B4A Assembly Finances

1. COMMENTARY

The following information provides a summary of the Assembly’s financial position and performance over three completed financial years, being 12 months to June 2015, June 2016 and June 2017, as well as a forecast for the 12 months to June 2018 (at the date of writing this report) between the Triennial Assembly meetings.

This analysis and commentary covers the Assembly and its Agencies with the exception of the Church's national superannuation fund, the Beneficiary Fund (which is administered by Mercer) 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.

The last three years have seen the Assembly undertake many changes; some of these changes as a result of the need to address Frontier Services’ financial position, including undertaking significant transition works to exit both Aged Care and Community Services, whilst others are as a result of the Assembly and its Agencies undertaking strategic planning initiatives.

The collective financial position of the Assembly and its Agencies has steadily improved over this three-year period, and the Assembly thanks all those parties within the Church, and those beyond, for their assistance in helping this recovery. It should be noted that significant works have been undertaken to repair the balance sheet of Frontier Services, which at 30 June 2014 reflected a deficiency of net assets of $17M, compared to a deficiency at the date of this report of $2M (reduction of $15M). Frontier Services is now in a profitable position and expected to repay Assembly $300K in the 2017/18 Financial Year. The Frontier Services Board-approved five-year financial forecast also includes a minimum amount of $300K repayment to Assembly in each of 2018/19 to 2021/22 years to work towards repaying the Assembly debt of $1.9M at the date of this report. Pleasing income management and careful cost control is paying dividends across the board, not only in Frontier Services.

Negotiations with the Synods with regard to their contribution to the Assembly, have led to a three-year funding model, calculated on the number of Congregations, which led to changes in the individual Synod contributions to the Assembly, but with no overall increase from $3.2M per annum. This funding model commenced in the 2016/17 financial year, and will need to be renegotiated prior to the 2019/20 financial year. This has provided much needed stability and sustainability.

The Assembly Finance, Audit and Risk Committee (AFARC) 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. The Committee is pleased with the significant improvement in the financial position of the Assembly over this three-year period.

As at June 2016, the Assembly, being collocated with the NSW/ACT Synod at 222 Pitt St, entered into a Service Level Agreement (SLA) with the NSW/ACT Synod for the provision of several areas of back-of-house support. Under this SLA, the NSW/ACT Synod now provides Payroll, Human Resources, Financial Accounting, Accounts Receivable and Payable, as well as all IT requirements, to the Assembly and its Agencies. The main purpose of entering into the SLA is that both parties can benefit and share the savings generated from greater economies of scale and that the Assembly can benefit from the expertise held in larger teams. The Assembly and its Agencies have also actively reduced other costs including the relocation of Frontier Services into the Assembly’s offices, therefore reducing rental expenses, and the appointment of KPMG as auditors (current NSW/ACT Synod auditors) to generate further efficiencies. Similar work is underway, with Synod offices nationwide, in regard to the national procurement of insurance services. This is a work in progress.

The Committee considers that during this three-year period the Assembly and its Agencies have competently discharged their governance duties and responsibilities. All Agency financial reports comply with Australian Accounting Standards. A detailed set of the accounts will be available for perusal at the Assembly.

2.  ALL AGENCIES – SUMMARY FINANCIAL REPORT

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

Financial movements over the triennium, as well as a forecast for the 2017/18 year can be summarised as follows:

 

Forecast

30 June 2018

Year ended

30 June 2017

Year ended

30 June 2016

Year ended

30 June 2015

$000$000$000$000
Income (includes DGR Appeal monies)16,83218,36718,55520,390
Expenses16,79817,84417,87919,604
 

Forecast

30 June 2018

As at

30 June 2017

As at

30 June 2016

As at

30 June 2015

Net Assets23,44723,42222,89720,966

Note: the 2018 forecast includes the dissolution of the Benevolent Fund where approximately $980K of funds were transferred as a grant to the Synods to be used to support their respective ministers needing assistance. The dissolution of the Benevolent Fund was not budgeted for in 2017/18 and is the main explanation as to the reason for June 2018 forecast reflecting only a slight surplus for the financial year (noting that the budget for 2017/18 is for a net surplus of $198k).

In conclusion, it is pleasing to see the Net Assets of the Assembly increase from $20.9M to $23.4M over the three-year period ending 30 June 2017.

3.  FINANCIAL REPORT – GRAPHS

The following graphs show a snapshot of financial performance:

4.   OTHER MATTERS

While AFARC’s focus over the past years has been on financial remediation and restoring sustainability and stability, there are other matters and highlights, to bring to the attention of the Assembly. These include:

  • The pleasing results to date would not have been possible without the dedication and commitment of a revitalised Assembly office under the General Secretary’s leadership. This has been complemented by Agency leadership bringing renewed skills and focus. AFARC greatly appreciates this support; our work and achievements would not be possible without them.
  • Considerable work is underway in regard to risk management and mitigation, leveraging a proven risk management framework, embedded within, and owned by, Agency leadership teams. This will enable enhanced identification and management of risks with a commensurate improvement of reporting - including at Assembly level.
  • In conjunction with the Assembly Investment Committee, there has been a significant movement of funds away from cash and short-term cash based investments to longer-term investment for higher returns with over $10M invested in the UFS Ethical Diversified Fund in 2017/18 – without increasing the financial risk profile for the Assembly or its Agencies.
  • Simplification of accounting practices to reduce the number of inter-entity transactions has taken place – delivering greater clarity and transparency.
  • A complete review of internal policies has been completed, which lead to a number of revisions and updates (to reflect contemporary practices) along with the rationalisation of redundant policies.
  • Considered and carefully managed asset realisation has been conducted – delivering enhanced stewardship and management.
  • A funding grant of $1M provided to Synods in 2017/18 through the dissolution of the Benevolent Fund, has helped to strengthen Synod financial positions.
  • At the end of 2017, UnitingWorld satisfied the stringent requirements regarding program quality, effectiveness, transparency, accountability, and governance set by the Department of Foreign Affairs and Trade, with reviewers recommending full accreditation for another five years.

These highlights, and many others, are noteworthy. Looking forward, it is the intent of AFARC to transition from adding value through remediation and firefighting to a more positive value add, working closely with the Agencies in relation to matters under AFARC’s remit such as financial management (including reserves policies to underpin sustainability), compliance, governance, risk, and related opportunities. This is a supplement to, not a substitute for, ongoing attention to financial performance.

Notwithstanding this intent, however, some headwinds will likely prevail, including:

  • The ongoing need to consider the implications of the Church’s response to the Royal Commission into Institutional Responses to Child Sexual Abuse, including redress and potential structural and governance responses. Consideration of the costs (such as funding of claims received, and potentially yet to be received, by Assembly Agencies, as well as Assembly resourcing) and compliance related aspects (for example in relation to ongoing responsibilities relating to child safety) will likely be considerations for AFARC over the next triennium.
  • Risks arising in relation to any decision concerning marriagemarriage will need to be carefully and prayerfully considered by the Committee. Reputational, and other, considerations in an holistic sense will likely need to be explored.
  • Financial stewardship will never leave AFARC’s agenda.
  • AFARC is also actively seeking new membership and we are especially seeking to address a gender imbalance. This will occupy the Committee’s attention in the near future.

Assembly’s support as we encounter these headwinds is both welcome and assumed.

5.  CONCLUSION AND RECOMMENDATION

AFARC is pleased to report a marked improvement in financial position since the Fourteenth Assembly and we look forward to the Fifteenth Assembly with enthusiasm as we continue to provide support and advice to the Assembly, its Standing Committee and relevant Agencies.  We appreciate the support of Assembly and its dedicated leadership team.

Finally, the Committee pays tribute to Peter Andrews, the former AFARC Chairman, and wishes to thank him for his leadership, commitment, wisdom, and patience over many years.  Peter leaves the Committee and the Agencies under its remit in a markedly better financial and governance position. We wish him well for the future.

It is recommended that Assembly receive this report.


Stuart Woodward
Chairperson
Assembly Finance, Audit and Risk Committee