RICHMOND FELLOWSHIP OF HONG KONG. (Limited by Guarantee) Reports and Financial Statements

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1 (Limited by Guarantee) Reports and Financial Statements

2 Reports and Financial Statements Contents Pages Report of the Executive Committee Members 1 to 4 Independent Auditor s Report 5 Statement of Comprehensive Income 6 Statement of Financial Position 7 Statement of Changes in Reserves 8 & 9 Statement of Cash Flows 10 Notes to the Financial Statements 11 to 22

3 Report of the Executive Committee Members The Executive Committee members have pleasure in submitting their annual report and the audited financial statements for the year ended 31 March Business review Objectives of business Richmond Fellowship of Hong Kong ("the Fellowship") was established in 1984 as a non-profit making registered charity in Hong Kong. It is affiliated to the Richmond Psychosocial Foundation International (RPFI), a world-wide network of self-governing non-profit organization which shares the common aim of promoting good community care practice in the field of mental health. It is a member of the Asia Pacific Forum of the Richmond Fellowship which was established in 1991, to facilitate the exchange of knowledge and experience between the RPFI members in Australia, New Zealand, the Pacific Islands, Nepal, India and Hong Kong. Richmond Fellowship of Hong Kong is also a member of many renowned international professional organizations, such as the World Association of Psychosocial Rehabilitation, the World Schizophrenia Fellowship and the World Federation for Mental Health. The Fellowship s work builds on its passion and expertize in mental health field, in connection to its international participation and specialized in service provision locally. The aim of work is not only on mental health service provision, but also directed towards empowerment of service users in their journey of recovery. The Fellowship is exempted from tax under Section 88 of the Hong Kong Inland Revenue Ordinance. Main areas of work Residential Training Services Service users at half-way houses and support hostel are encouraged to participate in various kinds of community education and volunteer activities that help to build up their community support system and facilitate their integration into the community. Community Mental Health Support Services To implement comprehensive community-based mental health services, the Fellowship provides diversified community support services for people in recovery and community members, so as to promote social inclusion and mental wellness. Public education and mental health promotion are also carried out. Integrated Vocational Rehabilitation Services Integrated Vocational Rehabilitation Service (IVRS) provides people recovering from mental illness with a series of employment training to build up their confidence and help them re-enter the labour market. Services include New Jade Manufacturing Centre providing suitable working environment and training, Richmond Customer Service Supported Employment providing regular training programmes such as courier service, cleaning service, and job interviewing skills, and Sunnyway On the Job Training Programme for Young People with Disabilities providing those aged between 15 and 25 with supported employment training like information technology, interpersonal relationship and communications. Richmond Welbiz Limited, our social enterprise has become a contractor providing office cleaning, as well as car cleaning service to both government and business sectors, while creating job opportunities for trained service users qualified for open employment. Meanwhile, corporate souvenirs and gift market have also been developed, offering more job opportunities for service users in order to enhance their quality of life and promote social inclusion. 1

4 Report of the Executive Committee Members Business review (cont d) Financial performance Key financial performance - Annual income received from the Social Welfare Department, operating activities and funders amounted to HK$69.93 million, which has been increased by 8% or HK$5.27 million from last year; - Annual expenditure was amounted to HK$69.56 million, which has been increased by 2% or HK$1.51 million from last year. - Central administration costs were HK$ 9.65 million, representing 14% of total expenditure. Subvention from Social Welfare Department Major subvention from the Social Welfare Department rose by HK$3.61 million to HK$53.46 million, representing 76 % of total income. The Fellowship mainly received HK$48.5 million for Lump Sum Grant, HK$3.16 million for Provident Fund and HK$1.76 million for Rent and Rates. Public support No Flag Day activity was held in 2015/2016. The total income in 2015/2016 was HK$69.93 million which was 8% or HK$5.27 million higher than the previous year. It was primarily due to an increase in annual subvention from the Social Welfare Department. Expenditures for core services The Fellowship provided mental health support and education to the community. In 2015/2016, major expenditures of core services were shown in the table below: (Million in HK$) Residential Service Vocational Rehabilitation Community Services Salaries Rental expenses Food costs Programme expenses Total Overall major expenditure was amounted to HK$55.29 million, representing 79 % of total expenditures. Accountability measures Projects, Central Admin and Others Central administration costs represented 14% of the Fellowship s total expenditures. These costs contributed to the organization s senior management, general administration, financial management, human resources management, research, services development, marketing, fundraising and information technology support. In addition to the Hong Kong Accounting Standards and Hong Kong Financial Reporting Standards, the Fellowship also complies with the requirements stated in the Lump Sum Grant Manual and the Lotteries Fund Manual issued by the Social Welfare Department. 2

5 Report of the Executive Committee Members Business review (cont d) Internal controls The Executive Committee Members, including Treasurer of the Richmond Fellowship of Hong Kong meets regularly to review and discuss all financial and auditing issues related to the Fellowship. In compliance with the requirements of Funding and Service Agreements and the Lump Sum Grant Manual and Lotteries Fund Manual issued by the Social Welfare Department, the Fellowship will hold a meeting of Service Performance Monitoring System to review financial and non-financial policies twice a year. This enables the Fellowship to evaluate and improve the effectiveness of its internal control system and risk management practices. Human resources matters In 2015/2016, the overall turnover rate of the Fellowship was remain unchanged, (i.e. 20%). Two work injury cases were recorded, representing 1.02% of total staff members. In order to reduce the possibility of work injury, the information of occupational and safety was provided to staff members regularly. Green policy The Fellowship seeks to promote mental health for people living with mental or emotional disturbances, as well as community members at large. At the same time, the Fellowship needs to be aware of the impact of all its activities on the environment and on communities, and to reduce negative impacts of its own operations. Every project or service unit will as part of its management routines consider its impact on the environment and communities. People across the Fellowship are asked to report specific data that contributes to the measurement and reporting of corporate key performance indicators. These management routines are set up to be cost effective and sustainable. Across the Fellowship, the principles of Reduce, Reuse, Repair and Recycle are applied to minimize its environmental impacts. Financial statements The financial performance of the Fellowship for the year ended 31 March 2016 and its financial position of the Fellowship at that date are set out in the financial statements on pages 6 to 22. Reserves The Fellowship holds Lump Sum Grant reserves which are capped at 25% of annual total operating expenditure (excluding PF expenditure) for that year. Any amount above this cap needs to be refunded to the Government in the following fiscal year unless the cap is raised by the Director of Social Welfare Department upon application with justification form the Fellowship. The level of general reserves does not have the above mentioned restriction. The surplus is mainly generated from self-finance production activities. Details of movements in the reserves of the Fellowship during the year are set out in the statement of changes in reserves on pages 8 to 9. The Executive Committee members of the F ellowship have adopted a reserve policy based on responsibility for organizational security, stability of service delivery and public education programme. For reserves related to activities supported by Social Welfare Development funding, requirements as stipulated in Lump Sum Grant Manual and Best Practice Manual apply. 3

6 Report of the Executive Committee Members Executive Committee members The Executive Committee members of the Fellowship during the financial year and up to the date of this report were: Prof. Ng Yat Nam, Petrus Dr. Chow Shiu Cheung Ms. Lam Man Chung, Hilda Dr. Tang Wing Kay, Victoria Mr. Au Pak Ching, Romeo JP Mr. Cheng Chung Yan, Vincent Mr. Cheung Lam Chau, Raymond Mr. Wan Sing Hin, Maurice Dr. Yeung Wai Song - resigned on 27 June 2015 Pursuant to the Articles of Association of the Fellowship, one-third of the Executive Committee Members for the time being shall retire at the forthcoming Annual General Meeting, and being eligible, offer themselves for re-election. Executive Committee Members interest in contract At no time during the year was the Fellowship a party to any arrangement to enable the Executive Committee members to acquire benefits by means of acquisition of debentures, if any, of the Fellowship or any other body corporate. No transaction, arrangement or contract of significance to which the Fellowship was a party and in which an Executive Committee member of the Fellowship had a material interest, subsisted at the end of the year or at any time during the year. Auditor The financial statements have been audited by Messrs. LKY China who retire and, being eligible, offer themselves for re-appointment. By order of the Executive Committee Hong Kong, 4 Nov 2016 Dr. Fung Cheung Tim Company Secretary 4

7 Independent Auditor s Report To the Members of (Incorporated in Hong Kong with liability limited by guarantee) We have audited the financial statements of set out on pages 6 to 22, which comprise the statement of financial position as at 31 March 2016, and the statement of comprehensive income, statement of changes in reserves and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Executive Committee Members responsibility for the financial statements The Executive Committee Members are responsible for the preparation of the financial statements that give a true and fair view in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants and the Hong Kong Companies Ordinance, and for such internal control as the Executive Committee Members determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s responsibility Our responsibility is to express an opinion on these financial statements based on our audit and to report our opinion solely to you, as a body, in accordance with Section 405 of the Hong Kong Companies Ordinance and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Executive Committee Members, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements give a true and fair view of the financial position of the Fellowship as at 31 March 2016 and of its financial performance and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in compliance with the Hong Kong Companies Ordinance. Hong Kong, LKY China Certified Public Accountants (Practising) 5

8 Statement of Comprehensive Income Note Income 5 68,557,146 64,281,327 Other revenue 1,322, ,714 Administrative expenses (69,561,944) (68,055,571) Surplus/(deficit) from operation 6 317,808 (3,480,530) Bank interest income 52,157 87,925 Surplus/(deficit) for the year 7 369,965 (3,392,605) Other comprehensive income Grant and subsidy received 1,512,735 5,761,771 Flag day income - 622,789 Interest received 1,492 4,353 Minor work expenditure (61,000) (20,470) Project expenses (725,328) (849,847) Allocation to projects (983,562) (1,404,721) Refund to Funders (44,632) (218,460) Returned to Government (390,424) - Refund to Social Welfare Department (48,401) (84,038) Reimbursement from Social Welfare Department - 7,587 (739,120) 3,818,964 Total comprehensive (expenses)/income for the year (369,155) 426,359 6

9 Statement of Financial Position as at 31 March 2016 Note Non-current assets Furniture and equipment 9 5,171,238 7,147,068 Current assets Accounts receivable 10 1,926,446 1,545,320 Cash and cash equivalents 11 26,300,793 26,010,012 28,227,239 27,555,332 Current liabilities Accrued charges 2,485,910 3,424,273 Amount due to a related association , ,198 3,288,703 4,223,471 Net current assets 24,938,536 23,331,861 Net assets 30,109,774 30,478,929 Agency reserves Designated Funds 309,978 1,176,061 Social Welfare Development Fund 152, ,500 Social Welfare Reserve Fund 22,202,290 23,160,703 General Fund 7,444,739 5,915,665 Total fund 30,109,774 30,478,929 The financial statements together with accompany notes set out on pages 6 to 22 were approved and authorized for issue by the Executive Committee Members on 4 Nov 2016 and are signed on its behalf by: Prof. Ng Yat Nam, Petrus Chairman Ms. Lam Man Chung, Hilda Honorary Treasurer 7

10 Statement of Changes in Reserves Designated Funds Social Welfare Development Fund note 19 Social Welfare Reserve Fund General Fund Total Grants from promoting Access to and Training in Information Technology for People with Disabilities Reserve for Sponsorship of Justone Service Users Block Grant Reserve Lottery Fund Oneoff Subsidy Lottery Fund Paramedical staff subventio Mental Health in China Flag Day Fund Operation of Santa Claus Fund Employee Retraining Board Sub-total Lump Sum Grant Reserve Reserve of Central Items Sub-total note 14 note 15 note 16 note 17 note 18 HK$ HK$ Balance as at 1 April ,030 - (2,242) 17, ,985, , ,778 17,000-2,562, ,965 19,065,339 5,144,135 (626,742) 23,582,732 3,629,543 30,052,570 The Sir Robert HT Charitable Fund 2014 Provident Fund Subvention Surplus Other comprehensive income - Grant and subsidy received 710,000 4,660, , ,000 57,600 6,094, , ,384,560 -Interest received , ,201 1, ,353 Other comprehensive expenses - Minor works (20,470) (20,470) (20,470) - Project expenses (45,491) (504,477) - (38,600) - (588,568) (261,279) (849,847) -Allocation to projects (1,404,721) (1,404,721) (1,404,721) -Refund to Partnership Fund (218,460) (218,460) -Refund to SWD (74,338) (74,338) for surplus of Rent and Rates for 2012/ (9,700) - - (9,700) - (9,700) -Reimbursement from SWD for deficit of rate for 2011/ , ,587-7,587 Net other comprehensive income 689,530 4,660, (824,222) (504,455) - 5,400 57,600 4,083,874 (44,337) (2,113) - - (2,113) (218,460) 3,818,964 Deficit for the year (Note 7) (1,296,776) 778,819 98,041 (419,916) (2,972,689) (3,392,605) Transfer between funds for equipment acquired and subvented (810,122) (4,660,021) (5,470,143) (7,128) ,477,271-7 Total comprehensive income (120,592) (824,222) (504,455) - 5,400 57,600 (1,386,269) (51,465) 3 (1,298,889) 8 778,819 98,041 (422,029) 2,286, ,359 Balance as at 1 April ,438 - (2,242) 17, ,161,353 (216,534) 132,778 22,400 57,600 1,176, ,500 17,766,450 5,922,954 (528,701) 23,160,703 5,915,665 30,478,929 8

11 Statement of Changes in Reserves (cont d) Block Grant Reserve note 14 HK$ Lottery Fund - One-off Subsidy note 15 HK$ Lottery Fund - Paramedical staff subvention Lottery Fund - Peer support worker Mental Health in China Designated Funds Grants from promoting Access to and Training in Information Technology for People with Disabilities note 16 Flag Day Fund note 17 HK$ Operation of Santa Claus Fund Employee Retraining Board Reserve for Sponsorship of Justone Service Users The Sir Robert HT Charitable Fund 2014 Social Welfare Development Fund note 19 Lump Sum Grant Reserve Social Welfare Reserve Fund Provident Fund Subvention Surplus Reserve of Central Items Sub-total Sub-total note 18 Balance as at 1 April ,438 - (2,242) - 17, ,161,353 (216,534) 132,778 22,400 57,600 1,176, ,500 17,766,450 5,922,954 (528,701) 23,160,703 5,915,665 30,478,929 Other comprehensive income - Grant and subsidy received 769, , ,000-1,226, , Interest received , , ,492 Other comprehensive expenses - - Minor works (61,000) (61,000) (61,000) - Project expenses (251,699) - (56,000) (57,252) (364,951) (360,377) (725,328) - Allocation to projects (983,562) (983,562) (983,562) - Refund to Funders (348) (348) (44,284) (44,632) - Returned to Government (390,424) - (390,424) - (390,424) - Refund to SWD (46,901) (46,901) - (46,901) for surplus of Rent and Rates for 2013/ (1,500) - - (1,500) - (1,500) Net other comprehensive expense 708, , (982,087) (251,699) - 8,000 (57,600) (182,278) (73,733) (1,500) (390,424) (46,901) (438,825) (44,284) (739,120) - Surplus for the year (Note 7) (1,581,872) 829,832 (4,000) (756,040) 1,126, ,965 Transfer between funds for equipment acquired and subvented (292,327) (393,107) (685,434) ,434 - Transfer between funds - - 2,242 (613) ,629 - (45,462) (45,258) 43,629 - Opening adjustment Re-SWD letter dated 6 May , ,710 (281,710) - General Fund - Total 1,512,735 Total comprehensive expense 415,674-2,242 (613) - - (982,087) (251,699) - 8,000 (57,600) (866,083) (73,733) (1,347,124) 439,612 (50,901) (958,413) 1,529,074 (369,155) Balance as at 31 March , (613) 17, ,266 (468,233) 132,778 30, , ,767 16,419,326 6,362,566 (579,602) 22,202,290 7,444,739 30,109,774 9

12 Statement of Cash Flows 2016 HK$ 2015 HK$ Cash flows from operating activities Total comprehensive (expenses)/income for the year (369,155) 426,359 Adjustments for Depreciation 3,109,269 3,683,639 Bank interest income (52,157) (87,925) Loss on disposal of furniture and equipment 46,506 1,546 Operating cash flows before working capital changes 2,734,463 4,023,619 Decrease in inventories - 10,538 (Increase)/decrease in accounts receivable (381,126) 244,154 (Decrease)/increase in accrued charges (938,363) 428,678 Increase in amount due to a related association 3, ,198 Net cash generated from operating activities 1,418,569 5,506,187 Cash flows from investing activities Bank interest received 52,157 87,925 Purchase of furniture and equipment (1,179,945) (1,718,291) Net cash used in investing activities (1,127,788) (1,630,366) Net increase in cash and cash equivalents 290,781 3,875,821 Cash and cash equivalents at As at 1 April 26,010,012 22,134,191 As at 31 March 26,300,793 26,010,012 10

13 Notes to the financial statements 1. General Information The Fellowship is an association domiciled and incorporated in Hong Kong with liabilities of members limited by guarantee. The address of the registered office and principal place of operation of the Fellowship is Room 1801, 18/F, 21 Pak Fuk Road, North Point, Hong Kong. The functional currency of the Fellowship is Hong Kong dollars. The principal activities of the Fellowship are to provide public services aiming at support and rehabilitation for those suffering from mental or emotional disturbance. During the year, the Fellowship operates twenty-three centres/functions: (a) Head Office (b) Wan Tsui Half-way House (c) Ping Shan Half-way House (d) New Jade Manufacturing Centre (e) Richmond Customer Service (f) Sheung Tak Half-way House (g) Guangzhou Family Resource Centre (h) Tsui Wah Half-way House (i) Integrated Community Centre for Mental Wellness (j) Sunnyway On The Job Training Programme for Young People with Disabilities (k) LiKang Court (l) Youth Mental Health Project (m) Daily Meal Network Service (n) Richmond Health Farm (o) Farm With You Project (p) Justone Service (q) Operation Santa Claus Project Family Services (r) Family Network Community Project (s) Richmond Fellowship Community Network Project (t) Richmond China Enrichment (u) The Partnership Fund for the Disadvantaged- Heart 2 Heart V2.2 (v) Vocational Assessment and Intervention Enhancement Project (w) Clinical Psychology Service 2. Statement of compliance with Hong Kong Financial Reporting Standards The Fellowship s financial statements have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards (HKFRSs), which includes all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (HKASs) and Interpretations issued by the Hong Kong Institute of Certified Public Accountants (HKICPA), accounting principles generally accepted in Hong Kong, and the requirements of the Hong Kong Companies Ordinance. A summary of significant accounting policies is set out in note 3. In 2016, the Fellowship has initially applied the following new standards and amendments to standards are first effective for accounting periods beginning on or after 1 January The application of the above revised HKFRSs has no material effects on the Fellowship s financial performance and positions. 11

14 Notes to the financial statements 3. Summary of significant accounting policies The financial statements have been prepared on the historical cost basis and in accordance with HKFRS issued by the HKICPA, including applicable disclosures required by the Hong Kong Companies Ordinance. The preparation of the financial statements in conformity with HKFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in the respective notes, if appropriate. The followings are the specific accounting policies that are necessary for a proper understanding of the financial statements: a. Furniture and equipment Furniture and equipment are stated at cost or valuation less accumulated depreciation and any accumulated impairment losses. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to the working condition and location for its intended use. Subsequent expenditure relating to furniture and equipment that has already been recognised is added to the carrying amount of the asset when it is probable that future economic benefits, in excess of the originally assessed standard of performance of the existing asset, will flow to the enterprise. If not, the expenditure is treated as an expense in the period in which it is incurred. Depreciation is charged so as to write off the cost or valuation of assets over their estimated useful lives on a straight line basis. b. Leases i) Finance lease Leases of assets are classified as finance leases when the leases transfer substantially all risks and rewards incidental to ownership of the assets to the Fellowship. All other leases are classified as operating leases. Assets held under finance leases are recognised in the state of financial position at amounts equal to the fair value of the leased assets, or, if lower, the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liabilities, net of finance charges, on the finance leases are recorded as obligations under finance leases. All assets held under finance leases are classified as fixed assets, except for those properties held to earn rental income which are classified as investment property, in the statement of financial position. Depreciation and impairment loss are calculated and recognised in the same manner as the depreciation and impairment loss on furniture and equipment as above, except for the estimated useful lives cannot exceed the relevant lease terms, if shorter. Minimum lease payments are apportioned between finance charge and the reduction of the outstanding liabilities. The finance charge is recognised in the statement of comprehensive income over the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. 12

15 Notes to the financial statements 3. Summary of significant accounting policies (cont d) b. Leases (cont d) ii) Operating leases Lease payments under an operating leases are recognised as an expenses on a straight-line basis over the lease term. The payments made on acquiring land held under an operating lease are recognised in the statement of financial position as lease premium for land. Contingent rents are charged as expenses in the periods in which they are incurred. c. Financial instruments Financial assets and financial liabilities are recognised in the statement of financial position when the Fellowship becomes a party to the contractual provisions of the instrument. (i) Accounts receivable Accounts receivable are initially measured at fair value and, after initial recognition, at amortised cost less impairment losses for bad and doubtful debts, if any. At each end of reporting date, the Fellowship assesses whether there is any objective evidence that a receivable or group of receivables is impaired. Impairment losses on accounts receivables are recognised in surplus or deficit when there is objective evidence that an impairment loss has been incurred and are measured as the difference between the receivable s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at its original effective interest rate, i.e. the effective interest rate computed at initial recognition. (ii) Cash and cash equivalents Cash comprises cash on hand and at bank and demand deposits with bank. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. (iii) Accounts payable Accounts payable are initially measured at fair value and, after initial recognition, at amortised cost, except for short-term payables with no stated interest rate and the effect of discounting being immaterial that are measured at their original invoice amount. d. Impairment of assets Assets that have an indefinite useful life are not subject to amortisation, which are at least tested annually for impairment and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). 13

16 Notes to the financial statements 3. Summary of significant accounting policies (cont d) e. Provisions and contingent liabilities Provisions are recognised for liabilities of uncertain timing or amount when Fellowship has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditure expected to settle the obligation. Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote. f. Revenue recognition Subventions from government and other agencies, and all other revenue are accounted for on accrual basis. g. Retirement benefit costs Payments to defined contribution retirement benefit plans are charged as an expense as they fall due. 4. Critical accounting estimates and judgement The Fellowship s management makes assumptions, estimates and judgements in the process of applying the Fellowship s accounting policies that affect the assets, liabilities, income and expenses in the financial statements prepared in accordance with HKFRSs. The assumptions, estimates and judgements are based on historical experience and other factors that are believed to be reasonable under the circumstances. While the management reviews their judgements, estimates and assumptions continuously, the actual results will seldom equal to the estimates. a. Key assumption and other key sources of estimation uncertainty Certain key assumptions and risk factors in respect of the financial risk management are set out in note 21. In the opinion of executive committee members, there is no other key sources of estimation uncertainty that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the financial year. b. Critical judgements in applying the Fellowship s accounting policies In the opinion of executive committee members, there is no critical judgements in applying the Fellowship s accounting policies. 14

17 Notes to the financial statements 5. Income Income received during the year are as follows, Subvention granted for the year - Lump Sum Grant 53,468,859 49,848,299 Subvention granted for the year Keep Clean ,000 - Fees and dues 10,567,951 10,922,123 Community Chest allocation 873, ,200 Donation received 3,618,496 2,734,140 Stationery shop sales - 5,565 68,557,146 64,281, Surplus/(deficit) from operation Surplus/(deficit) from operation for the year is stated after charging, Executive Committee Members remuneration as Executive Committee Members - - for management Staff cost Salaries and allowances 49,608,453 46,360,394 Contributions to defined contribution plan 2,615,101 2,451,411 Staff training and development scheme 1,212 3,904 Severance payment 20,509-52,245,275 48,815,709 Sheltered workshops trainees cost Training allowances 1,875,963 1,894,136 Incentive allowances 829, ,472 2,705,449 2,595,608 Auditor s remuneration 57,000 48,700 Depreciation 3,109,269 3,683,639 Food for members in half-way houses and centres 1,839,373 1,942,518 Program expense 2,150,576 2,512,126 Hire of premises under operating leases 1,618,468 1,621,278 Loss on disposal of plant and equipment 46,506 1,546 15

18 Notes to the financial statements 7. Surplus/(deficit) allocation Surplus/(deficit) for the year - derived from Funding and Service Agreements ( FSA ) activities (3,240,675) (3,118,197) - derived from other activities 3,610,640 (274,408) 369,965 (3,392,605) Allocation: Deficit derived from FSA activities subvented by SWD transfer to Social Welfare Reserve Fund - Lump Sum Grant Reserve (1,581,872) (1,296,776) - Provident Fund Subvention Surplus 829, ,819 - Reserve of Central Items (4,000) 98,041 (756,040) (419,916) Balance of surplus/(deficit) transfer to General Fund 1,126,005 (2,972,689) 369,965 (3,392,605) Taxation No provision for Hong Kong profits tax has been made as the Fellowship being a charitable institution is exempted from tax under Section 88 of Inland Revenue Ordinance. 9. Furniture and equipment Leasehold improvement 16 Furniture and equipment Motor vehicle Cost As at ,722,866 10,162,545-20,885,411 Additions during the year 761, ,816-1,718,291 Written off during the year - (155,481) - (155,481) As at ,484,341 10,963,880-22,448,221 Additions during the year 69, , ,891 1,179,945 Written off during the year (25,000) (177,392) - (202,392) As at ,528,591 11,614, ,891 23,425,774 Accumulated depreciation As at ,086,810 7,684,639-11,771,449 Charge for the year 2,177,364 1,506,275-3,683,639 Written back on disposals - (153,935) - (153,935) As at ,264,174 9,036,979-15,301,153 Charge for the year 1,852,880 1,199,811 56,578 3,109,269 Written back on disposals (25,000) (130,886) - (155,886) As at ,092,054 10,105,904 56,578 18,254,536 Carrying amount As at ,436,537 1,508, ,313 5,171,238 As at ,220,167 1,926,901-7,147,068 Total

19 Notes to the financial statements For the year ended31 March Furniture and equipment (cont d) Depreciation is charged on straight line basis at the following annual rates, Leasehold improvement 1-5 years Furniture and equipment 1-5 years 10. Accounts receivable Utility deposit and prepayment 612, ,281 Services receivable 1,314, ,039 1,926,446 1,545, Cash and cash equivalents Short-term bank deposits 8,838,793 8,772,197 Cash and bank balances 17,462,000 17,237,815 26,300,793 26,010, Amount due to a related association The amount due to a related association, Richmond Welbiz Limited, of which is under common control with the Fellowship, is unsecured, interest-free and has no fixed term of repayment. 13. Operating leases commitments At 31 March 2016, the Fellowship had total commitments under operating leases to make payments in respect of properties as follows: Within one year 1,421,640 1,584,072 After one year, but within five years 2,843,280-4,264,920 1,584,072 17

20 Notes to the financial statements 14. Block Grant Reserve Movement of F&E Replenishment and Minor Works Block Grant Reserve Balance as at 1 April 2, ,030 Add: Block Grant received during the year 769, ,000 Add: Bank interest received 1 Less: Expenditure during the year Vehicle Overhauling 5,890 5,970 Minor Works Projects 130, ,588 Furniture & Equipment 216, ,034 (353,327) (830,592) Balance as at 31 March 418,112 2,438 Capital Commitments As at 31 March 2016, the outstanding commitments in respect of F&E Replenishment and Minor Works Grant were as follows, Contracted for but not provided in the financial statements - - Authorized but not contracted for Lottery Fund One off subsidy Balance as at 1 April - - Lottery Fund One-off subsidy received 393,107 4,660,021 Amount of the subsidy spent during the year (393,107) (4,660,021) Balance as at 31 March Lottery Fund Paramedical staff subvention Balance as at 1 April (2,242) (2,242) Additional resources for paramedical staff received - - Salary for paramedical staff - - Provident fund for paramedical staff - - Transfer from LSG reserve to cover the deficit 2,242 - Balance as at 31 March - (2,242) 18

21 Notes to the financial statements 17. Flag Day Fund (a) Balance as at 1 April 1,161,353 1,985,575 Add: Flag day income - 622,789 Bank interest income 1,475 3,201 1,162,828 2,611,565 Less: Flag day expenses - (45,491) Telephone charge - (2,058) Bank charges - (60) Allocation to projects - Public education services - Youth Mental Health (418,568) (390,586) - Public education services - Richmond Family Institute (3,590) (733) - Supported hostel- LiKang Court (527,208) (467,248) - 24-hour Richmond hotline and emergency centre - Justone Service (Richmond) (34,196) (544,036) Balance as at 31 March 179,266 1,161,353 (b) Allocation to projects Administrative cost 30,846 Utilities (Electricity, internet, telephone) 59,162 Capital costs- Furniture and equipment 11,198 Insurance 21,759 Program expenses 32,492 Staff salary & MPF contribution 820,396 Travelling 7, ,562 For the remaining net proceeds collected from the flag days held on 29 July 2009, 26 February 2011,24 December 2011, 7 December 2013 and 17 January 2015 brought forward, the usage of HK$418,568, HK$3,590, HK$527,208 and HK$34,196 were used in Youth Mental Health, Richmond Family Institute, Liking Court and Justone Service (Richmond) respectively The unused balance of HK$179,266 will be carried forward and will be used for the purposes of (i) capital costs; (ii) recurrent costs; (iii) insurances; (iv) utilities; (v) travelling expenses; (vi) administrative cost; and (vii) program expenses. 18. Operation Santa Claus Fund for Family Work Balance as at 1 April (216,534) 287,921 Operation Santa Claus fund received during the year - 22 Less: Expenditure during the year Projects expenses (251,699) (504,477) Balance as at 31 March (468,233) (216,534) 19

22 Notes to the financial statements 19. Social Welfare Development Fund ( SWDF ) Balance as at 1 April 226, ,965 Add: Allocation from SWDF during the year 286, ,128 Bank interest income 16 1,152 Less: Expenditure during the year - Training and professional development programmes 266, ,131 - Business system upgrading Bank charge for equipment acquired Job related training courses initiated by staff 93, ,158 - Refund to Social Welfare Department - 74,338 - Transfer of funds for equipment acquired - 7,128 (360,377) (342,745) Balance as at 31 March 152, , Capital disclosure The Fellowship s objectives when managing capital are to safeguard the Fellowship s ability to continue as a going concern, in order to carry out its principal activities. The Fellowship s overall strategy remains unchanged from prior year. The capital structure of the Fellowship consists of accumulated surplus and designated fund for service projects. In order to maintain or adjust the capital structure, the Fellowship may appeal for donations from the Hong Kong Government and the general public. 21. Financial instruments The Fellowship has classified its financial assets in the following categories: Loan and receivable: Accounts receivable (note 10) 1,926,446 1,545,320 Short-term bank deposits (note 11) 8,838,793 8,772,197 Cash and bank balances (note 11) 17,462,000 17,237,815 28,227,239 27,555,332 The Fellowship has classified its financial liabilities in the following categories: Financial liabilities at amortised cost: Accrued charges 2,485,910 3,424,273 All other financial instruments are carried at amounts not materially different from their fair values as at 31 March 2015 and The Fellowship is exposed to credit risk, liquidity risk and market risk arising in the normal course of its operations and financial instruments. The Fellowship s risk management objectives, policies and processes mainly focus on minimizing the potential adverse effects of these risks on its financial performance and position by closely monitoring the individual exposure. 20

23 Notes to the financial statements 21. Financial instruments (cont d) a. Credit risk The Fellowship is exposed to credit risk on financial assets, mainly attributable to accounts receivable. It sets credit limit on each individual customer and prior approval is required for any transaction exceeding that limit. Summary quantitative data: Accounts receivable (note 10) 1,926,446 1,545,320 At 31 March 2016, the Fellowship has no concentration of risk and the maximum exposure to credit risk is represented by the carrying amount of each financial assets. b. Liquidity risk The Fellowship is exposed to liquidity risk on financial liabilities. It manages its funds conservatively by maintaining a comfortable level of cash and cash equivalents in order to meet continuous operational need. Summary quantitative data Not later than 1 month Later than 1 months and not later than 1 year Carrying amount 2016 HK$ Accrued charges 687,981 1,797,929 2,485, Accrued charges 998,975 2,425,298 3,424,273 c. Interest rate risk The Fellowship s exposure on fair value interest rate risk mainly arises from its fixed deposits with banks, which are classified as held-to-maturity investments. It also has exposure on cash flow interest rate risk which is mainly arising from its deposits with banks and interest-bearing borrowings with the banks. It is a common practice in Hong Kong to have floating rate borrowings with the banks. The Fellowship mainly holds fixed deposits with banks with maturity within 3 months and the exposure is considered not significant. In consequence, no material exposure on fair value interest rate risk is expected. Even that, the Fellowship closely monitors the fair value fluctuation of the investments and disposes of them in case of significant increase in interest rate is foreseen. 21

24 Notes to the financial statements 21. Financial instruments (cont d) Sensitivity analysis At 31 March 2016, if interest rates at that date had been 100 basis points lower with all other variables held constant, the Fellowship s deficit for the year and reserves would have been HK$263,008 (2015: HK$260,100 lower) higher, and other components of equity would have been HK$263,008 (2015: 260,100 lower) higher. At 31 March 2016, if interest rates at that date had been 100 basis points higher, with all other variables held constant, the Fellowship s deficit and reserves would have been HK$263,008 (2015: HK$260,100 higher) lower, and other components of equity would have been HK$263,008 (2015: HK$260,100 higher) lower. The sensitivity analysis has been prepared with the assumption that the change in interest rates had occurred at the end of reporting date and had been applied to the exposure to interest rate risk for the relevant financial instruments in existence at that date. The changes in interest rate represents management s assessment of a reasonably possible change in interest rates at that date over the period until the next annual end of reporting date. The analysis is prepared on the same basis for Hong Kong Financial Reporting Standards issued but not yet effective for the year HKFRSs that have been issued but are not yet effective for the year include the following HKFRSs which may be relevant to the Company s operations and financial statements: Effective for annual periods beginning on or after Annual improvements Project Annual improvements cycle 1 January 2016 HKFRS 14 Regulatory Deferral Accounts 1 January 2016 HKFRS 10 and Sale or Contribution of Assets between an To be determined by HKAS 28 (Amendments) Investor and its Associate or Joint Venture IASB HKFRS 10, HKFRS 12 and Investment entities: applying the 1 January 2016 HKAS 28 (Amendments) consolidation exception HKFRS 11 (Amendments) Accounting for Acquisitions of Interests in Joint 1 January 2016 Operations HKFRS 1 (Amendments) Disclosure initiative 1 January 2016 HKAS 16 and Clarification of Acceptable Methods of 1 January 2016 HKAS 38 (Amendments) Depreciation and Amortisation HKAS 16 and Agriculture: bearer plants 1 January 2016 HKAS 41(Amendments) HKAS 27 (Amendments) Equity Method in Separate Financial Statements 1 January 2016 HKFRS 15 Revenue from Contracts with Customers 1 January 2018 HKFRS 9 Financial Instruments 1 January 2018 The Company has not early adopted these HKFRSs. Initial assessment has indicated that the adoption of these HKFRSs would not have a significant impact on the Company s financial statements in the year of initial application. The Company will be continuing with the assessment of the impact of these HKFRSs and other significant changes may be identified as a result. 22