Financial policy

Operating costs
Operating costs include all expenditure by the Net4kids Organisation in the execution of its tasks on behalf of the Net4kids Aid Foundation and Continuity Fund. This includes all fundraising, operational and management costs for all three foundations.

Despite the fact that these costs are not financed via donations, we closely monitor the relationship between these costs and received donations. As becomes clear from the overview below, the costs as a percentage of total donations have undergone a positive development over the past four years. In the initial two years, we saw higher initial costs and relatively low donations. In subsequent years the costs fall and the donations exhibit strong growth. In the last year, the costs amounted to 24.3% of donations.

The long term goal is also to keep the costs – as a percentage of donations – below 25%. However, Net4kids is a rapidly growing organisation. We will accept incidental higher cost percentages in order to support investments to allow professional support of the organisation’s growth.

Organisation costs vs donations

Capital policy
The capital policy is focused on maintaining sufficient reserves to meet the following needs on a going concern basis:

• Covering shortfalls in the operation of the Net4kids Organisation caused by lacking organisation sponsors and/or lack of earnings on capital from the Net4kids Continuity Fund for at least three years.
• Cover all current and planned project commitments not yet covered by donor pledges for the duration of the projects.
• Cover unforeseen shortages in potential future project commitments for the coming three years.

Items 1 and 2 may be estimated accurately based on the current situation. The required reserves for these two items amounts to about € 340,000. A conservative estimate based on a risk analysis for point 3 returns an amount of around € 360,000. This brings the total required reserve to € 700,000, well within the freely available own capital of € 1,131,241. This is commented on in further detail in the Risks chapter.

Investment policy and results
The investment policy is aimed at achieving adequate returns with the security of the principal sum being of key importance. Additionally, the liquidity of the portfolio is important. The investments consist of fixed rate values with a Moody’s rating of A3 or better. These fixed rate values can be traded on a daily basis. Practically no funds are fixed for the shorter or longer term.

€ 56,722 in interest was generated over the invested capital in 2006. Against this interest is a negative exchange difference on the fixed rate values of € 43,107. The return on investments amounted to a disappointing 1.1%. Given this result, the degree to which our investment portfolio is consistent with our investment policy will be examined in the coming year.