The financial statements for the period ending June 30th (representing the first half of the 2002 fiscal year) show that we are on track with our budget revenue projections, and are continuing to have success in keeping expenditures below what has been budgeted.
In the budget, we projected revenue in the first half of $53,711,831, and have come very close to that mark with a total of $53,552,367 a difference of only 0.30%. Given the very high level of strike activity since June 30th, however, it seems likely that by the time we finish the fiscal year in December we will fall short of our revenue targets. Overall, the revenue generated in the regions was 0.35% below what was estimated, but the situation varied considerably from region-to-region, as it has done in the past. Ontario, the Atlantic and the Maritimes Regions all had revenue greater than what was budgeted, while shortfalls occurred in Manitoba, Alberta, Quebec, Saskatchewan and BC. Revenue from the Airline Division and Local 1000 were greater than budgeted, while HEUs was below the forecasted amount.
Fortunately, expenditures for the six-month period came in substantially below budget, leaving us in a surplus position of $627,411 for the first half of the year. Staff salaries were slightly below budget, largely due to the delays in filling certain positions. Employee benefit costs continued the trend shown in the first quarter of being under budget. A large variance continued in the National Services Department program spending, principally due to delays in publications and other areas of spending within the Communications Branch budget. The Equipment Leases and Maintenance category continued to be substantially below budget although, as I predicted in May, this was mainly due to a delay in the billing of our leases through the Bank of Nova Scotia, and it is now moving closer to the budgeted figure. The other major area where the results for the first half of the year were substantially below budget is the Technology section within Finance and Administration. In the annual budget, we provided for some costs involved in the conversion to a new software system which have not yet been incurred, but which are anticipated to come on stream later this fall. As well, we have been successful in reducing the number of outside contractors needed to maintain the Oracle system, so those spending lines are also below the budgeted amounts.
With respect to budget categories in which expenditures have exceeded the budget, the most significant is Professional Fees, where the costs have been more than double what we had provided for in the budget. In light of all that took place during the January-June period with respect to the review of technology, the forensic audit of Cam Masses expenses, the litigation with BridgeTech, and the whole matter of the election irregularities, it is not surprising that the professional fees incurred in these matters would be very substantial. Hopefully, with the exception of the ongoing BridgeTech litigation, the worst in this regard should be behind us.
Professional Fees in the regions also were significantly over budget, particularly in the Quebec Region. In May, I reported that costs for Operational Travel were some 18% over budget. Fortunately, this improved in the second quarter, and we are now showing those costs as 8% over budget. However, the accounting for these costs continues to present us with some difficulties, as we move from a system of estimates of field staff expenditures to one that more closely represents current actuals. So, we anticipate that there may continue to be some over/under movements in this category while we refine the process.
National Strike Fund
The financial statements for the National Strike Fund at June 30th present a picture of a Fund that is considerably stronger than the one that exists at the actual date of this meeting. For that reason we have provided the Board with a preliminary report as of August 31st (which is not yet available as I write this Report).
At June 30th, the Members Equity in the Strike Fund totaled $10,258,134 an increase of about $1.7 million since March 31st. For the first half of fiscal 2002, revenue into the Strike Fund was $9,767,253, while expenditures totalled $3,786,791. By far the greatest portion of these expenditures (85%) was for Strike-Related Benefits. The other spending categories were Strike Averting Expenses (13.5%) and Legal and Arbitration Expenses (1.5%). Of the Strike-Related Benefits, most of the expenses were for the strike at the City of Windsor (Ontario) and the continuing strike at Vido0074ron (Quebec).
The ongoing, lengthy strikes at Vido0074ron and Sc0075r in Quebec, the strikes of Locals 79 and 416 against the City of Toronto in July, and the recent province-wide strike of Local 1418 in New Brunswick, have created a substantial impact on the Strike Fund that will continue for some time. We are continuously doing cash flow projections to anticipate scenarios in which we would need to draw on the lines of credit we have established. In addition to our standing line of credit with the Caisse dconomie des Pompiers, we have also contacted a number of other unions who have expressed their willingness to assist us with loans should the need arise. It is important that we have this back-up in place, as we can never be in a position where our locals feel uncertain about CUPEs ability to fund their strikes. On the contrary, employers will continue to know that CUPE will stand behind our striking members, financially and otherwise, whatever it takes.
National Defence Fund
The Members Equity in the National Defence Fund as of June 30th was $2,648,386. This compares to $3,758,563 at March 31st. Revenue to the Fund for the first six months of the fiscal year totaled $2,632,780, while expenses were $2,683,160. The major categories of expenditure were Cost-Sharing Programs ($727,186), Major Organizing ($693,375), Strategic National Priorities ($802,803), Special BC Funding ($421,562) and Political Action ($38,234).
The Board will recall that in the financial statements dated December 31, 2001 that were presented to the February meeting of the Board, the Members Equity in the Defence Fund was put at just under $8.3 million. This was the figure that was then used to estimate the 60/40 split that the Board approved between the new Strike Fund and the Defence Fund. Accordingly, we predicted that approximately $5 million would become an asset of the Strike Fund, and approximately $3.3 million would remain as a Defence Fund asset.
The most recent revisions to the 2001 statements, as per our auditors, shows an actual final balance of $7,129,453 in the Defence Fund as of December 31, 2001. This reduction from the original estimates was due to late additions and revisions in all areas of the former Defence Fund, including strike benefits, strike averting costs, legal and arbitration expenses and major organizing. The final figure for the Members Equity transferred to the Strike Fund (60%) was $4,277,672, and the remaining $2,851,781 stayed in the Defence Fund. This was approximately $650,000 less than the $3.3 million that we had estimated would remain in the Defence Fund. It is particularly important that the Board be aware of this revision, since the February meeting approved a notional division of that $3.3 million, with $1 million earmarked for additional campaign and program expenditures, $1 million for commitments made in previous years, and the remaining $1.3 million retained for possible transfer to the Strike Fund at the end of the fiscal year. These figures must now be adjusted to take into account the fact that only $2.85 million was actually retained in the Defence Fund, not $3.3 million as initially calculated.