Financial Review 2006 / 07

Extracted from the audited Annual Report & Group Financial Statements of Severn Hospice Ltd for the year ended 31st March 2007. The full audited accounts are available in pdf format by clicking here

The Hospice provides all its services free of charge.  The majority of the funding to enable it to do so comes from public donations and the NHS, with the balance generated by the Hospice’s shops, lottery and trading company and from investment income on its reserves and working balances.  Local people continue to be very generous to the Hospice and in 2006-07 legacies of £884,419 were received.  The Hospice lottery and shops have continued to make an invaluable contribution.

In 2006-07 63% of income (net of the cost of generation) came from donations, legacies and fundraising activities, a decrease of 8% on last year’s figure.  This decrease was due to a drop in the legacy figure, which is still high but significantly lower than last year’s record £1,597,439.  The decrease was offset to some extent by income from trusts for the Telford project. NHS funding amounted to 31% of funds, a 4% increase on last year’s NHS funding (this included a £75,405 contribution to the Telford project).  In total, funds (income net of cost generation) were more or less equal to last year’s figure.

Total charitable expenditure was up by 12.5% to £3.9m.  This was mainly due to inflationary pressures, particularly on salary costs, and to increased activity in terms of both inpatient referrals and providing palliative care at home.  The cost of fundraising, net of the costs of shops and lottery was again kept to under 10% of the amount raised, representing less than 10p in every £1 donated. 

Capital expenditure during the year amounted to just over £2,472,000, including £2,360,000 on work on the Telford project, with the balance used to upgrade facilities on the Shrewsbury site.  There is an anticipated further £2,274,000 to be paid in completion of the Telford project.

The Charity made a surplus in 2006-07 and was able to increase its reserves to give security to its existing operations and to support future developments, in particular the major expansion of Hospice services across the Hospice’s catchment area.  Once again, the local community, through the admirable dedication and efforts of so many individuals and groups, has enabled the Hospice, once more, to end the year strongly.

Reserves Policy

In determining a prudent level of free reserves the Board takes into account that the total annual expenditure is now in the region of £5.25m and the inevitable uncertainties that exist as a consequence of the Hospice’s dependence upon voluntary giving and upon legacy income in particular.  The policy is that free reserves should normally be held of at least half the following year’s estimated expenditure on running the Hospice (the equivalent of six months’ running costs).  

At the end of 2006-07 free, designated and restricted reserves are higher than in former years because they contain the monies raised for the new building at Telford, construction of which is now underway.

The use of designated funds in 2007-08 will reflect this as the final payments for the construction and commissioning of the building are made.

Investment Policy and Returns

When it is considered in the best interest of the Hospice, cash reserves can be invested for the medium/long term.

It is then the policy of the Board of Directors to hold no more than 75% of investment funds in equities. Investments are kept under review by the Investment Sub Committee.

In the first quarter of 2006-07 the Board, on recommendation of the Committee, decided to sell all its investments to provide the cash reserves required to fund the building of Severn Hospice Telford, and currently has no investments other than short term investment of cash balances.