providing too little detail (which can be misleading) and too much detail (which can be confusing).  We believe our published accounts and other material strike this balance, especially as they are supplemented by a publicly advertised Annual General Meeting at which interested parties can request further information should they so desire.

Organisation of this review

1. This review is organised according to the headings in the register entry. This is how to use this section of the review:
   • For each heading in the register entry, first read the information under that heading.
   • Then check if that heading is included below. (Headings for which there is no comment are not included.)
2. There is then a more detailed comment on the Financial Report.
3. Lastly, there is a section Membership of accountability organisations claimed.

Sources

• ACNC Register (including links)
• Internet search on BCA, The Kirkby Trust
• BCA website, and Facebook page. (Not on LinkedIn.)
• State government fundraising licence registers.
• Comments, via email on 26 August, to my draft review.
• www.glassdoor.com

REGISTRATION DETAILS

Entity Subtype (‘charitable purposes’)

• A primary sub-type consistent with sharing the Gospel.
• However this is the closest that the objects in the BCA governing document come to mentioning the Gospel:
  • “To provide for persons…
    • religious services..
    • religious medical and other missionaries for the religious..
  • “…to employ missionaries.
• BCA comment: “All evangelical, protestant and reformed Anglican missionaries have the proclamation of the gospel as their core activity.”

CHARITY DETAILS

Legal name

• Even though the name is absent ‘Ltd’, the organisation is a company limited by guarantee, with permission to omit the Ltd.
• A charity with the same name, but with the addition of ‘as the operator of a PBI’, is part of BCA. It doesn’t have to report separately yet[ii]. (Its figures should be included in BCA’s figures.)
  • BCA comment: “The second BCA referred to is not a separate legal entity (i.e. there is no separate constitutional documents for ‘The Bush Church Aid Society of Australia as the operator of a PBI ‘). There was a change in the registration requirements for entities operating one or more PBI’s or HPC’s as at 2 December 2012 (i.e. on introduction of the ACNC). The impact of the change was that the PBI’s were registered as ‘sub-entities’ and issued a separate ABN – refer here.   The ACNC will not require separate financial reports as the revenue of the sub-entities is less than the threshold. The ACNC has further advised BCA that we are not required to submit an AIS for the 2014 accounting period.   As the PBI Funds are not separate legal entities, the financial results/position are included in the financial report of the BCA, as part of the parent entity.
    • Reviewer response: For 2015 and beyond, BCA will, unless it registers as a group, have to submit an Annual Information Statement (AIS) for the second charity. 

Other Name(s)

• See Legal Name, above.
• BCA does not have a business name registered for any of the derivatives or abbreviations of its name that it uses.

Charity ABN

• No tax deduction can be claimed for a donation to BCA.
• However, it operates four separate funds donations to which are tax deductible:
  • One of its own: The Bush Church Aid Society of Australia Outback Education Fund,
  • Two run by the sub-entity (see Legal Name, above): mentioned above: The Bush Church Aid Society of Aust Hostels Fund, and The Bush Church Aid Society of Aust Nursing and Medical Services Fund, and
  • The Kirkby Trust, yet another separate charity.
• According to the 2014 Annual Report[iii], available from this page, there’s a fifth way of getting a tax deduction to benefit BCA’s beneficiaries on its way:

We also signed a Memorandum of Understanding with the Ministry Training Strategy that will allow us to solicit tax deductible donations to establish pre-college Ministry Apprenticeships in BCA locations. A number of BCA Field Staff are in the process of being trained to offer skilled supervision of these apprentices, the first of whom we hope to be appointed in 2106 [page 2] 

• Three of these funds are an option under the ‘Donate’ button. I can find no mention of the ‘Aust Hostels Fund’ on the website.
  • BCA comment: “We are not currently soliciting donations for the Hostels Fund.”
• Only the Kirkby Trust is mentioned in the financial report. It is consolidated with BCA, but also has a separate charity existence.
  • BCA comment: “The 3 other Funds are not separate legal entities; they are DGR funds operated by the BCA but two of these have been given a separate ABN by the ACNC. They are included in the BCA report. It is not a consolidation issue, but a matter of the definition of the ‘entity’. However, the Kirkby Trust is a separate legal entity and is therefore included under the consolidation standard.”

Charity Street Address

• From the website it appears that this is also the postal address.

ANNUAL REPORTING

• AIS 2014:
  • This is the Annual Information Statement.
  • It includes basic financial information. If you think that’s all you need then you should note that the figures in the AIS 2014 are for BCA only, not the figures presented in the consolidated financial statements in the Financial Report 2014.
    • BCA comment: “The consolidated financial statements contain the figures for both BCA (and the funds within that entity) and the Kirkby Trust, which is a separate entity.”
• Financial Report 2014:
  • See Latest financial report – detail, below.

ABOUT THE CHARITY

Date Established

• BCA recounts its history on its website.

Who the Charity Benefits

• Vision
  • It’s the heading here, but the content fits better under the next heading
• Mission
  • From the website:

BCA has a priority in mission to the isolated, remote urban and rural people of Australia.

BCA’s purpose is:

– to proclaim Christ so that people may respond to him;

– to nurture Christians in their faith and ministry;

– to strengthen local Christian communities in their mission;

– to provide services of Christian care and advocacy;

– to develop an understanding of Christ’s mission and

– to promote active partnership throughout the church.

•  Not clear here, or on its website, is that BCA is an Anglican organisation, and is required by its constitution to do everything it does ‘in conformity with the principles of the Anglican Church in Australia (Evangelical, Protestant and Reformed)’.

• Activities (What does BCA do?)
  • From the AIS 2014 under ‘activities and outcomes’

During the period covered by this information statement the Society sought to achieve [its] purposes by selecting, appointing and supporting Field Staff to carry out a variety of ministries including pastoral work, Christian education, counselling and youth work. We also educated supporters and others on rural issues through publications, media releases and through presentations to churches and other activities. We reviewed our governance structures in areas such as risk management and professional standards to ensure they are consistent with best practice and launched a new initiative to encourage young people in post-secondary study to move to the bush for work and service after graduation. We are currently implementing a new branding strategy and CRM database to improve or communication with current and potential supporters.

• Outcomes (What was delivered?)
  • See Activities, above.
  • The 2014 Year in Review section of the 2014 Annual Report (here), with one exception – the Staff Conference – records only staff movements
• Impacts (How were people’s lives improved?)
  • None given.
    • BCA comment: “The ACNC did not ask for “Impacts”. We believe the information in the activities shows the areas where BCA has an impact.”

Size of Charity

• 2013-14 ‘Revenue’ was $4.1 million, easily exceeding the $1 million threshold for the top size of charity.

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.
  • BCA comment: “It is misleading to say that the information will be out-of-date. There is no requirement to report before 30 June 2016. This would be the same for all charities.”
    • Reviewer response: My statement is true. The fact that a charity is compliant doesn’t make the information any less out-of-date. Sensible donors, especially of large sums, may seek more up-to-date information.

Basic Religious Charity[iv]

• BCA isn’t one, but see Mission, above.

WHERE THE CHARITY OPERATES

Operating State(s) [v]

• BCA is not registered with any of State/Territory fundraising regulators.
  • BCA comment: “We are exempt, being a religious order affiliated with a recognised denomination for the purposes of Section 26 of the Marriage Act 1961.”
    • Reviewer response: Do all seven states have this exemption?

RESPONSIBLE PERSONS

• To see all their positions in Australia, search here.

No. of Australian charity governing body memberships

Aila ALDERSON                              3[vii]

Arthur ANSCOMBE                         4

Mellita BATE                                                3

Leonie BURGESS                            3

Frederick CHILTON                        11

David CRAIN                                    3

John HARROWER                          6

Richard HOST                                  3

Terence KEITH                                3

(Eleanor) Jane LAMONT               3

Stephen MAY                                    3

Richard MINOL                               2

Lilian MORGAN                              3

John NICHOLLS                              7 (but two are duplicates)

David O’MARA                                 4

Raymond PHILLIPS                       3

Paul ROBERTSON                           17 (but see footnote vi)

Wayne SCHULLER                         3

Henry SHAFING                              3

Mark SHORT                                    3

Roslyn SYMONS                              4

Neil WALTHEW                              3

• In having a board of only 22 members, not 25, BCA is non-compliant with its constitution.
  • Perhaps the shortfall has something to do with the fact that when six councillors retired in May 2014, only four people were elected. (See the Councillors’ Report, below).
    • BCA comment: “Appointment of further Councillors is in train pursuant to the processes under BCA’s Constitution.
  • Although Short may be the Secretary, the Secretary is not a member of the Council, so his position should be shown as ‘National Director’.
    • BCA comment: “The Council is the Board of Directors and Mark Short is the Company Secretary.”[viii]

(End of review of the ACNC Register information)

Latest financial report – detail

• BCA have called this report their Annual report rather than the usual ‘Financial Report’. So as not to confuse it with their real Annual Report, I will refer to it as the financial report.

Councillors’ (i.e. Directors’) Report (page 3 of the financial report)

• This report is a voluntary inclusion by BCA – it is not required for this type of company.
• The reference at the beginning of this Report, and throughout the financial report, to the ‘consolidated entity’ is due to the existence of a subsidiary – No. 3 of the five names mentioned in the section Charity ABN, above.
  • BCA comment: “As previously advised, there are only two entities – The Bush Church Aid Society of Australia and The Kirkby Trust (for which The Bush Church Aid Society of Australia is the Trustee).The DGR funds (two of which are shown as sub-entities on the ACNC website) are not separate entities for the purposes of financial reporting and are included in the BCA entity. They are not included under the Consolidation requirements.”
• Councillors
  • BCA, as is their right because the whole report is extra disclosure by them, have chosen not to include the usual brief biography for each director. Although the location is not immediately obvious – you have to click on their photo here – the information for most of them is available on the website.
    • BCA comment: We highlight that as we are registered with the ACNC, we are not required to comply with the Corporations Act s300B (refer to Corporations Act s111L). Nevertheless, we included information in the Director’ Report we believed was relevant to the users.
• The website doesn’t match the Register. Given that BCA recently updated the positions shown on the Register[ix] (see Responsible Persons, above), I suspect that it is the website that needs to be updated.)
  • BCA comment: “The website is currently undergoing significant changes.”
• Of the 20 ‘Ordinary Councillors’ (paragraph 26 of the Constitution, found under the section Charity’s Documents, above) 15 represent their state. However, these Councillors are not identified as representatives of a state.
  • Even on the website you cannot find out which eight Committee members represent a state.
    • BCA comment: “The residential address of each of the Councillors is provided to the ACNC. Although Councillors are elected by a process arranged geographically by States, they are not representatives of a State. Please note also that BCA operates Regions (not States) broken up by Anglican Diocesan boundaries. States form parts of a Region.”
      • Reviewer response: Paragraph 32 in Section B of the Constitution says that “The Councillors required to be elected in any year to represent a particular State shall elected at the meeting of members resident in that State…”
  • Members (sic) guarantee
    • The collection – meant to be ‘collective’ I think – liability of members’ in the event of a winding up, $2,590, means that there are 25,900 members liable for the guarantee. This no doubt reflects the fact that, according to the constitution, many donors automatically become members. If you are a regular donor or have been a donor in the past, are you aware that you may be a member of BCA?
      • BCA comment: We have noted the typographical error – “collection” should read “collective”.
  • I would have expected this amount to have changed from the prior year. There is no explanation of why it hasn’t.
    • BCA comment: “The amount is not material for reporting purposes.” 

What was earned, what was consumed during the year – the Statement of Comprehensive Income (page 8 of the financial report)

Revenue and other income $4.6 million (including Note 2)

• Revenue was $4.1 million.
• There is no separate total for ‘Other income’ anywhere in the report.
  • BCA comment: “The Other Income in bold is a heading. The next line with Other Income has a total of $93,000 against it. This is made up of 13 separate items including contributions from BCA location parishes, merchandise and stamp sales and income from locally run events.”
    • Reviewer response: The other two lines, totalling $366K, are also under the heading of ‘Other income’.

Donation and legacy revenue $3.4 m

• ‘Legacy revenue’ is the same as bequests.
• Approximately 83% of revenue.
• There is no breakup, so it is not possible to see how much came through each channel.
  • BCA comment: “The suggested detail of reporting is not required. Donations come to BCA in many forms – directly from individual supporters, from churches, through BCA money boxes, in response to appeals, over the internet. A comprehensive breakdown of the source of revenue and how much donors give across the designated funds is presented at the Annual General Meeting.”
    • Reviewer response: Given the importance of the distinction between ‘donations’ and ‘bequests’ to an understanding of BCA finances (see below), at least this split should be provided.
  • For one of the donation choices there are separate financial statements: The Kirkby Trust. It is separately registered as a charity, and its financial report shows that $296K was donated to it.

Grants and fees $63K

• There is no reason given for an evangelical organisation to receive grants.
  • BCA comment: “One example of a grant is the government School Chaplaincy grant.”
• Nor what fees it charges.
  • BCA comment: “There is no income from fees. “Grants and fees” is a generic term which was set up in our accounting system, and is carried over into the financial accounts.”

Dividends and distributions $591K

Fair value (loss)/gain on other financial assets at fair value $361K

• This is the income on a $9.5 million (at the start of the year) investment portfolio.
• No explanation is given in the financial report for holding this amount of donor money rather than using it on the charity’s mission.
  • However, the answer appears in the 2014 Annual Report:

Once again we were able to meet budget and to grow our reserves closer towards the goal of being able to fund our Administrative Expenses from Investment Income so that every dollar donated will be used for ministry.

• So current donors are financing a fund that will allow future donors to be told that 100% of their money is going to ‘ministry’[x].
  • BCA comment: “The quotation above contains two separate points: meeting budget and growing reserves. Current donors are not financing the reserves. Current donors are financing current ministries. Only bequests are deposited into the reserves and it is only the interest and dividends received from them that go towards ministry. In this way supporters are able to leave an enduring bequest and it ensures that commitments made to ministry can be maintained.”
    • Reviewer response: Bequests are not normally automatically a donation to capital as BCA implies. The reader of the statements is not told that bequests are stockpiled in this way. Nor that the intention is to be able to have such a large sum that ministry will be able to be funded from the earnings.

Expenses (by calculation) $3.6 m…what was consumed to further the mission

• Because the expenses are classified by their nature, not their function, it is not possible to relate them to the Society’s purposes.
• No finance expenses are shown.
  • BCA comment: “See page 8”
    • Reviewer response: There are no finance expenses on page 8.
• Fundraising expenses are not shown – or explained.
  • BCA comment: “Fundraising and the education of potential supporters about our mission in order to encourage them to donate is undertaken by our National Director and Regional Officers (of which there are 5) , one Honorary Regional Officer in Tasmania and the voluntary Regional Committee members. It can be misleading to list fundraising costs – not all charities will list the same expenses against fundraising. Anything that raises the awareness of BCA with others or introduces them to a new ministry situation could be regarded as fundraising.”
    • Reviewer response: They will only be misleading if there is no explanation of what is and isn’t included in them.

Salary and other staff expenses $1.2 million

• Is this defined in the same way as the usual accounting term ‘Employee benefits expense’?
  • BCA comment: “Yes”
• BCA had 12 full time, nine part time, and two casual employees in December 2014 [AIS 2014].

Grants $1.2 million

• There is no breakup of this item, so we can’t relate the grants to BCA’s purposes or the website invitations.
  • BCA comment: “BCA Field Staff are usually paid by the Anglican Diocese in which they minister and BCA makes grants to those Dioceses to cover the payroll expenses, motor vehicle expenses and other costs of ministry. A breakdown of these expenses is made available by the Hon. Treasurer at the Annual General Meeting.“
• Making grants in BCA’s subsidiary, The Kirkby Trust, seem to be a very costly activity: $129K for $33K of grants.
  • BCA comment: “$113,000 is for grants combined with BCA. So the actual cost is only $14,870.”
    • Reviewer response: These figures are from the Trusts accounts, so should only have Trust expenses. 

Other expenses from ordinary[xi] activities $301K

• This is a relatively large amount for sundry, general or other expenses. We are not given its composition.
  • BCA comment: “This represents less than 10% of total expenses and therefore no further disclosure was considered necessary. However, expenses included are for, but not limited to, the fleet of motor vehicles, printing and stationery, office equipment and repairs, and professional management fees.”

Surplus/Total comprehensive income $952K

• This is a very healthy 21% of revenue. See the prior section for an explanation for keeping so much of donors money.
  • BCA comment: “The surplus does not come from donations but rather from bequests and is invested in our portfolio of managed funds, the interest and dividends from which are applied to current ministry. In this way supporters can leave an enduring legacy to ensure that our ongoing commitments to ministry can be met.”

What’s left at the end of the year – Statement of Financial Position (page 9 of financial report

Cash and cash equivalents $1.4 million

• No breakup of this very healthy balance is given.
  • BCA comment: “There is no requirement to do so.”

 Financial assets at fair value through profit or loss $10.9 million

• Note 6 shows that this is a diversified investment portfolio. But nowhere are we told why a charity ministering to people in the bush should have such a portfolio, and for such a large amount.
• Over 50% is held in shares, a risky asset class.   These shares, it appears from the policy note ‘Investments and other financial assets’, are actively traded for profit in the short term. It does not appear that donors are told that their money is being used in this way.
  • BCA comment: “You refer to donors’ money being actively traded – we do not trade donor’s money. Donations go towards ministry costs. As per our investment policy, the portfolio of managed funds is made up from bequests and the interest and dividends we have earned from that supports ongoing ministry. We have a conservative portfolio and donations from current donors are not included in the portfolio. The funds in the portfolio have been made up of bequests received.
    • Reviewer response:  53% in shares is not a conservative portfolio. See, for example, here.

Property, plant and equipment $2.7 million

• $82K rent was earned. There is no explanation why there is no corresponding investment property.
  • BCA comment: “The rent earned is from a small office space at Level 7, 37 York Street, Sydney and from houses purchased for use of our Regional Officers. When the houses are not required they are rented out.  Any Investment property would be regarded as long term and the situations mentioned herein could change at any time.”

Non-current liabilities – Provisions $(zero)

• There is no explanation why there are no non-current employee provisions.
  • BCA comment: “There is an amount of $9,500 which should appear in the non-current liabilities. We apologise for this error. The other liabilities are current because we have long serving staff members.”

 Where the money came from, where the money went – Statement of Cash Flows – page 11 of the financial report

• There is no reconciliation of of the amounts in its statement of cash flows with the equivalent items reported in the statement of financial position.
  • BCA comment: “The Cash and Cash Equivalents total of $1.4m agrees to the Cash and Cash Equivalents total on the Statement of Financial Position – there is no reconciliation or separate note required.”
    • Reviewer response: See AASB 107.45.

 Essential information to go with the figures – the Notes to the Financial Statements – page 12 of the financial report

Note 1 Summary of significant accounting policies

• The subsidiary is not identified until Note 15.
• (c) Revenue recognition
  • This does not match the revenue received.
    • BCA comment: “We believe that we have disclosed those that are most important.”
• (k) Employee entitlements
  • There is no mention of superannuation.
    • BCA comment: “The standard defined contributions to employee entitlements have been used and are all that is necessary to understand the accounts.”
• (m) Inventory
  • The type(s) of inventory is not disclosed. Nor is it in Note 7 Inventories.
    • BCA comment: “This amount is immaterial for reporting purposes. Inventory is on our website.”
  • Missing policy Notes:
  • New and revised standards…
  • Intangible assets (including subsequent expenditure)
  • Leases
  • GST
• Note 11 Accounts payable and borrowings:
  • There is no explanation in the ‘Revenue recognition’ policy note of the item ‘Allocated donations’.
    • BCA comment: “A Scholarship was left for BCA to administer upon the death of April Bottom in 2003. In the terms of the Will the amount awarded each year was to increase by $500 p.a. from $5,000 in 2004. The amount of $10,000 had been awarded for 2015 but not paid to recipient at the end of BCA’s financial year.”
  • The policy note ‘Loans from other persons’ does not explain the reason for these borrowings when there was so much in the bank, nor why they can’t now be repaid.
    • BCA comment: “There has been no need to borrow. These loans are not borrowings in the usual sense. Rather, they are unsolicited interest free loans from our supporters.  They are amortised because the agreement we have with the supporters of the unsolicited interest free loans states that, should they so wish, BCA will repay the loan on one week’s notice. Invariably these loans are converted to donations prior to the donor’s death.”
      • Reviewer response: Amortised?
• Note 14 Related party transactions
  • There are no related party transactions in the Councillors’ Report, the place to which we are directed.
    • BCA comment: “There weren’t any this year.”
  • ‘The Councillors…with the greatest authority for the strategic direction and management of the Society’ are…the whole Council. But Councillors can’t, under the Constitution, be paid. The $182K is likely therefore to have been for the National Director.
• Note 15 Investment in controlled entity
  • The power to govern the financial and operating policies of The Kirkby Trust’ do not, as claimed, necessarily mean that BCA controls the trust. Can BCA, under the terms of the trust, legitimately, that is, without breaching its fiduciary duty, affect its results when making decisions as the trustee? What effect the different tax deductibility status held by the Trust?
    • BCA comment: “All dealings by BCA as Trustee are in compliance with the provisions of the Trust Deed and its tax status.”
• Note 19 Operating Leases
  • The usual division of the payments over future periods is not given.
    • BCA comment: “This is not considered a material disclosure given the minimal amount of lease activity.”
• Note 21 Parent entity financial information
  • The parent’s capital commitments are not shown.
    • BCA comment: “We don’t have any.”

Membership of accountability organisations claimed

No membership of accountability organisations claimed on the website or in the Annual Report.

(End of review)

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

[ii] This is a automatic consequence of BCA having a Public Benevolent Institution when the ACNC came into being.   It can continue to avoid having to report separately by BCA applying to the ACNC to report as a group.

[iii] This is not a conventional annual report, but merely a two page address by the National Director, a page of 2014 highlights and half a page of death notices. It is also not conventionally located on the website, being located two steps under Mission Resources.

[iv] See http://tedsherwood.com/basic-religious-charity-a-justified-exemption/.

[v] 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.’

[vi] Do all seven states have this exemption?

[vii] 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. MD says that three of these belong to another John Arnold.

[viii] His membership of Council is because he is the National Director, not because he is the Secretary. The Secretary is not a member. (Many charities include the Secretary here even if they are not a member of the board.)

[ix] Medium and large charities – BCA is a large charity – have 28 days to tell ACNC of change to their Responsible Persons, so it would not be unusual for a charity’s website to contain the most up-to-date listing.

[x] Those of us who are administrators could rightly take offence at the suggestion that only work in the ‘field’ is ministry.

[xi] This implies that some activities (and surplus, see further down the Statement) are extraordinary. However, this distinction has been long since dropped from the Accounting Standards.