Brian and Bobbie Houston’s LMI “charity” scrutinized

You might need to get yourself a cup of tea and get comfortable. Ted Sherwood of Charity reviews and other comments recently reviewed Brian and Bobbie Houston’s LMI “charity”.

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Leadership Ministries Incorporated, charity reviewThis is a charity review, a review for those with an interest in the Australian charity Leadership Ministries Incorporated (LM).

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 decision about IN.

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

Ministry response

Prior to publishing this review, I sent my observations to the charity, on 15 March 2016, and invited them to comment. They did not respond.

Organisation of this review

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

Sources

• ACNC Register (including links)
• Google search on the charity’s name.
• No separate website. The name in the list of Mission Interlink members links to this section of the Hillsong (Church) website.
• Not on FaceBook or LinkedIn.
• State government fundraising licence registers.
• No reviews on Glassdoor yet.

REGISTRATION DETAILS

Entity Subtype

• A subtype consistent with sharing the Gospel.
• The constitution says that the association is about ‘the promotion of the Christian faith’ by ‘lectures…public meetings, concerts, exhibitions, classes, seminars and conferences’ (clause 2, ‘Objects’).
• Brian Houston, joint leader, with his wife, of Hillsong Church, says that LM ‘is the entity by which Bobby and I conduct our broader ministry[ii], outside of Hillsong Church here in Australia.’[iii]

CHARITY DETAILS

Legal Name

• LM is a NSW incorporated association.

Charity ABN

• No tax deduction is claimable for a donation to LM.

Charity Address for Service

• I have no reason to believe that this doesn’t work.

Charity Street Address

• This is the Hills campus of Hillsong (Church).

Email

• I have no reason to believe that this doesn’t work.

Phone

• No number in www.whitepages.com.au. I suggest that you ring the Hills campus of Hillsong (Church) – see Charity Street Address, above.   02 8853 5353.   Ask for Peter Ridley (see Charity Address for Service, above), who is the CEO of the Church (or at least was in March 2014)

Website

• This is the one that Missions Interlink uses: http://hillsong.com/brian-bobbie/.

ANNUAL REPORTING

• AIS 2014
  • This is LM’s compulsory Annual Information Statement 2014 (AIS 2014).
  • It gives basic financial information. If you think that this might be sufficient for you
    • Only the totals in the Income Statement can be confirmed from the financial statements – the intermediate figures are not disclosed there.
    • The figures in the Balance Sheet Extract match those in the financial statements.
• Financial Report 2014
  • The report was signed six months after the year end.
  • It was then lodged the next day, four days before the final day for lodgement.
  • The coverage of finances in this review is left until the financial report proper (see Latest financial report – detail, below). (Go straight there.)

ABOUT THE CHARITY

• Statement of Faith

• None on the website.
• The constitution says (clause 3(b)) that applicants for membership are required to accept ‘the Christian beliefs as set out in Appendix B’. However, there is no Appendix B, nor a missing page.

Date Established

• An ABN was only held from October that year.
• No history found, either on the website or the internet.

Who the Charity Benefits

• Vision and Mission
  • Nothing found.
• Activities (What did LM do?)
  • From the Description of charity’s activities and outcomes in the AIS 2014:
    • The charity hosts and supports Christian worship services and programmes whose aims are to teach biblical principles and offer hope to people through the Gospel of Jesus Christ.
      • Nothing particularly about 2014.
      • The two people responsible for running these services, Brian and Bobby Houston, are very public figures. Note, then, the absence of any mention of them.
      • These services and programmes that were run in 2015, recorded, and are now for sale in the store to which one is directed (the Hillsong store), give a good picture of LM’s activities (and some outcomes) in 2014.
• Outcomes (What did LM deliver?)
  • LM did not respond to the request in the AIS 2014 for a description of its outcomes.
  • See last comment under Activities.
• Impact (How were people’s lives improved?)
  • Nothing found.

Size of Charity

• LM has a far lower revenue now than a decade ago. Back then it would have been a ‘Large’ 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.
  • You may therefore need to ask for more up-to-date information.

WHERE THE CHARITY OPERATES

Operating State(s)[iv]

• LM holds a fundraising licence in none of the seven states that have a licensing regime.
  • Apart from exemptions, whether it needs such a licence depends on whether the states think that, by the Houstons speaking in their state, they are ‘fundraising’ in their territory.

CHARITY’S DOCUMENT (SIC)

• There is no Annual Report/Review available on the ACNC Register.
• Nor on the website.

RESPONSIBLE PERSONS

No. of Australian ‘responsible person’ positions[v]

Peter Ridley           This function was not working at the time of publication

• Only one committee member? All the committee members should be listed here.
• Is Peter Ridley also a committee member? If not, he shouldn’t be listed here. (And if so, ‘Position’ should show his role on the committee.)
• In his disclosure letter in 2010, Brian Houston said that ‘no one from our family serves on the LMI board’. This is contradicted by the LM constitution [clause 7(b)]: it appoints Brian as is an office bearer for life, the ‘Executive Director’. So he should be on this list.
• From the same source, we know that there should also be at least a Chairman, a Secretary and a Treasurer [clause 7(b)].
• No comparison of this list with the Committee Members (sic) Report is possible because the usual list of directors there is absent. 

(End of review of the ACNC Register information)

Latest financial report – detail

• Nowhere in this report are the two leading lights of LM mentioned, which, given their high public profile (and not just in Christian circles), is interesting.
• There is no explanation for why an organisation that is principally two speakers on the Christian speaking circuit, and which is run from the Hillsong (Church) office, needs to own a building (or buildings).
• There is an almost complete lack of disclosure of how the money was spent.
• The audit report contains long out-of-date language.
• The decision not to produce general purpose financial statements, the type of financial statements that are designed for those users (including prospective users) who are unable to get LM to produce statements tailored to their needs, is highly questionable.

Committee Members (sic) Report (first page of the Financial Report)

• No such report is required by the ACNC.
• It should be signed by two committee members, and on behalf of the committee.
• This also applies to the document (page 2 of the Financial Report) where the directors put their name to the Report – the Committee Member’s (sic) declaration.
• Missing sections:
  • Offices and committee members
  • Objectives (short-term and long-term)
  • Strategy for achieving the objectives
  • Performance measures
• Sections not required: all of them bar ‘Principal activities’

An independent opinion on the financial statements – the Independent Audit Report… (the second page of the Financial Report)

• The auditor omits one of the statements when describing what’s in the financial report. (Plus he should actually be describing what he audited.)
• Although this is a ‘clean’ opinion (read here and here to draw the right conclusions from this), the auditor’s frequent and material deviation from the applicable Auditing Standard, somewhat reduces confidence in this opinion. For example,
  • ‘on a test basis’ was replaced in 2006
  • He cannot disclaim all responsibility for the selection of appropriate accounting policies, and
  • The lack of an Emphasis of Matter paragraph.

What was earned, what was consumed during the year – the Statement of Comprehensive Income (page 3 of the Financial Report)

• Other comprehensive income is missing.
• Revenue from ministry activities $669K (including Note 2(l)
  • The AIS 2014 contradicts this figure – $100K of it is not revenue, but ‘Other Income’.
  • The Note explains ‘Operational Income’, but we assume that LM meant ‘Revenue from ministry activities’.
  • There is no disclosure of how much came from each of ‘pastoral services’, donations, honorariums, and resource sales.
  • ‘Donations and bequests’ are reported in the AIS 2014: $91K
  • If the situation in 2014 was the same as when Brian wrote the disclosure letter, this description omits the rent that is received for the LM property that has a permanent tenant.
• Other expense from ministry activities $581K
  • This is much too large a percentage of total expenses, 94%, to be unexplained.
  • See below for ‘Employee expenses’
  • The AIS 2014 shows that $60K went on grants
• The following expenses are not disclosed:
  • Superannuation expense
  • Administration
  • Fundraising
  • Cost of sales (for the ‘resource sales’)
  • Employee benefits expense
    • The AIS 2014 shows ‘Employee expenses’ as $361K
    • Using the number of employees shown in the AIS 2014 (2 full -time and one part-time), and counting part-time as 50%, this figure represents an average of $144K pa. per employee.
      • That’s at least $288K for the Houston household from LM[vi].

What’s left at the end of the period – the Statement of Financial Position (page 4 of the Financial Report)

• Trade and Other Receivables $170K (including Note 4)
  • The only additional disclosure in the Note is that LM is owed $4K for GST.
  • $166K is too large for ‘Other’ – especially when it has increased from $74K.
• Property and Equipment $888K (including Note 5)
  • There is no policy note on property.
  • The reason why a charity that provides speakers for ‘worship services and programmes’, and is run from a Hillsong church, need a freehold building (or buildings) is not disclosed.
  • In 2010 Brian said that there were two properties, the use of which was ‘in line with ministry purposes’. How exactly?
  • One had a permanent tenant. How is this consistent with the charity’s purposes?
  • The usual reconciliations of written down values are missing.

Where the cash came from and where it went – the Statement of Cash Flows (page 6 of the Financial Report)

• For the receipts, it is reasonable to assume – although one shouldn’t have to – that they have the same source as in Note 2(l) (see Revenue… above), but merely saying ‘payments’ for 100% of the cash tells the reader nothing.

Essential information to go with the figures – the Notes to the Financial Statements (page 7 of the Financial Report)

• 1   Organisation information
  • The accounts are for LM as an individual entity?
  • Since it is not mentioned, we can assume that committee has no power to amend and reissue the statements
• 2   Summary of Significant Accounting Policies
  • (b) Basis of preparation
    • It is very hard to see, given the reach of Brian and Bobby’s activities and the interest of the press in them and the empire they lead, how the committee members can reasonably conclude that any person with an interest in LM can ‘command the preparation of reports tailored so as to satisfy specifically all of their information needs.’
      • Did the committee members understand what they were saying (and signing)?
    • The fact that they then give a completely different reason for not producing financial statements fully compliant with the Accounting Standards, throws considerable doubt on the integrity of the first reason. Especially when the second reason is nothing about the users’ needs, and all about convenience to LM.
    • Why no compliance with the other two Accounting Standards that are conventionally in the list for special purpose statements, AASB 1008 and AASB 1054?
  • (i) Cash and cash equivalents
    • Are there never any term deposits? (Three months is the usual cut-off.)
• Missing policy Notes
  • Revenue recognition
  • Property: normally included with Plant and equipment (Note 2(f))
  • New, revised or amending Accounting Standards and Interpretations adopted
  • Current and non-current classification
• 4 Trade and Other Receivables
  • ‘Other Receivables’ has gone from $74K to $166K yet there is still no disclosure.
• Missing Notes
  • Contingent liabilities
  • Capital commitments

Membership of accountability organisations claimed

• Although it doesn’t claim it, LM is a member of Missions Interlink, and is thus subject to its accountability requirements.

(End of review)

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

[ii] Brian says that this work is ‘the unique ministry that Bobbie and I do’ [‘…A Letter From Brian Houston, see prior link].

[iii] Both are permanently controversial: Brian, Bobbie.   To balance that, here is their own description: Brian, Bobbie. And Wikipaedia (note the site’s own cautions): Brian, Bobbie. Brian has received some (deserved) extra coverage recently.

[iv] 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.’

[v] 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.

[vi] They also have significant income from Hillsong (Church). And royalties? In his letter about their finances, written in 2010, he said that his income from LM was $150K. He also disclosed that he received another $150K from Hillsong Church, and that Bobbie’s income was ‘significantly less’ than his.

Source: By Ted Sherwood, Leadership Ministries Incorporated, charity review, Charity Reviews And Other Comments, http://tedsherwood.com/leadership-ministries-inc-charity-review/, Published 29/03/2016. (Accessed 29/03/2016.)