Compassion Australia: charity review

This is review in the series ‘Members of Missions Interlink’, Missions Interlink being ‘the Australian network for global mission’[1].

‘Compassion Australia’  is one such Member, and an organisation that seeks donations online.

Both Members and Associates have to accept a set of standards, the introduction to which includes this statement:

http://tedsherwood.com/wp-content/uploads/2018/11/word-image-20.png

This Member did not respond to a draft of this review.

The charities’ regulator, the ACNC, in their article, Donating to Legitimate Charities, gives “some things to consider to help you make sure your donation is going where it is intended”:

  1. Check the charity’s name.
  2. Ask for identification from anyone seeking a donation.
  3. Be careful of online requests for donations.
  4. No tax deduction doesn’t mean the charity is not a legitimate one.
  5. Find out more about how the charity says it uses donations.

Here’s the results for ‘Compassion Australia’[2], with #5 supplemented by the essentials of the ACNC’s What should I consider when deciding which charity to support?[3].

1.  A search on the ACNC Register of charities gives a charity in that name (Compassion)[4].

2. Does Compassion use street collectors? I couldn’t find the answer to this on their website, nor in their Annual Report[5] (available on the ACNC Register). The method is not included in the (non-exhaustive) list of methods of promoting child sponsorship in Note 14 [Financial Report 2018].

3. The “web address begins with ‘https’ and there is a closed padlock symbol next to the web address in the address bar”, so the website is secure [the ACNC article above].

But on the giving page there is no mention of the security of your information.

4. The Australian Business Register (linked from Compassion’s ACNC Register record), says that the charity is entitled to receive tax deductible gifts. So is its fund ‘The Compassion Overseas Aid and Development Fund’ (the Fund).

For some reason only the Fund is mentioned in the FAQ ‘Are my donations to Compassion tax deductible?’:

Compassion explains the lack of tax deductibility in another FAQ (and adds a program not mentioned above):

I would have thought it difficult though to avoid ‘the promotion of a particular religious cause’ while the teaching of the children was ‘Christian teaching’ done by a local Christian church:

It appears though that Christian teaching can be done without sharing the Gospel:

Perhaps the answer lies in the fact that they do not require the children to become Christians:

5. The use of your donations

Here’s why Compassion thinks that you are safe in trusting them with your donation:

  • Fundraising Institute Australia (FIA):
    • Compassion membership confirmed.
    • The accountability is principally over dealing with you as a donor. You can access the Code with which Compassion must comply from the link in the middle of this page.
    • A Code Authority ‘Is responsible for the effective operation and administration of the Code including monitoring, complaints handling and appeals’ [Administration of the Code, Guidelines]. However, there is no further mention of monitoring in the Guidelines.
  • Missions Interlink:
    • No, the FIA does not require membership of Missions Interlink.
    • Here are the standards.
    • My experience from doing hundreds of reviews says that the members have little to fear from any monitoring of compliance with these standards.
      • And see this review.
  • Bentleys Brisbane (Audit) Pty Ltd: It is not correct to say that this firm, or any other firm, audits Compassion. They audit Compassion’s annual financial statements, something far less than Compassion’s entire operations, and even this is subject to clear limitations (see, here and here).
  • Internal audit: This is Compassion checking on itself. Does Compassion have the strongest version of this internal control, including the internal auditor reporting to the board?
  • Compassion says that it cannot be a member of the organisation representing aid and development organisations, an organisation that has an accountability regime:

    • Compassion doesn’t explain why operating through a church stops them from being a member. I can see nothing in the AICD material that automatically makes Compassion ineligible for membership.
  • It says it must comply with AusAid’s guidelines for overseas aid organisation. However, it is not an Australian accredited NGO, so is not subject to the Department of Foreign Affairs and Trade’s accountability.
  • For a public company like Compassion, the members, if sufficient in number, and independent of management, can be a source of accountability on the board (and therefore management). But Compassion has only seven members, and since the Constitution (see the ACNC Register) requires directors to be members, it is likely that, with seven directors, there are no members outside of board members. So, no accountability there.

Activities

From the Directors’ Report (in the Financial Report 2018):

They do this, almost completely (see below), through child sponsorship:

This is the ‘unique approach’:

And here is what is done with the child:

Despite the evidence for cash transfers to the poor, for instance, here, Compassion rarely uses them, and doesn’t explain why:

There’s more than one way of achieving the change that Compassion is trying to achieve. If you want to understand the choice, you could start with this article.

Compassion is only tangentially involved in community development:

Giving options

  • 13 of them. For only two of them is tax deductibility mentioned: ‘yes’ for the ‘Christmas Gift Fund’ and ‘no’ for the ‘Bible Fund’.
  • The giving page does not mention whether your money goes to Compassion generally or to the Fund. But elsewhere we are told that all donations go to the Fund:

What about the non-tax-deductible programs?

The Fund is not mentioned in the Financial Report.

Donations received

This is disclosed as a single line in a Note: ‘Sponsorships and donations 84,237,330’. So, no distinction between tax-deductible and on tax-deductible money, nor reporting to match your giving options (see above).

Cash spent

The audited account of how donations are used is the Financial Report 2018 on the ACNC Register.

This is the only information about where the cash went on operating activities:

[6]

Resources consumed (i.e. accrual)

The accrual section of the Report is more helpful (although not very helpful):

None of these terms are defined in the Report[7].

Notes 3 and 4 give us ‘Employee benefits expense; (13.6% of expenses), interest expense (negligible), ‘Depreciation and amortization expense’ (1.5%), and ‘Audit services’ ($30K).

But there is no further information on the expenses in the extract above.

Compassion claims that ‘approximately 80 per cent [of funds raised] is used for the direct benefit of children in our programs’:

[8]

But notice that their definition of ‘direct’ is wider than we might normally think it to be: it includes ‘Advocacy expenses’ (most likely the ‘For community education in Australia’ on page 9 of the Annual Report), and ‘Program support expenses’. These two add to 11% of the expenses.

‘Funds movement’

Compassion includes further information about inflows and outflows in the Notes to the accounts:

There is no explanation anywhere of

  • The relationship between these fourteen funds or programs and the 13 giving options.
    • There are some new terms that are unexplained.
  • The meaning of ‘funds’. How does it relate to ‘expenses’ and cash payments?
  • Why a ‘Funds movement schedule’ is included.
  • How the individual expenses relate to the expenses from the accrual statement (above).

Destination of the ‘funds’, operating cash outflow or ‘Program expenses’

There is no disclosure of the geographical destination of your funds.

How they ensured that the money was used for the purpose for which you gave it

Other than indirectly via the description of internal audit function (see above), there is no information.

Impact

Compassion use a research result[9] published six years to support the efficacy of their method of child development:

Nothing more recent or done by Compassion itself found.

 

Please contact me if you need a more in-depth review.

 

 

 

  1. https://missionsinterlink.org.au/about/
  2. See here for my last review.
  3. Focus on the nature of the charity’s work, its beneficiaries and the impact the charity is having in the community.Is it clear what the charity is trying to achieve and how its activities work towards its objectives?Would you like to spend your money, or time if volunteering, to support these objectives?Is the charity being transparent about its activities? [A section in the article, Donating and Volunteering].
  4. It has two business names: Compassion Child Sponsorship and Partners of Compassion [www.asic.gov.au]. Although it is permitted to omit ‘Limited/Ltd’ at the end of its name, it has no licence to trade under other than Compassion Australia. The website seems to contravene this.
  5. Care: both the Annual Report and the Financial Report 2018 are labelled ‘Annual report’.
  6. Although this level of disclosure may be compliant with the letter of the applicable Accounting Standard ( AASB 107), it is not consistent with either the intent of the Standard and paragraphs 14 and 19, or what is reasonable to expect from a major Christ-led charity that is reporting a true and fair view.
  7. The Annual Report has definitions for two of them:
  8. Notice that this is not an answer to the question.
  9. The FAQ mentions only the journal and the year, so here’s the citation: Bruce Wydick, Paul Glewwe, and Laine Rutledge, “Does International Child Sponsorship Work? A Six-Country Study of Impacts on Adult Life Outcomes,” Journal of Political Economy 121, no. 2 (April 2013): 393-436.)
    https://doi.org/10.1086/670138

 

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