The financial outcome for 2013 is set out in the ‘ Consolidated Statement of Financial Activities

During 2013 Concern’s income and expenditure fell due to the winding down of a number of emergency response activities in a number of our countries of operation.

In addition to this planned reduction, Concern continued to be impacted by the difficult global and domestic economic environment. While support for Concern’s work remained strong, the general weakness of the Irish and UK economies affected the level of fundraising income received in 2013.

The final position for the year shows net outgoing resources of €1.7 million. This deficit was planned and is predominately due to the residue of funds which were received in 2010 and 2011 for the emergencies in Haiti, Pakistan and in the Horn of Africa, being utilised in 2013.

A more detailed commentary on the financial results reflected in the 2013 Annual Report, is set out below:

Income

The organisation’s total income in 2013 amounted to €127 million. This represents a decrease of 11 per cent from income levels in 2012 and is the net impact of a number of substantial movements across our main income sources.

Grants from governments and institutional donors

Concern received a total of €83 million in grants from governments and institutional donors in 2013 – see  note 2(a) to the financial statements for analysis by donor. This represents an 11.4 per cent decrease from our 2012 levels. This decrease is primarily due to the completion of emergency projects in a number of our country programmes.

The European Union was the single largest donor in 2013 - providing €25 million or 30 per cent of total co-funding income. The Irish Government was the next largest donor providing €23 million.

Donated commodities

Commodities donated to the organisation and distributed as part of its relief programmes were valued at €2.8 million. In 2013, a 61 per cent decrease from 2012– see note 2(b) to the financial statements for details. The main reason for the decrease was due to the completion of food distribution programmes in Niger and Cambodia.

Public donations

Income from public donations in Ireland and UK reached €40.5 million – see note 2(c) to the financial statements for additional analysis of voluntary income. This represents a decrease of 2.8 per cent when compared to 2012. The decline was lower than anticipated due to the generous donations received for Philippines emergency appeal.

During 2013 our committed giving income held up reasonably well. Committed giving is an important source of income for the organisation as it represents a significant portion of our total income, it is also provides a reliable base from which to plan on- going activities. Thanks are due to all of the donors who have continued to support the organisation in the midst of difficult economic times.

Expenditure

Our total expenditure for the year was €129 million, made up as follows:

2013
€’m %
Charitable activities 116.6 90.4%
Cost of generating funds 11.7 9.1%
Governance 0.7 0.5%
129.0 100%

Total expenditure at €129 million, represents a 12.4 per cent decrease from the 2012 level of €147.3 million. As previously outlined this decrease is primarily due to the completion of emergency projects in a number of countries including Haiti, Bangladesh, Somalia and Niger.

Two exceptional costs are included in the expenditure figures for 2013 and 2012. These costs have been appropriately allocated across each of the expenditure categories above:

  • Impairment charge 2013 (€0.8 million) - During 2013 the Council reviewed the value of its land and freehold premises and decided that they should write down the value of these assets to their recoverable value. This has resulted in an impairment charge of €0.8m in the current year.
  • Past service credit 2012 (€1.3 million) – In 2012 the Pensions Board approved a Section 50 application in relation to Concern’s defined benefit pension scheme. This application provided for an amendment to post retirement pension increases (namely the reduction of the current fixed rate of escalation from three per cent pa to the lesser of CPI or three per cent pa), and the cessation of a discretionary practice of providing a revaluation in respect of the defined benefit pensions relating to pensionable service completed prior to January 1, 1991. This resulted in a past service credit of €1.3 million in 2012 which was spread across the expenditure headings outlined above. This credit makes the comparative figures for 2013 seem lower than normal.

Charitable activities

Expenditure on charitable activities in 2013 totalled €116.6 million, a 14 per cent decrease from 2012 levels. As can be seen in note 3, most of the decrease resulted from reduced expenditure on emergency response activities in 2013. The increase in activities across the majority of our other sectors reflects the change in the focus of programming in the country’s whose emergency response activities have wound down over the last two years. During 2012 and 2013 the decision was made to exit Cambodia, India and Zimbabwe by the end of 2013. These decisions have also contributed to the fall in charitable expenditure in 2013.

Cost of generating funds

The cost of generating funds totalled €11.7 million in 2013. Outside of the two main expenditure items explained above expenditure is more or less the same as in 2012. Continued emphasis was placed on ensuring that Concern’s returns on fundraising investment were maximised.

Governance costs 

Governance costs for 2013 amounted to €0.7 million, or 0.5 per cent of total expenditure. The small decrease in expenditure reflects the reduction in the CEO’s salary in the current year.

The total costs set out above in relation to charitable activities; fundraising and governance include attributable support costs. Our total support costs for the year amounted to €10.7 million (see note 6 to the financial statements), compared to €8.6 million in 2012, a 24 Governance costs per cent increase. This increase is due to the impairment charge in the current year and the past service credit applied in 2012, as outlined above. Outside of these adjustments support costs have fallen in 2013, reflecting a number of expenditure cuts that were made during the year in response to the continued fall in voluntary income.

Key financial performance indicators

There are a number of key financial performance indicators which, taken together, are used by management and Council as a measure of performance and financial strength. These are set out below:


Indicator 2013 2012
Return on fundraising spend 3.5 3.9
Government and institutional income as a percentage of charitable expenditure 71% 69%
Support costs as a percentage of total costs 8.3% 5.8%
Unrestricted reserves as a percentage of total income 28% 22.7%

  • Return on fundraising spend essentially measures how much we get back for each euro spent on fundraising. This figure decreased by 10 per cent in 2013, due to an increased investment in fundraising activities that are expected to yield returns in future years and due to the impact of the exceptional costs outlined in the previous section.
  • Government and institutional income as a percentage of charitable expenditure indicates the proportion of our core work which we can get funded without reliance on public appeals. The 71 per cent recorded in 2013 is slightly higher than the levels achieved in 2012. The organisation’s ability to maintain this level of co-funding demonstrates its continued success in accessing government and institutional funding.

  • Support costs as a percentage of total costs illustrates how much of total expenditure is absorbed by essential but non-core activities and functions. The 8.3 per cent achieved in 2013, represents a significant increase of 2.5 per cent on the 2012position. As previously noted this increase is mainly due to the impairment charge in the current year and the past service credit applied in 2012.

  • Unrestricted reserves as a percentage of total income indicate the resources on which the group can draw in order to continue its work in the event of a downturn in income. The level of unrestricted reserves held at the end of 2013 is considered adequate and is in line with our reserves policy.

Overall we are satisfied with the financial performance for the year, especially given the continued difficult operating conditions.

Reserves and Financial Position

It is Concern’s policy to retain only sufficient reserves to safeguard the continuity of its overseas operations, thereby committing the maximum possible resources to its current programmes.

The total reserves of €38.4 million at December 31, 2013 are detailed in note 19 to the financial statements and fall into two categories:

  • Restricted funds (€2.9 million): these funds are tied to particular purposes, which arise because of restrictions on their use imposed by the donor at time of receipt or because the funds were collected in a public appeal to raise money for a particular purpose. It is the organisation’s policy to fully apply such funds for the purposes for which they were donated as quickly as possible. The majority of these funds relate to the emergency income for Philippines which Concern intend to utilise in 2014.
  • Unrestricted funds: these are of two types: 

    • Designated funds (€35.5 million); these are unrestricted funds which have been allocated by the Council for specific purposes and which are (as a result) not available for general usage. At the end of 2013 funds had been designated for three specific purposes as follows:
      • To cover the 2014 budget deficit.
      • To recognise that a portion of reserves is invested in the charity’s fixed assets (tangible and financial) and is not therefore available for other purposes.
      • To ensure the continuity of operations in the event of a temporary downturn in income.


    • General unrestricted funds (€0.1 million): these represent funds which are available for the general purposes of the charity.

Council reviews the level of reserves held periodically. The last review was done in conjunction with the approval of the 2014 budget. At that time it was agreed that the restricted reserves should be utilised as soon as reasonably possible and, that the 2014 expenditure plans were not expected to move the organisation’s unrestricted reserves from the 2013 levels which are felt to be appropriate.

Based on the results for the year, the year-end financial position and the approved 2014 budget, the Council believes that the charity has adequate resources to continue in operational existence for the foreseeable future. For this reason the Council continues to adopt the ‘going concern’ basis in preparing the financial statements.

Financial Results of Subsidiary Companies

In addition to the parent company, during 2013 there were two active subsidiary companies within the group:

  • Concern Worldwide (UK) engages in fundraising, development education and advocacy work in the United Kingdom. The company had another successful year in 2013, producing substantial net income for group activities. The year- end position of the company was satisfactory and it is expected to continue trading for the foreseeable future.
  • Concern Charity Trading Limited continued to provide support to group fundraising activities. Any costs associated with this activity have been borne by the parent company.

As explained in note 25 to the financial statements, apart from the parent company and the above subsidiaries, there is one other company within the group. This company was not operational in 2013 and did not have material assets or liabilities at the balance sheet date.

Investment Policy

The bulk of Concern’s liquid reserves are placed in short- term interest-bearing deposits, with maturity dates designed to satisfy Concern’s cash flow requirements. These deposits are placed with reputable financial institutions as authorised by Council, within set investment thresholds.

During the year the organisation disposed of its long-term investment with Irish Life Investment Managers. 

Financial Instruments, Financial Risk Management Policies, Objectives and Strategies 

The group finances its operations mainly from incoming resources and reserves. The financial instruments that arise from this activity comprise of investments, cash and liquid resources. Other financial instruments such as debtors and creditors arise directly from normal operations. The group does not trade in derivatives or other financial instruments in the ordinary course of business.

The group’s international operations expose it to different financial risks that include credit risk, interest rate risk, foreign exchange rate risk, and liquidity risk. Financial risk management policies are in place which seek to limit the impact of these risks on the performance of the group. It is the aim of the group to manage these risks in a non- speculative manner.

The group’s policies for managing each of its main financial risks are broadly as follows:

Credit risk:

Credit risk is the risk that the financial institutions in which liquid investments and cash at bank are held may default on the cash deposited and the risk that co-funder debtors of the group may default on their obligations.

The risk of default by credit institutions is managed by the group by ensuring that cash at bank and short- term investments are held with institutions that have a satisfactory credit rating as approved by Council.

The amounts due from co- funders represent amounts owed to the group by those government and institutional funders for work that has been performed but for which the related funding has not been received by year-end. This is managed by the group by ensuring that all agreements with these co-funders are supported by signed contracts and that all reporting and project related requirements are fulfilled to ensure receipt of funding. There is not a significant concentration of risk and the history of defaults is negligible.

The group has detailed procedures for monitoring and managing the credit risk in relation to other receivables.

Interest rate risk:

Interest rate risk exists when assets and liabilities attract interest rates set according to different bases or which are set at different times. The main companies in the group have interest bearing assets and liabilities. In general, rates on the majority of cash and short term bank deposits are fixed only for relatively short periods in order to match funding requirements while being able to benefit from opportunities due to movements in longer term rates. The main company in the group, namely Concern Worldwide, also has an interest bearing liability in the form of a bank loan. The interest rate on part of the loan was fixed in 2012 for five years. The remainder of the bank loan attracts a variable interest rate charge; however the company has the ability to fix the whole or part of this interest rate in order to mitigate the risk of adverse interest rate fluctuations.

Foreign exchange risk:

Much of the group’s costs, particularly overseas costs, are denominated in US dollar while most income is received in euro and sterling. A strengthening of the US dollar against the euro and sterling could have a significant adverse effect on the group’s ability to deliver its planned programme of work. These currency risks are monitored on an ongoing basis and managed as deemed appropriate by utilising a combination of spot and forward foreign currency contracts.

Liquidity risk:

Liquidity risk is the risk that the group will be unable to meet financial commitments arising from the cash flows generated by its activities. The risk can arise from mismatches in the timing of cash flows relating to assets and liabilities. The group’s liquidity is managed by ensuring that sufficient cash and deposits are held on short notice, and by retaining sufficient reserves to cover short term fluctuations in income.