YWAM Medical Ships – Australia Ltd: charity review

Mini charity review of Ywam Medical Ships – Australia Ltd (YMS) as an organisation that seeks donations. (Including the answers to the questions that the Australian charity regulator, the ACNC, suggests that you ask.)

The previous review (September 2016) (in black) is used as a base, with comment only if the situation has changed or extra information would be helpful.

Is YMS registered?

• As a charity, yes.
• Other registrations:
  • As a public company, a company limited by guarantee.
  • Only operates in Queensland [ACNC Register] but no fundraising licence there.
    • Or, with the exception of Tasmania, in any of the other five states that have a licensing regime.
      • 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.
      • 2018: it is now much more accepted that an online invitation is indeed fundraising.

What do they do?

• Generally, from the website.
• More specifically, from the Annual Information Statement (AIS) 2015 2018:
  • YWAM MSA Medical Ships is actively developing communities by addressing the health care and training needs in Papua New Guinea (PNG) alongside the priorities and vision of the PNG National Health Plan, PNG National Department of Education and Australia and PNG’s commitment to the Millennium Development Goals sustainable development goals. YWAM MSA Medical Ships is implementing programs with its Mmedical Sship and land-based teams in rural PNG communities in association with key stakeholders and partners….This includes delivering healthcare and training to some of the most remote locations in PNG…
• For the detail of what was delivered under these programs, see the very good coverage in the Annual Report^[1].

Do they share the Gospel?

• Not according to information on the website, or in the Annual Report.
  • Which is consistent with ‘Advancing religion’ only being one of four Entity Subtypes on the ACNC Register, YMS’s objects (in the constitution), and its funding by the Australian Government.

What impact are they making?

• YMS claim, in the Annual Report [page 3], that
  • Every dollar given to YWAM Medical Ships will produce a 300% return on investment, which means more lives helped.
  • They no longer make this claim.
    • No evidence found for this statistic.
• Except for possibly the above claim, no systematic evidence of impact was found.

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

• If you define direct costs as ‘the field’, then YMS say that the figure is 12%.
• This claim appears to have been removed.
• Apart from not knowing the definition of ‘field’ in YMS, the expenses are not classified so as to allow a split between direct and indirect costs.

Can you get a tax deduction?

• Yes (see the last section in the ABN record).
  • But not, according to the donation page, for ‘outreach fees’.
    • There is no explanation for this exception.
    • ‘Outreach’ is not evangelism, so it should not threaten their government funding nor their DGR status.

Is their online giving secure?

• Eway is used, so yes.
• The website URL has a closed padlock at the beginning, so the site is secure. But there is no mention, on the donation pages, of the security of your information.

Is their reporting up-to-date?

• Yes (but lodged a month late, seven and a half months after their year-end).
  • Lodged a month before the six-month deadline.
  • 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 eight months ago. 2018: nearly a year ago.

Does their reporting comply with the regulator’s requirements?

• AIS 2015: Except for the absence of outcomes, yes.
• AIS 2018: No.
  • Because it says, incorrectly, that
    • they don’t fundraise online;
    • their financial statements are special purpose; and
    • they earned nothing from investments.
  • ‘Other comprehensive income’ does not match the accounts.
• Financial Report 2015 2018: No
  • There is no audit report.
  • The audit report is included, but it is unsigned.
  • YMS has a ship that cost $9.1 m plus the cost of the subsequent fit out as a hospital, yet there is no ship in the Statement of Financial Position.
  • This was not correct: there was an item under ‘Plant & Equipment’. (But it was only for $124K.)
    • Note 18 Note 17 in the Notes to the Financial Statements says that the ship ‘is recorded as an asset in the books of YWAM PNG Ship Ltd’, but the only explanation is that the ship was purchased by YMS ‘on behalf of YWAM PNG Ship Ltd.’
    • Normally, if a somebody purchases something on behalf of somebody else, that somebody else would be the user of the item. Why is this not the case here?
    • The asset ‘MV YWAM PNG’ is $553K, well short of its cost.
  • The only asset relating to the ship is an intangible asset called ‘Right to Use Agreement – YWAM PNG Ship Ltd’ for $3 m.
    • There is no mention of this intangible in the policy Note on intangibles, nor is the valuation basis identified.
    • ‘(m) Intangibles

Purchase of Future Use Rights to the Vessel Future use rights

Future use rights to the vessel is initially recognised at cost. The future use rights to the vessel has a finite life and is carried at cost less any accumulated amortisation and impairment losses. It has a usual life of thirty years and it is assessed annually for (sic)

• • • Why, if YMS own the ship, do they need to buy the right to use it?
  • There is a loan to from Suncorp for $2.41 m $2.00 million, presumably against the ship.
    • The terms of this loan are not disclosed.
    • The Statement of Financial Position says that no repayments are due within the next 12 months. Is this correct?
  • There is also a liability of $3.21 m $3.20 million for ‘funds held on Trust’, described in Note 18 Note 17 as ‘the donations that were received during the period up to the date of the purchase’.
    • There is no explanation of the relationship of this liability to the either the assets in each company’s books, or the loan.
    • Only $1.10 m $925K of financial assets are held by YMS, well short of the funds held in trust.
    • Where are the rest of the funds? What are the terms of the trust? When is it due to be repaid?
  • There is no explanation why, if ‘All of YWAM MSA’s staff, including senior project managers, are full-time volunteers’, YMS
    • has according to their AIS 2015, 2018 three casual employees three full time, one part time, and
    • incurred $2.23 m $5.03 million ‘Employee benefits expense’.
  • The ‘Basis of preparation’ section in Note 1 first says that ‘general purpose financial statements have been prepared’, but contradicts this three paragraphs later by saying that the Report is ‘a special purpose financial report’. Now corrected.
  • The ‘Related Party Transactions’ Note (number 12 number 11), does not mention the dealings (see above) with YWAM PNG Ship Ltd.
  • Nor with YWAM Townsville Assoc. Inc. Five of the eight directors are also the directors of YMS.
  • It appears from Note 12 that $400K was donated to YWAM Townsville. There is no explanation of this item. N0 loan in 2018.
  • YWAM Townsville is an incorporated association with five directors, yet YMS says, without explanation, that it is ‘controlled by a [YMS] director and his wife’ (presumably Jared and Rebekah Hoover).
  • YMS owns the business name YWAM Medical Ships PNG. Is YWAM PNG Ship Ltd a subsidiary? The accounts do not disclose the relationship.
  • ‘Closing stock’ is incorrectly included in ‘Other comprehensive income…’.
  • The ‘Closing stock’ in the Statement of Profit or Loss…’ does not match the figure in the Statement of Financial Position.
  • 73% of the revenue, $6.15 million, is ‘Gifts in Kind’. There is no explanation of this item. The ‘Revenue’ Note does not mention this kind of revenue and there is no Note for the item in the Statement.
  • Note 2 classifies all the revenue as ‘grants’.
  • There is no explanation for the item ‘Other’, $370K, in ‘Other income’.
  • ‘Inventories on hand’, $630K, are not identified.
  • They record ‘Employee benefits’, but nothing under ‘Key Management Personnel’.

What financial situation was shown by that Report?

• YMS recorded a deficit again – albeit reduced from $832 K to $144K.
• The deficit is back up to $221K.
• They have a large working capital deficit (short-term assets less short-term liabilities). This threatens the going concern assumption.
• Working capital is now positive. But this is because the $3.20 million funds held on trust were reclassified as non-current liabilities. Without explanation. This reclassification implies that these funds, or any portion of them are not repayable without 12 months, whereas in previous years they were.
• The longer term financial structure is more sound.
• The high level of liabilities means that equity ($311K ) is only 2.2 times last year’s deficit. Now only 1.8 times.
• Despite having a strategy to maintain the gearing ratio below 10%, YMS report (Note 15) an increase in the gearing ratio from 70% to 76%. They do not say whether they are doing anything about this.
• Note 16 implies that dividends can be paid, something that is strictly forbidden for a not-for-profit.

What did the auditor say about the last financial statements?

• Although other documents in the Financial Report show that an audit was performed, the audit report has not been included.
• The auditor, Roger Dunston of Jessups, gave a ‘clean’ opinion. He’s not signed the report though.

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

YWAM Medical Ships PNG under ‘Other Name(s) – yes.

Except for the broken link to the Annual Report, yes.

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

• None.
• “Medical Ship’
• ‘Support our Volunteers’

The donation page also allows a donation to another organisation, the YWAM organisation that shares accommodation with YMS.

Who are the people controlling the organisation?

• The people shown when you roll down here.
  • This information is no longer provided.
  • These are the people who were responsible for the accounts:
    • Anna Scott
    • Jared Hoover
    • Jeremy Schierer
    • Kenneth Mulligan
    • Rebekah Hoover [‘Directors’ Report, Financial Report 2018].
  • All five work for YWAM. This means the composition of the board does not comply with the constitution.
  • In addition, this group of five includes a couple.
  • The responsible persons on the ACNC Register include Jennifer Rentsch. As she is the Company Secretary, this is probably a mistake.
  • YMS do not disclose whether any of these people are appointed by ‘YWAM Australia’s National Executive Board’, as is permitted by the constitution.
  • The directors Who are accountable to the members of the company.
  • A Directors’ Report usually discloses the number of members. YMS doesn’t.
  • YMS has two advisors who are accountants: Bruce Coutts and Carl Valentine.

To whom are YMS accountable?

• Here’s their answer, a FAQ:
  • As a Company, YWAM MSA has a Board of Directors which is accountable to its members. YWAM is also a signatory on the World Relief Code and a member of Missions Interlink, and all medical volunteers carry PNG medical registration. There are a number of external accountability bodies as well, which cover our ship and medical operations. All services and findings are reported to the PNG Department of Health
  • The FAQ now:

• • • Membership of Missions Interlink confirmed.
    • YMS is no longer a member of Missions Interlink.
      • For one opinion on the strength of this accountability, see the section Activities in this review.
    • Missing: the ACNC
    • Incorrectly claimed in the footer of the website: a signatory to the ACFID Code of Conduct.
    • Now a Member.

Are they responsive to feedback?

• When sent a draft of this review, Jennifer Rentsch¹ sent this response:
  • ‘I have taken time to read through the mini review which you have undertaken on YWAM Medical Ships Australia. 

There are substantial errors in your report due to a lack of understanding of the supporting legal structures of the organisation. In that regard, we would welcome any donors to contact our office directly for any questions or information they may require.’ 

• I sent YMS a draft of this review. I received this response, again from Jennifer

I have received your updated review. 

As previously noted, there are substantial errors in your report due to a lack of understanding of the supporting legal structures of the organisation.  YWAM Medical Ships Australia is subject to substantial government and private oversight in performing its objectives. We would certainly welcome any donors or key stakeholders to contact our office directly for any questions or information they may require. 

• A willingness to take questions from donors or potential donors does not obviate the need to be understandable in public reports.
• A little research will show that it is unwise to rely on ‘government oversight’ to ensure that you are doing the right thing by the secular authorities (and certainly by God).
• If by ‘private authorities’ she means the board and members, the evidence shows that these people often need help to ensure that the charity is complaint.
• Having confirmed that I had described the legal structure of YMS correctly (a company limited by guarantee), and not being able to find any errors in the review, I asked Jennifer for her help. She did not respond.
  • I remain willing to correct any errors.

¹ Who was added to the list of responsible persons after the review.

1. The link from this document on the ACNC Register was broken at the time of this review. ↑