Financial picture for RI continues to improve
I'm pleased to report that since my last letter on 15 February, the financial picture has continued to improve for both Rotary International and The Rotary Foundation. While the financial markets remain volatile, for the first nine months of this fiscal year, RI's investments earned US$17.0 million, which more than recovered 2009 losses of $12.1 million. With investment returns of $92 million, the Foundation recouped more than half of its 2009 losses; its operating reserve is now positive at $3 million, up from negative $41 million at the end of June 2009. Operating expenses across the organization are well controlled and remain below budget.
During the past several months, the Foundation's Investment Advisory Committee, Rotary's investment consultants, and staff have comprehensively reviewed the investment policies for the Annual Programs Fund, the Permanent Fund, and RI's General Fund. New policies will be recommended to the Trustees and the Board of Directors at their June meetings. These recommendations include reducing the equity risk in the portfolios and adding assets that will help protect the portfolios from inflation risk. In April, the Trustees approved a new operating reserve policy. Beginning this fiscal year, they will establish a funded operating reserve that will be 100 percent invested in fixed income securities. Although fully funding the reserve may take some time, this more conservative investment approach should enhance the Foundation's ability to finance its operations when financial markets decline.
The improved financial situation has allowed the Trustees to approve a 2010-11 budget in which the World Fund will support Matching Grants at the previous high 2007-08 district levels and fund Future Vision global grants.
The Foundation’s sound financial management and stewardship practices have been recognized in the world of philanthropy. Independent evaluator Charity Navigator ranks The Rotary Foundation as No. 4 on its list "10 Best Charities Everyone’s Heard Of," saying: "These 10 charities … became household names in part because of their exceptional financial management, no easy feat considering the scope and size of their operations. Charitable givers should feel confident that these national institutions put their donations to good use."
Fortunately, a great many Rotarians agree with this assessment. Excluding funds from the Bill & Melinda Gates Foundation grant, overall contributions are up by $5 million compared with last year. Rotary’s US$200 Million Challenge has reached $124 million, well ahead of schedule toward its goal.
While we are all happy to see positive investment returns, increasing contribution levels, and stable membership figures, the senior leaders and staff remain vigilant in safeguarding Rotary's assets. RI's Finance Committee and the Foundation's Investment Advisory Committee are working with the staff to reduce risk while maximizing investment income, fully restore the Foundation's operating reserve, and keep operating expenses at or under budget.
The recent financial crisis generated a surge of interest in Rotary's investment policies and budgeting process. We have worked to become increasingly responsive to the many questions we’ve received from you. The financials section on Rotary.org has enhanced our transparency, and I have communicated regularly about the organization’s financial status. Given Rotary's improved financial position, I don't anticipate the need to continue these regular communications. We will, however, post updates on the financials section on the RI website when appropriate. We are also planning a finance update to be held on Monday, 21 June, at the RI Convention in Montréal, where Rotary senior leaders and RI staff will present information and answer your questions. I encourage interested convention goers to attend this informative session.