The Instituteof Economic Affairs (A Charitable Company Limited by Guarantee) TRUSTEES' REPORT AND FINANCIAL STATEMENTS 31 December 2014 Company Registration No. 755502 Registered Charity No. 235351 The Instituteof Economic Affairs TRUSTEES' REPORT Company Registration Number: 755502 Charity Registration Number: 235351 TRUSTEES Neil Record Professor DR Myddelton Kevin Bell Robert Boyd Michael Fisher Sir Michael Hintze Professor Patrick Minford Professor Mark Pennington Bruno Prior Professor Martin Ricketts Linda Whetstone Chairman (appointed 3rd March 2015) Chairman (retired 3rd March 20 I 5) Treasurer DIRECTOR GENERAL Mark Littlewood EDITORIAL AND PROGRAMME DIRECTOR Professor Philip Booth SECRETARY C Rusbridge REGISTERED OFFICE 2 Lord North Street Westminster London SWlP 3LB AUDITOR Baker Tilly UK Audit LLP, Chartered Accountants The Pinnacle, 170 Mid sum mer Boulevard Milton Keynes Bucks MK91BP BANKERS Barclays Bank plc Pall Mall Corporate Banking Centre Pall Co rporate Group PO Box 15163 London SWlA IQD INVESTMENT MANAGERS CCLA Investment Managem ent Limited BNY Mellon Fund Managers Limited M & G Secur it ies Limited Henderson Global Investor s Pag e 1 The Instituteof Economic Affairs TRUSTEES' REPORT The Trustees present their report together with the financial statements of the Institute of Economic Affairs for the financial year ended 31 December 2014. STATIJS The Institute of Economic Affairs (IEA) is a charitable company limited by guarantee. The Institute was established through a trust deed in November 1955 and incorporated in 1963. It was set up under a Memorandum of Association which set out its objects and powers and governed under its Articles of Association. It is a registered charity No. CC/235351. GOVERNANCE The IEA is managed by its Director General, Mark Littlewood, who oversees all aspects of its affairs and is responsible for achieving its goals. He reports three times a year to the full Board of Trustees and more frequently to its Finance and General Purposes Committee. Decisions about the level and mix of activities are made by the Trustees; about detailed day-to-day operations by senior staff, sometimes with advice from the Finance and General Purposes Committee. Three of the Trustees, the Chainnan of the Board, the Treasurer, Robert Boyd, and the Chairman of the Finance and General Purposes Committee, Kevin Bell, together form a sub-committee which reviews the Director General's performance annually; and they also serve as a Nominations Committee and as an Audit Committee. OBJECTIVES AND ACTIVITIES The charity's main aims are to promote learning by means of research into economics and politics and to improve public understanding thereof. We try to achieve our objectives by means of the activities listed below, which include allocated costs of Administration and Research. Academic programmes: • • • • Publications Student/teacher outreach Lectures, conferences, seminars and special events Communication and distribution, including website Fundraising and subscriber support. PUBLIC BENEFIT As detailed above, the charity's main aims are to promote learning by means ofresearch into economics and politics and to improve public understanding thereof. We bring analysis of issues relating to political economy to the public's attention through our various academic programmes and other activities. The Trustees confinn that, in exercising their powers and fulfilling their responsibilities in pursuit of the aims described above , they have paid due regard to the guidance on public benefit published by the Charity Commission. REVIEW OF ACHIEVEMENTS Our mission is: "To improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems." We aim to achieve our mission by undertaking the various activities listed above. Ordinary donations were some 33% higher than in 2013. We continue to seek flexibility in responding to potential changes, both in income and in programme opportunities. Over the year, visits to the website (www.iea.org.uk) were up by nearly 38% to 1,823,000. Thirty two IEA publications were each downloaded more than 3,000 times. Page 2 The Instituteof Economic Affairs TRUSTEES' REPORT We continued to expand the student/teacher outreach programme , under Dr Steve Davies, our Director of Education. The IEA intern programme reached new highs, with a record number of students spending up to eight weeks working on research projects. The students are regularly invited to our main events and a number of special events - exposing them to the ideas of academic economists - were organised for them. One of these was Freedom Week, which we are now running jointly with the Adam Smith Institute and which had a record number of applicants in 2014. We organise a series of regional sixth-form conferences at schools across the UK. Total attendances increased significantly over 2013. The IEA State of the Economy Conference was attended by more than 60 studen ts, financed by bursary donations from IEA supporter s. The lEA published or co-published six titles in print in 2014, together with three editions of our journal, Eco nomic Affairs. A further fourteen titles were published in our Main Web series. Many IEA publications that were previously out of print have also been made available through our print-on-demand system . ln all we published about t 00 authors across our monographs , web papers and journal and our triennial student/teacher supplement reach ed 2,000 individuals or educational establishments across the UK. In addition we co-published five books with trade publishers. Our magazine, EA, has proved very successful with students and teachers throughout the UK. Each edition features some of the best writers in the world on economic freedom. EA is sent to every school in the UK teaching 'A' level or JB Economics or Business Studies and articles are used as teaching modules in schools and universities. The IEA orga nised about 100 events in 2014, including major conferences and many lunch, dinner and evening events, including lectures, seminars, interviews, debates, book launches and other special events. Our annual Hayek Memorial Lecture was delivered by Professor John Taylor, in June 2014 and attracted an audience of over 500. The IEA continued to expand its media coverage, with senior IEA staff and fellows making around 4,000 media appearances across print, radio and television - up nearly 70 per cent on the previous year. In addition, more than 5,900 people now follow the IEA on Facebook and 6,700 follow us on Twitter . The IEA takes no view on the desirability or otherwise of the United Kingdom leaving the European Union. The focus of the TEA's Brexit Prize competition during the year was to explore possible details of the UK's future outside the EU if that were the people's choice in any future referendum. The competition attracted 120 entries and a great deal of media attention. We are grateful to the panel of judges , chaired by Lord Lawson, for their work and we congratulate Iain Mansfield, who won the prize for the best essay. Our objectives are essentially long-term in nature and it remains extremely difficult to assess from year to year the extent of 'public understanding ' and changes therein. We measure the vo lume of many of our activities; and we aim to maintain or improve their quality. All our main publications are refereed by indepe ndent scho lars and we benefit from a network of distinguished academic advisers, to whom we are most grateful. There is a formal meeting of academic advisers once a year, under the chainnanship of Professor Martin Ricketts, one of our Trustees. Continuing themes are oveMegulation , much of it stemm ing from the European Union; systemic problem s in the welfare state, including social security, education and health services; infrastructure deficiencies; and other aspects of government interference . In early 2015, as this Report is being written, the UK government is still inc urring enormous annual deficits, yet appreciation of the urgen t need to cut back significantly the scope of government remains limited. Hence the IEA's role in spreading public understanding is as important as ever. Page3 The Instituteof Economic Affairs TRUSTEES'REPORT FINANCIAL REVIEW Total incoming resources during the year were £1,922,000 and total resources expended were £2,408,000 leaving net resources expended of £486,000. Restricted income was £566,000 compared with resources expended on restricted projects of £713,000. The net decrease in funds was £317,000, after allowing for realised and unrealised gains and losses on investments. Investment income on the Ralph Harris Fund during the year amounted to £56,000. The financial statements, together with the notes thereto, expand on these outline details. Our income mainly comprises donations from individuals, companies, foundations and personal trusts, together with revenue from sales of publications and from conferences and income from investments. We do not accept donations or grants from government. It is a feature of the modem UK scene that all too many so-called "charities" do receive much - in many cases most - of their funds from government (that is, from taxpayers). The Finance and General Purposes Committee, and the full Board of Managing Trustees, regularly review the amount of donations. There has been a 33% increase in the amount of donations in 2014 and we are grateful to all our donors for supporting our work. During the year the Institute received a legacy of $500,000 from Nobel Laureate Ronald Coase. Thanks to his generosity we were able to undertake a major refurbishment at 2 Lord North Street. GRANT MAKING POLICY The Trustees make occasional grants to individuals to support their research and to attend conferences. These are often from restricted funds donated specifically for such purposes . From time to time grants may be made to other Institutes where the Trustees think it appropriate. All such projects are assessed by reference to our mission. INVESTMENT AND RESERVES POLICIES The Institute' s educational mission has a long-term orientation, as noted above, whereas our ability to carry out our work depends on attracting annual donations in a highly competitive fund-raising environment. Accordin gly the Trustees' policy is to invest conservatively, largely in equity funds, fixed interest funds and govenunent securities. The Ralph Harris Fund is invested with a long-term time horizon. Income on investments is used to support the IEA's work. The Treasurer and the Finance and General Purposes Committee regularl y review investment results. The Trustees' policy on reserves, which is reviewed annually, is to have sufficient liquid funds on hand to cover two months of budgeted expenditure. We believe this is adequate, under normal circumstances, to enable us to maintain operations in the event of seasonal or other fluctuations in donations and/or expe nditure. The Trustees do not seek to accumulate reserves, but rather to apply donations in support of the Institut e's programme s in accordance with donors' intent. The free reserves of the charity as at 31 December 2014, defined as being unrestricted, undesi gnated funds not represented by tangible fixed assets, amounted to £141,000 (2013: £274,000). RISK REVIEW The primary risks and uncertainties to which the IEA is exposed are reputational, loss of key personnel, and financial. Reputational risk centres on the quality and integrity of the Institute' s research and publications and other activities. As noted above, all the IEA's major publications are peer reviewed under a system managed by the Editorial and Programme Director, Professor Philip Booth, and supervised by the Chairman of our Academic Advisory Board, Professor Martin Ricketts. The IEA maintains strict independence from commercia l, party political or other interests . It does not accept commissions to perform research on behalf of others. Page4 The Instituteof Economic Affairs TRUSTEES' REPORT The performance of key personnel is reviewed at least annually, either by the Director General or by a small committee of Trustees, led by the Chairman, to assess whether both the employer's and employees' objectives are being satisfied. As with any small organisation, it is not possible to completely protect against the loss of key people. Financial risks and uncertainties are largely covered by the Reserves and Investment policies noted above. The Trustees examine at least once a year the major strategic, operational and financial risks and uncertainties which the Institute faces, either at regular or special Board meetings, or through the Finance and General Purposes Committee. FUTURE PLANS The Institute intends to enhance its activities still further in 2015 and beyond, continuing our long-established programme of publications and conferences, focusing especially on developing our website and student/teacher outreach and ieaTV. We recognise our need to attract new readers, listeners and viewers (and new authors). Currently our main focus for research is on the welfare state, the impact of regulation and the causes and effects of high levels of government spending. TRUSTEES The following were trustees (who are directors for the purposes of company law) at the time of signing this report and financial statements. They all held office throughout the year 2014 and up to the date of signing this report, unless otherwise stated. Neil Record Professor DR Myddelton Kevin Bell Robert Boyd Michael Fisher Sir Michael Hintze Professor Patrick Minford Professor Mark Pennington Bruno Prior Professor Martin Ricketts Linda Whetstone Chairman (appointed 3rc1March 2015) Chairman (retired 3rd March 2015) Treasurer None of the Trustees has an interest, direct or indirect, in any contract entered into by the Institute. The Trustees may from time to time, and at any time, appoint any person to be a Trustee, up to the prescribed maximum of twelve. Appointments are nonnally made on the recommendation of the Nominations Committee. Any Trustee so appointed retains office until the next Annual General Meeting , and is then eligible for re-election on a three-year rotating basis. New Trustees are 'trained' mostly on the job by attending meetings of Trustees. They are provided with notes covering the institute's mission, history, organisation, governance and details of the other Trustees, together with the latest Trustees' report and accounts. Newly appointed Trustees will usualJy already have substantial board level or departmental management experience in either the commercial or academic arena. TAXATION STATUS The charitable company is a registered charity and, as such, for taxation purposes is entitled to exemption under the Income and Corporation Taxes Act 1988. AUDITOR A resolution to reappoint Baker Tilly UK Audit LLP, Chartered Accountants , as auditors will be put to the members at the annual general meeting. Page5 The Institute of Economic Affairs TRUSTEES'REPORT This report has been prepared in accordance with the Statement of Recommended Practice: Accounting and Reporting by Charities (issued in March 2005). The Trustees have taken advantage of the exemptions available under the small companies' regime. By order of the board Neil Record Chairman 2015 Page6 The Instituteof Economic Affairs TRUSTEES'REPORT TRUSTEES' RESPONSIBILITIES The Trustees (who are also directors of the Institute of Economic Affairs for the purposes of company law) are responsible for preparing the Trustees' Report and the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). Company law requires the Trustees to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the charitable company and of the incoming resources and application of resources, including the income and expenditure, of the charitable company for that period . In preparing those financial statements, the Trustees 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 have been followed, subject to any material departures disclosed and explained in the financial statements; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. The Trustees are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the charitable company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the charitable company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. In so far as the Trustees are aware: • there is no relevant audit information of which the charitable company's auditor is unaware; and • the Trustees have taken all steps that they ought to have taken to make themse lves aware of any relevant audit infonn ation and to establish that the auditor is aware of that information. By order of the board Neil Record Chairman ~=!-Ap~, 201s Page? The Institute of Economic Affairs INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF THE INSTITUTE OF ECONOMIC AFFAIRS For the year ended 31 December 2014 We have audited the financial statements of the Institute of Economic Affa irs for the year ended 3 1 December 2014 on pages 9 to 20. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). Thi s report is made solely to the charitable company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the charitab le company' s members those matters we are required to state to them in an aud itor 's report and for no other purpose . To the fullest extent pennitted by law, we do not accept or assume responsibility to anyone other than the charitable company and the charitable company's members as a bod y, for our audit work, for this report , or for the opinions we have formed. Respective responsibilities of trustees and auditor As explained more fully in the Statement of Trustees' Responsibilities set out on page 7, the trustees (who are also directors for the purposes of company law) are respon sib le for the preparation of the financial statement s and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Aud itors . Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the Financial Reporting Council's website at http ://www .frc.org.uk/audit scopeukprivate. Opinion on financial statements In our opinion the financial statements: give a true and fair view of the state of the charitable company's affairs as at 31 December 2014 and of its incoming resources and application of resources, including its incom e and expenditure, for the year then ended; have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice ; and have been prepared in accordance with the Companies Act 2006. Opinion on other requirement of the Companies Act 2006 In our opinion the information given in the Trustees' Report for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: the charity has not kept adequate accounting records , or returns adequate for our audit have not been received from branches not visited by us; or the financial statements are not in agreement with the accounting records and returns; or certain disclosures of trustees' remuneration specified by Jaw are not made; or we have not received all the information and explanations we require for our audit; or the Trustees were not entitled to prepare the financial statements in accordance with the small companies regime and take advantage of the small companies exemption from the requirement to prepare a strategic report or in preparing the Trustees' Report . ~~~~~w,~!,,~~,}-kL.f For and on behalf of BAKER TILLY UK AUDIT LLP , Statutory Auditor Chartered Accountants The Pinnacl e, 170 Midsummer Boulevard Milton Keynes, Bucks MK9 IBP 2.'1 ApnlJLoISPage 8 The Instituteof Economic Affairs STATEMENT OF FINANCIAL ACTIVITIES (INCLUDING AN INCOME AND EXPENDITURE ACCOUNT) For the year ended 31 December 2014 Unrestricted funds Notes £000 INCOMING RESOURCES Incoming resources from generated funds Voluntary income Activities for generating funds Investment income Dividends receiv able Interest receivable Incoming resources from charitable activities: Academic programme: Publications and subscriptions Events 1 1,206 Restricted funds £000 Total 2014 £000 557 1,330 13 16 50 16 52 26 22 22 58 58 34 69 1,922 1,527 193 214 862 624 285 236 185 22 41 9 15 1 1,300 566 RESOURCES EXPENDED Charitab le activitie s: Fundraising and subscriber Support Academic programme: Publications Student/Teacher outreach Events Communications Governance 3 315 197 23 Total resource s expended 2 1,695 713 4 (395) (147) 21 - - 56 193 579 388 8 283 160 219 51 548 534 248 23 - - NET MOVEMENT IN FUNDS Total 2013 £000 1,763 13 Total incoming resources NET INCOMING RESOURCES /(RESOURCES EXPENDED) Other recognised gains and losses: Unrealised gains on investments Realised gains/(losses) on disposal of investments Endowment fund £000 (395) (126) - 2,408 1,566 56 (486) (39) 131 152 269 17 17 28 204 (317) 258 - (200) Transfers between funds TOTAL FUNDS BROUGHT FORWARD 11,12, 13, 14 1,048 784 2,595 4,427 4,169 TOTALFUNDSCAR.RlED FORWARD 11,12, 13,14 853 658 2,599 4,110 4,42 7 200 All of the above results are derived from continuing activities. The Statement of Financial Activities includes all ga ins and losses in the year. Page 9 The Instituteof Economic Affairs BALANCESHEET Company Registration No. 755502 Registered Charity No. 235351 As at 31 December 2014 Notes 2014 2013 £000 £000 664 3,169 689 3,251 3,833 3,940 300 173 180 419 473 599 (196) (112) 277 487 4, 110 4,427 11 2,599 2,595 Restricted funds 12, )4 658 784 Unrestricted funds Designated funds General funds 13,14 13 704 149 774 274 14 4,t 10 4,427 FIXEDASSETS Tangible assets Investments 7 8 CURRENT ASSETS Debtors Cash at bank and in hand 9 CREDITORS: Amounts falling due within one year 10 NET CURRENT ASSETS TOT AL ASSETS LESS CURRENT LIABILITIES FUNDS Endowment fund TOTAL FUNDS The financial statements have been prepared in accordance with the provisions applicable to companies subject to the small companies' regime. The financial statements on pages 9 to 20 were approved by the Trustees and authorised for issue on 2015 and are signed on their behalf by: 2.'::j-A~ ·\ Neil Record Trustee 20 15 Page IO The Institute of Economic Affairs ACCOUNTING POLICIES BASIS OF ACCOUNTfNG The financial statements have been prepared under the historical cost convention modified to include the revaluation of fixed asset investments at mark et value, and in accordance with the Companies Act 2006 and follow the recommendations in Accounting and Reporting by Charities: Statement of Recommended Practice, issued in March 2005. The Trustees consider that there are no material uncertainties that may cast doubt upon the charity's ability to continue as a going concern and hence the financial statements have been prepared on this basis. TANG IBLE FIXED ASSETS Fixed assets are stated at histor ical cost, less depreciation . Depreciation is provided on tangible fixed assets , other than freehold land, at rates calculated to write each asset down evenly over its expected useful life, as follows :Freehold property Office equipment over 40 years over 3 years Expenditure of a capital nature below £1,000 is not capitalised, but charged to the Statement of Financial Activities in the year of expenditure. STOCKS AND WORK IN PROGRESS No value for accounts purposes is attributed to stocks of unsold publications . PENSION CONTRIBUTIONS The Institute operate s a defined contribution scheme . Contributions are charged to the Statement of Financial Activities on an accruals basis. INCOMING RESOURCES Income from donations is included in incoming resources when these are receivable, except: • when donors specify that donations given to the charity must be used in future accounting periods, the income is deferred until those periods; • when donors impose conditions, which have to be fulfilled before the charity becomes entitled to use such income, the income is deferred and not included in incoming resources until the preconditions for use have been met. Subscription income is credited to incoming resources for the subscription period covered . All other income including income from investments is credited to incoming resources when receivable by the charity . RESOURCES EXPENDED All expenditure is accounted for on an accruals basis and has been classified under headings that aggregate all costs related to the category. Charitable expenditure comprises those costs incurred by the charity in the delivery of its activities and services for its beneficiaries . It includes both costs that can be allocated directly to such activities and those costs of an indirect nature necessary to support them. Governance costs include those costs associated with meeting the constitutional and statutory requirements of the charity and include the audit fees and costs linked to the strategic management of the charity. All costs are allocated between expenditure categories on a basis designed to reflect the use of the resource . Costs relating to a particular activity are allocated directly . Support costs include central functions and have been allocated to activity cost categories on a basis consistent with the use of resources e.g. by floor space. Staff costs have been allocated according to the time spent on each activity. Page 11 The Instituteof Economic Affairs ACCOUNTING POLICIES (continued) FOREIGN CURRENCY Assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date. Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. All differences are taken to the statement of financial activities. RESEARCH EXPENDITURE Research expenditure is written off in the financial statements as it is incurred. UNRESTRlCTED FUNDS Unrestricted funds comprise those funds which the trustees are free to use for any purpose in furtherance of the charitable objectives. Designated funds are unrestricted funds which the trustees have currently designated for specific purposes. General funds are unrestricted funds for which no specific purposes have been designated. RESTRICTED FUNDS Restricted funds are those donated to the Institute for one or more specific purposes. ENDOWMENT FUND The Ralph Harri s Fund is an expendable endowment fund whose use is restricted to financial support for the position of the Director General, including employment and support costs . INVESTMENTS Investments held as fixed assets comprise equities, open-ended funds, fixed interest securities and currency and are stated at year end market value. Leasehold Property is stated at the Trustees' assessmen t of year-end market value. No depreciation is charged on the property in accordance with SSAP 19. This departure from the requirements of the Companies Act 2006, which requires all properties to be depreciated, is, in the opinion of the Trustees, necessary for the financial statements to give a true and fair view in accordance with applicable accounting standards. Realised gains and losses on the disposal of investments are recognised in the Statement of Financial Activities. Unrealised gains and losses represent the movement in market value of investments and are recognised in the Statement of Financial Activities. OPERATING LEASES All operating lease rentals are recognised in the Statement of financial Activities on a straight line basis over the life of the lease. CASH FLOW STA TEMENT The company has taken advantage of the small company exemption from preparing a cash flow statement under the terms of FRS 1. Page 12 The Institute of Economic Affairs NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2014 2014 £000 2013 £000 412 1,351 408 922 1,763 1,330 DONATIONS (VOLUNTARY INCOME) Foundations, corporate and individuals Restricted Unrestricted 2 ALLOCATION OF COSTS 2014 Fundraising and subscriber support Publications Student!f eacher Outreach Events Communications Governance Direct Costs £000 Support costs £000 2014 Total £000 21 266 134 232 86 13 172 596 414 302 162 10 193 862 548 534 248 23 752 1,656 2,408 ALLOCATION OF SUPPORT COSTS 2014 Personnel costs Office costs Property costs Travel costs 993 168 475 20 1,656 Support costs have been allocated as follows: Fundraising and subscriber support Publications Student!feacher Outreach Events Communication s Governance Support costs Personnel Costs 8% 30% 31% 23% 8% 0% 12% 40% 21% 15% 11% 1% Page 13 The Instituteof Economic Affairs NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2014 2 ALLOCATIONOFCOSTS 2013 Fundraising and subscriber support Publications Student/Teacher Outreach Events Communications Governance Direct costs £000 Support costs £000 2013 Total £000 16 267 90 73 30 14 198 357 195 163 155 8 214 624 285 236 185 22 490 1,076 1,566 ALLOCATION OF SUPPORT COSTS 2013 Personnel costs Office costs Property costs Travel costs 820 158 79 19 1,076 Support costs have been allocated as follows : Fundraising and subscriber support Publications Student/Teacher Outreach Events Communications Governance 3 GOVERNANCE Salaries and staff costs Audit Legal and professional Support costs Personnel costs 14% 28% 24% 24% 10% 0% 20% 35% 16% 12% 16% 1% 2014 £000 2013 £000 10 12 8 11 3 23 22 Pagel4 The Instituteof Economic Affairs NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2014 4 NET INCOMING RESOURCES/(RESOURCES EXPENDED) Net incoming resources/(resources expended) for the year are stated after charging: Depreciation - charge for year Auditor's remuneration Operating lease rentals - plant and machinery 5 2014 £000 2013 £000 25 12 4 26 11 2 TAXATION The Institute is not liable to corporation tax on its income and gains in the current year to the extent that they are applied for charitable purposes. 6 EMPLOYEES The average monthly number of persons employed by the Institute during the year was: Office and management Staff costs for above persons: Wages and salaries, including benefits Social security costs Other pension costs The number of employees whose emoluments as defined for taxation purposes amounted to over £60,000 in the year was as follows: £60,001 - £70,000 £70,001 - £80,000 £100,001 - £110,000 2014 No. 2013 No. 16 13 2014 £000 2013 £000 697 76 51 593 66 38 824 697 2014 No. 2013 No. 1 The employees earning over £60,000 participate in the company defined contribution pension scheme. Contributions paid in the year in respect of these employees amounted to £29,526 (2013: £18,909). No Trustees, or persons related or connected to them, rece ived any remuneration reimbursement of expenses from the Institute during the year . or Page 15 The Institute of Economic Affairs NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2014 7 TANG IBLE FIXED ASSETS Freehold property £000 8 Office equipment £000 Total £000 Cost 1 January 2014 and 31 December 2014 965 95 1,060 Depreciation l January 2014 Charged for year 292 17 79 8 371 25 31 December 2014 309 87 396 Net book value 31 December 2014 656 8 664 3 1 December 2013 673 16 689 FIXE D ASSET INVESTMENTS Market value at 1 January 2014 Addi tions Disposals Unrealised gains Open-end funds £000 Cash held on deposit £000 2,748 (147) 152 Property £000 Total £000 403 207 (294) 100 3,251 207 (441) 152 Market value at 3 1 Decem ber 2014 2,753 316 100 3,169 Historic al cost at 31 December 2014 1,976 221 71 2,268 Historical cost at 31 December 2013 2,123 332 71 2,526 Property represents an equity share in leasehold property, and is included in the accounts at the Trustees' assessment of market value. Page 16 The Institute of Economic Affairs NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2014 9 DEBTORS 2014 £000 Trade debtors Taxation recoverable Prepayments and accrued income 10 CREDITORS: Amounts falling due within one year 69 8 130 15 155 103 300 180 2014 £000 Trade creditors Taxation and social security Other creditors Accruals and deferred income 2013 £000 2013 £000 103 24 5 64 39 20 14 39 196 112 Deferred income has arisen as a result of 2 year subscriptions, and membership donations, paid in advance. Amounts are released to the Statement of Financial Activities within the year to which the subscription or donation relates. 2014 £000 11 2013 £000 Deferred income at 1 January 2014 Released to Statement of Financial Activities in year Deferred in year 3 3 (3) 24 (3) Deferred income at 31 December 20 I 4 24 3 3 EXPENDABLE ENDOWMENT FUND Ralph Harris Fund At t January 2014 £000 Investment Income £000 Tran sfers between funds £000 Investment Gains £000 At 31 December 2014 £000 2,595 56 (200) 148 2,599 The Ralph Harris Fund has been established as an expendable endowment fund to endow the position of Director General of the IEA as "Director General and Ralph Harris Fellow." Page l 7 The Instituteof Economic Affairs NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2014 12 RESTRICTED FUNDS At 1 January 2014 £000 Income Expenditure Investment £000 £000 Gains £000 2 13 (2) (13) State of the Economy conference Freedom Forum Earhart grant for Pablo Pietro Earhart grant for Kristian Niemietz Trade Policy Research Centre Brexit Essay Competition Sock Puppets Bit Coin Monograph Earhart grant for Fortress Europe Monograph IEA TV and Audio Visual European Network 9 6 77 158 15 85 (85) 105 45 Thinktent Transport Unit 51 50 25 82 Age Endeavour Health Project MFund 2 35 566 -784 2014 £000 9 (6) (77) (182) (15) (2) 15 At 31 December I] 15 (105) (5 I) 45 (50) (25) 9 (10) (90) 21 506 566 (713) - - 21 658 72 State of the Economy conference donations cover the cost of bursary places for students. A donation was received towards the cost of the Freedom Forum, which is a long weekend residential education and information event for between 250 to 300 participants. The Earhart Foundation has funded a research fellowship for Kristian Niemietz at the IEA, and a graduate fellowship for Pablo Pietro at Kings Co llege London. The Trade Po licy Research Centre carries out research into the UK's trade policy options outside the Common Commercial Policy/Single Market Framework of the EU. Significant donations were collected in 2013 to fund the Brexit Prize competition which was conc luded and awarded in 2014. A monograph will be published in 2015. A donation was received to develop further in 2014 the ideas within the Sock Puppets web papers already published in 2013 . A donation was received to support a monograph on Bitcoin which was published in the year. The Earhart Foundation has funded a monograph on the theme of Fortress Europe to be published in 2015. Donations were received to support the development ofIEA TV and improv ement of audio visual equipment for IEA events. Donations were received to estab lish a European Network of Free Market Think Tanks . Page18 The Instituteof Economic Affairs NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2014 Donations were received to establish a marquee, organised with two other think tanks, to be the central point for free market debate at the Conservative Party Conference. The IEA Transport Unit creates papers, monographs and events on the role of markets in the transport sector. The Age Endeavour Fellowship supports IEA research into work and the elderly. Funding has been received for a project to encourage independence and enterprise for a healthy old age. The M FWld was set up to promote research into the reduction in the siz.e of the public sector and to promote an interest in market economy policies on the part of teachers and senior pupils. 13 UNRESTRICTED FUNDS Atl January 2014 £000 Income £000 Expenditure £000 Transfers £000 At31 December 2014 £000 Designated Funds Fixed Asset Fund Dorian Fund Warren Fund 673 69 32 (17) (53) 656 16 32 Designated unrestricted funds 774 (70) 704 Unrestricted general funds 274 1,300 270 149 1,048 --1,300 200 853 (1,695) --- (1,695) The Fixed Asset Fund represents donations made to the Institute currently designated and used by the Trustees for the purpose ofacquiring freehold and investment property. A transfer has been made between the Fixed Asset Fund and General Fund in order to reflect the depreciation of the freehold property in the year. The Dorian Fund has been designated by the Trustees to support the costs of an education director. The Warren Fund is used by the Trustees to provide working capital. 14 ANALYSIS OF NET ASSETS BETWEEN FUNDS Designated Funds £000 Fund balances at 31 December 20 14 are represented by : Tangible fixed assets Investments Current assets Current liabilities 656 48 Total net assets 704 Restricted funds £000 Endowment fund £000 8 138 199 (196) 425 233 2,558 149 658 2,599 General Funds £000 41 Total funds £000 664 3,169 473 (196) 4, I 10 Page 19 The Instituteof Economic Affairs NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2014 15 PENSION SCHEMES The Institute operates a defined contribution scheme and contributions to the scheme are made to an independent insurance company. The pension costs of the Institute's scheme amounted to £51,133 (2013: £37,590). There were £4,578 contributions outstanding at the end of the year (2013: £14,169). 16 STATUS The Institute is a company limited by guarantee and has no share capital. The Institute had 11 (2013: 11) members at the year end. The Memorandum of Association provides that members are liable to contribute a sum not exceeding£ 1 each in the event of the company being wound up while they are members or within one year of ceasing to be members. 17 RELATED PARTY TRANSACTIONS There were no related party transactions in the year (20 l3: nil). 18 COMMITMENT UNDER OPERA TING LEASES 2014 £000 2013 4 2 £000 At 31 December 2014, the Institute had annual commitments under noncancellable operating leases as follows: Plant and machinery: Expiring between 2 and 5 years Page 20