100% of your tax deductible donations to the Primary Club reach the recipient
The Honorary Treasurer of The Primary Club of Australia has written a report explaining that 100% of your tax deductible donations to the Primary Club, as defined by the ATO, reach the recipient. Not one dollar of these funds is used in the administration, raising of funds or publicity. Very few charities can make that claim. We invite you to read this report and learn more about what the Primary Club does with your donation dollar.
“Good intentions – but where is the money trail?”
Members of the Primary Club of Australia Inc (“PCA”) will probably have seen the article in the Sydney Morning Herald (“SMH”) on Saturday 27th August, 2011. For those who have not seen the article the following link provides access to the relevant article on the SMH website.
This is the second in a series of articles that have addressed some of the perceived shortfalls in the “not for profit” sector. The first addressed the issue of how much of the dollars raised actually reaches the actual recipient of charity. The current investigation deals further with the wider issue of transparency of information.
The Committee of the PCA believes it is in the interests of our members and other stakeholders to comment further on these articles. In this memorandum we will address:
- Donations reaching the recipient of aid: and
- Transparency of information.
1. Donations reaching the recipient of aid
This was the thrust of the first series of articles concerning the percentage of “donations” that ultimately reach the recipient of aid. In particular, there has been comment about the percentage of revenues that charities spend on administrative fees, revenue raising and publicity. The PCA responded earlier to this report and our statement already appears on our website. The Committee believes that it is in the interest of our members to repeat our views that were expressed earlier.
In the recent article presented in the print media, rough comparisons were made between various well known charities. It is possible some conclusions could be drawn about the effectiveness of some charitable operations from these statistics.
The Committee of the PCA reviewed the original article and has made the following assessment :
- The information provided in this article was extremely basic;
- There was insufficient information to accurately determine how individual charities raised their funds; and
- To draw any conclusions comparing the effectiveness of one charity against another was fraught with unacceptable levels of margin for error to render the exercise worthless.
The Committee therefore has decided, to ensure complete transparency, to advise all Members of the tenets under which the Club operates.
1.1 Types of Revenue
The PCA has three main methods of raising revenue :
- Event Revenue
Under GST legislation each of these types of revenue has a different GST treatment. For the purposes of this information sheet we will exclude any commentary on GST as it may only confuse the issue. Should there be any specific questions relating to GST impact these may be directed to the Honorary Treasurer.
Subscriptions are levied on an annual basis to all Members. These funds are deposited to our general operating account and are used in the running of the PCA. In particular, these funds are used to pay wages and associated costs of our Administrative Secretary, without whose efforts the PCA could not operate effectively. In addition, these funds are used in the general administration of the PCA, such as:
- Keeping Members up to date through the printing and distribution of newsletters, annual reports and the like;
- Providing telephone and internet facilities for communication with Members;
- Effecting necessary insurances to cover our events.
It is our goal that all administration costs are met by the subscriptions paid by Members, which is why maintaining and increasing membership is so important.
The definition of donations is governed by rules set out by the Australian Taxation Office (“ATO”). The ATO’s definition is quite limited. However, in brief, to qualify as a donation the following must be met:
- It must be in the form of cash or goods and/or services;
- The donor must receive nothing in return for providing the donation; and
- There can be no compulsion in providing the donation.
Common forms of donations the Club receives are:
- The fines Members pay when Australian cricketers attain a “Golden Duck” or “Primary” in international matches;
- Donations made by our Golden Duck Donors (“GDD”). To qualify as a GDD an annual donation of a minimum of $1,000 is required; and
- Donations received as part of one of our events. For example, at the Marathon Cricket Event last year donations were received from a number of sources including the NSW Government, Cricket NSW, and various individuals.
These funds are deposited into a special Trust Account. From this account payments are made to various other registered charities, which have made formal application to the Charities Sub-Committee seeking funding for specific projects falling within the charter of the PCA. These arrangements have received endorsement from the ATO and the Club is a Deductible Gift Recipient (“DGR”) for taxation purposes. Not all charities have that endorsement.
The PCA stands by the fact that 100% of donations, as defined by the ATO, reach the recipient. Not one dollar of these funds is used in the administration, raising of funds or publicity. Very few charities can make that claim.
1.1.3 Event Revenue
This covers such type of revenue as:
- Registration or entry fees for functions, dinners, and other events such as our golf days;
- Raffles and auction items.
Under ATO rules revenue from these sources cannot be termed “donations” as something is being received in return for the payment.
The Club runs a limited number of events during the year. In NSW, this includes the Pymble and Elanora Golf Days, the Test Breakfast, the Tattersalls Dinner, and the Marathon Cricket Event. In Victoria, we hold the Annual Golf Day & the ODI Breakfast. These events are run essentially with voluntary labour provided by the Committee and other members. In addition, we recently have obtained the part-time services of a Charity Development Manager, whose role is to maximize sponsorship, advertising, auction items and donations at these events. We believe this is the best method to receive greatest return for the time we invest in these events.
The profit contribution from these events is transferred from Club operating funds to the Trust Account from our general operating accounts to use in our charitable works. Our aim is to provide worthwhile events that are run on a profitable basis, so as to maximize our support for other charities.
In summary, the Committee would like to advise Members, and any other stakeholders, of the following situation:
- All donations, as defined by the ATO, are used exclusively in our charitable works. Not one donation dollar goes towards the administration or running of the PCA;
- The PCA seeks to attract sufficient members whose annual subscriptions cover all the administrative and running costs of the PCA; and
- The PCA seeks to run distinctive and successful events (staffed on a voluntary basis) for our Members and their guests, which maximize profits for the betterment of others through additional funds being made available to other charities through the Trust Account.
2. Transparency of information
The later media articles also addressed the issue of the variations in information made available by the various charities and foundations. The PCA believes that it provides full disclosure to its members and other stakeholders as a result of the following.
2.1 Department of Fair Trading (“Fair Trading”)
The PCA is registered as an Incorporated entity through the NSW Government’s Department of Fair Trading. Each year we are required to submit our annual accounts to Fair Trading as part of the annual re-registration process.
2.2 Audited Accounts
Every year our financial accounts are audited in accordance with the guidelines as set out by the Institute of Chartered Accountants (“ICA”). We disclose in our financial statements
- The revenue and costs for every event that we run each year. All members and other stakeholders can see at a glance how much profit contribution is made from each event;
- A list of donations paid during the past financial year with comparative information to the previous year; and
- A list of commitments that are unpaid at the end of that financial year
The audit is normally completed by the end of September each year. A copy of the audited financial statements is available from our website. Currently the audited financial statements for the past 3 financial years are available from our website.
2.3 Annual Report
Each year our annual report is sent to all members of the PCA. A copy of the annual report is also available on our website, with the audited accounts, for our members and other stakeholders.
2.4 Commitments for Donations
In 2010, after a discussion with our auditors, there was a change in accounting policy to recognize a commitment to pay a donation at the time when the application for funding is approved by the Charities Committee, or the General Committee, in accordance with our authorization limits policy. In prior years the donation was only recognized at the time of payment.
It is the policy of the General Committee that applications for assistance will only be approved where there are, or will be, sufficient funds available to pay the donation immediately, or when required by the charity being assisted at the completion of their project. In our balance sheet, we always aim to have a small excess of trust funds on hand over donations committed. This indicates that there are sufficient funds to pay for all approved applications immediately.
Once an application is approved we are dependant upon the charity completing its approved project so that funds may actually be dispensed. Occasionally this takes some time, i.e. a few months, but in most cases payment is made within a couple of weeks.
2.5 Trust Reserves
It is a policy of the General Committee that there should be no more than fifty thousand dollars ($50,000) in trust reserves, i.e. excess of trust funds over donations committed, at any time. We are, however, dependant on charities making suitable applications in accordance with our charter. As a result there are from time to time available trust reserves, but as a general statement, the Charities Committee is always seeking additional funds from which to approve grants to recipient charities.
The General Committee is confident that the PCA meets all its legal requirements for disclosure. In addition, we believe our transparency would meet any requirement from our members or other stakeholders.
Should you have any questions about the matters discussed here, or any other point of interest, please do not hesitate to make contact with us through the PCA website.
Gordon Davis JP, CPA
Honorary Treasurer for and on behalf of the General Committee Primary Club of Australia Inc