The Institute of Economic AfFairs (A Charitable Company Limited by Guarantee) TRUSTEES' REPORT AND FINANCIAL STATEMENTS 31 December 2015 Company Registration No. 755502 Retpstered Chattty No. 235351 The Institute of Economic AA'airs TRUSTEES' REPORT Company R gistration Number: Charity Registration Number: 755502 235351 TRUSTEES Neil Record Professor DR Myddelton Kevin Bell Robert Boyd Mchael Fisher Sir Michael Hintze Professor Patrick Minford Professor Mark P nniogton Bruno Prior Ptotbssor Martin Ricketts Linda Whetstone Chairman(appointed 3~March2015) Chahm m (retired 3~ March2015) Tleasurer DIRECTOR GENERAL Mark Littlewood ACADEMIC AND RESEARCH DIRECTOR Professor PhiTip Booth SECRETARY C Rusbridge REGISTERED OFFICE 2 Lord North Street W stminstm London SW1P 3LB AUDITOR RSM UK Audit LLP, Chartered Accountants The Pinnacle, 170 Midsummer Boulevard Milton Keynes Bucks MK9 1BP Barclays Bank pic Pall Mall Corporate Banking Centm Pall Corporate Group PO Box 15163 London SW1A IQD INVESTMENT MANAGERS CCLA Investment Management Limited BNY Mellon Fund Managem Limited M dt G Securities Limited Hetubnson Global Investom Page I The Institute of Economic TRUSTEES' REPORT AfFairs The Trustees pmsent their report together with the for the financial year ended 31 December 2015. ~ statements of the Institute of Economic Affairs The fnumcial statements comply with the Charities Act 2011, The Companies Act 2006, the Memorandum and Articles of Association, and Accounting and Reporting by harities: Statement of Recommended Practice appficable to charities preparbtg their accounts in accordance with the Financial Reporting Stambud applicable in the UK and Republic of heland (pubfished on 16 July 2014). STATUS of Economic Afgrha gBA) is a charitable company limited by guarantm. 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 egistered charity No. CCI235351. The Institute The IEA is ~ by its Director GeneraL Mark Littlewood, who oversees afi aspects of its afihirs and is responsible for achieving its goals. He reports three times a year to the full Board of Trustem and more fiequeatly to its Finance and General Purposes Committee, comprising the committee Chairman, Kevin Bell, the Chairman of the Board, Neil Record, the I?easurer, Robert Boyd and board member, Bruno Prior. These individuals also serve as the Audit Committee. Decisions about the level and mix of activities rue made by the Trustees; about detailed day-to-day operations by senior statf, sometimes with advice fiom the Finance aud General Purposes Committee. Two of the Trustees, the Chairman of the Board, Neil Record, and the Chairnum of the Finance and General Purposes Committee, Kevin Bell, form a sub-committee which reviews the Director General's perfonnance annually. Thee of the Trustees, the Chairman of the Board, Neil Reconl, Kevin Befi, and Linda Whetstone, together form a Nominations subcommittee which recommends potential Trustees to the fuH Board fium time to time. OBJECTIVES AND ACTIVITIES The charity's main aims are to prumolu learning by means improve public understanding thereof. of research into economics and politics and to We try to achieve our objectives by means of tbe activities listed below, which include allocated costs A ministnmon and Reseandt of Academic programmes: ~ Publications ~ outreach Lectures, conferences, seminan and special events Communication and distribution, including website ~ ~ Stud~ Fundraisiug and subscriber support PUBLIC BENEFIT As detailed above, the charity's main aims are to promote learning by means of research into economics and politics and to improve public 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 confiun that, iu exercishg their powers and fulfifiing their respoosil&lfities iu pursuit of the aims described above, they have paid due reyud to the guidance on public benefit published by the Charity Commission. ~ding Page 2 The Institute of Economic TRUSTEES' REPORT Affairs REVIEW OF ACHIEVEMENTS Our mission is: "To improve understanding of the Smdamental institutions of a and expounding the mle of markets in solving economic and social problems. " fin society by analyzing We aim to achieve our mission by underlxking the various activities listed above. Ordinary donations were some I lqo lower than in 2014. We continue to seek flexibility in responding potential changes, both in income and in pmgramme opportunities. Over the year, there were amund 410,000 visits to the website to ~ w~i~~uk . We continued to expand our student/teacher educational outreach programme with a record number of students interning at the IEA, participating in workshops, attending events, developing eblis and working on research pmjects. We also continued to run Freedom Week, a one-week educational seminar held at Cambridge University which is free to atteruL In July, we held our first annual conference for 16-25 year olds, THINK, a twoday event which featured speakers Som all over the world and attracted nearly 300 young people, many of whom had never come across the IEA before. All sessions were filmed for isa TV including the 'Economics of Game of Thrones' which has had nearly 2,000 views since. We have continued to organise a series of regional sixth-form economics confixences at schools setose the UK. We now partner with more than 20 schools a year and reach more than 000 4, students. The IEA published seven monographs in print in 2015, together with thee editions of our journaL Economic Atfirirs. A further nineteen titles were published as briefings and discussion papers. Many IBA publications that were previously out of print have also bean made available though our print-on-demand system. In all we published more than 100 authors acmss our monographs, discussion papers, other shorter papers and journal. In addition we co-published two books with trade publishers. Our magazine, EA, bas proved very successful with students and teachers throughout the UK. Each edition katures some of the best writers in the world on economic Seedom. EA is sent to every school in the UK teaching 'A' level or IB Economics or Business Studies and articles are used as teaching modules in schools and universities. I~ ~ c~s The IEA organised about 100 events in 2015, including major and many lunch, dinner and evening events, including seminars, interviews, debates, book launches and other special events. Our annual Hayek Memorial Lecture was delivered by Frofiesor William Easterly. Nearly 600 people attendssL including large numbers of making it our most successful event ever. The IEA continued to expand its media coverage, with senior IBA stafF and fellows making just shy of 4,000 media appearances acmss print, radio and television. In addition, mom than 8,$00 people now follow the IEA on Facebook and 11,000 ibllow us on Twitter. The IEA takes no corpcmte position on whether Britain should stay m the EU and a wide range of views are beld by the hstitute's staff, trustees and wider supporters. Not only are there substantial internal disagreements on whether tbe UK should nunain in the EU or leave it, but thee are differing views about, for example, what policies the UK should embrace if it did choose to leave tbe EU and what the various risks and oppornuuties are Som tahng various different courses of action. Our objectives are essentially long-term in nature and it remains extremely difficult to assess &om year to year the extent of 'public understanding' and changes therein. We measure the volume of many of our activities; and we aim to maintain or impmve their quality. Page 3 The Institute of Economic TRUSTEES' REPORT AfFairs All our main publications are mfareed by independent scholars and we beueSt Som a network of distinguished academic advisers, to whom we are most grateibb We hold a formal meeting of academic advisers once a year, under tbe chairmanship of Professor Martin Ricketts, one of our Trustees. C ntinuing themes are over-regulatiou, much of it stemming Som the European Union; systemic problems in the weigue state, including social security, education and health services; in&sstructure deficieocies; and other aspects of government in erference. The IBA has recently embarked on a major pmject (tbe Paragon Initiative) to critically examine every aspect of govennnent activity &om an economic perspective and pmpose major reform. FINANCIAL REVIEW Total income for the year was 81,693,000 and total expenditure was f2, 132,000. After taking account of realised gains on disposal of investments of f288, 000, and unrealised losses on investments still held at the year end of f107,000, there was a net reduction in funds of f258, 000 in the year. Restricted income was 8644, 000 companxl with expenditure on restricted projects of 8842, 000. Investment income on the Ralph Harris Fund during the year amounted to f47, 000. The Snancial statements, together with the notes thereto, expand on these outline details. Our income mainly comprises donations Som individuals, companies, foundations and personal trusts, together with revenue Som sales of publications and &cm cnferencm and income Som investments. We do not accept donations or grants Som government. It is a feature of the modem UK scene that all too many so-called "charities" do mceive much —in many cases most —of their funds Som government (that is, Som taxpayers). The Hnance and General Purposes Committee, and the full Board of Managing Trustees, regularly review the amount of donations. There has been an 1154 decrease in tbe amount of donatiom in 2015, compared with 20 14. We sre grateful to all our donors for supporting our work. GRANT MAKING POLICY ~. The Trustees nuke occasional grants to individuals to support their research snd to attend confenxuws. These ste o&en Som restricted funds donated speciScally Str such purposes. Fnun time to time grants may be made to other Institutes where the Trustees think it All such projects are assessed by reference to our mission. ~ INVESTMENT AND RESERVES POLICIBS The Institute's educational mission bas a long-term orientatioo, as noted above, whseas our ability to carry out our work depends on annual donations in a highly competitive fund-raising environment. A cordingly the Trustees' policy is to invest conservatively, largely in equity funds, Sxed interest funds and government securities. Tbe Ralph Harris Fund is invested with a long-term time horizon. Income on investmeots is used to support the IEA's work. The Treasurer and the Finance and General Purposes Committee regularly mview investment results. During the year the rate of return on investmeats has been approximately 2%6. The Trustees' policy on reserves, which is reviewed annually, is to have suÃcient liquid funds on hand to cover two months of budgeted expemlitme, which amounts to appmximately f350,000. We believe this is adequate, under normal circumstances, to enable us to maintain operations in the event of seasonal or other Suctuarions in donations and/or expenditure. This target has been met in that there was cash at bank and in hand of X244, 000 at the year end plus the cash deposits held within the Ralph Hams Fund of 6316,000 which are available to endow the position of the Dhector General of the IEA. A transfer of f200, 000 has been budgeted for in this respect. The Trustees do not seek to accumulate reserves, but rather to apply donations in support of the Institute's programmm in accordance with donors' intent. The See reserves of the charity as at 31 December 2015, degned as being unrestricted, undesigoated not represented by tangible Sxed assets, amounted to 8242, 000 (2014: $141, 000). funds Page 4 The Institute of Economic TRUSTEES' REPORT Affairs RISK REVIEW The principal risks aad acertainties to which the IEA is exposed am reputational, loss financial. ~ of key personnel, and Reputational risk centres an tbe quality and integrity of tbe Institute's research and publications snd other activities. As noted above, aH tbe IEA's major publications sm peer reviewed under a system managed by the Academic and Dhector, Pmfessar PhiHp Booth, and s pervised by the Chairman of our Academic Advisary Board, Professor Martm Ricketts. Tbe IEA maintains strict independence fiam ccmmercia4 party political or other lateresm. It does not accept cammissions to perform an behalf of cammemial ar governmental inaxests. ~ The perfarnumce of key personnel is reviewed at least snnuafiy, either by the Director General ar by a small committee of Trustees, led by the Chairman, to assess whetlm both the employer's and employees' objectives are being satisfieL As with aay smaH arganisation, it is not possible to completely protect against tbe loss of key people. Financial risks and un rtainties are largely covered by the Reserves and Investment policies noted above. ~, The Trustees examine at least once a year the major strategic, operatiaaal ncerteiMas which the Institute fitces, either at regular or special Board and General Purposes Committee. and financial risks and ar through tbe Finance FUTURE PLANS ~s, The Institute inteads to enhance its activities still farther in 2016 and beyond, continuing our long-established programme of publications and focusing especially on developing our website and student/teacher outreach snd ieaTV. We recogaise our need to atauct new readers, listeners and viewers (and aew authors). Cunently our main focus for research is aa the welfiue state, the impact of regulation and the causes and efibcts of high levels of government speeding. TRUSTEES The following were trustees (who are dhectors for the purposes of campsay lsw) at the time of sigaing this report and financial ststemeats. They afi held office thmughout the year 2015 and up to the date of signing this report, unless alherwise stated. Neil Recard Pmfiasar DR Myddelton Kevin BeH Robert Boyd Michael Fisher Sir Michael Hintze Professor Patrick Minford Professor Mark Peaningtm Bruno Prior Professor Marth Ricketts Linda Whetstone 3" Chairman (appointed March 2015) Chairman (retired 3~ March 2015) Nane of the Trustees bas an interest, direct ar bufimct, in any contract eatemd into by the Institute. The Trustees msy fiam time to time, and at any time, appoint any person to be a Thmtee, up to the prescribed maximum of twelve. Appointmeats are normally made on the recommeadatiaa of tbe Nominations Committee. Any Trustee so appointed retains ofiice until the next Annual General Meeting, and is then eligible Sr re-election on a three-year mtating basis. Page 5 The Institute of Economic TRUSTEES' REPORT AfFairs New Trustees are 'trained' mostly ou the job by attending meetings of Trustees. They me 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 usually already have substsaM board level or management experience in either the or academic arena dep~ PAY POLICY FOR SENIOR STAFF c~ 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. Pay increases and bonuses are awarded to reward merit. Decisions reyn&e pay levels are Informed by reference to other think tanks and also comparable positions in related sectors. TAXATION STATUS The charitable company is a egistered charity and, as such, for taxation purposes is entitled to exemption under the Income and Corporation Taxes Act 1988. AUDITOR A resolution to reappoint RSM UK Audit LLP (formerly Baker Tilly UK Audit LLP), Accountants, as auditors will be put to the members at the annual general meeting. iuutered This report bas been prepared in accordance with the Statement of Recommended Practice: Accounting and Reporting by Charities (issoed in July 2014) hariticu SORP (FRS102)). The Trustees have taken ( advantage of the exemptions available under the small companies' regime from the requhumeot to prepare a strategic report and in preparing the Trustees Report. By order of the board Aw Neg Reond Chairman 25 April 2016 Page 6 The Institute of Economic AfFairs STATEMENT OF TRUSTEES' RESPONSIBILITIES The Trustees (who are also dhuctars of the Institute of Eoaaomic Afihhs for the purposes of company law) are responsible for papering the Trustees' Repart aad the financia statements in accordance with appffcable law and United Kingdom Accounting Standards (United Khgdom Geacrally Accepted Accounting Practice). Company Iaw requhus the Trustem to prepare financial statements for each financial year which give a true and fidr view of the state of aff'airs of the charitable campaay and of the iacomhg resources and application of resaurces, including the income and expenditme, of the charitable company for that period. In preparing those financial statements, the Trustees atu required to: ~ select suitable accounting policies and then apply them consisteatly; ~ observe the methods and principles in the Charities SORP; ~ make judgemeats and estimates that are reasonable and prudent; ~ state whether applicable accounting have been followed, subject to any material deparuuus disclosed and explained in the financial statements; and ~ prepare the financial statements on the going concern basis unless it is inappropriate the company will caatinue in business. ~ to presume that The Trustees are responsible for keeping proper accounting records that disclose with reasonable aocuracy at any time the financial position of the charitable company and usable them to easmu that the financial statements comply with the Campaaies Act 2006. They are also responsible for safeguarding tbe assets of the charitable company and hence for taking reasonable steps for the preveatioa and detectioa of ffuud and other htegularities. In so fiu as the Trustees are aware: ~ there is no relevant audit iafinmation ~ the Trustees have taken all steps that they ought to have tskea to malta themselves relevant audit information snd to establish that the auditor is aware of that information. By order of the of which the charitable company's auditor is unaware; and aware of any board Neil Recard Chairnum 25 April 2016 Page 7 The Institute of Economic Affairs INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF THE INSTITUTE OF ECONOMIC AFFAIRS For the year ended 31 December 2015 We have audited the Snancial statements of the Institute of Economic ANurs for tbe year endol 31 December 2015 on pages 9 to 24. The Snancial reporting Sumework that has been applied in their preparation is applicable law and United ~ Kingdom Accounting including Standards (United Kingdom Generally Accepted Accounting Practice) FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland". This 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 so that we might state to the charitable company's members those matters we are required to stats to them in an auditor's report and for no other purpose. To the fullest extent pernritted by law, we do not accept or assume responsibility to anyone other thm the charitable company and the charitable company's members ss a body, Sr our audit work, for this report, or for the opinions we have thrmed. Respeegve respensiblgtias of trustees and auditor As explained more fully ia the Statement of Trustees' Responsibilities set out on page 7, the trustees (wbo are also dhuctors of the company for the purposes of company Iaw) sre responsible for the preparation of the Snancial statements aad for being satisged that they give a true and gur view. Our responsibility is to audit and express an opinion on the Scandal statements in accordance with applicable law and Internarional Stanihuds on Auditing (UK and Ireland). Those standards requhu us to comply with the Auditiag Practices Board's (APB's) Ethical Standards for Auditors. s~ Scope of the audit af the Bnandal statements A description of the scope of aa audit of financial webslte at bttp://www. gu. ofg. uk/alldlts opellkpnvate. Opinion on Bnancial statements In our opinion the Snanclal statements: give a true and Sdr view of tbe state incoming nxources and application is provided on the Financial Reporting Council's of thc charitabte company's atgdrs of resources, including its inanne as at 31 December 2015 and of its 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 acconhmce with the Companbu Act 2006. Opinion on other ruqutrement of the Companies Act 2006 In our opinion the information given in tbe Trusiees' Report &r the Snancial year for which the Snancial siutements are prepared is consistent with the Snanciai statements. Matters on which we are required to rupert by exception We have nothing to report in respect of the following matters where the Companies Act 2006 mquires us to report to you if, in our opinion: the charity bas not kept adequate accounting records, or returns adequate Su our audit have not bees received tom branches not visited by us; or the Snancial statsmeats are not in agreement with the accounting records and returns; or ceriain disclosures of tnurtscs' remuneration speciged by law are not made; or we have not received all the information and explanations we require for our audit; or tbe Trustees ware not eatitled to take advantage of the small companies exemption &em the requirement to prepare a sirstegic rcport or in preparing the Trustees' Report. ~ RSH uK SARAH MASON (Senior Statutory Auditor) For and on behalf of RSM UK Audit LLP (tbrmerly Baker Tilly UK Audit LLP), Statutory Auditor Accountants The Pinnacle, 170 Mdsummer Boulevard Mlton Keynes, Bucks MK9 1BP Q M+2ol( Page 8 The Institute of Economic AfFairs STATEMENT OF FINANCIAL ACTIVITKS (INCLUDING AN INCOME AND EXPENDITURE ACCOUNT) For the year ended 31 December 2015 Umestrlcted Restricted funds funds 6000 8000 Notes INCOME FROM: Donations Charitable Activities: Publications and Subscriptions Events Other Trading Activities Investments: Dividends raceivabla Interest receivable Endowment fund 00 2014 6000 f000 1,542 1,763 26 53 18 22 58 13 9 44 10 50 16 47 1,693 1,922 201 195 810 886 554 26 53 18 38 1,002 Total 2015 Note 1 638 TOTAL Total EXPENDITURE ON: Raising Funds: Fuudraising and subscriber sUpport 201 Charitable activities: Academic programme: Publications Student/Teacher outreach Events Communications TOTAL Net Gains/(Losses) on Investments: Realised gains on disposals Unrealised (losses)/gains NET INCOME/ (EXPENDITURE) 346 189 340 214 464 235 77 66 417 539 280 243 1,290 842 2, 132 2,417 124 57 (43) 107 (64) 288 (107) 17 152 (184) 90 (258) (326) (258) (326) (164) Gmss trsnsgas between funds 200 NET MOVEh6PK IN FUNDS RECONCILIATION OF FUNDS: TOTAL FUNDS BROUGHT FORWARD 11,12, 13,14 TOTAL FUNDS CARRIED FORWARD 11,12, 13,14 All of the operations for boih years are continuing. stated above. 424 (200) 36 (184) 844 658 2,599 4, 101 4,427 474 2,489 3,843 4, 101 880 (110) There were no recogtdsed gains or losses other than those Page 9 The Institute of Economic BALANCE SHEET As at 31 December 2015 Affairs Company Registration No. 755502 Registered Charity No. 235351 Notes 2015 2014 8000 8000 638 2, 810 664 3, 169 3,448 3,833 301 244 300 545 473 (150) (205) 395 268 3,843 4, 101 2,489 2,599 12, 14 474 658 13,14 880 14 3,843 FIXED ASSETS Tangible assets Investments 7 8 CURRENT ASSETS Debtors Cash at bank and in hand CREDITORS: Amounts SHing due within one year 10 NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES 173 THE FUNDS OF THE CHARITY: Endowment fund Restricted funds Uarestrictcd gods TOTAL FUNDS 4, 101 The financial statements on pages 9 to 24 were approved by the Trustees and authorised for issue on 25 April 2016 and are signed on their behalf by: Neil Record 25 April 2016 Page 10 The Institute of Economic Affairs STATEMENT OF CASH FLOWS For the year ended 31 December 2015 CASH FLOWS FROM OPERATING ACTIVITKS: Net cash used in operating activities Cash flows tram investing activities: Dividends and interest Proceeds Sum sale of investments Purchase of investments Net cash provided by investing activities Change in cash and cash equivalents iu the year Cash aud cash equivalents at I January (A) 2015 2014 f000 SMO (523) (563) 54 1,013 66 458 (473) (207) 594 317 71 173 (246) Cash and cash equivalents at 31 December 419 173 (A) RECONCILIATION OF NET INCOME/(EXPENDITURE) TO NET CAH FLOW FROM OPERATING ACTIVITIES: Net (expenditure) for the reportmg period (as per the statement of Bnsncial activities) Adjustmeots for: Depreciation charges (Gains) on investments Dividends and interest (Increase) in debtors Decrease)/Increase in creditors Net cash used in operating activities (258) 26 (181) (326) 25 (55) (169) (66) (120) 93 (523) (563) (54) (I) Page 11 The Institute of Economic Affairs ACCOUNTING POLICIES BASIS OF ACCOUNTING AND GOING CONCERN The financial statements have been prepmed under the historical cost convention with items recognised at cost or value except for investments which are recognised at market value. The financial statements have been prepmud in acoordance with the Statemeut of Recommended Practice: Accounting snd Reportbtg by Charities reparite their accounts in accordance with the Financial Reporting Standard applicable in the UK and Republic ofbeland (FRS 102) issued on 16 July 2014, the Charities Act 2011, and the Companies Act 2006. ~on The Institute constitutes a pubfic benefit entity as deBned by FRS 102. Tbe Trustem confirm that at the time of pproviug the Bnancial statements, there is a reasonable expectation that tbe Institute bas adequate resources to continue in operational existence for the foreseeable fuuue. In amvtng at this conclusion, the Trustees have taken account of current and anticipated Bnancial performance in the current economic conditions, and the Institute's reserves position. For this reason, the going concern basis continues to be adopted in the ptepmafion of the Institute's fiuancial statements. ~ RECONCILIATION WITH PREVIOUS GENERALLY ACCEPTED ACCOUNTING PRACTICE This is the first year that the charity has presented its results under FRS 102. The last Bnancial prepared under the previous UK GAAP were for the year ended 31 December 20 14. The date of transition to FRS 102 was I January 2014. Set out below are the changes in accounting policies which reconcfie profit for the Bnancial year ended 31 December 2014 and the total reserves as at 1 January 2014 and 31 December 2014 between UK GAAP as previously reported and FRS 102. In preparing the accounts the Trustees have considered whether in applying the accounting policies required by FRS 102 and the Charities SORP (FRS 102), a restatement of comparative items was needeL Holiday Pay Accrual: FRS 102 requires short term employee benefits to be charged to the SOFA as the employee service is received. This has resulted in the charity recognising a liability for holiday pay of $9,000 on tnmsition to FRS 102. Previous holiday pay accruals were not recognised and were charged to the SOFA as they were paid. In accordance with the requirements of FRS 102 a reconciliation of opening balances and net income/(expenditme) fix the year is provided with tbe net income/(expenditure) under previous GAAP adjusted for the recognition of holiday pay accruals. Reconcfiiatloa of reported net income Reported net (expenditure) before transfers as previously stated Adjustment for holiday pay expense 2014 net (expenditure) as restated U~ Reeonefiiafien Adjustment 6'000 (317) (9) (326) of funds funds as previously stated for holiday pay accrual 2014 umestricted funds as restated 853 (9) 844 TANGIBLE FIXED ASSETS Fixed assets are stated at istorictd cost, less depreciation. Depreciation is provided on tangfi&le Bxed assets, other than fieebold hmd, at mtes calculated to write each asset down evenly over its expected useful fife, as follows:Ftuehold property Office equipment Expenditure of a capital nature below Activities in the year of expenditure. over 40 years over 3 yarns 61,000 is not capitalised, but charged to the Statement of Financial Page 12 The Institute of Economic Affairs ACCOUNTING POLICIES (continued) INVESTMENT PROPERTY Investment property is initially measured at cost and subsequently measured at fidr value whilst a reliable measure of fidr value is available without undue cost or eifort. Changes in fidr value are recognised in the SOFA. ~~ The Companies Act 2006 requires all properties to be depreciauxL However, this requirement confiicts with the geuerafiy accounting principle set out in FRS 102. The trustees consider that, because the hvestmeut is not held for consumption, but fix its investment potential, to depreciate it would not give a true and fidr vimv. Ifthis aperture finm the Companies Act 2006 had not been made in order to give a true and fidr view, the profit for the financial year would have been reduced by depreciation. STOCKS AND WORK IN PROGRESS No value Sr accounts purposes is attributed to stocks PENSION CONTRIBUTIONS Tbe Institute operates a defined contribution Financial Activities on an accruals basis. of unsold scheme. publications. Contributions are charged to the Statement of INCOMING RESOURCES Income fium donations is included in incoming resources when these are receivable, except: ~ when donors specify that dcnatiaas gives to the charity must be used in future accounting periods, the income is deferred until those periods; ~ when donors impose coadifions, which have to be fulfified before the charity becomes entitled to use such income, the income is defiared and not included in incamiug resomues until the preconditions for use have been met. Subscription income is credited to incoming resomces for the subscription period covered. AB other income including income &om investments is credited to incoming resources when receivable by the charity. ~ RESOURCES EXPENDED AB expenditure is for on an accruals basis and has been classified under headings that aggregate afi costs related to the category. Charitable expenditum 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 aBocated directly to such activities and those costs of an indirect nature necessary to support them. AB costs are afiocated between expenditure categories on a basis designed to retlect the use of the resourca Costs relating to a particular activity ate aBocated directly. Support costs include central functions and have been allocated to activity cost categories on a basis consisnmt with the use of resources e.g. by floor space. Stair costs have been allocated txxxnding to the time spent ou each activity ~ FOREIGN CURRENCY Assets and liaMities denomhated in foreign cunnncies are trauslamd at the rate of exchange ruling at the balance sheet date. Transacfions in fondgn curreocies are recorded at the rate ruling at the date of the tnmsaction. AB are taken to the statement of financial activities. RESEARCH EXPENDITURE Research expenditure is written oif in the financial statements as it is incunetL ENDOWMENT PUND The Ralph Hanis Fund is an expendable endowment fund whose use is reslricted to finanrial support for the position of tbe Director General, hcluding employment and support costs. Page 13 The Institute of Economic Affairs ACCOUNTING POLICIES (continued) I qqRESTRICTED FUNDS Unrestricted funds comprise those funds which the trustees are fiee to use for any purpose in furtherance of the objectives. Designated fimds ate umestricted funds which the trustees have currently designated for specific purposes. General funds are unrestricted funds for which no specific purposes have been desiguatetL ~le RESTRICTED FUNDS Restricted funds are those donated to the Institute fbr one or more speci6c purposes. OPERATING LEASBS All operating lease rentals are recognised in the Statement the life of the lease. of Financial Activities on a straight line basis over INSTR~ FINANCIAL The charity has chosen to adopt sections 11 and 12 of FRS 102 in respect charity only has financial assets and financial liabilities of a khd that of financial instruments. The qualify as Basic fiuancial instruments. Financial assets: Basic financial assets, including investments held as fixed assets, uade and other receivables, and cash and bank balances are initially recognised at transaction price. ~ Investmeuts beld as fixed assets comprise equities, open-ended funds, fixed intwest securitms and and we stated at year end market value. Realised gains and losses on disposal and uruealised gains and losses due to the movement in market value of invesuneuts and are recognised in the Statement of Financial Activities. Other financial assets are assessed at the eud due to reduction in tbe recoverable amount Financial Activities. of each sporting period for objective evidence of impairment Any impahment losses are mcognised in the Statement of Financial liabilities: Basic financid IiabiTitfes, hcluding trade and other payables are hitially recognised at transaction price. Any subsequent changes to amounts payable we recognised in the Statement of Financial Activities. Trade payables me obligations to pay fbr goods or services that Bave been acquired in the ordinary of business fiom suppliers. one year or less. Accounts payable are classified as cunent liabilities course if paymeut is due within CRITICAL ACCOUNTING ESTIMATES AND AREAS OF JUDGEMENT Estimates and judgements are tinually evaluated and are based on historical experience and other firctors, including expectatious of future events that are beHeved to be reasonable under the cfrcumsumces. Critical areas of judgement: —in categorising leases as finance leases or operating leases, management makes judgements whether significant risks and rewanh of have transgnred to the charity as lessee. Leases ~p as to Puge 14 The Institute of Economic AfFairs NOTES To THE FINANCIAL STATE~S For the year ended 31 December 2015 STATEMENT OF FINANCIAL ACTIVITIES —COMPARATIVE FIGURES Unrestricted funds INCOME FROM: Donations Charitable Activities: Publications and Restricted funds Notes 8000 8000 2 1,206 557 Subscrlptimts Events Other Trading Activities Investments: Dividends receivable Internet mceivable Endowment fund f000 2014 6000 1,763 22 58 13 1,300 Total 22 58 13 566 41 15 50 16 56 1,922 EXPENDITURE ON: Fundnusing snd subscriber support Charitable activities: Academic programme: Publications Student/Teacher ouueach Events Communications 195 3 603 394 320 192 219 51 243 1,704 713 2,417 Net Gains on Investments: Realised gains on disposals Unrealised gains NET INCOME/ (EXPENDITURE) 4 Transfers between funds 195 (404) 283 160 886 554 539 21 17 131 152 (126) 204 (326) 200 17 (200) NET MOVEMENT IN FUNDS (204) (126) 11,12 13,14 1,048 784 2,595 4,427 11,12 13,14 844 658 2, 599 4, 101 4 (326) RECONCILIATION OF FUNDS: TOTAL FUNDS BROUGHT FORWARD TOTAL FUNDS CARRIED FORWARD Page 15 The Institute of Economic AfFairs NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2015 2 DONATIONS (VOLUNTARY INCOME) Foundations, corporate and individuals Restricted Umestricted 3 ALLOCATION OF COSTS 2015 Fundraising and subscriber support Publications Studeutfpeachcr Outreach Events Communications 2015 $000 2014 8000 638 904 412 1,351 1,542 1,763 Direct Costs Support 2015 costs Total 8000 f000 8000 27 279 155 167 80 174 531 269 250 200 201 810 424 417 280 708 1,424 2, 132 ALLOCATION OF SUPPORT COSTS 2015 Personnel costs OfBce costs Property costs Travel costs 1,154 185 74 11 1,424 Support costs have been allocated as follows: Support costs Fundraising and subscriber support PubHcations StudentZeacher Outreach Events Communications Personnel Costs 9o/o 13' 30%o 39% 27% 17%o 24%o 16% 15% 10% Pcgs 16 The Institute of Economic Affairs NOTES To THE FINANCIAL STATEMENTS For the year ended 31 December 2015 ALLOCATION OF COSTS 2014 Fundratsing and subscriber support Publications Student/Teacher Outreach Events Communications ALLOCATION Dinect Support COSts 2014 Total 6000 6000 6000 21 266 134 232 174 620 420 86 307 1$7 195 886 554 539 243 739 1,678 2, 417 OF SUPPORT COSTS 2014 Personnel coscr OOsce casts Property costs Bevel costs 1,002 181 47$ 20 1, 678 Support costs have been allocated aslbllows: Support costs Fundralsing and subscriber support Publications Student/Teacher Outreach Events Communications NET INCOMNG RESOURCES/(RESOURCES EXPENDED) Net incoming resources/(resources expended) for the year are stated atter charging: Depreciation —charge fcr year Auditor's remunerahon Operating lease rentals —phmt and machinny There were no professional fees other than auditor's remuneration 5 Personnel CostS SYo 12Yo 3 I Yo 419 o 31o/v 21Yo 23YS 15Yo 7YS 11/o 2015 2014 f000 OOOO 26 12 25 12 6 4 paid in the year. TAXATION The nstitute 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. Page 17 The Institute of Economic Affairs NOTES To THE FINANCIAL STATEMENTS For the year ended 31 December 2015 EMPLOYEES The average monthly number during the year was: Otfice and management of persons 2015 No. 2014 No. 19 16 2015 8000 2014 8000 819 86 66 697 76 51 971 824 2015 No. 2014 No. employed by the Institute Staff costs for above persona: Wages and salaries, including benefits Social security costs Other pension costs The number of employees whose emoluments as defined for taxation purpose amounted to over 860,000 in the year was as follows: f60,001 - 870,000 870,001 - 880,000 890,001 - 8100,000 8100,001 - 8110,000 The employees earning over $60,000 partirdpate in the company defined contribution pension scheme. Contributions paid in tbe year in respect of these employees amounted to $45,663 (2014: f29,526). The key management penennel of the institute comprise the Trustees, the Dhactor General, the Chief Operating Officer and the Acadenuc and Research Director. The total employee benefits of these key management personnel wctu 8316,677 (20 14: $260, 025), including pension and social security costs. No Trustees, reimbursement ~ «r persons related or to them, received any remuneration of expenses fiom the Institute during the year. or Page 18 The Institute of Economic Affairs NOTES To THE FINANCIAL STATEIVIENTS For the year ended 31 December 2015 7 TANGIBLE FIXED ASSETS Freehold property Cost I January 2015 mul 31 December 2015 8000 OIEce equipment Total 8000 8000 95 1,060 396 26 Depreciation 8 I January 2015 Charged for year 309 18 87 8 31 December 2015 327 95 Net book value 31 December 2015 638 31 December 2014 656 FIXED ASSET 638 INVES~ Open-eud funds 8000 value at I January 2015 Additions Disposals Umealised gains Cash held on deposit 8000 Maddest 2, 753 316 Property Total 8000 8000 100 3, 169 473 (725) (107) 473 (294) (107) (331) Market value at 31 December 2015 2,352 458 2, 810 Historical cost at 31 December 2015 1,682 353 2,035 Historical cost at 31 December 2014 1,976 221 (100) 71 2,268 Property represents an equity share in leasehold property, and was previously included in tbe accounts at the Trustees' assessment of nuuket value. This property was sold during the year and the Institute's shue generated a profit on disposal of $123,539. Prrgs 19 The Institute of Economic Affhirs NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2015 9 DEBTORS 2015 8000 2014 165 136 130 15 155 301 300 Trade debtors Taxation recoverable Prepayments and accrued income 10 CREDITORS: Amounts Sdliug due within one year 2015 BI00 2014 8000 49 103 24 Tmde creditors Taxation and social security Other creditors Accruals snd defaced income 28 8 65 150 Deferred income has arisen as a result of 2 year subscriptions, dorusiaas paid ht advance. Amounts are released to the Statement the year to which the subscription, income or donation relates. 5 73 205 and con8xence income and Activities within of Financial Deferred income at I January 2015 Released to Statement of Financial Activities in year Deferred ht year De8med income at 31 December 2015 11 BNO 2015 8000 2014 8000 24 (24) 33 3 (3) 33 EXPENDABLE ENDOWMENT FUND At I January 2015 8000 2,599 Investment Income Transfers between funds At $000 8000 8000 31 December 2015 $000 47 (200) 43 2,489 Investment Gains The Ralph Harris Fund has bees established as an expendable eadowment fund to endow the positiau General of the IEA as "Director General aud Ralph Hams Fellow. of Directar " Page 20 The Institute of Economic Affairs NOTES To THE FINANCIAL STATEMENTS For the year ended 31 December 2015 12 RESTRICTED FUNDS At 1 2015 8000 Expenditure Bducational Fellowships Tax and Growth Pmjcet Trade Policy Research Centre 15 6 (6) 1 (1) 25 26 58 56 (25) (35) (58) (56) 15 76 (15) (76) (11) (4) (230) 230 70 55 7 45 644 conference donations cover the cost (24) (42) (82) 14 444 (842) 14 474 of bursary A donation was received Som a UK university towards the cost of sn 30 places for students. applications of market-based support fellowships tbr graduate economics. The Tax and Growth Project funds research on issues gmwth. for one internship Donations ware received towartds an event to celebrate the 60a Anniversary event ibr the IBA former Director General John Blundell. Donatioi were received to 2015 8000 8000 (115) (55) (7) 72 506 658 of thc Economy fD00 (11) THINK Conference Age Endeavour Health Pmj set M Fund State December Investment Gains f000 State of the Economy conference Student Internship Events - 60a and Memorial Bnmit Prize Essay Competition EU Employment Report Fuaus Freedom Earhart gnmt for Monograph on relationship between the UK and EU Paragon Initiative Eumptsm Network Think Teat At31 Nst Jamuuy of its students. of the IEA aad a study and for exploration of taxation, goveaunent spending of memorial practical and economic The Trade Policy Ressraeh Centre canics out research into thc UK's trade policy options outside the Common Commercial Policy/Single Market Pramework of the EU. ~ Following thc Brsxit Prise Essay Competition ia 20 14, a monograph was published in A donation Som an individual was received to support a paper employmeat and BU membership. Thc Future Freedom project aims tc inspire, educate and support tbe young of thc future. 2015. the rs ationship bstweea UK of today to be tbe &ee marketecss Page 21 The Institute of Economic Affairs NOTES To THE FINANCIAL STATEMERIS For the year ended 31 December 2015 The Earhut Foundatioa funded a Monograph examining how the EU might look if it were remodelled fiom This wss not completed before the Foundation ceased snd the bahmce of the grunt was nstulIled. a classical liberal perspecdve. The Paragon Initiative is a five-year research programme government activity fiom an economic perspective. Donations were received to support a network of public that will critically examine every aspect of policy organisations &om Eumpean countries. ~ve Donations were received to establish a marquee, organized with two other think tanks, to be the central point for fiee market debate at tbe Party Conference. THINK is an annual confisence for 16-25 year olds fiztturing speakers fiom amund the world. The Age Endeavour Pellowship supports IEA research into work and the elderly. The Health project aims to encourage independence and eaterprise for a healthy old age. The M Fund was set up to pnnnote research into the reduction in the size of the public sector and to promote an interest in market economy policies on the part of teachers and senior pupils. 13 UNEESTRICTED FUNDS At 1 At 31 December January Designated Funds Fixed Asset Fund Dorian Fund Wauua Ftmd d unrestricted funds 2015 Income f000 6000 Expenditure 6000 Transfius $000 2015 6000 656 16 32 (18) (16) (32) 638 704 (66) 638 140 1,126 (1,290) 266 242 844 1,126 (1,290) 200 880 The Fixed Asset Fund epresenm domnions made to tbe Institute cunmtly desigaated and used by the Trustees for the purpose of acquiYing fieehold and investment pmperty. A transfer has been made between the Fixed Asset Fund and Genera Fund in order to reflect the depreciation of the fieehold pmperty in the year. The Dorian Fund was designated by dre Trustees to support the costs been fully expeaded. of an education dbuctor, and has now The Warrea Fund is used by tbe Tmstees to provide working capital. Page 22 The Institute of Economic AfFairs NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2015 14 ANALYSIS OF NET ASSETS BETWEEN FUNDS Designated Funds General Funds 8000 ~d 15 Fund balances at 31 December 2015 me by: Tangible fixed assets Investments Current assets Cunuut liabilities 638 Total net assets 638 Restricted funds 8000 Endowment fund Total funds %00 8000 8000 359 115 2,451 2,810 545 638 392 (150) 242 38 (150) 474 2,489 3,843 PENSION SCHEMES The Institute operates a defined contribution in ependent insurance company. scheme snd contributions to the scheme are made to an The pension costs of the Institute's scheme amounted to $71,458 (2014: f51,133). There were $8,057 contributions outstanding at the end of the year (2014: 84,578). 16 STATUS The nstitute is a company limited by guanmtce snd has no share capitaL Thc Institute bad 10 (2014: 11)members at the year ead. 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 During the year 89,000 (2014: nil) was paid to the partner term maternity cover contract. of the Director GeneraL in respect of a short Donations fiom trustees in the year totalled 8135,510 (2014: $131332). No conditions were attached to any of these donations which would retlutre the chsrity to alter significantly the nature of its existing activities. 18 COMMITMENT UNDER OPERATING LEASES At 31 December 2015, the Institute had annual commitments cancellable perating leases as follows: Plant and machinery: Expiring between 2 and 5 years payable in one year payable tn one to two years payable in two to fivc year 2015 8000 2014 f000 under non- 16 16 14 Page 23 The Institute of Economic AfFairs NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2015 19 HNANCIAL INSTRUMENTS Financial Assets: Investments held as Bxed assets Trade and other receivables ( note Cash and bank balancm 9) Total Financial LisbiTities: Trade and other payablea Total ( note 10) 2015 8000 2014 2, 810 165 244 3,169 3419 3,487 85 132 85 132 BNO 145 173