Arrow Leadership Australia Limited: mini-charity review

Mini-charity review of Arrow Leadership Australia Limited, an organisation that seeks donations online, and is accredited with the CMA Standards Council[1]. (Including the answers to the questions that the Australian charity regulator, the ACNC, suggests that you ask.)

Are they responsive to feedback[2]?

  • I sent them a draft of this review on 4 January, with publication scheduled for 15 January. The Executive Director, Liam Glover, responded on 11 January. This was the substantive part of his response: ‘Thank you for taking the time to alert us to your observations. We will review in due course that which you have raised below.

Is Arrow registered?

  • As a charity, yes.
  • Arrow is a public company, a company limited by guarantee.
  • It has two business names, ILG Group, and Arrow Marketplace Connections.
    • Neither is disclosed on the ACNC Register.
  • Although it is permitted to omit ‘Limited/Ltd’ at the end of its name, it has no licence to trade under other than Arrow Leadership Australia. The website and Facebook page contravene this.
  • It has no trademarks.
  • Arrow operates, per the ACNC Register, throughout Australia. It seeks donations on the internet.
    • Whether or not it uses street collectors is not disclosed.
    • It has no State fundraising licences[3].
  • Arrow, per the ACNC Register, does not operate overseas.

What do they do?

  • See the first section here.
  • These are the programs that give effect to that ‘calling’.
  • Neither ILG Group or Arrow Marketplace Connections, Arrow’s two business names, are mentioned on the website.
  • There’s no annual report this year; next year one will be required because of their accreditation with the CMA Standards Council [Standard 8.2].

Does Arrow share the Gospel?[4]

  • No (they train Christians).

What impact are they having?

  • Nothing systematic found.
  • Standard 5.6 of the CMA Standards Council standards (see above) requires that regular program evaluations must be performed. There is no mention of these on the website.

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

  • The expenses are not disclosed in a way that allows an estimate of this.

Do they pay their board members?

  • The governing document does not permit this.
  • Expenses are not disclosed at a level that allows one to check for a payment.

Can you get a tax deduction?

  • No
    • This is contradicted by the donation page. Here it says that a donation to The Brian Coombs Sponsorship Fund entitles you to a tax deduction. This is because Arrow is collecting for a third party, the charity ‘Annabel Charitable Foundation’ (actually The Annabel Charitable Foundation Ltd or Annabel Foundation).
      • Arrow implies, here and elsewhere, that The Brian Coombs Sponsorship Fund is part of Arrow. Not only is The Annabel Charitable Foundation Ltd an unrelated charity, but the Fund does not even have an ABN. Their representations are therefore contrary to Standard 9.1 of the CMA Standards Council’s standards with which they must comply.

Is their online giving secure?

  • Security is not mentioned.

Is their reporting up-to-date?

  • Yes (lodged six months after their year-end, four days before the deadline, and the same time as 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 12 months ago.

Does their reporting comply with the regulator’s requirements?

  • Annual Information Statement (AIS) 2016: No
    • The Annual Information Statement (AIS) 2016 does not describe 2016’s activities, as it should, but just describes what Arrow does.
    • The business names are omitted.
    • Outcomes are not mentioned.
  • Financial Report 2016[5]: Doubtful.
    • With donors and participants in events numbering enough to produce revenue of over $1m, and operations throughout Australia, it is difficult to see how the directors could reasonably conclude, effectively, that all stakeholders, both past and prospective, have the capacity to ask the company to produce financial statements tailored to their individual needs.
    • Arrow is committed to “good governance, transparency and accountability” (as recognized by their recent accreditation with the CMA Standards Council), so you might make the following additional suggestions/comments to them:
      • Disclose the arrangement with The Annabel Charitable Foundation Ltd (see above), and the effect on the accounts.
      • Disclose information about related parties.
      • Include a Note on related parties.
      • What exactly was the issue that caused the auditor to qualify the accounts this year?
      • What changes were made, if any, to avoid last year’s qualification?
      • Use one of the two expense classifications allowed by the Accounting Standards, not a mixed classification.
      • Include all the disclosures required by the Accounting Standards for the Statement of Changes in Equity.
      • What was the reason for the prior period adjustment?
      • Include intangibles in the accounting policy Note.
      • Treat ‘Other income’ consistently between the Statement of Income and Expenditure and Other Comprehensive Income and Note 2.
      • Disclose fundraising expenses.
    • Because of the above not immaterial issues, it is arguable that the financial statements are not ‘complete and accurate’, and therefore Arrow is not complying with Standard 6.1 of the CMA Standards Council standards (see above).

What financial situation was shown by that Report?

  • Surplus as a percentage of revenue increased from 2% to 6%.
  • ‘Cash and cash equivalents’ represents 2.6 months of revenue (down from 3.6 last year).
  • Employee benefits was 40% of expenses (up from 37% last year).
  • Current assets as a multiple of current liabilities (working capital) was increased from 1.2 to 1.7.
  • Although there was only 18K of long-term assets, similar liabilities only totalled $4K.

What did the auditor say about the last financial statements?

  • The auditor, Peter Shields, for Saward Dawson, issued a qualified opinion (that is, not a ‘clean’ opinion).
    • Saward Dawson did not audit the previous financial statements. They said that this meant that they were ‘not in a position to express an opinion on the comparatives for 31 December 2015 as we are uncertain as to the extent of the unidentified errors in the 2015 balances and transactions, as well as the effects on the current year’s financial statements.’
    • It appears that this qualification is in response to this requirement in the Australian Auditing Standards:
      • If the auditor concludes that the opening balances contain a misstatement that materially affects the current period’s financial report, and the effect of the misstatement is not appropriately accounted for or not adequately presented or disclosed, the auditor shall express a qualified opinion or an adverse opinion, as appropriate, in accordance with ASA 705 [ASA 501, paragraph 11, www.aasb.gov.au].
    • The previous auditor also issued a qualified opinion. This was the ‘basis’ for that opinion:
      • As is common for organisations of this type, it is not practical for Arrow Leadership Australia Ltd to maintain an effective system of internal control over the collection of donations and other fund raising (sic) activities until their initial entry in the accounting records. Accordingly, our audit in relation to fund raising (sic) was limited to amounts recorded in the accounting records.
  • Silence on a similar deficiency this year means either that Arrow introduced controls over fundraising revenue, or the current auditor has different thresholds for a qualified opinion on this deficiency [ASA 510, paragraph 9, www.aasb.gov.au].

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

  • No
    • ‘Other Name(s)’ is missing the two business names.
    • The Secretary is included as a ‘responsible person’[6].

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

  • ‘Partnership Fund – Have your gift DOUBLED to equip Christian Leaders’
  • ‘Brian Coombs Sponsorship Fund’
  • ‘Arrow Leadership International Development’

Where were your (net) donations sent?

  • Money is collected for three programs. How much is spent on each is not disclosed.

Who are the people controlling the organisation?

  • The people shown here.
  • The ACNC Register (under ‘Responsible Persons’) has one additional name, Amanda Otten:
  • For only one of the directors with a LinkedIn profile, Adam Lowe, is their Arrow role mentioned.
  • As the Secretary, Amanda Otten is not a ‘responsible person’, she should not be included on the Register.
  • There are 171 charities with an Adam Lowe as a board member, and 13 with a Christopher Edwards. But 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 Arrow’s Adam Lowe is not a director, and likewise for Christopher Edwards, you are left with the total being more than a handful, it would be legitimate for you to question whether their ability to discharge their fiduciary responsibilities is threatened.
  • The Board is responsible to the membership. When last disclosed (30 June 2016, Notes to the Financial Statements), there were 23 members. Directors are required to be directors (‘Governing document’), so it is effectively 14 people holding the directors accountable.

To whom are Arrow accountable?

  • As a charity, to the ACNC.
  • Arrow was recently accredited by the CMA Standards Council. It is therefore entitled to display their seal – see the website footer. For this right it must abide by the Council’s Principles and Standards of Responsible Stewardship.
  • Arrow is also accountable, as a company, to ASIC.

 

 

 

  1. Arrow is a Foundation Partner. At the announcement of the Foundation Partners, Steve Kerr, the Executive Director of CMASC, said “Foundation Partner status is tangible recognition and reward for their efforts – these are high quality organisations.” 
  2. Arrow do not invite feedback or complaints. This is contrary to Standard 8.7 of the CMA Standards Council’s standards with which they must comply.
  3. 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.
  4. “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.
  5. 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.
  6. Although there is no specific requirement in the CMA Standards Council standards for the Register to be complete and accurate, there are other requirements that make it an entirely reasonable expectation.

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