Charity Foundations Term Paper

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AngliCORD Board of Directors

John Doe, CEO

Recent Article in BRW concerning Charity Accountability

This memo aims to address a recent and rather disturbing article in the March 24-30, 2005, Australian Business Review Weekly entitled "Charity Inc." I rather suggest that each of you obtain a copy and read it so as to get the full effect of what I am about to address. As I am sure you are all very well aware of our organizational objectives: "AngliCORD is a partnership between Anglicans in Australia and Anglicans in the developing world. We seek to respond to Jesus' gospel of love through works of compassion and justice. We provide emergency relief and work in cooperation with local churches to alleviate poverty through sustainable development." (AngliCORD, 2005)

An article such as this could have massive repercussions on our organization's ability to gain funding from existing and/or potential sources as well as having an adverse effect that could possibly curtail efforts to utilize funding we have already acknowledged. This memo therefore will be a list of viable suggestions that may need to be further investigated by each of you and your staffs in order to confirm or correct any and all associated issues covered by the authors of the before mentioned article.

The bulk of the article was about the inefficient maintenance and accountability of non-profit organizations throughout Australia. There were several examples that the authors of the article provided that clearly demonstrated that there was some merit to the accusations made in and throughout the article and that in there may be future referendums, legal actions and/or new precedence established in the not so distant future in order to address and correct existing governmental shortfalls for non-profit management. The gist of the information the authors present tells of the current lack of control throughout the governmental bureaucracy, tax officials and other legislative overseers for the majority of the non-profit organizations throughout the continent.

There was specific mention of the religious factions that hold non-profit status such as but not limited to the largest such entity which is currently the Catholic Church system. "Until recently, Catholics in Australia had good reason to be proud of the achievements of their Church, and its leadership showed every sign of confidence that it would continue to play a vital role in the social life of the nation. By the mid-1980s, Catholics had eclipsed Anglicans in terms of sheer numbers, to become the largest single religious group in the country. The Catholic Church was employing more people than any other enterprise outside of government, it was the major private-sector player in the fields of welfare, education and health, and it had become the most identifiable voice of institutional Christianity." (Mcgillion, 2003)

But, the article was not solely based on that ideology as other religious-based organizations were also referenced. The main point regarding these religious factions were some blatant concerns about how these organizations that have been deemed as non-profits in the eyes of government are being totally unaccountable for their financial maintenance. In other words, these organizations are completely unaware of their true net worth, do not maintain acceptable accounting records and may even have additional sources of revenue from business entities that should be considered to be for profit entities. There were references to businesses such as ventures like pizza places, dry cleaners, insurance companies, other restaurants and more.

The fact of the matter is -- I am immediately requesting that we as an organization implement a complete and thorough investigation of our entire organization and all associated affiliate entities in order to avoid having to answer some embarrassing questions in the future as well as to be able to provide our supporters and donation base a complete and legitimate accounting and statistical disclosure of all of our charitable work and financial designations. I believe that it is crucial that we aim to have our organization design, implement and institute a thorough and viable code of ethics that would resolve any and all issues found by you and your teams in your investigation in regard to budgeting, funding, allocation, or administrative issues and concerns. Consider some recent findings from charitable organizations from around the globe. "Terrorist financing reportedly has involved not only classic money laundering, where the proceeds of illicit activities are washed or layered in order to conceal their origin, but also the diversion or skimming of funds from such legitimate sources as profits from small storefront businesses and charitable donations to domestic organizations and large international nongovernmental organizations." (Crimm, 2004)

Consider the repercussions if any of our personal bank accounts were not balanced over a couple of days, weeks, months, or as demonstrated by the article, years in some instances. Each of us has responsible as individuals (and in the case for this organization) to maintain reliable financial information. Any of us would consider the lack of financial accountability in our personal lives to be an atrocity and a sure mismanagement of our personal finances. But, based on this article, many non-profit organizations throughout Australia are dong just that -- they literally have no idea what they are worth, how much money they take in and where that money is best focused. In a nutshell, there is no accountability to where the money goes after it is accepted

Therefore, as a non-profit that can make a difference, we as an organization need to establish a set of comprehensive ethical financial and organizational guidelines. The objective of this would be to cover all of the organization's fiscal practices so as to guard against all potential and future conflicts of interest as well as being prepared for complete financial disclosure. There is no doubt in my mind that this article I am referring to will create an immediate need by the current governmental administration to address the obvious mismanagement problems for the nation's non-profit corporations. Once these probes commence, there may be immediate increases in the overall level of non-profit financial scrutiny and governmental oversight.

There is no doubt that we can use this to take the bull by the horns. In other words, I am suggestion that we as an organization should immediately address this situation long before the inevitable governmental sanctions, legislation changes and accounting backed probing begins. Our organization should be compelled to demand disclosure from all of our affiliates and connected organizations. Consider the issues that could arrive any day because we as an organization have historically only been required to maintain thorough records for donations over $250,000. The problem with this accounting position is that these vast sum donations represent only a very small percentage of our total non-profit revenues donations and therefore represents a minute portion of our company's inherent wealth.

With that being said, when donors, members of the public or lawmakers expect to go through or audit our accounting and financial deals and books, we certainly would not want to be systematically tied to all of the other incompetent Australian non-profit accounting processes. The industry is simply too inconsistent and that gives the nonprofit sector a black eye at best. We as an organization want to be assured that our accounting processes meet standards that any perspective investigator or investor would hold over a private or for profit organization. We should expect the highest possible standards of ethical practices in our financial dealings so as to provide a safe haven for potential investors.

All of this will come to naught if we are linked to operations that do not maintain the same financial or moral obligations as us. Therefore, I also suggest that we as an organization also turn to our sector's peers to strongly urge that they also follow similar criteria to the one we are in the process of establishing. If and when the entire non-profit industry throughout Australia follows our lead, there are many beneficiaries. For example, AngliCORD benefits by promoting the fact that we were the industry and national originators of all Australian non-profits and foundations adopting a series financial and moral code of ethics that enhance the governance and operations of the industry. "Not the least important development in public sector auditing over recent decades has been a crystallisation of thinking about the audit institution's independence, especially the crucial requirement that it be independent from the executive arm of government ... there has long been a substantial recognition of the need to endow the Auditor-General with functional independence ... However, in societies such as ours, where Ministers are responsible to the legislature for the administration of legislation and the representative house of the legislature is dominated by the executive, no institution created by legislation can be completely independent of the executive. And there persists a sensitive question whether indirect influence can be exerted on the independence of the audit function through pressure on resources. -- John Monaghan (Annual Report 1986 -- 87:4 -- 5)" (Ng, Ryan, & Wanna, 2001)

Now, the process of developing and implementing such a drastic change in…[continue]

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