Tag: David Carroll

Gospel for Asia and Evangelical Council for Financial Accountability's Standard 4

ecfa sealYesterday, I wrote that Gospel for Asia may be in conflict with IRS guidelines regarding granting U.S. tax exempt donations to foreign entities. Today, I want to compare publicly available information about GFA to the Evangelical Council for Financial Accountability’s Guideline Four. In this post, I am specifically interested in the ECFA requirements for members who send money to foreign organizations and affiliates.
ECFA members are required to adhere to the following guidelines:

International grant-making.  U.S. tax law does not prohibit the making of grants by a U.S. tax-exempt organization to recipients in other countries if they further the U.S. organization’s tax-exempt purposes. However, the IRS has articulated some parameters as to when contributions may or may not be deductible for tax purposes, if they are made to a U.S. charity and subsequently distributed in the form of a grant to a foreign recipient.
The reason for IRS scrutiny of such grants is because only donations to a U.S. tax-exempt organization are deductible as charitable contributions. Contributions by a U.S. taxpayer to a foreign organization are not tax-deductible.
A U.S. charity may not act merely as a conduit of funds for a foreign recipient. This would result in treating these indirect contributions to a foreign organization as tax-deductible contributions, something that would not be allowed if the funds were made directly to the foreign entity.
However, if a grant is made by a U.S. charity to further its exempt purposes, and if the grant funds are clearly under the control and discretion of the U.S. charity rather than the donor, it is unlikely that the IRS will challenge the deductibility of the gift.

The issue of “discretion and control” is what I raised yesterday. GFA-US did not disclose millions of dollars of U.S. donor money given to Believers’ Church, Love India Ministry and Last Hour Ministry in the 2013 annual audit. Instead, GFA-US claimed that $58.5 million went to GFA-India. However, GFA-India only disclosed $6.5 million in donations from the United States. Even if donations from GFA-US to the other three NGOs were listed in the 2013 audit, $30.5 million dollars still went unreported in India in 2013 (see this article for the breakdown).

The real donees for about $28 million dollars from U.S. donors are Believers’ Church, Love India Ministry and Last Hour Ministry. According to GFA-US, Believers’ Church is a separate organization legally. Recently, David Carroll told Christian Today:

GFA’s Chief Operating Officer David Carroll told Christian Today that it was important to understand that GFA India and Believers Church were separate entities from Gospel for Asia USA.

Carroll said that the Indian GFA and Believers’ Church are responsible for dispersing the funds:

“Though Gospel for Asia India and Believers Church is responsible for dispersing the funds, they know the requests of the donors for the specific designations the money was given for and they are fastidious about documenting the disbursement of donor funds. The donations go where they have been designated.”

It may be true that the donations go where the donors want, but then again they may not. GFA has given the public reasons to question. David Carroll wants us to take his word that GFA-India and Believers’ Church spend the money in keeping with donor intent. However, when auditor Jason Watkins, pastor and former donor Bruce Morrison, and I analysed the public reports of GFA-India’s and Believers’ Church’s spending in India, we couldn’t find millions of dollars GFA-US said was sent to India. The reports of what was received in India don’t match the claims of giving in the U.S. In response to questions about the discrepancy, GFA has been silent. Furthermore, an Indian tax court recently wrote that GFA used funds for reasons not in keeping with the intended purpose. Without a plausible accounting of millions of donor dollars, why should the donor public believe that GFA-India and BC are spending the funds they do report in keeping with donor intent?

The guidelines continue:

Organizations may seek professional counsel concerning operations that result in grants to foreign recipients. Various rulings and tax cases stipulate certain characteristics in evaluating whether grants to foreign recipients are proper, exempt-purpose expenditures of the U.S. charity and, therefore, if any supporting gifts actually are deductible by donors of those funds.

Impact of international operations on the financial statements.  It is important for organizations to properly control, adequately account for, responsibly audit, and fully disclose in their financial statements the nature and scope of their operations, both within the U.S. and internationally. Organizations and their auditors should consider the impact of worldwide operations on the scope of the audit, and the financial statements should report on all organizational assets, liabilities, revenue, and expenses.

This guideline is not being met. The 2012 and 2013 audits do not disclose funds given to Believers’ Church, Love India Ministry and Last Hour Ministry. The amount claimed to be given to GFA-India by GFA-US comes nowhere close to matching up with what is reported in India. Furthermore, GFA’s audit doesn’t include $14 million USD given by Canadians, supposedly to India, but not reported in India. According to GFA’s COO David Carroll, Canadian funds are lumped in with the U.S. funds and reported together. However, that makes the discrepancy $14 million greater since GFA-India does not report a penny coming from Canada.

The publicly available audit provided by GFA does not fully disclose their operations within the U.S. and internationally. This has been true for years and yet GFA has used the ECFA seal of approval to claim financial health and integrity. As recently as June 10, the ECFA told Christian Today:

Regarding apparent financial discrepancies, it said: “There are certain foreign NGOs that include ‘Gospel for Asia’ in their name. The data of those NGOs is not consolidated with that of Gospel for Asia (US) for financial statements purposes.”

Why not? ECFA’s guideline four certainly appears to require consolidated reports.

It [ECFA] concluded: “Gospel for Asia is in full compliance with ECFA in requiring our members to provide a copy of its current financial statements upon written request and other disclosures as the law may require. The organisation has gone beyond what the law requires by submitting to ECFA’s accreditation process.”

Is GFA-US (and ECFA) really going to claim that these GFA NGOs are not part of their international operations? If so, then how can GFA-US claim that they exercise “discretion and control” over the donations given by U.S. tax payers? If GFA-India and Believers’ Church are so autonomous that they are not part of ECFA-required financial reporting, then how can U.S. donors be confident that GFA-US has sufficient “discretion and control” to make sure those dollars are going where donors specify?  This question is especially relevant since the reports filed by the Indian recipients of U.S. donations to GFA don’t match what GFA claims they send to India.

Back to the guidelines:

To be “unqualified” or “clean,” an independent auditor’s report must reflect no restriction on the scope of the audit.

The reach of an organization extends to activities conducted under its control (internationally) when expenditures are made to further its exempt purposes to compensate workers, pay business expenses, provide benevolence to the poor and needy, or to make exempt-purpose grants.

These “exempt purposes” are among the purposes reported in India for funds sent by GFA in Texas.

The guidelines continue:

In order for financial statements to be in conformity with generally accepted accounting principles (GAAP), they must accurately portray the full range of the organization’s operations internationally.

A review of GFA’s 2012 and 2013 audits makes it clear that GFA is in violation of this statement. The financial status of the Indian affiliate (what GFA-India is called in the 2013 financial statement) is not reported, nor are donations to Believers’ Church, Love India Ministry and Last Hour Ministry reported in the audit. I should add that the funds smurfed to India via student groups illegally carrying money to India without being declared in the United States is not referred to in the 2012 and 2013 audits.

Guideline 4 continues:

The FASB Accounting Standards Codification 958-205 (Topic 205, “Presentation of Financial Statements”) sets forth that such statements must focus on the organization as a whole, including its total assets, liabilities, net assets, revenue, expenses, and changes in net assets. In addition, ASC-810 (Topic 810, “Consolidation”) helps guide a reporting organization as to when it must consolidate another not-for-profit organization in which it has a controlling financial interest.

Significant granting activities should be properly disclosed in an organization’s financial statements, including a description of the nature and purpose of the grants and the grant administration policies.

I think $20.6 million to Believers’ Church, $3.6 million to Last Hour Ministry and $3.6 million to Love India Ministry would have to be considered “significant granting activity.” These are not disclosed in the financial audit done by Bland Garvey; and yet ECFA declares GFA to be in compliance.

Guideline 4 continues:

Grant administration policies should be well-developed and approved by the governing board, while adaptable to a wide range of circumstances. The following are possible controls and accountability measures:

  1. Written progress reports
  2. Required accounting or financial statements
  3. Required internal or independent audits and inspections
  4. On-site program inspections by grantor personnel
  5. Retaining discretion as to when funds will be remitted based on administration policies and grant agreements, including the policy and practice of refusing conditional or earmarked gifts that create an obligation to remit the funds immediately
  6. Adequate oversight (supervision) and review (program evaluation) or compliance with administration policies by the governing board and/or the organization’s independent auditors

Conformity with applicable laws and regulations.  Standard 4 establishes the guideline that ECFA accredited organizations shall use resources in conformity with applicable laws and regulations. The standard provides a caveat that biblical mandates may be taken into account when considering conformity with laws and regulations. In select situations, an accredited organization may feel compelled to take actions that are in conflict with certain laws, i.e., with respect to religious freedoms and carrying out the Great Commission.

The ECFA requires the board and auditors to maintain oversight sufficient to insure that the organizations policies are being carried out. The public doesn’t know why millions of dollars don’t show up in Indian reports. However, it is known and now admitted that GFA violated its own policies regarding cash transfers to India via smuggling cash via students. GFA claims to only send money to foreign destinations via bank wire. For some undisclosed period of time an undisclosed sum of cash was sent to India without declaring the cash to U.S. or India customs. ECFA and GFA want all of that to go away by saying they won’t do it again.
What donors should understand is that GFA was a member in good standing the entire time they violated their own and ECFA’s standards. They remain a member in good standing with no consequences at all to that standing.
For ECFA purposes only, the last section may give GFA some wiggle room to keep secrets about reporting funds received in India. If GFA-India isn’t reporting all of the income that GFA-US claims is going there (we already know an Indian court has asserted that all the funds are not being used for the intended purposes), this would be a violation of Indian law. The lack of reporting of Canada as a source of $14 million USD appears to be a violation of Indian law. GFA might claim that the lack of reporting was due to protecting missionaries in some way. This seems to be the GFA response line but I have heard no plausible explanation about how non-disclosure of some funds but not others protects anyone’s safety.
 

How Does Gospel for Asia Exercise Discretion and Control of U.S. Tax-Exempt Contributions Given to Asia?

Other than to operate the School of Discipleship, Gospel for Asia in Texas appears to exist to collect donations and send them to various countries in Asia where locals carry out various charitable and religious activities. The foreign donations are wired (or smuggled) to NGOs in India and other nations in Asia. According to GFA’s 2013 audit financial statement nearly $60.1 million dollars were wired to five GFA related parties in India, Myanmar, Nepal, Sri Lanka, and Bangladesh. See below:
RelatedPartyGFAAudit2013
In addition, we know that GFA also sent money to Believers’ Church, Last Hour Ministry, and Love India Ministry, three NGOs registered with the Indian government. For some reason, these transactions were not disclosed in the 2013 audit as related party transactions, even though K.P. Yohannan is involved with those organizations. These contributions claimed by GFA to the related parties is a substantial part of what GFA takes in from American donors. As I have pointed out before, a substantial amount of this money does not show up on reports of foreign contributions which are required to be filed with the Indian government (see below).
These facts might be of some consequence if the IRS decides to look into GFA’s operations. In June of this year, the Evangelical Council for Financial Accountability posted the following advice for member organizations. As I read it, this advice and the IRS decision has relevance to GFA.

Earlier this year the IRS stripped the tax-exempt status of an unnamed “American Friends of” organization because more than a substantial part of the organization’s activities did not further its exempt purpose. However, the IRS stated that even if its ruling would be overturned on appeal, contributions to the organization would nonetheless not be deductible because the organization failed to exercise sufficient control and discretion over its funds.
“American Friends of” organizations support the exempt purposes of foreign organizations by raising financial support for them in the United States. Donations to an “American Friends of” organization are generally deductible, but only if the organization can prove it exercises sufficient control and discretion over the donated funds to ensure that the funds are being used to further the exempt purposes of the organization. In other words, to maintain deductibility of donations, an “American Friends of” organization must be more than a conduit; rather, it must exercise full control and discretion over where its funds are distributed and how they are used.
In the recent ruling, there were two key factors identified by the IRS in determining that the organization was acting as a conduit between donors in the United States and the foreign organization. First, the organization did not maintain contemporaneous substantiation that it exercised control and discretion of its funds as outlined in Revenue Rulings 63-252 and 66-79. Second, the organization could not prove that it funded specific projects which it reviewed in advance; rather, the evidence showed that disbursements were made for the general operating expenses of the foreign organization.
This ruling is a reminder of the importance of keeping detailed, contemporaneous records to substantiate how an organization exercises control and discretion over its funds, particularly when disbursements are made to organizations to which deductible contributions cannot be made directly (which includes many foreign exempt organizations). For additional details, the IRS ruling can be accessed via this link.

The link leads to a redacted IRS determination regarding tax exempt status of an unnamed organization with most operation in a foreign country. The conclusion wasIRS ruling conduitIs GFA-India (and the other countries) a related party or is GFA-United States doing business in India as GFA-India? I may not be asking this precisely but the point of the question is to wonder out loud if GFA leaders in America are in charge of how American contributions are spent in India. The FC-6 reports filed by GFA-India, Believers’ Church, Last Hour Ministry and Love India Ministry indicate that funds are spent for salaries and other operating costs, as was the case with the unnamed charity which was investigated by the IRS. A fair question for GFA is: Who is exercising “discretion and control” of the funds sent to GFA-India, Believers’ Church, Love India Ministry and Last Hour Ministry?
In this context, it is concerning that Believers’ Church, Love India Ministry and Last Hour Ministry are not mentioned in the audit, nor is it clear that GFA-US even claims “discretion and control” of funds sent to these groups. For instance, according to GFA’s website, Believers’ Church and GFA have no “legal binding” relationship:
believers church legal GFA
How then can GFA-US have “discretion and control” of the funds donated to GFA but given by GFA to Believers’ Church?  Perhaps that is why BC builds hospitals and schools and runs a micro-finance lending organization and in Myanmar even sponsors a soccer team.
It is troubling that millions of dollars of donor money are unaccounted for in India. Recall that Canadian pastor Bruce Morrison received no answers when he asked GFA leaders why $43.5 million of American and Canadian donations was not reported in India.  Morrison’s findings mirror mine and those of auditor Jason Watkins who examined public records of 2013 GFA spending:
2013 pie chart spending
Watkins found more funds missing ($48 v. Morrison’s $43.5 million) because he also examined records from the UK and Australia.
Since these funds are unaccounted for in India, then how can GFA-US make a case that it is exercising appropriate “discretion and control?” If GFA does have “discretion and control” over these tax-exempt funds, then why does GFA fail to answers questions from the public and donors about where the money goes?
Add these question to the growing list.
 

A Canadian Pastor Explains Why His Church Dropped Support for Gospel for Asia

Bruce Morrison is a pastor in New Glasgow, Nova Scotia, Canada. For 20 years, Morrison’s church supported Gospel for Asia but stopped doing so in April of this year. Now, in a 13 page letter, Morrison details the reasons for ending support and provides insight into his efforts to get answers from GFA.

Morrison’s findings are very similar to my own. While we have spoken some over the past several weeks, Morrison began looking into GFA’s finances about a month before I did. His church dropped support about the time I began writing about GFA and came as the result of his research and efforts to get answers from GFA.

Read Morrison’s letter with the knowledge in mind that his church supported GFA for 20 years. It is hard to believe that a church with that track record would be unable to get basic answers from a mission organization. However, given my experience with GFA, I certainly believe it. The lack of information and answers should be a red flag to current and prospective donors.

Silence is complicity
Morrison writes with concern for other churches. After asserting that “stories of abuse at the hands of spiritual leaders are far more common than they should be,” Morrison writes:

It is with both a sense of reluctance, but also of moral responsibility, that I write this letter to the larger body of Christ. Reluctance – from the unpleasantness of speaking about the need for correction in a Christian ministry, and responsibility – since silence in instances such as I will describe herein is complicity.

If GFA has answers to the issues which Morrison raises, it it beyond my understanding why they have not offered them. Specifically, Morrison wants an explanation of why foreign contributions to India for 2013 in the amount of $43.48 million do not show up in Indian records. He wants to know why over $150 million was sitting in Indian banks at the end of FY 2013. He wants to know if GFA got written permission from donors to bank around $50 million in a corpus fund.  There are many other questions as well. I have been raising these same questions independently since April.

I encourage readers to read Morrison’s letter to the “larger body of Christ.”

C'mon Gospel for Asia, Let's Talk

On May 7, 2015 Gospel for Asia’s Chief Operating Officer David Carroll told me he would no longer answer any more of my questions. Leading up to that email was my question about why funds given and reported outside of India didn’t show up in Indian records. Specifically at that time, I asked about the funds (15 million Canadian dollars) declared in Canada as being sent to India in 2013 but never reported as being contributed from a foreign source as required by Indian law (I later wrote about that discrepancy). My email from May 5 was as follows:

David – I have reviewed some information available to Canadians regarding charities. In the year most recently available, filings with the Canadian govt. show 15million to India.
In the same year in India, govt forms show nothing came in from Canada.
Can you account for this discrepancy? I intend to write about this tomorrow afternoon.
Thank you, Warren

On May 6, Carroll wrote back:

Good morning, Mr. Throckmorton,
The Canadian funds were combined with U.S. funds by our auditor in India for various accounting reasons. There is no requirement that they be reported separately.
Thank you.
David

That same day, I wrote back with follow up questions and a request for information.

David – Can you provide contact information for your auditor in India? This combination of funds appears to be in violation of Canadian law, and possibly Indian law, according to my sources. I would like to understand the auditor’s rationale for believing there is no rationale for these sources to be reported separately.
Thanks, Warren

On May 7, Carroll cut off contact.

Warren,
No, Gospel for Asia has not violated the law.
When you first contacted us, I mentioned that we would not be able to respond to every question you put before us. Now, with the increased volume and frequency of your questions, it has become clear that this back and forth has become a distraction from our mission work. For this reason, this will be my final response. We understand that you will continue to explore issues around Gospel for Asia and continue to be fed accusations from former employees, and we accept that.
We continue to remain accountable to all applicable laws and regulations, to the Evangelical Council for Financial Accountability and to independent auditors.
Sincerely,
David

In my post on the Canadian funds, I made sure GFA’s position was included. I would have included more if GFA had provided it. Instead I got my hand smacked and was sent to time out.
I have written GFA several times since then. I have addressed correspondence to Carroll, John Beers, and K.P. Yohannan. I have sent some of the emails to the Evangelical Council for Financial Accountability. No answers.
In light of my efforts to get answers from GFA, imagine my surprise when I heard from former donors that GFA is saying they tried to work with me but have been advised by their financial consultants (?) not to talk to me. I wrote David Carroll yesterday to ask him if GFA reps are telling donors that GFA tried to work with me. Apparently still taking his financial consultants’ advise, there has been no reply.
GFA, according to several former donors, you are telling them that the reason you can’t disclose answers to the question posed here is because I am asking about funds going to high risk areas for persecution.  We both know that isn’t a plausible answer since no identities or activities would be disclosed by answers to the questions I have asked.
GFA, if you are telling donors that you have tried to work with me, please stop. We both know better. I am willing to look at any new information you provide. You know it isn’t just me asking these questions. Pastors are asking, donors are asking, staff are asking, former staff are asking. If you really want to work with me, you have my contact information.
The following issues would be a good start:

Will the Evangelical Council for Financial Accountability Hold Gospel for Asia Accountable?

I am not betting on it.
CashThe Calvary Chapel Senior Pastors Conference ended yesterday with no public statements from anyone within the Calvary Chapel movement about Gospel for Asia. GFA exhibited at the conference but left their table unmanned much of the time according to sources there. Several pastors, speaking on condition of anonymity, told me that their church would soon drop support for GFA due to GFA’s public silence about various financial, personnel and leadership concerns.
Several sources have told me that GFA is holding up their membership in the Evangelical Council for Financial Accountability as proof that no real problems exist. Furthermore, GFA insiders have told me that ECFA executives have reviewed GFA’s finances and is privately expressing confidence in GFA. ECFA leaders have ignored my requests for clarification or explanation about the missing money, money carrying to India, etc.
Mars Hill Church similarly pointed to ECFA membership as an indication that funds were being used properly. Even as the church did that, Mars Hill made changes to their procedures to come more into compliance with ECFA guidelines. What I learned about ECFA via the Mars Hill experience and then later through ECFA’s handling of Faith Christian Church is that donors cannot count on ECFA to disclose problems with members.
Now ECFA membership is being used by GFA to avoid explanations of multiple concerns raised by around 100 former employees, former donors, and bloggers. In my opinion, ECFA is now responsible for whatever problems GFA manifests. Here again is a summary of issues that GFA and ECFA have ignored.

Millions of dollars are unaccounted for and GFA has not given any reasons or explanations. Now GFA is claiming that ECFA has seen the books and has given the all-clear.
Since GFA won’t be accountable, I publicly call on ECFA to provide information relevant to list of concerns listed above.