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Author Topic: 2016 accounts, some observations and opinions (and questions to be answered pls)  (Read 866 times)

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Offline sickbag_andy

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Well it's about funds so I thought this would be the best place to post this. some food for thought (and discussion). I thought that as it's a different topic than any of the others it's better to start a new one rather than drag an existing one 'off topic'

There’s been some discussion on the 2016 accounts of late and I’ve had a bit of a look through them and have found a few points which puzzle me a bit…..
On the income and expenditure statement (page 15) I’ve picked out a few things that concern me a bit for the years ahead:
There is a marked drop in the donations/legacies and charitable activities incomes – around 40% on each, I think we all realised that donations would drop significantly once flying stopped but bear in mind the final flights were at the end of October 2015 so this account probably picked up a fair amount of income in the last months of 2015 with the euphoria that was generated during those final few months of flying so those figures will surely drop significantly in the next year’s accounts as people cancelled their direct debits etc.

I do find it alarming how much the income v expenditure has swung in 12 months from a £223k profit to a £198k loss i.e. a swing of £421k and funds carried forward to the 2017 trading year of £1036k. That leaves just over 5 years before it runs out at that loss rate however they redundancy axe hit around the end of March(?) 2017, 5 months after the accounts date when the other cost savings measures were also introduced so there is likely to be a continued loss of around £83k up to that time based on a pro rata figure from the 2016 accounts.

BUT returning to that 5 years before it runs out that assumes that all assets could be realised and on page 16 it splits fixed and current assets and the current assets value is £450k so the time scale could be far less if losses continue even at a lower rate unless of course they dig into their fixed assets and sell one Vulcan bomber (purchaser to arrange collection?)
Now that loss does concern me, it is slightly confusing because the income is divided into donations and legacies, charitable activities, other trading activities and the mysterious ‘other’ in all totalling £1240k. Expenditure is broken down into raising funds (£1376k), charitable activities and a bit of tax, in all totalling £2598k and thus bringing about the £198k loss. Assuming that donations are mainly standing orders which surely need minimal administration (otherwise they aren’t worth doing) and legacies need an equally small amount of expenditure so lets assume that the majority of those costs went on the charitable activities, other trading activities and ‘other’ that’s a cost of £2598k to raise £1355k errr? Okay there’s a small bit attributable to the donations and legacies but that’s a heck of a loss and one has to ask why so much was spent to raise funds and ‘others’ for an essentially static airframe.

So why operate at such a loss in an attempt to raise funds when existing funds theoretically will be needed to equip a new hangar in a few months? I’ve heard of speculate to accumulate but this seems more like speculate to degenerate.
Donations (and legacies) are broken down on p.23 and shows a significant drop in percentage terms on most items, 2015 figures in brackets):
 Regular donations 184,026 (250,848) -26%
One off donations 73,792 (419,753) -83%
Corporate donations and sponsorship 200,000 (246,994) -19%
Other donations 258,435 (315,128) -18%
Gift aid recovered 31,795 (148,726) -79%
Legacies 297045 (nil)
So it would appear that a substantial number of standing orders were cancelled once flying ceased, something I think everybody expected (I hope my ‘everybody’ included the Trust), I wonder how many more have gone in the last 10 months with all the uncertainty over the project. I don’t suppose they have increased and as the chances of taxi runs and general enthusiasm diminished I anticipate that the next accounts will show a similar significant drop. Again with the one off donations, how many came in the first few months post flying, that’s a big drop over the year and I will stick my neck out and say it will be down to a trickle in the next account especially with the hangar appeal – people may have given to that and only that this year. I won’t discuss corporate, I don’t understand it apart from the fact that without Eddie F’s support it would never have got this far (thanks Eddie), ‘other’ donations dropped around 18%  - I don’t know what ‘other’ includes so what will happen to that this year I’ve no idea but can’t see the figure going back up. There’s a massive drop in gift aid presumably because in 2015  a lot of that was from Operation 2015 and it’s a bit harder to collect it from the one offs and others. One plus in 2016 was a large legacy sum (or several smaller but significant ones) from nothing the previous year but can we really expect that to continue year on year? I really do worry that these figures will drop similarly year on year and there will be a rapid dry up of funds. Okay some staff have gone to reduce costs but for a charity there still seems to be an incredible percentage of overheads.
On page 28 one thing that does strike home is raffle income down from £323k in 2015 to £109k in 2016 – approx. 2/3 down. That really does hit home, all those raffle tickets sent out but so many not returned, that is (to me) a big sign that even in early 2016 people were starting to forget the Vulcan  - out of sight, out of mind and surely those big raffle windfalls will rapidly dwindle away to become hardly worthwhile and that funding stream will soon dry up. Hands up – I admit I haven’t bought any this year and don’t remember if I bought many if any at all last year, in the flying era I always bought all that were mailed out - maybe I’m just another joe public now.

Staff costs – pages 27 and 28 show staff costs, p.27 shows activities carried out directly costs and p.28 support staff costs .
Direct costs in 2016 were £698239 (£831020 in 2015)  and Support costs 2016 were £246600 (£38134 in 2015). Add those together and the total for 2016 was £854839 and for 2015 £869154, for an aircraft that basically sat in the hangar and occasionally went out for a brief engine run – to me that’s an awful lot of money for very little return. Okay with the redundancies we should see those costs drop on the 2017 accounts but isn’t that shutting the stable door once the horse has bolted (with a fat bag of cash tied to it’s saddle)? Sorry but for that sort of money I really think we could/should have expected slightly more. Yes we can point the finger at the airport operators being stringent about operating procedures IF taxi runs were to be allowed, procedures which would have been far more relaxed at a non commercial airport but surely that should have been foreseen such that for a wage bill only £150k short of £1 million we saw nothing in the way of taxi runs in return, I said a while back that Doncaster was the correct choice while the aircraft was flying but not once it ceased and I think those figures bear that out AND don’t say hindsight is a wonderful thing – it was bleedin’ obvious from well before the final flight.
Staff numbers – the report gives the average for the year but we all know that there were large scale redundancies in March, the report gives the following figures:
The average monthly number of employees during the year was (2015 in brackets):
 Management and administration 22 (14) , Aircraft crew 14 (20);  total 36 (34)  so a reduction in aircrew (understandable really as it doesn’t fly now) by 6 persons and an increase in management / admin of 8 persons i.e. a nett increase of 2. Okay that has been addressed now but WHY do you need more staff for a non flying aircraft that has an aversion to sunlight such that it spends most of it’s time in a hangar or more latterly it’s shooting the breeze coming off the sewage works with a tarpaulin to keep the sun off it’s cockpit.  Sorry but unless somebody can explain the rationale behind this then it appears that one of those many mangers made a monumental cock up that has made an enormous hole in the funds. I really would like an explanation of the thinking behind that.

The trust spent in excess of £50k on the Canberra and after questions were raised when I donated I understood that I was contributing to the upkeep of the Vulcan and that all raised funds were ring fenced for the upkeep of ‘558 as restricted funds. When I look through the accounts I see that the only restricted funds are £60 as a left over from ’Operation 2015’ (see page 37) and this £60 seems to be the figure that crops up every time restricted funds are mentioned.
SO – answers please:
1: were there ever any other restricted funds?
2: What happened to them i.e. did they fund the Canberra purchase?
3: And why aren’t the remaining funds restricted in such a way? A good proportion of the money was raised on the back of ‘558 with donators assuming they were supporting that aircraft surely the public (those that still care) should expect to be assured that their donations went to where they intended them to go i.e. to the upkeep of Vulcan XH558.

Page 39 states a loss on operating activities of £328204 – for what? As far as I can make out there were virtually no operating activities in that year, just the last 3 flights and then stuck in a hangar with the occasional venture into the open for a private engine run with the sounding of an e-fanfare in the twice weekly newsletter AND why did we still have 2 per week for so long and why do we even need one per week now – just send one out when there is something significant to report, that way it will gain more attention and save on production costs (yes I know it’s e-mailed but someone must get paid for writing it).
The money that is being spent here on an aircraft that can’t fly, can barely move without all sorts of procedures and controls in place and is hidden away from the public for the foreseeable future (yes I know, we keep being told that plans are in for a hangar but with the level of funds available I don’t see it as sustainable for very long) defies all logic, that budget probably equates to virtually all the funds spent on all the other preserved aircraft in the country. Surely it’s time to throw in the towel and run it solely on a volunteer basis as per all other grounded preserved aircraft. Carrying on at this level of expenditure is simply a recipe for disaster.

A quote from the report:
 Heritage The aircraft has developed a loyal following of many thousands of supporters. She is and will remain the best preserved all-British four-engined jet aircraft anywhere in the world still capable of powered ground runs. XH558 has to be maintained in the current working state, albeit not flying, under the terms of the Trust’s contract with the National Heritage Memorial Fund (NHMF) until 6 February 2085.
I think ‘has’ can be deleted from the first line as that loyal following has largely dissipated. She may well be the best preserved aircraft but what is the point if she is never allowed to do taxi runs, there is always a reason why not, you could have a bingo card game with the excuses on it and cross them off until you fill a line there are so many of them (watch out here comes another fund raiser now I’ve opened my e-mouth). The two other running Vulcans in the uk / world are maintained to a sufficient standard to enable them to actually taxi and at a fraction of the cost and in the case of ‘655 in front of a watching crowd in close proximity so maybe the Trust need to look at them and consider if they are ever going to meet all the conditions and if so is a volyuntary team the way foreward. If it’s not because the airport want a ‘professional’ team to maintain the aircraft then that has already failed and the Trust must hold their hands up and say that post flying, Doncaster was the wrong choice.

Re the 2085 date – with all the sell offs of spares surely there won’t be any left to maintain it until 2025 let alone 2085 and being realistic how could she ever be, all those with the necessary expertise will have been pushing up the daisies for many years come 2085. And anyway, even if they want to run her, fossil fuels will have run out way before then so there will be nothing to run the engines with unless of course the sewage farm is still there and they can manufacture a biofuel!  But really, expecting to still be doing engine runs in 68 years time is just not realistic and surely the heritage fund will realise that so surely that condition can be bargained out.

Final thoughts:
My personal analysis of the last year is that far from the eviction from hangar 3 being a disaster for the aircraft it more likely actually prevented a disaster as it brought the Trust to it’s senses and realised that the draining of funds at that rate was unsustainable even in the short term let alone 85 years and forced their hand into doing something, sadly involving making a tribe of Indians redundant although a disproportionate number of chiefs remained. Whether that was a large enough reduction will remain to be seen but I personally just can’t see it being enough. Eventually the Trust will have to face the inevitable and make it a wholly voluntary operation.

Andy
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Offline sickbag_andy

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One thing I realised this morning and didn't include in my post was a point re the unrestricted funds (I touched on it but not in this detail)  - this presumably includes sales income from shows and the webstore, all of this income is recorded as unrestricted funds hence when joe public thought he was buying something to support XH558 it could actually have been spent on the Canberra and they would be non the wiser. I always thought the Canberra money came from a totally separate fund (source of which I never understood) but looks like that was just another £50k of money intended for 558 which was squandered away.

Why they ever bought that I really don't know and never will unless it was to prolong their income - maybe they should name it 'Spirit of the gravy train'

I have to admit I'm starting to think this whole episode really stinks - just like the final resting place . So sad.
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Offline StAthan lecky

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What a brilliant well thought out and in depth analysis of the state of the accounting for 2016 ! well done Andy for your patience and perseverance in dissecting the accounts,I hope that someone from the Trust will reply to your post but doubt it very much 1 perhaps Eddie F would like to comment ?

Mike
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Offline wcg

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I hope that someone from the Trust will reply to your post
Unfortunately, you've got two hopes of that and one of them's Bob.
Clive..{ South Wales }{ +868 posts on old Forum }
Now an ex-Club Member & no longer contributing to VTST / XH558