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Transcript of World ORT · 126 Albert Street, London, NW1 ?NE, United Kingdom. ... 59 Route de Chancy, P.O. Box...
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World ORT
Consolidated Report and Financial Statements
Year ended 31 December 2016
201 7-09-14
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General Information World ORT
Contents
Page:
2 Report of the trustees
8 Independent Auditors' Report
10 Consolidated Statement of Comprehensive Activities
11 Consolidated Statement of Financial Position
12 Consolidated Cash Flow Statement
13 Consolidated Statement of changes in Charitable Funds
14 Notes to the Consolidated Financial Statements
Company secretary and registered office
Stephen West, 1, Rue De Varembe, CH-1211 Geneve 20, Switzerland.
Administration address
126 Albert Street, London, NW1 ?NE, United Kingdom.
Auditors Ernst & Young, 59 Route de Chancy, P.O. Box 48, CH-1213 Petit Laney 1, Switzerland.
Bankers UBS AG, case Postale 2770, CH-1211 Geneve 2, Switzerland.
Solicitors Professeur Franc;ois Bellanger, 8-10 Ruse de Hesse, CP-5715, 1211 Geneve 11 , Switzerland.
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Report of the Trustees World ORT
for the year ended 31 December 2016
The trustees of World ORT present their annual report for the year ended 31 December 2016.
Trustees with specific functions are termed ''officers".
Officers Non-Executive
President
Deputy President Chair of the Board of trustees Treasurer
Secretary
Executive Director General & CEO
Chief Financial Officer and Company Secretary
Other Chair of the Audit and Risk Committee
Chair of the Finance Committee
to 22 May 2017
Mauricio Merikanskas
Dr. Conrad Giles Jean de Gunzburg Shelley Fagel
Dario Wertheim
to 30 June 2017 Shmuel Sisso Stephen West
to 22 May 2017 Martin Behr
to 03 July 2017 Graham Edwards
The responsibili ty for the financial statements lies with the Board of Trustees.
Trustees' responsibilities
from 23 May 2017
Dr. Conrad Giles Richard Bernstein
Dario Wertheim Peter Klauber
Judy Menikoff
from 01 September 2017 Avi Ganon
Stephen West
from 23 May 2017 Emil Kalo
from 04 July 2017 Peter Klauber
The trustees of World ORT are responsible for the preparation of the financial statements for each financial year which give a true and fair view of the organisation's income and expenditure during the year and of its state of affairs at the end of the year. In preparing these financial statements they are required to:
• select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • state whether applicable accounting standards and statements of recommended practice have been
followed, subject to any material departures being disclosed and explained in the financial statements: and
• prepare the financial statements on the going concern basis unless it is inappropriate to assume that the organisation will continue in business.
The responsibilities of the trustees include keeping proper accounting records which disclose, with reasonable accuracy, at any time, the financial position of the organisation. They are also responsible for safeguarding the assets of the organisation and hence for taking reasonable steps for the prevention and detection of fraud and other breaches of laws and regulations.
Status of the World ORT group World ORT is a not-for-profit organisation registered with the Registry of Commerce in Geneva and domiciled in Switzerland. The registered address is:
1, Rue De Varembe, CH-1211 Geneve 20, Switzerland.
Mission and objectives The mission of World ORT, a non-profit, non-political organisation whose aim is to work for the advancement of Jewish people through training and education; to provide communities, wherever they are, with the skills and knowledge necessary to cope with the complexities and uncertainties of their environment; to foster economic self-sufficiency, mobility and a sense of identity through the use of state-ofthe-art technology.
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Report of the Trustees (continued) for the year ended 31 December 2016
World ORT's programmes
W orld ORT
Important to the success of World ORT is the role of affiliated organisations in fundraising or implementing programmes. Affiliates are autonomous national organisations forming part of the worldwide ORT network and using the "ORT' name. This network operates exclusively for educational purposes.
Fundraising is performed by World ORT and by the affiliate, national organ isations in various countries. Fundraisers have a catalogue of World ORT projects to show potential donors. Their success depends on a number of factors including the economic environment and donor's life cycle.
Projects are not commenced until funding has been secured and project activity can be cyclical. World ORT has managed to smooth these effects by entering into partnersh ips with national and local governments where possible.
Each relationship with a government body is defined by the relevant contract and accounted for accordingly.
Education division activities of 2016 The first Ecology Summer School was run in Panama in February 201 6 with 30 students from 8 countries. This was the first summer school which was tailor-made for ORT students in Latin America.
World ORT Media Technology summer school. Run in Sofia, Bulgaria, for the second time with 28 students from 7 countries. ORT Davidson summer school in Weizmann Institute in Israel was traditionally ru n in August 2016 with the attendance of 20 students from 9 countries.
A successor of Wingate Seminar, LEAD training for teachers was run in London in November, focusing on leadersh ip training for middle and senior management in Jewish schools with 22 participants from 13 countries.
The 13th World ORT Hatter Seminar took place in April 2016 with the subject of "New Directions in Math Education" with the attendance of 20 participants from 11 countries.
World ORT continues to run and develop web projects: a. Music in the Holocaust b. Russian Jewish Encyclopaedia
Project Implementation in operational countries FSU: World ORT and ORTs in the countries of the FSU continue to run a long operation which consists of 17 Jewish schools, training centres for adults and Research, Development & Education. In 2016, ORT in FSU approached the final stage of the QUEST initiative and prepared transition into the new 4-year programme focused on STEM in 16 Jewish schools.
World ORT in Eastern Europe: a. Bulgaria - a new science lab was launched in September 2016. The number of students in Lauder ORT school reached more than a thousand. b. Czech Republic - ORT continues to develop science and technology in Lauder school in Prague.
Heftsiba programme sends teachers from Israel to schools in FSU and Baltic States for an academic year. This programme is sponsored by the Israel Ministry of the Diaspora.
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Report of the Trustees (continued) for the year ended 31 December 2016
World ORT's operations in Israel:
World ORT Kadima Mada
World ORT
WOKM is working with the Israeli government and local municipalities throughout the country to improve standards in schools through programs coordinated by educational specialists based at World ORT in Israel and with the backing, support and experience of World ORT specialists worldwide.
World ORT Kadima Mada "Educating for Life" Educational Network The creation of this new educational network enables WOKM to be involved in the day-to-day management of its member schools. Through direct management of these schools, WOKM is able to create tailor-made solutions and to effect greater improvements in education for the benefit of the students and for the wider Israeli education system.
Kfar Hasidim, Hodayot, Abir Yaakov and Kfar Silver serve as a "last stop" for some of the most disadvantaged youth in Israel who, without special intervention, are at risk of failing academically and socially. Both Kfar Hasidim and Hodayot high schools have been affiliated with WOKM since 2007 and have seen significant improvements in educational achievement during that time as a result of their affiliation. WOKM has helped these schools to implement various pedagogical initiatives and has provided them with new and innovative educational equipment, cutting-edge pedagogical programs and state-of-the-art science and technology laboratories.
Levinson High School and Rabin High School in Kiryat Yam, which also recently became part of the World ORT "Educating for Life" Educational Network, are now beginning to benefit from a raft of new innovations in pedagogy and new investment to ensure that students, many of whom are from deprived backgrounds, have an equal and even a better chance to reach their full potentia l.
World ORT YOUniversity Centres of Excellence Providing the opportunity to succeed for students in under-served communities in Israel The World ORT YOUniversity Centres of Excellence in Israel enable underprivileged children to gain access to after-school educational enrichment opportunities in STEM subjects never before available in their communities.
The Centres of Excellence serve students in Israel's geographic and socio-economic peripheries
• Kiryat Gat, Dimona and Beer Sheva in the south. • Nahariya, Nazareth, Kiryat Yam and Sated in the north. • Jerusalem, serving Haredi (strictly Orthodox) youth. • East Jerusalem, serving the city's Arab population.
The centres offer junior and senior high school students hands-on educational experiences through project-based learning using the most up-to-date innovative educational tools and methodologies. Examples of courses offered at the World ORT YOUniversity Centres of Excellence include: architecture, robotics, CSI forensics, young computer technician, chess club, photography & videography, young engineers, entrepreneurship, astronomy & space club, fashion design, electronics, young doctors, website building, digital media, 3D design and printing, veterinary medicine and more. More than 5,000 students are benefitting from the classes and activities offered at the seven YOUniversity Centres of Excellence this academic year.
Kfar Silver During 2016 World ORT acquired the real estate and operations of Kfar Silver Youth Village and farm near Ashkelon in Southern Israel. In the grounds is a school with dormitories the operation of which is performed by WOKM within their network of schools.
The trustees believe the youth village has great unrealised educational potential (see note 20).
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Report of the Trustees (continued) for the year ended 31 December 2016
lnvesbnent Policy
World ORT
The trustees have unlimited powers of investment. The trustees delegate this responsibility to the investment committee who meet approximately three times per annum. Details of the financial assets can be found in note 11 .
In summary, the investment policy has three main strands: 1 Ownership of freehold land and an office building , ORT House in London, which hosts the
administrative staff.
ORT House comprises most of the value of the fixed assets. Some offices in the property are let to tenants all of whom are non-commercial organisations. The revenue from the letting activity in 2016 was $401 ,000 (2015: $452,000). The property's running costs in the year were $479,000 (2015: $511 ,000).
2 Investment in State of Israel bonds. About half of the investment in bonds is on behalf of a longterm project in Israel.
3 Placement of funds which are not required in the day-to-day running of World ORT in the hands of an investment manager of international standing. The investment committee gives the investment manager the overall asset allocation which is regularly reviewed.
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Report of the Trustees (continued) for the year ended 31 December 2016
World ORT
Risk Management The trustees examine the major risks that the charity faces each financial year when preparing and updating the strategic plan. Details of the financial risks faced by World ORT are in note 17.
Operational risks are identified as (1) the reliance on a small number of country organisations for a large proportion of the voluntary income, (2) project management, (3) the defined benefit pension scheme. There is a risk of World ORT having a concentration of only a few fundraising countries or organisations. This risk is managed as follows:
1.1 World ORT has direct access to certain major donors in agreement with their local country organisations.
1.2 Encouraging donor country organisations to diversify their fundraising base from major individuals and family trusts to many individual small donors.
1.3 Helping the operational countries to raise funds. In the first instance they are attracting funds from government and municipalities. Secondly, they are seeking parental contributions. Thirdly, they are seeking third-party donations hopefully including major donors. This last point has proved very difficult in countries where there is not yet a culture of giving.
2 Project management risks mainly consist of (1) the deliverable benefit is not defined and agreed by all parties, (2) projects start before adequate funding is secured, (3) the approved spending is exceeded and (4) that the benefit is not delivered within the agreed time. World ORT manages these risks using procedures, plans and reviews.
2.1 In the case of major donors or third party organisations, the tangible or intangible object to be delivered is agreed at the outset either by a project proposal document or a formal agreement.
2.2 Projects are not started until there is certainty as to the source of funds. The Director General and the Chief Financial Officer authorise the project to start by signing a project initiation document.
2.3 The finance system is designed around project management. Reports are available by project to show progress in funding , expenditure, the current project balance and the timeline to completion.
2.4 Project managers turn the initial project plan into purchase orders which are then authorised by their manager.
2.5 Project managers regularly review their data in the financial planning system and then any revised project timeline is authorised by their manager.
2.6 Where agreed with the donors or third-party organisations, a report is submitted to them confirming that the project has been delivered and to the recipient's satisfaction.
3 The defined benefit pension scheme has a deficit of $641,000 as set out in note 18. The actuaries have advised the trustees of a recovery plan which has been put into effect. This commits World ORT to additional payments to the pension fund of about $100,000 each year.
The trustees closed the scheme to new members in 1999. It had three active members at the end of 2016. The next retirement is expected in 2018. The last member is due to retire in 2028.
The trustees explored the option to fix the liability with a third party. This mainly involves paying-up the deficit immediately plus an amount for future risk. At the moment, the trustees believe it is more cost-effective to manage the risk internally. The trustees appointed a professional trustee in early 2014 with the remit to identify scheme risk and recommend ways to minimise it. Further considerations of the scheme risk are in note 18.
4 The risk of not letting space in ORT House is managed by: 4.1 Maintaining the building to a commercially attractive standard. 4.2 A large space is occupied with a conferencing activity which has a diverse set of clients in the public and
charity sectors. 4.3 Dividing the rest of the excess space into smaller units to achieve a diversity of tenants.
Rental and licence fee revenue Number of tenants
and one licensed activity
under $50,000 per annum $51 ,000 - $100,000 per annum Total number of tenants and one licensed activity
6
Actual 2016
9 2
11
Plan Plan 201 7 2018
9 9 2 2
11 11
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Report of the Trustees (continued)
for the year ended 31 December 2016
Results for the year
World ORT
Total revenue for the year was US$64.2 million, compared with US$69.6 million in 2015.Revenue for restricted projects was US$57.1 million for the year (2015: US$63 million). World ORT International Co-operation projects in 2016 took place in Liberia, Myanmar andSri Lanka (run by IC Washington DC, USA office). There was a net total deficit of $331,000 for the year (2015: deficit of $3,357,000). Unrestricted activities showed a deficit of $142,000 for the year due to unrestricted revenuebeing better than budget and savings in management and administration costs.
Restricted projects showed a deficit of $189,000 for the year due to timing differences ofproject revenue to expenditure.
Review of financial transactions
Gains on investments, including re-invested income, were $196,000 compared with a loss oninvestments of $119,000 in 2015.
Property and fixed assets
Movements on fixed assets are set out in note 1 O to the financial statements. The trustees are of the opinion that the market value of freehold land and buildings is at least equal to thevalue shown in these financial statements.
The financial statements, together with explanatory notes set out on pages 14 to 36, summarisethe transactions of the organisation during the year ended 31 December 2016. The financial statements comply with International Accounting Standards.
Signed in terms of the Constitution of World ORT by:
Avi Ganon Director General
� ......-::
7
Chair of Finance Committee
25 September 2017
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EY Building a better working world
Ernst & Young Ltd Route de Chancy 59 PO Box CH-1213 Laney
To the Board of Trustees of
World ORT, Geneva
Laney, 25 September 2017
Phone +41 58 286 56 56 Fax •4158286 56 57 www ey corn/eh
Report of the statutory auditor on the consolidated financial statements
As statutory auditor, we have audited the accompanying consolidated financial statements of World ORT, which comprise the consolidated statements of comprehensive activities, consolidated statement of financial position, consolidated cash flow statement, consolidated statement of changes in charitable funds and notes, on pages 10 to 36, for the year ended 31 December 2016.
Responsibility of the Board of Trustees The Board of Trustees is responsible for the preparation of these consolidated financial statements in accordance with the International Financial Reporting Standards (IFRS) and the requirements of Swiss law. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. The Board of Trustees is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.
Auditor's responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Swiss law, Swiss Auditing Standards and Internationa l Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the aud itor considers the internal control system relevant to the entity's preparation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion In our opinion, the consolidated financial statements for the year ended 31 December 2016 give a true and fair view of the financial position, the results of operations and the cash flows in accordance with IFRS and comply with Swiss law.
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EY Building a better working world
Report on other legal requirements
We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 69b CC in relation to article 728 CO) and that there are no circumstances incompatible with our independence.
In accordance with article 69b CC in relation to article 728a paragraph 1 item 3 CO and Swiss Auditing
Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of consolidated financial statements according to the instructions of the Board of Trustees.
We recommend that the consolidated financial statements submitted to you be approved,
Ernst & Young Ltd
Fredi Widmann Licensed audit expert (Auditor in charge)
Enclosure
2/ Didier Lequin Licensed audit expert
• Consolidated financial statements (statements of comprehensive activities, statement of financial position , cash flow statement, statement of changes in charitable funds and notes).
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Consolidated statement of comprehensive activities World ORT for the year ended 31 December 2016
Unrestricted Restricted 2016 2015 Note funds funds Total Total
US$'000 US$'000 US$'000 US$'000
Revenue Donations and grants 3a 6,140 57,142 63,282 68,897
Property 3b 401 401 452
Meetings and other revenue 492 492 234
Total revenue 7,033 57,142 64,175 69,583
Expenditure Direct project and charitable expenditure:
Grants and project costs 2,192 57,395 59,587 66,240
Delivery costs 1,905 1,905 2,252
Property costs 3b 479 479 511
Other direct costs 746 746 581
Total 5,322 57,395 62,717 69,584
Other expenditure:
Fundraising 962 962 1,756
Management and administration 1,056 1,056 1,560
Total 4 2,018 2,018 3,316
Total expenditure 7,340 57,395 64,735 72,900
Net deficit before financial items 8 (307) (253) (560) (3,317)
Financial income Interest earned 4 4 4 Interest paid (17) (17) Investment income 21 25 46 75 Gains/(losses) on investments, realised and unrealised 11 157 39 196 (119)
Total 165 64 229 (40)
Deficit for the year (142) (189) (331) (3,357)
Other recognised gains and losses
Actuarial (loss)/gain on defined benefit (292) (292) 90
pension scheme
Net movement in funds (434) (189) (623) (3,267)
The notes on pages 14 to 36 form part of these Financial Statements
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Consolidated statement of financial position World ORT at 31 December 2016
2016 2015 Note US$'000 US$'000
Assets Non-current assets Property, fixtures and equipment 10 5,953 3,683 Financial assets 11 11 ,453 11 ,371
17,406 15,054 Current assets Inventories 166 Accounts receivables 12 6,590 3,424 Cash and cash equivalents 13 9,624 11 ,959
16,380 15,383
TOTAL ASSETS 33,786 30,437
Charitable funds and liabilities Charitable funds Restricted funds
Restricted endowment funds 19 (a) 1,848 2,624 Restricted project funds 19 (b) 16,746 16,159
18,594 18,783 Unrestricted funds
General reserves 4,586 5,020
4,586 5,020
Total Charitable funds 23,180 23,803
Non-current liabilities Interest-bearing loans and borrowings 16 247 Net employee defined benefit liabilities 18 641 707
888 707
Current liabilities
Accounts payable 14 9,517 5,927
Interest-bearing loans and borrowings 16 201
9,718 5,927
Total liabilities 10,606 6,634
Total charitable funds and liabilities 33,786 30,437
The notes on pages 14 to 36 form part of these Financial Statements
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Consolidated statement of cash flows World ORT for the year ended 31 December 2016
2016 2015 Note US$'000 US$'000
Cash flows from operating activities
Net deficit before financial items (560) (3,317)
Adjustments to reconcile deficit to net cash used in operating activities:
Adjustments to the profit or loss items: Depreciation and impairment of property and equipment 171 92 Adjust for pension actuarial loss thru reserves (292) 90 Other movement 1
(120) 182
Changes in asset and liability items (lncrease)/decrease in accounts receivables {2,420) 184 Decrease in inventories 27 Increase in trade and other payables 728 2,611 Decrease in defined benefit liability (66) (2)
(1 ,731) 2,793
Cash flows from investing activities Purchase of tangible fixed assets 10 (197) (170) Acquisition of cash with Kfar Silver ownership 142 Interest received 4 4 Interest paid (17) Investment income 46 75 Investment added 11 (815) (915)
Investment capital returned 11 928 730
91 (276)
Cash flows from financing activities Payment of borrowings (15)
Net decrease in cash and cash equivalents (2,335) (618)
Cash and cash equivalents at 1 January 11,959 12,577
Cash and cash equivalents at 31 December 9,624 11 ,959
The notes on pages 14 to 36 form part of these Financial Statements
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Consolidated statement of changes in charitable funds for the year ended 31 December 2016
Restricted Unrestricted funds
Endowment Projects US$'000 US$'000
At 1 January 2015 2,727 18,499
Deficit for the year 2015 (23) (2,420)
Grant from restricted endowment fund (80) 80
Pension actuarial gain
At 31 December 2015 2,624 16,159
Surplus/(deficit) for the year 2016 39 (228)
Grant from restricted endowment fund (815) 815
Pension actuarial loss
At 31 December 2016 1,848 16,746
An explanation of the pension actuarial (loss)lgain is set out in note 18.
An explanation of the Charitable Funds is set out in note 19.
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funds General
Reserves US$'000
5,844
(914)
90
5,020
(142)
(292)
4,586
World ORT
Total funds
US$'000
27,070
(3,357)
90
23,803
(331)
(292)
23,180
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Notes to the Consolidated Financial Statements at 31 December 2016
1 Authorisation of financial statements and statement of compliance with IFRSs
World ORT
The consolidated financial statements of World ORT for the year ended 31 December 2016 were authorised for issue by the trustees of World ORT on 19 September 2017. The consolidated financial statements of World ORT have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.
2 Accounting policies a. Basis of preparation
The consolidated financial statements have been prepared on a historical cost basis, except for financial instruments that have been measured at fair value. The accounting policies that follow set out those policies which apply in preparing the financial statements for the year ended 31 December 2016.
The consolidated financial statements have been prepared in US Dollars as this is the functional and presentational currency of the World ORT group. All values have been rounded to the nearest thousand (US$'000) except when otherwise indicated.
Judgements and key sources of estimation and uncertainty The preparation of financial statements requires the trustees to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities at the financial position date and the amounts reported for revenues and expenses during the year. However, the nature of estimation means that actual outcomes could differ from those estimates.
In the process of applying World ORT's accounting policies, the trustees have made the following judgements, assumptions and estimations which have the most significant effect on the amounts recognised in the financial statements.
• Legal claim In October 2007 ORT Israel brought a claim of US$4.7 million against World ORT and ORT America jointly. See note 22. Trustees have to judge if it is possible to estimate with any certainty the amount, if any, that may need to be paid, whether to make a provision for the future legal cost of the dispute and, with advice from legal counsel, whether to make provision in these financial statements for any liability arising out of the claims. There was a decision of the High Court in Israel to award ORT Israel $200,000. The provision has not yet been changed as ORT Israel may appeal the decision.
• Non-financial assets World ORT assesses whether there are any indicators of impairment for all non-financial assets at each reporting date. When value in use calculations are undertaken trustees must estimate future cash flows from the asset or cash generating unit and choose a suitable discount rate in order to reflect the present value of those
The current carrying value of non-financial assets of $6 million (2015: $3.7 million) is not considered impaired.
• Defined benefit pension scheme The valuation of the scheme assets and liabilities is subject to assumptions about discount rates, expected rates of return on assets, future salary increases, mortality rates and future pension
World ORT retains the services of qualified actuaries to advise the trustees when making these assumptions and the current applied assumptions are in line with prevailing market benchmarks.
• Fair value of financial instruments State of Israel bonds are valued at their nominal value as they will be held to maturity. Other financial assets are held in a portfolio. World ORT retains a fund manager to manage the portfolio and submit a period-end valuation. The liquid nature of the portfolio's assets leads the manager to apply their market value at the financial position date (also see notes 2i and 2j) .
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Notes to the Consolidated Financial Statements at 31 December 2016
2 Accounting policies (continued)
b. Jurisdictions
World ORT
World ORT and its subsidiaries are registered in Switzerland, United States of America, Israel and the United Kingdom and are therefore subject to tax law in these jurisdictions respectively. As each entity is exempt from paying tax, no IAS 12 disclosures have to be made.
c. Basis of consolidation The consolidated financial statements of World ORT for the year ended 31 December 2016 include five subsidiary undertakings, consolidated in full , as follows:
Subsidiaries Country Status
World ORT Inc. United States of America Wholly owned World ORT Trust United Kingdom Wholly owned Kfar Silver Youth Village Israel Wholly owned
World ORT Kadima Mada Israel Effective control *
Sasa Setton Kav Or Israel Effective control *
* World ORT owns 49% of World ORT Kadima Mada. The remaining 51 % of the shares are held in trusteeship equally by seven independent, unrelated shareholders. The shares were transferred to the trustees on 04 May 2012. World ORT considers that it has effective control with this share structure and benefits from an independent oversight. The World ORT Kadima Mada senior staff are appointed by World ORT. The World ORT Kadima Mada budgets are controlled and approved by World ORT.
There is no minority interest in World ORT Kadima Mada as there are no permanent assets and no free reserves. The ownership represented by the shares is non-beneficial.
* World ORT Kadima Mada owns 49% of Sasa Setton Kav Or. The remain ing 51 % of the shares are held in trusteeship equally by seven independent, unrelated shareholders. The shares were transferred to the trustees on 1 July 2014. World ORT Kadima Mada considers that it has effective control with this share structure and benefits from an independent oversight. The Sasa Setton Kav Or senior staff are appointed by World ORT Kadima Mada. The Sasa Setton Kav Or budgets are controlled and approved by World ORT Kadima Mada.
There is no minority interest in Sasa Setton Kav Or as there are no permanent assets and no free reserves. The ownership represented by the shares is non-beneficial.
The consolidated financial statements contain revenue and expenses of schools in the former Soviet Union and Baltic States. These are schools for which World ORT has effective control by appointing the school principal and providing additional funds.
All inter-entity transactions, including unrealised gains and losses, have been eliminated.
The financial statements of the subsidiaries are prepared for the same reporting period as World ORT, using consistent accounting policies.
World ORT provides support to subsidiaries as follows: World ORT Inc: provision of funding and liquidity support. World ORT Trust: provision of liquidity support. Kfar Silver Youth Village: provision of funding and liquidity support World ORT Kadima Mada: provision of funding and liquidity support
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Notes to the Consolidated Financial Statements at 31 December 2016
World ORT
2 Accounting policies (continued)
d. Foreign currency translation The functional and presentation currency of the World ORT group is the US Dollar. It is the functional currency because most income is due in US Dollars and , in turn , the group matches as much of its commitments as possible in that currency. World ORT Kadima Mada and Sasa Setton Kav Or have the functional currency of the Israel Shekel because all of its commitments and charitable funds are in that currency. World ORT Trust has the functional currency of the US Dollar because the majority of its commitments and all of its charitable funds are in that currency. Transactions in non-dollar currencies are initially recorded in the functional currency rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency exchange rate ruling at the financial position date. Fixed assets are translated at the rate of the initial transaction.
Exchange differences are recognised in profit or toss in the period in which they arise.
e. Revenue • Revenue, including donations, is recognised in the period in which World ORT is entitled to
receipt and where the revenue can be reliably measured. • Revenue from government bodies is recognised either according to contracts or where World
ORT exercises control of the school.
• Unrestricted funds are available for use at the trustees' discretion in furtherance of the objectives of World ORT.
• Restricted funds are subject to specific restrictions imposed by the donor.
• Gifts in kind are included in restricted income at their fair value when received . • International Co-operation projects are included in restricted funds and are accounted for under
the same oolicies. • Property income and other revenue is recognised on the accruals basis.
f. Provisions Provisions are recognised when World ORT or a subsidiary has a present obligation {legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
g. Property, fixtures and equipment Property, fixtures and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Such costs include costs directly attributable to making the asset capable of operating as intended.
Depreciation is provided on all tangible fixed assets, other than freehold land, at rates calculated to write off the cost or valuation, less estimated residual value, based on prices prevailing at the date of acquisition or revaluation, of each asset evenly over its expected useful life. The rates applied are as follows:
Freehold buildings: 2% per annum on cost Building improvements: 20% per annum on cost Fixtures and equipment: 20% per annum on cost Computer equipment: 33.33% per annum on cost
The carrying values of tangible fixed assets are reviewed for impairment in periods if events or changes in circumstances indicate carrying values may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amounts, the assets are written down to their estimated recoverable amounts.
An asset's recoverable amount is the higher of an asset's fair value less costs to sell and its value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the asset.
Expenditure on fixed assets to be used on projects is charged to project costs in profit or loss in the period in which it is incurred.
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Notes to the Consolidated Financial Statements at 31 December 2016
2 Accounting policies (continued) h. Leases
Leases as lessor
World ORT
Property lease revenue is recognised in profit or loss as receipts fall due according to the contracts with the tenants.
Leases as lessee Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments are recognised as an expense in profit or loss on a straight line basis over the lease term.
i. Financial assets: initial recognition and measurement Financial assets within the scope of IAS 39 are classified as financial assets at fair value through the profit and loss account, loans and receivables, held-to-maturity investments, available-for-sale financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
State of Israel bonds are held-to-maturity investments. The other financial assets are held-fortrading subject to the overall asset-allocation policy set by the World ORT investment committee to the fund manager.
j . Financial assets at fair value through the profit and loss account Financial assets are initially recognised at fair value plus transaction costs, except in the case of financial assets recorded at fair value through the profit and loss account. All financial assets at fa ir value through the profit and loss account are traded in active markets and so subsequent measurement of fair value of these financial assets is determined with reference to the quoted market bid price at the close of business on the financial position date. Any gains or losses are included with gains or loss on investments in the profit and loss account.
The types of financial assets held by the Group are listed in note 11 .
k. Cash and cash equivalents Cash and cash equivalents comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less. Their carrying values equate to fair value by reason of their short term nature.
I. Receivables Receivables, which have terms according to their individual contracts, are recognised and carried at the lower of their original invoice amount and their recoverable amount. Where the time value of money is material, receivables are carried at amortised cost. Provision is made when there is objective evidence that the Group will not be able to recover balances in full. Balances are written off when the probability of recovery is assessed as being remote.
m. Accounts payable Accounts payable are recognised and carried at the original invoiced amount or, in the case of accruals, the anticipated amount to be invoiced. Where the time value of money is material, payables are carried at amortised cost.
n. Pensions and other post employment benefits A subsidiary undertaking operates a defined benefit pension scheme and a defined contribution scheme. Both schemes require contributions to be made to separately administered funds. The defined benefit plan was established on 14 February 197 4 and was closed to new members with effect from 1 November 1999. The cost of providing benefits under the defined benefit plans is determined using the projected unit credit method. Re-measurements, comprising of actuarial gains and losses, the effect of the asset cei ling, excluding net interest (not applicable to the Group) and the return on plan assets (excluding net interest), are recognised immediately in the statement of financial position with a correspond ing debit or credit to retained earnings through OCI in the period in which they occur. Re-measurements are not reclassified to profit or loss in subsequent periods.
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Notes to the Consolidated Financial Statements at 31 December 2016
Accounting policies (continued)
n. Pensions and other post employment benefits (continued) Past service costs are recognised in profit or loss on the earlier of:
• The date of the plan amendment or curtailment, and • The date that the Group recognises restructuring-related costs
World ORT
• Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. World ORT recognises the following changes in the net defined benefit obligation under Other Expenditure in consolidated statement of comprehensive activities:
• Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements
• Net interest expense or income • The defined benefit asset or liability comprises the present value of the defined benefit obligation (using
a discount rate based on high quality corporate bonds), less past service costs not yet recognised and less the fair value of plan assets out of which the obligations are to be settled. Plan assets are assets that are held by a long-term employee benefit fund or qualifying insurance policies. The value of any plan asset recognised is restricted to the sum of any past service costs not yet recognised and the present value of any economic benefits available in the form of refunds from the plan or reductions in the future contributions to the plan. The net defined benefit employee liability at 31 December 2016 is $641 ,000 (2015: $707,000). Further details, including the principal assumptions agreed with the actuary, are given in note 18 .
• The defined contribution scheme was started from 1 April 2001 and is open to all employees who have been in employment for at least three months. The assets of the scheme are held separately from those of World ORT. Contributions are charged to the statement of comprehensive activities as they become payable in accordance with the scheme rules. Differences between contributions payable in the year and the contributions actually paid are shown as either prepayments or accruals in the financial position.
o. Fund accounting Endowment funds are set aside for future purposes and form part of the restricted funds.
p. Reserves World ORT will maintain general funds to an amount equalling at least one year's expenditure excluding direct project expenditure. The trustees have established this policy in order to protect the organisation's charitable programme in the event of a reduction in World ORT's revenue or an unexpected need for additional expenditure.
q. Project funds Project funds are monies received from donors and partners in advance of the financial needs of the project (see note 19). Fund raising for projects is performed up to the value of the plan set out in the oroiect orooosal. Occasionally the circumstances of a project change so that the funds received are in excess of the revised needs of the project. In these cases the policy is to offer the donor(s) an alternative project to make use of their funds.
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Notes to the Consolidated Financial Statements at 31 December 2016
2 Accounting policies (continued)
q. Derecognition of financial assets and liabilities Financial assets
World ORT
A financial asset is derecognised where the rights to receive cash flows from the asset have expired; or the rights to receive cash flows from the asset have been transferred together with substantially all the risks and rewards of the asset, or where control of the asset has been transferred.
Financial liabilities A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires.
r. Derivative financial instruments World ORT may use, from time-to-time, derivative financial instruments in the form of foreign currency contracts to hedge its risks associated with foreign currency fluctuations as stated in note 17. Such derivative financial instruments are initially recognised at fair value on the date on wh ich a derivative contract is entered into and subsequently re-measured at fair value and classified at fair value through profit and loss. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
Unrealised gains and losses are booked directly in profit or loss as the conditions for hedge accounting have not been met.
The fair value of forward exchange contracts is calculated by using the forward exchange rates at the financial position date for contracts with similar maturity profiles. During year 2016 no derivative financial instruments were used (2015: none).
s. New and amended standards and interpretations The Group applied for the first time certain standards and amendments, which are effective for annual periods beginning on or after 1 January 2016. The nature and the impact of each new standard and amendment is described below. This list is not exhaustive but only discloses the changes relevant to the Group.
Amendments to IAS 19 Defined Benefit Plans: Employee Contributions IAS 19 requires an entity to consider contributions from employees or third parties when accounting for defined benefit plans. Where the contributions are linked to service, they should be attributed to periods of service as a negative benefit. These amendments clarify that, if the amount of the contributions is independent of the number of years of service, an entity is permitted to recognise such contributions as a reduction in the service cost in the period in which the service is rendered, instead of allocating the contributions to the periods of service. This amendment had no impact on the Group as the amount of contributions is linked to the years of service.
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Notes to the Consolidated Financial Statements at 31 December 2016
2 Accounting policies (continued}
t. Disclosure of new standards in the period prior to their adoption
World ORT
The standards and interpretations issued, but not yet effective, up to the date of issuance of the Group's financial statements are shown below. This list is not exhaustive but only discloses the changes relevant to the Group. The Group intends to adopt these standards, if applicable, when they become effective.
IFRS 9 Financial Instruments In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments which reflects all phases of the financial instruments project and replaces IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. The standard introduces new requirements for classification and measurement, impairment, and hedge accounting. IFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted. Retrospective application is required, but comparative information is not compulsory. The Group does not expect a significant impact on its balance sheet or equity on applying the classification and measurement requirements of IFRS 9. It expects to continue measuring at fair value all financial assets currently held at fair value.
Impairments: IFRS 9 requires the Group to record expected credit losses on all of its debt securities, loans and trade receivables, either on a 12-month or lifetime basis. The Group expects to apply the simplified approach and record lifetime expected losses on all trade receivables. The Group does not expect an impact on its balance sheet or equity on applying the credit losses requirements of IFRS 9. The Group expects to continue to measure all receivables at fair value.
Amendments to IAS 7: Statement of Cash Flows The International Accounting Standards Board (IASB} has published amendments to IAS 7 'Statement of Cash Flows' in January 2016. The amendments are intended to clarify IAS 7 to improve information provided to users of financial statements about an entity's financing activities. The amendments in Disclosure Initiative (Amendments to IAS 7) come with the objective that entities shall provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities. The amendments require disclosure of the changes between the opening balance and the closing balance of financial liabilities, including changes from cash flows, changes arising from obtaining or losing control of subsidiaries, the effect of changes in foreign exchange rates and changes in fair value. They are effective for annual periods beginning on or after 1 January 2017, with earlier application being permitted.
The Company will include the necessary disclosures in the financial statements when applicable.
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Notes to the Consolidated Financial Statements at 31 December 2016
2 Accounting policies (continued) t. Disclosure of new standards in the period prior to their adoption (continued)
IFRS 15 Revenue from Contracts with Customers
World ORT
IFRS 15 was issued in May 2014 and establishes a new five-step model that will apply to revenue arising from contracts with customers . Under IFRS 15 revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The new revenue standard will supersede all current revenue recognition requirements under IFRS. Either a full or modified retrospective application is required for annual periods beginning on or after 01 January 2018 with early adoption permitted. The Group is currently assessing the impact of IFRS 15 and plans to adopt the new standard on the required effective date.
The principles in IFRS 15 provide a more structured approach to measuring and recognising revenue.
(a) Sale of Goods Contracts with education authorities in which equipment transfer is the only performance obligation are not expected to have any impact on the Group. The Group expects the revenue recognition to occur at a point in time when control of the asset is transferred to the customer, generally on delivery of the goods.
In applying IFRS 15, the Group considered the following: (i) Variable consideration If revenue cannot be reliably measured, the Group defers revenue recognition until the uncertainty is resolved . Such provisions give rise to variable consideration under IFRS 15, and will be required to be estimated at contract inception.
(ii) Warranty obligations The Group provides warranties for general repairs and does not provide extended warranties or maintenance services in its contracts with customers. As such, the Group determines that such warranties are assurance-type warranties which will continue to be accounted for under IAS 37 Provisions, Contingent Liabilities and Contingent Assets consistent with its current practice.
(b) Rendering of services The Group provides installation services within the provision of educational information technology equipment. These services are sold either on their own in contracts with the education authorities while others may be bundled together with the sale of equipment to a education authorities. The Group has preliminarily assessed that the services are satisfied over time given that the education establishment simultaneously receives and consumes the benefits provided by the Group. Consequently, the Group does not expect any significant impact to arise from these service contracts.
(c) Equipment received from donors When an entity receives, or expects to receive, non-cash consideration, IFRS 15 requires that the fair value of the non-cash consideration is included in the transaction price. An entity would have to measure the fair value of the non-cash consideration in accordance with IFRS 13 Fair Value Measurement. The Group occasionally receives transfers of electronic equipment from donors, which are recognised at fair value as plant and equipment under IFRIC 18 Transfers of Assets from Customers. This is consistent with the requirements of IFRS 15 and the Group does not expect equipment received from donors to have any resultant significant impact.
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Notes to the Consolidated Financial Statements at 31 December 2016
2 Accounting policies (continued) t. Disclosure of new standards in the period prior to their adoption (continued)
IFRS 16 Leases
World ORT
In January 2016, the IASB issued IFRS 16, "Leases" ("the new Standard"). Accord ing to the new Standard, a lease is a contract, or part of a contract, that conveys the right to use an asset for a period of time in exchange for consideration. According to the new Standard
· Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except in certain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".
· Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding right-of-use asset. Lessees will also recognize interest and depreciation expense separately.
· Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performance or use (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors as
- In the event of change in variable lease payments that are CPI-linked, lessees are required to remeasure the lease liability and the effect of the remeasurement is an adjustment to the carrying amount of the right-of-use asset.
The new Standard includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatment for operating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.
· The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.
- The new Standard is effective for annual periods beginning on or after January 1, 2019. Early adoption is permitted provided that IFRS 15, "Revenue from Contracts with Customers", is applied
· For leases existing at the date of transition, the new Standard permits lessees to use either a full retrospective approach, or a modified retrospective approach, with certain transition relief whereby restatement of comparative data is not required . The Company is evaluating the possible effects of the new Standard. Since the Company's lease contracts are not significant, the Company estimates that the adoption of the new Standard will not have a material impact on the Company's assets and liabilities. However, at this stage, the Company is unable to quantify the impact on the financial statements.
IFRS 40 Investment property
In December 2016, the IASB issued amendments to IAS 40, "Investment Property" ("the Amendments"). The Amendments provide guidance and clarifications on the application of the provisions of IAS 40 regarding transfers to or from investment property. The Amendments determine that the list of circumstances specified in the Standard regarding transfers of investment property represents examples that evidence a change in use of the property rather than a closed list. Moreover, the Amendments clarify that a change in management's intention, in and of itself, does not evidence a change in use.
The Amendments are to be applied retrospectively in the financial statements for annual periods beginning on January 1, 2018. Early application is permitted. The Amendments allow application using a partial retrospective basis, according to which the Amendments are to be applied to transfers that occurred in the period of initial application with no restatement of comparative data. In this situation, the adjustments to the carrying amounts of the assets as of the date of initial application of the Amendments will be recorded directly in charitable funds. At the time of approving the financial statements, the Group does not consider it holds any investment property.
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Notes to the Consolidated Financial Statements at 31 December 2016
3a Donations and grants
Donations restricted to specific projects
International Co-operation grants
Unrestricted donations
2016 US$'000
57,007
135
57,142
6,140
63 ,282
World ORT
2015 US$'000
62,785
231
63,016
5,881
68,897
Included within donations restricted to specific projects are grants received from governments, institutions, and municipal authorities which are used to meet direct educational costs of the projects.
3b Property
Rents and tenant recharges
Property costs
4 Other Expenditure (Fundraising and Administration)
Personnel
less: projects' contribution
Personnel costs (net)
Defined contribution pension - benefits expense
Defined benefit pension - contributions less other adjustments
Defined benefit pension - service costs and interest
Defined benefit pension - currency exchange gains on balances Office
Travel and meetings
Premises and insurance
Operating lease rentals
Audit and consultancy fees
Legal fees
Other professional fees
Depreciation
Currency exchange losses
23
2016 US$'000
401
(479)
(78)
2016 US$'000
1,769
(848) 921
325
3
38
(127)
79
230
148
25
103
21
122
2
128
2,018
2015 US$'000
452
(51 1)
(59)
2015 US$'000
2,450
(627) 1,823
200
33
292
(33)
70
283
160
36
176
52
153
19
52
3,316
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Notes to the Consolidated Financial Statements World ORT at 31 December 2016
5 Employee benefit expenses by activity Fund- Admin-
Projects Delivery Property raising istration Total Year US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
5a Salaries 2016 19,373 1,275 95 1,194 452 22,389 less: projects' contribution (830) (18) (848) Net salary cost 2016 19,373 1,275 95 364 434 21 ,541
Salaries 2015 9,641 896 120 1,752 535 12,944 less: projects' contribution (613) (1 4) (627) Net salary cost 2015 9,641 896 120 1,139 521 12,317
Fund- Admin-Projects Delivery Property ra ising istration Total
Year US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
5b Social security costs 20161 692 153 8 81 :~ I 976 2015 576 104 10 112 853
Fund- Admin-Projects Delivery Property raising istration Total
Year US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Sc Pension costs 20161 (110) 49 12 189 1771 317
2015 53 5 119 373 550 The cost of the defined benefit pension scheme is included in administration costs.
6 Employees by activity Fund- Admin-Projects Delivery Property raising istration Total
Year FTE FTE FTE FTE FTE FTE Average full-time equivalent 20161 1,077 69 3 9 ;1 1,164 employees 2015 535 51 3 9 604
The 2016 large increase in employees in projects consists of additional teachers in Israel for the three new schools and the programme for tutoring sick children at home.
7 Depreciation, leasing and foreign exchange differences included in the consolidated statement of comprehensive activities
Fund- Admin-Projects Delivery Property raising istration Total
Year US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 7a Buildings and equipment 20161 142
:I 142
expenditure overseas not 842 842 capitalised 2015
Fund- Admin-Projects Delivery Property ra ising istration Total
Year US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 7b Depreciation 20161 68 55 46 1
1; I 171
16 57 1 92 2015
Fund- Admin-Projects Delivery Property ra ising istration Total
Year US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 7c Leases 20161 236 297 2 ~; I 558
2015 324 148 18 507
Fund- Admin-Projects Delivery Property raising istration Total
Year US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 7d Foreign exchange 20161 145 (44) (24) 2 12~
1
205 differences (net) 214 5 (1) 219 2015
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Notes to the Consolidated Financial Statements at 31 December 2016
8 Net deficit before financial items This is stated after charging: Depreciation of owned fixed assets Operating lease expenses:
Buildings Cars and equipment
Auditor's remuneration - audit seNices * The audit fees for 2016 is reduced by over-accruals in prior years.
9 Key personnel compensation Key management personnel are those people having authority and responsibility for planning, directing and controlling the activities of World ORT, directly or indirectly.
Short term employment benefits
Other long term pension costs
10 Property, fixtures and equipment
Cost At 1 January 2015
Additions Disposals
At 1 January 2016 Additions - Kfar Silver acquisition* Additions - other assets Disposals
At 31 December 2016 Depreciation At 1 January 2015
Charge for year Disposals
At 1 January 2016 Charge for year Disposals
At 31 December 2016
Net book value
At 31 December 2015
At 31 December 2016
Freehold land and
buildings
US$'000 3,542
3,542 1,397
4,939
99 7
106 16
122
3,436
4,817
Building improve-
ments
US$'000 39
39
39
26 8
34 5
39
5
World ORT
2016 2015 US$'000 US$'000
171 92
344 300 214 176
116 * 204
2016 US$'000
578
109
2015 US$'000
700
78
687 778 =====
Fixtures, equipment
& computers
US$'000
535 170
(8) 697 847 197
(1 86) 1,555
386 77 (8)
455 150
(186) 419
242
1,136
Total
US$'000 4,116
170 (8)
4 ,278 2,244
197 (186)
6,533
511 92 (8)
595 171
(186) 580
3,683
5,953
Included in the above at a nominal value of US$8 are 8 school buildings occupied by affiliated organisations (2015 US$8 for 8 schools) .
• During 2016 World ORT acquired the real estate and operations of Kfar Silver Youth Village and farm. (see note 20 ).
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Notes to the Consolidated Financial Statements at 31 December 2016
11 Financial assets at fair value through the Statement of Comprehensive Activities 2016
US$'000 Net gain/(loss) on revaluation 231 Realised gains/(losses) on sales 45 Currency exchange differences {BO~ Gains/(losses) on investments, realised and unrealised 196
Fair value at 1 January 11,371
Additions during the year (mainly Israeli bonds re-invested) 815 Withdrawal of capital (m ainly Israeli bonds maturing) (928)
Currency exchange differences (1)
Fair value at 31 December 11 ,453
2016 Financial assets which are held at fair value comprise the following: US$'000 Investment cash and deposits 135 State of Israel bonds 1,565 Fixed income funds 3,102 Listed equities 3,780 Options, swaps and structured assets
Alternative assets - mainly derivative funds 1,332 Foreign exchange 20 Miscellaneous - mainly cross-tracking ETFs 1,519 Fair value at 31 December 11 ,453
Within Within After 2016 Financial assets maturity profile 2016 2017 2017 Total
$'000 $'000 $'000 $'000
State of Israel bonds 113 1,565 1,565 Other financial assets 9,888 9,888 Fair value at 31 December 10,001 0 1,565 11,453
The carrying value and fair value of financial assets and liabilities are the same.
26
World ORT
2015 US$'000
(91)
(154)
126
(119)
11 ,305
915
(730)
11 ,371
2015 US$'000
33
1,613
3,654
4,408
1,556
75
32
11,371
2015 Total $'000
1,613
9,758
11 ,371
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Notes to the Consolidated Financial Statements at 31 December 2016
12 Accounts receivable
Revenue accrued
Trade receivables
Due from affiliated ORT organisations
Prepayments
Other debtors
Accrued income is denominated in the following currencies:
US Dollar
Israel shekel
Trade receivables are denominated in the following currencies:
US Dollar
Israel shekel Sterling
2016 US$'000
3,434
984
672
1,250
250
6,590
2016 US$'000
3,434
3,434
2016 US$'000
312
453 219
984
World ORT
2015 US$'000
781
702
987
343
611
3,424
2015 US$'000
781
781
2015 US$'000
123
374
205 702
The US Dollar and Sterling accrued income and trade receivables are non-interest bearing. There is no significant concentration of risk. The Sterling trade receivables balance consists mainly of rent due by tenants occupying space excess to World ORT's requirements. The rent is due with 7 days. The credit quality of the tenant is established in advance of the tenancy agreement.
The accrued income and trade receivables denominated in the Israel Shekel are non-interest bearing advances for projects and are due within 120 days. The other parties are mainly Israel government ministries whose credit quality is well established.
Maturity profile The table below summarises the maturity profile of World ORT's accounts receivable at 31 December 2016 and 2015 based on contractual undiscounted receipts.
Neither past due nor Less than 3 to 12 More than Total
Year ended 31 December 2016 impaired 3 months months 12 months 2016 $'000 $'000 $'000 $'000 $'000
Accrued income 3,434 3,434 Trade receivables 940 44 984 Due from affiliated ORT organisations 172 500 672 Prepayments 1,250 1,250 Other debtors 250 250
Neither past due nor Less than 3 to 12 More than Total
Year ended 31 December 2015 impaired 3 months months 12 months 2015 $'000 $'000 $'000 $'000 $'000
Accrued income 781 781 Trade receivables 533 45 124 702 Due from affiliated ORT organisations 987 987 Prepayments 343 343 Other debtors 611 611
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Notes to the Consolidated Financial Statements at 31 December 2016
World ORT
12 Accounts receivable (continued) 2016 US$'000
2015 US$'000
Due from affiliated ORT organisations are denominated in the following currencies: Swiss Franc 500 Sterling 127 US Dollar 45 Euro
672
632 155 150 50
987
Amounts due from affiliated ORT organisations are non-interest bearing and are due within 30 to 180 days. In the amounts due from affiliated ORT organisations there was $500,000 (2015 $632,000) due from one organisation which was expected within 180 days of the year-end.
13 Cash and cash equivalents 2016 2015 US$'000 US$'000
14
Cash at bank and in hand
Short term deposits
Denominated in the following currencies: US Dollar
British Pound
Israel Shekel
Euro
Russian Rouble
Swiss Franc Ukraine Hryvna
Held at the following locations:
Management and administrative bank accounts Project bank accounts
Cash restrictions There were bank guarantees required by contracts for certain projects in Israel which temporally reduced the cash available for other activities:
Bank guarantees within project bank accounts
6,913
2,711
9,624
2016 US$'000
5,307
371
3,775
112
40
10 9
9,624
2016 US$'000
5,671
3,953
9,624
2016 US$'000
1,003
3,327
8,632
11,959
2015 US$'000
7,697
621
3,319
182
40
91 9
11,959
2015 US$'000
8,458
3,501
11,959
2015 US$'000
263
Cash at bank earns interest at floating rates based on daily deposit rates. Short term deposits are made for varying periods of between one day and three months depending on World ORT's immediate cash requirements.
World ORT only deposits cash surpluses with major banks of high quality credit standing.
2016 2015 Accounts payable US$'000 US$'000
Payables 3,081 1,973 Other creditors 2,613 870 Taxation and social security 596 365 Accruals 2,090 1,099 Due to affiliated ORT organisations 1,137 1,620
9,51 7 5,927
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Notes to the Consolidated Financial Statements at 31 December 2016
World ORT
15 Leasing - obligations Leases with World ORT as lessor Annual amounts due under non-cancellable occupancy leases with tenants are as follows:
Tenant leases which expire: within one year
in two to five years
Leases with World ORT as lessee
Buildings 2016 2015
US$'000 US$'000
116
147
162
177 263 339
=== Buildings Equipment
Annual amounts due under non-cancellable operating leases are as follows:
2016 2015 2016 2015 US$'000 US$'000 US$'000 US$'000
Operating leases which expire: within one year
in two to five years
16 Interest-bearing loans and borrowings
Bank overdraft Bank loan - repayable within one year Bank borrowings repayable within one year
Bank loan - repayable by 2021
84 12
96
2016 US$'000
136
65 201
247
448
218
36
254
2015 US$'000
43
6
49
186
15
201
The bank loan supports the activities of Kfar Silver Youth Village. World ORT incurred the liability for the borrowings when it acquired the property, equipment and operations of the Kfar Silver Youth Vi llage during 2016
17 Financial instruments
Financial risk management objectives and policies
World ORT's principal financial instruments, other than derivatives, comprise cash , short-term deposits , bonds and equity investments. The main purpose of these financial instruments is to preserve value between the time funds were raised and their use in World ORT's operations. World ORT also has various other financial instruments such as accounts receivable and accounts payable which arise directly from its operations.
World ORT use derivative financial instruments in the form of foreign currency contracts but these do not form a hedge as defined by the International Accounting Standards Board.
Fair values
The fair value of financial assets through the profit and loss is determined with reference to quoted (adjusted) prices in active markets for identical assets, and so World ORT does not use a fair value hierarchy in disclosing the fair value of these financial instruments The main risks arising from World ORT's financial instruments are interest rate risk, equity market risk and foreign currency risk.
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Notes to the Consolidated Financial Statements at 31 December 2016
17 Financial instruments (continued)
Interest rate risk
World ORT
World ORT's exposure to market risk for changes in interest rates relates primarily to the money it keeps as cash, short-term deposits and bonds. It is World ORT's policy not to enter into derivative financial instruments for this risk. The bond and fixed income funds investments are principally exposed to fair value interest rate risk as Sensitivity to cash flow interest rate changes: The currencies predominantly held by World ORT are the US Dollar, Israel Shekel and the British Pound (see note 13). Therefore the significant sensitivity to interest rate changes are to changes in the interest rates for those currencies.
Effect on loss for the year Change in interest rate by 2016 2015
US$'000 US$'000 Change in USO interest rates 1% 65 90 Change in I LS interest rates 1 % 35 19 Change in GBP interest rates 1% 5 10 N.B. An increase in interest rates improves the World ORT financial result. Liquidity risk Liquidity risk largely consists of supplier contracts for projects, mainly equipping schools. No contracts for the supply of equipment for a project are signed until the funds for that project are in place. World ORT management send explicit authority to local managers to start a project and enter into contracts for it.
Equity market risk World ORT has exposure to market risk for changes in equity values when investing its endowment and other funds. World ORT seeks to manage this risk by appointing an Investment committee. This committee has in turn appointed professional fund managers to manage the funds in a diversified, actively managed portfolio. The Investment committee has given the fund managers a broad guideline of how the portfolio should be allocated. The Investment committee meets with the fund managers three times a year to review the allocation policy and the performance of the portfolio.
Foreign currency risk As a result of the global nature of its operations, World ORT can be significantly affected by the movements between the revenue currencies relative to the local currencies of the projects . This is managed mainly by stating the spending budget of a project in the currency of the source of the funds. Where this is not possible the Investment committee will recommend whether to hedge the risk. The forward currency contract must be in the same currency as the hedged item. It is World ORT's policy not to enter into forward contracts until a firm commitment is in place.
The sensitivity to reasonably possible changes in the Israel Shekel and British Pound exchange rate with all other variables held constant, of World ORT's statement of comprehensive activities is demonstrated below.
Change in Effect on exchange rate loss for the year Effect on funds to US Dollar 2016 2015 2016 2015
US$'000 US$'000 US$'000 US$'000 Israel Shekel 5% (1) 164 189 164
-5% 1 (181) (189) (164) British Pounds. 5% 27 68 (19) (31 )
-5% (29) (75) 19 31 Forward currency exchange contracts At 31 December 2016 there were no forward currency exchange contracts (at 31 December 2015 - none). Credit risk World ORT manages credit risk mainly through the Investment committee. This committee meets several times per year. The Investment committee reviews the credit risk with banks and financial institutions. The committee ensures reserves are in a diversified portfolio of institutions in an appropriate range of currencies each with adequate resources to ensure the stability of their financial market.
The Finance committee reviews the credit risk with non-financial counterparties such as affiliates. The trustees of World ORT Trust review the credit risk of tenants. Where they perceive any impairment in counterparty ability to pay then they ensure adequate provision has been made. It is the opinion of these committees that there is no significant concentration of credit risk within World ORT. The maximum credit risk exposure relating to financial assets is represented by the carrying value at the financial position date.
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Notes to the Consolidated Financial Statements at 31 December 2016
World ORT
18 Employee post-employment benefits
World ORT has a subsidiary which operates the following pension plans:
The Defined Contribution Pension scheme The assets of the defined contribution pension scheme are held separately from those of World ORT in an independently administered fund. World ORT contributes up to 11% (m ainly 5%). The cost to World ORT of contributions to the scheme was $324,000 (2015: $178,000).
The reason for the year-on-year increase was that there was an increase in take-up of scheme membership during the year and more staff opted for salary sacrifice into their pension fund accounts.
Unpaid contributions at the end of the year were $20 ,000, paid in January 201 7 (2015: $9,000 paid in January 2016) .
Employee benefits - The Defined Benefit Pension plan This scheme is known as the ORT Retirement Benefit Plan (ORBP) which is based in Great Britain and administered by a third party. The assets of the scheme are held separately to those of World ORT. The plan assets are 100% invested in a with-profit fund.
The plan closed to new entrants in 1999. The plan has an independent professional trustee.
Periodically, the trustee reviews the level of funding in the ORBP as required by UK pension law. Such a review includes the asset-liability matching strategy and investment risk management policy. The board of trustees adjusts its contribution based on the results of the triennial actuarial review.
Since the pension liability is adjusted to consumer price index, the pension plan is exposed to UK's inflation , interest rate risks and changes in the life expectancy for pensioners. As the plan assets include significant investments in corporate bonds and quoted equity shares of entities, World ORT is also exposed to market risk arising in the corporate bonds and equity sectors.
A full actuarial valuation was carried out at 1 January 2015. A calculation was done to 31 December 2016 by a qualified actuary, independent of the scheme's sponsoring employer. The major assumptions used by the actuary are shown below.
World ORT currently pays contributions at the rate of 38.8% of pensionable pay (2015: 38 .8%). Contributory members pay their employee contributions at the rate of 7% of pensionable salary. The employer makes a special payment for the contributions of the non-contributory members at the same rate. In 2016 World ORT made an added contribution of $118,000.
The additional contribution will be reviewed as part of the valuation of 1 January 2016.
Membership of the defined benefit pension plan
Active members at 31 December
Preserved and deferred members at 31 December
2016 3
27
2015 3
39
Of the active members, the average time to the plan's normal retirement age of 65 is 4.5 years with the youngest having 11 .5 years to serve.
Based on the existing schedule of contributions, World ORT expects to contribute US$103,000 plus 47.1% of total pensionable salaries to The ORT Retirement Benefit Plan in the next accounting year.
The projected amounts recognised in the Consolidated Statement of Comprehensive Activities are:
Current service cost Interest expense (on present value of obligation) Interest Income (on fair value of plan assets) Past service cost
Pension cost charges to Consolidated Statement of Comprehensive Activities
31
2016 US$'000
(19} (69) 50
(38)
2017 US$'000
(24) (56) 40
(40)
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Notes to the Consolidated Financial Statements at 31 December 2016
18 Employee benefits - The Defined Benefit Pension plan (continued)
2016 changes in the defined benefrt obligation and the fair value or plan assets
$'000
Defined benefit obligation
Fair value of plan assets
Benefit liability
Pension cost charge to Activities
Past ser"tice
Current cost 1 Jan service (including 2016 cost curta1lmenls )
(2,1311
1,424
1707)
(19)
Net interest
(69
50
)
s ub-total included in
Activities
(88)
50
(38)
2015 changes in the defined benefit obligation and the fair value of plan assets
pension cost charge to Activities
Past $'000 service
Current COS!
1 Jan service (including 2015 ccst curtailments)
Defined benefit obligation (2,24t) (25) (246 )
Fair value of plan assets 1,532
Benefit liability 1709)
Ne! 1nteres t
172 51
)
sub-total included in
Activities
(343)
51
(292)
Re-measurement losses included in Other Comprehensive Income
Return on plan assels
(excluding amounls
,nciuded 1n net interest
expense)
97
97
Retum on plan assets
(excluding amounts
included in net interest
expense)
(791
(79)
32
Actuarial Actuanat changes changes
arising from arising from Expene changes in changes in nee
demographic financial adJUStm assumpllons assumptions ents
(4l1) 22
1•111 22
included in Other Comprehensive Income
Actuanal Actuanal changes changes
ansing from arising from Expene changes in changes in nee
demographic financial adjustm assumptions assumptions ents
17 144 8
0
17 144 8
sub.total included
inOCI
(389)
97
(292}
sub-total included
in OCI
169
(79)
90
Contributions
by plan
by partic.-employer pants
(5)
269 5
269
Contributions
by plan
by partici-employer pants
(8)
171 8
171
Benefit payments
159
(159)
Benefit payments
191
(191}
World ORT
Exeh adJUS I
396
(269)
127
Exch adjus1
101
(68)
33
31 Dec 2016
(2,058)
1,417
{641)
31 Dec 2015
12,1311
1,424
(707)
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Notes to the Consolidated Financial Statements at 31 December 2016
18 Employee benefits - The Defined Benefit Pension plan (continued)
Fair value of plan assets - structure of assets The assets of the plan are held in the Aviva Life & Pensions UK Limited as follows:
Deferred Allocation Funding with-profits policy
Value of Guaranteed Annuity Options
During 2016 all the assets of the plan were held in the Aviva Life & Pensions UK Limited Mutual Sun Fund (PMF)
The asset allocation of the fund was as follows:
UK shares
International shares
Property
UK fixed interest
Corporate bonds
International bonds
Cash and cash alternatives
Principal assumptions
World ORT
31 Dec 2016
US$'000 1,243 88%
174 12%
1,417 100%
31 Dec 31 Dec 2016 2015
% %
13 11
23 17
7 6
24 28
30 35
3 3
0 0 100 100
Principal assumptions used in determining pension benefit obligations for the defined benefit pension plan Financial assumptions 2016 2015
Discount rate 3.7% 3.7% Inflation assumption (Retail Price Index in Britain) 3.0% 3.0% Salary growth 1.2% 1.2%
Pension revaluation in deferment (CPI, maximum 5%) 2.2% 2.2%
Pension increase in payment (CPI , maximum 5%) 2.2% 2.2%
Demographic assumptions Assumed life expectancy in years, on retirement at 65: 2016 2015
Male currently aged 65 23.4 23.4
Female currently aged 65 25.8 25.7
Male currently aged 45 25.6 25.4
Female currently aged 45 28.0 27.9
Sensitivity to assumptions The results of the IAS19 valuation are sensitive to the assumptions adopted. The broad impact on a scheme's liabilities of changes to the principal assumptions (all other things being equal) is set out below:
Assumption Impact on Change in
scheme liabilities liabilities
Discount rate Decrease by 0.5% Increase by 9%
Rate of inflation Increase by 0.5% Increase by 4% Rate of salary growth Increase by 0.5% Increase by 1%
Life expectancy Increase by 1 year Increase by 3%
33
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Notes to the Consolidated Financial Statements at 31 December 2016
18 Employee benefits - The Defined Benefit Pension plan (continued)
Risks for the defined benefit pension plan
World ORT
The board of trustees is responsible for the administration of the plan. They appointed a professional to be a trustee of the plan in 2014. Part of the professional trustee's remit is to identify risks and recommend ways to minimise them. He will address the legislative risk of complying with the large body of legislation surrounding defined benefit plans.
The plan assets have been taken at their fair value and the defined benefit obligation is based on market related assumptions. The defined benefit obligation is calculated according to the requirements of International Accounting Standard (IAS) 19, using assumptions determined by the trustees, having taken actuarial advice.
Projection risk - The provisions of IAS 19 do not stipulate that a full valuation is needed at each financia l year end. Instead, it is permissible to update previous valuation results (providing that the previous valuation used has an effective date within the last three years) . As a result, we have projected the results of the last actuarial valuation as at 1 January 2015 forward to 31 December 2016. By its nature a projection of the liabilities involves some degree of estimation. At the time of preparation of these figures we are not aware of any reason why the true figures would differ significantly from the enclosed projections. However, we cannot be definitive about the degree of accuracy of the projected valuation figures, as their accuracy can only be checked with the results of a full valuation.
Investment/ Mismatch risk - The discount rate used to calculate the defined benefit obligation under IAS19 should reflect the yield available on a high quality (AA or similar) corporate bond of equivalent currency and term to the liabilities at the date of the valuation. The actual investment strategy adopted by the trustees is not to be fully invested in corporate bonds, which means movements in the Scheme's assets may well not correspond to changes in the value of the IAS1 9 liabilities over time leading to volatility in the IAS19 results from year to year.
Longevity risk - If pensions are not bought out and members live longer than expected, the benefits will be payable for longer than allowed for in the calculation of the liabilities leading to an experience loss on the plan liabilities (all other things being equal). Annuity risk - Purchase of an annuity for an individual is an investment decision made at the choice of the trustees to remove both the investment and mortality risks held by their scheme. The annuity remains an asset of the scheme whilst held in the name of the trustees, but its cost could be greater than allowed for in the IAS 19 liabilities.
Benefit risk - In calculating the liabilities the company must make a number of assumptions about the way that the Scheme's benefits will increase over time e.g. pensionable salary growth and inflation. If the increase in benefits does not follow the assumptions made, there is a risk that the liabilities will increase by more than expected leading to an experience loss on the plan liabilities.
Solvency risk - The IAS19 liabilities are calculated on an ongoing basis, assuming that the company remains solvent and the Scheme remains in existence. If the Scheme were to enter winding up then the Scheme's benefits may have to be bought out with an insurance company and the cost is likely to be higher than the IAS 19 liabilities.
Term to Retirement This table shows an analysis by term of retirement of Scheme membership and past service liability as at the date of the last actuarial valuation, 1 January 2016.
Proportion No of of
members liabilities
0 - 5 years 24 53.6%
6 - 1- years 6 21 .5%
11 -15 years 6 15.3%
16 - 20 years 2 2.6%
21 - 25 years 4 7.0%
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Notes to the Consolidated Financial Statements at 31 December 2016
19 Charitable funds a. Restricted endowment funds
World ORT
These funds are tied to particular purposes, which arise because of restrictions on their use required by the donors at the time of receipt. In 2014, following the sale of a property in Paris, a $1 .5 million endowment fund was created to fund, at trustees discretion, future ad-hoe programs to foster best practice in education. During 2016 the trustees released $750,000 of this to match fundraising for the STEM campaign in FSU.
b. Restricted project funds Restricted project funds are advances by donors and Board allocations to fund specific projects or a collection of projects. The balance represents the unspent portion at the year-end. The advanced funds will be spent over the remaining lives of the projects; periods normally planned at up to four years. A restricted project is undertaken only when the planned funding requirement has been received or pledged.
20 Kfar Silver, Israel acquisition In August 2016 World ORT acquired the Youth Village and farm at Kfar Silver, Israel from the Zionist Organisation of America (ZOA). There was no consideration paid to ZOA; World ORT acquired the assets and liabilities.
At the point of acquisition, Kfar Silver had fixed assets at an historic cost of US$14 million, accumulated depreciation of US$10 million and equity of US$ 2 million. Under acquisition accounting rules, the accumulated depreciation and the equity were deducted from the historic cost value of the assets. This gave an acquisition fair value of fixed assets of US$ 2.3 million.
Current assets were $1 million (inventories of $0.2m, receivables of $0.7m and cash of $0.1 m). This gave a total fair value of fixed and current assets of $3.3 million.
Bank loan due in more than a year was $0.3 million. Current liabilities were $3 million (payables of $2.8m and a bank loan and an overdraft of $0.2 m). This gave a total fair value of liabilities of $3.3 million. As of the date of the approval of the financial statements, a final valuation for the fair value of the identifiable assets acquired and liabilities assumed by an external valuation specialist has not been obtained. The purchase consideration and the fair value of the acquired assets and liabilities may be adjusted within 12 months from the acquisition date. At the date of final measurement, adjustments are generally made by restating comparative information previously determined provisionally.
Following the acquisition, it was agreed that World ORT Kadima Mada, Israel would perform the operational management of the Kfar Silver Youth Village, which comprises mostly of the school and dormitory, and integrated it with WOKM's network of schools.
This leaves World ORT with the Kfar Silver farm whose revenue consists of a contract to supply milk to a dairy. The farm also produces vegetables. The vegetables do not present to a standard to supply to supermarkets so they are used by the school in their meals.
21 Related party disclosure During the year certain trustees donated $251 ,299 (2015: $542,323) to World ORT. The uses of these donations were specified by the donors.
22 Contingencies In October 2007 ORT Israel brought a claim of US$4.7 million against World ORT and ORT America jointly. One cause of the action is in respect of subvention which ORT Israel claim they are entitled to receive. The action also involves other issues. It is not possible to estimate with certainty the amount, if any, that may need to be paid. However, the trustees are satisfied, on the basis of advice from legal counsel , that adequate provision has been made in these financial statements for any liability arising out of the claims. The trustees cannot make an estimate of the likely timing of the legal process.
The costs of the dispute to World ORT incurred to 31 December 2016 are charged in the statement of comprehensive activities. A provision for the future legal cost of the dispute has not been made because since the year-end no material legal costs have been incurred and it is not possible to estimate the extent of future legal costs. There was a decision of the High Court in Israel to award ORT Israel $200,000. The provision has not yet been changed as ORT Israel may appeal the decision.
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Notes to the Consolidated Financial Statements at 31 December 2016
22 Contingencies (continued)
World ORT
Included within unrestricted donations is a donation of CHF 0.9 million received from a Swiss bank representing a distribution of unclaimed dormant accounts probably relating to victims of Nazi persecution. Under the terms of the donation, World ORT has agreed that if, within a period of 10 years, the bank should demand a return of all or part of this donation, then World ORT will comply. At the date of these financial statements, no such request has been received. This undertaking expires in December 2024.
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