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Board Report: June 2016

Hi Everyone,

Having now passed the shortest day (with some record warm temperatures) and the end of our financial year we are now charging on our way to the summer of 2016/17 - it's a bit scary thinking there is just 14 weeks left until patrols begin again!! 

The June Board meeting was held in Wellington on Sunday 26th June and was our last meeting for the 2015/16 financial year.   

From a financial perspective the results for the eleven months to 31st May are a Net Operating Surplus of $1.058 million, which is $68,000 ahead of budget.  This small positive variance is all due to timing variations.   A explanation of these variances is in the attached Financial Summary Dashboard.

More importantly the latest forecast the full year Net Operating Surplus will be around $87,000.  The reason for the big drop in June is that this is when the depreciation costs are charged (around $0.5m) plus there is very little income in June so there is traditionally a big deficit in the month.

Our small forecast profit is a positive, and follows two strong years of turnaround.  We continue to be challenged by the ever changing Grants and Sponsorship environment.  It is pleasing to have the team constantly looking to keep tight control of costs to fit the world we live in. The forecast Net Operating Surplus is however $264,000 less than budget, this downside resulting from our NZLGB grant being $200,000 less than budget, a short term sponsorship of $100,000 not being renewed, and two gaming trust grants being a combined $160,000 less than budget.  Fortunately we did achieve a few wins along the way to offset this and after Capex and depreciation we still add a good level of positive cash-flow to continue rebuilding our reserves.  

As I noted previously, the targets set for this year were deliberately very aggressive, knowing that we would be starting to see the reduction in State Insurance sponsorship income.  Both I and the Board are comfortable with the forecast outcome for the year.

Significant items of note from the meeting are:

  • The Board reviewed the 'detailed' version of the SLSNZ 2016/17 Strategic Plan.  The 'summary' version was circulated to clubs a couple of months ago and is also available on the SLSNZ website.  The detailed version goes down into depth on individual actions, timings and responsibilities for the management team - and is the document that is reported on back to the Board as the year progresses.  The Board was happy with how the plan has come together and we are looking forward to seeing it put into action.
  • We are lucky to have the Chair and CEO of SLS Northern Region join us for a productive few hours.   The discussion covered many topics and highlighted some good initiatives to ensure we remain closely aligned, and continue to help each other in the areas where we have mutual interests.  We will be re-establishing a regular board-to-board dialogue, which will allow us to continue to drive our key message to key stakeholders and partners.
  • One of the areas we discussed was the new Accounting Standards Framework (PBE IPSAS 6) for Public Benefit Entities such as ourselves.  This is the first year these new standards are being implemented and a major question for SLSNZ is whether we should consolidate all 74 Clubs into a single national "Group".  This consolidation would just be for financial reporting purposes, and would not change how SLSNZ and Clubs operate today.  After a lot of discussion with Management and our advisors, the Board has decided we will not consolidate member Clubs (and their associated trusts) into a single national Group.  The Board believes SLSNZ does not cross the threshold of power and benefit, i.e. that it has the power to effect operational and financial policies of Clubs to the point where it derives a financial benefit from that power.  Consolidation is not favoured because it is likely to suggest that surf life saving collectively has substantial resources and result in challenges for maintaining grants and sponsorships, and is likely to drive significantly higher operational and audit costs.  If Clubs have any questions about these new reporting standards you should discuss your specific circumstances with your accountant. 
  • Sustainability was another major theme for the meeting - with the Board doing a final check of the 2016/17 budget before it gets loaded.  We also had a good discussion on the importance of diversification of revenues.  The establishment of the SLSNZ Foundation and growth in the fundraising area were given particular attention.  To the Board, revenue sustainability means reducing our reliance on gambling related revenues, and this has been highlighted with the volatility in NZ Lotteries Grant Board funding this year, and is forecast to continue next year as well.  Combined with increased competition for reducing levels of funding from gaming trusts we are working on revenue diversify as fast as possible.  On that note I hope you have been buying your lotto tickets recently - large jackpots help maintain all our funding from NZ Lotteries Grant Board. Progress on replacing State Insurance as a sponsor was also given close scrutiny.  The Board noted that the SLSNZ Foundation Trust Deed was in the final stage of execution and would shortly move on to being officially registered, which is an important milestone with this initiative.
  • Also of real importance to the movement was the discussion on Board appointments, with applications now open for four Board positions that have come up for rotation this year.  Applications close on the 25th July and then the Board Appointments Panel (which I chair) will begin their work.  As a panel we enjoy having lots of choice of quality candidates, so I encourage people who want to contribute at a governance level to give it some serious thought.
  •  In looking at Health & Safety, the reduction we saw in the total number of injuries to members through the year does seem to be real now.  Excluding National Sports events and SLSNZ employees there were 32% fewer incidents than last year where members needed first aid treatment (dropping from 392 to 265).  At the serious injury end of the spectrum there were similar improvements with 21% fewer needing doctors treatment (48 down to 38) and 48% fewer needing hospital treatment (21 down to 11).  More information will come out to clubs on those serious incidents so you can see the kinds of incidents that are occurring and test your own systems to make sure you have the root causes covered in your club.
  • In terms of decisions the Board endorsed the selection of nominees for roles on the International Lifesaving Federation Commissions, for which elections will take place at the General Assembly being held in September in the Netherlands. There were four nominees endorsed - Wayne Franich for the Sport Commission, Graeme Cullen for the Business Commission, Michael Bassett-Foss for the Drowning Prevention Commission and Nick Mulcahy for the Rescue Commission.  The Board also approved the application for the new Governor General to remain as the patron of SLSNZ.  Vice Regal patronage does not automatically continue when there is a new Governor General so an application process is required.

And that's it from the meeting.  In terms of other topics I would encourage clubs to register your delegates for the SLSNZ AGM, as there are only 6 weeks left to do that.  We had a great turnout last year and look forward to at least as many this year.  Make sure you also send our CEO any topics you would like to discuss at the Club Chairs Workshop earlier in the day.

The next Board meeting will be held in Wellington on Friday 18th August.   So until my next update……

Yours in surf,

Geoff Hamilton
Chairman
Surf Life Saving New Zealand