1995 Financial Report - CGIAR Library

III. 1995 Financial PositionA complement to the discussion of CGIAR contributions and expenditures is an analysis ofthe System’s financial position. The aggregation of Center financial information for 1991 to 1995 isshown in Table 3 as the CGIAR System financial position. Annex Table IV-I provides details byCenter. Using standard measures of financial analysis,, the 1995 financial information confirms anumber of positive trends, and indicates that the CGIAR as a whole, and the Centers individually,are in good financial condition.NETASSESTSThese balances are prime indicators for not-for-profit organizations, equivalent to equitycapital and reserves in a for-profit organization. A growth trend in these balances is a positiveindicator of financial health, although there is no norm for the optimal size of the balances. Netassets include capital invested in fixed assets, operating funds, capital-related funds, and funds setup for special purposes.The steady increase in the CGIAR’s net assets since 1991 has been led by a build up of the capitalrenewal fund following the introduction of depreciation accounting. While the overall level of net assetsincreased in 1995, it was largely due to increases in fixed assets, reflecting capital renewal as fundbalances stabilized. This is consistent with the resumption of expenditure growth in 1995, noted earlier,following a period of financial uncertainties during 1993 to 1994, when many Centers suspended theircapital investment plans.OPERATINGFUNDThe operating fund is the accumulated operating surplus/deficit, as is shown on the statement offinancial position. This is equivalent to “retained earnings” in a business enterprise.The operating fund (i.e., retained earnings) maintained an upward trend in 1995. This was alsoreflected at the Center level, as most Centers were able to match expenditures and revenues closely, withthe result that operating fund levels were maintained. As shown in Chart 16 (see page 181, operatingfund levels at the majority of Centers in 1995 were at or above the average of 58 days coverage of theirspending requirements. ICRISAT’s operating fund, which had been fully exhausted in 1994 to meet staffseparation costs, was not replenished in 1995; however, ICRISAT intends to do so in 1996.LIQUIDITYLiquidity, as measured by the current ratio and working capital, has stabilized at a levelreflecting sound cash management practices at most Centers.CurrentRatioCurrent ratio is current assets divided by current liabilities, represented as a fraction. This liquiditymeasure is comparable across organizations, regardless of size, because it is a relative figure. Different16