2005/2006 General Assembly Accounts

Financial statements for the year ended 30 June 2006

Supplementary information to financial statements for year ending 30 June 2006

2005/06 has been a turn-around year. Assembly moved from an operating deficit to an operating surplus – achieving a sustainable financial position.

An operating surplus of $0.88 million for the year to 30 June 2006 compares with an adjusted operating loss of $0.87 million for the previous year (a $1.45 million loss less the 2005 CWM reclassification of $0.58 million). However, much of this surplus is inaccessible income, such as interest paid on restricted purpose trust accounts and bequests received during the year that are to be invested to produce future interest income.

Highlights of the year ending 30 June 2006:

• An adjusted operating surplus of $0.88 million, which compares with an operating deficit of $0.87 million in 2004/05.
• The operating surplus was driven by a decrease in expenditure, which fell by more than $1.1 million. These significant savings in expenditure were effected by a reduction in staff costs of around $680,000 and a reduction in grants and donations of nearly $380,000.
• Operating expenditure decreased significantly for the second year in a row.
• The operating income increase was largely due to the combination of higher investment income and a greater level of gifts and donations.
• Significant gains were made on the sale of property ($380,000) and through property revaluations ($181,000).
• Doubtful debt provision expense in 2005/06 was $210,000 less than the previous year despite an unchanged level of Assembly Assessment collection. The reduction was a consequence of a change in the amount recorded as outstanding from prior years.
• Assembly deposits and trust accounts with the Presbyterian Investment Fund (PIF) increased by over $4.1 million to a total of $14.7 million, in large part due to the deposit with PIF of the $3.9 million proceeds of the sale of Laughton House.

Overview

This year’s turn-around from the deficit in 2004/05 was brought about primarily by a reduction in expenditure of just over $1.1 million. An adjusted expenditure level of $6.1 million in 2005/06 compares with spending of $7.3 million in the previous year. (See table below). This comprised an overall reduction in spending of nearly 16 percent.

Also significant in accounting for the operating surplus was a substantial increase in operating income of nearly $0.6 million.

Budget

The operating surplus of $0.88 million is significantly better than the level expected in the budget, which anticipated a break-even operating result.

Performance as against Budget (2005/06)

Adjusted operating surplus for 2005/06 at $0.88 million was significantly above the budget expectation of a break-even operating result. (The actual surplus of $1.44 million includes gains on sale of property and revaluation of property that are not included in the Assembly’s operating budget).

The higher than budgeted operating surplus was due to higher levels of income. In terms of expenditure, while some costs were lower than budgeted – staff and communications - these were offset by a higher than budgeted level of grants and donations and an above-budget level of payment to the Beneficiary Fund.

The above-budget operating surplus can be largely attributed to two factors – higher investment income of $480,000, and grants and gifts that were $609,000 above the level expected.

The higher level of investment income partly reflects the way in which the budget was formed – to exclude interest that was not accessible to Assembly. Interest of over $200,000 was earned on trusts for purposes that cannot be accessed. In contrast, the budget for 2006/07 now includes all interest income to enable a more valid comparison with actual interest income in that year. Higher levels of interest also resulted from funds earned on the proceeds of the sale of Laughton House. The sale had not been part of the 2005/2006 budget assumptions.

There were two major factors that led to the much higher level of grants and gifts than the amount anticipated in the budget. Of most significance was the high level of funds bequeathed to Assembly trusts. The amount received fluctuates considerably from year to year, and in 2005/06 $322,000 was received against a budget estimate of only $25,000. These funds were largely inaccessible being either for investment (interest only) or for restricted expenditure purposes In addition, there was a grant specifically for the School of Ministry from the Synod of Otago and Southland of $294,000 against an expected receipt of $194,000.

Doubtful Debt Provision and Assembly Assessment

There was an increase in the provision for doubtful debts in the 2005/06 accounts of $314,498. This reflects the continued underpayment of Assembly Assessment by some parishes, which has resulted in a shortfall as against assessment of around 12 percent to 13 percent over the last two years. Renewed efforts will be made in the current financial year to resolve outstanding issues and to persuade parishes to meet their full assessment. A key part of this involves working with Asian and Pacific Island parishes.

Proceeds from the Sale of Laughton House

Assembly deposits with the Presbyterian Investment Fund (PIF) increased over 2005/06 from $10.5 million to around $14.7 million. The increase principally reflects the deposit of the proceeds of the sale of Laughton House of $3.9 million. These funds are not available for use by Assembly pending a decision by the Commission of Assembly on possible restrictions on their use. Similarly, all other funds on deposit with the PIF are restricted in their use by the terms of the trusts under which they are held, or by the trusts being capital restricted (interest only). While interest earned on the proceeds of the sale of Laughton House is available to Assembly, the amount received largely offsets the loss of rent from previous tenants of Laughton House and the rental currently paid for office premises for national staff. The intention behind the sale of Laughton House was to enhance Assembly’s flexibility in the use of its resources.

John Trainor and Ian Watson
Co-conveners