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Preliminary Financial Report

06 September 2006

1. Introduction

This is the first preliminary finance report to this central committee. It has been the practice of the Moderator of the finance committee to give an overview of the finances to the central committee before the finance committee starts its work. Usually the report has three parts: firstly, an historical perspective; secondly, an assessment of the financial results as close to the date of the central committee as possible and finally, a summary of the future financial prospects of Council. Since this is the first full central committee following our election in Porto Alegre, the report also focuses on the issues arising during the critical transition phase now entered upon by the Council, as steps are taken towards implementation of the financial, management and programme recommendations of the 9th Assembly.

2. 2005 Finance Report

All members have received copies of the Financial Report 2005. It is a positive report. At this stage, it is important to recall that 2005 was the third consecutive year in which the Council recorded an overall surplus. General reserves closed in 2005 at CHF 6.3 million. Although short of the longer-term target of CHF 9 million set by the former Central Committee, this remains a satisfactory outcome following the difficult years of 2000-2002.

3. Results to 30 June 2006 

 

Results to

June 2006

CHF 000s

Full Year

Budget 06

CHF 000s

Target

50%

Income

Membership and unrestricted income

3,513

6,528

54%

Contributions

11,074

28,207

39%

Investments and currency gains/(losses)

(134)

(90)

148%

Rentals, sales & misc. income

3,912

6,850

57%

Total income

18,365

41,495

44%

 

 

 

 

Expenditure

Direct programme costs

2,944

7,882

37%

Staff costs

9,093

18,162

50%

All other programme costs and transfers

12,534

20,757

60%

Total costs and transfers

24,571

46,801

53%

 

 

 

 

 

Net decrease in funds

(6,206)

(5,306)

 

 

 

 

 

Decrease in Restricted Funds - Assembly

(3,961)

(4,089)

97%

Decrease in Restricted Funds - All others

(2,393)

(1,889)

127%

Decrease Designated funds - Assembly

(553)

(553)

100%

Increase Unrestricted Funds

701

1,225

57%

Net decrease in funds

(6,206)

(5,306)

 

At June 2006, there is a net reduction in funds of CHF 6.2 million. This is a change in character of result compared with the three recent consecutive years of surplus. The net decrease in funds is explained in the light of the approved budget for the Council for this year, which provides for an overall net reduction in funds of CHF 5.3 million. That approved reduction in funds concerns principally the assembly, for which contributions were gratefully collected in prior years, creating an opening fund balance which is used entirely in 2006. 

There are three elements requiring comment in the results to June 2006. The first and most significant element is the assembly financial results, which are close to budget, with a reduction in (restricted and designated) funds of CHF 4.5 million. The indication is that total costs will be within plan, with the assembly accounts closing at breakeven, or with a small positive closing balance. While final costs will be recorded in September, total costs for the 9th Assembly over the three-year budget period total CHF 7.3 million, compared with over CHF 10 million for the 8th Assembly in Harare (based on the financial report 1998). There are many reasons for the significant difference in cost between the assemblies, but perhaps not least the duration of the event and the number of delegates. Harare was a 12 day assembly with 966 delegates, while the Porto Alegre assembly was for 10 days with 691 delegates.  

Secondly, there is an unfavourable result for programme funds at end June. A deficit of CHF 2.4 million is reported at that date, when a reduction in funds of CHF 1 million might have been anticipated based on the budget. The unfavourable variance from budget is explained principally by the fact that only 36% of programme contributions income budgeted were received by the end of June. Contributions collected in July and August have helped to close the time-lag gap, and to date, forecast indications are that the contributions budget for the year will be met.  

Finally, results to June also indicate an increase in unrestricted funds of CHF 700,000, moving towards the year's targeted increase of CHF 1.2 million. Thus, while assembly and programme funds are reduced, a surplus or increase in funds is expected to be returned to the Council, with a further increase in general reserves. At the end of 2006, if the budget is realised in full, general reserves should increase to CHF 7.5 million, while programme funds will have decreased to CHF 3.3 million. This will bring a new challenge going forward. Previously, unplanned expenditure within a programme could often be covered by a general programme balance held. With very low programme balances, even more careful management will be required in the future, to ensure that individual programmes and projects work closely within budget. 

4. Prospects 2007-2009 - and current transition

The 9th Assembly made recommendations which will result in significant changes in the way programmes will be organized and managed in the future. A new programme configuration 2007-2009 is proposed, and a new organizational structure is to be considered for approval. While the programme plans are placed before us now for review, funding requests were already made to the funding partners in July, on the understanding that any material changes effected by central committee will be shared with them promptly. The Council is now in a critical transition period that needs to be managed carefully and with sensitivity to all affected parties.  

The finance committee will review the draft budget 2007 alongside the framework budget which was presented at the assembly, but also in relation to the new programme focus which has been placed before this central committee. During the central committee, programme committee and finance committee will work together to ensure good stewardship by reviewing the priorities evidenced in the disposition of the Council's resources following the assembly recommendations, and by developing an understanding of the financial implications of the budget. Two encounters are envisaged. In anticipation of the fact that finance committee and programme committee may recommend certain actions to be taken which may have an impact on budget 2007, and which may therefore require further monitoring after the central committee, the finance committee may consider recommending that the central committee delegate to the Officers or Executive Committee the review of the evolution of budget 2007. 

While it is true that the financial situation of the Council is on the road to stabilisation, there is urgent need to identify creative efforts and actions that will facilitate growth of our resources to ensure that the programmatic priorities of the assembly are met, and that the necessary renovation of the Ecumenical Centre can take place. Investments now play a small role in our funding. Ten years ago, the Council held over CHF 60 million; today, the Council holds about CHF 18 million. The finance committee will review investment policy and results, but will not look to our existing investments to facilitate growth. 

One of the tasks of the central committee in our constitution is "to adopt the budget of the World Council and secure its financial support" (article VI/2/c/5). If we are to pursue new funding opportunities and secure new financial support, we must all first demonstrate our own commitment through our membership contributions. Many churches continue to contribute far less than the assessment proposed by the new membership calculation, and we must work together to resolve this issue, setting agreed plans of action wherever possible to meet fair targets. The finance committee will be revisiting the income strategy paper dealt with by the last central committee to bring new members of the finance committee up to date and to prepare them to review the prospects for 2007 both realistically, and with enthusiasm. 

Appended to this preliminary report is the Finance Overview presented to the Executive Committee this week. Questions on the Finance Overview will be welcomed by the Finance Committee. 

Dean Anders Gadegaard
Moderator of the Finance Committee