ROYAL COLLEGE OF PAEDIATRICS AND CHILD HEALTH
COUNCIL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 AUGUST 2006
Charity No: 1057744
(1) ROYAL COLLEGE OF PAEDIATRICS AND CHILD HEALTH COUNCIL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 AUGUST 2006
Page Reference and Administrative Details
Report of Council
4 - 12
Independent Auditorsâ€™ Report
Statement of Financial Activities
Cash Flow Statement
Notes to the Financial Statements
17 - 30
(2) ROYAL COLLEGE OF PAEDIATRICS AND CHILD HEALTH REFERENCE AND ADMINISTRATIVE DETAILS FOR THE YEAR ENDED 31 AUGUST 2006 PRINCIPAL OFFICE
50 Hallam Street, London, W1W 6DE Telephone: 020 7307 5600 Website: www.rcpch.ac.uk
REGISTERED CHARITY NUMBER
COUNCIL Members of College Council are the Trustees of the College. Council comprises the following people as at 7 February 2007 (except for those marked with asterisks; Officer positions are those held as at 7 February 2007): The Senior Officers Dr Patricia Hamilton Professor Sir Alan Craft* Dr Hilary Cass+++ Dr Sheila Shribman** Dr Sue Hobbins Dr Alun Elias-Jones* Dr Mary McGraw Dr Chris Verity Professor Neil McIntosh Dr Simon Lenton
President President Registrar Registrar Honorary Treasurer Honorary Treasurer Vice President for Training and Assessment Vice President for Education Vice President for Science and Research Vice President for Health Services
National and Other Officers Professor Denis Gill Dr Adrian Margerison Dr Gwyneth Owen Dr Tom Lissauer Dr Stephen Greene+ Dr Peter Sullivan* Dr David Shortland+ Dr Ian Doughty+ Dr Claire Smith Dr Alastair Thomson Dr Rashmin Tamhne+ Dr Mark Everard*
Ireland Scotland Wales Examinations International (the David Baum Fellow) International (the David Baum Fellow) Workforce Planning Higher Specialist Training General Professional Training (the Donald Court Fellow) Continuing Professional Development Honorary Editor Honorary Editor
Other Members of Council Dr Jack Beattie Dr Ruth Charlton Dr Keith Dodd+++++ Dr Geoffrey Lawson Dr Donald MacGregor++++ Professor Richard Olver++ Dr Moira Stewart* Dr Helen Venning Dr Martha Wyles++
Dr Barbara Bell+ Dr John Cosgrove* Dr Iolo Doull Dr Natalie Lyth Dr Margaret Mearns* Dr Ruby Schwartz Dr Ian Swann Dr Russell Viner+
Dr Steve Bennett Britton++ Dr Greg Dilliway* Dr Andrew Evans Dr Peter MacFarlane Dr Ramesh Mehta Dr Robert Scott-Jupp++++ Dr Sepideh Taheri Dr Michael Webb+
Dr David Beverley Dr Paul Dimitri++ Dr Ben Ko* Dr Nick Mann Dr Richard Newton Dr Sian Snelling Dr Jane Tizard* Dr Edward Wozniak*
All of the people named above were members of Council throughout the period 1 September 2005 to 7 February 2007 unless denoted as follows: * for members who retired from Council in July 2006; ** for members who retired from Council on 30 November 2005 + for members elected to Council from 5 July 2006 ++ for members elected to Council from 2 November 2005 +++ for members elected to Council from 22 February 2006 ++++ for members elected to Council from 1 November 2006 +++++ for members elected to Council from 7 February 2007
(3) ROYAL COLLEGE OF PAEDIATRICS AND CHILD HEALTH REFERENCE AND ADMINISTRATIVE DETAILS (continued) FOR THE YEAR ENDED 31 AUGUST 2006 SENIOR STAFF as at 7 February 2007 Len Tyler David Ennis Jacqueline Fitzgerald Mike Poole
Chief Executive Director of Policy and Standards Director of Operations Director of Internal Services
Sargent & Co, Chartered Accountants & Registered Auditors, 194B Addington Road, Selsdon, South Croydon, Surrey CR2 8LD
Hempsons, 40 Villiers Street, London WC2N 6NJ
Lazard Asset Management Limited, 50 Stratton Street, London W1J 8LL
The Royal Bank of Scotland, London WC1V 6PQ
(4) ROYAL COLLEGE OF PAEDIATRICS AND CHILD HEALTH REPORT OF COUNCIL FOR THE YEAR ENDED 31 AUGUST 2006 The Council, members of which are the trustees of the charity, presents its annual report and the audited financial statements of the Royal College of Paediatrics and Child Health (“the College”) for the year ended 31 August 2006. Reference and administrative information set out on pages 2 and 3 forms part of this report. The trustees have adopted the provisions of the Statement of Recommended Practice (SORP) “Accounting and Reporting by Charities” issued in 2005 in preparing the annual report and financial statements of the College. STRUCTURE, GOVERNANCE AND MANAGEMENT The College is a registered charity and was incorporated by Royal Charter on 23 August 1996 when all of the assets and liabilities of the British Paediatric Association (founded in 1928) were transferred to the College. Its affairs are further managed and regulated in accordance with its Bye-Laws and Regulations. Council The governing body of the College is the elected Council which meets three times a year to control and manage all the affairs of the College in furtherance of its objects. In between meetings of the Council, management is carried out by its committees and in particular Executive Committee which meets between four and six times a year to ensure that activities are progressing and co-ordinated and to advise Council how to progress important matters. Council is constituted to number up to twenty officers plus thirty-one representatives. The names of Council members who served during the period are provided on page 2. The President, Registrar and Vice Presidents are elected by postal ballot of Ordinary Members and Fellows; National Officers are elected by postal ballot of Ordinary Members and Fellows in the relevant geographical region; Council elect all other officers including the Honorary Treasurer. Officers serve initially for a three year term which, except for the President, may be extended by a further two years by a decision of Council. Most representatives are elected by their appropriate constituency, serve initially for a three year term and can stand for re-election for a further two years. Council members take decisions in the best interests of the College as a whole. They are expected to be objective when decision-making and a register of interests is maintained in respect of each Council member. On appointment to office, Council members receive an induction pack of written information and induction training is arranged for them which currently comprises a half day meeting where they meet each other and certain Officers and staff who give presentations. Committees generally consist of a number of Council members plus members and others elected and coopted by the committee itself. All committee appointments have limits to continuous service, and as a minimum are ratified by Executive Committee and reported to Council. Council approves the five-year strategy, and each year revises the work plan and approves the annual budget. Once approved, the implementation of the work plan is delegated via Executive Committee to Officers and staff. Day-to-day budget management is delegated to staff. Review of Governance and Structure As reported last year, the College has been performing a review of its governance and structures for decision-making and management. Both Council and Executive Committee have had their roles clarified. Executive Committee’s role in ensuring co-ordinated delivery of activity has been emphasised as communicated to it by Council primarily via the College’s work plan. With effect from 1 September 2005 Executive Committee was significantly reduced in size and responsibility for management of the budget overall was explicitly moved to it from Finance Committee. Finance Committee’s terms of reference have been thoroughly reviewed during this reporting year and reflect the change in budget management responsibilities as well as emphasising the committee’s audit purpose and its role in reviewing governance and risk management matters. In keeping with the review of other committees’ terms of reference, Finance Committee now also formally includes relevant staff as full members of the committee.
(5) ROYAL COLLEGE OF PAEDIATRICS AND CHILD HEALTH REPORT OF COUNCIL FOR THE YEAR ENDED 31 AUGUST 2006 (continued) STRUCTURE, GOVERNANCE AND MANAGEMENT (continued) Review of Governance and Structure (continued) The terms of reference for top-level committees in Education, Training & Assessment, Research and Health Services will now be reviewed to establish a robust and coherent strategy for each committee that will inform the departmental and College work plans and support the effective delivery of the business of the College rather than implementing the new Boards for each of these areas previously reported as approved in principle by Council. Council also recognises the importance of “Policy” activities to be co-ordinated by the Registrar. A corresponding review of senior staffing structures, further emphasising delivery of planned activities, has resulted in the creation three “Director” posts and some reorganisation of management of functions, all with effect from September 2006. Council’s Responsibilities in Respect of the Financial Statements The law applicable to charities in England and Wales and the bye-laws of the College require the members of Council, who are also the charity trustees, to prepare financial statements for each financial year which give a true and fair view of the financial activities of the College during the year and of its financial position at the end of the year. In preparing those financial statements the Council is required to: • select suitable accounting policies and then apply them consistently; • make judgments and estimates that are reasonable and prudent; • state whether applicable accounting standards and statements of recommended practice have been followed, subject to any material departures disclosed and explained in the financial statements; and • prepare the financial statements on the going concern basis unless it is inappropriate to assume that the College will continue to operate. Council is responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the College and enable it to ensure that the financial statements comply with the Charities Act 1993. It is also responsible for safeguarding the assets of the College and hence for the prevention and detection of fraud and other irregularities and to provide reasonable assurance that: • the College is operating efficiently and effectively; • its assets are safeguarded against unauthorised use or disposition; • proper records are maintained and financial information used within the College or for publication is reliable; • the College complies with its Charter and relevant laws and regulations; and • the College has actively pursued all of its objectives and policies throughout the year. Risk Management Council has agreed processes by which it reviews, identifies and assesses major risks, ensuring that controls are put in place where necessary to mitigate those risks. Council has delegated responsibility for day-to-day considerations to a Risk Management Group (which mainly comprises the head of each department) and the Finance Committee of the College. The Risk Management Group meets at least twice a year to consider the major risk issues for the College. They are charged with implementing procedures for identifying and assessing risk, both for new ventures and for established activities, and to review control mechanisms. They are also responsible for presenting a Risk Management Summary to Council, which documents all relevant risk issues and recommendations for action and reports of actions already taken. Procedures are periodically reviewed to ensure that they continue to meet the needs of the College. One of the biggest risks which the College currently considers itself to be facing continues to be the consequences of the new consultant contract in the UK, as compounded by the introduction of the European Working Time Directive. Together they are expected to reduce the amount of time that members have available to contribute to College work and this impact is already becoming increasingly apparent. The College will continue to seek opportunities, primarily through the Academy of Medical Royal Colleges, to highlight the importance of people being released from their NHS duties to assist with College activities. Executive Committee will be monitoring this risk closely. The Risk Management Group has also alerted Council to the impact of potential adverse publicity arising from a number of situations including any criminal conviction for an offence involving children or a regulatory body’s investigation of a member’s clinical practice. The College’s Head of Media and Chief Executive will be working on a strategy to reduce any such impact.
(6) ROYAL COLLEGE OF PAEDIATRICS AND CHILD HEALTH REPORT OF COUNCIL FOR THE YEAR ENDED 31 AUGUST 2006 (continued) OBJECTIVES AND ACTIVITIES The primary purposes for which the College is established are its objects. These are stated in the Royal Charter and are as follows: -
to advance the art and science of paediatrics; to raise the standard of medical care provided to children; to educate and examine those concerned with the health of children; to advance the education of the public (and in particular medical practitioners) in child health which means the protection of children, the prevention of illness and disease in children and safeguarding their optimal development.
The College therefore aims to promote high quality, effective and efficient health services for children and young people, their parents and other carers, delivered by appropriately trained and experienced doctors. The College seeks to ensure that there is an evidence-base for such services’ effectiveness and efficiency and it works with all health carers of children to improve the overall physical, mental and emotional health of children and young people in the UK and elsewhere. Significant strategies adopted and activities undertaken in order to achieve these aims include the following: Education, Training and Examinations • Work with postgraduate deaneries and the Postgraduate Medical Education Board to ensure that high quality education is provided to trainees • Promotion of and support for life-long learning within the paediatric profession • Development of robust, quality-assured methods of assessment • Develop educationally sound, valid curricula for the postgraduate education of paediatricians • Maintenance of full and accurate training records for paediatric trainees • Develop distance learning programmes in paediatric sub-specialties • Organise, promote and evaluate high quality courses and seminars • Regular assessment of training posts in the UK and overseas where appropriate • Develop a co-ordinated programme of work to promote training and good practice in child protection Research • Promote clinical effectiveness through the development and implementation of evidence-based medicine including appraisal and development of guidelines • Monitor the overall effectiveness of services designed to improve child health • Maintain a research unit to identify priorities and opportunities for research, undertaking relevant research to enhance the evidence base for clinical practice • Continue to facilitate the epidemiological surveillance of rare conditions in children through the activities of the British and Irish Paediatric Surveillance Units • Continue to promote systematic reviews of evidence in support of clinical practice in paediatrics and child health and audit practice against evidence-based standards • Plan the paediatric workforce through regular censuses of paediatric staff and by maintaining information about children’s health services • Assess the impact of the Working Time Directive on services and advocate appropriate action Other Professional Activities and Standards • Develop a network of health services for children and young people that ensures appropriate local and regional provision of general and specialist services • Actively encourage managed clinical networks • To use the talents of members as one of the unique strengths of the College • Publish Archives of Disease in Childhood • Continue to provide information on the safe prescribing of medicines used in paediatric practice; and ensure that these medicines are developed and tested to the same standards as those for adults and receive appropriate licensing • When requested, assess the performance of individual practitioners, teams and clinical services against agreed standards of clinical performance.
(7) ROYAL COLLEGE OF PAEDIATRICS AND CHILD HEALTH REPORT OF COUNCIL FOR THE YEAR ENDED 31 AUGUST 2006 (continued) OBJECTIVES AND ACTIVITIES (continued) Other Professional Activities and Standards (continued) • Offer support and advice to individual paediatricians whose performance fails to meet appropriate standards • Advocate for the rights of children and young people in society and to promote their health and wellbeing • Advocate, on behalf of the profession, to strengthen the provision of health services for children • Access the views of children and promote their rights to information and participation in health care and research • Integrate, in association with other bodies, the opinions of children, parents and their representatives in improving child health services • Ensure that paediatricians are trained and have access to guidance that will allow them to be advocates for children • Support paediatricians involved in difficult or contentious areas of work such as child protection • Continue to promote the implementation of the United Nation’s Convention on the Rights of the Child throughout the College • Work with other medical and non medical groups, in partnership with families, to address the issues of the effect of poverty, child abuse and neglect and other disadvantages on children’s health and well being • Lobby for national policies to ameliorate the effects of poverty and other disadvantage on children’s health • Support effective interventions which promote the health of children including guidance on diet and exercise, sex education and accident prevention • To forge links with others working in international paediatrics and child health • To facilitate opportunities for those who wish to train and work overseas • To enable overseas doctors to train and work in the United Kingdom • To advocate the rights and health need of children internationally • To be an authoritative source of advice on international child health issues. • Promote the Aims and Objectives of the David Baum International Foundation. • Develop the ongoing Overseas Linkages Programme initiatives (e.g. Malawi, South Africa, Pakistan, India, Kosovo) • To play an active role within the European Union in standard setting • Build relations with specific institutions overseas through memorandums of understanding • Continue to develop information technology to improve communications between College staff, officers, membership and the wider public • Actively develop College staff through effective appraisal and training and ensure that all staff are given the opportunity to understand and to contribute to the College’s strategic vision Volunteers The College is reliant on a considerable number of people to achieve its objectives and it is grateful and indebted to the many volunteers who serve in many capacities (for example on committees and working parties, as examiners, tutors, regional advisers) who provide many hours work for the charitable objects of the College without remuneration. The freely given support of many universities, NHS Trusts and similar organisations is also invaluable.
(8) ROYAL COLLEGE OF PAEDIATRICS AND CHILD HEALTH REPORT OF COUNCIL FOR THE YEAR ENDED 31 AUGUST 2006 (continued) ACHIEVEMENTS AND PERFORMANCE Education, Training and Examinations • Successful delivery of interim visits on behalf of PMETB • delivery to PMETB of accurate listing of all approved UK paediatric SHO posts • Training resumed for West Bank paediatricians and first phase of pilot completed through the David Baum International Foundation • Progressed the development of the Child in Mind training programme of self-directed learning in child mental health, the Everley Jones designated fund to ensure completion of stages 1 to 3 in 2006 (and design of implementation programme in early 2007) • Launched the first phase of the Child Protection Training Project in January 2006. This delivers training to SHOs. It is predominantly funded by the Department of Health with a significant contribution also from the NSPCC to help with the reproduction and dissemination of educational material. Materials for training SpRs and Career Grade Paediatricians are currently planned to be completed by December 2007, using funding provided by Johnson and Johnson Pediatric Institute • Final WellChild Research Fellowship of current series completed • Progressed the Paediatric Nurse Mentoring programme in Cape Town, South Africa • Diploma in Paediatric Nutrition course run for the third and fourth times at the University of Southampton. Council in November 2005 and July 2006 approved in principle the external validation of the Diploma by the University • Launched new format of Diploma in Child Health. This examination now better tests competences of those in primary care child health and is a more defensible format. • Developed TAP analysis and pre-result monitoring meetings for quality assuring written examinations • Largest ever number of candidates examined during this period • Progressed the expansion of MRCPCH internationally Spring Meeting • The Spring Meeting continues as the College’s biggest activity for the education of medical practitioners in child health and is the focus of the College’s contribution to continuing professional development and to disseminating research findings. It has significant income and expenditure and a break-even financial target. Numbers attending were down in 2006 compared to 2005, possibly reflecting the fact that the meeting coincided with school half-term. As well as the continuous review and development of the programme, chiefly by Academic Board, technical developments are under discussion for on-line registration to be managed in-house in future. Research • First year completed of a two year national audit of neonatal intensive care, funded by the Healthcare Commission • Successful application for research funding from the DfES for a project on parents information needs when health professionals suspect abuse Other Professional Activities and Standards • With joint venture partners, published the first British National Formulary for Children (BNF-C) in September 2005 and the second edition in July 2006. Over 200,000 copies supplied to doctors and GP practices in the four countries of the UK, thanks to support from their Departments of Health. Website (www.bnfc.org) also launched, offering free access to BNFC data • Child Protection Companion completed and published • Second course for Iraqi paediatricians run in Amman in December 2005; assisted by £15,000 of funding from the British Council • Review of College governance structures progressed. Executive Committee reformed in September 2005, staff restructuring with effect from September 2006 • More frequent meetings with Ministers at Westminster, Cardiff and Edinburgh • Membership increased to 8,946 at 31 August 2006 (from 8,479 at 31 August 2005) • Responses to consultations by Government departments and other national organisations • Policy conference in March 2006 “Transforming Training – Transforming Service” More information on the services and achievements of the College are included in the Annual Report 20062007 that is due to be published in March 2007 and sent to all members and supporters of the College. Further copies are available by contacting the College office.
(9) ROYAL COLLEGE OF PAEDIATRICS AND CHILD HEALTH REPORT OF COUNCIL FOR THE YEAR ENDED 31 AUGUST 2006 (continued) FINANCIAL REVIEW The Statement of Financial Activities for the year is set out on page 14 of the financial statements; the overall net movement in funds is £1,210,795 (2005 - £1,634,553). Excluding gains (mainly re investments) the net incoming resources is £800,712 (2005 - £1,042,085), a decrease of £241,373. Incoming resources, at £8,283,530, are £449,060 (5.7%) higher than the previous year; this comprises an increase of £1,141,943 in incoming resources for unrestricted funds and a £692,883 decrease in incoming resources for restricted funds. Within Publications income the successful launch of the British National Formulary for Children (BNF-C) is the reason for £548,896 of the increase in incoming resources for unrestricted funds. The first edition was published in September 2005 and a second edition was then published, as originally scheduled, in July 2006. It should be noted, however, that in future only one edition per year is anticipated, so this level of income is not expected to recur. This activity is accounted for through the College’s associated undertaking RCPCH Publications Limited which is equally owned by the College and the Neonatal Paediatric Pharmacists Group (NPPG). The successful launch is also the reason why the “Interest in Associated Undertaking” increases net incoming resources by £98,049 in the current year, reversing the reduction by the same amount in the previous year when costs of development were being incurred. Further details are given in note 17 on pages 26 and 27. Note 17 also details performance of the College’s wholly-owned subsidiary undertaking, British Paediatric Services Limited (BPSL). Its net profit is donated to the College as a gift aid payment and has decreased slightly from £142,168 to £133,503. Publications income also includes £333,358 (2005 - £260,029) in respect of the surplus due to the College from the joint venture to publish Archives of Disease in Childhood. Most members receive this important and respected College publication as part of their membership and full access to the Archives of Disease in Childhood website is given without charge to anyone with access to the internet living in lower-income countries (as defined by the HINARI). Whilst the continuing rise of electronic publishing generally is seen as a threat to this income, the College and our partner in this activity, BMJ Publishing Limited, are continuing to develop the journal so as to minimise any impact. In this vein the recently introduced issues of “Education and Practice” are set to increase from four editions per year currently to six editions from 2007. Membership subscription income has increased by £212,985 (9.8%) reflecting the real growth in membership (by 5.5% from 8,479 to 8,946) and a 2% increase is subscription rates on 1 January 2006 for those resident in UK, Ireland the rest of the European Union and North America. Recognising that members elsewhere are often in resource-poor countries, Council agreed that no increase would be levied for them, meaning that for over 1,100 members their 2006 membership subscription remained at 2005 levels. Unrestricted voluntary income includes a one-off donation of £150,000 that has been designated to create the Paul Polani fund which it is intended shall be used to encourage work in neuro-disability, as shown in note 13 on pages 24 and 25. Elsewhere, the continued expansion and development across most of the College’s activities has not necessarily been matched by increasing the incoming resources for unrestricted funds. This is generally as budgeted given the levels of net incoming resources anticipated. It is worth noting in this regard that income from examinations has only increased marginally (by £15,002) whereas running and development costs have been allowed to increase significantly (by £218,043). The unexpectedly low attendance at the 2006 Spring Meeting accounts for the £90,525 reduction in income from £523,941 to £433,416; this is mitigated to some degree by the £49,352 reduction in costs (from £537,173 to £487,821).
(10) ROYAL COLLEGE OF PAEDIATRICS AND CHILD HEALTH REPORT OF COUNCIL FOR THE YEAR ENDED 31 AUGUST 2006 (continued) FINANCIAL REVIEW (continued) Restricted income has fallen from £1,367,364 to £674,481. The College was particularly successful in the previous year at attracting grant funding and this has not been repeated, such income having reduced to £520,477 (2005 - £1,129,873). Part of the apparent reduction is explained by Research income for the Neonatal Audit work amounting to £186,699 (2005 - £Nil) being unrestricted income. As detailed in note 11 on page 24 over 92% of grant income emanates from the Department of Health or similar sources. Much of the grant funding for research and training projects has been accounted for in advance and restricted funds include £519,340 (2005- £843,440) for the related expenditure that will be incurred in future years. The College’s current lower-key fund-raising strategy, which includes directly employing someone who provides part-time fund-raising support to co-ordinate fund-raising activity, continues. The fund-raising strategy envisages employing high-level support only when a project requiring substantial sums is identified, such as for the purchase of a new building. Total resources expended has increased by £886,531 from £6,694,336 to £7,580,867. The increase reflects a significant expansion across all of the College’s work and particularly in Training, Research and Other Professional Activities (principally initiatives surrounding childrens’ participation and child protection). These are listed above as part of “Achievements and Performance”. The increase in expenditure has been kept to a minimum again by continuing to carefully monitor and control costs. The College has again applied its own funds, primarily the Everley Jones fund, towards Education, Training and Research initiatives which are unable to attract such external funding. The balance on the Everley Jones fund at 31 August 2006 is £870,204 of which over £200,000 has been committed to underwrite and ensure such Education, Training and Research initiatives go-ahead. Investment Policy and Objectives The Bye-laws of the College give Council the power to employ a suitably qualified professional investment manager. The monitoring of investment performance is delegated to Finance Committee and the performance itself is reported to each meeting of Council and Executive Committee. The College approved its current “instruction to investment brokers” in July 2001 which states that “Direct investment in firms which are known to manufacture firearms, tobacco, infant milk formulae are not permitted”, that “Pharmaceutical companies are not considered ethically inappropriate but investment in such companies could put the College in a difficult position” and “One possible way forward for the College would be to invest in a unit trust so that there is no direct link between the College and investment decisions. If such a trust has a policy that does not allow investment in tobacco, possibly firearms (but in particular land mines) and possibly infant milk formulae, then such investment could be considered”. Lazard Asset Management were appointed as investment manager in October 2001 and actively started investing one year later. The investment manager has a proven investment performance history and offers the benefit of diversification way beyond that which the College alone could achieve. Together with its investment manager, the College has calculated that sums in excess of £3million, which are unlikely to be required within 3 years, can be invested by the investment manager. An overall return that at least meets the Bank of England base interest rate is currently considered a sufficient target. During the year the investment manager managed and advised on further investment in the Lazard Diversified Charity Fund and initial, relatively small, investment into the Lazard Emerging Markets Growth Fund and the Sterling High Quality Bond Fund. Details of all investments are given in note 2 and note 8. The investments with the investment manager achieved a return of 12.1% (2005 – 19.5%) which included the gains amounting to £399,943 (2005 - £592,468). This would appear to be a good result given the cautious investment strategy which is appreciative of the uncertainty inherent in the stock market and the uncertainty as to the extent to which funds would be required in the short term, primarily to purchase new premises to accommodate growth in activity and staff numbers. The College has therefore continued to hold a significant proportion of its investments as deposits with the College’s bankers and the average return on these investments was 4.4% (2005– 4.6%). The Bank of England base rate for the year averaged 4.5% (2005 4.7%)
(11) ROYAL COLLEGE OF PAEDIATRICS AND CHILD HEALTH REPORT OF COUNCIL FOR THE YEAR ENDED 31 AUGUST 2006 (continued) FINANCIAL REVIEW (continued) Infrastructure The College’s freehold premises have previously been recognised as being too small to meet the demands placed on it as the amount of work done by the College increases, particularly in respect of examinations and education. A significant amount of additional office space nearby therefore continues to be rented until suitable larger premises are identified and acquired. The continuing expansion of staff numbers has led to the rental of further additional space with effect from September 2006. The College’s rented offices in Cardiff and Edinburgh continue to be larger than when they were first established. In the meantime, maintenance of the freehold building continues at a significant level, which is why no depreciation is charged. Reserves Policy The College reviews its level of reserves to determine what is required to permit a responsible reaction to uncertainties. The requirement continues to be the equivalent of one year’s expenditure held in non-capital funds not otherwise committed or designated, namely the College’s General Fund. The current level of reserves required is therefore in excess of £7million. In addition, it is currently estimated that a further £9million will be required to enable the College to acquire the type of premises it considers appropriate for the long-term. The required target total annual increase in reserves of £250,000 remains unaltered and the College intends to designate any funds in excess of reserves required into a new fund for the purpose of acquiring new premises. The reserves position and policy will continue to be reviewed on an annual basis. The College’s balance sheet remains robust and has been further strengthened by this year’s result. The increase in general funds of £1,540,241 is substantial and general funds at 31 August 2006 stand at £7,340,737. PLANS FOR FUTURE PERIODS The College’s Work Plan to 31 August 2007 includes the following: Education, Training and Examinations • Produce a strategy for CPD courses targeted at career grade paediatricians • Progress the Child in Mind project, part-funded by the College’s Everley Jones fund • Production of an outline programme for “Educating paediatricians – the next generation” • Progress the Child Protection Training project aimed at SpRs and career grade paediatricians • Progress the development of the assessment of competencies • Develop and publish “post-core” competencies • Investigate running the examination in other countries • Evidence-based medicines course for paediatricians in India (David Baum International Foundation funded) • Developing post-graduate training in adolescent health medicine Spring Meeting • Development of measures of the quality of the Spring Meeting Research • Research that increasingly underpins policy • Continue guideline appraisal in general; publish guidelines for interpreting physical signs of child sexual abuse (funded by the College’s Everley Jones fund) • Preparation for revalidation • Consideration of parents’ information needs, particularly in respect of medicines • Workforce – proposed report “Paediatrics in 2012” • Progress the national neonatal intensive care audit programme Other Professional Activities and Standards • Develop the College’s links and influence with opinion-formers for child health • Continued growth in membership • Develop the roles of Associate Overseas Directors • Further support and training for paediatricians in Iraq • Infrastructure: meeting both the short-term and longer-term premises requirements and investment in IT (including significant development of the College’s website)
(12) ROYAL COLLEGE OF PAEDIATRICS AND CHILD HEALTH REPORT OF COUNCIL FOR THE YEAR ENDED 31 AUGUST 2006 (continued) EMPLOYEE INVOLVEMENT AND EQUAL OPPORTUNITIES Employees have been consulted on issues of concern to them by means of regular consultative committee, health & safety committee and staff meetings and have been kept informed on specific matters directly by each Head of Department. The College has an equal opportunities policy which applies to staff, Officers, committee members, members, examination candidates and all College programmes of work. Full details of this policy are available from the College office. In accordance with its equal opportunities policy, the College has clarified fair employment practices in the recruitment, selection, retention and training of disabled staff.
AUDITORS A resolution proposing that Kingston Smith LLP be appointed as the next auditors of the College will be put to the Annual General Meeting. This is a recommendation of Finance Committee and Council following a formal tendering exercise in August 2006. The College wishes to record its thanks to Sargent & Co for over ten years of excellent service.
This report was approved by Council on 7 February 2007 and signed on its behalf.
Dr P Hamilton President
Dr S M Hobbins Honorary Treasurer
(13) ROYAL COLLEGE OF PAEDIATRICS AND CHILD HEALTH AUDITORS’ REPORT TO THE MEMBERS OF COUNCIL OF THE ROYAL COLLEGE OF PAEDIATRICS AND CHILD HEALTH We have audited the financial statements of The Royal College of Paediatrics and Child Health for the year ended 31 August 2006 which comprise the Statement of Financial Activities, the Balance Sheet, the Cash Flow Statement and the related notes. These Financial Statements have been prepared under the accounting policies set out therein. This report is made solely to the charity’s trustees, as a body, in accordance with Regulations made under the Charities Act 1993. Our work has been undertaken so that we might state to the charity’s trustees those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the charity and the charity’s trustees as a body, for our audit work, for this report, or for the opinions we have formed. RESPECTIVE RESPONSIBILITIES OF TRUSTEES AND AUDITORS As described in the Statement of Council’s Responsibilities, the trustees are responsible for the preparation of the Report of Council and the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). We have been appointed as auditors under Section 43 of the Charities Act 1993 and report in accordance with Regulations made under Section 44 of that Act. Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Charities Act 1993. We also report to you if, in our opinion, the Report of Council is consistent with the financial statements, if the charity has not kept proper accounting records or if we have not received all the information and explanations we require for our audit. We read the Report of Council and consider the implications for our report if we become aware of any apparent misstatements within it. BASIS OF AUDIT OPINION We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of significant estimates and judgements made by the trustees in the preparation of the financial statements, and of whether the accounting policies are appropriate to the charity’s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. OPINION In our opinion the financial statements: • give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, of the state of the group and charity’s affairs as at 31 August 2006 and of the group’s incoming resources and application of resources in the year then ended; and • have been properly prepared in accordance with the Charities Act 1993. In our opinion the information given in the Report of Council is consistent with the financial statements. Sargent & Co Chartered Accountants & Registered Auditors 194B Addington Road Selsdon South Croydon Surrey CR2 8LD
7 February 2007
(14) ROYAL COLLEGE OF PAEDIATRICS AND CHILD HEALTH CONSOLIDATED STATEMENT OF FINANCIAL ACTIVITIES FOR THE YEAR ENDED 31 AUGUST 2006
Notes Unrestricted Funds £
Restricted Funds £
Endowment Funds £
2006 Total £
2005 Total £
Incoming Resources from Generated Funds Voluntary income Activities for generating funds Investment income 2 Incoming Resources from Charitable Activities Examinations Spring Meeting Education 11 Training 11 Research 11 Members subscriptions Publications Other income
164,617 165,347 395,660
262,338 165,347 417,469
194,522 166,511 378,409
2,527,769 432,916 74,055 49,066 186,699 2,396,048 896,401 320,471
500 79,984 247,342 227,125 -
2,527,769 433,416 154,039 296,408 413,824 2,396,048 896,401 320,471
2,512,767 523,941 373,617 424,642 494,867 2,183,063 293,009 289,122
TOTAL INCOMING RESOURCES
1,923,486 487,321 335,871 91,293 641,256 2,429,154 45,196
500 307,179 783,544 379,420 85,247 -
1,923,486 487,821 643,050 874,837 1,020,676 2,514,401 45,196
1,705,443 537,173 633,412 754,904 855,440 2,097,318 43,857
RESOURCES EXPENDED Costs of Generating Funds Costs of generating voluntary income Fundraising Trading: Cost of goods sold and other costs Charitable activities Examinations Spring Meeting Education Training Research Other professional activities & standards Governance costs TOTAL RESOURCES EXPENDED
NET INCOMING / (OUTGOING) RESOURCES BEFORE INTEREST IN ASSOCIATE AND TRANSFERS 6 1,584,072 Interest in result of Associated Undertaking
Transfer between Funds
NET INCOMING RESOURCES BEFORE OTHER RECOGNISEDGAINS AND LOSSES Gains on revaluation of fixed assets Gains and losses on investment assets
1,190,993 10,140 399,943
NET MOVEMENT IN FUNDS
Fund balances brought forward
TOTAL FUNDS CARRIED FORWARD
£14,855 £12,147,970 £10,937,175
There were no recognised gains and losses for the period other than those included in the Statement of Financial Activities. The notes on pages 17 to 30 form part of these financial statements.
(15) ROYAL COLLEGE OF PAEDIATRICS AND CHILD HEALTH BALANCE SHEETS AS AT 31 AUGUST 2006 Notes FIXED ASSETS
Group 2005 2006 £ £
College 2006 2005 £ £
CURRENT ASSETS Stock of Publications and Merchandise Debtors
Cash at bank and in hand CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
10 (1,918,203) (2,148,266) (1,896,445) (2,123,019)
NET CURRENT ASSETS
TOTAL ASSETS LESS CURRENT LIABILITIES
CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
16 £12,147,970 £10,937,175 £12,147,966 £11,035,220
REPRESENTED BY Unrestricted Funds Designated Funds
Charitable Trading Subsidiary Fund
Charitable Trading Associate Fund
Total Unrestricted Funds
TOTAL FUNDS OF THE COLLEGE
£12,147,970 £10,937,175 £12,147,966 £11,035,220
The financial statements were approved by the Council on 7 February 2007 and signed on their behalf.
………………………………………. Dr P Hamilton President
………………………………………. Dr S M Hobbins Honorary Treasurer
The notes on pages 17 to 30 form part of these financial statements.
(16) ROYAL COLLEGE OF PAEDIATRICS AND CHILD HEALTH CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 AUGUST 2006
Notes Reconciliation of Changes in Resources to Net Cash Inflow From Operating Activities Net incoming resources Depreciation (Increase) / Decrease in stocks of good for resale
(Increase) in debtors
(Decrease) / Increase in creditors
Investment income received
Net cash (outflow) / inflow from operating activities
CONSOLIDATED CASH FLOW STATEMENT Net cash (outflow) / inflow from operating activities Returns on investment and servicing of finance
Management of liquid resources
(DECREASE) / INCREASE IN CASH
383,515 (589,324) 4,000,000
Reconciliation of Net Cash Flow to Movement In Net Funds (Decrease) / Increase in cash Cash used to decrease liquid resources
Movement in net funds in the year
Net funds at 1 September Net funds at 31 August
The notes on pages 17 to 30 form part of these financial statements.
(17) ROYAL COLLEGE OF PAEDIATRICS AND CHILD HEALTH NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 AUGUST 2006 1.
ACCOUNTING POLICIES 1.1 Basis of Preparation The financial statements are prepared in accordance with the Statement of Recommended Practice (SORP) “Accounting and Reporting by Charities” issued in March 2005 and in accordance with applicable accounting standards and the Charities Act 1993. The financial statements are prepared under the historical cost convention except that investments held as fixed assets are carried at market value. 1.2 Consolidation The statement of financial activities (SOFA) and balance sheet consolidate the financial statements of the College and its related undertakings British Paediatric Services Limited and RCPCH Publications Limited; details of the relationship are given in notes 8 and 17. The results are consolidated on a “line-by-line basis” for a subsidiary undertaking and on a “one-line basis” (of net results or share of net assets) for an associated undertaking. No separate SOFA or cash flow statement has been presented for the College alone as permitted by paragraph 397 of the SORP. 1.3 Funds Unrestricted funds relate to the income which is available to meet the general objectives of the College. Unrestricted general funds are unrestricted funds which have not been designated for particular purposes and which are available for use at the discretion of Council in furtherance of the general objects of the College. Designated funds comprise unrestricted funds that have been set aside by Council for specific future purposes or projects. Restricted funds are funds which are to be used in accordance with specific restrictions imposed by donors or which have been raised by the College for particular purposes. Endowment funds are monies which have been given to the College in trust with the restriction that they are held as capital with the income generated from them to be used for specific awards. Further explanation of the nature and purpose of each fund is included in the relevant notes to the financial statements Investment income and gains are allocated where appropriate to the relevant fund. 1.4 Incoming Resources Incoming resources are included in the SOFA on a receivable basis which means when the College is entitled to the income and the amount can be quantified sufficiently reliably and with virtual certainty. Legacies are included upon notification provided these criteria are met. Income from donations and grants, including capital grants, is therefore included in incoming resources when receivable, except as follows: - when donors specify that donations and grants given to the College must be used in future accounting periods, the income is deferred until those periods. - when donors impose conditions which have to be fulfilled before the College becomes entitled to use such income, the income is deferred and not included in incoming resources until the pre-conditions for use have been met. When donors specify that donations and grants, including capital grants, are for particular restricted purposes, which do not amount to pre-conditions regarding entitlement, this income is included in incoming resources of restricted funds when receivable.
(18) ROYAL COLLEGE OF PAEDIATRICS AND CHILD HEALTH NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 AUGUST 2006 (continued) 1.
ACCOUNTING POLICIES (continued) 1.4 Incoming Resources (continued) Members subscriptions are due on 1 January each year for existing members and on date of admission for new members; income is accounted for on an accruals basis over the calendar year to which they relate. Investment income is recognised when due except for dividends which are accounted for on receipt. No amounts are included in the financial statements for services donated by volunteers. 1.5 Resources Expended All expenditure is accounted for on an accruals basis and has been classified under headings that aggregate all costs related to the category. Where costs cannot be directly attributed to particular headings they have been allocated to activities on a basis consistent with use of the resources. Note 3 to these financial statements details the method of allocation of such costs. Costs of generating voluntary income are those incurred in seeking voluntary contributions and do not include the costs of disseminating information in support of the charitable activities. Governance costs include the costs associated with the meetings of the Council, Executive Committee and Finance Committee and those incurred in connection with the statutory external audit. 1.6 Tangible Fixed Assets Depreciation Tangible Fixed Assets are stated at cost or valuation to the Royal College of Paediatrics and Child Health (or the original cost to the British Paediatric Association in connection with assets transferred on 23 August 1996) less accumulated depreciation. Depreciation is provided at rates calculated to write off the cost of fixed assets, less their estimated residual value, over their expected useful lives on the following bases: Office Equipment Fixtures and Fittings Database Hardware and Software Other Computer Hardware and Software
Five years straight line basis Ten years straight line basis Five years straight line basis Three years straight line basis
No depreciation will be charged on the freehold property as it is intended that maintenance will be carried out to maintain it at a level which is at least commensurate with its original cost. Equipment costing less than £3,500 (including VAT) is charged to expenditure and is not capitalised. 1.7 Fixed Asset Investments Fixed asset investments are included in the balance sheet at their market value at the balance sheet date. It is the College’s policy to keep valuations up-to-date such that when investments are sold there is no gain or loss arising relating to previous years. As a result the SOFA does not distinguish between the valuation adjustments relating to sales and those related to continued holdings as they are together treated as changes in the investment portfolio throughout the year. 1.8 Stock of Publications and Merchandise Stock of publications and merchandise is stated at the lower of cost and realisable value, on a first in first out basis, after making due allowance for obsolete and slow moving stocks. 1.9 Pensions The College operates a scheme to contribute a defined amount to individual employees’ pension schemes and the pension charge represents the amounts payable by the College to the various schemes in respect of the year.
(19) ROYAL COLLEGE OF PAEDIATRICS AND CHILD HEALTH NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 AUGUST 2006 (continued) 1.
ACCOUNTING POLICIES (continued) 1.9 Pensions (continued) For a few employees the College also participates in the Universities Superannuation Scheme (USS), a defined benefit scheme which is externally funded and contracted out of the State Second Pension (S2P). The assets of the scheme are held in a separate trustee-administered fund. The College is unable to identify its share of the underlying assets and liabilities of the scheme on a consistent and reasonable basis and therefore, as required by FRS 17 “Retirement benefits”, accounts for the scheme as if it were a defined contribution scheme. As a result, the amount charged to expenditure represents the contributions payable to the scheme in respect of the accounting period. 1.10 Operating Leases Rentals applicable to operating leases where substantially all the benefits and risks of ownership remain with the lessor are included in the Statement of Financial Activities on a straight line basis. 1.11 Taxation The College, but not its trading subsidiaries, by virtue of its charitable status, is exempt from Corporation Tax on any surplus of income over expenditure. Value Added Tax (VAT) charged to the College may be fully recoverable, partly recoverable or totally irrecoverable. In accordance with principles laid down by HM Revenue & Customs, all VAT which is only partly recoverable or is totally irrecoverable is included within the different types of expenditure in the Statement of Financial Activities and the proportion which is recoverable is included in other income.
INVESTMENT INCOME Unrestricted Funds
Funds held by investment managers: Dividends from quoted investments Interest
Funds managed by the College Interest
Other Direct Costs £
Other Allocated Costs £
2006 Total £
2005 Total £
TOTAL RESOURCES EXPENDED Staff Costs £ Costs of generating voluntary income
Other professional activities & standards 1,015,971 1,148,855
Fundraising trading: cost of goods sold and other costs Examinations Spring Meeting
Governance costs Total Resources Expended
2,960,766 3,537,562 1,082,539 7,580,867
(20) ROYAL COLLEGE OF PAEDIATRICS AND CHILD HEALTH NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 AUGUST 2006 (continued) 3.
TOTAL RESOURCES EXPENDED (continued) Other allocated costs can be further analysed by activity as follows Human Information Finance Premises & Facilities Resources Technology £ £ £ £ Costs of generating voluntary income
Other professional activities and standards 150,091
Fundraising trading: cost of goods sold and other costs Examinations
Governance costs Total Allocated costs
All allocated costs have been allocated on the basis of the headcount except £57,795 of the Information Technology cost which has been directly attributed. 4.
Employers Social Security Costs
Employers Pension Costs
Number 98 91
Number 80 75
19 2 4 13 12 24 17
16 2 3 10 11 19 14
STAFF COSTS The staff costs were:Wages and Salaries
The average number of employees employed by the College: Calculated on a full-time equivalent basis: Full-time equivalent, analysed by activity: Examinations Spring Meeting Education Training Research Other professional activities and standards Facilities, HR, Information Technology & Finance
The number of employees whose total emoluments for the year, as defined for taxation purposes, exceeded £60,000 were: £60,001 - £70,000 1 1 £70,001 - £80,000 1 Related contributions were made to pension schemes (see note 20) amounting to £16,783 (2005 £10,678) The relevant staff costs have been included in the costs of generating voluntary income and in the costs of charitable activities.
(21) ROYAL COLLEGE OF PAEDIATRICS AND CHILD HEALTH NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 AUGUST 2006 (continued) 4.
STAFF COSTS (continued) Staff costs can be further analysed by activity as follows Premises Human Information Finance Directly Attributable & Facilities Resources Technology £ £ £ £ £ Costs of generating voluntary income
Other professional activities and standards 816,024
Fundraising trading: cost of goods sold and other costs Examinations Spring Meeting
Governance costs Total Resources Expended
All allocated staff costs have been allocated on the basis of the headcount except £34,179 of the Information Technology cost which has been directly attributed.
COUNCIL MEMBERS’ (TRUSTEES’) REMUNERATION The trustees neither received nor waived any emoluments during the year (2005 - None). During the year the College has met expenses incurred by 43 (2005 - 45) Members of Council amounting to £85,956 (2005 - £80,115) in respect of travel, subsistence and overnight accommodation, solely necessary for attendance at meetings. Professional indemnity insurance has been in place throughout the year at a cost of £8,503 (2005 – net cost of £6,256) and includes indemnity cover for Members of Council as well as professional indemnity cover for other areas of the College’s work.
NET INCOMING RESOURCES
The net incoming resources is stated after charging:Depreciation of tangible fixed assets owned by the charity Auditors’ remuneration Audit fee Accountancy, taxation and other services Operating lease rentals - land & buildings - other
(22) ROYAL COLLEGE OF PAEDIATRICS AND CHILD HEALTH NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 AUGUST 2006 (continued) 7.
TANGIBLE FIXED ASSETS Group and College Fixtures, Office Equipment and IT £
Freehold Property £
Written back on Disposals
Cost/Valuation At 1 September 2005 Revaluation Additions Disposals At 31 August 2006
Depreciation At 1 September 2005
At 31 August 2006
At 1 September 2005
At 31 August 2006 Net Book Value
All fixed assets are held mainly for direct charitable use. Fixtures, Office Equipment and IT includes silverware and regalia and similar donated assets which have been valued for insurance purposes and for these accounts at a value of £42,000 (2005 £31,860. The freehold property is included in the balance sheet at cost. Although Council believes that its market value is in excess of £5million, it is considered that the cost of obtaining a formal market valuation more than outweighs any related benefit and that a valid comparison with other properties cannot be made. 8.
FIXED ASSET INVESTMENTS
College 2005 £
With Investment Managers Quoted investments Market value at 1 September Additions at cost Equalisation adjustment to cost Net investment gains Market value at 31 August
4,790,936 (1,492) 399,943 5,189,387
Cash held as part of investment portfolio 1,492 Total with Investment Managers 5,190,879
3,698,210 500,258 592,468 4,790,936
4,790,936 (1,492) 399,943 5,189,387
3,698,210 500,258 592,468 4,790,936
Held by the College Net interest in Associate undertaking Shares at cost: British Paediatric Services Limited RCPCH Publications Limited
(23) ROYAL COLLEGE OF PAEDIATRICS AND CHILD HEALTH NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 AUGUST 2006 (continued) 8.
FIXED ASSET INVESTMENTS (continued) The historical cost of quoted investments at 31 August 2006 was £4,096,968 (2005 £4,096,968). All of the quoted investments are listed on the UK stock exchange. 84.3% (2005 82.7%) of the value of the Total with Investment Managers is held in the Lazard Diversified Charity Fund, a common investment fund which invests in a balanced and diversified portfolio of UK and international equities and bonds. Its pharmaceuticals content is considered acceptable by virtue of the fact that there is no direct link between the investment decisions of the College and the Investment Managers. These financial statements include the results of both companies (see note 17) which have been consolidated with those of the College in accordance with the accounting policy on consolidation (see note 1.2). The College owns 100% of the ordinary share capital of British Paediatric Services Limited which has been consolidated as a subsidiary undertaking throughout. The College’s owns 50% of the ordinary share capital of RCPCH Publications Limited and, as there is no controlling interest, it has therefore been consolidated as an associated undertaking. Both companies are registered in England and Wales.
Amount owed from related undertakings
Due within one year: Trade debtors
Other taxes Grants receivable (see note 11) Prepayments and Accrued Income
Group CREDITORS: AMOUNTS FALLING DUE 2006 2005 WITHIN ONE YEAR £ £ Trade Creditors Amount owed to related undertakings Other creditors and deferred income Taxation and Social Security Grants income deferred (see note 11)
College 2006 £
(24) ROYAL COLLEGE OF PAEDIATRICS AND CHILD HEALTH NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 AUGUST 2006 (continued) 11.
GRANTS Group and College
Balance at 1 Sept 2005 (see notes 9 and 10) £
Received in Year
Department of Health/Health Authority grants Other grants
Balance at 31 Aug 2006 (see notes 9 and 10) £
Net income from grants is included in restricted funds incoming resources as follows: 2006 2005 £ £ Education 46,010 274,504
Total net income from grants
CREDITORS: AMOUNTS FALLING DUE AFTER ONE YEAR - Group and College Other creditors and deferred income
2005 £ 1,000
These represent an unsecured interest free loan received from a member which falls due for repayment within one year from the balance sheet date. 13.
Incoming Outgoing Balance at 1 September 2005 Resources Resources £ £ £
Foundation Appeal Everley Jones Bequest Research Paul Polani Fund Medicines Fund General Donations Fund Fixed Assets Fund Total Designated Funds Charitable Trading Subsidiary Fund (see note 17)
Transfers Gains & Balance at Losses 31 August 2006 £ £ £ -
- 2,235,268 21,178
10,140 3,796,227 -
Charitable Trading Associate Fund (98,049) 98,049 (see note 17) General Funds 5,800,496 7,227,490 (5,708,389) (378,803) 399,943 7,340,737 Total Unrestricted Funds
9,535,892 7,707,098 (6,024,977) (491,128) 410,083 11,136,968
Incoming Resources includes the interest in the result of the Associated Undertaking.
(25) ROYAL COLLEGE OF PAEDIATRICS AND CHILD HEALTH NOTES TO THE FINANCIAL STATEMENT FOR THE YEAR ENDED 31 AUGUST 2005 (continued) 13.
UNRESTRICTED FUNDS (continued) The General Funds represent the free funds of the College which are not designated for particular purposes. The Foundation Appeal was launched in 1997 to raise money on establishing the College for all of its objects. Part of the Foundation Appeal has been applied to purchase new Council Room furniture costing £70,259. At 31 August 2006 £28,970 of the Foundation Appeal represents the net book value of this furniture. The Everley Jones Bequest was given for the general charitable objects of the College and Council has decided to designate all of the monies from this legacy into a separate fund for different developments being undertaken by Education, Training and Research departments. The Research fund comprises net royalty income from two publications which have been designated to fund work to be carried out by the Research Division. The Paul Polani fund arises from a one-off donation and has been designated to encourage work in neuro-disability, possibly by funding an award. The Medicines Fund comprises the remaining balance of net profit from RCPCH Publications Limited from when it was wholly-owned by the College after deducting any grant from the College and “Medicines for Children” publication costs incurred by the College. It is designated to fund the development of childrens’ pharmaceutical projects. The General Donations fund ensures that all voluntary gifts and donations received for the general work of the College are designated so their application can be monitored. The fund includes silverware and regalia and similar donated assets, which have been included in these financial statements at a value of £42,000 (2005 - £31,860). The Fixed Asset Fund identifies those funds that are not free funds and it represents the net book value of tangible fixed assets except for the Council Room furniture and donated assets, which have been funded from the Foundation Appeal and General Donations fund.
Balance at 1 September 2005 £ 125,346
Other Awards and Prizes
Incoming Resources £ 4,690
Outgoing Transfers Balance at Resources 31 August 2006 £ £ £ (38,207) 91,829
Education & Training
David Baum International Foundation Overseas Levy
Total Restricted Funds
The WellChild Fellowships are scholarships awarded jointly with the Royal College of Physicians of London, normally supporting the recipients’ PhD studies Other Awards and Prizes is the aggregate of the following: Donald Paterson Prize Fund, John Lorber Fund, Heinz Fund, Visiting Fellowship Fund and the net income from the Michael Blacow Memorial Fund and the James Spence Medal Fund. The David Baum International Foundation aims to improve the health of children in disadvantaged areas of the world. Monies for the Foundation were first received in 1999 and it was registered with the Charity Commission in September 2001 as a subsidiary charity of the College. The College holds all of the assets of this subsidiary charity as part of its current asset investments.
ROYAL COLLEGE OF PAEDIATRICS AND CHILD HEALTH NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 AUGUST 2006 (continued) 14.
RESTRICTED FUNDS (continued) The Overseas Levy was first collected from the membership in January 2002 following a decision of the 2001 AGM and is restricted to fund the development of overseas activities. The Education & Training and Research funds are net unspent voluntary income, mainly grants, received for the development of specific education programmes and research into and audit of particular childhood illnesses and conditions.
PERMANENT ENDOWMENT FUNDS The Permanent Endowment funds comprise the Michael Blacow Memorial Fund and the James Spence Medal Fund. They are in respect of endowments received by the British Paediatric Association transferred to the College at its inception together with a subsequent donation from Mr Peter Blacow to enable the Michael Blacow Memorial Fund to maintain the value of its awards in future. The income generated by these funds is included in Other Awards and Prizes restricted income and is used to further the charitable objectives of the College.
ANALYSIS OF GROUP NET ASSETS BETWEEN FUNDS Unrestricted Funds £
Restricted Funds £
Endowment Funds £
Total Funds £
Tangible Fixed Assets
Net Current Assets
NET INCOME FROM AND TRANSACTIONS WITH RELATED TRADING UNDERTAKINGS The College has two related trading undertakings, British Paediatric Services Limited (“BPSL”; non-primary purpose) and RCPCH Publications Limited (primary purpose), further details of which are given in note 8. The related trading undertakings make gift payments to the College, usually their total net profit. All activities have been consolidated in the SOFA in accordance with the accounting policy on consolidation (see note 1.2) and are included in both incoming resources and resources expended within “Information and publications”, “Other trading” and “Investment Income”. Both related trading undertakings have an accounting reference date of 31 August and summaries of their trading results are shown below. BPSL manages the provision of exhibition space at the Spring Meeting, provides some membership information for mailing services and distributes medical publications of interest to paediatricians. RCPCH Publications Limited publishes formularies aimed at pharmacists, paediatricians, general practitioners, nurse prescribers and other health care professionals. The aim of each formulary is to assist those who prescribe, dispense or administer medicines for children. The formularies are unusual in that they cover the off-label use of medicines and also list unlicensed medicines necessary for the treatment of children.
(27) ROYAL COLLEGE OF PAEDIATRICS AND CHILD HEALTH NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 AUGUST 2006 (continued)
NET INCOME FROM AND TRANSACTIONS WITH RELATED TRADING UNDERTAKINGS (continued)
2006 BPSL RCPCH Publications £ £ 1,297,586 166,629
Cost of Sales and Administrative Expenses Operating Profit / (Loss) Interest Receivable Net Profit / (Loss)
(20,554) (36,970) 1,277,032 129,659 16,858
2005 RCPCH BPSL Publications £ £ 163,853 166,949 (363,765) (28,582) (199,912) 138,367 3,815
Charitable Trading Funds Balance at 1 September Net Profit / (Loss)
To be gifted to College for year ended 31 August
To be gifted to NPPG for year ended 31 August
Balance at 31 August
- (142,168) (196,097)
College share Balance at 1 September Balance at 31 August
In respect of RCPCH Publications Limited the College charged £12,808 (2005 - £28,761) for College staff and facilities used. After incurring significant costs associated with the development of the first edition of the British National Formulary for Children (“BNF-C”), this reporting year saw it published as a book in September 2005 with the website going live that month and publication of a CD rom version in October 2005. A second edition was then published, as originally scheduled, in July 2006. It should be noted, however, that in future only one edition per year is anticipated, so this level of income is not expected to recur. As a result however, the expected return to profitability and a net asset position of the company has therefore been achieved The BNF-C is produced as a joint venture, the arrangements for which were formalised in an agreement between RCPCH Publications Limited, The Royal Pharmaceutical Society and BMJ Publishing Group Limited dated 13 April 2005. The joint venturers then entered into a three-year supply agreement with the Department of Health dated 20 September 2005 that will ensure all relevant health professionals in England will receive the BNF-C.
(28) ROYAL COLLEGE OF PAEDIATRICS AND CHILD HEALTH NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 AUGUST 2006 (continued) 18.
GROSS CASH FLOWS
Returns on investment and servicing of Finance 417,298
Payments to acquire tangible fixed assets
Payments to acquire Investments
Investment income received
Adjustment to payments to acquire Investments
Management of Liquid Resources Net cash transferred to short term deposits
ANALYSIS OF CHANGES IN NET FUNDS
Cash at bank and in hand Cash held as part of Investment Portfolio Other current asset investments
5,256,766 39,691 5,296,457
PENSION COMMITMENTS The College makes contributions to two different types of pension schemes as follows: Individual Employees’ Pension Schemes The College operates a scheme to contribute a defined amount to individual employees pension schemes. The assets of the various schemes are held separately from those of the College in independently administered funds. The total cost for the College of these schemes was £139,248 (2005 - £90,514 ). This includes £50,919 (2005 - £11,614) outstanding contributions, within other creditors, at the balance sheet date. Universities Superannuation Scheme The College participates in the Universities Superannuation Scheme (“USS”), a defined benefit scheme which is externally funded and contracted out of the state Second Pension (S2P). The assets of the scheme are held in a separate trustee-administered fund. The College is unable to identify its share of the underlying assets and liabilities of the scheme on a consistent and reasonable basis and therefore, as required by FRS 17 “Retirement benefits”, accounts for the scheme as if it were a defined contribution scheme. As a result, the amount charged to expenditure represents the contributions payable to the scheme in respect of the accounting period.
(29) ROYAL COLLEGE OF PAEDIATRICS AND CHILD HEALTH NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 AUGUST 2006 (continued) 20.
PENSION COMMITMENTS (continued) Universities Superannuation Scheme (continued) The latest actuarial valuation of the scheme was at 31 March 2005. The assumptions which have the most significant effect on the result of the valuation are those relating to the rate of return on investments (i.e. the valuation rate of interest) and the rates of increase in salary and pensions. In relation to the past service liabilities the financial assumptions were derived from market yields prevailing at the valuation date. It was assumed that the valuation rate of interest would be 4.5% per annum, salary increases would be 3.9% per annum (plus an additional allowance for increases in salaries due to age and promotion in line with recent experience) and pensions would increase by 2.9% per annum. In relation to the future service liabilities it was assumed that the valuation rate of interest would be 6.2% per annum, including an additional investment return assumption of 1.7% per annum, salary increases would be 3.9% per annum (also plus an allowance for increases in salaries due to age and promotion) and pensions would increase by 2.9% per annum. The valuation was carried out using the projected unit method. At the valuation date, the value of the assets of the scheme was £21,740 million and the value of the past service liabilities was £28,308 million indicating a deficit of £6,568 million. The assets therefore were sufficient to cover 77% of the benefits which had accrued to members after allowing for expected future increases in earnings. The actuary also valued the scheme on a number of other bases as at the valuation date. Using the Minimum Funding Requirement prescribed assumptions introduced by the Pensions Act 1995, the scheme was 126% funded at that date; under the Pension Protection Fund regulations introduced by the Pensions Act 2004 it was 110% funded; on a buy-out basis (ie assuming the Scheme had discontinued on the valuation date) the assets would have been approximately 74% of the amount necessary to secure all the USS benefits with an insurance company; and using the FRS17 formula as if USS was a single employer scheme, the actuary estimated that the funding level would have been approximately 90%.” The College contribution rate required for future service benefits alone at the date of the valuation was 14.3% of pensionable salaries but the trustee company, on the advice of the actuary, decided to maintain the College contribution rate at 14% of pensionable salaries. Surpluses or deficits which arise at future valuations may impact on the institution’s future contribution commitment. An additional factor which could impact the funding level of the scheme is that with effect from 16 March 2006, USS positioned itself as a “last man standing” scheme so that in the event of the insolvency of any of the participating employers in USS, the amount of any pension funding shortfall (which cannot otherwise be recovered) in respect of that employer will be spread across the remaining participant employers and reflected in the next actuarial valuation of the scheme. The next formal triennial actuarial valuation is due as at 31 March 2008. The contribution rate will be reviewed as part of each valuation. The total USS pension cost for the College was £28,466 (2005 - £28,847). This includes £3,696 (2005 - £3,567) outstanding contributions, within other creditors, at the balance sheet date. The contribution rate payable by the College was 14% of pensionable salaries.
(30) ROYAL COLLEGE OF PAEDIATRICS AND CHILD HEALTH NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 AUGUST 2006 (continued) 21.
OTHER COMMITMENTS At 31 August 2006 the College has an annual financial commitment amounting to £261,854 in respect of ten non-cancellable other operating lease agreements which are summarised by expiry date as follows: Under One to Two to one year two years five years Total £ £ £ £ Land & buildings
109,035 205,354 56,500
On 1 September 2004 the College entered into a contract with a publisher to publish educational material which the College is developing. The contract committed the College to paying £15,000 in total. As at 31 August 2006 £5,000 remained outstanding and is payable within one year from restricted funds. On 14 August 2006 the College entered into a contract with a charity to develop and supply materials for the safeguarding children level 2 Education project. The contract committed the College to paying £137,730 in total from restricted and designated funds, £125,670 of which is payable within one year of 31 August 2006, the balance of £12,060 is payable within one to two years. On 29 September 2006 the College entered into a contract with a software developer to provide development work for the neonatal audit Research activity. The contract committed the College to paying £156,275 in total which is all payable within one year of 31 August 2006. As at 31 August 2006 the College had outstanding grant payment commitments totalling £131,843 payable from restricted and designated funds. As at 31 August 2006 £101,407 is payable within one year and the balance of £30,436 is payable within one to two years.
CONTINGENT LIABILITY On 13 April 2005 the College provided a guarantee to The Royal Pharmaceutical Society and BMJ Publishing Group Limited who are the other two parties in the joint venture with RCPCH Publications Limited to produce the British National Formulary for Children. The guarantee will indemnify the other two parties for losses, damages and costs if RCPCH Publications Limited fails to meet its obligations under the joint venture contract. The guarantee is no longer expected to be called upon because the joint venture has successfully completed its initial development phase.