How to read a Financial Report?

BALANCE SHEET
INCOME STATEMENT
CASH FLOW STATEMENT
NOTE

WHAT DO THEY TELL US?

A homework on

NATURE SOCIETY SINGAPORE

AUSTRALIAN WILDLIFE CONSERVANCY

Financial reports' of 2005 to 2010

Carnegie Mellon University Australia - 90724 Financial Analysis - First Assignment, Feb2012
Nature Society (Singapore) and Australian Wildlife Conservancy's Financial Statements 2005 to 2010
by Thien, Do. PPM S12. Box 65, ttdo@andrew.cmu.edu

FINANCIAL ANALYSIS

Assignment One: Individual Analysis on Financial Statements [12 marks].

Examine and analyze the items in the latest balance sheets, income statements, cash flow
statements, notes to financial statements, and auditor’s reports of two organizations from a
similar-type of industry, or not-for-profit organizations, or governmental organizations.

I. NATURE SOCIETY SINGAPORE

II. AUSTRALIAN WILDLIFE CONSERVANCY

TYPE: NOT-FOR-PROFIT ORGANIZATIONS

MATERIALS: FINANCIAL STATEMENTS FROM 2005 TO 2010

Page 2


I. INTRODUCTIONS

Nature Society (Singapore) (NSS), is a non government, Not-For-Profit
organizationfounded in 1991. It's contributed a big part to promoting the
natural heritageof Singapore, an island city state of a total land area of 647
square km.

NSS core missions are: to leverage nature appreciation; to advocate conservation of the
natural environment in Singapore and to leverage participation and collaboration in local,
regional and international efforts in preserving Earth's biodiversity. Its main activities are
including guided nature walks, overseas eco-trips; nature conservation surveys and projects
and co-campaigns with other partners.

Run by volunteers, the NSS depends financially on its members' contributions as well as
companies, institutions and individuals.

http://www.nss.org.sg/

Australian Wildlife Conservancy (AWC) is an independent Not-For-Profit
organization (2001), working to conserve threatened wildlife and ecosystem
and to raise awareness and appreciation to nature in Australia.

Based in Australia, home to more bio-diversity than any other developed
countries in the worlds but also where wildlife is facing an extinction crisis,
AWC works principally through the acquisitions of extensive areas of land. These lands are
managed for conservation and research programs. The organization also helps implement
large-scale, practical conservation programs around Australia to provide a more secure
future for threatened animals and their habitats.

AWC is funded by the public as well as government grants.

http://www.australianwildlife.org/Home.aspx

Page 3


PART I

THE BALANCE SHEET
NATURE SOCIETY (SINGAPORE) (NSS)

High Payables.BS 2010, Receivables was $30,699SGD, nearly 8 times higher than previous
years of 2009. Question: The organisation had many projects and activities and need to
collect cash quick to fund those, why was Receivables of 2010 so high?

Significant Increase In Asset: BS of 2008showed a huge increase in asset of $423,032 SGD, or
39,69% in comparison with previous year. The year after that, it recorded a lost in Asset of
$65,896 SGD. Question: Why the organisation didn't use its Cash and Cash Equivalent
($939,694 SGD) to increase its investment to generate a higher and steady income in the
future?

AUSTRALIANWILDLIFE CONSERVANCY (AWC)

Pool Of Cash And No Investment.On BS 2007, AWC had $5,190,051 of "Cash and Cash
equivalents" and no "Current Investment" or "Loans and Borrowings". Question: Why it
didn't investits own cash (or borrow more) into some future investments? What is the plan
for future?

Future Investment. BS 2008showed a jumping total Liabilities, almost 10 times higher than
previous year which allowed it chance to expand the business. Question: With $10,543,534
AUD in "Cash and Cash equivalents" why AWC had a high Loan and Borrowings of another
$2,106,206 AUD? What was the money for and why AWC didn't use its "Cash and Cash
Equivalents" for that.

Page 4


INCOME STATEMENT

Change Of Expenditure Skew from Print to Online. The 05 ISs showed an obvious
movementtoward Going Online. From 2006 to 2010 the organization decreased its expense
for "Publication & Printing" from $40,111 SGD down to $2435 SGD; while its "Web
Maintenance" increased from $0 in the first 2 years to $30,841 SGD. Question? How this
change in expenditure would affect its income and future growth?

Management inefficiency.IS 2009: Donation Income decreased heavily, reporting a negative
of $386,485 SGD or 90,05% lost as compared with previous year. QuestionWhy there were
more Staffs and trips expenses on the year and still they couldn't show income efficiency?


Increase in main income. In IS 2008, there was a $9,480,419 AUD increased in Donation and
Grants. Being an Not for Profit organization and mainly get income from Public and
Government grants, what were the financial events or other events that madethisso low this
year? Why AWC couldn't keep this grow the yearsafter that?

Administration and Development. In IS 2010, there was an increase by 91.8% or $459,892
AUD of Administration and Development expenditure, in comparison with previous year.
Question: Why Administration and Development expenditure increased that much while
overall operating surplus for the year slightly decrease of $669,215 AUD ?

Page 5


CASH FLOW STATEMENT

High Payables.Looking at CFS 2010, we see that there was an increase in Payables of $
63,179 SGD higher than Net Cash generated from operations is $49,192 SGD. Question:
Could the organization can financially supportits current activities if Payables was that high?

Negative Cash Flow.From CFS 2009, Cash and Cash equivalents at beginning of the financial
year was $908, 898 SGD, at the end of the year it was $856,471 SGD. Question: With so many
activities and projects on the year, how could the organization can ensure a healthy
operation results with a negative cash flow ?


Increase of Cash Flow Investing Activities. In CFS 2008, there was an significant increase of
Cash Flow Investing Activities, brought it to $12,506,970 AUD and Loan Received (Repayment
of Finance Lease Liabilities) of $2,100,000 AUD. Question: What activities or project was it
used for ?

Low Cash Flow from Operating Activities.CFS 2009 let us know that Net Cash From
Operating Activities decreased to $6,296,594 AUD or 60% as compared to 2008. Question:
How and why did net cash decrease so heavily ?

Page 6


NOTES

Unbalanced Budget Between
Groups. Of all Special Interest Groups
and Committees, Plant group and
Vertebrate Study Group brought back
the most positive income while
expenses were low.

Aside Butterfly (which NSS has been
running yearlong initiative "Painted
Wing"), Incomes from Other Groups like Birds or Marine Conservation were extremely low
compared to its expenses. Why didn't NSS reallocate its budget to leverage Plant and Vertebrate
Study Groups, earn more income to support the other groups?

Growing Assets but Losing members.Looking at BS or IS, we see that NSS has been growing
pretty good, however the Notes let us know that it's losing its members (and income). Single
members with annual fee of about $40 SGD has decreased 165 people, or 16,94% in 5 years.
Family members also gradually decreased 27.59%.Members are very important to the existence
of NSS, see that income from Single is the most profitable, what should be done to increase
members from this group? How about drawing potential young members (Junior) or partnership
with external organizations ? (it will help to get more members)

AUSTRALIAN WILDLIFE CONSERVANCY (AWC)

Notes of 2009 let us know about the Grants of previous year, included $8.49mto support a
purchase but didn't explain about the poor grants of 2009, $130,243 AUD. This was the lowest
Grant that AWC received in 5 years. It also didn't explain why Surplus of 2009 was so low
($5,741,993 AUD) compared to previous year ($14,639,471 AUD).

In the 5 Notes, AWC mentioned about Contingencies that require some long term
responsibilities, some of them can be up to 99 years like the agreement to Protect the land held
at Scotia Sanctuary, Newhaven, Mornington, Marion Downs, Kalamurina,  Wongalara, Taravale
Station, Mt Zero and Pungalina. Should AWC set up an long-term fund to ensure and support the
successes of these ?

Page 7


PART II

The BALANCE SHEET
Size of Companies.The first difference between Nature Society (Singapore) (NSS) and
Australian Wildlife Conservancy (AWC) is the size of 2 organizations. By 2010, Total asset of
NSS was $1,483,197 SGD while that of AWC was $63,148,984 AUD.

Reason: They are 2 recognized active NFP organizations of the same category but they have:

Different source of income:NSS is mainly funded by donors and its members. AWC is mainly
funded by government grants.

Different coveringarea : NSS works on Singapore, a small island with total land area of 647
square km and 4m in population. AWC cover Australia area which is 8,468,300 square km,
13,088 times larger.

Different activities: NSS focuses on projects for its members, while AWC conducts
observation researches and programs on the land that they own.

Invert Ratio of Current Assets and Non Current Assets.Second difference isainvert Ratio
between Current Assets/ Non Current Assets, by 2010, the ratio are:

Current Assets Non Current Asset Currency

NSS 967,566 515,631 SGD

65,23% 24,77%

AWC 14,877,861 49,920,705 AUD

22,96% 77,14%

AWC works principally through the acquisitions of extensive areas of land and this activities
always associated with large asset. Theiroperating liabilities and other current assets are
much smaller in comparison with their Non Current Assets as it includes the lands they own.

Different from that, NSS Total current assets has to be higher than their Non Current Assets
as they run several projects a year to complete the organization's missions.

Page 8


THEINCOME STATEMENT
Net Surplus.Net surplus for NSS in 2010 showed an negative number of $3,056 SGD; while
AWC had $5,072,778 AUD. However It didn't look quite like NSS had a bad year and AWC had
a good year.

2010 was the year NSS had some good news: their efforts to push up Event and activities
start to show results in $63,436, representing 334,82% increased compared to previous year.
They also spent some $30,841 SGD in Web maintenance - nearly 100 times higher than 2009.
The web set-up was part of preparation for strategic plan in future.

For AWC, a surplus of $5,072,778 AUD for 2010 is a strong results but it represented a
decrease of $669,215 AUD compared to that of 2008, so this is not really a good year for
AWC.

The Switch in Model of Working.The IS also let us know that NSS has been switching from
Printing & offline subscription to Online based working model, though this is quite late
compared with other organizations, especially putting in Singapore high internet penetration
landscape.

On 2008, it started to spend a modest amount of money on Website (($481 SGD) and only
had it developed in 2010 with $30,841 SGD as mentioned above. During the switching time,
number of Membership subscription lightly decreased from $66,600 SGD to $50704 SGD.
When it comes to a switch in model of working this is a good result; in other words, NSS had
successfully kept old members and gain more internet sawy ones, as well as pushing more
interactive activities online and offline.Besides, with a small country of 4m in population and
77.8% internet penetration, going online is a MUST so this is a good move.

However in AWC case, though they also have a nice website but they will never growing over
online, the website will help with communications and support their operation only.

Page 9


THE CASH FLOW STATEMENT
Purchase / Depreciation of Property, Plan and Equipment of NSS was well budgeted and has
remained quite constantly over 5 years with the mean of $16,522 SGD; this item for NSS was
identified as part of Operation Activities.

This is different from AWC. Their cash flow for Acquisition of Property, Plan and Equipment
has been various between $5,272,661 and $0, based on the projects they worked on at the
time. This is put on Investing Activities.

On SFS of AWC, there was Repayment of Borrowings, which wasn't annually showed up, it
could be as high as $7,796,824 on 2006 or $0 on 2007 and 2010. This is because there were
Borrowings for acquisition new large lands for nature observation and researches, an
important mission of AWC. It's normal.

However, NSS hardly ever borrows from banks. They don't have this on the Cash Flow
Statement.

Page 10


COMMENTS
NSS: From Financial Statement of 5 years in a row, I see that the span of time we are looking
at (2006-2010) is the organization’s changing time.

Long time established (before officially founded in 1991, It was formerly known as the
Singapore branch of the Malayan Nature Society, formed in 1954), the organization is facing
the challenge of retaining its members, expanding with more activities, and catch up with
pace of technology-involved world. (Also, it has its FS professional audited)

Being an NPFO which has income mainly from donors and membership fee, understanding
target customers (Members) is very important. With 77.8% of Internet Penetration, going
online is a must to survive in Singapore, the customers are no longer go to bookshop or
reading publications to get information, they go online!. In such a landscape, it's quite late
for NSS to start going online until 2008. The numbers tell that with hesitance, it decided to
cut cost on Publication one year before that, still it took the organization two more years (3
years totally!) to really take steps in online, with a "real interactive website".

Closer looking in the Financial Reports, I see that the biggest problems the organization has
to fix now is how to retain and expand its membership. In 5 years of restructuring the
working model, it has lost some 19.64% members of all types; this didn't strongly result in a
lost of income but membership is very important to model working of NSS, without
members, the NSS can't complete its missions.

Another notice in NSS's operation is the unbalanced budgets between groups of interests.
There were groups with income of less than half of its expenses; and there were other
groups with nearly no expenses ($2 SGD, Plant Group, 2010) and brought back a quite big
amount ($7.718 SGD).

However I can see that NSS managed quite well during the whole time. Its Total asset has
grown from less than 1m to 1.49m in 5 years and with full effort with online, there's a high
possibility that the trend of growing is up for the next coming years.

Summary Suggestions
Good Asset growth rate Balance Expenses between groups of interest
Actively interactive (Events, exhibitions, Initiatives to draw more members
Talks..)
Actively interactive online More partnership with other organizations

Page 11


AWC:

Originatedfrom a land purchase in 1991, 10 years after that the AWC became a public
charitable organization. This clearly set the model working for AWC and it has steadily grown
since then.

By acquiring large lands for nature observation and researching purposes, Asset of the
organization increased strongly year on year with an average Growth Rate of 21%.

However, based on acquiring lands (and facilities for each) its Loans and Borrowings and
Loan are not frequently, thus sometimes it's hard to tell just from numbers; justifications
have to be considered from different angles.

Regarding to the organisation's missions, we see that AWC has completed so well its mission
of reserving the nature. So far it owns and manages 21 sanctuaries covering a combined area
of 26,000 square kilometers, more land than any other non-government environment
organization in Australia.

AWC's secondary missions are to conduct researches and observations on its lands. We don't
see this clear on the financial report but the organizations has done well on this and has help
regional Ecologist features in BBC Wildlife and New York Times and other recognized media.

It's maintained a good relationship with not only the Government, Ecologists and Media but
also its Readers by its newsletters (also online version).

It's done well the reserving mission. One thing AWC can improve is more activities for
members to enhance the appreciation to nature (Such as: designing more eco-activities,
initiatives, communications programs...)

Summary Suggestions
Very Good Asset Growth Rate Expand more activities
Fulfill its missions More partnership with other organizations
Maintain a very good relationships with
other stakeholders

END.

Page 12


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