B4A – Assembly Finances

1. Commentary

The following information provides a summary of the Assembly‟s financial position and performance over 3 years between the Triennial Assembly meetings.

This analysis and commentary covers all of the Assembly agencies with the exception of the church’s national superannuation fund the Beneficiary Fund (which is a separately incorporated entity) and the (Ministers‟) Home Endowment Fund (which is administered by the Synod of Victoria & Tasmania). The analysis also excludes UCA Assembly Ltd which is the non-trading trustee company established to hold all Assembly property.

Subsequent to the 13th Assembly the financial year for all agencies was changed from a calendar year to a financial year. All results are now reported as 30 June.

The last three years have seen the most significant challenge to the financial well-being and long term sustainability of the Assembly since its inception. This has arisen as a consequence of the crisis within Frontier Services; a considerable reduction in Synod contributions as well as a fall in interest and investment returns.

The Assembly executive team led by the General Secretary, together with the various Agency Committees has responded to these challenges with understandable diligence and, wherever possible has adjusted expenditure priorities to match the falling income.

Negotiations remain on foot with the Synods with regard to their contributions to the Assembly. These negotiations have particular urgency because other income sources (such as a distribution from a property investment in Canberra ACT and the payment of a rebate from Telstra) will also come under pressure in the next 12 months; and actions taken over the past year to reduce expenditure have essentially eliminated all “easy‟ options.

The Assembly therefore continues to face a considerable financial challenge. There are no realistic prospects of a ready turnaround to this situation and the prospect of full recovery of the funds that needed to be committed to stabilise Frontier Services remains, at best, uncertain. As outlined in the Frontier Services report attention is being directed to asset realisation as well as to sustaining fundraising activities but the full impact of these actions is yet to be determined.

Among other impacts, the support given to Frontier Services has had a major impact on quantum of the Assembly’s free or investment funds and hence on investment earnings. Further the reduction in those free funds serves to limit the flexibility of the Assembly to participate in other activities.

The Assembly Finance, Audit and Risk Committee has worked closely with the executive team and the various Agency Committees throughout the Triennium. The Committee is comfortable in advising the Assembly that there has been an appropriate (and in some instances a much needed and improved) focus on governance principles, identification and management of risks (both strategic and operational) and the establishment and implementation of robust policies and processes. These matters of course remain a “work in progress‟.

During the Triennium, the Assembly Investment Committee was established to provide specialist advice and guidance to all Agencies. Establishment of this Committee has proved to be beneficial – especially given the volatile state of the investment market.

With the particular exception of Frontier Services (as reported elsewhere) and also a particular set of circumstances with one aspect of UAICC‟s activities (now rectified), all Agencies have consistently fulfilled their critical compliance obligations to government funding bodies, government regulators and also to Assembly policies.

In the midst of the financial challenges, it is pleasing to report that external audits of all Agencies’ financial reports have been undertaken and none contained formal qualifications by the Auditor. The most recent report for Frontier Services (as at 30 June 2014) was however issued only after very considerable attention was given as to whether it could fairly be stated that the Agency was solvent and able to meet its financial obligations as they fall due. In the event those assurances were demonstrated, at the time, to the satisfaction of the Auditor.

All Agency financial reports comply with Australian Accounting Standards. A detailed set of the accounts will be available for perusal at the Assembly.

1.1 Agencies (excluding Frontier Services)

Agencies included within this section include the Assembly Fund, Secretariat, Uniting Justice and other ministries, UAICC, UnitingCare Australia, UnitingWorld Relief & Development and UnitingWorld Church Connections.

Financial movements over the Triennium can be summarised as follows:

Eighteen months ended

30 June 2014

Year ended

31 December 2012

Year ended

31 December 2011

$000 $000 $000
Income (includes DGR Appeal monies) 20,599 15,537 14,896
Expenses 24,601 13,542 13,422

 

As at

30 June 2014

 

As at

31 December 2012

 

As at

31 December 2012

Net Assets 24,105 28,106 26,244

As the Assembly and most of the agencies changed from a December to a June year-end, the figures presented for 2014 are for an eighteen-month period, making direct comparison difficult.

The major impacts over this triennial period were:

  • Synod contributions have reduced from $4.4m in 2011 to $3.1m (annualised) for the eighteen months to June 2014. In real terms, after adjusting for CPI, this equates to a fall of $1.2m per annum or 27% over the triennium.
  • Interest and investment earnings have been affected by the historically low interest rates and the move into more liquid assets, with average earnings of 5.4% to June 2014, compared to 6.6% to December 2012.
  • Close monitoring of expenses has resulted in a reduction in operating expenses from $8.1m in 2011 to $7.9m (annualised) to 2014.
  • The reduction in net assets of ($2.1m) is after the impairment of the loan to Frontier Services of $5m.
  • The decrease in net assets is represented by:
  • Decrease in General and Designated Funds held by ($0.8m)
  • Increase in Specific and Endowment Funds held by $1.7m (restricted funds)
  • Decrease in Capital Funds held by ($2.9m)
  • Decrease in Financial Asset Reserves by ($0.1m) (unrealised gains in investments)

As much of the funding received is “earmarked”, it is useful to look at the funds available to the agencies:

30 June 2014

$000

31 December 2012

$000

31 December 2011

$000

Net Assets 24,105 28,106 26,244
Less: Property, other fixed assets (5,279) (5,655) (5,713)
Sub-total monetary funds 18,826 22,451 20,531
Less: all Designated, Specific, Endowment funds etc.

 

(13,005)

 

(15,687)

 

(14,116)

Net available funds – “Free cash” 5,821 6,764 6,415

1.2 Frontier Services

Commentary with respect to the financial circumstances of Frontier Services is included in Part 6 of the Frontier Services Interim Board’s report to Assembly.

The very significant changes to the structure and operating model of this agency over the course of the Triennium mean that comparison with previous years is misleading.

Rectification of matters identified in Aged Care Accreditation audits; the financial structure of the transactions to achieve devolution of aged care assets to the Queensland and West Australian Synods and the current steps being taken to devolve Community Services interests have had a significant and deleterious impact on the financial well-being of Frontier Services and also on the Assembly itself.

During the course of the devolution and restructure, the cash reserves of Frontier Services came under extreme pressure. This necessitated the advancement of loans to the agency from the Assembly Fund as well as the framing of formal expressions of support to support other borrowings by Frontier Services. As a consequence the Assembly‟s free funds were very significantly reduced and, as a corollary, Frontier Services has had to accept significant debt obligations.

The Assembly Finance, Audit and Risk Committee has carefully and continuously monitored the unfolding situation with particular focus on cash flow and medium term solvency. An important factor over the next 12 months will be the outcome of the asset realisation program as well as the ability of Frontier Services to sustain its fundraising activities.

Peter M Andrews
Chairperson
Assembly Finance Audit and Risk Committee

B4A – Assembly Finances – Section 2.1

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B4A – Assembly Finances – Section 2.2

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B4A – Assembly Finances – Section 2.3

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B4A – Assembly Finances – Section 3

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