NOTES TO THE STATEMENT OF INCOME AND EXPENSES

in Euros

10 Income from individuals

Income from individuals includes structural and one-off donations from individuals as well as legacies.

Developments 2017

War Child aims to develop long-term relationships with individual donors to ensure stability in income and the continuity of projects. The large majority of the income generated by individual donors came from Friends, as War Child calls its structural donors. In spite of an increasingly competitive fundraising market, the number of Friends increased compared to previous year. Our fundraising initiatives included the Jij&ik tv show, a Martin Garrix concert in Paradiso and the Kili Challenge. We did not reach our ambitious income target from individuals of €9.7 million. Instead we raised €8.8 million income from individuals in 2017 (8.7 per cent below budget), which is however 1 per cent higher than the previous year.

11 Income from companies

Income from companies includes periodical donations from our Business Friends, one-off gifts from actions, donations in kind as well as restricted subsidies.

Developments 2017

In 2017 we raised €3.1 million from the business sector, 26 per cent above our target for the year and 17 per cent above the income in 2016. We saw the biggest growth in incidental donations, which appears to be an ongoing trend in this sector. As with the trend in the market for individual donors, it was a challenge to secure long-term commitments from companies. Main business donors of monetary funding are ASN Bank and Rituals Cosmetics. Approximately one third of income from businesses comes from the value of donations in kind. War Child has a low cost policy and tries to find donors for every purchase it makes at head office. This ranges from free software licenses to free hotel rooms for our foreign visitors. Thanks to our good reputation that our donors recognize, we are quite successful in this, raising free goods and services with a value of over €1 million in 2017. Main donors of gifts in kind are Microsoft, Google Adwords, T-Mobile and Insights Benelux.

12 Income from lotteries

Income from lotteries consists of contributions from the Dutch National Postcode Lottery. Since 2009, War Child receives an annual unrestricted contribution and since 2014 we have received various contributions designated to specific projects.

Developments 2017

Income from lotteries has substantially increased in comparison with the previous year (148 per cent). The National Postcode Lottery contributes structurally to our organisation with an impressive €1.4 million. In addition, the National Postcode Lottery awarded the 'Dreamfund' to War Child for its Can’t wait to learn programme, which we started to implement in 2016. In 2017, War Child also received funding from the National Postcode Lottery for its TeamUp programme with refugees in the Netherlands. Thanks to these generous contributions War Child has been able to expand its programmes in 2017, resulting in a 41 per cent excess of its budget for income from lotteries.

13 Income from government 

Income from governments includes income from individual governments, as well as from governmental bodies and from organisations that receive the vast majority of their funding from governments. In cases where the back-donor is a government and War Child has a contract with equal conditions with another party, this income is categorized as income from governments.

Developments 2017

The income from governments is €13.0 million in 2017, which is 3 per cent above the income of 2016 (€12.5 million) and 11 per cent below the budget of the year. The Netherlands Government is our largest donor with a contribution in 2017 of as much as €4.4 million. War Child receives this mainly through the Dutch Relief Alliance for programmes in Syria, Iraq, South Sudan, Yemen, Afghanistan and Central African Republic. The United Nations and the European Commission continue to contribute to War Child's programmes in various countries through its subsidiaries and affiliates such as UNICEF, UNHCR, DG ECHO and Europe Aid. Global Affairs Canada (GAC) contributes to our educational programme in Colombia.

14 Income from other organisations

The income from other organisations includes income from foundations, educational institutions, religious institutions and associations. This is a mix of unrestricted as well as restricted funding.

Developments 2017

The income from foundations more than doubled compared with the previous year, and it was 26 per cent above budget 2017. The largest donor in this income category ois the IKEA Foundation, which is responsible for 68 per cent of income from other non-profit organisations. IKEA Foundation funds three of War Child’s projects in various countries: the Can’t wait to Learn programme in amongst others Sudan and Lebanon, the Time to be a Child project in Jordan and the Building Sustainable Futures project in South Sudan. These projects grew substantially compared with their sizes in 2016, which was planned due to delays in the implementation in 2016.

15 Project activities

Expenses towards project activities are costs related to the implementation of War Child’s projects. War Child's projects are amongst others in the field of psychosocial support, child protection, education, participation and advocacy. In its project countries, War Child implements its projects itself as well as by partner organisations. Costs of project activities include expenses such as staff costs, materials purchased, transport costs, office expenses and payments to local partners. Costs of the country offices are fully attributed towards project activities. Costs of the head office are attributed to project activities if the costs are directly related to implementing projects, which in most cases means that those expenses are funded by a grant. In addition, indirect head office support costs are allocated to project activities based on the estimated time spent by head office employees on project activities. The latter is further explained in notes on Support Costs.

Developments 2017

Total expenses on project activities are €29.6 million in 2017, or 37 per cent above 2016 and 6 per cent above budget. The growth compared with previous year is mainly related to new grants from the Netherlands government to the Dutch Relief Alliance, which allowed War Child to implement projects in Syria, Iraq, South Sudan, Yemen, Afghanistan and Central African Republic. The largest programme country is Lebanon with €6.5 million project expenses, which is an increase of 55 per cent compared with 2016.

Besides our programme in Lebanon and in the countries where Dutch Relief Alliance grants were awarded to us, we also grew in Uganda, which was necessary due to the influx in the North of refugees from South Sudan. The project activities expenses in Jordan were also higher than in the previous year, which was related to the expansion of various projects.

Negative variances between budget and actual expenses in 2017 can be explained by grants that were not awarded to War Child against expectations, or by delays in implementation of multi-annual projects. For some countries it is more difficult than expected to raise funding, such as in the Democratic Republic of Congo, Burundi, South Sudan and Sri Lanka. We will continue to try and raise funding for these programme countries in 2018 and fortunately we will be able to implement projects in these countries funded by our unrestricted income.

16 Preparation and coordination

Costs for preparation and coordination include for example costs for the evaluations of our programmes, security measures and security trainings, quality assurance and monitoring activities.

Developments 2017

The majority of direct costs for preparation and coordination originate in the International Programmes department of War Child. Total costs have increased year on year by 27 per cent and are 6 per cent above 2017 budget. The direct costs have more than doubled compared with 2016 because of War Child’s strategic focus on quality. Indirect head office support costs are allocated to 'Preparation and Coordination' based on the estimated time spent by all head office employees. Although direct preparation and coordination costs are relatively low (€0.2 million), the time spent on it is quite substantial, as indicated by the high allocation of support costs (€1.3 million). Head office employees of the International Programmes department spend most of their time on preparation and coordination activities. The mechanism of support cost allocation is further explained in the notes on Support Costs.

17 Awareness raising

Awareness raising includes the costs of raising awareness of people in general and of certain focus groups and networks in particular. Direct costs include those  costs related to lobbying, War Child's website, conferences, campaigns and the awareness raising component of events and actions.

Developments 2017

Awareness raising costs are 5 per cent under budget and 7 per cent under the costs in previous year. Costs of activities which have a mixed objective of fundraising and awareness raising are allocated to each of these cost categories based on the estimated weight of each of those two components, depending on the nature of the activity. For each mixed activity, the project leader provides a justified weight of each component. For example, the costs of the TV show and our door to door communication are split 50%-50% between fundraising and awareness raising. During those activities, new Friends are acquired and many individuals are being informed about the children affected by conflict.

The allocation percentages are consistently determined and applied in consecutive periods. War Child intends to apply percentages which are in line with those that are applied by similar organisations. The allocation percentages used by each organisation are however not always transparent. War Child would be in favour of more transparency and clearer guidelines on the subject.

Indirect head office support costs are allocated to 'Awareness raising' based on the estimated time spent by all head office employees. The latter is further explained in notes on Support Costs.

18 Fundraising

Costs of fundraising are incurred for activities which aim to persuade people, businesses and other organizations to become Friends of War Child, to donate money or to enter into grant contracts with War Child.

Developments 2017

Total fundraising costs divided by total fundraising income is 10 per cent. Raising funds is important to War Child, because without funding we cannot implement our activities. In 2017, total costs of fundraising increased with 15 per cent in comparison with previous year, and the costs remained 6 per cent below the budget of 2017. The year on year increase is related to the costs for setting up fundraising offices in new markets. War Child invested in the running costs of War Child Sweden, which is an independent foundation that raises funds in the Swedish market.

A large component of fundraising expenses is the support allocation. Indirect head office support costs are allocated to costs of fundraising based on the estimated time spent by all head office employees. The fundraising department is a relatively large department at War Child’s head office, hence the relatively high amount of support costs allocation. The latter is further explained in notes on Support Costs.

19 Management and administration

War Child strives to spend as much on its objective as possible and it is continuously pursuing cost savings opportunities. On the other hand, it realizes that lower management costs are not necessarily always desirable. If management and administration would not get proper attention, then the continuitity of the organisation could be at risk. Nonetheless, War Child aims to keep its percentage for management and administration low. In 2017 it reached 4.3 per cent, which is lower than in 2016 (5.0 per cent) despite necessary expenses for new systems. In the coming years War Child strives to further decrease this percentage, since operational excellence and efficiency are an important part of its strategic objectives. It is however difficult to compare the ratios of organisations that are active in very diverse contexts and types of activities. Some organisations are more complex to manage and administrate than others.

The absolute amount of costs for management and administration in 2017 (€1.7 million) increased by 11 per cent compared with the level of 2016 (€1.5 million) and was 4 per cent above the budget (€1.5 million). This is explained by the overall growth of the organisation with a 28 per cent of growth in total income compared with previous year. If management and administration were not properly invested in, then the continuitity of the organisation could be at risk.

Support costs

Support costs are those costs incurred in War Child’s head office in The Netherlands that are not directly attributed towards an expense category, such as project activities or fundraising. These include, for example, salaries, rental costs for the head office and ICT costs.

Developments 2017

Support costs increased in 2017 by €1.1 million to €6.6 million, which was 4 per cent above the budget for the year (€6.4 million). This increase can be explained by the increase of head office support personnel expenses by €0.6 million, which is related to the objective to improve quality of work, and by the increase of office costs by €0.5 million. The latter is related to two new ICT systems, of which one went live at the end of 2017 and the other will go live at the beginning of 2018.

Depreciation of head office assets is classified as support costs, whereas depreciation of assets used in War Child's programme countries is classified as project expenses.

Allocation of support costs

War Child’s support costs are allocated based on estimated time spent per head office employee on each of the expense categories. The allocation method for support costs is determined based on estimates provided by departmental managers. The allocation method is consistently applied. War Child has explicitly chosen not to implement a time-sheet system in its head office, since it is not a requirement in the accounting principles RJ650, and given that this is a large administrative burden which absorbs time away from supporting War Child's beneficiaries. War Child's allocation method is based on high-level estimates instead of on factual time spent on each project. This method complies with applicable regulations and guidelines. Only if and when employees' salaries are allocated to donor grants will employees registrate the actual time spent on those grants. Based on the estimated time spent by head office support employees, the total amount of support costs is allocated as follows:

Personnel costs

War Child’s total personnel expenses are specified below. The category other personnel expenses includes costs for amongst others commuting transport, for training, recruitment, canteen and team building.

20 Financial gain / (loss)

Developments 2017

War Child does not invest the funds it is trusted with by its donors. Interest income is related to interest received on War Child's bank accounts. The decrease in interest income compared with the previous year was caused by lower interest rates. As opposed to 2016, when there was an exchange rate gain of €0.1 million, the year 2017 saw an exchange rate loss of €0.2 million. This is mainly caused by exchange rate fluctuations of outstanding grant amounts in foreign currencies. War Child does not hedge this risk. The exchange rate differences do not impact on War Child's programming capacity as long as its expenses are in the same currency as the grant. Refer to the notes to the balance sheet for further details.

Attribution of expenses

The above clarification of the attribution of expenses towards expense categories is in accordance with Annex 3 of the accounting guideline RJ650. 

Where possible, expenses are directly attributed towards one or more of the above expense categories. Expenses that cannot directly  be attributed are allocated towards the categories on the basis as explained in the paragraph Support Costs.

Developments 2017

The table indicates an increase in a number of cost categories, which is related to the overall growth of our project activities. This is the case for contributions, which are sub-grants to implementing partners, as well as procurements and staff costs.

Appropriation of the Result

On April 20 2018, the Supervisory Board of Stichting War Child discussed the annual report and the financial statements 2017. In accordance with article 8.1.a of the articles of association of War Child, the Supervisory Board adopted the annual report and the annual accounts of War Child, including the proposed appropriation of the surplus. The members of the Supervisory Board as per 20 April 2018 are Peter Bakker (President), Willemijn Verloop (Vice-President), Rob Theunissen (Treasurer), Raymond Cloosterman, Edith Kroese and Arjan Hehenkamp.

The articles of association provide guidance about the appropriation of the surplus in stating that the foundation shall not keep more reserves than reasonably necessary for its continuity, as determined by the Managing Director. Art. 3.4: "De stichting houdt niet meer vermogen aan dan naar het oordeel van de directie redelijkerwijs nodig is om de continuïteit van haar werkzaamheden ten behoeve van haar doelstelling te waarborgen."

Events after the balance sheet date

No events have occurred between the balance sheet date and the date on which the Supervisory Board adopted the annual accounts, which would affect the 2017 annual accounts or the condition of War Child at the end of the financial year or thereafter.