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Report of the Chief Financial Officer

 

Overall Operating Results 

The Canadian Red Cross Society operates four core programs – Emergency Management, Prevention and Safety, Community Health and Wellness, and International Operations – which are supported by fee-for-service contracts, and donations (restricted and unrestricted).

The total revenues for the year ending March 31, 2019 were $391 million (2018: $465.6 million) and the total operating expenses were $376.9 million (2018: $457.9 million). The decrease in expenses was due to reductions in programming in all four programs. An expected decrease in revenues and expenses occurred as the Alberta Fires response and B.C. Fires progressed from the early to long-term recovery phase. In addition, our planned exits in some Community Health and Wellness programming also contributed to this decrease. The distribution of total expenses is shown in the chart below.

In the year ending March 31, 2019, the Red Cross earned an excess of revenues over expenses of about $14.2 million (2018: $7.7 million), the increase in the excess of revenues over expenses from 2018 of about $6.5 million was mainly due to increased net revenues from programs of about $10.3 million offset by a net decrease in fundraising of about $7.2 million arising from the lift in donations from the B.C. Fires in 2017/18. Gain on sale of property increased by about $4 million largely from the sale of two properties in Ottawa.

Excluding investment income and gains on the sale of buildings, the Red Cross earned an excess of revenues over expenses of $6.5 million (2018: $4.3 million). The increase in the excess of revenues over expenses of $2.2 million in 2019 was primarily due to an increase in program net revenues, offset by a reduction of fundraising revenues following Red Cross response to several appeals during the prior period.

Total Expenses ($ Millions)

Total Program Expenses 87% (2018: 89%)
Total Funding Expenses 10% (2018: 8%)
Governance and General Management Expenses 3% (2018: 3%)​
Total Expenses for the Year  $377 million (2018: $458 million)
 

Emergency Management

Emergency management revenues were $164.7 million (2018: $216.5 million), and primarily comprised of emergency response and recovery programming of $152.9 million (2018: $206.4 million). Major responses accounted for about $123.1 million of the total revenue, and other responses, including personal disaster assistance, accounted for about $29.8 million.

The chart below highlights the most significant response revenues.

The volume of activities generated by new responses such as the tornadoes in Eastern Canada and flooding in New Brunswick were not significant enough to compensate for the decreased activity from the fire operations in Alberta and British Columbia and other operations now in the longer-term recovery phase.

The baseline emergency management program had total revenues of $7.3 million (2018: $6.0 million) to maintain the current capacity of emergency management, including the provision of volunteer training and support for volunteers during responses.

Emergency Management Revenue Major Responses


 

International Operations

International Operations had revenues of $68.9 million (2018: $75.2 million), which primarily represents programming for emergency response ($22 million), global programming ($42.1 million) and other activities ($4.8 million).

Total revenues decreased by about $6.3 million due to decreased programming in Africa, Philippines and Nepal.

The excess of expenses over revenues decreased by about $2.5 million due to an improvement in cost-recovery rates compared to the prior year.
 

​Prevention and Safety

Prevention and Safety programs had revenues of $18.8 million (2018: $17.9 million), which primarily represent First Aid training sales of $15.4 million (2018: $14.1 million) and Water Safety of $3.4 million (2018: $3.8 million). The increase of about $1.3 million in First Aid revenues was primarily due to a 19% increase in training partner revenue. Water Safety revenue decreased due to instructor training being down by 15% and pupil training by 8% year over year.

The excess of expenses over revenues increased by $3 million largely due to costs invested in launching the new First Aid portal during 2018.
 

​Community Health and Wellness

Community Health and Wellness programs, which mostly operate in the Atlantic region, Ontario, Alberta and B.C., had revenues of $55.7 million (2018: $72.1million) primarily from home support of $16 million (2018: $25.1 million), health equipment loans of $22 million (2018: $23.1 million), transportation of $8.5 million (2018: $10.6 million), meal deliveries of $3.4 million (2018: $4.0 million), and community initiatives of $5.7 million (2018:$9.3 million).

The transition out of several home support programs in Ontario and lower service hours in the Atlantic region resulted in a revenue decrease of about $16.4 million.

The excess of expenses over revenues improved by about $5.5 million arising from the exit from low recovery contracts.
 

Fundraising

Philanthropy raised unrestricted and restricted donations of $111.7 million (2018: $162.4 million). The overall decrease is largely attributable to the decrease in fundraising appeal totals from $68.8 million in 2018 to $14.6 million in 2019 from several domestic appeals.

Although the cost of fundraising did not increase significantly from last year (2019: $36.9 million ; 2018: $35 million) as a percentage of total funds raised, the fundraising costs for the Red Cross were 35.1% (2018: 23.4%). The percentage increased from last year due to reduced appeal fundraising in the current year compared to $68 million raised from various appeals in the prior year. The five-year rolling average cost of fundraising for the Red Cross is 25.6% (2018: 21.4%).
 

Financial Position

As of March 31, 2019, the Red Cross was in a strong financial position with net assets of $143.7 million (2018: $129 million) which increased by about $14.7 million from last year, due mainly to the excess of revenues over expenses of about $14 million from improved program contributions, increased donations, building sales, and investment income.
 
Unrestricted cash or cash equivalents was about $32.9 million (2018: $32.3 million) remaining steady with the prior year.
 
Externally restricted cash or cash equivalents of $188.5 million (2018: $230.3 million) represent restricted donations from appeals during the year or carried forward from prior years. The decrease in externally restricted cash is due mainly to the spend on the B.C. Fires and Alberta Fires.
 
The Red Cross maintains about $33.5 million (2018: $31.9 million) as a contingency fund to ensure the continuity of Red Cross operations if a disruptive event impacts fundraising or program revenues.
 
Working capital for Red Cross consists mainly of accounts receivable and accounts payable arising from credit provided to or from its partners in the above-noted programs. The Red Cross has limited credit risk as the majority of its debtors are provincial and federal governments.
 
Inventory consists of current materials and supplies necessary for our disaster management and international programs, so they can respond quickly across Canada or internationally.
 

Accountability and Oversight

The audited financial statements of the Red Cross have been prepared in accordance with Canadian generally accepted accounting principles for not-for-profit organizations established by the Accounting Standards Board of Canada.
 
The Board of the Red Cross approves an annual operating plan and budget and receives quarterly reports from management. Additionally, the Audit and Finance Committee (“Committee”) of the Board – composed of volunteers with expertise in finance, accounting, investment and risk management – meets quarterly with management to monitor the external audit, financial performance and internal control environment of the organization.
 
In the prior year, the Board approved the establishment of an internal audit function, which has further enhanced the corporate governance structures of the Red Cross. The internal audit function conducted three audits during the year.
 
Enterprise risks and related mitigation strategies of the Red Cross are reviewed quarterly, as needed, and are examined by the Board and the Committee. Management has been further investing its incident management, compliance, quality oversight, and data governance capacities.
 
The audited financial statements of the Red Cross and audited special purpose financial statements are available on the Red Cross website at redcross.ca.

Sincerely,
Larry Mills
Chief Financial Officer
Chief Corporate Services Officer

Annual Report 2018-2019 

 

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