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Report of the Finance Committee (adopted)

06 September 2006

1.       Ratification of the Financial Report 2005

The finance committee reviewed the Financial Report 2005, which reported a total increase in funds of CHF 1.9 million and general reserves of CHF 6.3 million.  The report of the auditors includes their opinion that the results present the financial position of the WCC fairly in all material respects. The finance committee noted with appreciation the increase in the number of churches participating through membership contributions, with 75% of member churches paying in 2005, compared with 55% in 1999.

The central committee ratifies and adopts the audited Financial Report 2005.

2.      Appointment of the auditors

Following an audit tender process in 2004 which concluded that KPMG offered the best quality and value-for-money audit service, the finance committee had recommended the appointment of KPMG as auditors for a four-year period in principle, subject to annual appointment by central committee.

The central committee appoints KPMG as auditors for the financial year 2006.

3.      KPMG report to management 2005

The KPMG audit partner and manager presented to the finance committee the report of the auditors on control issues arising in the course of their audit work for the year 2005. The finance committee discussed the issues together with the members of the audit committee, who confirmed that they would monitor the implementation of management's responses to the issues, which were documented in the report. 

There were two principal issues. Firstly, the auditors observed that when various responsible staff were interviewed about the controls executed to ensure payments approved were within budget, and to ensure that beneficiaries demonstrated that grants received had been disbursed for the purpose agreed, there proved to be inconsistency in the quality of responses, and in the manner in which controls were performed and documented. In response, it was confirmed that control guidelines are to be issued and implemented by June 2007. The second issue concerned the fact that there was an over-dependence on the few professionally qualified finance staff, staff departures over the last two years not having been replaced. The issue is now being addressed with suitable recruitments. 

4.      Income strategy 2006-2008 and membership contribution report

The finance committee received a report on the income strategy 2006-2008, and on the membership contribution campaign.

The finance committee recognised that WCC must work together with member churches when undertaking fund-raising campaigns.

There was discussion concerning the rules to apply when a member church has failed to contribute for three years, and has not responded to WCC's communications during that time. There are currently 25 churches that have made no payment since at least 2002. The finance committee proposed that central committee members might undertake to contact and discuss with member churches in their regions those churches' on-going membership and commitment. 

The central committee approves and adopts as a rule that churches which have not paid membership contributions for three consecutive years nor have had any communication with the WCC during three years be declared non-active as recommended by the Assembly. 

The central committee calls for the support and action of all central committee members in helping the Council achieve the goal of annual income of CHF seven million in the coming three year period.

5.      Budget 2007

The finance committee reviewed the draft budget 2007 as set out below, and heard a report on the budget assumptions and issues.

Compared with the framework budget 2007, which had been presented to executive committee in February 2006, budgeted expenditure had increased by CHF 1.3 million to CHF 37.9 million, while budgeted income remained at CHF 39 million. The reasons for increased costs compared to the framework were both increases in staff costs equivalent to about five new positions, and increased programme and infrastructure costs, the latter being in particular maintenance costs for the building.  

Under the draft budget, unrestricted funds were budgeted to increase by CHF 1.8 million, reduced by CHF 0.5 million from the target of CHF 2.3 million set in the framework budget. 

Overall, the draft budget remains a balanced budget, in that total income exceeds total expenditure. Based on the current level of general reserves at CHF 6.3 million, to be increased in 2006 by CHF 1.2 million, a target of CHF 1.8 million increase in unrestricted funds in 2007 is sufficient to allow the Council to reach the target general reserves level of CHF 9 million. 

It was explained that the draft budget is not yet complete, in that not all detailed activities have been included in the budget. In addition, ACT Development's income and expenditure had not yet been included in the budget. There had been no overall review to ensure a consistent quality in budgeting work and assurance that budgeted costs for project work are reasonable. The committee expects that such a control will be part of the immediate monitoring process to be covered under the co-ordination of the General Secretariat for this budget (and in the future, under the co-ordination of the PMER staff, working with budgeting and planning staff).  

 

Restricted

Unrestricted

Designated

Total

 

CHF million

CHF million

CHF million

CHF million

Funds & Reserves brought forward

15.89

7.56

14.37

37.82

 

 

 

 

 

Membership & unrestricted income

-

6.54

-

6.54

Programme contributions income

25.76

-

-

25.76

Other income

2.59

3.10

1.03

6.72

Total income

28.35

9.64

1.03

39.02

 

 

 

 

 

Programme & other costs

15.88

3.08

1.03

19.99

Salaries

13.42

4.40

-

17.82

Transfers

0.28

(0.25)

-

0.03

Total costs and transfers

29.58

7.23

1.03

37.84

Infrastructure cost distribution

4.49

(4.49)

-

-

Total cost after infrastr distribution

34.07

2.74

1.03

37.84

 

 

 

 

 

Distribution of unrestricted income

5.11

(5.11)

-

-

 

 

 

 

 

Surplus/(fund drawdown)

(0.61)

1.79

-

1.18

 

 

 

 

 

Closing Funds & Reserves

15.28

9.35

14.37

39.00

The central committee

  • approves the total expenditure and transfers of CHF 37.85 million, requiring that cost not be increased unless matching contributions or other income are also firmly pledged; 
  • requires that staff complete the elaboration of the full detailed budget and the related control work; 
  • delegates to the Officers the authority to approve the detailed budget before the end of the year, in consultation with the Moderator of the Finance Committee.

 

6.      Framework budgets 2008 and 2009

Framework budgets 2008 and 2009 were presented and reviewed. The framework budgets presented a relatively stable level of income at CHF 38.5 million for each year, and total expenditure of CHF 38.3 million for each year.  The increase to unrestricted funds is budgeted at CHF 1 million in 2008 and CHF 700,000 in 2009.  

Increases to unrestricted funds in 2008 and 2009 will be applied towards the financing of the renovation of the Ecumenical Centre.  

The central committee approves the framework budgets for 2008 and 2009.  

The central committee delegates to the executive committee the competence to approve the 2008 budget.  

7.      Review of the programme plans 2007-2013

The finance committee reviewed the programme planning document GEN06, and presented to the programme committee the comments included as an annex to this report. 

8.      Renovation of the Ecumenical Centre

The finance committee received a report on the necessary renovation of the Ecumenical Centre totalling CHF 6.6 million. The renovation is motivated by the requirement to ensure that the building meets regulatory standards for fire safety. The committee was concerned that the renovation plans at present did not include projections for overall improvements not related to fire safety, and that the plan presented did not include a contingency of 10%. In particular the renovation of the plenary hall is a concern of the finance committee.

The central committee:

  • approves the renovation project in principle in order that commitments may be made; 
  • requires that detailed project plans and a progress report be made to the next executive committee;
  • requires that fund-raising efforts take place in order to ensure that the renovation of the plenary hall can be implemented by 2009.

 

9.      Capital expenditure plans and financing

Capital expenditure plans for the years 2006-2011 were reviewed, incorporating the renovation project, a renovation of villas at Bossey and renewal of IT and other equipment. The total expenditure over the period was estimated at CHF 10 million.

Based on the current level of general reserves, the plans to increase the reserves further in 2007 to 2009, and taking into account the cash flow estimates for the years concerned, an analysis indicated that the total capital expenditure plans could be covered principally but not entirely by the WCC's own funds.  A loan of CHF 2 million was estimated to be required to be contracted in 2007 for the renovation of the Ecumenical Centre.  

It was confirmed that the Council continues with the plan to reimburse the Bossey loans at the level of CHF 200,000 annually.  

The central committee:

  • approves the capital expenditure plans for 2007 totalling CHF 3.2 million, including the first phase of the renovation of the Ecumenical Centre;
  • delegates to the Officers the authority to approve the loans to a limit of CHF 2 million.  

 

10.   WCC subsidiaries and representative offices

As required by executive committee, and requested by the assembly finance committee, the finance committee reviewed the costs and a risk analysis prepared by the staff.  

There are 14 subsidiaries and representative offices, seven of which cover the EHAIA programme. Others are regional offices, or are active in specific programme work or the EAPPI initiative.  

The risk analysis highlighted certain inconsistencies in the administrative and control structures, and indicated the need for policy guidelines for the offices.

The central committee requires

  • that policy guidelines for the overall management of the offices, including human resources policies, external representation and institutional responsibility with attention to the different legal status of the categories of office, be presented to the next executive committee.

 

11.    Staff statistics and staff rules and regulations

The finance committee discussed a report on the number and category of staff employed by the Council in Geneva and in the field, under both staff and consultancy contracts. 

The report included the following summary of the number of staff employed, which, when part-time positions are taken into account, is equivalent to 162 full-time working positions. 

Staff categories

Staff No.

Leadership

4

Programme executives (42), programme/projects consultants (4), seconded (4)

50

Specialized

"b" (equivalent to programme executives) + seconded (1)

19

"a" (equivalent to administrative assistants)

9

Administrative Assistants (Geneva and US)

59

House staff

Hb

6

Ha

6

Hotel staff at Bossey under collective agreement (CCNT)

4

Short -term programme assistants, junior consultants etc in Geneva

14

Total (head count)

171

 

 

Project staff outside

Geneva

EHAIA

7

ETE Eastern Europe

1

Total head count outside Geneva

8

Grand-total world-wide with Geneva contracts

179

The finance committee will continue to monitor the staff statistics report, and requests that it incorporate an analysis of the costs of the different categories. Where the staff costs are reported in the income and expenditure statement in lines other than staff costs, this should be explained. 

Following up on the recommendation from the assembly regarding the renewal of executive programme staff contracts, the finance committee recognized in the report given by the General Secretary (GEN04, appendix) the commitment to implement the spirit of that recommendation.  

The central committee requires that:

  • when new positions are created, or when existing positions become vacant, recruitment procedures be open to external applicants; 
  • new contracts be extended for four years, with the possibility of renewal for one term of three years only; with the understanding that exceptions may be necessary upon approval by the executive committee. 

 

12.   Mandates of the audit committee and the investment advisory group

On the request of the assembly finance committee, a draft mandate for the audit committee was submitted. The draft had been proposed by the audit committee itself.  

The finance committee suggested certain amendments to the proposal including the appointment of one finance committee member as a member of the audit committee, and, in order to ensure close communication between the two committees, the requirement that the finance committee invite a member of the audit committee to participate in the finance committee meetings in the future. Both mandates should include guidance on the term of service of each member, and the responsibility of each committee to ensure overall renewal of membership. 

Concerning the investment advisory group, the finance committee reviewed a report on the present compliance with investment policy. A mandate had not been documented for the investment advisory group, whose responsibilities are indicated at present only in the investment policy. 

The central committee requires that a final draft of the audit committee mandate and a draft of the investment advisory group mandate be presented to the executive committee in February 2007 for decision. 

ANNEX

 Comments of the finance committee to the programme committee

on review of programme plans 2007-2013

1.      The programmes as presented seem generally quite similar to those undertaken before.  It would be appropriate to include a brief report on what is particularly new, in the spirit of transformation and renewal expressed in Porto Alegre, as well as a clear statement on the programmes and projects which have been or are to be brought to conclusion.

2.      Recognition is given to the due process in the elaboration of the programme plans, which included a review by executive committee in May. The finance committee understands that it is the programme committee which should now forward recommendations for amendments to the programme plans, if any, to central committee. Given the priority which was perceived to have been accorded to certain issues at the assembly, members of the finance committee expressed disappointment with the insufficient emphasis now placed in certain areas, in both narrative and financial plans. The areas of Middle East focus, inter-religious dialogue and migration, which also received emphasis in the Reports of the General Secretary and the Moderator, fell in this category. In addition, climate change and AGAPE were mentioned as being areas where finance committee members were disappointed with the current level of emphasis.  In contrast, the emphasis accorded to a new project, Global platform for theology and analysis, was not well understood in the context of the other relative priorities.

3.      As yet, focus is not placed consistently on the role and responsibilities which are uniquely those of WCC in relation to programme work. It is understood that the sharpening of this focus is part of the process of the first three-year programme cycle.

4.      In order to be able to take constructive decisions to shape the seven-year programme cycle, it is important that the mid-term evaluations be planned for and executed in early 2009, in order that their conclusions may be presented for review and action at central committee August 2009. 

5.      ACT Development's estimated budget of CHF 700,000 has been omitted from the programme plan document. An explanatory note should be included in the planning document on ACT Development as an organization in formation, its objectives and planned work within WCC, as well as its estimated budget. 

6.      To ensure that global resources are leveraged, duplication of effort avoided and focus therefore placed wisely, each programme should include as part of its process an assessment of the resources and expertise across the ecumenical network.  Consideration should be given to including other organizations directly in the work of the programme, whenever the organization holds recognized expertise. In certain cases, an external organization may be competent to play the role of project leader.  

7.      The quality of the wording of measurable objectives for projects requires careful attention. One project mentioned "holding churches accountable" as a measure of achievement. This would seem not only unclear, immeasurable, but also constitutionally unjustifiable, except in relation to membership contributions or other financial agreements. 

8.      The cost profile of projects over the three-year period did not present a start-up phase, a mature phase and a closing phase, as might have been anticipated. It was understood that more work is to be performed in developing the three-year budget profiles. 

9.      As evidence that detailed costs have been fairly and reasonably estimated in the budgets, a report on the conclusions and work performed to test the quality of the budget information should be presented to the next finance sub-committee of executive committee. The team reviewing budgets should include not only finance staff, but also staff assigned to programmes, who might add value in a quality review of another programme's detailed budget.