Operating and financial data
FINANCIAL RESULTS FOR THE FOUNDATIONS IN 2017
On 31st December 2017 the book value of the net assets of the Foundations of banking origin amounted to €39.8 billion accounting for 86% of total assets which added up to €46.1 billion. In this financial year the book value remained substantially unchanged, recording a positive change of €90 million (+ 0.2%) deriving from the €718 million increase in the assets of 60 Foundations and the decrease of €628 million in the assets others 28 Foundations. From 2000 – the year in which Ciampi’s law became active – to 2017 there has been an annual average growth rate of 0.7%. In the same period 2000-2017 the Foundations were able to allocate resources to a value of €21.3 billion and to set aside further funds – to a value of about €1.9 billion – for future philanthropic activities, reaching a total of €23.2 billion.
Grouping the Foundations by geographic area reveals that those located in Northern Italy (47) hold capital to the value of more than €30 billion, 74.2% of total gross capital. In the North-Western part of the country in particular, where 5 of the 18 largest Foundations are located, the average net assets have a value about two and a half times the general average (€1,087million versus €452 million) . However in Southern Italy and the islands where, for historic reasons there are only 11 Foundations, the average asset holding is recorded as €181 million, less than half of the general average. The 5 largest Foundations (accounting for 47.7% of total assets) are: Fondazione Cariplo, Compagnia di San Paolo, Fondazione Cassa di Risparmio di Torino, Fondazione Cassa di Risparmio di Padova e Rovigo, Fondazione Cassa di Risparmio di Verona Vicenza Belluno e Ancona. The net assets of the 18 largest Foundations(1) represent 77.3% of the overall system, while the 18 smallest Foundations weigh in at little more than 1.1%.
About 94.2% of the total assets of the Foundations of banking origin (€46.1 billion) consists of financial activities, while tangible and intangible fixed assets represent only 4.8%, 1% other items.
Fixed financial assets amounted to €27.8 billion (€27,8 in 2016). Adding to this, fixed assets in operating companies amounted to €1 billion (unchanged compared to 2016), the total financial assets accounted for 62.3% of assets against 63.7% in 2016.
The investment in not immobilized financial assets increased by €1 billion and amounted to €13 billion. In this context, asset management recorded a sharp reduction and totaled €1.7 billion compared to €6.6 in 2016, while investments in funds rose sharply (+ € 6 billion) and holdings in the company remained almost unchanged (- €77 million). Total investment in spun off banks (either immobilized or not) amounted to €12.2 billion, with a decrease of €1.3 billion compared to 2016. This reduction is the result of the sale of shares.
By 31st December 2017 of 88 Foundations, 35 no longer held shares in their original spun off banks, 47 had a shareholding of less than 50% shares in their original spun off banks that are part of banking groups, while 6 of the smaller Foundations – in line with existing legislation(2) – continued to have a major shareholding in their spun off banks. Furthermore, 85 of the 86 Foundations associated with Acri, approving of the Memorandum of Understanding - signed 22nd April 2015 by the Association and the Ministry of Economy and Finance - which aims to optimise the combination of profitability and possible risks when utilising their capital, have accepted the principle of an appropriate change. It particularises that a Foundation should not utilise more than a third of its total assets, either directly or indirectly, on an individual subject, using “fair value” to evaluate the exposure and composition of the said assets. In such an operation, all the financial instruments will be included in the evaluation.
The total proceeds for the financial year 2017 were €2,087.4 million, +53.8% compared to the previous year (€1,357.2 million). The positive result of financial investments undoubtedly affected (the yield went from 2% in 2016 to 4.5%), which was affected by the good performance of share prices, rather than changes in rates. In fact, total interest is reduced by around €23 million, while the margin resulting from the management of financial instruments improved significantly, from -€51.7 million to +€13.9 million euros, despite the devaluations made by some Foundations on certain investments. The result of asset management shows an improvement (+€167 million) and the dividends also grow by €345 million in total, with the profits distributed by the spun off banks, which rose from €630 million in 2016 to €637 million. Finally, non-financial income, at €51.3 million (€ 81.5 million in 2016), and extraordinary income, at €238.3 million (€33.3 million in 2016), increased overall by 147%, from €114.8 million to €289.6 million.
The average net return on the total assets(3) of the Foundations in 2017 was 5.3%, increased from the previous year: a positive result in both absolute and relative terms, considering that the profit is net of the high direct and indirect tax burden, which in 2017 has grown further.
Operational costs for all the Foundations in 2017 rose from €239.2 million to €247.7 million. This variation is mainly due to the increase in provisions, the fees paid to consultants and amortization; while the fees paid to organs, trading commissions and interest expense are.
The fiscal charges – for direct taxes on income received and indirect taxes paid throughout the year – came to over €487 million (€354.6 million in 2016) of which: €278.6 million for withholding taxes on investment income; €108.8 million for Ires; €4.1 million for Imu; €2.7 million for Irap.
The significant increase in taxation over the years is the effect of some factors: the progressive tightening, from 12.5% to 26%, between 2012 and 2014, of the rate for the taxation of financial income; the increase from 5% to 77.74% of the tax base of the collected dividends, introduced by Law no. 190 of December 23, 2014 (c.d. 2015 Stability Law). Instead, the reduction of Ires rate from 27.5% to 24% with effect from 1st January 2017, from 2018 will be totally absorbed by the expansion of the tax base of dividends from 77.74% to 100% introduced by the Decree of the May 26, 2017
Operating surplus on total revenues, which increased by 76.2%, was 1,476.7 million euro against €838.3 million in 2016, equal to 70.7% of total income (61.8% in 2016).
With regard to the reserve funds set aside from the capital, for 2017 the Supervising Authorities confirmed a rate of provision for the “Reserve Requirements” at 20% of the operating surplus and fixed a top rate of 15% for provision to the “Reserve for Asset Integrity”. For all the Foundations combined, the data shows a sum of €474 million set aside for the capital reserve (€244.5 million in 2016).
Resources for institutional activity, including funds destined for future activities, accounted for 73.1% of total operating surplus and amounted to €1,078.7 million, against €641.4 million in 2016.
In 2017 the institutional activities of the Foundations of banking origin recorded a slight decrease in volumes (-4.5%) compared to 2016, the year in which there was a reversal of the trend after some years of uninterrupted contraction. In absolute terms, the disbursements of 2017, including provisions for special funds for voluntary ex art. 15 L. 266/91, amounted to €984.6 million (€1,030.7 million in 2016), for 19,860 interventions (20,286 in 2016; -2.1%). The average amount per project slight decrease to €49,576 (€50,806 in 2016), and the average number of projects achieved per Foundation also decreases: in 2017 was about 226 against 231 in 2016.
Sectors of Activity
From the 21 “eligible sectors” (by law(4)), the Foundations focus on 7 sectors for the major part of their grant-bestowing activities. Based on the amount of the funds allocated, the sector for Art, cultural activities and heritage came first, receiving €236.9 million, 24.1% of the total (25.3% in 2016). Within this sector, funding was provided mainly to the sub-sector labelled Initiatives to support artistic and literary productions (accounting for 34.7% of the funds allocated to the sector). In second place was the sub-sector Conservation and enhancement of historic buildings and archaeological sites (27.2% of the sum allocated to the sector). Next came Museum activities (14.9%) followed by the sub-sectors Promotion and Enhancement of Visual arts (10.2%); Publishing and other communication media (4.8%); Library and archives (4.6%).
The second sector was that of Social assistance with €135.6 million, 13.8% of the total (12.4% in 2016). The greater part (97.9%) went to the sub-sector Social services, followed by Services providing aid in the event of natural disasters, Civil protection and Refugee assistance (2.1%). Recipients included: the disabled (56.8%), the elderly (31.9%), children (9.8%), those with drug/alcohol dependencies (0.9%). Other beneficiaries (families at risk, people with no fixed abode, prisoners, etc.) received 0.5%.
The third sector was Research and Development with €117.8 million, 12% of total funding (12.1% in 2016). The sub-sector Research and experimental development in the medical field received 28.5%. To Research and development in the field of human and social science went 28.5% followed by Dissemination and expansion of Technological knowledge with 19.7%; then Research and development in the field of mathematical, physical and natural sciences with 12.3% followed by and Research and development in the Engineering field with 11.9%.
In fourth place was the sector Voluntary activities, philanthropy and charity receiving a total of €115.2 million, 11.7% of total funding (12.1% in 2016). Of this amount, the largest share went to the subsector Special reserve funds for voluntary organizations (34%, over €39.2 million), followed by: Contributions to grant-providing foundations and other philanthropic charities (28.5%) i.e. funds allocated to such entities as community foundations, and other non-profit entities that channel resources to third sector organizations; Promotion and support for voluntary organizations (26.6%); Humanitarian and philanthropic initiatives (5.6%); Support for the development and living standards of poor countries (3.2%).
In fifth place was the sector Education, learning and training with €95 million, with 9.6% of the total allocated (9.4% in 2016). The main sub-sectors were: Higher education, i.e. university or equivalent education (32.4%); Primary and secondary education (29.7%); Youth development and training (23.5%) and Professional instruction and Adult training (13.2%).
The sixth sector selected was the sector Local development with €76.7 million, 7.8% of the funds allocated (9.8% in 2016). This sector includes projects for the Promotion of economic development in local communities (72.5% of the total allocated to the sector); Social housing construction projects (10.7%); Accomplishment of public works or utilities (8.6%); Public popular housing (8.2%), Microcredit projects.
In seventh position was the sector Public health, receiving €46.3 million, 4.7% of the total (4% in 2016). In this field we find sub-sectors including: Hospital services (50.6%), which range from the provision of medical equipment to the implementation of specific projects and the construction and restructuring of essential facilities; Other health services (47.6%), ranging from home assistance for the ill, to support for the treatment of the terminally ill and the disabled; Psychological and mental pathologies and disorders (1.8%).
Significantly Welfare - under which umbrella we find the sectors Social assistance, Public health and Volunteering - received a total of €297 million. To these resources we have to add the €120 million specifically addressed in 2017 by 73 Foundations associated with Acri to the Fondo per il Contrasto della Povertà Educativa Minorile. This leads to €417 million the resources allocated to Welfare: more than 42% of total grants.
Concluding the classification we have Environmental protection and quality, with funding of €17.8 million (1.8% against 1.4% in 2016); Family and related values with €11.4 million (1.2% against 0.6% in 2016), Sport and recreation with €10.3 million (1% against 1.1% in 2016), and lastly, Civil rights; Religion and spiritual development; Crime prevention and public safety altogether received €2 million for a total of 76 projects.
Regarding the choice of sectors for their allocations, more than half of the Foundations operates with a medium-sized of sector specialization, while the remaining part stands at an high degree, confirming the trend recorded in 2016. However, this does not change the predominant characterization: the Foundations choose to concentrate on just two sector a sum between 40% and 60% of total funding. These percentages document the full alignment of erogative policies of the Foundations to the already mentioned laws which impose to allocate at least 50% of funds available to no more than five “eligible sectors”.
The average number of sectors of each Foundation is 6.2 (in 2016 the average was 6.4). 86 Foundations operate in the sector Art, Cultural activities and Heritage. Regarding the other sectors, those with the highest presence of the Foundations are Voluntary activities, philanthropy and charity (where 84 Foundations operate); Education, Learning and Training (81 Foundations), Public health (59 Foundations), Research and Development (54 Foundations), Local development (49 Foundations). In 2017, 73 Foundations have joined the Fondo per il contrasto alla povertà educativa minorile.
The percentage of grants allocated that are higher than €100,000 was 73.6% (73.1% in 2016) with the number of corresponding projects standing at 7.6% (6.7% in 2016). The percentage of those higher than €500,000 was 50.4%. The allocation of sums of €5,000 or lower increases slightly compared to the previous year both in the amount (2.3% against 2.2% in 2016) and in the number of projects (45.5% against 44.9% in 2016). The long-term grants(5) decreased in the amounts (6.2%), and in the number of projects (2.8%).
The recipients of the grants provided by the Foundations are always private non-profit organisations – accounting for 78.4% of total funding (77% in 2016) and 72.5% of all projects (70.2% in 2016) – or public institutions. The principal private recipients include: foundations (naturally not the Foundations of banking origin) who, with 30.1% of total funding, confirmed their first position among all the beneficiaries, both public and private. The foundations are followed by Other private organisations (22.9%), which includes Committees, private Ipab, Ngo, private schools and health facilities; Associations (13.6%, of which 1.3% was devoted to socially-oriented Associations); Voluntary organisations (5.6%); Religious Institutions (2.8%); Social cooperatives (2.2%); Social enterprises (0.4%). Among the public institutions, who received in total 21.6% of the total funding, were: Local authorities (10.2%); Public schools and Universities (8.3%); Public Health authorities and businesses (1.7%); Other public authorities (1.3%) and Local governments (0.9%).
The Foundations continued to focus strongly on their local communities in 2017: grants provided to the Foundations’ own regions accounted for the great majority of the total (85.9% of total funding and 93.2% of total projects). As to geographic distribution Northern Italy received 70.5% of total funding of which 46.1% went to the North-West and 24% to the North-East; Central Italy received 23.8%, while Southern Italy and the Islands received 6.2%. In the Southern territories and islands the Foundations also operate through the Fondazione Con il Sud, which in 2017 carried out activities to the value of €15 million.
Among the projects that the Foundations share with other financial organisations a particular emphasis has been laid, during the last few years, on those realized in conjunction with other Foundations of banking origin, within a vista of a system of operations that are co-ordinated and developed with a long-term view. It is possible that this concept has come directly from the Foundations, deciding among themselves to “form a consortium” or else it has matured in the ambience of Acri. These are projects needing a deep breath, of great national impact, regarding which the “communal” approach is seen as an essential factor for success. On the one hand it allows the use of a common professional factor developed by the individual Foundations within their own local territories, while on the other it encourages an increase in project efficiency and rationalisation. When the same projects are carried out separately by a number of different organisations there could be a risk of fragmentation or duplication and the loss of useful information, while shared planning allows the synchronised direction of strengths which therefore must have a greater impact.
A short list, obviously not exhaustive: the Fondo Nazionale Iniziative Comuni for emergency interventions following natural disasters; Funder35 for the strengthening of the organizational and management skills of youth cultural enterprises; Foundazioni for Africa - Burkina Faso, for the promotion of local development in some regions of the African country; Young Investigator Training Program, for the support of young Italian researchers residing abroad or foreigners to carry out training sessions at Italian research institutes; Green Jobs, to spread environmental awareness in schools and among young people as an opportunity to develop new professions; Per aspera ad astra, which intends to extend on a national scale the thirty year experience of theatre in prison by the Compagnia della Fortezza in Volterra.
(1) Foundations are grouped by net assets in five quintiles: large Foundations (net assets from €439 million and up); medium-large Foundations (net assets between €205 million and €439 million); medium Foundations (net assets from €94 million to €205 million); medium-small Foundations (net assets between €48 million and €94 million); small Foundations (net assets up to €48 million).
(2) A waiver introduced in 2003 (art.4 Law no.143/2003 converted into Law no.212/2003 which substituted para.3 of art.25 of legislative law no.153/99
(3) This report is based on a numerator of the total revenues, and a denominator of the average asset value, at the book value shown at the beginning and at the end of the financial year.
(4) Legislative Decree no. 153 of 17/5/1999, article 1, paragraph 1c: Family and related values; Education, learning and training, including the purchase of publishing products for schools; Voluntary activities, philanthropy and charity; Religion and spiritual development; Assistance to the elderly; Civil rights; Crime prevention and public safety; Food safety and quality agriculture; Local development and low income housing; Consumer protection; Civil protection, Public health; Preventive and rehabilitative medicine; Sports activities; Addiction prevention and recovery; Psychological and mental pathologies and disorders; Scientific and technological research; Environmental protection and quality; Art, cultural activities and heritage. To this we add public utility works and infrastructure growth following Legislative Decree no. 163 of 12/4/2006, article 153, paragraph 2 and article 172, paragraph 6.
(5) For multi-year projects, reference was made to the amounts attributable to the fiscal year.