CGIAR SYSTEM ORGANIZATION AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 Cover image: Female farmers attending an information meeting on solar pumps. Photo by C. de Bode/CGIAR. CGIAR SYSTEM ORGANIZATION AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 IINNIDNEDPEEPNENDDEENNTT A AUUDDITITOORR’S’S R REEPPOORRTT OONN TTHHEE FFIINNAANNCCIIAALL S STTAATTEEMMEENNTTS INDEDPEEPENEDEN T AUDITOR’ S RPEPROTR TO NON T HTE EF IFNIANCIAL S TATEMENENTST SS YeYYeYaearear aer er ne ednneddee d Dd D eDecececememmbbbeeberrer 3r 331 311, 1,, 2,220 2001011818 8 ToT oth teh em memembebresr so of ft hthee C CGGIIAARR SSyysstetemm M Manaangaegmemenetn Bt oBaorda T oT toh teh e me embresr sf o tf th e GCIGAIRA Sy Ssytesmte M anangaegmemnetn Bt oBaoradr dr d I n compliance with the assignment entrusted to us by you, we hereby report to you, for the year ended IInnD I cnecoc omecmmopmpblliepiaarlnni acc3nee1c ,ew w 2iiwt0thhi1t 8htth h teoeh neaa ssatsshsiigsegni ngmanmumeednneittnt etoe nfnet ntrrtuthurseustt esedtadec d tcto ot mo uu spus a sbnb yby iy n oygyuo o,ufu i,wn, waew neehc eihharele rrbseeytbb ayyrt ee rpmreeopepronto rtrtsto t t(oyoh o eyuyro,oeu auf,of ,t freof rotr h r“t eht heye e y aeyFra einera nare ndneecdndiaed lde d DDeSeDctcaeetmcmeembmbeebrrne tr3s3 ”11)3,, 1 o,2f2 0C0211G0881I A8 o oRnon Sn ty thshtethe ema au auOdudirdtig tia to nofoi fz fta htthteihoe en a acaccscoc camootmtmpaacppnhaayennidyny iitgnno gg ft i hnffiiiasnn nraacennipaccolii aratlsl .t a ssttaeamtteememnetensn tts(s h (e(hrheerarefetaeafrtfe ter“ rt h““teht heFe i FnFianniancnaiacnlic aila l SSt tSataemtemenetns”ts) ”o)f o Cf GCIGAIRA RSy Ssytesmtem O rOgragnainzaiztaiotnio ans a ast atattcahcehde tdo t toh tihs irse rpeoprot.r t . a tements”) of CGIAR System Organization as attached to this report. These Financial Statements were prepared under the responsibility of the Management. Our role is to express TThahTenehs soeep s FFieni inFnioaiannnna cconiinaac llit aSShlt etSaastteaee mtFmeimenenanetntnssc t wiwsa ewle rSreetr ap eptr eperpeapraerde udn udnedre trh teh ree rsepsopnosnibsibliitlyit oyf o tfh teh Me Manaangaegmemenetn. tO. uOru rro rleo lies itso t eox epxrpersess s an rempeanrtesd b uansedde ro tnh eo urre sapuodnits.i bility of the Management. Our role is to express an a onp oipninonio onn o tnh tehses Fe iFniannacniacli aSlt Sataemtemenetns tbsa bsaesde odn o nou oru aru aduidt.i t. opinion on these Financial Statements based on our audit. We conducted our audit in accordance with the International Standards on Auditing. 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PPaPagagege 1e 1 o1 of o f3f 33 33 3 Letter from the Chair of the Board The CGIAR System Organization’s (‘System Organization’) 2018 Financial Statements reflect its continuing and successful efforts to streamline and more strategically focus its activities, as well as to support the ongoing evolution of a more impactful CGIAR System. 2018 was a year that saw great work towards more effective strategizing and planning for the System. Under the leadership of its Executive Director, the System Organization effectively stewarded the development of Strengthening the Partnership, Creating Impact – CGIAR System 3-Year Business Plan 2019-2021. The 3-Year Business Plan lays the groundwork for the advancement of a System-wide CGIAR 2030 Plan (‘2030 Plan’) that will be developed over the coming two years in collaboration with stakeholders inside and outside of the CGIAR System. The aim of the 2030 Plan is to set out an ambitious forward vision for the CGIAR System including a new round of programming for the 2022-2030 period, framed in terms of CGIAR’s planned contribution to meeting the Sustainable Development Goals. System Organization management has provided effective support to the CGIAR System Council and its newly established Assurance Oversight Committee (‘AOC’). Management has facilitated the work of the System Council’s Strategic Impact, Monitoring and Evaluation Committee (‘SIMEC’) in the committee’s oversight and realignment of the System Council’s independent advisory services. Following a decision of the System Management Board in September 2018, management will be proceeding in 2019 with the establishment of a small staff presence in Rome, Italy, facilitated by a hosting and co-location agreement with Bioversity International, a CGIAR Center. At its September 2018 meeting, the System Management Board also endorsed a proposal from several CGIAR stakeholders that the System Organization work in collaboration with interested CGIAR Centers to establish a CGIAR Rome Hub to provide greater connectivity and profile for CGIAR as a system in the global food security debate and with other development/agriculture institutions. These strategic developments will be supported by an ever-improving capacity to measure performance standards and monitor compliance and achievements through a combined assurance approach. As formal CGIAR Center alliances and increased System-wide interest in shared services opportunities continue to be explored, the prospects of strengthened collaboration make 2019 an exciting year to look forward to. I want to give credit to the System Management Board and its Audit and Risk Committee for their exceptionally hard work in 2018, and particularly to their members, whether independent or from Centers, who completed their mandates in 2018. I convey our gratitude to our Funders for their continued support. Finally, I would like to congratulate each member of the System Management Office’s staff for their engagement and commitment to deliver on the mission and vision of the CGIAR System during 2018. Marco Ferroni Chair, CGIAR System Management Board Statement on risk management The System Management Board has ultimate responsibility for ensuring that the System Organization has in place appropriate risk management and internal control systems and practices. The Board’s responsibility includes the determination of the nature and extent of the key risks that the Board is willing to take to achieve the strategic objectives of the organization, and being satisfied that management has understood the risks, is implementing (the first line of defense) and monitoring (the second line of defense) appropriate policies, and is providing the Board with timely information so that the Board may discharge its responsibilities. Financial, operational and reputational risk is an everyday part of CGIAR System activities given: the range of actors; the number of countries in which CGIAR research actions are undertaken by CGIAR Centers and CGIAR Partners; that CGIAR’s operations are heavily focused on operating with and across multiple partnerships; and in certain settings, there are challenging development contexts that impact on day-to-day operations. The System Organization is one constituent part of the CGIAR System, with multiple other stakeholders having different roles and responsibilities. The Risk Management Framework of the CGIAR System (‘Framework’) provides for risk management to be embedded in CGIAR’s governance and management practices and throughout the control environment of relevant CGIAR entities. The Framework explains roles and responsibilities and describes how all the parts fit together in an ‘extended enterprise’ environment where a number of CGIAR entities come together in a joint endeavor in order to achieve outcomes that none of them could have achieved on their own. Because of the links between strategy and the underlying opportunities and risks, the Framework sets out the agreed five ‘strategic operational objectives’ for the CGIAR System, and thus for the System Organization operational entity– namely ‘delivery, relevance, reputation, reliability and efficiency’. Within the scope of all that is possible as a System, the System’s risk appetite statement provides a guide on CGIAR’s overall willingness to exploit opportunities to reach its three System Level Outcomes, with relevant entities ensuring that their respective risk management practices are aligned with the System’s overall risk appetite. The focus is on taking the right risks, but with no tolerance for financial mismanagement. This heightened focus on risk management as a daily business practice is reflected in changes in the way the System Organization now operates. Key deliverables are revisited half-yearly, resulting in clearer accountabilities and milestones. Internal audit requirements for the System Organization are periodically re-assessed and processes have been established for a systematic follow-up on the implementation of audit recommendations. The System Management Board’s Audit and Risk Committee met six times over the 2018 year and conducted a joint meeting with the newly formed Assurance Oversight Committee of the System Council. As part of the Audit and Risk Committee’s role and responsibilities, it reviewed forecasts of available resources for the CGIAR Portfolio, monitored the financial position and stability of the System Organization and the Centers, and considered the System level risks of specific events in Centers and provided guidance and oversight to the development of 3-Year 2019-2021 CGIAR Research Financing Plan in support of the 3-Year Business Plan. In continued support to the System Management Board and the CGIAR System, the Audit and Risk Committee in 2019 will prioritize (i) the definition and implementation of a cross-System whistleblowing process to ensure effective linkages with Center-own processes; (ii) operational protocols for System-wide policy consultation and adoption; and (iii) the development and communication of a System-wide policy on event reporting, with clear definitions of triggers for when an event should be reported and a mechanism for System-wide sharing of information and disclosure to stakeholders. Gordon MacNeil, Chair, Audit and Risk Committee  Management statements of responsibility for financial reporting The CGIAR System Management Office has direct responsibility for the accounting of all System Organization expenditures and has maintained a system of internal controls designed to provide reasonable assurance that assets are safeguarded and that the financial records of the Office are properly kept. On 17 June 2016, the CGIAR Centers and Funders adopted a ‘CGIAR System Framework’ that sets out the overall governing framework of the CGIAR System and provides for a System Council and a CGIAR System Organization with its two constituent parts, a CGIAR System Management Board and CGIAR System Management Office. The responsibilities of the System Management Office are further defined in the ‘Charter of the CGIAR System Organization’. The accompanying annual Financial Statements of the System Organization for the year ended 31 December 2018, have been prepared in accordance with International Financial Reporting Standards (‘IFRS’). PricewaterhouseCoopers (‘PwC’) has been engaged to examine and report on the financial statements of the System Organization. The firm’s examination is conducted in accordance with International Standards on Auditing (‘ISAs’). PwC’s report accompanies these 2018 Financial Statements. The System Organization’s Chief Audit Executive performs internal audit assurance and advisory engagements according to a Charter approved by the System Management Board pursuant to The International Standards for the Professional Practice of Internal Auditing. Internal Audit delivers findings and provides recommendations regarding the adequacy of the CGIAR System Organization’s policies and procedures and the effectiveness of their implementation. The System Organization has fiduciary responsibility for all Window 1 and Window 2 funds disbursed from the CGIAR Trust Fund managed by the World Bank as Trustee to CGIAR Centers and other partners that are leading or participating in CGIAR Research Programs and Platforms1. Consistent with prior years these funds are not reflected in the Financial Statements of the CGIAR System Organization. These funds are for the implementation of CGIAR Research Programs and Platforms and are reported in the financial statements of the respective Centers. Taking into account the ‘extended enterprise’ nature of CGIAR’s operations, separately, the System Organization prepares aggregated CGIAR System financial information (presented annually as the ‘CGIAR Financial Report’), which is based on the 15 Centers audited financial statements and the reporting of expenditures by System entities2. The CGIAR System financial information presents System Organization and Center management, the CGIAR System Management Board and the System Council, with an accurate view of the System’s operations, which enables identification and discernment of strategic opportunities and risks. Elwyn Grainger-Jones Jamie Craig Executive Director Director, Financial and Digital Services 1 The Global Crop Diversity Trust is leading the ‘Genebank Platform’ until end-2021 and has entered into a Financial Framework Agreement with the System Organization in respect of the management of that Platform as if it was a CGIAR Center. 2 As defined in the document titled ‘Policy on CGIAR System Cost Financing’ accessible at: https://cgspace.cgiar.org/bitstream/handle/10568/89415/Policy%20on%20CGIAR%20System%20Cost%20Financing. pdf?sequence=1&isAllowed=y 4 (THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS) CGIAR System Organization (An international not-for-profit organization) AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 Contents Statement of financial position..................................................................................................7 Statement of activities and other comprehensive income.......................................................8 Statement of cash flows.............................................................................................................9 Statement of changes in net asssets........................................................................................10 Notes to financial statements..................................................................................................11 (THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS) 5 6 (THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS) CGIAR System Organization STATEMENT OF FINANCIAL POSITION As at 31 December 2018 and 2017 (all figures expressed in thousands of US dollars) Note 2018 2017 $ $ Assets Current Assets Cash and cash equivalents 7 7,285 9,036 Accounts receivable Funders 8 34 - Employees 8 13 - CGIAR Centers 8 252 260 Others 8 711 114 Prepaid expenses 9 329 296 Total Current Assets 8,624 9,706 Total assets 8,624 9,706 Liabilities and net assets Current Liabilities Accounts payable Funders 10 5,440 6,187 Employees 10 16 7 CGIAR Centers 10 330 826 Others 10 397 212 Deferred revenue 11 120 234 Accruals and Provisions 12 878 971 Total Current Liabilities 7,181 8,437 Undesignated Net Assets 1,443 1,269 Total liabilities and net assets 8,624 9,706 (THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS) 7 8 (THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS) CGIAR System Organization STATEMENT OF ACTIVITIES AND OTHER COMPREHENSIVE INCOME For the years ended 31 December 2018 and 2017 (all figures expressed in thousands of US dollars) 2018 2017 Unestricted Restricted Restricted Total Unestricted Restricted Restricted Total Note Non-portfolio portfolio Non-portfolio Non-portfolio portfolio Non-portfolio $ $ $ $ $ $ $ $ Revenue and Gains Grant Revenue Window 1 and 2 13 - - 8,056 8,056 - 327 9,969 10,296 Bilateral 13 - - 510 510 - - 655 655 Total Grant Revenue - - 8,566 8,566 - 327 10,624 10,951 Other Revenue 14 1,468 - 45 1,513 1,511 - 161 1,672 Total Revenue and Gains 1,468 - 8,611 10,079 1,511 327 10,785 12,623 Expenses CGIAR Collaboration 15 - - 247 247 - 327 2,538 2,865 Non-CGIAR Collaboration 16 - - 289 289 - - 1,225 1,225 General and Administration 1,429 - 8,069 9,498 1,318 - 7,022 8,340 Total Operating Expense 18 1,429 - 8,605 10,034 1,318 327 10,785 12,430 Financial Income 19 311 - - 311 130 - - 130 Financial Expenses 19 (182) - - (182) (165) - - (165) 129 - - 129 (35) - - (35) Surplus for the year 168 - 6 174 158 - - 158 CGIAR System Organization STATEMENT OF CASH FLOWS For the years ended 31 December 2018 and 2017 (all figures expressed in thousands of US dollars) 2018 2017 $ $ Cash flows generated from / (used in) operating activities Surplus for the year 174 158 Adjustments to reconcile changes in net assets to net cash provided by operating activities: Decrease (increase) in assets Accounts receivable (636) 554 Prepaid expenses (33) (21) Increase (decrease) in liabilities Accounts payable (1,163) 1,609 Accruals and provisions (93) 243 Net cash provided by (used in) operations (1,751) 2,543 Cash and cash equivalents at the beginning of the year 9,036 6,493 Cash and cash equivalents at the end of the year 7,285 9,036 (THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS) 9 CGIAR System Organization STATEMENT OF CHANGES IN NET ASSSETS For the years ended 31 December 2018 and 2017 (all figures expressed in thousands of US dollars) 2018 2017 $ $ Balance on 1 January 1,269 1,111 Surplus for the year 174 158 Balance as at 31 December 1,443 1,269 10 (THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THECSGEI AFRIN SAYNSTCEIMAL O SRTGATAENMIZAETNITOSN) CGIAR System Organization NOTES TO FINANCIAL STATEMENTS For the years ended 31 December 2018 and 2017 (all figures expressed in thousands of US dollars) 1. General information Governance arrangements As then known, with the branding changed to ‘CGIAR’ as the full name in 20083, the formerly titled Consultative Group on International Agricultural Research, was established as a global partnership in 1971. After several reforms, on 17 June 2016 CGIAR’s Centers and Funders adopted a ‘CGIAR System Framework’ (‘Framework’) that transformed the overall governance arrangements of the CGIAR System. The Framework provides for a System Council and a CGIAR System Organization (’System Organization’), the latter with its two constituent parts, a System Management Board and System Management Office. Effective from 1 July 2016, with the agreement of CGIAR’s Centers and Funders, by decision of the former CGIAR Consortium Board on 21 June 2016 in its final decision- making role, and by decision of CGIAR’s Centers effective on 30 June 2016, the CGIAR Consortium Constitution was amended and replaced in its entirety with the Charter of the CGIAR System Organization (’Charter’). These governance changes impacted Board composition, the Board’s overall mandate, and the legal name of the System Organization. There was no impact on the legal personality of the organization itself by reason that the organization’s legal personality derives from the ‘Agreement establishing the Consortium of International Agricultural Research Centers as an International Organization’, effective on 20 July 2012 and its subsequent amendment, effective on 21 November 2016 (‘Agreement’). That Agreement annexes the Charter as the governing document of the System Organization. The System Organization has had full operational and legal responsibility for its activities since 2016, overseen by the former Consortium Board to 30 June 2016. From 1 July 2016, the System Management Board was in place. Refer to Note 6 below for membership details of the System Management Board as constituted in 2018. Pursuant to the Charter, the purpose of the System Organization is to provide support to the CGIAR System. Led by the Executive Director, the System Organization manages the day-to-day operations of the System Organization, the System Management Board and the System Council, and facilitates collaboration within the CGIAR System. The CGIAR System Organization is an independent international organization with such international legal personality as may be necessary for the exercise of its functions and powers, and the fulfillment of its purposes, including without prejudice to the generality of the foregoing, the legal capacity: (a) to enter into treaties, agreements, arrangements and contracts; (b) to acquire and dispose of movable and immovable property; (c) to institute and respond to legal proceedings. 3 See CGIAR Branding Guidelines, Refreshed 2017 AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 11 The System Organization is not subject to statutory laws and regulations which would require the entity to prepare a full set of annual Financial Statements. For the 2017 calendar year, due to decisions taken by the CGIAR System Council and the System Management Board in July 20164, the System Organization continued to operate pursuant to the ‘Joint Agreement entered into between the CGIAR Consortium and the Fund Council of the CGIAR Fund represented by the World Bank’ (‘Joint Agreement’)5. Pursuant to article 19.3 of the Joint Agreement, the System Organization was required to present a full set of annual Financial Statements through to 31 December 2017, at which time the obligations under the Joint Agreement came to an end. For 2018 and beyond, the System Organization recognizes the benefit to its stakeholders of continuing to provide a comprehensive annual review of its business performance and financial position through the provision of a full set of annual Financial Statements, together with an independent external audit opinion. Agreements with the French Government and Région Occitanie The authority for the System Organization to operate in France is conferred in the ‘Agreement between the Government of the French Republic and the Consortium of International Agricultural Research Centers regarding the headquarters of the Consortium and its privileges and immunities on French territory’ entered into on 4 March 2013 (‘Headquarters Agreement’)6. On 31 March 2015, an agreement was signed with the Région Occitanie (formerly titled Languedoc- Roussillon) providing an office building located at 1000, avenue Agropolis, F-34394 Montpellier Cedex 5, France, from where the System Organization operates (‘Premises Agreement’). The building includes 790 sqm of office, meeting and open space, and the facility is built on a piece of land of approximately 1,000 sqm, which is part of the Agricultural Agropolis Park. The facility is provided by the Région Occitanie free of charge except for an agreed upon late modification for which the System Organization agreed to reimburse the Région with a payment of Euro 10,474 during the first five years of occupation. The Premises Agreement is in place for a duration of 20 years and if not renewed the facility shall be returned to the Région Occitanie. 2. Vision and Mission CGIAR’s vision is a world free of poverty, hunger and environmental degradation. CGIAR’s mission is to advance agri-food science and innovation to enable poor people, especially poor women, to increase agricultural productivity and resilience, share in economic growth, feed themselves and their families better, and conserve natural resources in the face of climate change and other threats. CGIAR’s 2016 - 2030 Strategy and Results Framework (“SRF”)7 defines CGIAR’s aspirations and strategic actions to deliver on our mission, with the actions of the System Organization operationally aligned to that SRF due to the organization’s status as one part of the collective whole of the definition of the CGIAR System.8 3. Significant accounting policies This note provides a list of the significant accounting policies adopted in the preparation of these financial statements. These policies have been consistently applied to all the years presented, unless otherwise stated. 4 Decisions taken by the System Council on 12 July 2016, and the System Management Board 13 July 2016 5 Approved by the Fund Council on 5 April 2011, and the former Consortium Board on 5 May 2011 6 As now amended by the French Government in December 2016, to reflect the June 2016 governance transition and the new operating name of the CGIAR System Organization. 7 SRF 2016 – 2030: http://www.cgiar.org/?s=strategy+and+results+framework&s_area=all 8 CGIAR System Framework, definitions, item (g). 12 CGIAR SYSTEM ORGANIZATION 3.1 Basis of preparation The Financial Statements have been prepared in accordance with International Financial Reporting Standards (‘IFRS’). IFRS also covers all International Accounting Standards (‘IAS’) and all interpretations of the International Financial Reporting Interpretations Committee, previously called the Standard Interpretation Committee. The Financial Statements as of and for the year ended 31 December 2018 (‘Financial Statements’), approved by the System Management Board on 3 May 2019, have been prepared on a going concern basis. The approach adopted by the System Organization for the management of financial risks is discussed in Note 4 - Management of financial risks below. Financial Statement formats and related classification criteria adopted by the System Organization, in accordance with IAS 1 – Presentation of Financial Statements, are as follows: • Statement of Financial Position has been prepared using the current/non-current distinction; • Statement of Activities and Other Comprehensive Income has been prepared by classifying expenses based on their function; • Cash Flow statement presents the cash flows generated by operating activities using the ‘indirect method’. 3.2 Other accounting policies A brief description is provided below of the accounting policies and principles adopted in preparing the Financial Statements. a) Foreign currency translations Functional and presentation currency Items included in the Financial Statements are measured using the currency of the primary economic environment in which the System Organization operates (the ‘functional currency’). The Financial Statements are presented in US dollars, which is the Organization’s functional and presentation currency. Those assets and liabilities denominated in other currencies are converted at the exchange rate in effect at the end of each financial period. Grants received in currencies other than US dollars are recorded at market exchange rates in effect at the time the grant is received or, if outstanding as of 31 December at the market exchange rate in effect at the year-end. Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognized in the income statement. b) Revenue recognition Grant revenue Most of the revenue is derived through the recognition of revenue from restricted grants. Restricted grants are those that are received from a transfer of resources, including Window 1 funds transferred from the CGIAR Trust Fund to the System Organization in return for past or future compliance with specific conditions. These grants are recognized as revenue once there is reasonable assurance that the System Organization has complied with the conditions attached. Restricted grants are recognized as revenue to the extent of expenses for that grant are incurred. AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 13 Restricted grants in currencies other than US dollars, are recorded as income and expenses at the exchange rate in effect at the time of receipt of funds. Grants related to acquisition of assets are recognized as a reduction of the assets and systematically taken as a reduction of depreciation over the useful life of the asset to which they refer. Other revenue Other revenue is measured at the fair value of the consideration received or receivable. The System Organization recognizes revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the System Organization and risks and rewards of the underlying goods or services have been transferred. c) Cash and cash equivalents Cash and cash equivalents include cash on hand, demand deposits with financial institutions, other short-term and highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. d) Accounts receivable Receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method less provision for impairment. Receivables are generally defined as claims held against others for the future receipt of money, goods or services and include claims from Funders, advances to employees, and advances to CGIAR Centers and claims against third parties for services rendered. Accounts receivable from Funders consist of claims from Funders for grants pledged in accordance with the terms specified by the Funder. It also pertains to claims for expenses paid on behalf of projects more than cash received from Funders. Recognition • Unrestricted grants: receivables from unrestricted grants should be recognized in full in the period specified by the Funder. Before an unrestricted grant can be recognized as revenue, enough verifiable evidence should exist documenting that a commitment was made by the Funder and received by the organization. • Restricted grants: receivables from restricted grants will be recognized in accordance with the terms of the underlying contract. • Receivables from employees are recognized as they arise and cancelled when payment is received. • Advances to CGIAR Centers are recognized when the cash or other assets borrowed are delivered or when payment is made for a liability to the Center. • Other receivables are recognized upon the occurrence of event or transaction which gives the System Organization a legal claim against others. e) Accounts payables These amounts represent liabilities for goods and services provided to the System Organization prior to the end of the financial year, which are unpaid. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognized initially at their fair value and subsequently measured at amortized cost using the effective interest method. f) Provisions Provisions are recognized when the System Organization has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be 14 CGIAR SYSTEM ORGANIZATION required to settle the obligation, and the amount can be reliably estimated. Provisions are not recognized for future operating losses. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognized as interest expense. When the System Organization expects some or all of a provision to be reimbursed, the reimbursement is recognized as a separate asset, but only when the reimbursement is certain. The expense relating to a provision is presented in the statement of financial activity net of any reimbursement. g) Employee benefits i. Short-term employee benefits Liabilities for wages and salaries, including bonuses (if any) that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service, are recognized in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet. ii. Defined contribution plan The System Organization contributes to a defined contribution retirement benefit plan for all qualifying employees. The monthly contribution is 16% of gross salary. Contributions to the defined contribution plan are recorded as expenses as incurred. The assets of the defined contribution plan are held separately from those of the System Organization in the name the individual employee and under the oversight of the Board of Trustees of AIARC. h) Net assets Net assets include general designated and undesignated reserves in their utilization. Designated reserves are typically dedicated to serve the acquisition or replacement of property, plant and equipment (capital fund) and are referred to capital invested in fixed assets. i) Rounding of amounts All amounts disclosed in the Financial Statements and notes have been rounded off to the nearest thousand unless otherwise stated. j) Accrual basis Under the accrual basis of accounting, transactions and events are recognized when they occur (and not when cash or its cash equivalent is received or paid) and these are recorded in the accounting books and reported in the Financial Statements during the periods to which they relate. Expenses are recognized in the Statement of Activities and Other Comprehensive Income based on a direct association between the costs incurred and the earnings of specific items of revenue. k) Income taxes Pursuant to the Headquarters Agreement entered into with the French Government (see Note 1), employees of the System Organization are not personally liable to pay French income AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 15 tax on salaries and other benefits paid by the System Organization. Consequently, the System Organization does not account for income tax in its Financial Statements. 3.3 New and amended IFRS Standards effective for the current year The following standards and interpretations issued by the International Accounting Standards Board (‘IASB’) have mandatory application in 2018 and have been applied in the preparation of these statements. a) IFRS 15 - Revenue from Contracts with Customers This standard, issued by the IASB in May 2014, requires an institute to recognize revenue upon transfer of control of goods or services to a customer at an amount that reflects the consideration it expects to receive. This new revenue recognition model defines a five-step process to achieve this objective. The updated guidance also requires additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. b) IFRS 9 - Financial Instruments The improvements introduced by this new standard, issued by the IASB in July 2014, includes a logical approach for classification and measurement of financial instruments, impairment of financial assets, and general hedge accounting guidance. c) IFRIC Interpretation 22 - Foreign Currency Transactions and Advance Consideration This was issued by the IASB in December 2016 and addresses the exchange rate to use in transactions that involve advance consideration paid or received in a foreign currency. Based on management’s analysis, the new IFRS standards and interpretations referred to above have no material impact on the System Organization’s 2018 Financial Statements. 3.4 New and amended IFRS Standards effective for future years The following standard issued by the International Accounting Standards Board (‘IASB’) will have mandatory application in 2019 and a potential impact on the System Organization financial statements. a) IFRS 16 – Leases IFRS 16 provides a comprehensive model for the identification of lease arrangements and their treatment in the financial statements for both lessors and lessees. IFRS 16 will change how to account for leases previously classified as operating leases under IAS 17, which were off balance sheet. On initial application of IFRS 16, for all leases unless they are short term leases or leases of low value assets the System Organization will: • Recognize right of use assets and lease liabilities in the consolidated statement of financial position, initially measured at the present value of the future lease payments; • Recognize depreciation of right of use assets and interest on lease liabilities in the consolidated statement of profit or loss; • Separate the total amount of cash paid into a principal portion (presented within financing activities) and interest (presented within operating activities) in the consolidated cash flow statement. Based on management’s preliminary assessment, the new IFRS standard referred to above is not expected to have a material impact on the 2019 System Organization’s Financial Statements. 16 CGIAR SYSTEM ORGANIZATION 4. Management of financial risks The activities of the System Organization are exposed to the following financial risks: market risk (including exchange rate risk), credit risk, and liquidity risk. Management of the System Organization identifies and assesses financial risks in accordance with the Risk Management Framework of the CGIAR System9 and the accompanying Risk Management Guidelines of the CGIAR System10. 4.1 Market risk The System Organization is exposed to market risks associated with exchange rates. a) Exchange rate risk The System Organization operates internationally and is exposed to foreign exchange risk arising when its business transactions are in currencies other than US dollars, the latter being the currency with which the organization predominantly operates. The System Organization is exposed to foreign currency risk arising primarily through foreign exchange operations risk. Although the System Organization predominantly executes operating activities in US dollars, it is nevertheless exposed to foreign currency risk in connection with scheduled payments in currencies other than US dollars. In general, this mainly relates to foreign currency denominated payables for local and international operations and payments of salaries which are denominated in Euros. The System Organization monitors the exposure to foreign currency risk arising from operating activities and based on the limited transactions in foreign currencies, does not use derivative financial instruments to hedge its foreign exchange exposure in relation to investments or cash flows. The System Organization is primarily exposed to changes in USD/EUR exchange rates. The sensitivity of the Statement of Activities and Other Comprehensive Income to changes in the exchange rate arises mainly from EUR denominated cash and cash equivalents, accounts receivable and payables. The System Organization maintains most of its financial instruments in US dollars however there are some financial instruments denominated in Euros at year-end. The impact on the net surplus (deficit) of the organization of a reasonably possible change in the US dollars exchange rate in comparison to the Euro can be determined by considering the impact of a 10% shift in the exchange rate: 31 December 2018 Exchange Rate to USD Sensitivity Impact on Surplus (Deficit) December 10% 10% 31 Rate Higher Lower High Low Range USD USD USD EURO 0.88 0.97 0.79 14 (14) 18 31 December 2017 Exchange Rate to USD Sensitivity Impact on Surplus (Deficit) December 10% 10% 31 Rate Higher Lower High Low Range USD USD USD EURO 0.84 0.92 0.76 9 (9) 18 9 Approved 10 November 2017, https://www.cgiar.org/wp-content/uploads/2018/01/Risk-Management-Framework-APPROVED.pdf 10 Approved 11-12 December 2017, https://www.cgiar.org/wp-content/uploads/2018/02/Risk-Mgmt-Guidelines-APPROVED.pdf AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 17 b) Price risk The System Organization does not hold any financial instruments subject to price risk. c) Interest rate risk The System Organization is not subject to any significant interest rate risk as the only maturing interest rate are on the funds held in the bank accounts. 4.2 Credit risk The System Organization’s credit risk represents the exposure of the System Organization to potential losses due to counterparty inability to discharge the obligations undertaken. This exposure mainly relates to trade receivables deriving from claims for grants promised or pledged or for expenses paid on behalf of its operation or projects more than cash received from Funders. The credit risk for the System Organization’s operation is considered low since its primary function is that of a secretariat and not an implementer of CGIAR Research Programs or Platforms. In addition, Funders consist primarily of large international organizations or foundations, Crown corporations or national governments, or intergovernmental organizations. In the ordinary course of business, the System Organization faces the risk that receivables from CGIAR Centers may not be paid on the due date, leading then to an increase in their age and the risk of insolvency. To mitigate the credit risk associated with its counterparties, System Organization management constantly reviews its credit exposure and monitors the collection of receivables on the contractually agreed due dates. The assets are reported gross of impairment losses calculated based on the default risk of the counterparties, considering the information available on solvency as well as historical data. Credit risk also arises from cash and cash equivalents and deposits with banks and financial institutions. The organization mitigates this risk by ensuring that funds are maintained only in reputable well-established financial institutions. For trade receivables: • Reviews of aging reports are carried out monthly and provisions for doubtful amounts made for any potentially unrecoverable amounts. • Advances to partner and hosted Centers are subject to the System Organization’s internal requirements to limit losses arising from funds advanced by the System Organization. As at 31 December 2018 2017 USD USD Not yet overdue 761 177 Overdue 1 - 30 days 3 30 Overdue 30 - 90 days - 11 Overdue 91 - 120 days 13 45 Overdue by more than 120 days 199 111 Total 976 374 4.3 Liquidity risk Liquidity risk takes place when the System Organization has insufficient financial resources available to meet its financial obligations and commitments when due. The System 18 CGIAR SYSTEM ORGANIZATION Organization’s management of liquidity risk in the ordinary course of business involves maintaining a sufficient level of cash to maximize the efficiency of management of financial resources. Cash flows required to settle other financial liabilities, other than those to lenders, do not differ significantly from the recognized carrying amount. In this regard, it is noted that there is no significant concentration of liquidity risk, either in relation to financial assets or in relation to the sources of finance due to short-term period: As at 31 December 2018 Carrying amount Within 12 months Between 1 and 5 years Over 5 years Payables 6,183 6,183 - - Other current and non-current liabilities 998 998 - - Total 7,181 7,181 - - As at 31 December 2017 Carrying amount Within 12 months Between 1 and 5 years Over 5 years Payables 7,232 7,232 - - Other current and non-current liabilities 1,205 1,205 - - Total 8,437 8,437 - - 5. Use and estimate assumptions The preparation of Financial Statements requires that accounting standards and methods be applied, which in certain cases depend on subjective measurements and estimates based on past experience as well as assumptions which, on a case-by-case basis, are considered reasonable and realistic in the specific circumstances. The use of such estimates and assumptions influences the amounts reported in the statement of financial position, the comprehensive income statement, the statement of cash flows and the explanatory notes. Actual results for such items may differ from the amounts reported in the Financial Statements due to the uncertainties that characterize the assumptions and conditions on which such estimates were made. 6. CGIAR System Management Board As described in Note 1, CGIAR adopted a revised governance model in 2016, approved by the Centers and Funders in June 2016. As part of that revised model, the CGIAR System Management Board became the governing body of the System Organization from 1 July 2016. The Board’s nine voting members are appointed by the CGIAR Centers, typically for a two-year term. Membership rotations are typically staggered to provide for a balance between continuity of expertise and bringing in new voices to the Board taking into consideration gender equality and other diversity principles as much as possible. Effective from 12 April 2018, the CGIAR System decided to adjust the voting member composition of the System Management Board to move to a balance of three independent members and six Center-affiliated members (from two independent members and seven Center-affiliated members). The third independent voting member of the System Management Board was appointed with effect from 1 December 2018. Tables 1 and 2 below set out the Board’s composition during the 2018 fiscal year. The System Management Board selects the Executive Director pursuant to the Charter. AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 19 Table 1: List of System Management Board members from 1 July 2017 until 31 August 2018. Members Representation Term Marco Ferroni Chair and Independent Member Until 31 August 2019 Kanayo F. Nwanze Independent Member Until 31 August 2019 Ann Tutwiler Center-Affiliated Member Until 31 August 2018 Barbara Wells Center-Affiliated Member Until 31 August 2019 Geoff Hawtin Center-Affiliated Member Until 31 August 2019 Gordon MacNeil Center-Affiliated Member Until 31 August 2018 Jimmy Smith Center-Affiliated Member Until 31 August 2018 Margret Thalwitz Center-Affiliated Member Until 31 August 2018 Martin Kropff Center-Affiliated Member Until 31 August 2018 Elwyn Grainger-Jones Executive Director, (ex-officio non-voting) CGIAR System Organization For length of term in office Table 2: List of System Management Board members from 1 September 2018 to 31 December 2018 Members Representation Term Marco Ferroni Chair and Independent Member Until 31 August 2019 Isatou Jallow* Independent Member Until 30 November 2020 Kanayo F. Nwanze Independent Member Until 31 August 2019 Amos Namanga Ngongi Center-Affiliated Member Until 31 August 2020 Barbara Wells Center-Affiliated Member Until 31 August 2019 Claudia Sadoff Center-Affiliated Member Until 31 August 2020 Geoff Hawtin Center-Affiliated Member Until 31 August 2019 Gordon MacNeil Center-Affiliated Member Until 31 August 2019 Yvonne Pinto Center-Affiliated Member Until 31 August 2020 Elwyn Grainger-Jones Executive Director, (ex-officio non-voting) CGIAR System Organization For length of term in office * Term commenced 1 December 2018 7. Cash and cash equivalents The following table sets forth a breakdown of cash and cash equivalents: As at 31 December 2018 2017 USD USD BNPPARIBAS - ICARDA funds in trust 294 902 BNPPARIBAS USD Account 6,456 7,700 BNPPARIBAS Euro Account 315 250 Société Marseillaise de Crédit (SMC) USD Account 7 11 Société Marseillaise de Crédit (SMC) EUR Account 42 - ARKEA bank Entreprise USD account 166 166 ARKEA bank Entreprise EUR account - 1 Cash 5 6 Total 7,285 9,036 20 CGIAR SYSTEM ORGANIZATION Short term investments were made during the year, namely Certificates of Deposit (‘CoD’) with BNP Paribas in the amount of the estimated monthly salary and benefit commitments in US dollars. The investment return is accounted for as financial income. An agreement between ICARDA and the then named CGIAR Consortium (now System Organization) was amended in 2016 to extend, until 31 December 2018, the operation of a trust fund in US dollars to facilitate payments by the System Organization on ICARDA’s behalf as ICARDA had experienced delays in the processing of payments due to geopolitical circumstances. The arrangement was not renewed by agreement between the System Organization and ICARDA as at its end date at 31 December 2018, and all remaining funds held in trust were returned to ICARDA in 2019. 8. Accounts receivable All receivable balances are valued at their net realizable value, that is, the gross amount of receivable minus, if applicable, allowances provided for doubtful accounts. 8.1 Accounts receivables – Funders As at 31 December 2018 2017 USD USD ‘4 per 1000’ - Africa Symposium 34 - ‘Accounts receivables – Funders’ consist of claims for grants promised from Funders or pledged in accordance with the terms specified by the Funder. It also pertains to claims from Funders for expenses paid on behalf of projects in excess of cash received. The Executive Secretariat of the ‘4 pour 1000’, an initiative hosted in Montpellier by the System Organization with effect from June 2017, organized a symposium in South Africa from 24 to 26 October 2018 to raise awareness of the ‘4 pour 1000’ initiative on the continent by bringing together 200 participants from different African countries. Outstanding amounts were reimbursed by the Funders in February 2019. 8.2 Accounts receivables – Employees As at 31 December 2018 2017 USD USD Employees 13 - The amount at 31 December 2018 represents an accounting entry to reflect that the scholastic year in Montpellier runs from September to June of the following year. Certain staff made full payment of the educational costs for their children during the 2018 calendar year, with a proportion of those costs relating to attendance at school in the 2019 portion of the same academic year. AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 21 8.3 Accounts receivables – CGIAR Centers As at 31 December 2018 2017 USD USD AfricaRice 8 16 Bioversity 1 2 CIAT 1 2 CIFOR 44 33 CIMMYT 2 28 CIP - 29 ICARDA - 13 ICRISAT 5 1 IFPRI - 5 IITA 28 24 ILRI 37 36 IRRI 9 3 IWMI 18 2 World Agroforestry (ICRAF) 95 65 WorldFish 4 1 Total 252 260 ‘Accounts receivables – CGIAR Centers’ mainly consist of receivables for meetings hosted arrangements, shared services and others. 8.4 Accounts receivables – Others As at 31 December 2018 2017 USD USD Sundry Accounts Receivable 8 47 VAT Reclaimable 109 52 AIARC 578 15 Advances to Trade Creditors 16 - Total 711 114 ‘Accounts receivable – Others’ mainly consist of: • Outstanding reimbursement of VAT from the French government pursuant to the Headquarters Agreement referred to in Note 1 • Advances to AIARC11, a third-party supplier to the System Organization, for processing the monthly payroll, defined contribution pension contributions and health insurance premiums for the System Organization personnel. 11 The Association of International Agricultural Research Centers (AIARC) is a not-for-profit 501(c)(3) membership corporation, headquartered in Alexandria, Virginia, USA. 22 CGIAR SYSTEM ORGANIZATION 9. Prepaid expenses The following table sets forth a breakdown of prepaid expenses: As at 31 December 2018 2017 USD USD CGIAR System Organization Suppliers 94 107 Hosted Services Suppliers Shared Services for CGIAR Centers 228 154 Open Access/Open Data special initiative (‘Open Access’) - 12 Big Data in Agriculture Platform (‘Big Data’) 7 - CGIAR System Internal Audit Function - 23 Total 329 296 10. Accounts payable 10.1 Grants payable – Funders and other sources As at 31 December 2018 2017 USD USD CGIAR Centers – Board Orientation Program (i) 96 95 Strengthening Impact Assessment in CGIAR (ii) - 70 Virtual Information Platform (iii) - 7 Open Access (iv) 140 140 Big Data (v) 106 - Gender I (vi) - 218 4 pour 1000 (vii) 451 270 W1&2 funds (viii) 4,300 5,387 Gender II (ix) 347 - Total 5,440 6,187 These include grants received from Funders which conditions for revenue recognition are not yet met and amounts payable to Funders in respect of any unexpended funds received in advance for signed contracts: (i) At the decision of CGIAR Centers, the annual Center-led Board Orientation Program took place in September 2018. Expenditures were covered by course fee paid by participants’ Centers, with any remaining funds held to support future Board Orientation Programs. (ii) The Strengthening Impact Assessment in the CGIAR (‘SIAC’) Special Initiative project came to an end in June 2017. The Bill & Melinda Gates Foundation agreed that excess funds AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 23 could be used subsequent to that date. The funds were disbursed in February 2018 to ILRI, a CGIAR Center. (iii) The remaining funds in the Virtual Information Platform (1 January 2016 to 30 April 2018) were utilized in 2018. (iv) Concurrent with the submission of the CGIAR 2017 – 2022 Portfolio of CRP and Platform proposals in July 2016, it was decided that with effect from 1 January 2017 the Open Access Open Data (OA-OD) Special Initiative project would be incorporated into the Big Data Platform, which is led by CIAT. Since IFPRI is leading Module 1 of the Big Data Platform, it was agreed that the System Organization will keep the remaining funds in the OA-OD Special Initiative project to cover operating costs and monthly expenses of Big Data Platform staff hosted by the System Organization until such OA-OD funds are exhausted. In 2018, there was no disbursement required to the Big Data Platform from the carryover funds of Open Data Special Initiative. It is expected that funds will be utilized in 2019. (v) The CGIAR System Organization is hosting staff on behalf of the Big Data Platform. (vi) The Gender Special Initiative project (‘Gender I’) came to an end in March 2017, although reporting on results and impact will take at least until Q1 of 2019. The residual funds of USD 218 thousand were returned to the Window 1 account of the CGIAR Trust Fund in December 2018. (vii) The System Management Board authorized the Executive Director to sign, on behalf of the System Organization, an agreement for the hosting of the Secretariat of the ‘4 pour 1000’ Initiative, with effect from June 2017. (viii) Window 1 and 2 funds received in advance for 2019 operating budget. (ix) The CGIAR Strategy and Results Framework (SRF) 2016-2030 makes an explicit commitment to tackle gender equality throughout CGIAR, including by ‘closing the gender gap in equitable access to resources, information and power in the agri-food system by 2030’. Actions set out in the CGIAR Gender Equality Discussion Paper (‘Gender II’) to develop an overarching and high-level CGIAR Gender and Diversity Framework covering both gender in research as well as gender and diversity in the workplace, was funded jointly by the Bill & Melinda Gates Foundation and the Australian Center for International Agricultural Research. 10.2 Accounts payable – Employees As at 31 December 2018 2017 USD USD Travel expense claims to be reimbursed 16 7 24 CGIAR SYSTEM ORGANIZATION 10.3 Accounts payable – CGIAR centers As at 31 December 2018 2017 USD USD ICARDA Funds In-Trust 294 762 Bioversity - 11 CIAT - 13 CIP 4 2 ICARDA - 2 ICRISAT - 1 IFPRI 4 3 IITA 11 - ILRI 1 18 World Agroforestry (ICRAF) 14 14 WorldFish 2 - Total 330 826 As explained in Note 7, a ‘Funds In-Trust’ account was established to support ICARDA’s financial transactions until 31 December 2018. All remaining funds were returned to ICARDA in Q1 2019. 10.4 Accounts payable – Others As at 31 December 2018 2017 USD USD Trade 397 212 11. Deferred revenue Deferred revenue relates to the portions of revenue arising from shared-services arrangements for the subsequent year. As at 31 December 2018 2017 USD USD Shared Services - ESRI 35 37 Shared Services - ENVI 12 16 Shared Services - CGNET 50 129 Shared Services - Journals - 33 Shared Services - WinZip 4 3 Shared Services - Blue Jeans 9 8 Shared Services - InsideNGO 8 8 Shared Services - others 2 - Total 120 234 AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 25 12. Accruals As at 31 December 2018 2017 USD USD CGIAR System Organization 712 863 Hosted Services Accruals CGIAR Shared Services Internal Audit Unit (i) - 6 CGIAR System Internal Audit Support Service 1 - CGIAR System Internal Audit Function (i) 38 - Open Access - 85 Big Data 44 - Shared Services - InsideNGO 11 - 4 pour 1000 19 - System Council 50 17 Centers’ Board Orientation Program 3 - Total 878 971 (i) The mandate of CGIAR Shared Services Internal Audit Unit came to an end on 31 December 2017 upon the Board’s approval (during its 8th meeting) of the Terms of Reference and means of fulfilling the new CGIAR System Internal Audit Function, operational with effect from 1 January 2018. 13. W1&2 and grant revenue Window 1 & 2 revenues • Restricted Non-portfolio: Window 1 & 2 funds received from the CGIAR Trust Fund that are recognized as revenue only as expenses are incurred in support of the operations of the CGIAR System Organization. • Restricted portfolio: Window 1 & 2 funds specifically designated for ‘Special Initiative’ projects as approved by the former Fund Council. This revenue is recognized only to the extent that the specific work in the ‘Special Initiative’ has been completed. 2018 2017 Restricted Restricted Restricted Restricted portfolio Non-portfolio portfolio Non-portfolio USD USD USD USD CGIAR System Organization - 7,462 - 6,422 Hosted Initiatives Gender I - - 327 1,798 Open Access 784 Big Data 594 - Virtual Information Platform - - - 965 Total - 8,056 327 655 Bilateral grants: Funding, either unrestricted or related to Portfolio or to other research activities (if restricted), that flow directly from Funders to System Organization. 26 CGIAR SYSTEM ORGANIZATION 2018 2017 Restricted Restricted Non-portfolio Non-portfolio USD USD Bill & Melinda Gates Foundation (SIAC I) 70 562 4 pour 1000 338 93 Bill & Melinda Gates Foundation (Gender II) 69 - Australian Center for International Agricultural Research (Gender II) 33 - Total 510 655 14. Other revenue 2018 2017 Unrestricted Restricted Unrestricted Restricted Non-portfolio Non-portfolio USD USD USD USD Shared Services (i) 1,230 - 1,198 - Internal Tax (ii) 213 - 173 - CGIAR Shared Service Internal Audit Unit - - - 161 CGIAR System Internal Audit Support Service 9 - - - Centers’ Board Orientation Program - 45 44 - Others - reimbursement of expenses 16 - 96 - Total 1,468 45 1,511 161 Other Revenue includes: (i) Income from provision of shared purchasing services to Centers and partners. The CGIAR System Organization leverages the combined purchasing power of CGIAR to provide maximum value for money to the Centers. (ii) The internal tax that the System Organization is required to deduct at source from the gross salaries of employees for the benefit of the System Organization pursuant to the Headquarters Agreement signed with the Government of France (see Note 1). Currently, the System Organization (based on decisions of the former Consortium Board) has set that internal tax at the rate of 5.5%. The internal tax is recognized as revenue for the System Organization. 15. CGIAR collaboration 2018 2017 Restricted Restricted Restricted Restricted portfolio Non-portfolio portfolio Non-portfolio USD USD USD USD CGIAR System Organization - 177 - 240 Hosted Activities Open Access - - - 53 SIAC I - 70 - 264 Gender I - - 327 1,053 Virtual Information Platform - - - 928 Total - 247 327 2,538 AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 27 The conclusion of the various Special Initiatives Projects in 2017 and early 2018 explain the decrease in CGIAR collaboration expenses. 16. Non-CGIAR collaboration 2018 2017 Restricted Restricted Non-portfolio Non-portfolio USD USD System Organization 176 256 Hosted Activities Open Access 14 290 SIAC I - 277 Gender I - 412 4 pour 1000 11 - Gender II 88 - Total 289 1,225 17. Expenditures by natural classification The following table sets forth a breakdown of operating expenses: For the year ended 31 December 2018 2017 Unestricted Restricted Restricted Unestricted Restricted Restricted portfolio Non-portfolio portfolio Non-portfolio USD USD USD USD USD USD Personnel - - 5,202 - - 4,477 CGIAR Collaboration - - 247 - - 2,865 Other Collaboration - - 289 - 327 898 Supplies and Services 1,429 - 1,865 1,318 - 1,920 Travel - - 1,001 - - 625 Total 1,429 - 8,605 1,318 327 10,785 18. Financial incomes and financial expenses Represents realized and unrealized exchange gains and losses during the year, interest earned on short-term investments and all bank charges. 19. System organization specific funder arrangements On 23 March 2017, a funding arrangement between Canada, represented by the Minister for International Development acting through the Department of Foreign Affairs, Trade and Development (‘DFATD’), and the System Organization was signed allowing Canada to contribute funding for the CGIAR Portfolio 2017-2022 through the System Organization while transferring funds directly to the CGIAR Trust Fund administered by the World Bank (schedule II). An amendment on 12 December 2018 was signed for the 2018-2019 contribution however the funds were not transferred until 2019. 28 CGIAR SYSTEM ORGANIZATION AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 29 SCHEDULE I - RESTRICTED PROJECTS CGIAR System Organization SCHEDULE OF RESTRICTED PROJECTS For the year ended 31 December 2018 (Thousands of US dollars) FUNDER AND PROGRAM PROJECTS funding starting ending grant pledged expenditures 2018 expenditures total balance type date date prior years expenditures & reimbursements USD USD USD USD USD Restricted projects: Bilateral and Window 1 Bill & Melinda Gates SIAC I bilateral 11/9/12 2/28/18 4,085 4,015 70 4,085 - Open Access an Open Data - part 1 W1 1/10/15 1/9/17 2,380 2,240 - 2,240 140 Total Bill & Melinda Gates 6,465 6,255 70 6,325 140 ex Fund Office trough W1 Gender Management an Administration W1 5/7/14 3/31/17 780 738 42 780 - Electronic Platform W1 5/7/14 3/31/17 530 521 9 530 - Knowledge Sharing Workshops W1 5/7/14 3/31/17 690 532 158 690 - Leadership Development W1 5/7/14 3/31/17 300 219 81 300 - Mentoring and Coaching W1 5/7/14 3/31/17 1,125 1,166 (41) 1,125 - Postdoctoral Fellowships W1 5/7/14 3/31/17 2,400 2,443 (43) 2,400 - PDF external Assesment W1 5/7/14 3/31/17 55 42 13 55 - Total ex Fund Office trough W1 5,880 5,661 219 5,880 - Russian Federation trough W1 Virtual Information Platform W1 11/2/15 11/02/2017 1,000 993 7 1,000 - Total Russian Federation 1,000 993 7 1,000 - Total Restricted Projects 13,345 12,909 296 13,205 140 30 CGIAR SYSTEM ORGANIZATION SCHEDULE II - HOSTED ACTIVITIES CGIAR System Organization SCHEDULE OF RESTRICTED PROJECTS For the year ended 31 December 2018 (Thousands of US dollars) FUNDER AND PROGRAM PROJECTS funding starting ending grant expenditures 2018 total balance type date date pledged prior years expenditures expenditures USD USD USD USD USD Hosted activities: Bilateral, W1,W2 & W3 Bill & Melinda Gates Big Data -Phase 1 bilateral 1/11/18 12/31/18 700 - 594 594 106 Gender II Management and Administration bilateral 9/8/18 1/31/19 300 - 69 69 231 Total 1,000 - 663 663 337 ACIAR - Australian Centre for International Agricultural Research Gender II Management and Administration bilateral 11/2/15 11/2/17 145 - 33 33 112 Institut de Recheche pour le Developpement (IRD-France) 4per1000 bilateral 11/2/15 11/2/17 372 - 243 243 129 Agence Francaise de Développement (AFD) 4per1000 symposium bilateral 11/2/15 11/2/17 20 - 20 20 - Agency for the development of international cooperation in the areas of agriculture, food and rural space (ADECIA) 4per1000 symposium bilateral 11/2/15 11/2/17 10 - 10 10 - DEUTSCHE-GESELLSCHAFT FUR INTERNATIONAL ZUSAMMENARBEIT (GIZ) 4per1000 symposium bilateral 11/2/15 11/2/17 51 - 51 51 - Total Hosted Activities 1,598 - 1,020 1,020 578 These notes are an integral part of the 2018 Financial Statements SCHEDULE III - LIST OF FUNDERS SUPPORTING CGIAR BY SIGNING A FUNDING AGREEMENT DIRECTLY WITH THE SYSTEM ORGANIZATION CGIARS System Organization SCHEDULE OF RESTRICTED PROJECTS For the year ended 31 December 2018 (Thousands of Canadian dollars) FUNDER funding disbursements total type related year currency grant pledged expenditures Canada contribution (1) W1 2018 CAD 10,000 10,000 - Total 10,000 10,000 - (1) In line with the agreed “funding arrangements” between Her Majesty the Queen in right of Canada, represented by the Minister for International Development acting through the DFATD and CGIAR System Organization signed on 23 March, as amended, Canada Transferred the funds directly to the World Bank in January 2019 These notes are an integral part of the 2018 Financial Statements AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 31 CGIAR is a global research partnership for a food-secure future. CGIAR science is dedicated to reducing poverty, enhancing food and nutrition security, and improving natural resources and ecosystem services. Its research is carried out by 15 CGIAR Research Centers in close collaboration with hundreds of partners, including national and regional research institutes, civil society organizations, academia, development organizations and the private sector. CGIAR System Organization 1000 Avenue Agropolis Tel: +33 4 67 04 7575 www.cgiar.org 34394 Montpellier Fax: +33 4 67 04 7583 France Email: contact@cgiar.org