As the world economy continues to return, if somewhat haltingly, to a more vibrant state, it is good to be able to report that during the past twelve months there have been significant and beneficial changes in all aspects of the financial management and operation of the Union. It goes without saying that it has not been possible for IUPAC to emerge completely unscathed from the very difficult financial conditions that have prevailed during and since the recession, but we have come through these circumstances very well. More importantly, we have now set the foundations in our revenue generation and financial management information systems and expenditure controls that will enable us to progress and prosper in the future. The Executive Director and Secretary General have worked this year to bring the management accounting for all operations in-house and the Secretariat is now using new GAAP-compliant software. The recent appointment of a financial controller will ensure that our management accounting is undertaken in a much more timely manner.
Our three principal income streams remain the National subscriptions paid by our member countries, the income from our investment portfolio, and the profits from our publications and I will report on these in reverse order. The year that has just passed, 2014, was the first in our new collaborative publication venture with De Gruyter. The result has been very encouraging. The net profits from our publications—the subscriptions to Pure and Applied Chemistry, less its publication and distribution costs, and those of Chemistry International—had been steadily declining during the years prior to 2014, but this decline has now been turned around and we are likely to see instead an increase in this income in the future as the new arrangements settle down. Important decisions still remain to be made in respect of Chemistry International, and new income-earning possibilities have also been opened up by a new value-added database for IUPAC standards and recommendations.
At its meeting in February 2014 the Finance Committee, after a thorough review of our Investment Portfolio carried out in the light of the then-prevailing market conditions, advised that the Union should move to more proactive management of its resources while maintaining its prudent approach to ensure the safe preservation of our capital. Tenders for the management of the portfolio were solicited from financial management companies and, following interviews, the Finance Committee advised that the portfolio be managed by BB&T and Scott and Stringfellow. These new arrangements were negotiated by the Executive Director and the Treasurer and implemented in November 2014 with a new Investment policy statement being put in place to govern their operation.
The national subscriptions of our National Adhering Organisations provide the mainstay of the funding that is used to operate the Union and to finance our various programmes. The proportion to be paid by each member has been decided for many years using a model based on the values of the chemical production of each country as reported annually by Cefic. To avoid abrupt changes in these subscriptions the relevant Cefic data were averaged over the five most recent years for which they were available. Countries were also offered the option to pay in U.S. dollars or in their national currencies. In the latter case the exchange rates used were averaged over the four quarters of the year prior to a Council meeting—again to minimise abrupt changes in the subscription for any member. Unfortunately, the algorithm developed and used over the years in this model failed when used to calculate the national subscriptions for the upcoming biennium (2016-17). A significant number of countries were assigned very large and unacceptable percentage increases in their subscriptions. This failure was due in part to changes in the pattern of distribution of the manufacture of chemicals across the world but with this effect being greatly aggravated by the steady and large increase in the value of the U.S. dollar relative to most other currencies, particularly during the past two years. These exchange rate changes have also rendered the value of the payments being made in National currencies in the current biennium quite considerably smaller than was calculated at the time that they had been budgeted, thus reducing the real income of the Union. To overcome these difficulties an interim model to apply for the next biennium only was proposed, in consultation with the Officers and with the approval of the Bureau, to the recent Council meeting at Busan. The basic tenet of this model is to equally share the current financial burdens by setting the same percentage increase, five percent year on year, for all members on their current subscriptions. The budgets proposed also carried manageable deficits and the recovery was thereby moderated so that it will be gradual. In addition to accepting this interim arrangement, the Council also agreed to the setting up of a task force which will, in the immediate future, consult with all stakeholders, especially the National Adhering Organisations, to establish a new model on which to base the calculations of national subscriptions in the future. This new model is scheduled to be ready next year and will be sent for approval to the next Council meeting in Brazil in 2017.
As the end of my service as Treasurer of IUPAC approaches, I wish to thank my fellow Officers and the professional staff at the Secretariat for their unstinting support and help throughout. I am confident that all of the measures that have been put in place to improve and maintain our financial wellbeing will ensure that the Union can move on with confidence to celebrate its Centenary in 2019 and to continue for many years thereafter.
John Corish <email@example.com> has been treasurer of IUPAC since January 2008. He has served IUPAC at many levels since 1979, including chair of the Subcommittee on Materials Chemistry, president of the Inorganic Chemistry Division, and member of the Finance Committee.
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