Chief Financial Officer's report
In this report:
The Institute has completed a very successful financial year with a Group surplus of $1.9m which exceeded budget. The magnitude of the surplus was a result of some above-expectation revenue flows combined with cost savings.
Strong revenue performance
The Institute experienced good subscription growth as member numbers have swelled by almost 1000 (3.3% growth) over the year. This vote of confidence in the Institute is a strong acknowledgement of the benefits of membership. ABEL contributed strongly to the Group result with continued growth in PAS/PCE2 enrolments by intending Chartered Accountants, supplemented by significant growth in PCE1 enrolments, partly as a result of the reopening of the Associate Chartered Accountants College. The higher interest rate environment during the year was also beneficial to us and interest income is now a significant revenue stream. It was also very encouraging to see good contributions from the Auckland Conference Centre and the Chartered Accountants Journal. Given the softening economy, the lift in advertising revenue in the Journal endorses the Institute’s magazine as an important business publication.
Cost management
Our strong revenue performance was complemented by some significant savings made in production costs, including printing, copying and postage, while other costs were able to be held at prior year levels, including premises, ICT and recruitment and training. Salary and contract staff costs have risen as expected given the need to service greater membership numbers and also to provide greater levels of expertise in our specialist areas.
The financial outcome from our professional development businesses did not meet expectations and attendance figures disappointed management. A number of initiatives have been effected to meet the challenges in this highly competitive market, including new product offerings, enhancements to the core face-to-face learning product and further cost efficiencies to be sought wherever possible.
NZ IFRS compliance
This is the Institute’s first set of NZ IFRS-compliant financial statements and adjustments have been charged to opening members’ funds totaling $237,000. These costs comprised two provisions: for premises refurbishment and long-service leave.
Looking to the future
The Group’s balance sheet remains simple but strong. Cash and investments have grown due to the earlier start to the annual subscriptions process and the current year surplus. Group members’ funds now stand at $7m which is an excellent base for the Institute to operate from and also provides a useful level of income while remaining within an appropriate range on a per member basis.
The increased level of members’ funds and continued good cost control has enabled us to hold subscriptions at prior levels. The ability to share the benefits of our accumulated surpluses with our members is a fantastic outcome although given cost inflation and the need to continue to invest in the future of the profession, it may not be repeatable in the near future. There is a strong need to continue to invest in our infrastructure and to ensure the Institute meets the expectations of its stakeholders. The Fit for the Future review, the Rules review and the external review of our professional conduct process are examples of how the Institute is continuing to evolve and refine its structure, and we are also implementing new systems to provide further member services and to increase our behind-the-scenes efficiency.
Acknowledgements
Our transition to NZ IFRS, despite being relatively straightforward, required an increase in the level of preparation work for the financial statements and the Finance team are very grateful for the assistance provided by our advisors and auditors through the transition process, as well as to those involved in the financial affairs of the Group (at national and branch level and in ABEL). Financial governance is provided to the Institute by the members of the Audit, Finance and Risk Management Committee and we are very thankful for their assistance and guidance, provided on an honorary basis, throughout the year.
Kelvin Wong
Chief Financial Officer