Evangelical Council for Financial Accountability Reviewing Gospel for Asia

This morning Christian Today’s Mark Woods reports that the Evangelical Council for Financial Accountability is reviewing Gospel for Asia.
Woods takes note of the controversy surrounding GFA and says that the review is expected to last until October. At that time, GFA will provide answers to “outstanding questions.”
Woods and Christian Today have provided some good coverage of this matter while everybody else appears to be sitting on their hands. Perhaps they are waiting for the review results as well.
Waiting for the completion of a review to answer basic questions is puzzling and troubling. One basic question relates to the claim that $58.5 million dollars was sent to Gospel for Asia in India during the calendar year 2013. However, during that same span of time, GFA in India only reported receiving around $6 million from GFA in the U.S.  I cannot understand why GFA must wait until ECFA completes a review to address that discrepancy.
Furthermore, the 2013 audit says does not tell donors about the funds sent to Believers’ Church and two other Indian NGOs. Why not? And then there is the 2013 Canadian funds ($15 million CAD) which are not listed as being received in India despite the fact that GFA in Canada told the Canadian government those donations were being sent to India. Why does GFA need to wait until October to answer donor questions such as those asked by long-time supporter Pastor Bruce Morrison?
GFA president says he doesn’t sit on the Indian boards of GFA and Believers’ Church. Legal documents filed by GFA and BC in India say he does. Why do we need to wait until October for K.P. Yohannan to explain that discrepancy? Will Indian documents change by October?
Back room discussions continue…
 
 

Complaint Filed Against Gospel For Asia Australia Over Funds Sent to India

Australia blogger Ted Sherwood has filed a complaint with the Australian Charities and Not-for Profits Commission regarding Gospel for Asia Australia’s contributions to India. Money GFAA claimed went to GFA in India also went to Believers’ Church.  Sherwood’s disclosure is in a footnote to a detailed analysis of GFAA’s financial reports.
In the analysis, Sherwood says:

I have confirmed, from Indian government records (go here and select the year and Kerala), that approximately $2.1 m arrived in India.

  • The expense recorded below is $2.2 m, but without the exact transfer dates and translation rates, I cannot be more accurate.
  • But, equally as important, the same records show that not all this $2.1 m was sent to Gospel for Asia as Monica says here – 52% went to Believers Church[x]

This is a similar issue in the American audit. GFA-US said they sent $58.5 million to GFA-India in 2013 but only $6 million showed up on records filed by GFA-India. Another $22.5 was sent to Believers’ Church and two other NGOs affiliated with BC.RelatedPartyGFAAudit2013
 
In his analysis, Sherwood raises many questions about the use of funds in India and how Australian donors can trust that their funds are being spent as intended. For instance, Australian donors aren’t told that a substantial portion of funds are being sent to Believers’ Church. Rather, GFAA says:
AuditPromiseAust
As with the U.S. audit, GFA doesn’t tell donors that the lion’s share of the donations actually go Believers’ Church. In India, GFA says it is “a community development arm of Believers’ Church.” Why is the role of Believers’ Church obscured?
There may be good reason to wonder if BC or GFA-India will spend funds as intended. BC and GFAI have faced scrutiny in India over use of funds with one Indian court asserting that 

It is not in dispute that substantial income of the assessee trust was not used by both the assessees for the purposes for which they were formed.

It is a huge red flag when audits and organization documents fail to include material information and when a court says an organization isn’t spending donation for the intended purpose. It is even more troubling when an organization refuses to comment or clear up what appears to be discrepancies in public records and their claims.
 
 
 
 

Believers’ Church India Gave Nearly $20 Million to Help Build Gospel for Asia’s New Office Complex

Daily, Gospel for Asia affiliates all over the world solicit donations to help support children and mission activities in Asia. GFA affiliates in the U.S., Canada, the UK, Australia and New Zealand collect money from donors and funnel it to various non-government organizations affiliated with GFA in several Asian nations, most notably India, Nepal, Myanmar, Sri Lanka, and Bangladesh.*

I have recently learned that on at least one occasion the flow of funds was reversed. In May, David Carroll and K.P. Yohannan revealed to GFA’s staff that in 2013 Believers’ Church (GFA in India is an arm of BC) gave nearly $20 million to GFA in the United States toward the construction of a new compound in Wills Point, TX. The compound serves as GFA’s headquarters and the location of GFA’s School of Discipleship. I am getting figures together but my estimates of the costs of the compound were between $30-45 million.

Several staff speaking anonymously due to fears of retaliation told me that staff were told by GFA leaders that an anonymous donor gave the large gift to help complete the project. The 2012 and 2013 audits done by Bland Garvey refer to an anonymous donor as well.
GFAGiftIndiaBC
The sentence outlined in red above discloses that GFA received nearly $20 million “from an anonymous donor.” Former staff told me that the impression they had was that a single donor provided the gift and they had no idea that it came “from the field.”

Listen to David Carroll and K.P. Yohannan describe the gift. (Author’s note: When this post was first published I had audio from the staff meeting embedded. On November 13, 2015, I was notified by the management of Patheos that GFA had an attorney demand that Patheos remove the audio. Rather than engage in a costly lawsuit with GFA, management and I decided to remove the embedded audio. Instead, readers may click the link to hear the relevant portion of the staff meeting).

May 14, 2o15 staff meeting.

UPDATE on November 25, 2015: A transcript of the audio can now be read at this link. Not only did GFA demand removal of the audio but they demanded that the transcript be removed as well. I do not agree with this demand and am only doing it until I can determine a better course of action. I will leave some of the significant statements up but for now go to this link to read the entire transcript.

Below is a summary of the audio:

David Carroll told staff that there had been a story about a $19 million dollar anonymous gift for the campus construction. He said he wanted to clear up what happened.  He said in April of 2013, GFA leaders went to City Bank of Texas for a loan since GFA was running low on funds for campus construction. He said they were about to get the loan when “Brother KP mentioned it to some of the folks in Asia and mentioned that we were not able to do any better than that. We couldn’t, we would loved to have borrowed money from one of the Asian banks cause actually it’s much better terms, it would be much less costly, we weren’t able to do that being a foreign corporation.”

Carroll then said a board under Believers’ Church sent the nearly $20 million dollars because they thought it would be a good investment. Carroll then asked, “Was it field funds that should have gone to Nepal for earthquake victims or…” and then he was interrupted by K.P. Yohannan. Carroll told Yohannan he was getting to Yohannan’s point. Then Carroll said the board on the mission field “actually took a loan from one of their sources to replace that money so they could use it for the purpose it had been designated for there. So in essence, they got our loan.” He added, “They made that decision to give us that money and they wanted it to be anonymous. And I’m a little sad that it’s not anonymous, but I did want to explain to you where it came from, and the reasons behind it, and so, in their minds it was an investment.”

At that point, KP Yohannan chimed in and said, “It’s legal.”

Carroll added, “It’s completely legal, thank you.”

Carroll then claimed that the transaction was not a related party transaction. He said, “It is not a related party transaction because the board members here, they’re not the same board members as there. In other words, the leadership here did not influence that decision there. Brother KP mentioned it but it was not his decision. He had to get permission…”
KP Yohannan interrupted Carroll to claim that he is only a spiritual father in the Believers’ Church and that he does not “have any legal say or decision about legal matters. My role is a spiritual leadership.” He claimed that he doesn’t sit on any of the trusts in “these countries.”

For the entire transcript, go here.

This narrative raises so many more questions than it answers.

First, the gift
According to the Bland Garvey audit, nearly $19.8 million was given to GFA from the “anonymous donor” which we now know to be an entity of Believers’ Church. According to Carroll, the $19.8 million came from “a board under the Believers’ Church umbrella.” It sounds as though the entity took money given for field work and then replaced it with funds from another source. Carroll said:

But what they did on the mission field is they actually took a loan from one of their sources to replace that money so they could use it for the purpose it had been designated for there. So in essence, they got our loan. There are several income producing entities in Asia. That’s why partly why we have 35% of our church is self-sustaining, by God’s grace now in Asia. And they felt they could pay that loan off very very quickly.

What source has nearly $20 million dollars which can replace money given by donors for designated purposes? So Believers’ Church borrowed $19.8 million from “one of their sources” in order to replace money given for other purposes but given instead as a gift to GFA in the United States. I am not sure about the legality of sending donor money back to GFA when an Indian NGO borrows it from another part of their operation.

I also wonder why the Indian NGO needs donations from GFA affiliates if it can “very very quickly” repay a $19.8 million loan. GFA said they sent $58.5 million to India in 2013 while Indian government reports say only $28.5 million came in. This is one of the big discrepancies GFA refuses to address. For now my purpose is to show how the $19.8 million gift compares to what GFA sends Indian NGOs per year, and as one can see, the $19.8 million gift is a substantial portion in comparison to what they receive each year.

K.P. Yohannan, his board memberships and related party transactions

As I showed in two prior posts, that K.P. Yohannan is referred to in India as the “managing trustee of Believers’ Church.”  However, in this staff meeting, Yohannan again says, along with David Carroll, that he is not on any boards and has no legal standing. While it is possible that he might not be on boards at this moment, he was “managing trustee” up until February 2015. He would have been in management at the time these gifts were given. For GFA leaders to have any credibility on this matter, they need to explain the discrepancy between what Yohannan told the staff in May and what their own websites and legal documents filed in India say. They refer to K.P. Yohannan as managing trustee of Believers’ Church.

Furthermore, Yohannan is also the Metropolitan Bishop of the Believers’ Church. Bishops pledge their allegiance and obedience to him.  He sits on the boards of GFA (UK) and GFA NZ. He also sits on the interagency council involving Canada, US and Germany. The gifts were given in order to enhance GFA International which Yohannan leads. Carroll said Yohannan “mentioned it.” Why did he mention it if he has no power? In contrast to what David Carroll said, it is hard not to see this as a related party transaction.

This gift was reported by Bland Garvey but not as a related party transaction. It is oddly posted under “Concentration of Credit Risk.”

Many more questions

I will let readers suggest more questions, but here is one. Why did GFA find itself in so much trouble that a gift from the field was necessary? Did they not anticipate that a $40 million project would require funds? According to the records I have seen, GFA only took in a little over $20 million for the building in 2013. In other words, GFA was in the middle of a building project with no funds and no fund raising campaign. They were bailed out by the funds which came from Believers’ Church which is led by the CEO of Gospel for Asia. What builder would undertake a project of that magnitude without knowing something about the funding? What responsible board would start a $40 million project with no idea where the money would come from?

*These are the major donor nations and recipient NGO locations. There may be more donor nations and there are most certainly additional recipient nations but GFA has not provided specific information on the flow of funds to these nations and public records aren’t readily available.

Transcript:

David Carroll: There is, I don’t want to call it a rumor, a story, an inquiry about, what about the $19 million anonymous gift that was given for the campus back a year or so ago? What’s that all about? Did that come from the mission field, from field funds? So I want to explain that gift to you so that you know.

In about April of 2013, as we were building the campus here, we were running pretty critically short on money. We went to a bank at the time, City Bank of Texas, they’re located in Lubbock. Many of you might remember, we were still at the other building and A group of 11 bankers came, talk about a room, 11 bankers and an accountant and John [Beers]. That’s 12 bankers and an accountant. That was a rip-roaring time. Anyway, um, they came interested in our project to loan to it. So we brought them out here, we showed them the whole thing, we explained our vision, and actually we were working toward finalizing that loan, we were at the place of getting terms from them and when we realized the cost of the loan, Brother KP mentioned it to some of the folks in Asia and mentioned that we were not able to do any better than that. We couldn’t, we would loved to have borrowed money from one of the Asian banks cause actually it’s much better terms, it would be much less costly, we weren’t able to do that being a foreign corporation.

And so, what the people in Asia did, and it is a board that is under Believers’ Church umbrella, but Brother KP’s not on that board, it wasn’t his decision. The decision was made by them that since GFA North America had sent so much money to us from undesignated field funds, where needed most funds over the years, and since this campus to us is seen as an international headquarters which will be leadership training, it will be RYPs, which are always fruitful for the field, every time we have an RYP, the field tends to benefit from that. It will save the ministry somewhere between 4 and 5 million dollars a year when we’re at capacity here which is about 350 people. When that happens, we’re going to receive a lot of that extra money back and so they made the decision while we were in that bank loan process, that rather than go with that bank loan, we would like to make an anonymous gift for the campus fund.

And they did that. Was it field funds that should have gone to Nepal for earthquake victims or

K.P. Yohannan: – (Unintelligible)

DC – I was just getting to that.

KP – Sorry

DC – That’s fine. No, it wasn’t. But what they did on the mission field is they actually took a loan from one of their sources to replace that money so they could use it for the purpose it had been designated for there. So in essence, they got our loan. There are several income producing entities in Asia. That’s why partly why we have 35% of our church is self-sustaining, by God’s grace now in Asia. And they felt they could pay that loan off very very quickly. They made that decision to give us that money and they wanted it to be anonymous. And I’m a little sad that it’s not anonymous, but I did want to explain to you where it came from, and the reasons behind it, and so, in their minds it was an investment.

KP – It’s legal.

DC – It’s completely legal, thank you. There’s a board member, board documents as I understand it, I don’t live in Asia, but there’s board documents on the other side. The whole thing was done in complete legality.

By the way, one question, one part of that question was, is this a related party transaction? And the answer is no. It is not a related party transaction because the board members here, they’re not the same board members as there. In other words, the leadership here did not influence that decision there. Brother KP mentioned it but it was not his decision. He had to get permission, actually they told…

KP – I think David, it is important for people to know the person I am. It’s like Paul said in one place he’s a doulos, he’s a servant, another place he’s an apostle, another place he’s a brother, and my role is being a spiritual father of right now about 2.7 million people scattered throughout all these nations and I do not have any legal say or decision about legal matters. My role is a spiritual leadership. You may not have asked that but there are hundreds of trusts and entities in all these countries. I don’t sit on any of those things. There are their own people. And my role is the spiritual leadership. And I hope to some extent that is here also.

Information Missing from Gospel for Asia Websites After Report on K.P. Yohannan's Board Memberships in India

On August 14, I posted an excerpt from a May 14 Gospel for Asia meeting where K.P. Yohannan told GFA staff that he was not on any organization boards in India. Yohannan said:

I am not legally on any boards, any trusts, anything in any of these countries. I have no powers to make decisions or sign money, or release money, or make decisions…why? Because anybody who work in the United States or overseas countries have a board membership or have legal membership should not be part of their legal entities in India. It’s a conflict of interest… 

However, documents from Indian courts, the Indian state of Kerala, and a few of his own schools say otherwise. Yohannan is listed as the managing trustee and president of Gospel for Asia in India. He is also listed as managing trustee and lead Bishop (Metropolitan) for Believers’ Church. GFA in India is billed as a nation building arm of BC.
In that post, I have links to five court cases (there are many) and a state document where Yohannan is listed as a managing trustee of GFA and/or BC. I also have links and screen captures to Believers’ Church websites which describe Yohannan as chair of two boards within the church. However, those links now do not work or go to a “maintenance” page.
If you click the link to a Believers’ Church Residential School page which is supposed to contain “mandatory information” for schools in Delhi, it now looks like this:
BCMandatoryInfoChanged
Ten days ago, it looked like this (see also Google’s cache image):
YohannanBCTrustChairman
Yohannan’s son also serves on this managing committee and he is referred to as the V.P. of GFA and member of the trust.
BCRSSchoolcommittee
 
Siny Punnoose is a member of Yohannan’s family (niece I believe) and Daniel Johnson is his son-in-law. Rev. Daniel Punnoose is Yohannan’s son and serves on both the Trust* and as Vice President of GFA. Yohannan told his staff that such a dual membership was a conflict of interest.
The website for the Caarmel Engineering College also comes up blank. On August 14, Yohannan was listed as Chairman of the Trust (here I assume this means the Caarmel Educational Trust) and Metropolitan of the Believers’ Church, clearly a leadership position which makes him the leader of the denomination.
YohannanCaarmelEngTrust
The information page for the Believers’ Church Seminary’s administration continues to be live and shows Yohannan as president and his son as a board member.
In another post, I plan to post another denial by Yohannan of being on any board. This comes in context of a revelation in May to staff that an entity related to Believers’ Church in India gave $19 million to help pay for the construction of new headquarters and compound in Wills Point, TX.
More to come…
 
*I am not completely certain that this “Trust” is the Believers Church board. It may refer only to the school trust. Given the information on the rest of the page, it appears that Yohannan and his son are trustees of the Believers’ Church. According to documents filed by Believers’ Church lawyers, Yohannan is the managing trustee, yet another reason to believe that Yohannan has governing authority in Believers’ Church.
 
 
 

Believers' Church Communion Liturgy: Is This Evangelical?

BCliturgy2012I recently obtained a copy of the Believers’ Church book of liturgy (part one, part two). Recall that Gospel for Asia sent nearly $20 million to Believers’ Church in the fiscal year ending March 31, 2014. GFA’s president and founder, K.P. Yohannan, is the chair of the Believer’s Church trust and serves as the church’s Metropolitan Bishop.
According to former GFA staff, this book guides the priests during the church service and taking of communion. Although I am no expert on Roman Catholic doctrine, the practices seem quite consistent with Catholic (or perhaps Orthodox) teaching and practice. I am posting it to allow readers to decide and evaluate for themselves.
In particular, I was drawn to the liturgy and practices of communion. In the liturgy, the bread and wine are referred to as becoming the body and blood of Christ. The terminology seems much less evangelical and much more Catholic (or Orthodox), appearing to communicate a belief that the elements become the body and blood of Christ. Here are the portions of interest beginning on page 26.
BCLiturgyCommunion1
BCLiturgyCommunion2
BCLiturgyCommunion3
Even though Gospel for Asia and the Believers’ Church claim to be evangelical, this approach to communion seems quite un-evangelical. In addition to the declaration that the bread is the body and the wine is the blood, the priest crosses himself numerous times and the communion is served to the congregation by the priest in a format very unlike evangelical churches. Without passing judgment on the religious merit of this approach to communion, I suspect this narrative and methodology will be a surprise to most evangelicals.
Additional information:
Compare the Catholic prayer regarding the Body and Blood of Christ to the Believers’ Church liturgy. First, from the Roman Missal Eucharistic Prayer 2:
MissalPrayerEucharistCatholic
Now the comparable portion from the Believers’ Church liturgy:
BCLiturgyCommunion1
According to Richard Willmer, the elements becoming the Body and Blood of Christ “for us” rather than “to us” is a distinctly Catholic formulation as opposed to the Anglican view.  The Believers’ Church wording is very close to the Roman prayer.
 
 
 

Gospel for Asia's President K.P. Yohannan and Indian Courts Seem to Disagree About His Status With Indian Charities

Listening to the May 14, 2015 Gospel for Asia staff meeting, I heard K.P. Yohannan say he doesn’t have control or sit on any boards of GFA organizations in other countries. Listen:
Click this link: K.P. Yohannan tells staff he is not on any boards in India
Transcript:

And by the way, just so you know, I am not legally on any boards, any trusts, anything in any of these countries. I have no powers to make decisions or sign money, or release money, or make decisions, I am completely legally…why? Because anybody who work in the United States or overseas countries have a board membership or have legal membership should not be part of their legal entities in India. It’s a conflict of interest and therefore we send the funds and it is immediately under the government watch care and the government of India is responsible and investigative agencies and tax divisions to make sure  that is carried out within the time frame or whatever they do, that is a public thing.

I found this to be an odd declaration since the 2013 financial audit seems to point to a common board member of GFA in the United States and GFA affiliates in India, Nepal, Myanmar, Sri Lanka, and Bangladesh. From the 2013 audit:
RelatedPartyGFAAudit2013
If this board member isn’t K.P. Yohannan, then who is it? No matter who it is, by Yohannan’s reasoning, being on both boards would be unethical since Yohannan says having an American board member on the board of an Indian charity which allocates American funds is a conflict of interest.
However, it certainly seems as though it is Yohannan. For instance, Yohannan is referred to as a plaintiff in a court case brought by Gospel for Asia in India (click the link to read the case notes). He is also described as the “managing trustee and president” of Gospel for Asia based in Kerala. From the Indian website:
YohannanPresidentGFAI
This document is dated February of 2015, just three months before Yohannan told his staff he wasn’t on any boards. There are many other court cases which list him as “mananging trustee and president” of Gospel of Asia (link, link, link, link).
In another lawsuit, Yohannan is listed as the managing trustee of the Carmel Education Trust of the Believers’ Church.

3. Caarmel Education Trust, (Believer’s Church Trust) Represented by its Managing Trustee, Dr.K.P.Yohannan, Caarmel Engineering College, Perunadu,Pin – 689711 (R1 by Adv.K.Venugopalan Nair) (R2 & R3 by Adv.Anilkumar.A.S)   APPEAL No.897/2012

In this publication by the state of Kerala in India, Yohannan is referred to as the “Managing Trustee” of the Believers’ Church.

G . O. (Rt.) No. 448/2011/LBR. Thiruvananthapuram, 17th March 2011. Whereas, the Government are of opinion that an industrial dispute exists between Dr. K. P. Yohannan, Managing Trustee, Believers Church India (B. C. I.), Thottabhagam P. O., Thiruvalla and the workman of the above referred establishment Shri Joseph Kizhakkedathu, Manipara P. O., via Uliyikkal, Kannur District-670 705 in respect of matters mentioned in the annexure to this order ; And whereas, in the opinion of Government it is necessary to refer the said industrial dispute for adjudication…(emphasis added)

Yohannan is listed as the patron of the Believers’ Church Medical Cente, the Residential School and the Mahatma School. Why would he be listed as patron if he has nothing to do with determining their funding?
It seems clear that the legal system in India believes that K.P. Yohannan is on the boards and has responsibility for these entities.
Additional Information:
An alert reader posted a link in the comments that K.P. Yohannan is listed as the chairman of the Believers’ Church trust on a page of one of BC’s schools; and of course he is the Metropolitan Bishop of the church. He is president of GFA-US, a group which sent nearly $20 million to Believers’ Church in the FY ending in March 2014. In addition to K.P. Yohannan, Yohannan’s son Daniel sits on both boards (GFA-U.S. and Believers’ Church).
YohannanBCTrustChairman
Thanks to another alert reader, we can see that Yohannan and his son are listed as board members of the Believers’ Church Seminary, with K.P. Yohannan being listed as president of the Governing Board.  Yohannan is also listed on the Caarmel Engineering School as the chairman of the Believers’ Church trust.
YohannanCaarmelEngTrust
All of these listings are current.
 

According to Gospel for Asia's Indian Website the Bridge of Hope Program Doesn't Accept Foreign Sponsorships

In May of this year, I pointed out that Gospel for Asia requests $35/month to sponsor a child in Asia through the Bridge of Hope program but much less per month in India. Thanks to an alert reader, I was made aware that the Indian website for the Bridge of Hope program tells potential Indian donors that Bridge of Hope doesn’t accept foreign sponsors.
BridgeofHopeIndia
 
According to the Indian website, Bridge of Hope is a program of Believers’ Church. The American website doesn’t mention Believers’ Church and advertises the program as Gospel for Asia’s Bridge of Hope. Gospel for Asia’s Indian website hardly mentions Bridge of Hope. GFA-US sent around $30 million to Believers’ Church and two other K.P. Yohannan controlled NGOs in 2013. Ultimately, some of those funds support the Bridge of Hope program in India. At least that is what GFA tells donors in the U.S.
GFA-U.S. says donors are sponsoring children through Bridge of Hope. Bridge of Hope in India is managed by Believers’ Church which tells donors in India that sponsorship is not accepted from outside of India. Which message is correct?
Add this question to the growing list that GFA isn’t answering.
 

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.
 

Indian Tax Court on Gospel for Asia and Believers' Church: "Substantial Income" Not Used for Intended Purposes

In 2014, an Indian tax court considered a claim against Gospel for Asia and Believers’ Church. According to a court filing dated December 12, 2014, Gospel for Asia and Believers Church spent more of their income than allowed on purposes not related to the reason they were formed. Doing so made that income taxable. Gospel for Asia and Believers’ Church together appealed the assessment of tax, saying that the use of the funds were given to related organizations which had charitable purposes. The court found that funds were still being used for unintended purposes and remanded the matter back to the tax assessor. I have been unable to find any documentation of how much GFA and BC had to pay or if the matter has been resolved.
You can read the whole thing at this Indian site where public records are archived. I have pulled out the relevant portions below:

Shri M Anil Kumar, the ld.DR submitted that both the assessees are registered as charitable trust u/s 12AA of the Act. During the year under consideration, the assessing officer found that both the assessees have given loan to other trusts from the unutilised portion of the income which exceeded more than 15%. Referring to section 13(1)(d)(i) of the Act, the ld.DR submitted that the assessee trust invested its funds in the form/mode otherwise than prescribed in section 11(5) of the Act. Therefore, according to the ld.DR, there was violation of section 11(2) r.w.s. 13(2)(d) of the Act. According to the ld.DR, the assessee is not entitled for any exemption.

Assessees refer to Believers’ Church and Gospel for Asia. Both are registered as charitable trusts. Both groups had income during the 2010-2011 tax year and loaned more than the allowed 15% to other charitable trusts related to GFA and BC. Originally, the tax assessor considered those loans improper investments which meant that the income invested was not exempted from tax. The original complaint of the tax assessor was eventually set aside in favor of another interpretation by the tax court and remanded back to the tax assessor for reassessment of tax.
GFA and BC had the following interpretation of tax law. The “ld.representative for the assessee” refers to GFA’s and BC’s representative.

On the contrary, Shri Venkitachalam, the ld.representative for the assessee submitted that both the assessees advanced funds to other registered trusts which have similar objects. According to the ld.representative, the assessee advanced funds to BCMET for construction of hospital building. BCMET is also a registered trust u/s 12AA of the Act. The ld.representative further submitted that Carmel Education Trust also a registered charitable trust u/s 12A of the Act was given funds by the assessee to carry out their charitable activities. According to the ld.representative, when the funds were advanced to other similarly placed charitable trusts, amounts to application of income; therefore, the provisions of section 11(2) are not applicable. The ld.representative further submitted that advancing money to similarly placed charitable trusts does not amount to investment or deposit. Therefore, there is no violation of section 11(5) of the Act also.

GFA and BC “advanced funds” to related trusts, one involved in building Believers Church Medical College Hospital and the other an educational trust which operates various schools. I don’t know for certain, but it sounds like the educational trust was given funds to help fund operating expenses. The BC’s hospital was given money for construction of the state of the art facility. Thus, BC and GFA took income on donor money and used it to fund the hospital and engineering school.
The court considered both sides and concluded that “substantial income” of GFA and BC was not used for “the purposes for which they were formed.”

We have considered the rival submissions on either side and also perused the material available on record. It is not in dispute that substantial income of the assessee trust was not used by both the assessees for the purposes for which they were formed. (emphasis added)

The court said there is no question that GFA and BC misused the funds. The main question was about how to treat those funds for tax purposes. After going through an evaluation of Indian law relating to the facts of the case, the court ruled as follows:

Therefore, in view of the latest development of law with effect from 01-04-2003 if the income is paid or credited to another trust or institution even though they are registered u/s 12AA or approved u/s 10(23C) of the Act, the same has to be treated as income of the assessee.

bcmch
Believers’ Church Hospital and Medical College

Since GFA and BC loaned/advanced more than allowed by law, that income has to be treated as income of the two organizations. The court then sent the matter back to the tax assessor to figure out what GFA and BC owed.
I can’t find any additional cases or appeals so the matter might still be active. I asked GFA what happened in the case but, as usual, received no answers.
Donors have questions but all they are getting are assurances that their donations are going for the purposes intended. This case provides one more basis to question that claim.
This case adds one more item to the growing list of concerns about GFA’s financial affairs.

Indian Newspaper: Gospel for Asia and Believers' Church Threaten Newspaper, Claim Defamation of the Metropolitan

This seems like an odd way to evangelize.
I can’t read the Malayalam but the English indicates that GFA-India and Believers’ Church are threatening (or have filed, I can’t tell for sure) a defamation suit against a paper in Kerala India (“Breaking News Weekly”). If this is accurate, GFA-India and Believers’ Church are demanding $15.7 million for defamation which includes calling K.P. Yohannan by his name instead of referring to him as Metropolitan Bishop.
I am seeking a translation but for now here is the “legal notice” according to the paper.
 
Defamation suit1
Defamation suit2
Note that the letter says calling K.P. Yohannan by his name is defamation. He apparently is to be addressed as Metropolitan Bishop. The next two pages pull out Malayalam passages from the paper which GFA/Believers’ Church believe to be defamation. Here is page three and four. Page five is below.
Defamation suit3 Defamation suit4 Defamation suit5
This is all that was provided by the Indian newspaper. The amount demanded in U.S. dollars is $15.7 million (100 Crores). The lawyer wants that sum in 7 days.
If this is true, it won’t be the first time GFA/Believers Church have sued in India. You can use this website to read cases where GFA has been sued and has sued various parties in India.