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Foundation of Graduates in Early Childhood Studies -

Report from the Trustees of the Foundation of Graduates in Early Childhood Studies

Year ended June 30 2020

The past 12 months has been exceptionally challenging, not only for the Foundation and all the people and organisations it supports, but for the community as a whole and indeed the whole world.

We started the financial year with some sectors in drought. Over the summer of 2019 / 20 that changed with the terrible fires that swept over a significant part of Australia and impacted many in Victoria, including in the early childhood area. As trustees began to debate how to pivot our granting this year to try to help those areas impacted by the fires, and whether it was better to donate early or wait until the impact of immediate grants was seen and the other unmet needs emerged, we were overtaken in our thinking by the global Covid-19 pandemic which is still with us as this is being written.

The impact of the pandemic on economies and financial markets has been substantial, but not nearly as substantial as the human impact on families around the world. The early childhood sector has not been immune from this but, critically in our thinking, is that in such times it is the areas most in need that are most significantly impacted.

The Foundation has been impacted in two ways financially:

  • The fall in share markets has led to a temporary fall in the market value of our investments. However, this is only a transitory impact as the companies we are invested in are all solid and while the price of their shares may have fallen initially, they are rebounding now and most importantly the companies are still strong, even if conditions are tougher for them at present. We have no concerns about the long-term impact on the value of the portfolio or the foundation's ability to continue to support the early childhood sector;
  • The fall in interest rates, share dividends and other forms of income due to the impact of the pandemic on the economy following a long period of falling interest rates and other types of income is a bigger short-term issue, not only for the Foundation but for everyone who relies on income from investments. This low-income environment, where interest rates globally are now down to levels not seen in hundreds of years, and are the lowest ever in Australia, is expected to last for some years. The foundation is benefited in that almost all of its income comes from share dividends, rather than interest, and while they have been significantly impacted, and that impact will continue over the next year, much of the year's income had already been received before the pandemic struck. The income for the year we are now in will be the most impacted and we expect that this will improve by 2022.

Despite the lower income we have taken the decision to hold our granting levels for the 2021 financial year, that we are now in, to about the same levels as a more normal year. We believe that a foundation like ours should, if at all possible, provide as much support as possible in tough times even if it means temporarily digging into its reserves to do so.

Unfortunately, we are hearing many stories across the philanthropic sector of foundations and charitable trusts making significant cuts to their granting this year due to financial pressures - just at the time when the organisations and people they support are facing their own financial pressures. We will not be one of those cutting granting and indeed have already made the majority of our granting decisions for this year and paid out most of the grants for the 2020/21 year already. During this troubling 2020 year our report shows we significantly increased our distributions to $598,889 compared to the prior year of $440,157 to help early childhood learning.

This has involved some use of the reserves that we have built up over time, and will again in the current year and maybe for a bit longer after that, although we expect to rebuild them as conditions improve. The way we have run the foundation's finances is to try to balance current needs of our beneficiaries with their future needs. Each year we try to spend the current income on current needs of beneficiaries and put aside any capital growth to provide for future beneficiaries. However, in tough times like these that enables us to dip into those reserves to maintain our level of support despite lower income. The amount of income we will receive this coming year is still uncertain but it will be less than we grant. We will report on the outcome in next year's report but are very confident that it will not have a meaningful impact on the foundation's long-term prospects.

In the 2020 year that this report is for we actually granted a significantly higher amount than we earnt. As shown below we granted $191,832 on the Forest Hill side and $401,057 on the Warrawong side - nearly $200,000 above what we earned. This was a deliberate decision by trustees as we had had trouble finding appropriate projects to spend on in the Warrawong side in past years and had had built up a buffer that could be spent.

A significant part of that extra spend last year was made on “special” grants initiated by the trustees outside the normal process including one major one in conjunction with the Ian Potter Foundation which will be spread over three years. This is only the second time that we have partnered with another foundation to fund a significant project; the other one being where we assisted another applicant to get funds from the Alfred Felton Bequest to supplement our funding for a project many years ago to create and fund a take-home kit to teach farm safety to pre-school children, and their parents, in rural areas.

The current project, which is supplementing the funds provided by the Potter Foundation, is to help fund Australian Schools Plus fund a Fair Education Victoria Project to address high levels of absenteeism in primary schools in disadvantaged areas (and the associated long-term impact on those children's prospects). This is done by reaching back into the preschools, day-care centres and kindergartens in their catchment areas to provide professional development to educators in those feeder areas to engage with the community and parents to convince parents of the benefits of having early childhood education as well as trying to create a culture that will support parents having their children attending school every day.

Despite the impact of the pandemic on financial markets in March 2020, the share portfolio ended the year with a value of just over $7.85M, down from last year's almost $8.5M but still a substantial amount, especially as we had spent almost $600,000 on grants during the year. It should not be forgotten that the capital of the Foundation is $3.5m so we have grown substantial reserves over the years for just such troubled times when markets decline. While the published account shows a big fall in income this year, they are a bit misleading. The very high accounting income, and franking credits, shown for the 2019 year were a result of the foundation participating in so called “off market buybacks”. Most of the proceeds of such transactions, which are very beneficial to the foundation, are shown in the accounts as “income” and “imputation credits” where in reality they are a capital item for foundations and we strip them out of distributable income. The real fall in underlying income that we can distribute from the 2019 year was only about $30,000 as most of the 2020 year's income had been received before the pandemic struck.

This current year it will be very different income wise as a number of our high dividend paying companies have skipped a dividend and most other have reduced them. However as stated above we have maintained our level of granting (although we won't be doing as much extra granting in the Warrawong half as we did last year) and will temporarily fund that out of our reserves until income levels improve. The extra flexibility that the changes to the granting clauses in our trust deed that AGECS passed at the last AGM will assist in this regard.

As at the time of writing the value of the assets in our portfolio is about $7.7M (after we have paid many of the grants for the 2021 year, totalling about $370,000 so far). There has also been some improvement in the prospects for income to be received this year and following years. However, at least for the current year, the income is still expected to be significantly lower than what we received last year. We would note however that the changes made to the portfolio a few years ago to substantially reduce our exposure to banks and diversify income streams into other areas has reduced the impact of the income drop.

Below is the full list of grants made for the year this report covers.

Forest Hill Grants 2019/20

The following organizations were recipients of those grants totalling $191,832

Bendigo Community Toy Library Inc, Berwick Toy Library Incorporated, Bethany Kindergarten Services, Biala Peninsula, Charles Sturt University , Combined Preschools of Southern Grampians Inc , CSIRO Care Clayton Inc, Eltham Toy Library Inc., Emerald Hill Toy Libraries , Goodstart Early Learning Horsham, Gunbower & District Preschool Inc , Hume City Council, Jacaranda Preschool Inc (Lalor), Kew Toy Library, Kinglake Ranges Children's Centre, Knox and District Toy Library Inc., Knox City Council, Mansfield Kindergarten Incorporated, Maroondah Toy Library Inc, Mission Australia (Cranbourne), Moorabbin Area Toy Library Inc, Mount Gambier Toy Library Inc, Nancy Vibert Childcare Centre (Shepparton), NewHope Baptist Preschool (Blackburn), Rangeview Preschool Association, Reading Out of Poverty Inc., Royal Institute of Deaf and Blind Children, Shine Bright Helm Street (Bendigo), St Andrews Sunbury Kindergarten, Stonnington Toy Library Incorporated, Thomastown West Kindergarten Inc, Try Australia Children's Services (Carrum Downs Children's Centre), TRY Australia's Children's Services (Beveridge), Uniting Tasmania and Victoria (Ivanhoe), Villa Maria Catholic Homes, Vision Australia, Wangaratta Community Toy Library Incorporated, Wyndham Little Buddies Toy Library, Yarra City Council, Young Mens' Christian Association of Ballarat (Carey Street Kindergarten Ararat).

Warrawong grants 2019/20

The following organizations were recipients of those grants totalling $401,057

AGECS (fellowships), Albert Park Preschool Centre Inc., Baw Baw Shire Family Day Care, Braybrook Early Learning Centre, Brotherhood of St Laurence, Child and Family Care Network Inc, City of Yarra, Community Child Care Victoria, Craig Family Centre Inc, ECA (Victoria Branch), Eureka Community Kindergarten Association Inc. (ECKA) Wallace and District Kindergarten, FKA, Goodstart Early Learning Ltd, Goulburn Region Preschool Association, Gowrie Clare Court, Kinglake Ranges Children's Centre, Mallee Family Care Incorporated, Mitchell Shire Council, Nancy Vibert Child Care Centre, North Fitzroy Child Care Co-operative, Pinarc Disability Support, Reading out of Poverty Inc., Schools Plus, Save the Children Australia, Seymour Preschool Centre, The Malpa Project, Thomastown West Kindergarten Inc., TRY Australia Children's Services, Uniting Victoria Tasmania Ltd, Victorian Preschool Field Officers Ass, Wahroonga Preschool, Wilson Street Kindergarten, Windsor Community Children's Centre, Winston Hills Preschool, Yarra Ranges Kindergartens Inc.

Finally, I cannot end this report without recognising all of the hard work that Di Burgess and Kevin Fell in particular do in the finance and secretarial roles for the Foundation, along with all of the other trustees, both present and past, as well as advisory committees who have contributed to this great result.

The two Advisory Committees did a remarkable job processing, evaluating and selecting from among the large number of worthy applications. They did this job during a shut down that required them to use innovative ways of conducting their meetings. They met their deadlines without fuss, ensuring that funds got out to the early childhood field in these very trying times.

Sadly two members of those committees have resigned after years of faithful service: Clare Green from the Forest Hill Committee and Glenys Severin from the Warrawong Committee. The Trustees thank them for long commitment and sound advice and wish them well in their future endeavours.

Glenys has already been replaced by AGECS Council. We welcome Amy Saunders to the Warrawong Committee and look forward to working with her.

2020 Members of the Warrawong Committee:

Anne Houghton, Sharryn Clark, Ron Holmes, Kay Margetts, Amy Saunders, Glenys Severin and Jen Vissher

2020 Members of the Forest Hill Committee:

Sue Cleeve, Lyne Cruz, Angela Follachio, Clare Green, Glenda Grummet and Geraldine Ryan.

 

Hugh Hodges

Chair of the Foundation

On behalf of the Trustees

October 2020