Notes to the Statement of Income and Expenses

in Euros

10. Fundraising Income from Individuals

Income from individuals includes structural and one-off donations from individuals as well as legacies.

Developments 2020

We nearly met our ambitious income target from individuals of €10.3 million in the year of the COVID-19 pandemic. We raised €9.5 million in income from individuals in 2020 (7 per cent below budget) which is 4 per cent lower than the previous year (2019: €9.9 million). Gifts and donations decreased by 1 per cent year-on-year - those were 8 per cent under budget (€8.8 million realised against a budget of €9.6 million). The remainder of income from individuals comes from income from legacies. Income from legacies decreased by 31 per cent compared to the previous year and was 4 per cent below budget. War Child aims to develop long-term relationships with individual donors to ensure stability in income and the continuity of projects. The large majority of the income generated by individual donors came from approximately 95,000 Friends, as War Child calls its structural donors. More information is provided in the “Where Our Funds Come From” section in this annual report.

11. Fundraising Income from Companies

Income from companies includes periodical donations from our Business Friends, one-off gifts from actions, donations in kind as well as restricted subsidies.

Developments 2020

In 2020 we raised €2.6 million from the business sector - which was 75 per cent above our target for the year, however, 6 per cent below the income in 2019. It remains a challenge to secure long-term commitments from companies. Main business donors supporting us already for years with monetary funding are Rituals Cosmetics, Lenovo Foundation and Triple D BV.. We saw an increase of almost 50 per cent in gifts in kind in comparison to 2019 - a value of €1.3 million, which was 100 per cent above budget. About 50 per cent of income from businesses comes from the value of donations in kind. War Child has a low cost policy and tries to find donors for every purchase it makes at head office. This ranges from free paper to free legal advice. Thanks to our good reputation that our donors recognise, we are quite successful in raising free goods and services. More information is provided in the “Where Our Funds Come From” section in our annual report.

12. Fundraising Income from Lotteries

Income from lotteries consists of contributions from the Dutch National Postcode Lottery. Since 2009, War Child receives an annual unrestricted contribution and since 2014 we have received various contributions designated to specific projects.

Developments 2020

Income from lotteries has decreased by 44 per cent in comparison with the previous year. The National Postcode Lottery contributes structurally to our organisation with an impressive €1.4 million. In addition, the National Postcode Lottery awarded the “Dreamfund” to War Child in 2019 for its Can’t Wait to Learn programme. In 2020, this programme continued to be implemented. In 2020, no additional funds were contributed by the National Postcode Lottery, this explains the difference in income between 2019 and 2020. More information is provided in the “Where our Funds Come From” section in our annual report.

13. Fundraising Income from Government Grants

Income from governments includes income from individual governments as well as from governmental bodies and from organisations that receive the vast majority of their funding from governments. In cases where the back-donor is a government and War Child has a contract with equal conditions with another party, this income is categorised as income from governments. All War Child’s income from governments is incidental, although part of the income is related to multi-year grants. All grants have an end date.

Developments 2020

The income from governments accounts for 50 per cent of War Child’s total income. It is €22.1 million in 2020, which is 6 per cent above the government income of 2019 (€20.0 million). The substantial growth that was realised is 8 per cent below the ambitious budget for the year (€23.9 million).

With €7.3 million the European Union was War Child’s largest donor and funding was 12 per cent below the previous year’s income (2019: € 7.8 million). This represents 17 per cent of our total income, which is slightly above our limit of maximum 15 per cent from one donor. War Child has this target in order to remain independent from any one donor and to maintain a well-balanced donor portfolio.

The Netherlands Government is our second largest donor with a contribution in 2019 of €6.6 million. The United Nations agencies continue to contribute to War Child's programmes in various countries through its subsidiaries and affiliates such as UNICEF, UNHCR, UNESCO and UN OCHA.

14. Fundraising Income from Affiliated Parties

Income from affiliated parties includes the contributions of national and international parent and sister organisations of War Child.

War Child worked to further expand its presence in Europe and during the first quarter of 2019 officially registered and launched War Child Deutschland gGmbH as a German fundraising foundation.

War Child Deutschland gGmbH fundraised €39,000 income from sales and private donations, collected at galas and from corporates, to be used for our programs. A slight decrease due to the COVID-19 pandemic and less events and activities by War Child Deutschland.

15. Fundraising Income from Other Organisations

The income from other organisations includes income from foundations, educational institutions, religious institutions and associations. This is a mix of unrestricted as well as restricted funding.

Developments 2020

The income from other non-profit organisations in 2020 totalled €6.4 million which was a decrease of 8 per cent compared with the previous year (2019: €6.9 million), and 16 per cent below budget. The grants and donors are well diversified within this category. More information is provided in the “Where Our Funds Come From” section in our annual report.

16. Fundraising Income from Sale of Products

The income raised from sale of products are presented as net figures. The gross income is deducted with the direct costs and reported as net income. The net income raised from sale of products in 2020 totalled €20,000. The gross income from the sale of products totalled € 20,000 and the cost of goods sold were nil. This income was raised during special events for War Child mainly through selling of auction items, concert tickets and event dinners. More information is provided in the Where Our Funds Come From section in our annual report.

Expenses

Total expenses increased by a total of €1.6 million to reach €45.9 million - a growth of 4 per cent (2019: €44.3 million). War Child’s aim is to spend at least 85 per cent of its resources on its objectives – project activities, preparation and awareness raising. In 2020 War Child met this target. The ratio of expenses on the objective and sum of expenses was 86 per cent. War Child aims to spend maximum 4 per cent of its costs on management and administration. It met this target (2020: 3 per cent; 2019: 3 per cent) and it's fundraising expenses slightly increased to 11 per cent of its income (2019: 9 per cent). The main reason was that the amount of fundraising expenses increased due to additional TV campaigns and investment in door-to-door activities in 2020. Next to this, the total of fundraising income slightly decreased.

Cost allocation of general expenses

One of War Child’s core values is transparency. In our annual accounts this translates to openness about where our funds come from and how we spend them. Specifically, we are transparent about the cost allocation of general expenses. War Child allocates most of its head office expenses directly to the relevant cost category, meaning that - if and when possible - each expense is recognised under the relevant cost category. The expenses related to general management roles, such as the managing director, the director of Shared Operations, the Finance manager, the HR manager and the manager ICT are fully attributed to the cost category for management and administration.

As a result, a general cost allocation methodology is applied to general facility costs in the Netherlands only. The amount of allocated general costs is €519,195 and includes amongst others office rent, furniture, cleaning, reception and canteen costs. The basis of the allocation is the distribution of salary costs of employees in the Netherlands, resulting in 26 per cent of €550,886 is allocated to project activities, 20 per cent to preparation and coordination, 10 per cent to communication and awareness raising, 21 per cent to fundraising, and 23 per cent to general management and administration expenses.

Cost allocation of fundraising and awareness raising expenses

War Child’s events and activities for public engagement in the Netherlands may have a fundraising as well as an awareness raising component. The out of pocket expenses related to such mixed activities are attributed to each of the two categories on the basis of a percentage as justified by the objectives and activities of each mixed project. For each mixed activity, the project leader provides a justified weight of each component. For example, the costs of engaging the public face to face are split 75%-25% between fundraising and awareness raising. During those activities, new Friends are acquired and many individuals are being informed about the children affected by conflict.

The allocation percentages are consistently determined and applied in consecutive periods. If percentages change year on year, management justifies this based on a changed nature of the activities. All employees with a fundraising role are fully attributed to the cost category for fundraising.

War Child intends to apply percentages which are realistic and which are in line with those that are applied by similar organisations for similar projects. The allocation percentages used by other organisations are however not transparent. War Child would be in favour of more transparency and clearer guidelines on the subject. Below is a table with the applied percentages and resulting amounts of awareness raising in our largest mixed projects. Some projects were not budgeted because at the time of planning it was unsure or unknown if those would take place in 2020. Vice versa, not all other projects in the budget took place in 2020. Budgeting and planning for fundraising activities was more challenging than in previous years due to the consequences of the COVID-19 pandemic in 2020.

17. Project activities

Expenses towards project activities are costs related to the implementation of War Child’s programmatic interventions. War Child's projects are amongst others providing psychosocial support, child protection, education and advocacy. War Child implements its projects itself as well as by partner organisations. Costs of project activities include expenses such as staff costs, materials purchased, location rent, transport costs and office expenses. Costs of the country offices are fully attributed towards project activities. Costs of the head office are attributed to project activities if the costs are directly related to implementing projects, which in most cases means that those expenses are funded by a grant. This includes our Can’t Wait to Learn and TeamUp programmes as well as our research and development projects.

Developments 2020

Total expenses on project activities are €39.7 million in 2020, or 1 per cent above previous year (2019: €39.1 million) and 5 per cent below budget. Our budget for the year consists of ensured funding from signed grants as well as of ambitious projects that we will try to raise funds for in the various countries. In 2020, our fundraising targets were mainly achieved. War Child was able to realise a small growth of in project activities meaning that we were able to implement more projects in this challenging year.

In 2020 the Syrian response showed a growth from €5.8 million to €7.3 million. Other differences can be seen in the table above.

18. Preparation and Coordination

Costs for preparation and coordination include, for example, costs associated with the evaluation of our programmes, security measures and security trainings, quality assurance, programme management from head office, travel to country offices, internal audits, logistics management and monitoring activities.

19. Awareness Raising

Awareness raising includes the costs of raising awareness of people in general and of certain focus groups and networks in particular. Direct costs include those costs related to lobbying, War Child's website, conferences, campaigns and the awareness raising component of events and actions as described earlier under Cost Allocation.

Developments 2020

Awareness raising costs of €1.8 million are 39 per cent above budget and 15 per cent above the level of the previous year (2019: €1.6 million).

20. Fundraising

Costs of fundraising are incurred for activities which aim to persuade people, businesses and other organisations to become Friends of War Child, to donate money or to enter into grant contracts with War Child.

Developments 2020

Total fundraising costs divided by total fundraising income in 2020 is 11 per cent (9 per cent in previous year). In 2020, total costs of fundraising increased by 20 per cent in comparison with the previous year. Fundraising costs 2020 are above the 2020 budget due to management decisions taken during 2020, aiming to realize a tv campaign with theme 75 jaar freedom after WWII 'Doorbreek het zwijgen' and more investment to achieve more unrestricted income in the future in door-to-door activities. The total amount of fundraising costs of €4.6 million consists of costs for raising unrestricted funds –for example from our Friends-, restricted funds –for example from institutional donors- and costs for setting up new fundraising offices –War Child’s contributions to War Child Sweden and War Child Germany.

War Child contributed to the running costs of War Child Sweden, which is an independent foundation that raises funds for War Child in the Swedish market. It also contributed to the operational costs of War Child Deutschland gGmbH, which is a legal entity established in March 2019 of which the shares are fully owned by Stichting War Child. Costs for setting up fundraising offices in new markets increased in comparison with 2018 because of the new office in Germany. During the year an extra investment in fundraising activities in Sweden was decided.

21. Management and administration

War Child strives to spend as much on its objective as possible and it is continuously pursuing cost savings opportunities. On the other hand, it realizes that the lowest management costs are not necessarily desirable. Laws, regulations and donor requirements as well as risks of fraud and child safety contribute to a complex environment that require an adequate governance structure, a professional ICT infrastructure and an accurate administrative organisation and internal controls. If management and administration would not get proper attention then the continuity of the organisation could be at risk.

War Child aims to keep its percentage for management and administration below 4 per cent. In 2020 the same percentage applies as last year with 3 per cent. In the coming years, War Child will strive to keep this percentage as low as possible, since operational excellence and efficiency are an important part of its strategic objectives. It is however difficult to compare the ratios of organisations that have a different group structure and that implement very diverse types of activities.

Developments 2020

The costs for management and administration in 2020 (€1.6 million) are 2 per cent under budget (€1.6 million) and are 16 per cent above the level of 2019 (€1.4 million). This is due to the overall growth of the organisation in recent years.

22. Financial gains / (losses)

Developments 2020

War Child does not invest the funds it is trusted with by its donors. Interest income is related to interest received on War Child's bank accounts. The year 2020 saw an exchange rate gain of €253,002. This is mainly related to the revaluation of outstanding grant award and bank balances in US Dollar. War Child does not budget these gains or losses since those are unpredictable. War Child does not hedge this risk, but takes appropriate measures to mitigate the risk as far as possible. Also see the notes to the balance sheet.

Personnel costs

War Child’s total personnel expenses are specified below. The growth of 12 per cent compared to 2019 is mainly attributable to our growing staff base in Amsterdam. Our expenses for project activities increased slightly by 1 per cent compared with previous year. About 43 per cent of total staff expenses originate in the Netherlands, while 22 per cent of our full time equivalent (FTE) employees are located in the Netherlands. This is explained by higher average salaries. A large portion of the staff costs in the Netherlands are related to programme implementation - and those staff are funded by grants. The category other personnel expenses includes costs for amongst others commuting transport, insurance, training, recruitment, interns, canteen and team building.

Independent Auditor's Costs

War Child’s financial statements 2020 are audited by KPMG Accountants N.V. War Child determines the presentation of the auditors fee as the total fees for the examination of the financial statements based on the reporting period of the financial statements, irrespective of when the work is performed. 2020 expenses related to the global KPMG group totaled €118.183. During 2020, additional services related to audit of 2019 Financial Statements were performed and additional of €18,180 costs were booked. Additional costs for 2019 audit presented under 2020 costs in the overview below.

In 2020, War Child involved other KPMG Network companies to perform local audit in several countries of operation. The component 2020 audit for Lebanon was performed by KPMG Lebanon against a fee of €11,100. €5,550 additional KPMG Lebanon audit costs were booked in 2020, in relation to 2019 component audit in Lebanon. KPMG Cyprus performed 2018-2019 statutory audit of Syria office for the €8,925 costs.

Three Joint Response projects in Syria funded by the Ministry of Foreign Affairs of the Netherlands and the EU Delegation were audited by KPMG Lebanon, with the total audit costs as €17,000. EU project Realizing Rights and Expanding Opportunities of Children and Youth in Post Conflict in Sri-Lanka was audited by KPMG Sri-Lanka against the fee of €6,000.

In addition, 2020 payroll services for Syria office was provided KPMG Cyprus, for the annual amount of €  4,284.

All amounts are including VAT. 2019 numbers were adjusted to fit the required presentation.

All amounts are including VAT.

Attribution of expenses

The above clarification of the attribution of expenses towards expense categories is in accordance with Annex 3 of the accounting guideline RJ650.  The attribution towards cost types is done consistently throughout the years. War Child attributes expenses as per the following guidelines:

• Contributions includes expenses by implementing partners;

• Procurement includes all goods and services procured from third parties excluding outsourcing;

• Outsourcing includes services that are rendered by third parties executing a normal business operation of War Child, not being the implementation of project activities. An example is the outsourced acquisition of donors;

• Publicity includes advertising and visibility of War Child or its donors to the general public;

• Staff includes all personnel expenses;

• Housing includes rental, utilities and cleaning of office and accommodation;

• Office includes IT, communication, small equipment and postal mail;

• General includes bank costs, audits, value of gifts in kind and other general costs;

• Depreciation equals depreciation costs.

Appropriation of the Result

On June 10 2020, the Supervisory Board of Stichting War Child discussed the annual report and the financial statements 2020. In accordance with article 8.1.a of the articles of association of War Child, the Supervisory Board adopted the annual report and the annual accounts of War Child, including the proposed appropriation of the deficit. The members of the Supervisory Board as per 10 June 2021 are Peter Bakker (President), Hans van den Noorda, Willemijn Verloop (Vice-President), Rob Theunissen (Treasurer), Raymond Cloosterman, Edith Kroese, Arjan Hehenkamp and Stef Oud.

The articles of association provide guidance about the appropriation of the deficit in stating that the foundation shall not keep more reserves than reasonably necessary for its continuity, as determined by the Managing Director. Art. 3.4: "De stichting houdt niet meer vermogen aan dan naar het oordeel van de directie redelijkerwijs nodig is om de continuïteit van haar werkzaamheden ten behoeve van haar doelstelling te waarborgen."

Events after the balance sheet date

No events have occurred between the balance sheet date and the date on which the Supervisory Board adopted the annual accounts, which would affect the 2020 annual accounts or the condition of War Child at the end of the financial year or thereafter.