Treasurer's Report
Nairobi, Kenya

SLIDE 1 – Title Page

Thank you Madam President.

As Treasurer, it is my responsibility to present to this Council an account of the management of the funds of the World YWCA since the World Council in 2003.

It is a joy and privilege for me to be here. I love talking about Finances, but I will try to contain my enthusiasm and be concise.

I would like to focus on three topic areas being –

• Financial Governance and Oversight
• Financial Results for the Last Quadrennium
• Review of the Budget for the Next Quadrennium

Financial Governance and Oversight

SLIDE 2 – Financial Governance and Oversight

First of all, financial governance – what is it? Financial governance includes the structures, responsibilities and processes that the Executive Committee uses to direct and oversee the financial operations of the World YWCA. These structures, processes and policies determine how authority is exercised, how decisions are made, how you as stakeholders have a say and how decision makers – including myself as Treasurer, the Executive Committee and the World Office - are held to account.

Four key components of governance are Accountability, Transparency, Predictability and Participation.

First, Accountability. This is how, we the Executive Committee, respond or “answer to” members and other key stakeholders such as our funding partners and donors, concerning decisions and actions taken.

Transparency means having access to timely, relevant and reliable information. From my perspective as Treasurer, transparency means finding the right balance between providing too little information and flooding you with too much information so as to obscure the important facts.

Predictability is having policies and clear roles for the Executive Committee, as well as between the Executive Committee and the General Secretary and the World YWCA staff. This way there is predictability as to the actions and decisions that will be taken. That is, we have comfort that the actions and decisions will be within the approved policies and authorities.

Finally, Participation of you the members and key funding stakeholders in the strategy planning and evaluation process is the last governance principle. World Council is a pivotal tool in this governance process. It is through World Council that together we approve strategies and budgets. It is also through World Council that the Executive Committee and the General Secretary report to you on actions and initiatives in the previous four years.

These are the financial governance principles that are “top of mind” for me in my role as Treasurer. As I believe they are also top of mind for you.

Over the past 5 to 10 years, public attention has been repeatedly drawn to failures in governance whether in the corporate world or in the civil sector. Governing boards such as the Executive Committee carry the trust of the public as well as you the members of the World YWCA and our funding partners. We know that good governance practices are important for effective organizational performance. We also know that there is certain level of public distrust that the civil sector is less accountable and not as strong on governance processes. The Standards of Good Management and Accountability is a valuable tool for the World YWCA, as well as each National Association to ensure our practices are robust.

There are many financial governance and control processes. I would like to focus on a few of the Executive Committee initiatives over the last four years. I’m sort of reminded of a popular song in North America that has a line in it that says – “What have you done for me lately?”

SLIDE 3 – World YWCA Financial Governance Processes

This slide attempts to answer the question. While there are six points on this slide, I am going talk about them two at a time.

Focusing the first two - the Independent Auditors and the Audit Committee - the international accounting firm of KPMG was appointed as our auditor in 2002. KPMG has conducted annual independent examinations of our financial statements. Speaking specifically about the last fours years, KPMG has expressed an opinion each year as to the fair and accurate presentation of the Financial Statements. In other words, the auditors have rendered a “clean opinion” with no exceptions or reservations in their annual report. Each year a copy of the annual audited financial statements is provided to your National Association.

In addition, as a good governance practice, the Executive Committee established an Audit Committee to meet with the auditors at least once a year. The Audit Committee includes the President, myself as Chair and two other members of the Executive Committee, one of whom is a young woman. The Committee has both a private meeting with KPMG, as well as a joint meeting with KPMG and the World Office staff. It is the Audit Committee’s role to ensure the ongoing independence and suitable qualifications of KPMG. The Executive Committee has ultimate responsibility for appointing the auditor and approving the financial statements.

The next two tools are the Budget and the Finance Sub-Committee. While World Council approves the budget principles and plan for the quadrennium, between World Councils an annual budget is prepared taking into account changing circumstances. The Finance Sub-Committee is comprised of the Officers who are the President, the Vice Presidents and the Treasurer. The Finance Sub-Committee reviews both the historical financial results and forward looking budget in detail. The Executive Committee again has ultimate accountability and therefore receives a detailed report from myself on behalf of the Finance Sub-Committee. Throughout the year, I also have regular discussions with the General Secretary and the Finance Director.

Turning finally to the topic of Investments, two key financial governance and control processes are the Investment Advisory Group and the Investment Policy.

We have a total investment portfolio of over CHF 13 million. Management of the investments is divided between two investment managers, one in Switzerland and one the US. The Investment Advisory Group is chaired by a former World YWCA Treasurer, Murielle Joye, and includes representatives from our investment managers, as well as volunteer investment experts, the General Secretary, our Finance Director, and the President and the Treasurer. We truly appreciate the guidance and counsel this group provides.

Going back to the governance principle of Accountability, the Executive Committee is ultimately responsible to you for management and oversight of the portfolio. As a good governance practice, the Executive Committee has established an Investment Policy. The purpose of this policy is to lay out the investment objectives, risk tolerance and type of permitted investments for the portfolio. The Investment Advisory Group welcomes the policy as it helps the Group to tailor its advice to us about what to buy and when to sell, based on our particular objectives and risk tolerance.

Financial Results for the Last Quadrennium

SLIDE 4 – Summary Financial Results – 2003 – 2007

Turning now to the numbers, the Finance Working Papers are on pages 94 – 108 of the Delegate Working Papers and in particular if you could refer to page 103.

In terms of the historical results, the Delegate Working Papers has a summary for the past four years as compared to the approved budget Guidelines from Brisbane World Council. The results for the last four years are also compared to the actual results and budget for the prior quadrennium. At the time the Working Papers were sent out, the audit for the final year of this quadrennium was not complete, so the actual column is noted as being the projected results. I can confirm that our audit for the final year in the quadrennium is now complete and the surplus for the quadrennium is slightly higher at CHF 30,000 versus CHF 20,000 as projected and presented in the Delegate Working Papers.

When I read a set of financial statements for an organization, they tell me a story about that organization. The financial statement you have before you tells the story of an organization that manages its finances very closely. As you can see, we have a small surplus for the quadrennium, which basically means that we operated on a break even budget over the four year period. That is, we live within the revenues we generate and adjust our activities, if necessary, to manage expenses accordingly.

The story of the financial statement goes on to say that the organization has two broad categories of revenue. One is External and includes funds received from individual donors and funding partners. The other is Internal and includes monies we receive from our members and from our investments.

In terms of our External revenue, our primary donors for our core activities continue to be our ecumenical partners. These donors have been with us over the long term and are critically important to our financial viability. We treasure the partnership and relationship we have developed over the years. Of note is the fact that the funding and accountability pressures that they experience, translate into funding and accountability pressures for us also. Specifically, our direct access to unrestricted funding for what we have traditionally referred to as our core programme, is reduced because funding agencies are trending more towards project funding and specific outcome funding. We are able to continue to access funds, but more and more must use the funds for externally directed outcomes. This means we must align our project priorities within the parameters of existing funding sources. At the same time we work with our funding partners in order to demonstrate why our strategies and priorities should also be their strategies and priorities.

However, of note is the fact that our External funding sources for both the Core and Specific programmes have continued to diversity over the past four years. Other funding sources are opening up to us, with particular profile given to our global focus on HIV and AIDS and the Global campaign. Each of these initiatives in their own way has opened new doors, new dialogues with funding partners and new sources of revenue.

Through the HIV and AIDS program strategy we have developed good relationships and project funding with UN Agencies. This is one example of the power the global YWCA movement has when it works together on an issue.

The Global Campaign has also been successful in raising a substantial endowment for leadership development. But there is another benefit. Our work on the Global Campaign has been tremendous in increasing our profile with new types of donors. We now need to take these relationships to the next level in developing ongoing funding partnerships. This step aligns with our Strategic Goal concerning Capacity Building.

Turning next to what I referred to as internally generated funds, let me first focus on Investment Income and then second on Affiliation Fees.

Our investment income over the last fours years did not meet our original budget expectations, presented at World Council in Brisbane. The primary drivers of the performance (or lack thereof) were low interest rates over the period and the continued weakening of the US dollar versus the Swiss Franc, which is our base currency for financial reporting.

We have largely, but not exclusively, looked to interest and dividend income to help support our core activities. Going forward, our plan is to also increase the capital gain income by selling investments and more frequently realizing gains that have accrued in the portfolio. The funds received will be re-invested as part of the portfolio. This type of gain taking is not uncommon in the investment industry.

Affiliation Fees account for approximately CHF 650,000 of our annual budget and are the backbone of our core funding. Looking back over the past three quadrenniums, I note that the affiliation fee revenue have remained constant at around CHF 2.5 / 2.4 million, but given that our total revenues for the Core programme are increasing, the affiliation fee revenue as a percentage of the total revenue decreasing slightly.

The Affiliation Fee formula was adopted at World Council in 1995. What are the features of this formula? First we determine the overall level of funding that is needed from the members. We typically budget to derive approximately 30 – 35% of funding from Internal Sources. This is to ensure that we have autonomy, self-reliance and predictability for a portion of our budget and are not completely subject to the priorities and potential fluctuation in funding from external partners.

In terms of the budget for the next quadrennium we have not increased the total amount of the Affiliation Fees. So why have fees for some individual associations changed? That really is a function of the three components that are used to allocate the total Fee amount to each association. The three components are the Association’s membership and unrestricted income, as well as the Gross National Income for the country. To the extent that your membership numbers, your unrestricted income or the GNI for your country goes up or down versus the total of each of these elements for everyone, your share of the Affiliation Fee will increase or decrease.

The objectives of the formula are to provide predictability and certainty for the World Office with respect to the Core funding that will be received, as well as to be fair and balanced in the allocation between National Associations. The formula has worked well for the majority of associations, however a number of associations still find it difficult to pay the full affiliation fee amount. To this end, we very much rely on the continuing generosity of some National Associations who pay above the affiliation amount. Not only are you helping your sister organizations, you are helping decrease volatility in revenue for the World Office. I thank you for your generosity and for helping me sleep at night.

The formula has served us well for over 10 years. I don’t think there are any serious problems, but it is timely and prudent for us to periodically review the approach. For example, there has been a gradual shift such that formal membership is no longer a priority for some associations. As such, membership size may not be a good measure of the relative size or capacity to pay for different National Associations. We should explore this further and over the coming four years, we will formulate a mechanism to consult with you on the topic.

This concludes my formal Treasurer’s report and financial presentation. But before I move to the motion, I would like to express my thanks to Musimbi Kanyoro, Jane Bennett and the World Staff for your prudence, your professionalism and your diligence in managing the finances. It is because of you that the World YWCA is in a sound financial position and has a promising financial future. I would also like to thank the Investment Advisory Group for your investment wisdom and profitable advice. Finally I would like to thank my colleagues on the Audit Committee, the Finance Sub-Committee and the Executive Committee. You keep me “on my toes” and ask great questions.

Madam President, at this point, I ask for acceptance of my report.

Budget

Thank you Madam President.

SLIDE 5 – Proposed Core and Programme Budget

At this point, if I can refer you to the Proposed Quadrennium Core and Specific Programme Budget found on page 104 of the Delegate Working Papers, together with the Guidelines that are found on page 99. Council will be asked for approval of the Budget on Wednesday. Today, I would like to walk through some highlights.

Linking back to my opening comments concerning Financial Governance, the budget presented to you considers all the principles but in particular I would like to highlight a couple of changes that link to enhanced Accountability and Transparency. Specifically, the budget is presented in a new format – combining the Core and Specific Programmes and allocating expenses according to our Strategic Goals of Advocacy and Services, Leadership Development, and Capacity Building and Governance. So why the change? First, as a best practice, it is important to align financial plans with strategic plans. These two elements go hand in hand, so it is important that the budget reflect the priorities as established by you, the membership. Second, combining the Core and Specific Programme budgets provides an overall or comprehensive picture of the program activities of the World YWCA.

In terms of revenues, as I previously mentioned, the budget for member affiliation fees has been maintained at the same level as the previous quadrennium, and no changes to the affiliation formula are proposed.

Support from our traditional Ecumenical donors and other donations for core and specific programmes are budgeted to be consistent with prior years.

I hope that this is a conservative budget and that over the next four years, with your help; we will strive to outperform these numbers for revenue generation.

In terms of investment income, we have a planned return on the portfolio of 3.5%, which is comprised of 2.5% from interest and dividends, and 1% from realized capital gains.

In terms of expenses, personnel costs are based on current staff levels and current average costs. Inflation in Geneva is assumed to remain at or below 1.5% per annum.

This budget includes CHF 2.5 million in estimated costs and incomes for World Council in 2011. World Council is a major specific programme that comprises just over 10% of the revenue and expenses for the quadrennium and is the reason the numbers increase year over year for the last two years of the projected budget versus the first two years.

I would also like to point out that we annually set aside money for future expenses such as new office costs, personnel search costs, etc. These amounts are called Transfers to Reserves. When we incur the actual expenses, we use the funds that were set aside and show this as a Transfer from Reserve on an Income line.

Finally, we primarily operate in two currencies being the US Dollar and the Swiss Franc. While we endeavor to manage the risk associated with fluctuations in the exchange rates, it is difficult to predict what exactly will happen and therefore have included a small contingency for loss on foreign currency exchange of CHF 80,000 over the next four years.

This concludes the formal budget presentation. Thank you.