World Council of Churches Financial Report 2018 World Council of Churches 150 Route de Ferney P.O. Box 2100 1211 Geneva 2 Switzerland Contents page Report to the Member Churches on the 2018 Financial Report 5 Report of the Statutory Auditor to the Executive Committee 8 and to the Member Churches Schedule I: Consolidated Balance Sheet 10 Schedule II: Consolidated Income & Expenditure Account 11 Schedule III: Consolidated Statement of Movements in Funds & Reserves 12 Schedule IV: Consolidated Cash Flow Statement 14 Notes to the Consolidated Financial Statements 15 Schedule V: Restricted Funds 34 Schedule VI (a) and (b): Restricted Funds Programmes 35 Schedule VII: Unrestricted and Designated Funds 37 Schedule VIII: Unrestricted Operating Funds 38 Annual Summary of Contributions 39 Non-financial Contributions 48 Note on Membership Contributions 52 Financial Report 2018 5 REPORT TO MEMBER CHURCHES ON THE 2018 FINANCIAL REPORT We present with pleasure the financial report of the World Council of Churches for 2018. The year marked the start of the second four-year planning period since the 10th Assembly, with work shaped by the WCC Strategic Plan 2018-2021, and the accompanying financial strategy, approved by the central committee in June 2018. The 10th Assembly, Busan 2013, called the churches and ecumenical partners to join in a “Pilgrimage of Justice and Peace.” In 2018, the regional focus of the pilgrimage turned to Latin America and the Caribbean, and the WCC celebrated its 70th anniversary, with meetings with church leaders from around the world, including Pope Francis. In the year’s Annual Review, the general secretary affirmed that “our fellowship has taken concrete steps in the ecumenical quest for unity, precisely by walking, working and praying together.” Financial results 2018 In 2018, the WCC reported total income of CHF 24.8 million, total expenditure and transfers of CHF 29.3 million and a resultant net decrease in funds and reserves of CHF 4.5 million. This result is close to the forecast reported to executive committee in November 2018. The table below compares the result with the budget for 2018, as approved by executive committee in November 2017. Contributions income, gratefully received, totaled CHF 18 million, at budget level, and CHF 0.6 million higher than prior year. A slight strengthening of the Euro and other currencies against the Swiss franc, compared to prior year rates, was one favourable factor, accounting for about half of the increase. Other income totaled CHF 6.8 million, being CHF 1 million lower than budget, as a result of unrealized investment losses on the endowment fund, suffered in the last quarter of 2018. In the following four months, to April 30, 2019, the endowment fund recorded investment gains of CHF 0.8 million. Net increase in funds compared to budget 2018 Executive committee approved a budget for 2018 with a reduction in funds and reserves of CHF 3.1 million. The table below compares the actual and budgeted movements in fund categories before transfers of funds to/(from) general reserves and other funds. Budget 2018 Actual 2018 Variance fav/(unfav) CHF 000 CHF 000 CHF 000 Restricted funds Programme funds (2,433) (1,692) 741 Restricted endowment funds 66 (856) (922) Decrease in restricted funds (2,367) (2,548) (181) Unrestricted and designated funds Designated fund for fixed assets (52) (1,103) (1,051) Designated fund for the building project (608) (368) 240 Unrestricted Funds: Bossey hotel and (48) (257) (209) conference centre Unrestricted and designated funds: other 8 (299) (307) Decrease in unrestricted & (700) (2,027) (1,327) designated funds Total net decrease in funds (3,067) (4,575) (1,508) Programme funds Expenditure was below budget by CHF 0.4 million in Unity, Mission and Ecumenical Relations, firstly because some part of the expenditure for the Conference on World Mission and Evangelism was incurred 6 Financial Report 2018 in 2017, although budgeted in 2018; and some planned activities for 2018 were postponed to match available funding. Expenditure was also under budget by CHF 0.4 million in Ecumenical Formation, with lower grant expenditure in Ecumenical Theological Education, and slightly lower numbers of students at the Ecumenical Institute compared to budget. Unrestricted funds Unrestricted funds closed CHF 1.3 million lower than budgeted, principally because an additional depreciation charge of CHF 1 million was recognized concerning the Ecumenical Centre wings which are planned for demolition from 2022 to 2024 in the context of the Green Village real estate development project. General reserves General reserves reflect assets available to the council, after meeting obligations and liabilities, and without recourse to land and buildings. In 2018, the general reserves closed at CHF 6.9 million, after transfer of CHF 270,000 to the programme funds, to cover the costs of the papal visit, and as authorized by executive committee in May 2018. The general reserves target was set by central committee in June 2018 at CHF 7 million. The general reserves are covered by cash and Swiss franc bond funds, invested in accordance with the WCC Investment Policy. Hotel and conference centre at the Château de Bossey In 2018, the Bossey hotel and conference centre reported a net deficit of CHF 257,000, well below the break-even budget set (2017: net deficit CHF 47,000). The hotel suffered a decrease in room occupancy compared with 2017, particularly in the first quarter. With adjustment for the depreciation charge covered, the result nonetheless represented a positive cash flow of CHF 214,000, almost covering the loan reimbursements of CHF 250,000. Capital expenditure for the facilities at Bossey totaled CHF 172,000 in 2018 (2017: CHF 250,000). During 2018, the former hotel and conference centre manager resigned, and a new manager was appointed. The net results for the first quarter 2019 reflect an improvement of CHF 135,000, compared to the first quarter 2018. Membership income The WCC financial strategy 2018-2021 set as one outcome indicator for the period that the level of CHF 4 million in membership contributions be attained, and then sustained. In 2018, membership contributions totaled CHF 3.97 million (2017: CHF 3.84 million). Of the 350 churches registered as members, 202 (58%) paid a membership contribution in 2018, representing an increase of 22 member churches paying a contribution compared with prior year (2017: 180 (52%) paid a membership contribution). In 2014, the WCC central committee set a goal of increasing membership contributions by 2% to 5% per year with reference to the 2012 contribution levels. Many member churches increased their membership contribution in local currency during the period 2014-2017. In 2018, 131 member churches, or 65% of contributing member churches, contributed more in local currency than in 2017. The Annual Summary of Contributions, included in this report, provides a comprehensive list of all membership contributions. Capital expenditure Capital expenditure remained low in 2018 at CHF 380,000 (budget: CHF 619,000). Expenditure included CHF 106,000 for improvements in the residential building. Deficit fund to be covered from the development project The council’s balance sheet includes a deficit fund of CHF 23.7 million, to be covered from the real estate development project. The deficit fund was recorded following the funding of an extraordinary Financial Report 2018 7 contribution of CHF 24 million to the WCC Retirement Fund in 2011. The WCC Retirement Fund was refinanced to the level required by regulatory authorities. Assets and obligations were then transferred to an independent collective pension fund, and the WCC Retirement Fund was liquidated. Green Village In January 2018, the Area Development Plan (ADP) for the Green Village real estate development project came into effect, together with the classification of the main building of the Ecumenical Centre, and the Brugger garden. Set in gardens, with walkways and cycle paths, Green Village includes six new buildings, with offices, an apartment building and a hotel-residence, grouped around the Ecumenical Centre main building, which is to be renovated. Principles of sustainability and ecology will be hallmarks of the project. The WCC aims to meet three objectives in realizing the project: namely, to reimburse a loan of CHF 24 million (see above); to renovate the Ecumenical Centre to the required standards and to meet future needs; and to generate rental income to cover operating costs. In June 2018, at central committee, the steering committee launched the Green Village website, www.green-village.ch and announced that to honour work done to protect creation, the new buildings would be named Montreal, Kyoto, Lima, Rio, Durban and Stockholm, after cities in which environmental protocols were agreed. The financial objective for Montreal, the residential building, was approved by executive committee in April 2019, with construction planned to commence in late 2019. Marketing work continues to seek tenants for the first administrative building, Kyoto. Prospects for the future From 2015 to 2018, the council’s work has benefited from four years of stability in programme income, at the level of about CHF 18 million. The budget for 2019 is similarly profiled. The WCC Strategy 2018-2021 adopts a steady income scenario for the current four-year planning period. While WCC will continue to raise funds from UN agencies, governments and foundations, for particular project work in peace-building and social cohesion, it remains the faithful member churches and ecumenical partners who provide 95% of the resources which fund WCC programmes. As WCC plans for the 11th Assembly, in 2021 in Karlsruhe, it is as a fellowship of churches that WCC looks to the challenges ahead. In March 2019, an independent land evaluation of the Ecumenical Centre estate estimated the site value at CHF 109 million, increased by CHF 75 million, as a result of the ADP and building permits now obtained.