RI finances in the pink of health

At the Kuala Lumpur Zone Institute PRID P T Prabhakar presented an analysis of Rotary International’s revenues to show that RI’s finances are in the “pink of health”, and by the end of 2017 it was projected to have a surplus of $29 million.

He said RI’s first and most important source of revenue was from membership dues; in 2018, membership dues are expected to comprise over 70 per cent of Rotary’s overall revenue.

“As the net investment income returns are very volatile, Rotary plans conservatively and receives very little income from this source.”

The combined club dues and net income returns are used to pay for operating costs such as member services and programmes, marketing initiatives and allowances for the Board of Directors. These funds are also utilised for compliance activities such as filing the annual financial statement.

The third source of revenue comes from major Rotary events such as the International Convention, The Rotarian magazine and rental from the office space at the Evanston RI headquarters One Rotary Centre.

Every year, the onus rests on the board of directors to pass a balanced budget, and ensure that expenses are equal to or less than the receipts. However, one of Rotary’s bylaws also allows the Board to spend strategically from the reserves. In the past, these funds have been used to pay for regional membership plans, polio communication and contribution to TRF. This reserve is known as the general surplus fund.

Another bylaw stipulates that Rotary should have a reserve equivalent to at least 85 per cent of the highest level of expenses RI has incurred in the previous three years. “The RI Board sets a conservative reserve target, and revenues from past Conventions can be used for future Conventions that may not break even,” Prabhakar said.

The board also maintains a reserve for investment to ensure sufficient funding when investment returns are lower than budgeted; and some of the surplus funds can also be invested in Rotary’s future.

Thanks to a well calibrated and conservative spending and investment stance, “by the end of 2017 Rotary will have a surplus of $29 million above the Board target,” he added.