Compassion Australia: mini-charity review

Mini-charity review of Compassion Australia (Compassion), an organisation that seeks donations online[1] and is a member of Missions Interlink. (Including the answers to the questions that the Australian charity regulator, the ACNC, suggests that you ask.)

For the previous review, see here.

Are they responsive to feedback[2]?

  • I sent them a draft of this review. Like last year, they did not respond.

Is Compassion registered?

  • As a charity, yes[3].
  • Compassion is a public company limited by guarantee.
  • It has two business names: Compassion Child Sponsorship and Partners of Compassion. 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.
  • It has no trademarks. (Compassion International Inc, the US organisation, has nine, including the one on the top left of each of Compassion’s webpage.)
  • Compassion operates in Australia, per the ACNC Register, in all eight states. It has a fundraising licence in all seven states that have a licensing regime[4].

What do they do?

  • There is no description on the website.
  • The AIS 2016 is meant to be about 2016 specifically, but instead it gives us what we are looking for:
    • Compassion primarily works with individual children through our Child Sponsorship Program. Compassion’s holistic child development model is designed to help reduce the vulnerability of children and their families and build their resilience through year-round nutrition, health, education and income generation support. More information, including access to our annual reports, can be found at www.compassion.com.au
  • Here’s their information on the ‘Child Sponsorship Program’.
    • Individual child sponsorship is their way. 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.
  • It also
  • Both the ‘Child Sponsorship Program’ and ‘Critical Needs’ are delivered through ‘local child development centres’.
  • Compassion also offers gifts that you can buy.
    • The purchase price goes to the ‘Critical Needs’ program.
  • Compassion believes that not giving the poor cash will help engender your trust in the charity. But there is increasing evidence that in many cases it is better to give cash. Compassion do not address this.
  • All the sponsored children are overseas. This is what it does for Australian children.
  • Fundraising is a big part of what Compassion does.

Does Compassion share the Gospel?[6]

  • Although they don’t include ‘Advancing Religion’ as an ‘Entity Subtype’ on the ACNC Register, and although the objects in the constitution don’t specifically mention sharing the Gospel, and although Compassion is endorsed as a Deductible Gift Recipient, it does share the Gospel with the sponsored children:
    • Before registering their children in the Child Sponsorship Program, caregivers are told about the Christian foundation of the program and give permission for their children to receive Christian education. Ongoing participation in the program doesn’t depend on making a commitment to Christ and children are free to leave the program at any time. Our implementing church partners are careful to present the gospel in a non-coercive, culturally sensitive way.
    • The answer to the FAQ ‘Was Compassion trying to convert Indian children to Christianity? gives a different picture. As does this one.
    • And this one avoids the question.
    • A consistent picture should be possible – another of their FAQs says that sharing the Gospel doesn’t automatically rule out a program’s eligibility for a tax deduction.

What impact are they having?

  • An independent study of Compassion-sponsored children was completed in 2013. Here, in a FAQ, is Compassion’s description of the results:
    • Compassion has been involved in individual child development for over 60 years. Independent research published in the Journal of Political Economy in 2013 studied 1860 children who participated in Compassion’s Child Sponsorship Program between 1980 and 1992 and found that graduates stayed in school longer, were more likely to have salaries and white-collar employment, and were more likely to be leaders in their communities and churches than their peers who did not participate in the program. Once Compassion sponsored children, these adults are now making a difference in their communities as mums, dads, pastors, teachers, doctors, even members of parliament.
  • This information is also used in a promotional video.
  • The FAQ mentions only the journal and the year, the video only the name of the lead researcher. 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
  • Other than the above, nothing systematic found

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

  • Compassion says that ‘80 per cent [of funds raised] is used for the direct benefit of children in our programs’. But this ‘direct benefit’ includes
    • The development of the programs
    • ‘Informing and updating sponsors and facilitating their personal relationship with their sponsored child’, and
    • Educating the community in Australia.
      • The last item shows a particularly wide definition of ‘direct’.

Do they pay their directors?

  • The Compassion 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?

  • The ABN record shows that you can claim a tax deduction for a donation to Compassion. And to its two funds, Compassion Australia Necessitous Circumstances Fund and The Compassion Overseas Aid and Development Fund.
    • This is not what Compassion says in answer to the FAQ ‘Are my donations to Compassion tax deductible?’ on its website. There is says that it only has DGR status for its ‘Overseas Aid and Development Fund’, and that donations to the ‘Bible Fund’ are not tax-deductible.
      • And Leadership Development Program appears to be another one that is not tax-deductible.
    • Although it has an ‘overseas aid and development fund’, its model of using local churches means that it is not eligible for membership of the Australian Council for International Development (ACFID).

Is their online giving secure?

  • Security is not mentioned on the first two pages of the process.

Is their reporting up-to-date?

  • Yes (lodged six and a half months after their year-end, one month later than 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 17 months ago.

Does their reporting comply with the regulator’s requirements?

  • Annual Information Statement (AIS) 2016: No
    • The business names are omitted. (As is the trading name, but trading names are of little consequence nowadays.)
    • Outcomes are not mentioned.
    • Not necessarily wrong, but inexplicable:
      • ‘Grants…for use in Australia’ has no comparable item in the financial statements; ‘Local program expenses’ are $2.15 m, considerably short of the amount here.
      • ‘Grants…for use outside Australia’ compares with $59.77 m for ‘Program expenses’ plus ‘Program support expenses’ in the financial statements, a little short of the amount here.
  • Financial Report 2016[7]: Yes.
    • But Compassion iscommitted to earning, and keeping, the trust and confidence of our donors and sponsors through complete transparency, so here’s some changes, like last year, that would result in a clearer picture of performance and position:
      • Why are neither of the tax-deductible funds not mentioned in the Financial Report 2016?
      • Do they use third-party fundraisers other than online services such as GoFundraise?
      • Investment properties $1.46 m, including Note 8
        • Why is a charity holding investment properties?
        • What and where are they?
        • Why are they not earning any rent?
        • How did an investment property have a written down value of only $3K?
      • Why do the giving options not match the funds in the ‘Funds movements schedule’ (Note 14)?
      • Lack of disclosure in the operating activities section of the Statement of cash flows means that the usefulness of the statement is greatly reduced; for instance, the figures cannot be compared to those in the Statement of profit and loss and other comprehensive income.
      • Presumably ‘Local program expenses’ means those for Australian programs, and ‘Program expenses’ are those for the overseas work?
        • If so, why don’t the figures match those in the AIS 2016?
      • There is no explanation of the terms ‘administration’, ‘fundraising’, and ‘advocacy’.
        • One would think that much advocacy serves the fundraising effort as well.
          • Note 13, by including ‘Advocates under ‘Fundraising appeals’, confirms this.
      • How overhead is divided between ‘Program support expenses’ and fundraising, administration, and fundraising is not explained.
      • Presenting revenue as ‘Revenue from continuing operations’ implies that there is revenue from discontinued operations per AASB 5 (Non-current Assets Held for Sale and Discontinued Operations, www.aasb.gov.au). But there isn’t any.
      • Trade and other payables $12.98 m, including Note 10: why are there some employee benefits included here rather than with long service leave under provisions?
      • In the Statement of changes in equity, the components of other comprehensive income are not shown.
      • Other income $87K, including Note 2: this income came from outside Compassion’s ordinary activities. This year it wasn’t the usual profit on disposal of non-current assets, so it would be interesting to know what it was.
      • Fundraising expenses $10.04 m: as most of the money comes from the members of local churches, why is this 13% of expenses?
      • Policy Notes normally included but not in these accounts:
        • New, revised or amending Accounting Standards and Interpretations adopted
        • Current and non-current classification
        • Fair value measurement
      • Note 15 Related party transactions: it is good practice to also disclose whether there are any loans or receivables between the related parties.
    • And some new things this year:
      • ‘Other Receivables’ $1.15 m, including Note 6: this explanation has been added this year:
        • These amounts generally arise from transactions outside the usual operating activities of the Company….
          • What is an example of these not insignificant and recurring transactions?
      • There is no explanation of the very large decrease in ‘Office furniture and equipment’ (from $1.10 m to $409K).
      • ‘Time off in lieu’ has gone to zero. A change in policy?

What financial situation was shown by that Report?

  • Surplus as a percentage of revenue decreased from 17% to less than ½%.
  • ‘Cash and cash equivalents’ represents approximately 10 weeks of revenue.
  • Current assets as a multiple of current liabilities (working capital) have declined from 1.31 to 1.22.
  • With only $397K of non-current liabilities, long-term financial structure appears sound.
  • The 19 ‘key management personnel’ (see Note 16) account for 19% of the wages bill (up from 18% last year).
    • If they are all full-time, the average compensation is $113K.
  • Using the figures for employees declared in the AIS 2016 (128 full-time, 34 part-time, and 4 casuals), and if part-timers work 50% and casuals 10% of full-time hours, the non-key personnel average 80K p.a. in benefits.
    • There’s no ‘Profit on disposal of non-current assets reported’, so the disposal of the (undefined) ‘fundraising equipment’ (all of it) must have resulted in a loss.

What did the auditor say about the last financial statements?

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

  • Nearly. The two business names are still missing.

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

  • Child sponsorship, plus ‘Donate’:
    • ‘Christmas Gift Fund’
    • ‘Where Most Needed’
    • ‘Mums and Babies’
    • ‘Water and Sanitation’
    • ‘Give to Critical Needs’
      • ‘Income Generation’
      • ‘Health’
      • ‘Education and Training’
      • ‘Disaster Relief’
      • ‘Highly Vulnerable Children’
      • ‘Infrastructure’
    • ‘Unsponsored Children Fund’
    • ‘Indigenous Project’
    • ‘Bible Fund’
    • Plus ‘Gifts’:
      • ‘Livestock’
      • ‘Health’
      • ‘Learning’
      • ‘Child Sponsorship’
      • ‘Where Most Needed’
    • ‘Sponsor a Child’
  • The two tax-deductible funds are not mentioned.
    • Elsewhere, when answering the FAQ ‘What is the best way to donate to Compassion?, they request that cheques and money order be made payable to Compassion Overseas Aid and Development Fund. Why the restriction?

Where were your (net) donations sent?

  • This is not disclosed.

Who are the people controlling the organisation?

  • The people shown in the lower half here.
  • Which is the same as those listed on the ACNC Register (under ‘Responsible Persons’):
  • The Board is responsible to the membership. When last disclosed (30 June 2016, Directors’ Report), there were only seven members, and as the seven directors must be members, this provides no accountability.

To whom are Compassion accountable?

  • In answer to the FAQ ‘How do I know I can trust you with my money? Compassion says that
    • As an organisational partner of the Fundraising Institute of Australia (FIA), we comply with the standards of Missions Interlink (sic) and we are independently audited annually by Bentleys Brisbane (Audit) Pty Ltd.
      • The FIA does not require membership of Missions Interlink.
      • And its code is principally about fundraising, that is, the practices that Compassion uses to get your donation, not what they do with your donation once they’ve got it. So not relevant here.
      • Missions Interlink has some standards about post-fundraising behaviour. But read here for how much comfort you should take from this accountability.
  • It also refers to its ‘global internal audit function’. These standards are not published though (and nor are the results).
  • Further down there’s another paragraph on accountability:
    • The Australian Charities and Not-for-Profits Commission (ACNC) recently launched a ‘Tick of Charity Registration’ which aims to give reassurance to the public that a charity is transparent and accountable by highlighting its presence on the ACNC Charity Register. Compassion Australia is successfully registered on the ACNC Charity Register and has the green tick of approval.
  • Compassion is also accountable, as a company, to ASIC.

 

  1. Both here and on various third-party platforms (see later).
  2. I agree with Randy Alcorn [Money, Possessions, & Eternity, Tyndale, 2003] when he says that ‘Any Christian leaders who resist financial accountability make themselves suspect.’ [page 425].
  3. It’s ‘Entity Subtype’ is ‘Public benevolent institution’. It is a ‘Christian’ organisation that shares the Gospel (see below), so ‘Advancing Religion’ would also seem to be appropriate.
    • Compassion says, in a FAQ, ‘Why was Compassion registered as a “charitable” NGO instead of a “religious” NGO?, that
      • When Compassion registered as a charitable organisation, the laws and guidelines were different—we registered as “charitable” in full alignment to the laws and guidelines at that time.
        • ‘Charitable’ and ‘religious’ is no longer a relevant comparison. All charities are ‘charitable’. Since the advent of the ACNC Register, charities have been able to change the ‘Entity Subtype’ field.
  4. Last year I said that they didn’t have a licence in Victoria. This was because I had yet to realise that the Victorian search function required the full name, not just ‘Compassion’. Sorry Compassion.
  5. …Fundraising for Compassion is a great way of raising awareness and advocating for children living in poverty, while at the same time making a real difference in children’s lives. We have teamed up with online fundraiser Everyday Hero and GoFundraise to make the process easy for you. Or if you’d rather fundraise without a web presence, you certainly can. Everything you need to get started is right here. Click on the ‘Start Fundraising for Compassion’ tab [links mine].
  6. “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.
  7. 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.

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