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The Lutheran World Federation Department for World Service Geneva The Lutheran World Federation Department for World Service Geneva Independent auditor’s report to the Communion Office Leadership Team on the financial statements 2018 Independent auditor’s report to the Communion Office Leadership Team of The Lutheran World Federation Department for World Service Geneva Opinion On your instructions, we have audited the financial statements of The Lutheran World Federation Department for World Service, which comprise the balance sheet, income and expenditure statements and notes, for the year ended 31 December 2018. In our opinion, the accompanying financial statements are prepared, in all material respects, in accordance with the accounting principles followed by The Lutheran World Federation and in accordance with Note 1 of the financial statements. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs) and Swiss Auditing Standards. Our responsibilities under those provisions and standards are further described in the “Auditor’s responsibilities for the audit of the financial statements” section of our report. We are independent of the entity in accordance with the requirements of the Swiss audit profession and the IESBA Code of Ethics for Professional Accountants, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis of matter We draw attention to the notes to the financial statements, which describes the basis of accounting. The financial statements are prepared in relation to the accounting principles of the Lutheran World Federation. As a result, the financial statements may not be suitable for another purpose. Our report is intended solely for The Lutheran World Federation Department for World Service for use in connection with the purpose as described in the preceding paragraph. Our report should not be distributed to or used by parties other than The Lutheran World Federation Department for World Service or used for any other purpose. We do not, in giving our opinion, accept or assume responsibility or liability for any other purpose or to any other parties to whom our report is shown or into whose hands it may come. Our opinion is not modified in respect of this matter. Responsibilities of Management and the Federation Board for the financial statements Management is responsible for the preparation of the financial statements in accordance with the accounting principles followed by The Lutheran World Federation, and for such internal control as Management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. PricewaterhouseCoopers SA, avenue Giuseppe-Motta 50, case postale, CH-1211 Genève 2, Switzerland Téléphone: +41 58 792 91 00, Téléfax: +41 58 792 91 10, www.pwc.ch PricewaterhouseCoopers SA is a member of the global PricewaterhouseCoopers network of firms, each of which is a separate and independent legal entity. In preparing the financial statements, Management is responsible for assessing the entity’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless Management either intends to liquidate the entity or to cease operations, or has no realistic alternative but to do so. The Federation Board is responsible for overseeing the entity’s financial reporting process. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and Swiss Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs and Swiss Auditing Standards, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management. Conclude on the appropriateness of the Management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the entity to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with the Federation Board or its relevant committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. PricewaterhouseCoopers SA Marc Secretan Charlotte Tavernier Audit expert Audit expert Geneva, 21 May 2019 Enclosure: Financial statements (balance sheet, income and expenditure statement and notes) THE LUTHERAN WORLD FEDERATION Department for World Service BALANCE SHEET AS AT 31 DECEMBER (EUR) Note 2018 2018 Unrestricted Restricted Total 2018 Total 2017 Assets Total assets less liabilities 3.1 52,507,028 11,460,598 63,967,626 56,797,379 Programs/project balances receivable 3.2 0 9,760,602 9,760,602 11,287,200 Total net Assets 52,507,028 21,221,200 73,728,228 68,084,579 Liabilities and Reserves Current Liabilities Unexpended balances on programs/projects 3.2 0 13,276,136 13,276,136 12,254,353 Current accounts - former world service programs 2.11 0 614,876 614,876 143,374 Total Current Liabilities 0 13,891,012 13,891,012 12,397,727 Long Term Liabilities Field staff provisions 2.12 0 7,283,549 7,283,549 7,028,682 Provision for staff - assignment,leave and termination 2.12 266,554 0 266,554 293,771 Global emergency revolving fund 0 46,639 46,639 46,639 Total Long Term Liabilities 266,554 7,330,188 7,596,742 7,369,092 Total Liabilities 266,554 21,221,200 21,487,754 19,766,819 Reserves General Reserve 2.13 6,137,522 0 6,137,522 5,991,346 Institutional Capacity Development Reserve 2.13 585,000 0 585,000 585,000 Resettlement Administration 2.13 640,400 0 640,400 640,400 Field designated reserves 2.13 44,877,552 0 44,877,552 41,101,014 Total Reserves 52,240,474 0 52,240,474 48,317,760 Total Liabilities and Reserves 52,507,028 21,221,200 73,728,228 68,084,579 1 THE LUTHERAN WORLD FEDERATION Department for World Service INCOME AND EXPENDITURE STATEMENT FOR THE YEAR ENDED 31 DECEMBER (EUR) Unrestricted Restricted Restricted Global Projects Field Projects Total 2018 Total 2017 Operating Income Member churches and related agencies 2,195,703 682,679 34,699,454 37,577,836 46,338,377 Other Partners - 77,606 90,049,280 90,126,886 96,543,404 Net AVH/VTC operating results 2,258,916 - - 2,258,916 2,959,216 Administration fees 2,119,270 309,737 - 2,429,007 1,892,784 Non-project income 5,475,798 - - 5,475,798 5,953,766 Non-implementation projects - - 1,501,214 1,501,214 1,607,009 Total Operating Income 12,049,687 1,070,022 126,249,948 139,369,657 155,294,557 Operating Expenditure Staff related costs 2,953,034 - - 2,953,034 2,860,556 Travel and representation 193,912 - - 193,912 164,484 Other operating expenses 343,511 - - 343,511 308,000 Project expenses - 1,070,022 124,748,734 125,818,756 140,778,156 Non-implementation projects - - 1,501,214 1,501,214 1,607,009 Non-project expenses 3,958,173 - - 3,958,173 4,797,070 Committee for World Service 14,018 - - 14,018 16,971 Central services allocation 895,352 - - 895,352 810,682 Consulting 23,884 - - 23,884 20,407 Audit and other professional fees 34,805 - - 34,805 40,853 Interpreting and translating - - - - 58 Total Operating Expenditure before recharge 8,416,689 1,070,022 126,249,948
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