The Bureau wishes to revert to the practice of separating
the roles of the Treasurer and Chairman of the Finance Committee at
the close of my tenure at the end of the year. In preparation for this,
Dr. Edwin Przybylowicz took the chair at this year's annual Finance
Committee meeting and will continue in this appointment. Nevertheless,
he and I have agreed that it is awkward and somewhat confusing to report
the activities of Treasurer and Finance Committee separately to Council
and that we should continue, for the present, to present a combined
account.
As at the last several Council Meetings, I shall give a report of the
activities of the first year of the present biennium and one of the
complete biennium 1996-97. I shall also attempt an estimate of the outcome
for the present year. I had intended to retire from office at the end
of 1997 and so felt that I should give a brief summary of my stewardship
during the previous six years at the last Council Meeting. In fact,
I was persuaded to complete my eight years and so now I shall bring
that summary up to date for you in another paper.
But before presenting the figures, I have to report that unexplained
but extended delays in arranging the 1997 audit forced us to close out
business with Neutra Treuhand of Z_rich, our auditors for many
years, and to instruct Batchelor, Tillery, and Roberts of Raleigh, North
Carolina, local to the Secretariat. These auditors use the generally
accepted accounting principles of the United States. These principles
differ from the Swiss principles used hitherto. Whereas realized and
unrealized capital gains on our investments were previously shown only
in the balance sheet, these must now appear as income in the income
and expense account, so care must be taken in reading the appropriate
items. In what follows, I shall omit capital gains and give the excess
of income over expense resulting from our operations during the year
which reflects how we have performed our main tasks. Figures are to
the nearest thousand USD.
|
Actual
|
Budget
|
|
|
|
1996
|
291 *
|
161
|
1997
|
(194)
|
(161)
|
1996-97
|
97
|
0
|
|
|
|
1998
|
328
|
248
|
1999 E
|
40
|
(46)
|
1998-99
E
|
368
|
202
|
* excludes Barings "windfall"
of USD 344K
NB brackets denote a deficit; E, an estimate
1996-97
Biennium. I have given in detail the reasons for departure from
budget in my commentaries to those years' accounts in CI, but let me
summarize the principal factors. In 1997 the Secretariat was moved from
Oxford to Research Triangle Park at a total cost of USD 186K and in
that same year the cost of several extraordinary meetings called to
discuss and formulate the future strategy was USD 52K. These items were
discussed and approved by the Executive Committee and Bureau but were
not put into the budget because these were non-recurrent. If the cost
of these items is removed, the deficit becomes a surplus of about USD
44K. Even if these are included, the surplus from 1996, excluding the
Barings money, of USD 290,690 added to the deficit of USD 193,696 gives
a biennial surplus of USD 96,994. The principal causes that give rise
to these figures, and our being able to move the Secretariat and stage
several extraordinary meetings yet finish the biennium with a surplus,
are that the Publications surplus was some USD 110K over budget and
that the Geneva Assembly unexpectedly came in USD 83K below budget.
Also, there was a Divisions biennial underspend of USD 48K.
1998-99 Biennium. The preliminary biennial budget was
cast to give a small surplus, but subsequently the Executive Director
was able to trim some USD 200K from the initial Secretariat budget that
had been based on the Oxford costs. Consequently, the final budget showed
a surplus of USD 202K which was set aside for special projects and any
extra costs needed to implement the strategic plan. It is hoped that
Divisions and Standing Committees will be able to use at least part
of it by the end of the biennium.
As you may have read in my commentary to the 1998 accounts in CI, the
surplus for that year ran out at USD 327, 612, better even than the
substantial budget figure by USD 80K. The principal causes were a Publications
surplus over budget of USD 48K, a decrease of USD 30K in Secretariat
costs and a decrease of USD 75K in Operations Expense (Divisions, Standing
Committees, etc.) offset by a number of small overspends.
In making the estimate for this year, 1999, I have assumed that Publications
will again come in over budget, that the Assembly costs will be a little
less than USD 500K and that there will be a few other underspends. At
the time of writing, there is little firm information but it should
be possible to give a better estimate at the Council Meeting.
Reserves. In spite of the heavy calls made to meet the
cost of moving the Secretariat and extra meetings to formulate our future
strategy, the surplus made in the even years and the good performance
of our investment portfolio led to the market value of the general reserve
which does not include the Endowment Funds and the Southern Hemisphere
Sinking Fund, rising during the three years 1996-98 from USD 2,451K
to USD 2,710K an increase of 10.6%; but the OECD inflation figure for
this period was 11.9%, so that in real terms the reserve fell by 1.8%.
However, our total reserves rose from USD 2,754K to USD 3,644, an increase
of 32.4%, in real terms 18.2%, although a significant part of the rise
is due to the Barings "windfall" of USD 344K. This latter
was added to the money in the Building Fund to found an Endowment Fund
which now stands at USD 783K; USD 564K in the main fund and USD 220K
in the Endowment Reserve which will be used to match contributions from
outside organizations or individuals. The dividends and interest from
these funds will be used for new initiatives such as IUPAC scholarships.
The Southern Hemisphere Sinking Fund stood at USD 150K at the end of
1998 and another USD 50K will be added this year so that the extra costs
of travel to the Brisbane Assembly in 2001 will be well covered.
As a result of the discussions and decisions of the Finance Committee,
in association with Merrill Lynch, our investment Portfolio has performed
well. The increase in the equity portion of the portfolio was in 1996
24.0%, in 1997 23.4%, in 1998 17.2%. The corresponding increases in
the fixed interest portion were 4.9%, 6.3%, 6.0%. The increases for
the total portfolio were 17.0%, 16.8%, and 12.3%. The lower figure for
1998 is due to the Finance Committee's decision to move to a more defensive
position during that year because of the uncertainties in financial
markets. Because equities had performed so well over the previous years
the equity: fixed interest proportion stood at 70:30 at the start of
the year. It was moved to 60:40 by the end and it is considered provident
to keep it there during 1999.
Summary & Conclusions. The financial position of the
Union remains strong. From the beginning of the last complete biennium,
1996-7, to the end of 1998 the total reserves increased by 18.2% in
real terms and stood at USD 3,644K. This total is boosted by the windfall
from Barings Bank of USD 344K. If this is removed the increase in real
terms over the three years becomes 7.1%. The Barings money has been
added to the Building Fund to found an Endowment Fund of USD 783K. The
Southern Hemisphere Fund stood at USD 150K at the end of 1998; another
50K was added this year.
Excluding the Endowment Fund and Southern Hemisphere Fund, the general
reserve at 1 January 1999 was USD 2,710K well above the target value
of USD 2,380K so that the Union is not only well situated to meet any
external financial turmoil but has funds to
engage in new initiatives.
The picture is similar when we turn to funds for our scientific work,
the reason for our existence. The budget for Divisions in the present
biennium was, in real terms, set at the level existing before the stringent
cuts made at the Hamburg Assembly in 1991, although a fifth of this
was kept back as a fund that Divisions could call on for expanded programmes
and new projects. Later, the USD 202K referred to earlier in the report
was added to that fund which boosted it to a level in real terms 51%
above pre-Hamburg figures. In the next biennium, 2000-1, the direct
allocation will be increased by 5% and there will be a fund of almost
USD 550K for the Divisions and the new Project Committee to call on.
The Union, then, will be well able to meet any demands consequent upon
implementing the strategic plan.
Acknowledgement. Throughout my term of office as Treasurer,
there has been the closest of cooperation with the Finance Committee,
and sincere thanks are due to all of them, and particularly to Dr. Przybylowicz
who is now the Chairman, for their good counsel and their rigorous and
expert help. I also thankfully acknowledge the efficiency with which
Dr. Jost has set up and run the Secretariat in its new setting. By reducing
the previous biennial costs by some 20%, he has given a substantial
boost to funds for our scientific work.
JMW. 01.06.99.
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