ECFA Report: Gospel for Asia Has Yet to Answer the $259 Million Question

The report of the Evangelical Council for Financial Accountability’s investigation of Gospel for Asia contains some amazing facts. One fact contained in point 2 of the ECFA report is the disclosure of the massive amounts of donor money just sitting in foreign banks. The ECFA, apparently reading my May 22 blog post, wrote:

2. Excessive cash balances held in partner field accounts. Allegations were made that GFA had upwards of $150 million in partner field accounts, far more than necessary to provide appropriate operating reserves. During our visit on June 3, ECFA was informed that GFA field partner cash reserves were approximately $7 million. After ECFA requested detailed documentation of cash balances held by foreign field offices, on June 29, we discovered that GFA’s field partners had $259,437,098 on hand at March 31, 2014 and approximately $186 million in June 2015.
ECFA staff questioned the appropriateness of the high levels of cash being held in partner field accounts. We were told that GFA partners felt it was important to maintain the high balances in case the Indian government decided to block funds being transferred into the country.
The source of the balances was primarily from donor-restricted gifts to GFA, often raised in response to gift solicitations that communicated urgent field needs (see #4 below). ECFA staff expressed concern that the high reserves may not comply with ECFA Standards 4 and 7.1. Subsequent to our conversation on this matter on July 27, GFA provided ECFA with a plan to reduce partner field account reserves to $72 Million, and then amended the plan on August 27 to reduce reserves down to $11 Million. Again, GFA staff disclaimed that GFA exercises any control over field partners (see #10 below).
In our meeting on July 1, ECFA staff asked you what the GFA board would think if they knew of the high balances in partner field accounts. You indicated that neither the board nor you were aware of the magnitude of the balances. You responded, “They would be as surprised as I am.” Subsequently, the GFA board was notified, during their July 13 board meeting, of the balances held by field partners.

As of the end of the 2014 Indian fiscal year (March 31), GFA had a quarter of a billion dollars parked in Indian banks. Over that year, GFA had added $101 million to the $158 million I discovered. For years, GFA has been telling donors about the urgent needs of the homeless and hungry and they have been sitting on donor funds designated to meet those needs. This is scandalous.
If GFA in the United States really didn’t know, they should have fired Believers’ Church and GFA-India as partners. But then on second thought, that might have been awkward since K.P. Yohannan is the CEO of GFA and the Metropolitan and Managing Trustee for Believers’ Church and the related entities.
In his reply to the ECFA, Yohannan said plans have been made to deal with massive balances. However, there is reason to require proof. GFA initially told ECFA that the balance was $7 million. GFA told staff the same thing in a May 14 staff meeting. Here is what Yohannan said in reply to ECFA.
GFA reply excessive funds
 
Yohannan wants the public to believe that Believers’ Church, Gospel for Asia – India, Love India Ministries and Last Hour Ministry are completely independent and unrelated field partners. Yohannan told the ECFA he didn’t know how much money was in those accounts.
However, somehow, GFA convinced the field partners to completely shift their operating philosophy and commit to use nearly all of those funds, leaving only $11 million in reserve (what about the corpus fund?). Yohannan wants the public to believe that he exercised no authority in the matter.
Here’s the $259 million dollar question: Which K.P. Yohannan do we believe? Do we believe the Metropolitan Bishop who signed his name to the Believers’ Church Constitution, or the GFA CEO who told ECFA he didn’t know how much money his Indian organizations had squirreled away?
According to the Believers’ Church Constitution, Yohannan is the ultimate and final authority in all matters relating to Believers’ Church and their trusts. Assets cannot be moved without his approval.
This is a serious matter. For years, donors thought their funds were going to specific needs in India. Now we know much of the money wasn’t going to those needs but rather to interest bearing accounts. If I was a donor, I would want my money back.
Compounding the problem is the incredible claim from K.P. Yohannan that he didn’t know how those organizations were stewarding the funds. How could he not know? He runs those organizations. According to the church Constitution, he is the final authority. I don’t see how Yohannan can have it both ways. Instead of a vague apology, GFA needs to come up with a response that addresses the discrepancies delineated here.
MetropolitanPowersBC Cons
 
And then review what the Believers’ Church Constitution says about the Metropolitan’s role regarding property and funds. If Yohannan doesn’t know how much money Believers’ Church, Gospel for Asia – India and the other trusts have, then who does? He is the Managing Trustee and the one who nominates the other trustees.
GenSecretaryBelChurch
 

Gospel for Asia Places Apology Ad in December Christianity Today

This sounds a little more contrite than the letter to Calvary Chapel pastors but like that one, this letter is light on substance. A friend informed me that this ad was on page 59 of December’s Christianity Today.
CT Dec 2015 p 59
As I demonstrated yesterday, the ECFA did not affirm that all funds were accounted for.  Regarding missing funds, this is all the ECFA wrote in their report of the investigation of GFA:

15. Alleged missing funds according to Indian FC6 forms. ECFA received allegations that a significant amount of funds were missing based on attempts to reconcile GFA’s audited financial statements and field partner’s Indian FC6 forms. ECFA reviewed this matter to determine compliance with ECFA Standard 4. On July 20, GFA staff provided ECFA with a reconciliation of these amounts, which reflected a transfer of $29,300,000 to a GFA India account in Hong Kong. GFA staff reported that this transfer was not required to be reported on Indian FC6 forms and that this amount along with fiscal year timing differences led to the allegations of significant missing funds.

ECFA did not describe any review of Indian law nor did ECFA review more than one year. Over 8 years, there is an estimated $128 million unaccounted for. The ECFA did not review this claim and so it is false for Yohannan to tell CT readers that the ECFA cleared them on this allegation.
A big problem with this letter is that Yohannan is now telling people that they are learning and improving when for years, they claimed to be acting with the highest financial integrity.  Since for years GFA has claimed to be doing the very thing they now claim they are starting to do, why should they be believed now?
Here’s what ECFA had to say about GFA’s declarations:

Finally, we feel compelled to observe our concern, in general, about the following in addition to the above ECFA compliance-related issues:
Certain information provided to ECFA by GFA that was crucial to our review was, at least initially, inaccurate.
Our review process has covered nearly four months. Certain pertinent information about the compliance issues was not revealed to ECFA by GFA until late in the review process.
We have learned significant information from sources unrelated to GFA that we should have learned directly from GFA.

According to the ECFA, the way GFA leaders brought forth information did not inspire confidence.
 
 

Gospel for Asia Pulls More Endorsements from Website

Yesterday, Gospel for Asia linked to a list of ministry leaders who endorsed GFA’s work. Today, that link is missing and the endorsements have been pulled from the page.
The page yesterday looked like this:
Endorsements Before
Today, it looks like this:
Endorsements missing
 
All endorsements are missing and the link to the page is missing.
Recently George Verwer told me that he continued to support GFA and so this action may not reflect the feelings of all endorsers. For whatever reason, GFA has removed the information and a prominent link to the modified page
UPDATE: The page may have just been moved rather than deleted. It can be viewed here now. The church endorsements page contained mostly pastors at one time. See this 2014 page, and then this one in May, 2015. Note how many original endorsers are now missing.

ECFA Report: Gospel for Asia Leaders Deny Discretion and Control of Funds Sent to Indian Organizations

In a prior post, I wondered if Gospel for Asia had discretion and control over funds sent to India. I was surprised to read in the ECFA investigation report (disclosed yesterday by Gayle Erwin) that GFA – US leaders claimed GFA’s Indian partners are independent of the American organization. From the ECFA report:

5. Lack of discretion and control over funds granted to foreign entities. During our review on June 3, ECFA staff raised questions regarding GFA’s oversight and control of funds sent to foreign field partners. GFA’s staff indicated that the foreign field partners are completely independent organizations and therefore GFA did not exercise any direct control over field partners. GFA staff also indicated that they did not have a foreign grant process in place to oversee the use of funds.
Given legal requirements on tax-exempt entities to have appropriate discretion and control over the use of funds sent to foreign entities, ECFA staff indicated that GFA’s lack of a grant process appears to violate ECFA Standard 4’s requirement to follow applicable laws. Subsequent to these conversations, on August 21, GFA staff indicated a new foreign grant process was developed with the assistance of its new audit firm and will be in effect as of September 1, 2015.
Our review of the board minutes did not indicate the GFA board had approved, or even been notified, of GFA’s minimal oversight of funds provided to field partners.

In my prior post, I cited IRS guidance on the subject of discretion and control. In short, it sounds like GFA had been operating as a conduit for funds to India (or at least was claiming to be). Read the following ECFA guidance based on a recent IRS ruling:

“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.

While I don’t want to raise unnecessary alarm, if GFA’s claim is true, American donations to GFA may not be deductible. GFA claimed to ECFA that GFA did not exercise control over GFA India, Believers’ Church and other groups, and ECFA found fault with GFA for the lack of discretion and control. For donations going to foreign charities to be deductible, the American organization must exercise discretion and control. Since GFA claimed no control, it seems reasonable to wonder if the IRS will reconsider the status of those millions.
My guess is that if GFA’s discretion and control are questioned by the IRS, GFA will flip explanations and play up the degree of control K.P. Yohannan really has in India. It is simply not credible for GFA to claim Yohannan has no control when in fact, he is the ultimate authority in the Believers’ Church and sits on all trusts associated with the church.
In the final analysis, K.P. Yohannan exercises control and authority both in the U.S. and in the Indian affiliates. It is beyond belief that Yohannan and GFA would claim otherwise.

ECFA Report: Leaders of Gospel for Asia Claim Millions Went to Hong Kong Bank Instead of Indian Field Ministries

A question Gospel for Asia has steadfastly refused to address is the location of nearly $130 million in donor funds claimed in U.S. audits to have been sent to India. What shows up in Indian public records doesn’t match what is claimed on U.S. audits. The report of the Evangelical Council for Financial Accountability’s investigation into financial matters at GFA reveal a new claim by GFA about at least some of those dollars, but ultimately leaves the matter unanswered.
Previously, donors have told me that GFA leaders said I had missed funds sent to Indian states other than Kerala. Reviewing the FC-6 forms of all other Indian states, I came to a dead end. No other state records reported the receipt of any funds from the U.S. GFA office to any known GFA affiliate. I have also heard that GFA claims to send funds to two other unnamed charities in India. However, GFA has refused to provide any specifics.
In the GFA report, another claim is made:

15. Alleged missing funds according to Indian FC6 forms. ECFA received allegations that a significant amount of funds were missing based on attempts to reconcile GFA’s audited financial statements and field partner’s Indian FC6 forms. ECFA reviewed this matter to determine compliance with ECFA Standard 4. On July 20, GFA staff provided ECFA with a reconciliation of these amounts, which reflected a transfer of $29,300,000 to a GFA India account in Hong Kong. GFA staff reported that this transfer was not required to be reported on Indian FC6 forms and that this amount along with fiscal year timing differences led to the allegations of significant missing funds.

The way this paragraph is written gives me the impression that ECFA took GFA’s word that these funds did not have to be reported in India. This assumption is problematic and raises other troubling questions. GFA told the ECFA that just over $29 million which GFA claimed in their American audit was sent to GFA India actually went to a GFA India account in Hong Kong.
I do not know India law well enough to express an confident opinion on this claim. I don’t accept GFA’s claim at face value. While I intend to look into it, the claim raises additional questions. Since the funds were sent to GFA India for use in India, why would those funds be exempt from reporting? If GFA uses those funds in India as promised to donors and claimed in the American audit, eventually the money would have to be reported to the Indian government via the FC-6 forms. No matter where the money is parked once it leaves the donor, it will eventually need to be documented in India as a foreign contribution, if indeed it is ever sent to India. Over eight years, the best estimate I have seen is that $128 million is not accounted for. The ECFA investigation apparently only looked into the activities in one calendar year.
The claim about fiscal year timing differences is a distraction. Since the FC-6 forms requires a precise date of receipt to be reported, Jason Watkins and I have been able to take the timing of transfers into account.
That’s it. the ECFA investigators were not told stories about other Indian organizations receiving GFA funds. Apparently, there were no claims about sending money to other states in India. Staff and leaders who provided these spurious explanations to staff and donors did not provide the same reasons to the ECFA.
Just after being terminated from ECFA membership, GFA told the public that “no findings of money missing” came from the ECFA investigation. Having the ECFA report, it is clear that ECFA did not thoroughly examine multiple years of discrepancies between what GFA said they sent to India and what was reported in India to the government. Furthermore, the ECFA apparently took GFA’s word that funds deposited in Hong Kong satisfied GFA’s claim that those funds went to GFA India and did not require reporting to the Indian government. ECFA did not independently verify this claim.
In any case, I hope that staff and donors can now put to rest the false stories advanced by some within GFA (i.e., money sent to other states or other ministries) and concentrate on the big secret GFA has been protecting for months. I challenge GFA to produce chapter and verse in Indian law which exempts foreign contributions from disclosure if those funds are first deposited to banks outside of India. GFA will also need to provide documentation about the large and growing discrepancies over the past decade.