Vol. 22, No. 4
on IUPAC's Financial Condition for the Biennium 19981999
Near-Term Operational Income and Expense
Total IUPAC Portfolio Growth
Report and Balance Sheets
After serving IUPAC as Treasurer and Chairman of
the Finance Committee for eight years, Prof. John Ward has taken a well-deserved
retirement from the financial helm of IUPAC. During his term, IUPACs
financial condition improved from a position of income not meeting expenses
in the biennium to a position during the 19981999 biennium in
which income covered expenses and long-term reserves have been established
to strong levels.
Dr. Christoph Buxtorf
Dr. Edwin Przybylowicz
Financial responsibilities have transferred to Dr.
Christoph Buxtorf, newly elected Treasurer of IUPAC and recently retired
Head of Production and Technology of Novartis Crop Protection (Switzerland),
and Dr. Edwin Przybylowicz, Chairman of the Finance Committee and retired
Director of Research at Eastman Kodak Co. (USA). This report on the
financial condition of IUPAC is submitted to the IUPAC membership as
a summary. These comments are based on the financial figures summarized
in the tables that are part of this report. More detailed financial
statements can be found on the IUPAC
web site. The comments are summarized in two categories: near-term
operational income/expense and long-term investments.
Near-Term Operational Income
Over the past biennium, IUPAC income has exceeded
expenses by USD 373 500, an amount that was significantly greater than
in the previous biennium (1996-1997) when income exceeded expenses by
USD 20 600. Much of the surplus from these years has been moved to our
long-term investment accounts, where it has been earning a good return
for potential use to support the organizations projects.
The surplus during the past biennium is the result
of a number of factors, including: (1) a more efficient operation of
the Secretariat at Research Triangle Park, (2) stronger fiscal management
of expenses by Divisions and Standing Committees, and (3) tight fiscal
management by our Treasurer. The impending reorganization of the work
done by IUPAC may have also caused some reduction in spending during
this millennium. As the new project system gets established, it is anticipated
that expenses and income will be more closely matched. There are some
cautions and concerns to be noted, however, as we view IUPACs
operational financial condition. On the income side, our national subscriptions
provide slightly over 50% of our operating income. This income represents
the main support of our organization; however, it is subject to monetary
fluctuations and regional macroeconomic problems that regularly impact
the organization. For example, countries where severe inflation has
caused hardships are not able to meet their annual subscription because
inflation has diminished the value of their currencies. Such circumstances
are recognized and handled on a temporary basis by the Officers of the
Union in a way that does not impact the participation of the countries
in IUPAC activities. However, such occurrences do impact IUPACs
budgeted income levels. This effect has occurred in the recent past,
and IUPACs financial plans must take the possibility of such events
Another major contributor to our biennial income
is IUPAC publications. During the past biennium, publication income
provided approximately 33% of the total income. IUPAC, under the leadership
of our Executive Director, Dr. John Jost, has moved in the direction
of self-publishing. This change has improved the response time for IUPAC
publications and has also resulted in a significant improvement in income.
One caution in the longer term is whether printed publications will
continue to provide such income levels, given the trend toward electronic
publication and use of the excellent IUPAC web site.
The third major contributor to IUPAC income derives
from dividends and interest. During the past biennium, these sources
have contributed 9%, down slightly from the 10% of the previous biennium.
This item is mainly determined by the Unions average cash position
and the prevailing interest rates. On the expense side, total expenses
for this biennium are down by 8% over the previous biennium, during
which the Secretariat was moved from Oxford, England to Research Triangle
Park, North Carolina (USA). While this move had a significant impact
on our operations, it did not impact the scientific work of the organization.
Prof. Ward regularly reminded the Division Presidents and Standing Committee
Chairs of the availability of funding for worthy projects.
It will be a challenging task to select and support
projects under the Strategic Plan 20002001. IUPAC will undergo
a fundamental strategic change in the years ahead, from a commission-based
to a project-driven "new millennium" organization. The challenge
for financial planning will be to provide the necessary support for
good projects as well as an equitable distribution of funds across the
broad spectrum of activities in which IUPAC is involved.
Long-term investments for IUPAC are subdivided into
four funds: (1) Reserve Fund, (2) Southern Hemisphere Sinking Fund,
(3) Endowment Fund, and (4) Endowment Fund Reserve. While the accounting
practice shows specific amounts of money allocated to each of these
funds, for investment purposes, the aggregate of the four funds is handled
as a single portfolio. The purpose of each of these funds is as follows:
This fund is intended to provide operational expenses
to carry IUPAC for a full biennium, should other sources of income not
be forthcoming. It is the prime financial protection for the Union in
the event of a severe worldwide economic downturn.
Southern Hemisphere Sinking Fund
This fund is one that is planned to be used to help
hold General Assembly and Congress meetings in places where the costs
of travel, meeting arrangements, etc. are considerably more expensive
than the norm. It is anticipated that significant use of this fund will
be made during the upcoming General Assembly and Congress in Brisbane,
This fund was established to pay for special projects
of a broad nature that enhance the stature of the Union. For example,
the recently established IUPAC Prize for Young Chemists will be supported
entirely by the proceeds from the Endowment Fund. Proceeds from this
fund are calculated using the yield on fixed income investments rather
than the entire portfolio.
Endowment Fund Reserve
This fund was created to provide matching funds
from IUPAC to add to outside funds that might be made available to IUPAC
for endowment purposes. The Endowment Fund Reserve would match funding
for projects of an ongoing nature from partnerships of IUPAC with industry,
government, or technical organizations.
Total IUPAC Portfolio Growth
The total IUPAC investment portfolio grew from a
value of USD 3 055 920 at the end of the previous biennium (market value
as of 31 December 1997) to USD 3 940 707 (market value as of 31 December
1999) for a 29% gain in value. This change is the result of two factors:
(1) the investment growth of the portfolio during this period, and (2)
savings that were accrued from operations during this period and transferred
to the long-term investment account.
During the past biennium, the Finance Committee
and Treasurer have established a balanced portfolio of 60% equities
and 40% fixed income investments, with a regional balance of 60% U.S.
investments and 40% in Europe. During the next year, the Finance Committee
will develop a written investment policy statement, which will be reviewed
and approved regularly by Officers of the Union, as a means of understanding
and maintaining IUPACs strong financial condition.
Auditor's Report and Balance Sheets [pdf file - 35K]