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[Results
for 2008] [Outlook for 2009]
[Statement on risk management and internal
control]
[Financial statements]
Results
for 2008
Revenues
continued to grow from US$46 million in 2007 to $47.3 million
in 2008, including funds from the Transition Plan. They then
decreased slightly to $44.5 million. In 2007, CIAT was also
able to reverse the trend of negative operating results of
recent years and achieve a surplus of $0.67 million. This
positive trend continued throughout 2008, ending the year
with a surplus of $0.86 million.
Net
reserves increased slightly from US$4.3 million in 2007 to
$4.5 million in 2008. CIAT began protecting its local expenses
according to established hedging policy. In compliance with
international accounting and reporting standards, temporary
variances of currency hedges are being reported. Such variances
are temporary in nature, as the objectives of such operations
are to reduce budget-planning risks and protect the unrestricted
local operating budget for the following year from unpredictable
currency fluctuations. For the last 12 months, these fluctuations
reached more than 55% (see Figure 2). Hence, for 2008, CIAT
reports a temporary negative variance in net assets of $2.1
million, which will be fully recovered in 2009.
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Figure
2. Daily exchange rates Colombian peso/US$ (January
2007 to March 2009).
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By
reversing the continual deterioration of its net assets, CIAT
was able to more than double its days of operating reserves
from a low of just 18 days in 2006 to 39 days in 2008. This
compares favorably with the targeted 30 days of the Transition
Plan. However, meeting the CGIAR target of 75 to 90 days will
require continued commitment and focus on resource mobilization,
and the concerted implementation of the "full cost budgeting
and recovery process", which is based on "Activity
Based Costing" principles.
The
trend of core fund erosion continues. Unrestricted funds (net
Transition Plan funds plus self-generated income) have decreased
by US$2.2 million, thus reducing the ratio of unrestricted
to total funds to just 24% (see Figure 3).
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Figure
3. CIAT donor revenues.
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In
February 2008, the Executive Committee of the CGIAR, in a
special meeting, supported the proposed Transition Plan. These
resources enabled CIAT to reduce its staffing number further
by 18 positions—half from Corporate Services and half
from Research—and absorb, while complying with Colombian
labor law, the high termination costs for indefinite labor
contracts drawn up before 1990.
The
Transition Plan funds also allowed CIAT to review its strategic
aims and develop a new Strategic Direction Plan in consultation
with partners and other interested parties. Funds were also
earmarked for the reconstitution of CIAT's management team,
including a new board of trustees, the recruitment of an interim
director general, and the search and selection of a new director
general and head of finance.
In
line with the approved Transition Plan, CIAT used the remaining
funds to bridge crucial time-limited research staff contracts,
strengthen the relationship between CIAT and Colombia and
the rest of Latin America, and renovate CIAT's aging infrastructure,
particularly for research and information technology. The
funds helped rebuild the Geographic Information System offices,
which suffered from structural failure in early 2008.
We
take this opportunity to sincerely thank those donors who
helped fund the Transition Plan.
Outlook
for 2009
CIAT
estimates that total revenues will be slightly less than US$50
million and the balance will show a small surplus. Net assets
will keep reserves at current levels (expressed as days of
operating expenditures). With the current trend in the Colombian
peso exchange rate, CIAT anticipates a significant increase
in net assets during 2010, provided unrestricted donor funding
remains stable.
Statement
on risk management and internal control
The
Board of Trustees is responsible for establishing appropriate
practices that will identify and manage significant risks
in the achievement of CIAT's objectives. These practices will
also ensure that the Center's management of risks will align
with CGIAR principles and guidelines, now used by all CGIAR
centers.
These
risks are operational, financial, and reputational, and are
inherent to CIAT's activities. They represent potential losses
resulting from external events, human error, or inadequate
internal procedures or systems.
The
Management Team has communicated the risk management policy
it adopted to all Center staff, both in the areas of scientific
research, finance, and administration, and in the regional
offices. This policy, supported by the staff, is based on
a framework that identifies, evaluates, and prioritizes risks
and opportunities across CIAT.
CIAT
Management is charged with implementing the policy and continuously
evaluating identified risks. At all its meetings, the Board
receives a risk management assessment report and a follow-up
"action review".
CIAT
endeavors to manage risks by ensuring that the appropriate
infrastructure, controls, systems, and people are in place
throughout the Center. Key practices used to manage risks
and opportunities include financial reviews, clear policies
and accountabilities, transaction approval frameworks, financial
and management reporting, and the monitoring of metrics. This
last is designed to highlight the positive or negative performance
of individuals and procedures across a broad range of key
performance areas.
Risk
management assessment and the follow-up of actions are regular
items on the Management Team's weekly meeting agendas. The
Board's Audit and Risk Management Committee reviews and approves
the annual risk assessment conducted by the Management Team.
Assessment for 2008 identified risks in three broad areas:
- Quality
of science
- Financial
compliance
- Administrative
and legal integrity
In
2008, CIAT's operational environment was one of transition.
The Transition Plan approved in February 2008 has been implemented.
The full-cost budgeting and recovery process, based on the
"Activity Based Costing" principle, will be fully
implemented in 2009. The new strategic directions that outline
CIAT's future have been developed and are being implemented
under the guidance of the new Director General.
In
this context, CIAT has identified its priority risk areas
in terms of degree and immediacy of impact, and likelihood
of occurrence. These are:
- Maintaining
the effectiveness of research operations and retaining essential
staff while the new strategic plan is being implemented.
- Security
of in-trust genetic resources.
- Achieving
net assets and operating reserves and other financial targets.
- Ensuring
the security of staff working in regions suffering political
and social unrest.
- Managing
the Center's geographically decentralized structure to ensure
integration and communication among and within regions,
and with headquarters.
The
Board has reviewed the progress made by CIAT Management in
implementing the risk management framework over the last year,
and its focus on the highest priority risks. The Board notes
that the effectiveness of risk management depends not only
on the identification of risks, but also on the implementation
of mitigation plans. It is satisfied with the steps initiated
by Management to strengthen this latter area. It continuously
monitors the status of the mitigation actions taken, particularly
in relation to the high priority risk areas mentioned above.
The
Board is confident that the policy and practices so far implemented
will lead to a stronger and more effective management and
control over the potential risks that the Center faces now,
and may face in the future.
Financial
statements (see in PDF,
64 kb).
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