Chapter 2

ORGANIZATIONAL PERFORMANCE

20. It should be noted that although the PIR draws information from the FAO financial accounts and the underlying accounting records in setting out details of resources and expenditures, it is not intended to be an accounting document¹. For more complete financial information on the Regular Programme and extra-budgetary expenditure in 1998-99, reference should be made to the Audited Accounts of the Organization.

21. Other information provided in this Chapter includes the cost of field programme support, the extent of technical support provided to the field programme by FAO technical officers and baseline data concerning FAO's language policy. Output information is given at a summary level. Further analysis of the implementation of outputs specified for the technical programmes in the PWB 1998-99 is provided at programme level in Chapter 3. Detailed information on all of the outputs in the PWB 1998-99 and the status of their implementation has been placed on the FAO Internet site (http://www.fao.org/unfao/bodies/pir/).

EVOLUTION OF TOTAL RESOURCES

22. Expenditure in 1998-99, as reported in the draft financial accounts for 1998-99 by source of funds is presented in Table 2.1 under the accounting categories of General and Related Funds and Trust Funds and the United Nations Development Programme (UNDP):

• General and Related Funds encompass activities funded from the Regular Programme appropriation, and associated sources including jointly financed investment activities, support costs and other assorted items;
• Trust Funds and UNDP comprise activities funded from all other extra-budgetary resources.

TABLE 2.1: EXPENDITURE SUMMARY BY SOURCE OF FUNDS

* Includes items such as the 1998-99 expenditure against the 1996-97 TCP appropriation, adjusted by the unspent TCP appropriation from 1998-99 which can be spent in 2000-01, financial services provided to WFP, and the expenditure of the Information Products Revolving Fund and government cash counterpart contributions to country offices

23. Total expenditure in 1998-99 was US$ 1 200 million, US$ 38 million (3.3 percent) higher than 1996-97. Expenditure levels of the past two biennia are illustrated in Chart 2.1. Expenditure under General and Related Funds remained relatively constant; the funding of this expenditure from the Regular Programme appropriation is constant in nominal terms. The remaining sources show a decline of 4 percent for jointly-funded investment activities, 13 percent for trust funds support cost reimbursements and 45 percent for UNDP support cost reimbursements. Under Trust Funds and UNDP, the area of increased expenditure was special relief operations, which increased more than threefold from US$ 51 million in 1996-97 to US$ 175 million in 1998-99, largely as the result of a US$ 120 million increase in the Iraq Oil for Food programme. By contrast, trust funds expenditure (excluding emergency projects) declined by 6 percent and UNDP project expenditure declined by 38 percent in 1998-99 relative to the previous biennium.

24. The 1998-99 programme of work included, for the first time, the projected availability of resources from other income, which comprises voluntary contributions that are largely at the disposal of the Organization and managed closely with the regular budget appropriation. Inclusion of other income in the programme of work has the advantage of providing a more complete picture of the resources associated with the work being undertaken. However, changes in income versus the budgeted levels during programme implementation require corresponding changes in expenditures in order to conform to the approved budgetary appropriation, adding some uncertainty and complexity to the financial management of the budgetary appropriation by chapter.

25. The 1998-99 programme of work and adjustments made during its implementation are shown in Table 2.2. Resources originally planned in the PWB 1998-99 totalled US$ 736 million, US$ 650 million from the Regular Programme appropriation and US$ 86 million from other income. Adjustments are necessary because the implementation of the programme of work inevitably diverges from the plans as a result of decisions leading to internal changes as well as less controllable external influences during the implementation cycle. The financial regulations of the Organization require that all transfers of the Regular Programme appropriation between Chapters of the PWB have prior approval of the FAO Finance Committee. Accordingly, at its session in September 1999, the Finance Committee approved the transfer of up to US$ 11 million from Chapter 2: Technical and Economic Programmes, comprising US$ 1 million to Chapter 1: General Policy and Direction, US$ 4 million to Chapter 3: Development Services to Member Nations, US$ 3 million to Chapter 5: Support Services, and US$ 3 million to Chapter 6: Common Services.

26. Approved transfers between chapters are a decisive element in establishing internal resource levels at the disposal of programme managers, determining their capacity to deliver planned outputs. The reasons for the approved reallocation of resources are summarized below².

27. Budgetary transfers related to the programme of work were needed to cover shortfalls in income arising from the underperformance of UNDP and Trust Funds support cost reimbursements versus the levels budgeted. These income shortfalls amounted to US$ 10.4 million and required offsetting reductions in the programme of work for the affected budgetary chapters. The most severely affected was Chapter 3: Development Services to Member Nations, followed to a much lesser extent by Chapter 2: Technical and Economic Programmes and other chapters.

28. Budgetary transfers between chapters were also required to fund under-budgeted costs, high priority programmes, and other internal adjustments to ensure that net expenditure did not exceed the appropriation. This included the adverse staff cost variance - the need to cover actual staff costs above the budgeted level, which affects all chapters to a greater or lesser degree - the delayed handover of responsibility for voice and data services from the Administrative Services Division (Chapter 6) to the Information Systems and Technology Division (Chapter 5) and additional expenditures for Oracle (Chapter 5), World Food Day Special Events and Cerestronic (Chapter 5).

29. The approved transfers are summarized in Table 2.2. The transfers actually required were significantly lower than the amounts approved by the Finance Committee (US 7.4 million versus US$ 11 million). A transfer of US$ 0.8 million was made from Chapter 1 and US$ 6.6 million was transferred from Chapter 2 into Chapter 3 (US$ 3.6 million), Chapter 5 (US$ 1.5 million) and Chapter 6 (US$ 2.3 million). The transfer from Chapter 2 was accommodated through a planned reduction in staff allotments related to vacant posts and lower travel and consultant allotments. A more detailed explanation of the programme impact of these transfers is provided in Chapter 3 as part of the summary of implementation for each programme.

30. Expenditures against the final 1998-99 budget after approved transfers are shown in Table 2.3. Expenditure totalled US$ 718.3³ million against the final budget of US$ 726.1 million. Income was US$ 69.5 million against a final income target of US$ 76.1 million. Overall net expenditure against the Regular Programme appropriation of US$ 650 million was therefore US$ 648.8.

31. Another significant reduction in income, which required corresponding reduction in expenditure, related to Major Programme 3.2: Support to Investment. This was mainly the result of FAO/World Bank Cooperative Programme income projections, which did not materialize. Reduced expenditures to offset lower income were also made in the programmes of Chapter 1: General Policy and Direction and Chapter 2: Technical and Economic Programmes.

TABLE 2.2: PROGRAMME OF WORK AND BUDGETARY TRANSFERS, 1998-99 (US$ `000)

¹ In arriving at the Programme of Work and Income figures above, adjustments have been made to budgeted amounts for those elements that are accounted as Trust Funds in the accounts of the Organization. This is necessary to provide a comparable basis of relating the appropriation with the expenditure reported in the financial accounts of the Organization.

TABLE 2.3: BUDGETARY PERFORMANCE, 1998-99 (US$ `000)

32. The total of expenditures under the main chapters of the PWB are summarized in Chart 2.2. The technical work of the Organization accounted for 77 percent of expenditure in 1998-99, distributed as follows:

• 41 percent under Chapter 2: Technical and Economic Programmes,
• 24 percent under Chapter 3: Development Services to Member Nations,
• 12 percent under Chapter 4: Technical Cooperation Programme.

33. The share of expenditure between Headquarters and the decentralized offices is shown in Chart 2.3. Headquarters accounted for 68 percent of total expenditures in 1998-99 followed by the field programme expenditures for the Technical Cooperation Programme (TCP) and the Special Programme for Food Security (SPFS) with 10 percent, Regional Offices with 10 percent and FAORs with 8 percent. As these figures show, Headquarters remains the dominant source of expenditures for the Organization, despite the extensive decentralization that has taken place since 1994.

34. A breakdown of expenditures and approved transfers in relation to Chapter 2: Technical and Economic Programmes is shown in Table 2.4. These reductions occurred at different stages of the planning and implementation cycle of 1998-99. Their implications on planned outputs and activities are elaborated in Chapter 3, as part of the summary of implementation for each programme.

TABLE 2.4: BUDGETARY PERFORMANCE FOR PWB CHAPTER 2 - TECHNICAL AND ECONOMIC PROGRAMMES, 1998-99 (US$ `000)

35. The final column of Table 2.4 shows expenditure under the field programme, which comprises all technical assistance and emergency assistance activities funded through extra-budgetary sources, and Regular Programme funded technical assistance and emergency projects under the TCP and SPFS. Attention is drawn to the distinction between extra-budgetary resources, which refers to all non-Regular Programme sources of funds and related expenditures in the financial accounts of the Organization, and the field programme which refers to the expenditure relating directly to FAO's implementation of technical assistance projects. In this context, the World Health Organization (WHO) share of the Joint FAO/WHO Food Standards Programme (Codex Alimentarius) is part of extra-budgetary resources, but is not part of the field programme. Conversely, the Technical Cooperation Programme (TCP) and the provision for the Special Programme for Food Security (SPFS) are funded from the Regular Programme but are included as part of the field programme.

36. The ratios of 1998-99 expenditure of the field programme and the Regular Programme-funded programme of work for Chapter 2: Technical and Economic Programmes are shown in Table 2.5. Overall, field programme expenditures were nearly twice those of the programme of work. However, there were significant differences between the major programmes. Major Programme 2.1: Agricultural Production and Support Systems accounted for 63 percent of total field programme expenditures in 1998-99 and had the highest ratio, with field programme expenditure nearly four times that of the programme of work. It should be noted, however, that the ratio would fall to 2.4 if the effect of the Iraq Oil for Food programme were excluded. Major Programme 2.4: Forestry, also had a relatively high ratio, with expenditure on the field programme 2.3 times that of the programme of work. On the other hand, expenditure on the field programme for Major Programme 2.2: Food and Agricultural Policy and Development was only about a third that of the programme of work. The ratio was also less than 1.0 for Major Programme 2.3: Fisheries.

TABLE 2.5: RATIO OF FIELD PROGRAMME AND PROGRAMME OF WORK EXPENDITURES UNDER CHAPTER 2 (TECHNICAL AND ECONOMIC PROGRAMMES), 1998-99

* To avoid distorting the ratio, the Regular Programme-funded programme of work for Chapter 2 comprises all Regular Programme expenditure excluding SPFS project delivery, which amounted to US$ 7 million in 1998-99. This delivery is included under the column headed Field Programme.

¹ At the time of going to print, the 1998-99 audited accounts of the Organization are still under audit. Accordingly, the accounting figures in this document make use of the Draft Accounts published internally on 4 July 2000.

² Full explanations of 1998-99 budgetary performance are provided in the report on Programme and Budgetary Transfers in the 1998-1999 Biennium and Annual Report on Budgetary Performance to Member Nations (document FC 95/2).

³ Expenditure against the final 1998-99 budget of US$ 718.3 million compares with US$ 695.4 million reported as General and Related Funds expenditure in the draft financial accounts (see Table 2.1). The former figure comprises only those items of expenditure in the financial accounts that are chargeable to the 1998-99 Programme of Work and Budget. Specifically:

·it excludes US$ 10.5 million of 1998-99 currency gains on staff costs which are chargeable to the Special Reserve Account under Conference Resolution 13/81;

·it excludes US$ 2 million of expenditure incurred by the Information Products Revolving Fund as a separate fund is established for this purpose under Financial Regulation 6.9; and

· it adjusts the expenditure of the Technical Cooperation Programme so that the entire 1998-99 appropriation of Chapter 4 is assumed to be spent, since unutilized balances will remain available for obligations in 2000-01, in accordance with Financial Regulation 4.3.