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40th IUPAC COUNCIL Meeting
Berlin, Germany: 13-14
August 1999


Biennial Report of the Treasurer and Finance Committee

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.

> Download the Auditor's Report and Balance Sheets in pdf format (68K)


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