At TCF, we firmly believe transparency is a key ingredient in maximising our impact because it strengthens relationships with supporters and leads to more opportunities for collaboration.
The Directors of The Citizens Foundation have the pleasure of submitting their Report with the Financial Statements of the Foundation for the year ended 30 June 2017.
The year 2016-17 proved to be one of the most challenging years for us on record. Our school network grew by 20%. Historically, it is the fastest we’ve ever grown in a single year. The Foundation’s total assets are on a good footing of Rs. 14,056 million (US $ 134.13 million) as of June 30, 2017, compared to Rs. 8,061 million (US $ 77.14 million) as of June 30, 2016. This major increase in our Balance Sheet is due to the treatment of contributed/donated lands at fair value as per the accounting standards for not-for-profit organizations issued by Institute of Chartered Accountants of Pakistan (ICAP), and approved by Securities and Exchange Commission of Pakistan (SECP). The impact of fair value measurement is Rs. 5,101 million (US $ 48.68 million).
The operating results of the Foundation for the year ended June 30, 2017 reflect a 25% increase in total operating expenses. The Education Programme expenses grew by 27%. 16% of this growth was mainly due to the annualised impact of our Government Schools Programme expenditure; the rest was because of salary increments and market adjustments given to the faculty staff. Reduction in the cost of books, copies, uniform and other supplies was achieved through the introduction of book banks and adjustable size uniforms. Strict cost control was applied in school repair and maintenance expenses.
The management maintained efficient control on Programme Administration expenses, which remained at 7% of total operating cost, reflecting an increase of only 4% as compared to 21% last year. We are committed to ensuring that overheads as a percentage of operating cost remain within the 10% threshold which the organization has voluntarily set for itself.
The donation income was increased by 193%. This was mainly due to the adoption of accounting standards for NPO issued by ICAP, which resulted in valuation of contributed / donated lands at fair value, affecting the growth by 178%. Further, the contributions received from the government and concessional tuition fees collected were also recorded as donation income. It accounted for a growth of 10%. Our school support donation recorded a growth of 5%. We slipped into single digit growth in support donations because of fewer funds received from our Global Chapters and international grantors.
TCF’s Zakat process (in terms of collection as well as utilisation of Zakat) continues to be reviewed by a Shariah Advisor periodically and we have been granted a renewal of our Shariah Compliance Certificate, included in this Annual Report on page 60.
TCF’s income is exempt from income tax under sub-clause (xxx) of clause (66) of Part I of the Second Schedule of the Income Tax Ordinance, 2001. All TCF donors can get tax deduction benefits for their donations as per prescribed limits stated in sub-clause (ia) of clause (61) of Part I of the Second Schedule of the Income Tax Ordinance, 2001, under which the organization has been listed.
Financial stability is important to us. TCF manages endowed funds to ensure that it can carry out its operations in the long term. During the year ended June 30, 2017, TCF’s Endowment Fund has witnessed a growth of 28% from Rs. 1,864.9 million (US $ 17.85 million) to Rs. 2,378.6 million (US $ 22.69 million). We are grateful to all the donors who contribute generously to this fund.
There is no significant change in TCF’s objectives and strategies from the previous year. This year, our adoption of Accounting Standards issued by ICAP for NPO have made impact on the financial position of the Foundation, due to fair valuation of donated lands which contributed an increase in Foundation’s assets by Rs. 5,995 million (US $ 57.20 million).
Statement on Corporate and Financial Reporting Framework
These financial statements, prepared by the management of the Foundation, present fairly its state of affairs, the result of its operations, cash flows and changes in funds and reserves.
Proper books of accounts of the Foundation have been maintained.
Appropriate accounting policies have been consistently applied in preparation of the Financial Statements and accounting estimates are based on reasonable and prudent judgment.
International Financial Reporting Standards (IFRS) and Accounting Standards for not for profit organizations (NPO) as applicable in Pakistan have been followed to prepare the Foundation’s Financial Statements. Approved accounting standards comprise of such International Accounting Standards as notified under provisions of the Repealed Companies Ordinance, 1984 and Accounting Standards for not-for-profit organization issued by ICAP. In case the requirements differ, the provisions of or directives issued under the Repealed Companies Ordinance, 1984
The internal control systems have been designed and implemented effectively. These systems are continuously monitored by Internal Audit and through other monitoring mechanisms. The process of monitoring internal controls will continue as an ongoing process, with the objective to further strengthen the controls and bring improvements to the system.
- There are no significant doubts upon the Foundation’s ability to continue as an ongoing concern.
- There has been no material departure from the best practices of corporate governance.
- Key operating and financial data for last six years in summarised form is included in this Annual Report on page 66.
- Message from the Chief Executive endorsed by Board of Directors is being shared on pages 28-30.
- Information about contingencies and commitments is given in the Notes to the Financial Statements.
- The number of management and faculty staff as at 30 June 2017 was 11,074 (2016: 8,869).
- During the year seven meetings of Board of Directors, four meetings of the Audit Committee and two meetings of the Resource Mobilisation Committee were held, whereas the members of the Human Resource and Remuneration Committee, Governance and Nomination Committee, Education Committee, Investment Committee and Technology Steering Committee convened once.
CEO‘s Performance Evaluation
During the year, the Human Resource & Remuneration (HR&R) Committee of the Board evaluated the performance of the CEO in line with the established performance based evaluation system.
The evaluation was reviewed against the following criteria:
- Policy and Strategy
- People Management
- Business Processes/Excellence
- Governance and Compliance
- Financial Performance
- Impact on Society
The above-stated evaluation criteria recommended by the Committee was approved prior by the Board of Directors.
Abstract under section 218 (1) of the REPEALED Companies Ordinance, 1984.
During the year ended 30 June 2017, the Board of Directors has revised the remuneration of Mr. Syed Asaad Ayub Ahmad, Chief Executive Officer from PKR. 803,500 to PKR. 851,710 per month effective 01 January 2017. There was no change in other terms and conditions of his appointment. By virtue of being the Chief Executive Officer, Mr. Syed Asaad Ayub Ahmad is deemed to be a Director of the Foundation and is considered as interested in the aforementioned revision of his terms of appointment.
Board of Directors
Election of Directors was held on April 13, 2016 and a twelve-member Board excluding the Chief Executive Officer was elected unopposed whose term of office will expire on 12 April 2019. No casual vacancy occurred on the board during the current year. Directors’ profiles are included in this Annual Report on pages 44-45.
Evaluation of the Board of Directors
The Board of Directors of ‘The Citizens Foundation’ are experienced and qualified professionals who bring a diverse range of professional and technical expertise to the organization. The members discuss strategic objectives, budgetary expenses and projected national and international macroeconomic indicators to ensure that the Foundation’s strategy stays aligned with the key macroeconomic indicators.
The Board of Directors provides oversight on the Foundation’s strategy and management effectiveness in order to ensure alignment with its core mission as well as its operating environment.
The Board also plays a critical role in ensuring the Foundation’s financial sustainability through its fundraising efforts as well as being a source of guidance and expertise for all functional leaders within the organization.
Related Party Information
All related party transactions during the year 2017 were placed before the Audit Committee and the Board for their review and approval. These transactions were duly approved. The related party transactions mainly comprised of:
a) Rs. 480.90 million (2016: 474.87 million) as Donation/Service received from the companies, in which Directors of the Foundation are also holding directorial positions.
b) Rs. 12.46 million (2016: 11.34 million) in respect of Donations from the Foundation’s Directors.
c) Rs. 37.73 million (2016: 26.42 million) paid as remuneration / compensation to key management personnel and Rs. 0.86 million (2016: 1.31 million) received in respect of donation to the Foundation from their personal income.
d) Rs. 1.84 million (2016: 0.79 million) paid as IT related services to the Multinet Pakistan (Private) Limited, in which Mr. Adnan Asdar, Director of Foundation is also a Director.
The Financial Statements of the Foundation have been approved and duly audited without qualification by the auditors of the Foundation KPMG Taseer Hadi & Co.; their report is attached with the financial statements on page 67.
Emphasis in Auditor’s Report
In the current year’s Auditor’s Report, auditors have drawn attention towards change in the accounting policy for donated / contributed lands based on section 8 of the new accounting standard for NPOs issued by Institute of Chartered Accountants of Pakistan (ICAP).
The audit firm has been given satisfactory rating under the Quality Control Review Programme of ICAP. It is fully compliant with the International Federation of Accountants’ guideline on codes of ethics, as adopted by ICAP.
The Audit Committee and the Board of Directors of the Foundation have endorsed their appointment for members’ consideration at the forthcoming Annual General Meeting.