KingswayWelfareFundProposalMod

Link to KingswayWelfareFoundation > CouncilAgenda20211206

Kingsway Welfare Fund Proposal

• Prepared by the GWUC Welfare Finance Sub Committee consisting of ElinorMcCluskeydeGarza, WarrenGreenwood, HelenBoucher and AndrewAdams and has gone through a Review Committee consisting of DavidMorgan, KenCoutts and NeilPeters.

• To be considered by Church Council 8 Dec 2021

1. Financing the GWUC Welfare Function beyond 2022

We have been looking at alternate ways to structure the funding of the GWUC Welfare function. We have been engaging with Uniting, Synod and Presbytery. A description of the Welfare Services provided by GWUC is attached in Appendix A. Currently the GWUC Welfare function is funded by the Welfare budget, Wesley College, Henry Shaw Ed Fund, COP, Donations and a Bequest to cover staff costs. Funding for 2022 is in place however funding beyond 2022 is uncertain.

There are 3 options for funding beyond 2022 which are not mutually exclusive being:

1. To continue as is, however it is likely that additional funding is required to maintain the existing level of service.
2. Form a Service Agreement with Uniting to increase their assistance of the GWUC Welfare Function. Currently Uniting provides us with limited advice. Uniting have the resources to fully integrate the Welfare function within their organisation. There is potentially a wide range of outcomes that GWUC can facilitate with Uniting.

3. Setting up a Public Benevolent Institution, a Tax Exempt Deductible Gift Recipient entity, is a viable option for GWUC’s welfare activities, that can attract funding from within and external to GWUC, that can initial partly fund the Welfare function, with the potential of fully funding the Welfare function.

1.1. Service Agreement with Uniting

We have contacted Rev. GavinBlakemore of Uniting who is effectively the Liaison Officer between Uniting and Congregations on welfare matters. He has relationships with more than 30 Congregations and is a senior employee of Uniting. Gavin has advised that Uniting is prepared to work with GWUC to assist in the delivery of the GWUC Welfare function. Uniting are highly resourced and experienced operators within the Welfare sector. Uniting is a natural partner to provide assistance to GWUC in its delivery of Welfare. From initial discussions with Gavin, it became apparent the people with authority from Uniting and the GWUC would need to be empowered and involved to further the discussions, if an agreement of services is to be formed. Some of the issues identified included the control of finances, control of employment, resources and management of stakeholders' engagement. Uniting has flexibilities in the degrees of control from just one representative on the Committee of Management through to full control. Uniting has the ability to fulfill the statutory obligations of attracting tax deductable funds and has the ability to direct the funds to the GWUC Welfare Function if the donations are specifically nominated. At this stage it is beyond the scope of this Committee to commence negotiations with Uniting to further assist the GWUC Welfare Function. Negotiations to form an agreement for resource sharing could take years to be approved given that both parties are willing. Failed negotiations for a service agreement is a real possibility.

We recommend that further assistance from Uniting be pursued by GWUC by a senior appropriately appointed person to negotiate for a service agreement. Likely candidates being Council Chairperson, Council Secretary or the Treasurer. Council will need to provide guidance on items to be negotiated such as:

• Does GWUC require control of the Committee of management:
• Does GWUC require control of resources and the power of appointing employees.
• If Uniting was to participate in a more formal agreement, GWUC would have to assist Uniting comply with its Governance requirements for Uniting to retain its DGR 1 (tax deductibility status with the Australian Taxation Office)
• Other considerations include how does GWUC retain the supporter base that it has for the Welfare Function if it is outsourced to Uniting.
• The Senior appointed person is to provide a draft Service Agreement that is workable from the GWUC perspective if possible to Council.

1.2. GWUC to create a Public Benevolent Institution

It is recommended GWUC create an Incorporated Association that it can control. Attached in Appendix B is more information on an Incorporated Association. The setup costs of this would be around $1,000 which can be funded by the GWUC Endowment Fund. This approach would give GWUC total responsibility and control of the entity, its activities and the employment arrangements. Once established, the Association would be registered with the Australian Charities and Not-for-profits Commission (ACNC) and the Australian Taxation Office (ATO) as a PBI.

If the church council wanted to create such a PBI, the following specific conditions and controls would need to be considered such as (but not limited to):-

• There would need to be 5 people who would accept the responsibilities of being on the Governing Board of the Association who must ensure it met all the obligations. This governing board would need to meet regularly (suggest quarterly) to discuss the corporate governance and management of the Institution. It may be plausible that the membership be based on other roles in GWUC. For example we could designate that the Secretary of Church Council and a Member of the Finance Committee are always on the board as well as 3 other members:

• The Institution must not be seen to support the religious activities of GWUC in its charter and so the wording of its objectives would be key to its charitable registration:
• The assets of the Institution (donations and bank accounts) would have to be kept separate from those of GWUC. The Governing Board alone will hold that responsibility.
• The board must ensure the funds only go to those for whom the Institution was established.
• In the event of the Institution winding up, the assets of the Institution CANNOT go to GWUC. They would have to be dispersed to other Charitable Institutions with similar charters. We recommend that they go to Uniting.

Although these requirements sound challenging, other congregations have established charities for various periods of time. The two key issues are that the funds must NEVER be used for anything other than the Institution conditions and that the Board is independent of GWUC Church Council.

The suggested name of this entity is the Kingsway Welfare Fund Inc.

It should be noted that if Uniting becomes a better fit to operate the Glen Waverley Uniting Welfare Function then the Kingsway Welfare Fund can be closed with its remaining funds being transferred to Uniting.

1.3. Key terms to be incorporated into the Set-up of the Institution

• The Principal Purpose is to advance social welfare by funding the Welfare function of GWUC or like functions of GWUC. We have received advice that the attached ‘Objects and Statement of Purpose’ in Appendix C is likely to be acceptable by the Australia Taxation Office who grants the tax deductibility status of DGR1.

• The GWUC Council appoints the members of the [[#Board|Governing Board.] Appointments are for periods of 3 years or less. The GWUC Council is to ensure that there are five or more members of the fund.
• GWUC is to have access to minutes and the financial records of the association.
• Dual signatory on all financial transactions.
• The Institution is prohibited from using debt.
• A minimum of 5% of the Net Assets of the previous financial year are to be granted in each financial year.
• A requirement to produce Management Accounting Statements that are reported to Council and are available for public viewing upon request.
• Minimum of an Annual meeting.
• On wind-up of the Institution all proceeds are to go to Uniting or a similar outreach mission organisation.

1.4. Suggested Board Appointments

• Current Manager of the Welfare Function: ElinorMcCluskeydeGarza

• GWUC Finance Representative: AndrewAdams

• Representative from Church Council

• Representative from the WelfareCommittee

• Someone with Marketing expertise

1.5. Potential Donor and Community Engagement

We have sourced a potential donor being the Noel and Carmel O’Brien Family Foundation who can seed the fund $1,000 in its first year once the Fund has achieved its DGR1, tax deductibility status. The donor will need to be informed before May 2022 that tax deductibility status has been achieved to ensure funding within the 2022 financial year. The donor is then prepared to match the next $1,000 in donations dollar for dollar so that the fund would effectively gain an opening balance of $3,000. The donor requires a commitment from the GWUC Council that the Fund will be widely publicized within and outside of the Church for the donation to proceed. The donor is likely to commit to a further two years of operations whereby it matches dollar for dollar the first $2,000 in donations received in order that the fund gains $4,000 in years 2 and 3 of operations given that the fund can demonstrate community engagement.

Questions and Answers

1.6. Summary of Recommendations

1. That the Council empowers a senior member of the GWUC such as the Chairman, Secretary or Treasurer to commence discussions for forming a draft agreement with Uniting
2. The Council provides guidance to the senior member on what is likely to be an acceptable arrangement between GWUC and Uniting:
   1. Acceptable ratio of representation on the Board of Management.
   2. Who controls the resources;
   3. Who controls employment.
   4. Who controls the work premises.
   5. Any other terms that are critical to GWUC

3. Immediately provide the Welfare Funding Sub Committee authority to set up the Kingsway Welfare Fund being an incorporated association with the key terms stated above. It could take up to 5 months to register the fund with the Australian Taxation Office and the Australian Charities and Not for Profit Commission so that the fund achieves tax deductibility status of ‘DGR1’. Direct the GWUC Endowment Fund to provide set-up costs of approximately $1000. Advise of the initial Board Appointments

The Kingsway Welfare Fund needs to be set-up and resourced to assist in the funding the GWUC Welfare Function beyond 2022.

2. Appendix A: Welfare Services Provided by Glen Waverley Uniting Church (October 2021)

The aim of the program is to be the outward ‘face of Christ’ to the local community. This is achieved by providing the following support services:

• Assessment of the needs of service users who access our welfare program
• Providing referrals on an ‘as needed’ basis to specific services e.g. housing, counselling, Eastern Emergency Relief Centre, advocacy services
• Providing material aid in the form of:
  • Coles vouchers
  • travel vouchers
  • items from our food and toiletries bank
  • pharmacy vouchers
  • clothing items (purchased from the local opportunity shop with welfare finances)
  • education expenses (e.g camps, technology) through access to an education

trust fund

• Social inclusion support by nurturing ongoing positive relationships with service users

who may experience social isolation

• Occasional counselling and a ‘listening ear’ to clients who would not otherwise engage in

counselling, but because of our support and relationship, access it informally through our program.

• Spiritual nourishment - most clients may not attend a church but experience ‘church’

through the support of the church’s outreach program, and feel comfortable engaging in conversations of a spiritual nature because of the church based nature of the program. Some clients request spiritual literature e.g. bibles and this is provided

3. Appendix B GWUC Welfare Organisation

3.1. Incorporated Association

3.1.1. What is it?

An association is used for a not-for-profit group, which can include charities, clubs, schools and playgroups. The main feature of an association is that it is established for a particular purpose which is achieved through the co-operative efforts of its members.

In an incorporated association, the risk is attached to the entity as a whole not to the individual members. All incorporated associations have the legal element of “Incorporated” or “Inc” after their name.

GWUC's Fund would be incorporated in Victoria and would be permitted to operate within the state of Victoria. Victorian incorporated associations are registered with Consumer Affairs Victoria under the Associations Incorporation Reform Act 2012 (the Act).

3.1.2. Advantages

The advantages to incorporating include, but are not limited to:

1. Being recognised as a legal entity, being able to
   • Open a bank account
   • Sign contracts
   • Borrow money
   • Sue and be sued
   • Arrange insurance
   • Buy, own, sell, lease and rent property and other assets
2. Governments often prefer to deal with a separate entity. Many government grant programs only give funding to incorporated entities and some tax concessions may be more easily available to not-for-profits.
3. Separate entity continues even when members of the group change
4. The entity has ‘limited liability’ An incorporated entity has ‘limited liability’ and the entity protects the members from being personally liable for the entity’s debts. If something goes wrong and the incorporated entity has to pay an amount that it cannot afford to pay, then (usually):
   • the most the incorporated entity would have to pay is the amount of money and assets the entity owns, and
   • the people involved in the incorporated entity will not have to pay any of the amount that the entity can’t pay,
     • officers of the entity may be liable if they are found to breach their duties to the entity. Officer duties include, always acting in good faith, exercising reasonable care, skill and diligence, managing conflicts of interest and never taking advance of their position for personal advantage.

3.1.3. Obligations of an incorporated association

Generally, an incorporated entity is required to:

• have a name ― for an incorporated association, the name must end in ‘Incorporated’ or ‘Inc’,
• have a set of written rules that every person involved in the group agrees to comply with ― the document must set out a statement of the group’s purpose (objects)
• have a minimum of 5 members. It is important to note that GWUC can’t be a member as it is not incorporated. We will need to find at least 5 individuals to be members.
• have people who are willing to hold certain positions in the group ― for example, be on the board or committee of management or be the treasurer or secretary
• record the names of people in those positions and tell the government ― these details are publicly available
• hold certain meetings and keep certain records

3.1.4. How to incorporate

In order to incorporate an Association, the church must

• find at least 5 independent people to be members of the association.

• Choose a name (search that it is not already taken on the ASIC Business Names Register)

• Create rules and purpose
  • This can be done fairly easily, there are model rules available
  • It is important to consider the purpose of this association (see further in this document in relation to PBI Registration). There are also not-for-profit clauses that must be included to ensure that the association will be income tax exempt.
• Vote to incorporate the association

It will cost between $500 - $1,000 to incorporate an incorporated association, including a fee to be paid to Consumer Affairs Victoria.

3.2. Public Benevolent Institution

3.2.1. What is it?

A public benevolent institution (PBI) is a type of charity whose main purpose is to relieve poverty or distress. This endorsement allows organisations to offer tax deductible receipts to donors and provide tax exempt benefits to employees.

The main purpose of a benevolent relief must:

• Be significant enough to arouse compassion in the people in the community
• Relieve suffering that is experienced beyond part of ordinary daily like; and
• Be concrete enough – aimed at helping people who are recognised as being in need, not just a general or abstract purpose.

3.2.2. Advantages

The advantages of being recognised as a PBI include:

• Eligible for tax concessions such as Fringe Benefits Tax (to a grossed up value of $30,000)
• Provide tax deductible receipts to donors

3.2.3. Disadvantages

The disadvantages of being recognised as a PBI include:

• The set up can take up to three months
• The documentation required can take some work to prepare. The following documents will need to be prepared: Conflict of interest policy, Benevolent plan, Child protection, vulnerable adults protection policy etc.

3.2.4. How to register

There is an application prepared that is lodged with the ACNC. This application requires copies of different policies, as noted above as well as a copy of the constitution of the incorporated entity.

Currently, this process takes about three months.

The ACNC works together with the ATO and will issue an ABN and GST registration if required / applicable.

3.2.5. Overall risks to be considered with this approach:

• There is a risk that members who prefer a tax deduction, will only give to the DGR entity, and not continue to give to the church. It is something that we have seen in our client base. To mitigate this risk , we would suggest that the structure of the two church entities be made clear and that reasons for donating to the new entity are made clear and remind the members, that only congregation members that lodge a tax return will gain a benefit.
• Responsible persons, are there enough members of the congregation that would be willing to be a committee / board member of the new organisation, to coordinate the activities and run the new entity?

4. Appendix C; Objects and Statement of Purpose of Kingsway Welfare Fund Inc

1. The principal object for which the Association is established is to directly assist people who are in need of relief due to poverty, physical and/or mental illness, emotional distress, social difficulties or other forms of hardship.
2. The Association will employ any one or more of the following means to carry out and achieve its principal object:
   • To provide practical support, resources and services, such as finance and food, to people in the community who are in need of relief.
   • To provide social inclusion support by nurturing ongoing positive relationships with service users who may experience social isolation.
   • To provide such other forms of benevolent assistance as the Association may deem appropriate from time to time.
   • To provide referral services to people in need of relief, where appropriate and where the Association cannot meet such needs.
   • To provide opportunities for people within the Church to participate in community service to provide relief to people who are in need of relief due to poverty, physical and/or mental illness, emotional distress, social difficulties or other forms of hardship.

5. Appendix D – Questions and Answers

A series of questions raised by the Review Committee and answered by the GWUC Welfare Finance Sub Committee

Q. I did not get a good sense of why the committee recommends both paths, that is working with Uniting and setting up our own Tax Exempt Deductible Gift Recipient entity, rather than choosing between them. Can that be clarified?
A. Uniting should be pursued but may not work for us. The Kingsway Welfare Fund will significantly help in alleviating the 2023 current forecast deficit for the Welfare Function. Uniting at the moment will not assist in 2023.

Q. The clause "A minimum of 5% of the Net Assets of the previous financial year are to be granted in each financial year." seems superfluous. And I am unsure of the "granted". Is this the DGR granting money to the program?
A. There are charities that just hold onto the funds, the 5% clause is to prevents this scenario. Yes the Kingsway Welfare Fund is being set up, solely at the moment, to assist in the funding of the GWUC Welfare Function. Other Uniting Congregations have used similar DGR entities to fund food vans, soup kitchens and the like. As Council appoints the members/committee of management to the Fund, the Council indirectly controls the programs the DGR will fund.

Q. Does the Fund need a separate bank account? Can it share a treasurer with GWUC? Can GWUC Church Office provide accounting services?
A. The proposed Kingsway Welfare Fund is a separate legal entity, a clear division of assets is required, a separate bank account is required. Ideally the GWUC Office would assist in managing/providing accounting services for the fund. The GWUC Office through Joanne and the Xero Accounting ledger system currently have the skill set to manage the fund.

Q. I know it says the task group has engaged with Uniting, Synod and Presbytery. I would like to see a line stating that what is proposed is consistent with Uniting Church regulations?
A. Through our investigations with Uniting, Synod and Presbytery, it appears that the Uniting Church regulations provide no guidance. GWUC has a choice, If we want the welfare funds to be controlled at a Synod level we should engage Uniting, if we want the welfare funds controlled at a Congregation level we should set up the Kingsway Welfare Fund (KWF). There is precedence of other congregations such as Springvale UC, Frankston UC amongst others of setting up Welfare Funds independent of the Uniting Church. One of these funds was wound up after 5 years, another fund got amalgamated into Uniting. Either of these outcomes is fine for the KWF. At this stage we need the KWF to address a funding gap beyond 2022, whilst we possibly get Uniting on board if an agreement can be made.

Q. Issue of overview and review response re annual oversight and then Audit.
A. The Council controls the appointment of members to the KWF who control the fund. The Council will receive all minutes and management financial statements. The Council should appoint a Finance Committee member who is independent of the fund to perform an annual review. The Council can appoint an Auditor however this will be a significant additional expense and hence is not recommended at this stage. It should be noted the KWF is the property of the members of the KWF and not Uniting. The KWF property is effectively in trust for charitable purposes.

Q. Is there a need to start the set-up process of the Kingsway Welfare Fund in December?
A. Yes, If the Fund does not achieve DGR1 status from the Australian Taxation Office, which can take up to 4 months to process, by May 2022, the Seed Donor will reallocate the funds to a different charity.

Q. Could the Kingsway Welfare Fund cannibalise our existing giving program?
A. It could and needs to be managed. The tax deductibility status of the funds is more attractive to taxable income earners and is likely to attract more funds than existing arrangements. The KWF is likely to attract funds external from the Church, for example the seed Donor and people throughout Glen Waverley that are currently no attending our Church.

6. Issues to be worked through in the next three months

• Appointments of 5 or more people to the KWF with expertise in Accounting, Compliance, Marketing, Welfare. Also consider appointing a Liaison Officer between Council and the Fund. People and Culture (KenC and Katie Haala) could assist in forming the team
• What do we need to communicate to the Congregation?