CPF_Accounts_2004.doc

City Parochial Foundation Trustee’s Annual Report and Consolidated Financial Statements 2004 page 1

BRIEFHISTORY

The assets of the City Parochial Foundation derive from the philanthropy of the people of London. Around 1,400 separate charitable gifts and bequests, some of them 400 years old, were held by the 112 parishes within the City of London, to be used for the benefit of the churches or, more often, the poor of those parishes. During the 19th century, the City grew to be a world financial centre and the income of these charities, many endowed with City properties, rose substantially. In contrast, the numbers of beneficiaries fell. Some parishes had no residents at all.

On 10 August 1878, a Royal Commission was appointed to investigate the parochial charities of the City of London. Its report resulted in the City of London Parochial Charities Act, 1883. This Act provided that the five largest parishes should continue to manage their own charitable endowments, but that the bulk of the remainder should be administered by a new corporate body, to be known as the Trustees of the London Parochial Charities, with perpetual succession and a Common Seal. The Act further provided that the Charity Commissioners should prepare Schemes for the proper application of these funds. It defined the area of benefit as the City of London and the Metropolitan Police District of London, the largest boundary definition available for Greater London. The outcome was a Scheme promulgated on 23 February 1891 which brought all the endowments together into two funds, a City Church Fund and a Central Fund. Together these constituted the City Parochial Foundation, with the Trustees under the 1883 Act serving as the Foundation's Central Governing Body.

In 1986 the Foundation became the Trustee of the Trust for London. At the outset the Trust was endowed with £10m derived from the sale of the Greater London Council’s assets. It targets small locally based community organisations which are independent of larger bodies.

The Foundation is governed by the 1891 Central Scheme and various subsequent amending Schemes and orders.

At 1 January 2002 a single Common Investment Fund was established to pool the investment assets of the Central and City Church Funds and manage the endowment in a more effective and efficient manner.

The entitlement of the two participating funds in the Combined Fund at 1 January 2002 was 60% Central Fund and 40% City Church Fund, such proportions being settled by reference to the ten year historical average of distributable income of each fund prior to that date. The entitlement of the two funds may change over time.

By an Order of the Charity Commissioners dated 10 November 2003, the Foundation was authorised to adopt a “Total Return” approach to the management of its investment portfolio. The Foundation made this important change to enable it to exercise more effectively its statutory duty to be even-handed in its treatment of both present and future beneficiaries of the Foundation and elected to initiate this approach with effect from 1 January 2003.


ORGANISATION OBJECTIVES AND POLICIES

The Central Fund and the City Church Fund receive funds from the Combined Fund into their income funds. Use of income from the Central Fund is restricted to the area of benefit. It cannot be used for the advancement of religion but may be spent on furthering any charitable purpose which is directed to the assistance of poor inhabitants in the area of benefit. The income may also be applied to assist poor persons who are for the time being located within the area of benefit. In furtherance of these objects, the Trustee makes grants to charitable organisations or projects that work, directly or indirectly, to benefit poor inhabitants of that area.

In 1992 the Foundation applied funds to the conversion of a property to house the Resource Centre (London) Limited then known as the London Voluntary Sector Resource Centre Limited at 356 Holloway Road, London N7. This branch of the Foundation is itself a registered charity and is incorporated as a company limited by guarantee. The objective of the Resource Centre is to provide office accommodation, and meeting and conference facilities for London voluntary sector organisations.

In 1997, the Foundation took direct control of Bellingham Community Project Limited (then known as the Bellingham Recreation Project Limited). The Project operates playing fields owned by the Foundation in Lewisham, London SE6, and is running a leisure and lifestyle centre on it for the benefit of the local community.

Income from the City Church Fund, apart from a number of minor prepayments, is applied in the following proportions: one third is given to the City churches within the City of London and two thirds to the six Dioceses of the Church of England, in whole or in part within the area of benefit, in such proportions as are determined by the Church Commissioners. These proportions have always been according to population. The purposes to which the City Church Fund has to be applied are essentially religious including repairs to churches, the maintenance of services and the payment of stipends.


GOVERNING BODY

MEMBERS, OFFICERS AND

ADVISERS

The 21 governing body members are appointed by a variety of nominating bodies and only four governing body members are directly appointed by the Trustee itself. Unlike many other grant making trusts, it is guided neither by the spirit of a founder nor by family pride or ethos. It is more akin to a public body. The Trustee is always concerned to take a long-term view, particularly important in relation to property endowments, and to work to ensure that all its activities benefit the poor of London. The governing body members have an appropriate balance of skills and experience in the field of estates and finance, as well as that of grant-making and serve on five main Committees in order to ensure that the policies of the Foundation are implemented and that the work is properly managed.

A staff team, currently 14, works to the Trustee providing appropriate input into the policy debates, and the means of implementing all the decisions taken. In addition another 6 are employed by the Resource Centre and two at the Bellingham Community Project.

Whilst the more visible part of the Foundation’s work relates to grant-making, the work of the financial and administrative staff is equally important; any ineffectiveness in that area has the direct consequence of reducing the money available to benefit the poor of London. Efforts continue within the Foundation to develop the staff team as a whole, emphasising the contribution that each and every one makes to the ultimate purpose of the Foundation.

The advisers to the Foundation, namely the Solicitors, the Property Investment Advisers, the Property Valuers, the Property Managing Agents, the Investment Managers and the Auditors, play a vital role in raising issues and in some cases working with the staff on preliminary policy papers. The close collaboration between staff and advisers is important in the light of the demands made upon the voluntary sector through the Charities Act 1993 and other accounting regulations including the Statement of Recommended Practice – Accounting and Reporting by Charities (SORP 2000), with which the financial statements comply. The more collaborative the relationship between the Foundation and advisers, the more effective the Foundation becomes.

Professor Gerald Manners ended eight years as Chairman of the Central Governing Body in January 2004. Ms Maggie Baxter took over as Chair, having been voted Chair-elect during 2003.

Professor Manners, who is remaining as a member of the governing body, is thanked for his enormous contribution over the years as are those governing body members stepping down from office in April 2005 being Professor Julian Franks, Charles Edward Lord, John Barnes, Jyoti Munsiff and Albert Tucker.


The Trustees of The City Parochial Foundation Trustee (as at 13 May 2005)The City Parochial Foundation Trustee’s governing body members are appointed by the following bodies:

CommitteesThe Crown Ms Maggie Baxter (Chair)

Mr Tzeggai Yohannes DeresMs Elahe PanahiMr Nigel Pantling (Vice Chairman)Mr Peter Williams

A,E,F,G,I

E,GA,E,F,G,IA, G, F, I

Corporation of London Revd Dr Martin DudleyMr Robert Hughes-PenneyMr Ian Luder

G, IA,F,I

Church Commissioners The Archdeacon of LondonMr Peter Dale

E, GA,E,F, G, I

Council of the University of London Mrs Gillian Roberts A,F

University College London Professor Gerald Manners A,E,I

City and Guilds of London Institute Mr Paul Wates

Bishopsgate Foundation Mr Miles Barber F,I

King’s College London Mr John Muir A,F,G

City Parochial Foundation Mrs Ingrid PosenMrs Lynda StevensMr Neville WaltonMs Jane Wilmot

GE,GIF,G

Association of London Government Cllr. Raj Chandarana

Greater London Authority Ms Murziline Parchment F,GAll the governing body members are appointed on a five-year term by their nominating body. Their period of appointment commences on 4 April.Key to CommitteesA Asset Allocation Committee E Estate CommitteeG Grants Committee F Finance & Resources CommitteeI Investment Committee

Principal OfficersClerk Mr Bharat Mehta Director of Finance and Administration Miss Carol HarrisonPrincipal Officer (Grants) Mr Mubin Haq Principal Officer (Programmes & Evaluation) Ms Sioned Churchill

Professional AdvisersSolicitors Farrer & Co, 66 Lincoln’s Inn Fields, London WC2A 3LHProperty Investment CB Richard Ellis, 64 North Row, London W1K 6DA (until 31 December 2004)Advisers BH2, 15 Basinghall Street, London EC2V 5BR (from 1 January 2005)Property Managing Agents Allsop Commercial Management Limited, 1 Great Cumberland Place, London

W1H 7AL (from 1 January 2005)Property Valuers Cluttons, 26-28 Albion Place, Maidstone, Kent, ME14 5DZ Auditors KPMG LLP, 8 Salisbury Square, London EC4Y 8BBBankers Lloyds TSB Bank plc, Public and Community Sector, 25 Gresham Street, London

EC2V 7HNInvestment Managers RCM (UK) Ltd, 155 Bishopsgate, London EC2M 3AD

S G Asset Management UK Limited, 100 Ludgate Hill, London EC4M 7NLVeritas Asset Management (UK) Limited, Elizabeth House, 39 York Road, London SE1 7NQMorley Fund Management, 1 Poultry, London EC2R 8EJ


INVESTMENT POWERS

The charity’s investment powers are governed by a Scheme sealed on 16 September 1988.

The investment powers of the charity apply to both funds. All investments acquired by the Foundation have been acquired in accordance with these powers.

TOTAL RETURN

Over at least two decades at the end of the 20th Century, the Foundation saw the value of its Endowment Fund grow much faster than the Retail Price Index, while the increase in its investment income failed to keep pace. The impact on the Foundation’s beneficiaries was to put those seeking grants at a disadvantage compared to future beneficiaries, contrary to the Foundation’s statutory duty to maintain an even-handed approach. The Foundation therefore determined to apply to the Charity Commission for permission to change to a “Total Return” approach to the recognition of income.

The Total Return approach enables the charity to supplement its investment income with a proportion of the capital gains that have accumulated. To do so, the Foundation is required to identify the “Unapplied Total Return", that is the proportion of its assets in excess of the endowment uplifted for the effects of inflation. The Foundation selected 31 December 1942, the earliest date on which all property owned by the Foundation was valued, as the basis for this calculation.

The Foundation then considered the proportion of the Unapplied Total Return that should be retained to cover future possible reductions in the endowment fund caused by adverse market conditions conscious that should the Unapplied Total Return be exhausted then grant distribution would have to stop. From the balance, it decided to allocate up to £2 million for grant making for each of the four years beginning 1 January 2003 (adjusted for inflation), subject to annual confirmation by the Asset Allocation Committee.

At 1 January 2004 the Unapplied Total Return stood at £70 million. At the year end, the Unapplied Total Return stood at £80.0 million (2003: £69.8m).

In reaching these decisions the Foundation has sought professional advice from its investment managers and property advisers. The governing body itself includes individuals with experience and skills in both investment and financial matters. The Trustee’s objective remains to keep the value of the endowment and the income available for grant giving constant in real terms using the Retail Price Index as the benchmark.

City Parochial Foundation - Total return

-

50

100

150

200

250

300

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Years

£m

Total fund RPI-ed Endowment fdfund


REVIEW OF ACTIVITIES

DURING THE YEAR

A chart showing the movement in the Unapplied Total Return is shown below:

Incoming ResourcesIncome from investment properties represented 54% of the Foundation’s incoming resources. The total income from investment properties rose from £4,958,923 in 2003 to £5,110,436 in 2004.

Bank and other interest rose to £912,690 in 2004 from £869,276 in 2003. Income from listed investments rose from £1,868,691 in 2003 to £1,898,440 in 2004. The increase in bank and other interest related to a continued holding of cash and rising interest rates. The equity income was partly offset by the tapering of tax relief, which ended in March 2004.

The Foundation is very pleased to have received £649,023 from the Clothworkers’ Foundation in respect of its share of capital on the winding up of the William Heron Trust.

A commentary on the Resource Centre’s and the Bellingham Community Project’s activities is given below.

Cost of generating incomeExpenditure on generating income was £788,035 (2003: £704,130). This includes property management costs of £368,910 (2003: £333,994) and investment management costs of £237,512 (2003: £191,462). The latter costs are based on the value of the investment portfolio. Of these management charges, £194,367 (2003: £174,646) has been charged against the endowment funds as relating to those funds.

Grants payableTotal grants payable in the year were £8,713,550 (2003: £8,885,960). Of this amount £5,058,855 (2003: £5,092,005) was payable from the Central Fund and £3,654,695 (2003: £3,793,955) was payable from the City Church Fund.

Quinquennial Categories 2004

Collaborative Work1%

Exceptional Needs

1%

Small Grants

1%

Foundation's initiatives

6%

Second Tier and Infrastructure9%

Policy Change5%

Core Costs5%

Schemes to Reduce/Tackle Violence/Hate Crimes

12%

Education, Training and Employment Schemes

28%

Advice and Information and Individual Advocacy

32%


Grants made from the Central Fund2004 is the third year of the present quinquennium 2002-2006 during which the Foundation is allocating grants with the following priorities:

Organisations providing advice, information and individual advocacy;

Organisations developing, promoting and providing education, training and employment schemes;

Organisations that are attempting to develop initiatives that tackle violence and hate crimes against the target groups.

The Foundation also appreciates the importance of back up or development work for the voluntary sector and funds the following:

Core Costs and Management Costs; Policy Change; Second Tier and Infrastructure Organisations; Collaborative responses. Alliance Funding

The Foundation also has a Small Grants programme and may provide continuation funding for work funded by itself under the previous quinquennial policy.

An analysis of grants made from the Central Fund in 2004 other than that to Bellingham is shown in the chart below:

The Analysis of Grants by Category


The policy of making mainly revenue grants was continued with 99% of the grants falling into this category.

The boroughs receiving more than £100,000 of grant money were:Barking and Dagenham, Brent, Camden, Ealing, Hackney, Islington, Lambeth, Lewisham, Newham, Redbridge, Southwark, Sutton, Tower Hamlets and Westminster.

An analysis of the number of grant applications received and of grants made from the Central Fund is published in the Annual Grants Review which is available from the Clerk on request.

A reconciliation of grants shown in that publication is given below:

2004£

2003£

Grants detailed in Grants ReviewGrants written backOther

Net Central Fund grants

No. of grants made

5,347,023 (216,593) (71,575)

5,058,855

202 _____

5,229,234 (135,431) (1,798)

5,092,005

189 _____

The Foundation and Trust were winners of the best Grant maker category at the 2004 Charity Awards.

Grants made from the City Church FundThe Foundation divides the income from this fund between the Church Commissioners, the six Metropolitan Dioceses and the City Churches Grants Committee in accordance with the City Parochial Foundation’s governing instruments. One third of the income is allocated to the City churches and, after a contribution of £67,775 towards prior charges made by the Church Commissioners, two thirds of the income is payable to the six Dioceses in the proportions listed below:

Diocese %London 44.37 Rochester 6.18 Chelmsford 15.30Southwark 29.05 Guildford 2.27 St Albans 2.83

As given in note 6, the grants payable from the City Church Fund are:-

2004 2003£ £

Church Commissioners and Dioceses 2,436,463 2,529,303City Churches Grants Committee 1,187,092 1,233,512Schedule VII payments to City Churches 31,140 31,140

£3,654,695 £3,793,955


Schedule VII payments are historic fixed payments to the Church Councils of certain of the City Churches that form a first call on the monies available to the City Churches Grants Committee.

Support CostsThe Foundation allocates funds to the salaries and assisted costs of employing a team of grants staff and their assistants. It is the Foundation’s view that proper assessment and monitoring of charitable priorities in London cannot be achieved without this work, particularly the visits to all grant applicants not carried out by the majority of other grant makers. In addition the Foundation employs consultants to help, support and make more effective the grants made from its Central Fund. The costs of such work and a representative proportion of overheads are charged to Support costs. As a percentage of gross income, support costs amounted to 8% (2003: 8%).

Management and administration

Expenditure on Management and Administration was £234,765 (2003: £207,768).

Resources expended

These costs have been split across the various headings under Resources expended.

The Foundation has decided not to split realised and unrealised gains on listed investments, as allowed by the Charity Commission.

THE RESOURCE CENTRE

The performance of the Resource Centre, a subsidiary of the Foundation, is shown within the Restricted Funds of the charity.

Some 2,700 organisations used the Centre during the year and the conference facilities remain in high demand.

The accounts of the Resource Centre show incoming resources of £967,883 (2003: £929,684) and resources expended of £854,734 (2003: £846,613) making net incoming resources £113,149 (2003: £83,071), after payment of £284,109 (2003: £283,851) to the Foundation as rent for the premises.

The full statutory accounts of the Resource Centre are available from the Clerk to the Foundation at 6 Middle Street, London EC1.

BELLINGHAM The Foundation owns property in Lewisham, London SE6. The Bellingham site comprises a 12 acre playing field. The playing


COMMUNITY PROJECT LIMITED

fields are the direct responsibility of the Foundation through its subsidiary, the Bellingham Community Project Limited, a registered charity.

The Project had net incoming resources of £353,225 (2003: £4,384,533) after receipt of grants of £62,510 (2003: £1,250,121) from the Foundation. The Project is overseeing the running of a leisure and lifestyle centre on the site for the benefit of the local community. The Centre opened at Easter 2004 and is managed on a day-to-day basis by Greenwich Leisure Limied.

The principal funders of this £4 million building were Sport England, the Foundation itself and Lewisham Borough Council.

Bellingham Community Project Management Company Limited, a wholly owned subsidiary of the Project, did not trade during the year (2003: nil).

The results of the Project are incorporated in these Financial Statements as a branch of the Foundation as defined by SORP Accounting and Reporting by Charities.

INVESTMENTPOLICY

There are no restrictions on the Foundation’s power to invest.

The Foundation’s permanent endowment requires the Foundation to preserve the capital value of its investments in real terms whilst maximising the income available to its beneficiaries without taking undue risks.

The Foundation has adopted a Total Return Approach. As a result, investment decisions can be made without regard to whether any particular asset or class of assets generates income rather than capital growth. Paying due regard to investment risks, the Foundation’s investments are managed with a view to maximising their total return, consistent with maintaining an appropriate level of risk.

The Central Governing Body retains the Foundation’s overall power of investment but has delegated investment powers to the Foundation’s Asset Allocation, Investment and Estate Committees. The Asset Allocation Committee considers and determines into which markets it is prepared to invest and the proportional target share of asset classes including property, property unit trusts, equities, gilts and cash. Investment in any hedge instruments, derivatives, foreign currencies, warrants or other leveraged securities or investments would require the specific approval of the Foundation.

The Foundation’s Estate Committee oversees the property portfolio and the Investment Committee oversees equities, bonds and cash.


ASSET ALLOCATION

Both the Investment and Estate Committees in turn have delegated authority to appoint, monitor and, if necessary, dismiss the Foundations’ Investment Managers, Property Investment Advisers, Property Valuers and Property Managing Agents. Both committees establish with their advisers the objectives for their particular portfolios and set appropriate benchmarks and other criteria against which performance can be evaluated. Meetings with the relevant advisers and managers are held at regular intervals to review market conditions and performance against benchmarks. The suitability of the managers and advisers is reviewed every five years.

The Asset Allocation Committee has delegated authority to make decisions regarding the medium and longer-term objectives of the Foundation’s investment policies, and to set the short and medium term objectives of the Investment and Estate Committees.

The Foundation decided some years ago to reduce the amount of property held by itself over time from its historic base of 100% in City of London property to a level that permitted proper diversification in other asset classes, to provide for more consistent returns and balanced risks. The Committee has overviewed this process and set the following targets to achieve by 31 December 2006:

35 to 45 per cent property including property unit trusts 35 to 45 per cent equities 10 to 20 per cent cash and gilts

whilst maintaining a directly managed property portfolio of between £62 and £77 million at December 2002 values.

The Asset Allocation Committee has reviewed the asset mix of the Foundation’s portfolio half-yearly in order to monitor the progress of the Investment and Estate Committees in moving towards the agreed asset allocation targets.

As the following pie chart shows, this target had been achieved by 31 December 2004:


INVESTMENT PROPERTIES

During the year, CB Richard Ellis Limited (formerly CB Hillier Parker Limited) managed the property portfolio on a non-discretionary basis and were set targets to reduce the size of the Foundation’s portfolio in absolute terms, as opportunities arise; to diversify the nature of the portfolio; and to increase the yield of the portfolio to a level that is more consistent with the Investment Property Databank norm.

The investment property portfolio was valued at 31 December 2004 by Cluttons. This has been shown in the accounts at an open market value of £72,817,140 (2003: £65,418,686). Following a property disposal in the year with proceeds of £2.05 million showing a realised gain of £0.5 million, the remaining portfolio showed an unrealised gain of £8.9 million. Based on this valuation, the results for this year showed a positive total return of 25.8%, which compares to an IPD UK annual index total return of 18% and a negative total return of 6.0% for the previous year. This high performance was almost entirely due to the concentration of the portfolio on a single sector, City of London offices. So long as the Foundation maintains a preponderance of property in the City the performance of the portfolio will reflect the volatile economic performance of the financial companies located there.

The Foundation’s progress in achieving its objectives for its property portfolio is summarised in the table below:

Position as at 31 December 2001 2002 2003 2004Portfolio value £86.5m £76.2m £65.4m £72.8m% in Central London 81% 78.5% 79% 82%Annual income £5.5m £5.3m £5.0m £4.9mIncome yield 5.6% 6.0% 7.0% 6.6%

CB Richard Ellis came to the end of their five year appointment on 31 December 2004 and did not wish to be reappointed. BH2 were

City Parochial Foundation'sinvestment assets at 31 December 2004

Property43%

Property Unit Trusts2%

Cash & gilt portfolio12%

Cash & gilts within equities8%

Active equities21%

Passive equities14%


appointed from 1 January 2005 after a tendering process. Allsop Commercial Management Limited were appointed to manage the operational aspects of the portfolio.

INVESTMENT PROPERTY UNIT

TRUSTS

The Foundation holds units in the Falcon Property Unit Trust as part of its strategy of diversification away from City of London properties. These had a value of £3,803,668 (2003: £3,466,714). The aim is to out perform the IPD UK annual index. The total return has been 16.0% (2003: 11.5%) against the IPD UK annual index of 18.3% (2003: 10.9%).

INVESTMENTS The Foundation employs the services of four investment managers. They are set targets to outperform or match set benchmarks over rolling three year periods.

RCM (UK) Ltd manages part of the assets of the Combined Fund through passive index tracking Common Investment Funds. The portfolio thus replicates the performance of relevant market indices for different asset classes and aims to match the performance of the WM Charity Fund Index (ex property) for the portfolio as a whole. The total return for the year has been 11.1% (2003: 17.5%) and has been in line with the tracking benchmark.

The market value of the passive endowment held as listed investments including uninvested cash rose to £29,844,426 as at 31 December 2004 from £27,550,073 at 31 December 2003 in line with improved market conditions.

SG Asset Management UK Limited manages listed investments of the Combined Fund on a discretionary basis with a mandate to actively outperform the FTSE, S&P, Topix and Saloman Bros. indices over given asset classes by one per cent (net of fees). The total return for the year has been 9.4% against a benchmark of 10.7% (2003: 20.5% against a benchmark of 18.1%). Veritas Asset Management (UK) Limited manages a smaller fund on a discretionary basis and had a slightly more ambitious mandate to actively outperform the Global FT World Enquity Index by two per cent (gross of fees). The total return has been 9.4% against a benchmark of 8.2% (2003: 10.3% against a benchmark of 20.4%).

The market value of the active listed investments including uninvested cash rose to £43,619,033 at 31 December 2004 from £40,877,601 at 31 December 2003.

The Foundation also invests liquid funds in the money market. At the year end £20,590,846 of Combined funds were held in a cash portfolio which was managed by Morley Fund Management. Morley’s objective was to outperform the three month London Interbank Bid Rate (LIBID) by 0.75 per cent (net of fees), given a maximum allowable portfolio duration of three years. The total return for the year has been 4.60% against a benchmark of 4.63% (2003: 3.45% against a benchmark of 3.69%).

TRUST FOR LONDON

The Trust for London is a charity connected to the Foundation but whose accounts are not consolidated with the Foundation. It was formed in 1986. It has an expendable endowment fund which at 31 December 2004 stood at £16 million. This fund produced an income of £576,119 in 2004 (2003: £630,969). Grants are applied


to projects which target small locally based community organisations with charitable purposes and which are independent of larger bodies.

EVENTS SINCE THEYEAR END

Since the end of the year the Foundation has sold two properties with proceeds of £8.9 million and a profit of £1.1 million.

ACCOUNTING POLICIES

There were no changes in accounting policies.

RESERVESPOLICY

It is the Foundation’s policy not to maintain any unrestricted reserves.

GOVERNANCE AND INTERNAL

CONTROLS

Law applicable to charities in England and Wales requires the Trustee to prepare financial statement for each financial year which give a true and fair view of the state of affairs of the charity and of the group at the end of the year and of its financial activities during the year. In preparing those financial statements the Trustee is required to:

select suitable accounting policies and then apply them consistently;

make judgments 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 disclosed and explained in the financial statements;

prepare the financial statements on the going concern basis.

The Trustee has overall responsibility for ensuring that the charity has appropriate systems of control, financial and otherwise. It is responsible for keeping accounting records which disclose with reasonable accuracy at any time the financial position of the charity and which enables it to ensure that the financial statements comply


with the Charities Act 1993 and have been properly prepared in accordance with the Central Scheme approved by Her Majesty in Council on 23 February 1891 and subsequent amending Schemes and orders. It has general responsibility for taking such steps as are reasonably open to it to safeguard the assets of the charity and to prevent and detect fraud and other irregularities.

The systems of control are designed to provide reasonable, but not absolute assurance against material misstatement or loss. They include:

an annual budget approved by the Trustee; regular consideration by the Trustee of financial results,

variance from budgets, non-financial performance indicators and bench marking reviews;

delegation of authority and segregation of duties; identification and management of risks.

The Foundation has, with advice from its auditors, introduced a formal risk management process to assess business risks and implement risk management strategies. This involved identifying the types of risks it faces, categorising them in terms of potential impact and likelihood of occurrence, and identifying means of mitigating the risks. As part of the process the Foundation has reviewed the adequacy of the Foundation’s internal controls.

By order of the Trustee

Ms Maggie Baxter13 May 2005


REPORT OF THE

INDEPENDENT AUDITORS TO THE TRUSTEE

OF THE CITY

PAROCHIAL FOUNDATION

We have audited the financial statements on pages 17 to 29.

This report is made solely to the charity’s trustee in accordance with section 43 of the Charities Act 1993 and regulations made under section 44 of that Act. Our audit work has been undertaken so that we might state to the charity’s trustee those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the charity and the charity’s trustee for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Trustee and AuditorsYou are responsible as the Trustee for preparing the trustee’s report and, as described on page 14, the financial statements in accordance with applicable United Kingdom law and accounting standards. Our responsibilities, as independent auditors, are established in the United Kingdom by Statute, the Auditing Practices Board and by our profession’s ethical guidance.

We have been appointed as auditors under section 43 of the Charities Act 1993 and report in accordance with regulations made under section 44 of that Act. We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Charities Act 1993. We also report to you if, in our opinion, the trustees’ report is not consistent with the financial statements, if the charity has not kept proper accounting records or if we have not received all the information and explanations we require for our audit.

We read the other information accompanying the financial statements and consider whether it is consistent with those statements. We consider the implications for our report if we become aware of any apparent mis-statements or material inconsistencies with the financial statements.

Basis of opinionWe conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the Trustee in the preparation of the financial statements, and of whether the accounting policies are appropriate to the charity’s circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material mis-statement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.

OpinionIn our opinion the financial statements give a true and fair view of the charity and group’s state of affairs, as at 31 December 2004 and of their incoming resources and application of resources, in the year then ended and have been properly prepared in accordance with the Charities Act 1993.

KPMG LLPRegistered AuditorChartered Accountants8 Salisbury SquareLondon EC4Y 8BB13 May 2005















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