the finances of the rotary foundation fiscal 2006-07 rrfc institute march 2007
TRANSCRIPT
THE FINANCES OFTHE FINANCES OFTHE ROTARY FOUNDATIONTHE ROTARY FOUNDATION
FISCAL 2006-07FISCAL 2006-07
RRFC INSTITUTERRFC INSTITUTEMarch 2007March 2007
OVERVIEWOVERVIEW
TRF Financial GovernanceTRF Financial Governance Revenues and SpendingRevenues and Spending Net Assets and Operating ReserveNet Assets and Operating Reserve TRF InvestmentsTRF Investments Frequently Asked QuestionsFrequently Asked Questions
TRF’s Financial GovernanceTRF’s Financial Governance
Rotary International
Corporate Member
Board of Trustees
TRF Finance Committee
General Secretary
RI CFO TRF GM
Financial Services Staff
Rotary Foundation Staff
Revenues and Revenues and SpendingSpending
2005-06 Financial Results2005-06 Financial ResultsUS$(millions)US$(millions)
Investment Earnings$50.2
Contributions$111.9
Program Awards$91.1
Program Ops $16.9
Fund Dev $13.7
Expenses Revenues $162.1 $128.3
G&A $6.6
Net Increase
$33.8
The Rotary Foundation The Rotary Foundation Revenue TrendsRevenue Trends
US$(millions)US$(millions)
162161180
138
6041
118119
154155
-40
10
60
110
160
97 98 99 00 01 02 03 04 05 06
Contributions Investment Income (Loss)
The Rotary Foundation The Rotary Foundation Contribution TrendsContribution Trends
US$(millions)US$(millions)
AP
F R
eco
rd
0
18
36
54
72
90
108
126
144
97 98 99 00 01 02 03 04 05 06
Annual Programs Fund PolioPlus Permanent Fund
Disaster Recovery Flow Through
____PEFC____
2005-06 Designation of Contributions2005-06 Designation of ContributionsUS$111.9 millionUS$111.9 million
Permanent Fund11%
PolioPlus5%
Disaster Recovery
1%
Annual Programs
Fund83%
$92.6
$12.1
$5.6
Program OperationsProgram Operations
Scholarship & grant administration for EP, HP and PP Scholarship & grant administration for EP, HP and PP programs as well as support for Rotarians who implement programs as well as support for Rotarians who implement international activities.international activities. Fund DevelopmentFund Development
Personnel services, communications, public relations, Personnel services, communications, public relations, supplies, computer support, legal counsel and recognition supplies, computer support, legal counsel and recognition (ranging from awards to events).(ranging from awards to events). General AdministrationGeneral Administration
Personnel services, communications, computer support, Personnel services, communications, computer support, audit fees, Associate Foundations and Trustee services audit fees, Associate Foundations and Trustee services (administrative support, travel, meetings and committees, (administrative support, travel, meetings and committees, e.g., Future Vision).e.g., Future Vision).
The Rotary FoundationThe Rotary FoundationExpense CategoriesExpense Categories
What the Foundation Spent in 2006What the Foundation Spent in 2006 US$128.3 million US$128.3 million
Program Awards & Expenses
84%
Humanitarian41%
GeneralAdministration
5% FundDevelopment
11%
Educational22%
PolioPlus21%
The Rotary Foundation The Rotary Foundation Total Awards & ExpensesTotal Awards & Expenses
US$(millions)US$(millions)
128128
103108111116114
139
113
80
0
30
60
90
120
150
97 98 99 00 01 02 03 04 05 06
Program Awards Program OperationsFund Dev General Administration
84%
11%5%
The Rotary FoundationThe Rotary FoundationTrends in Program SpendingTrends in Program Spending
US$(millions)US$(millions)
108110
879495
102100115
95
61
0
20
40
60
80
100
120
97 98 99 00 01 02 03 04 05 06
Educational Humanitarian PolioPlus
Permanent Fund SpendingPermanent Fund SpendingUS$(millions)US$(millions)
2.7
3.7
4.7
6.1 6.3
0.9
4.64.9
0
1
2
3
4
5
6
7
1999 2000 2001 2002 2003 2004 2005 2006
PolioPlus Program PolioPlus Program 1985 through June 20061985 through June 2006Total Revenues of $647 MillionTotal Revenues of $647 Million
TRF Contributions
12%
Earned Income
24%
Rotarian Contributions
64%
$416
$78
$153
PolioPlus ProgramPolioPlus Program1985 through June 20061985 through June 2006
Total Expenditures of $591 MillionTotal Expenditures of $591 Million
Program91%
Fund Development
3%
Program Operations
6%
$535 $37
$19
3734
292726
242324
181916
0
5
10
15
20
25
30
35
40
45
96 97 98 99 00 01 02 03 04 05 06
General Administration Fund DevelopmentPrograms Operations
Trends in Total Operating Expenses –Trends in Total Operating Expenses –by Activityby Activity
(in $millions)(in $millions)
20 19 19 19 21
65 72 64 60 61
82 81 86 83 82
0
20
40
60
80
100
120
140
160
180
200
02 03 04 05 06
General Administration Fund Dev & Donor Operations
Programs Operations
Trends in Staff Levels –Trends in Staff Levels –by Activityby Activity
167172 169
162 164
1.8 2.1 2.2 2.9 3.1 3.4 4.6 5.5 6.0 7.6 8.72.7 3.1 3.0
3.7 3.7 3.83.2
3.54.1
5.06.1
2.62.6 2.2
2.7 2.7 2.6 2.21.9
2.3
3.1
2.1
0
5
10
15
20
25
96 97 98 99 00 01 02 03 04 05 06
Humanitarian Educational PolioPlus
Trends in Program Operations Trends in Program Operations Expenses – by programExpenses – by program
(in $millions)(in $millions)
16.915.6
12.5
10.910.09.79.59.4
7.47.87.0
7.0 8.1 8.1 10.1 10.2 11.3 12.810.0 11.0
16.7 16.2
8.5 8.1
10.7 10.4 9.810.3
12.915.1
16.821.0
7.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
96 97 98 99 00 01 02 03 04 05 06
TRF Direct Expenses RI Allocation
TRF Total Operating Expenses by SourceTRF Total Operating Expenses by Source (in $millions)(in $millions)
14.0
16.6 16.2
20.8 20.6 21.123.1 22.9
26.1
33.5
37.2
Net Assets and Net Assets and Operating ReserveOperating Reserve
Net Assets at 30 June 2006Net Assets at 30 June 2006US$637.4 millionUS$637.4 million
Annual Programs
Fund 64%
Permanent Fund28%
PolioPlus Fund
8%
$405.0$52.6
$179.6
Other Restricted of .2 million not on graphOther Restricted of .2 million not on graph
The Rotary Foundation The Rotary Foundation Net AssetsNet Assets
US$(millions) US$(millions)
553607 587 593
537
466494
571603
637
0
200
400
600
97 98 99 00 01 02 03 04 05 06
Operating Reserve DefinitionOperating Reserve Definition
The Foundation’s operating reserve is The Foundation’s operating reserve is the earned income balance of the the earned income balance of the Annual Programs Fund adjusted for any Annual Programs Fund adjusted for any unspent reserve allocations.unspent reserve allocations.
TRF Code of Policies Section 27.010TRF Code of Policies Section 27.010
140 151 151 146 135
112 113 116 129189
104 50 3673
7381
149
151
0
50
100
150
200
250
300
350
400
450
01 02 03 04 05 06
District Designated Fund World Fund Earned Income Reserve
The Rotary FoundationThe Rotary FoundationAnnual Programs Fund by ComponentAnnual Programs Fund by Component
(in $millions)(in $millions)
356314 303
348373
405
TRF Operating Reserve PolicyTRF Operating Reserve Policy
The Foundation shall maintain an operating reserve The Foundation shall maintain an operating reserve equal to the sum of :equal to the sum of :
(1)(1) budgeted operating expenses for the current year, budgeted operating expenses for the current year,
(2)(2) forecasted operating expenses* for the next two fiscal forecasted operating expenses* for the next two fiscal years, and years, and
(3)(3) 50% of the budgeted Annual Programs Fund awards 50% of the budgeted Annual Programs Fund awards for the current year. for the current year.
* Operating expenses include fund development and * Operating expenses include fund development and administrative expenses. administrative expenses.
TRF Code of Policies, section 19.020TRF Code of Policies, section 19.020
INVESTMENTSINVESTMENTS
Parties Responsible for TRF InvestmentsParties Responsible for TRF Investments
Investm ent ConsultantHew itt Investm ent Group
Custodian BankM ellon Bank
Investm ent M anagers
Staff
TRF Finance Com m ittee
The Board of Trustees
Trustees’ ResponsibilitiesTrustees’ Responsibilities
Formulating investment policiesFormulating investment policies Developing investment objectivesDeveloping investment objectives Allocating assets among the managersAllocating assets among the managers Monitoring investment managersMonitoring investment managers Adding, replacing or eliminating managers Adding, replacing or eliminating managers
when appropriatewhen appropriate
Source: The Rotary Foundation Code of Policies – sections 18.020, 18.030, 18.040, 18.050, 18.060, 18.070, 18.080, 18.090
Investments at 30 June 2006Investments at 30 June 2006US$674.5 millionUS$674.5 million
Annual Programs
65%
Life Income Agreements
3%PolioPlus
8%Canada
1%
Permanent Fund23%
Investment StructureInvestment Structure
U.S Equity PoolIndex Fund 20%Enhanced Index Fund 20%Large Cap Value 20%Large Cap Growth 20%Small Cap Value 10%Small Cap Growth 10%
Fixed Income PoolActive Manager 50%Active Manager 50%
Non-U.S. Equity PoolActive Manager 50%Active Manager 50%
Real EstateActive Manager 50%Active Manager 50%
Private EquityActive Manager 62%Active Manager 38%
Mellon BankCustodian Bank Services
Hedge Fund PoolFund of Funds 100%
Asset Allocation of APF Investments* Asset Allocation of APF Investments* US$438.7 million at 30 June 2006US$438.7 million at 30 June 2006
U.S. Stocks48% Non-U.S.
Stocks18%
Bonds22%
Real Estate10%
Hedge Funds2%
* Excludes RF (Canada)
Asset Allocation of Permanent Fund InvestmentsAsset Allocation of Permanent Fund InvestmentsUS$153.6 million at 30 June 2006 *US$153.6 million at 30 June 2006 *
U.S. Stocks56%
Non-U.S. Stocks
19%
Hedge Funds2%
Bonds12%
Real Estate11%
* Excludes Split-Interest Agreements
Asset Allocation of PolioPlus Fund InvestmentsAsset Allocation of PolioPlus Fund InvestmentsUS$52.3 million at 30 June 2006US$52.3 million at 30 June 2006
Bonds100%
Frequently Asked Frequently Asked QuestionsQuestions
How does The Rotary Foundation’s How does The Rotary Foundation’s financial performance compare with financial performance compare with other charities and non-profit other charities and non-profit organizations?organizations?
Unique Qualities of The Rotary Unique Qualities of The Rotary FoundationFoundation
The MissionThe Mission & Scope & Scope
The Expenditures CycleThe Expenditures Cycle & & SHARE ProgramSHARE Program
Recognition ProgramsRecognition Programs
Volunteer StructureVolunteer Structure
The Rotary Foundation The Rotary Foundation Charity Navigator RatingCharity Navigator Rating
ExceptionalExceptional
ExceedsExceeds industry standards and performs industry standards and performs better than most charities in its cause.better than most charities in its cause.
Comparisons, continued:Comparisons, continued:
U.S. Better Business Bureau Wise Giving U.S. Better Business Bureau Wise Giving Alliance Finance Standard 8: Alliance Finance Standard 8:
““at least 65% of a charity’s total at least 65% of a charity’s total expenses be spent on program expenses be spent on program activities”activities”
Program activities include both awards and Program activities include both awards and operating expenses, both identified as operating expenses, both identified as program services by the IRS Form 990.program services by the IRS Form 990.
Source: The U.S. Better Business Bureau Wise Giving Alliance Standards for Charity Accountability. Source: The U.S. Better Business Bureau Wise Giving Alliance Standards for Charity Accountability.
84%86%84%85%85%88%88%
90%90%86%86%
Minimum 65%
72%76%76%
80%80%83%84%
76%75%71%
74%
0%
20%
40%
60%
80%
100%
96 97 98 99 00 01 02 03 04 05 06
Total Program Spending Benchmark Only Program Awards
Program Spending as a % of Total Program Spending as a % of Total SpendingSpending
Why do the Trustees invest the Why do the Trustees invest the Foundation’s assets in the equity Foundation’s assets in the equity markets? ….. and what have the markets? ….. and what have the results been?results been?
The Rotary Foundation The Rotary Foundation Investment Results - All FundsInvestment Results - All Funds
US$(millions)US$(millions)
42.750.2
-11.9 -10.5
-66.0
-49.1
27.1
1.4
73.6
5.4
-40.0
-13.8
44.751.3
86.784.3
16.4
62.4
18.9
30.1
-80
-60
-40
-20
0
20
40
60
80
100
97 98 99 00 01 02 03 04 05 06
The Rotary FoundationThe Rotary FoundationInvestment ReturnsInvestment Returns
Annual Programs FundAnnual Programs Fund
7.9%
-15%
-5%
5%
15%
25%
97 98 99 00 01 02 03 04 05 06
APF Benchmark Avg Annual Return
The Rotary FoundationThe Rotary FoundationInvestment ReturnsInvestment Returns
Permanent FundPermanent Fund
7.9%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
97 98 99 00 01 02 03 04 05 06
Permanent Fund Benchmark Avg Annual Return
The Rotary FoundationThe Rotary FoundationInvestment ReturnsInvestment Returns
PolioPlus FundPolioPlus Fund
5.2%
0%
2%
4%
6%
8%
10%
12%
97 98 99 00 01 02 03 04 05 06
PolioPlus Benchmark Avg Annual Return
THE FINANCES OFTHE FINANCES OFTHE ROTARY FOUNDATIONTHE ROTARY FOUNDATION
FISCAL 2006-07FISCAL 2006-07
RRFC INSTITUTERRFC INSTITUTEMarch 2007March 2007
Questions Submitted by Questions Submitted by Regional Rotary Foundation Regional Rotary Foundation
CoordinatorsCoordinators
What expenses are covered by theWhat expenses are covered by the
SHARE three year investment cycle?SHARE three year investment cycle?
ExpensesExpenses
The investment income from the 3 year SHARE The investment income from the 3 year SHARE cycle covers cycle covers ALLALL program operating, fund program operating, fund development and gen. admin. expensesdevelopment and gen. admin. expenses
91.1
16.9
13.76.6
0
45
90
135
06
Program Awards Program OperationsFund Dev General Administration
37.2
128.3
When Rotary’s Senior Leaders say: “The When Rotary’s Senior Leaders say: “The Foundation is a terrific organization because Foundation is a terrific organization because 100% of your donation is spent on 100% of your donation is spent on programs. Your donation is held for three programs. Your donation is held for three years and the earnings are used to pay for years and the earnings are used to pay for operating expenses.” operating expenses.”
Are these statements still true?Are these statements still true?
YES!
12
2228 29
36
2621
3138 37
25
13
0
20
40
60
80
100
93/96 94/97 95/98 96/99 97/00 98/01 99/02 00/03 01/04 02/05 03/06 04/07B 05/08B 06/09B
Contributions Program Awards Cumulative Unspent Contributions
The Rotary FoundationThe Rotary FoundationComparisons of Annual Programs Fund Comparisons of Annual Programs Fund
Contributions to Program AwardsContributions to Program Awards(in $millions)(in $millions)
5
19 22 23
47
95
139149
158
123
69
49
76 76 7568
-50
-20
10
40
70
100
130
160
92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07B
Net Investment Returns Operating Expenses Excess Earnings *
The Rotary FoundationThe Rotary FoundationNet Investment Return and Operating Expenses Net Investment Return and Operating Expenses
(in US$ Millions)(in US$ Millions)
* These earnings accumulate in TRF’s Operating Reserve. Between 1997 and 2000 the Trustees used $99.3 million for program awards
ExpensesExpenses
How does the level of expenditure onHow does the level of expenditure on
“ “Fund Dev & Donor Ops” reflect inFund Dev & Donor Ops” reflect in
the income stream changes?the income stream changes?
Contributions vs. Contributions vs. Fund Development ExpensesFund Development Expenses
US $ (millions) US $ (millions)
6975 76
81 86 9095
143
114
129 127
0
20
40
60
80
100
120
140
160
96 97 98 99 00 01 02 03 04 05 06
Contributions (including flow through) Fund Development Expenses
Fund Development MetricsFund Development Metrics
0
500
1,000
Major Donors 307 417 399 601 411 675 757 757 960 863
1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 2004- 2005-
0
500
1,000
1,500
Bequest Society Commitments 0 0 0 875 1,111 607 470 698 615 622
1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 2004- 2005-
Fund Development MetricsFund Development Metrics
0
2,000
4,000
6,000
Benefactors 5,143 5,766 5,435 4,888 4,465 4,074 2,982 3,758 3,728 3,242
1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 2004- 2005-
0
20,000
40,000
60,000
80,000
Paul Harris Fellow s 64,476 46,740 37,300 39,757 37,590 44,308 50,467 48,219 53,645 51,305
1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 2004- 2005-
Fund Development MetricsFund Development MetricsLife Income AgreementsLife Income Agreements
Number of Agreements Number of Agreements with TRFwith TRF
Cumulative TotalsCumulative Totals
As of 30 June 2002As of 30 June 2002 191191
As of 30 June 2003 As of 30 June 2003 222222
As of 30 June 2004As of 30 June 2004 241241
As of 30 June 2005As of 30 June 2005 265265
As of 30 June 2006*As of 30 June 2006* 287287
* Note: Year 2005-06 numbers are preliminary
Do we really spend $37.2 million in expenses to Do we really spend $37.2 million in expenses to award $91.1 million in TRF programs?award $91.1 million in TRF programs?
ExpensesExpenses
First, of the $37.2 million, only $16.9 million, the First, of the $37.2 million, only $16.9 million, the program operating expenses, directly support program operating expenses, directly support program awards. Also, much of the operating program awards. Also, much of the operating expense is supporting program awards for future expense is supporting program awards for future years. years.
Second, the $91.1 million in program awards Second, the $91.1 million in program awards excludes all flow through activityexcludes all flow through activity
Spending performance compares favorably to Spending performance compares favorably to charitable giving standards charitable giving standards
No!No!
How was the World Fund spent How was the World Fund spent in the last fiscal year (FY06)?in the last fiscal year (FY06)?
Annual Programs FundAnnual Programs Fund
140 151 151 146 135
112 113 116 129189
104 50 3673
7381
149
151
0
50
100
150
200
250
300
350
400
450
01 02 03 04 05 06
District Designated Fund World Fund Earned Income Reserve
The Rotary FoundationThe Rotary FoundationAnnual Programs Fund by ComponentAnnual Programs Fund by Component
(in $millions)(in $millions)
356314 303
348373
405
How was the World Fund spent inHow was the World Fund spent in
the last fiscal year (FY06)?the last fiscal year (FY06)?
Annual Programs FundAnnual Programs Fund
World Fund was spent as follows:World Fund was spent as follows:
Humanitarian ProgramsHumanitarian Programs $23.3M $23.3M Educational Programs Educational Programs 4.5M 4.5M
PolioPlusPolioPlus 0.0M0.0M
TotalTotal $27.8M$27.8M
How was the DDF spent in the lastHow was the DDF spent in the last
fiscal year (FY06)?fiscal year (FY06)?
Annual Programs FundAnnual Programs Fund
District Designate Funds were spent District Designate Funds were spent as follows:as follows:
Humanitarian ProgramsHumanitarian Programs $18.7M $18.7M Educational Programs Educational Programs 15.5M 15.5M
PolioPlusPolioPlus 1.5M1.5M
TotalTotal $35.7M$35.7M
Regarding the District Designated Funds Regarding the District Designated Funds (DDF), do we apply pressure to the districts to (DDF), do we apply pressure to the districts to utilize these unused funds? utilize these unused funds?
No, the Trustees do not apply pressure. Instead, No, the Trustees do not apply pressure. Instead, the Trustees offer incentives to utilize these the Trustees offer incentives to utilize these funds, e.g., World Peace Centers, Low Income funds, e.g., World Peace Centers, Low Income Scholarships and PolioPlus Partners.Scholarships and PolioPlus Partners.
This subject is being addressed in the Future This subject is being addressed in the Future Vision survey.Vision survey.
Annual Programs FundAnnual Programs Fund
Why are information systems Why are information systems costs so high and rising?costs so high and rising?
-2
2
6
10
14
97 98 99 00 01 02 03 04 05 06 07B
Salaries & Benefits Equipment Software Lic & MaintConsultants Depreciation Cap of Staff & Conslt Other
Information Systems CostsInformation Systems Costs (in $ millions)(in $ millions)
7.6
6.1
10.59.5
7.97.2
8.0
10.610.0
13.8
15.9
15.9
13.8
10.010.6
8.07.2
7.9
9.510.5
6.1
7.6
0
2
4
6
8
10
12
14
16
97 98 99 00 01 02 03 04 05 06 07B
RI Portion Allocation TRF Budget
Information Systems CostsInformation Systems Costs (in $ millions)(in $ millions)
