The Finance Report for 1999 has been published and sent to Member Churches. The accounts showed total income of CHF 32,058,000, total expenditure including transfers of CHF 31,164,000 and a positive result of CHF 894,000 which was derived after exceptional unrealised gains in the investment portfolio during the last quarter of the year.

The staff were asked to provide clearer information concerning the realised and unrealised gains when preparing financial management information to the Governing Bodies.

The Finance Committee recommends:

• That the Central Committee approve the 1999 results as audited and published.

The Executive Committee Finance Report commented especially on the investment results which included unrealised losses which caused an adverse swing of CHF 2,830,000, resulting in an eventual deficit of CHF 751,000. This deficit results from a total income of CHF 24,853,000 and expenditure including transfers of CHF 25,604,000.

The preliminary nature of these results must be stressed. This means that there may be changes resulting from the final closing, the audit and the application of the International Accounting Standard 19 which deals with any possible liability of the Council towards the Pension Fund.

The Finance Committee noted that the total expenditure for 2000 was remarkably close to the original budget. It also discussed the investment income and the variations which occurred from year to year. The Council has to address the difficulty resulting from these swings. Staff were asked for the future to provide a 2-year performance against budget comparison.

The Finance Committee recommends:

• That a review of the investment results be undertaken by the Investment Advisory Group and the outcome be brought to the next meeting of the Executive Committee and circulated to the Finance Committee of the Central Committee, and that the next Executive Committee review the Investment Guidelines given to the investment managers.
• That the preliminary deficit for 2000 of CHF 751,000 resulting from a total income of CHF 24,853,000 and expenditure including transfers of CHF 25,604,000 be covered by a transfer from the General Reserve after adjustments resulting from the full closing and completion of the audit process.

The proposed budget for 2001 shows a total income of CHF 26,302,000 and total expenditure after transfers of CHF 27,802,000 to result in a budget deficit of CHF1,500,000. A significant reduction in budgeted expenditure has been achieved since the first presentation to the Executive Committee, but a further reduction of CHF 440,000 still needs to be found to achieve the target of a deficit of not more than CHF 1,500,000. In such a situation, any eventual increase in income beyond CHF 26,302,000 must be used to reduce the budgeted deficit.

In terms of contributions income, the Council has experienced situations where contributors fail to give advance warning of their reduced contributions against firm pledges. There is also a noticeable trend of contributions away from Operating towards Activity funding. For this reason the Committee does not propose an increase of designated contributions in the budget as presented.

The World Council of Churches being a community of hope with some good years behind the organisation, it is valid to hope for improved revenues in the future, partly from new sources. This leaves however two to three difficult years in between. The General Reserve will be at the level of approximately CHF 4.7 million at the beginning of 2001. The investment reserves which had been used in 2000 had been constituted out of good returns in prior years. Whilst to accept a deficit in the budget for 2001 of CHF 1,500,000 is a courageous act, it seems, in the long term view, that the situation is tenable. Any other action is likely to de-motivate staff and prevent the Council from working effectively.

The Finance Committee recommends:

• That the Central Committee approve the operating budget for 2001 with a total income of CHF 26,302,000 and a total expenditure of CHF 27’802’000. The deficit of CHF 1.5 million has to be covered from the General Reserve.

The scenario plan for 2002 through 2004 was compared with the preliminary result for 2000 and the proposed budget for 2001. These scenarii showed a need for increases in income to re-establish the financial stability of the Council, however these can only materialize over a period of 3-5 years, at best. This stability is partly based on a target percentage of staff costs to total operating costs of 66%.

The Membership Campaign was discussed and the point re-iterated that all members should be capable of contributing the minimum of CHF 1,000. It was noted that discussions about membership income have to take into account relative values of money in the different member churches’ contexts and financial situations.

The incidence of Central Committee meetings has slipped to be an annual event from to 2001 to 2004. This puts unbearable strains on the World Council of Churches’ financial situation.

The use of a moratorium on recruitment is one of the instruments to reduce staff costs. Caution must however be exercised in using this approach as it is likely to have some adverse effects on staff workload and morale. Another instrument is the secondment of staff which should be actively sought, particularly in years leading towards an Assembly.

Increased localization of work outside of Geneva, such as the existing HIV/AIDS Programme, Contact Magazine, Programme on Climate Change and the Disabilities Programme, should be pursued as this can also benefit the member churches by giving them more direct access to programmatic activities of the Council.

The Finance Committee recommends:

• That the Council keeps to an 18-month cycle for Central Committee meetings. As such it could refrain from meeting in 2004.
• That the General Secretary review the 66% target ratio of staff costs to total operating costs, in the light of the changing cost structure of the Council.

The immediate income development goals are to stabilise Designated Contributions, increase Membership and Undesignated Income and seek new sources of income from Trusts and planned giving. Because of the early stages of this strategy, it is only possible to speak with a limited degree of confidence about the success of the initiatives, and to refrain from making firm estimates at this stage. The challenge is for all member churches and especially those represented on Governing and Advisory Bodies. Raising the profile of the World Council of Churches is an essential part of that task.

The longer term strategy will take some time to develop. However, the world-wide reach, dedication and grass roots representation is a possibility to present the Council as a unique funding opportunity. There is an increasing number of Funds available -- especially Endowment Funds. The task ahead is to match the attractive parts of the Council’s work to these Funds.

Membership Campaign: This essential work undertaken in cooperation with the Church and Ecumenical Relations Team is now well under way. Regional discussions have begun in Europe and in the USA. The letter campaign has been launched in Europe and the issue has been discussed at most regional meetings of the Central Committee. It is proposed to establish regional Advisory Groups which would include a mixture of Church leaders and people responsible for financial decisions.

Designated Income: Maintaining the present level of Designated Income will in itself be an achievement.

New Sources of Income: The World Council of Churches needs to position itself to benefit from possible transfers of significant amounts of money from one generation to another, of which a good part is expected to go to charitable organisations and foundations. The World Council of Churches should capitalize on people’s desire to "give something back".

The Group of Five: The "Group of Five" concept seeks to concentrate the profile of the Council around a manageable number of foci. For that purpose it is necessary to identify five such foci that the Council could uplift with a view to attracting funds. The Finance Committee invited the Programme Committee to enter the discussion on the choice of programmatic examples for the "Group of Five".

Social Responsibility: Many organisations seek to exercise some form of social responsibility. However the Council must take care not to become inadvertently associated with such a concept and to investigate whether this would be compatible with the mission and the purpose of the Council. This new funding source should be further investigated and a formal proposal should be communicated to the Executive Committee.

The Finance Committee recommends:

• That Central Committee endorse the work done to date on the membership campaign, and encourage the proposal to establish regional advisory groups as described,
• That Central Committee endorse and commend the concept of the "Group of Five" proposal,
• That Central Committee endorse and commend search for new sources of funds as described above.

Following a recommendation of the Executive Committee, the WCC asked Pension Fund consultants, KPMG, to undertake a study on the feasibility of a move from the current defined benefits plan to a defined contributions scheme. The study highlighted that the age structure of the organisation was significantly above average for comparable organisations. The conclusion was that there was no reason which would prevent the Council from moving to a defined contributions scheme. The council should seek to guarantee the benefits due from the existing scheme for those approaching retirement. It must also examine all other cases to confirm that at the time of the transition, no individual is disadvantaged by the proposed changes.

Among the advantages of the proposed plan, younger and mid-career employees are likely to see an improvement to their retirement benefits. It will also improve the transparency of the determination of the portable capital for each employee. For the Council, it decreases the financial risks associated with the current defined benefits defined plan, limiting them to the compulsory 4% return on the individual’s vested capital in accordance with Swiss Law.

The proposals for change of the Pension Scheme must be discussed with staff and the Pension Fund Board. While limiting the risk associated with the current plan, the Council must maintain attractive conditions to staff in order to appeal to and help retain younger people for employment.

The Finance Committee recommends:

• That the initiatives taken so far by staff be endorsed,
• That the second stage of the study determining the individual rights of each beneficiary in the event of a change be undertaken,
• That the Executive Committee be mandated to take a final decision at its meeting in September 2001, so that if accepted the change could become effective at the beginning of 2002.

The World Council of Churches’ salary system was designed many years ago and has not undergone revision despite structural changes to the organisation and changes in the remuneration environment generally.

The financial conditions are such that the budget provision for staff costs in 2001 amounts to CHF 20.8 million (including Core and Non-Core staff), against a background of CHF 440,000 reduction still to be made in order to stay within a CHF 1.5 million deficit.

A small group of staff -- known as the design team -- has worked on proposals for change in consultation with the Staff Representative Group.

The proposals seek to address the existing broad range of grades across the revised categories of House Staff, Technical Staff, Administrative Staff, Executive Staff and Leadership of the Council, with a limited number of grades in each category.

Whilst the cost of living increases will be maintained, the individual salaries will be related to responsibilities and revised only as a result of a change in those responsibilities.

The Finance Committee recommends:

• That the plan, including the immediate and long term financial implications, be brought to the Executive Committee for approval at its meeting in September 2001.

The Council is in the process of moving its budgeting, accounting and reporting system to an Activity-based Costing System. This will have the advantage of harmonization of work-planning, budgeting and reporting, improved decision-making by way of increased transparency of the total cost of each main, or core, activity of the Council. Clearer identification of under and over funded activities will also be possible to allow adjustment of income development priorities.

Alongside the advantages, a number of potential problems must be cited. Some agencies will continue to designate funds at the most granular level and may not accept a percentage "levy" for administration. There may be a decrease in the Council’s ability to negotiate with donors the movement of funds between activities at short notice. Charging the full costs to each activity may result in apparent "over-pricing" situations.

The Finance Committee recommends:

• That the Central Committee strongly support the Activity Based Costing initiative.

A study has been conducted internally to determine whether the World Council of Churches should see itself as a "knowledge-base" organisation and to adapt its systems and working style to facilitate this. This study has identified that there is considerable information in the World Council of Churches which is of central importance, but that it is not organised in the most effective way for structured retention and general access. The study included more than 25 interviews with all categories of staff in the Council. Staff indicated a desire to share knowledge, but expressed difficulties in doing this, either as a result of lacking the necessary skills or the technological instruments. The main challenge is not around technology, but more related to the "culture" of the organisation which is not conducive to maximize the use of existing technology.

The two key positions within the Council necessary to continue this work are that of the IT Manager which is expected to be filled in the near future and that of the Web Master, which position is currently serviced by contract.

In addition to addressing internal communication needs, the possibility for access by the individuals comprising the constituency of the Member Churches should be a high priority. One measure of success should be the number of "unlikely" people who access the website and how often this occurs. This implies the site needing to be attractive to the "ordinary parishioner" as well as to the organisation of a church.

Archiving has also been identified as a critical need within the Council. Given current financial constraints, the primary objective is to avoid a further deterioration and obsolescence of the general archiving situation.

The Finance Committee recommends:

• The endorsement of the work on Knowledge Management and its continuation.

A brief report on the status of the Bossey renovation project was presented. A specific mention was made that a "construction loan" at favourable rates was obtained from the Banque Cantonale Vaudoise to finance a large portion of the costs of the project.

The renovation project will require that an extensive review of the Institute’s orientations be effected with a view to re-launch it as an institute of higher ecumenical learning upon completion of the project.

The Finance Committee recommends :

• That the concept of Bossey as an institute of higher ecumenical learning, including financial implications, should be further developed and discussed at the appropriate places.