FC 96/4


Ninety-sixth Session

Rome, 7 - 12 May 2001

Annual Report of Budgetary Performance
and Programme and Budgetary Transfers

Table of Contents


1. Financial Regulation (FR) 4.6 requires the Director-General to manage the Appropriations so as to ensure that adequate funds are available to meet expenditures during the biennium, and calls for the Finance Committee to review annually the Director-General's implementation of this regulation. In accordance with this requirement, this Thirty-fourth Annual Report of Budgetary Performance summarises, for information and discussion, the budgetary aspects of the Regular Programme performance for 2000.

2. Financial Regulation 4.5(a) calls for Finance Committee to be notified of certain transfers between divisions, and Financial Regulation 4.5(b) requires transfers from one chapter to another to be approved by the Finance Committee. This report also provides some advance notice of the likely magnitude of budgetary transfers arising from the implementation of the Programme of Work. A formal request for transfers between chapters will be submitted at the next session, in September 2001.


  • Spending as accounted at 31 December 2000 represented 46% of the Appropriation.
  • Full utilisation of the Appropriation of US$ 650 million is forecast for the biennium.
  • Major Programme shifts have occurred because of two factors:

- a decline in support cost reimbursements versus the budget for 2000 of US$ 4.2 million with an estimate of US$ 7.7 million for the biennium; and

- under-budgeted costs of Oracle and restructuring of the Finance Division (AFF), as reported to the Joint Meeting in September 2000, totalling US$ 5.9 million.

  • Resulting transfers between budgetary chapters for the biennium are forecast to be from Chapter 2 to support Chapter 3 (US$ 2.3 million) and Chapter 5 (US$ 3.7 million).
  • The US$ 9 million authority (Conference Resolution 3/99) will be largely utilised as planned for redeployment and separation costs.


3. Conference Resolution 2/99 on the Budgetary Appropriations for 2000-01 approved a budget of US$ 650 million, and FR 4.1(a) authorises the Director-General to incur obligations up to the amounts voted.

4. The Director-General manages the Appropriations via annual Regular Programme allotments issued by the Office of Programme, Budget and Evaluation (PBE) to allottees. The allotments include financial provision for under-budgeted activities, where appropriate, and are adjusted during the implementation cycle to take account of emerging requirements. They constitute spending limits for allottees, by programme heading.

5. The Appropriations comprise the approved Programme of Work less Other Income1. Table 1 summarises the management of the overall budgetary Appropriations. The 2000 performance is based on the actual expenditure in the interim unaudited accounts of the Organization, and the 2001 figures present the latest Regular Programme financial projections.

Table 1. Overview of 2000 Regular Programme Performance (US$ 000)



Budgetary Appropriation      
Programme of Work 368,098 366,354 734,452
Less Other Income (42,226) (42,226) (84,452)
Appropriation adopted by Conference Resolution 2/99 325,872 324,128 650,000
Less TCP Projects (Major Programme 4.1) 44,559 44,559 89,118
Adjusted Net Appropriation 281,313 279,569 560,882
Net Expenditure (excluding TCP projects budget) 258,519 302,063 560,582
Expenditure vs. Net Appropriation 22,794 (22,494) 300

6. The following points are made regarding the performance indicated in the preceding table.


7. In accordance with FR 4.1(a), shortfalls in Other Income versus the budgeted levels require corresponding reductions in planned expenditure during the biennium to remain within the approved budgetary Appropriation of US$ 650 million. The outturn for 2000 is summarised in Table 2, and shows an overall shortfall of US$ 0.9 million, or 97.7%, of the total budgeted income as having been earned. As this outcome was foreseen, corresponding reductions in the Programme of Work (i.e. expenditure) could be managed in a planned fashion.

Table 2. 2000-01 Budgetary Performance of Other Income3

2000 INCOME (US$ 000s)

Description Budget Actual Variance Actual as % of Budget
Trust Funds and UNDP Support Cost Income (18,426) (14,226) (4,200) 77.2%
Jointly funded investment activities (World Bank and others) (13,423) (17,050) 3,627 127.0%
Technical support services and other reimbursements (5,641) (5,356) (285) 94.9%
Total Income (37,490) (36,632) (858) 97.7%

8. Support cost reimbursements are essentially earned in proportion to the actual expenditure on non-emergency Trust Fund projects4 and United Nations Development Programme (UNDP) projects implemented or executed by FAO. The shortfall versus budgeted support cost income totals US$ 4.2 million. This is a result of a further decline in 2000 in UNDP project delivery, which fell by 30% to US$ 17 million, while non-emergency Trust Fund delivery failed to rise beyond the overall levels achieved in 1999.

9. Reimbursements for Jointly Funded Investment Activities relate to the work of the Investment Centre Division (TCI) in support of lending activities for the agricultural/rural sector under cost sharing arrangements from the World Bank and other multilateral financial institutions. An over-recovery of US$ 3.6 million emerged in 2000. This is due to a timing difference in the processing of expenditure and income of the World Bank Cooperative Programme, where FAO and the World Bank follow a different fiscal year (the World Bank's fiscal year is from July to June)5. It does not affect net performance as timing differences occur equally in income and expenditure.

10. Other external income includes: fees for technical support services; income from terminal project reports; reimbursements for administrative services to the World Food Programme (WFP); and Government Counterpart Cash Contributions to FAOR offices. In 2000, a minimal shortfall has occurred (US$ 0.3 million) versus the budgeted income. It is recalled that the 2000-01 budget for this category of income was reduced by approximately 30% since 1998-99, in order to bring the provision more in line with actual reimbursements.


11. Table 3 summarises the Regular Programme budgetary performance by major programme. It compares the Appropriation as revised6 pertaining to 2000 with the corresponding net expenditure and describes the main reasons for the variances against the programme budget.

Table 3. 2000 Budgetary Performance by Major Programme (US$ thousands)

Chapter/Major Programme     2000 Appropriation as Revised 2000 Expenditure/ Commitments
1. General Policy and Direction                
1.1 Governing Bodies 8,077   7,690   387   95.2%  
1.2 Policy, Direction and Planning 10,076   9,342   734   92.7%  
1.3 External Coordination and Liaison 6,351   4,351   2,000   68.5%  
1.9 Programme Management 395   463   (68)   117.2%  
Total Chapter 1 24,899   21,846   3,053   87.7%  
2. Technical and Economic Programmes                
2.1 Agricultural Production and Support Systems 44,215   38,477   5,738   87.0%  
2.2 Food and Agriculture Policy and Development 42,811   37,364   5,447   87.3%  
2.3 Fisheries 19,261   18,605   656   96.6%  
2.4 Forestry 15,166   14,681   485   96.8%  
2.5 Contributions to Sustainable Development and Special Programme Thrusts 23,620   22,279   1,341   94.3%  
Total Chapter 2 145,073   131,406   13,667  


3. Cooperation and Partnerships                
3.1 Policy Assistance 13,097   12,313   784   94.0%  
3.2 Support to Investment 9,420   7,754   1,666   82.3%  
3.3 Field Operations 3,461   3,268   193   94.4%  
3.4 FAO Representatives 31,597   29,749   1,848   94.2%  
3.5 Cooperation with External Partners 3,164   3,578   (414)   113.1%  
3.9 Programme Management 328   611   (283)   186.3%  
Total Chapter 3 61,067   57,273   3,794  


4. Technical Cooperation Programme                
4.1 Technical Cooperation Programme 44,559   44,582   (23)   100.1%  
4.2 TCP Unit 1,168   1,145   23   98.0%  
Total Chapter 4 45,727   45,727   -   100.0%  
5. Support Services                
5.1 Information and Publications Support 8,280   7,858   422   94.9%  
5.2 Administration 20,865   20,130   735   96.5%  
Total Chapter 5 29,145   27,988   1,157   96.0%  
6. Common Services 19,961   18,838   1,123   94.4%  
7. Contingencies -   -   -      
Grand Total Regular Programme 325,872   303,078   22,794   93.0%  

Chapter 1: General Policy and Direction

12. General Policy and Direction utilised 87.7% of its 2000 Appropriation. Under-spending arose in Major Programme 1.2, Policy, Direction and Planning, due to a carry forward to 2001 of a 2000 instalment payment to External Audit, and due to professional staff vacancies in PBE which were not utilised for other inputs. Under-spending in Major Programme 1.3, External Coordination and Liaison, was the result of a delay in receipt of accounting documentation to permit processing of payments of the Organization's financial contribution to inter-agency coordination mechanisms, and rental payment for the premises of one Liaison Office. Funds are expected to be utilised in 2001.

Chapter 2: Technical and Economic Programmes

13. Technical and Economic Programmes were under-spent by US$ 13.7 million, utilising 90.6% of the Appropriation.

14. Approximately US$ 3.1 million of the under-spending can be explained by the planned reduction to the allotments, implemented on the basis of vacant professional posts, and the reduction to certain non-staff components. These cuts were required to cover expected shortfalls in Support Cost Income and to compensate for under-budgeted, high-priority programmes in other chapters.

15. The remaining under-spending was mainly incurred under Major Programmes 2.1, Agricultural Production and Support Systems, and 2.2, Food and Agriculture Policy and Development:

Chapter 3: Cooperation and Partnerships

16. Cooperation and Partnerships utilised 93.8% of the 2000 Appropriation, due to under-spending mainly in Major Programmes 3.2, Support to Investment, and 3.4, FAO Representatives. In both major programmes, some of the under-spending can be attributed to 2000 non-staff costs being posted against the 2001 financial accounts. Furthermore, in Major Programme 3.4, staff cost savings were incurred due to exchange rate gains on non-staff costs, as the dollar strengthened against most currencies where FAOR offices are located.

17. Major Programme 3.3, Field Operations, has undergone the restructuring anticipated, but not fully developed in the Programme of Work and Budget (PWB) 2000-01. This entails abolition of the Regional Operations branches and transfer of project operational responsibility to country offices and technical officers, as well as related restructuring of the Technical Cooperation Department (TC). While this work is proceeding according to plan, it is recalled that over 40% of the total support cost income in the PWB 2000-01 is allocated to Major Programme 3.3 and the resulting impact of the support cost shortfall of US$ 4.2 million is approximately US$ 1.8 million.

Chapter 5: Support Services

18. The restructuring of AFF was completed in 2000, but the division has faced difficulty in filling 11 additional professional positions approved under the new structure. Notwithstanding the surplus against the Chapter 5 Appropriation in 2000, it is recalled that substantial expenditure beyond the total Appropriation for Major Programme 5.2 is foreseen in 2001 for the Oracle development project7.

Chapter 6: Common Services

19. Expenditure of 94.4% of the Appropriation in Chapter 6 arises from under-spending in the Administrative Services Division (AFS) where outstanding work orders for buildings maintenance work were not processed at year-end, and some favourable currency effects were recorded against Headquarters non-staff expenditure because of the stronger US Dollar versus the Lira.


20. There is no constitutional constraint as regards spending by expenditure category; the Organization is free to choose the most effective inputs to fulfil the approved Programme of Work. However, a review of spending by account can provide useful indications of cost fluctuations and trends. A review of the Regular Programme expenditure in 2000 (excluding TCP projects), by account and a brief description of trends emerging in the 2000-01 biennium, is covered in Annex I.


21. The year 2000 actual expenditure and the estimated requirements for the second year of the biennium, tentatively indicate that transfers will be required principally in favour of Chapter 1 (US$ 0.4 million), Chapter 3 (US$ 2.3 million) and Chapter 5 (US$ 3.7 million). Resources would need to be transferred from Chapter 2 (US$ 6.1 million). Funds transferred from Chapter 2 amount to less than half of the 2000 under-spending for that chapter.

Table 4. 2000-01 Forecasted Budgetary Performance by Chapter (US$ million)


2000-01 Appropriation

2000-01 Expenditure/ Commitments Balance vs. Appropriation
1. General Policy and Direction 50.9   51.3     (0.4)  
2. Technical and Economic Programmes 289.2   283.1     6.1  
3. Cooperation and Partnerships 120.6   122.9     (2.3)  
4. Technical Cooperation Programme 91.5   91.5     0.0  
5. Support Services 57.3   61.0     (3.7)  
6. Common Services 39.9   39.6     0.3  
7. Contingencies* 0.6   0.3     0.3  
Grand Total Regular Programme 650.0   649.7      0.3  
* Contingencies is used to offset unforeseen expenditure under Chapter 5

22. The transfer into Chapter 1 is mainly required for the funding of temporary administrative posts in the Office of the Director-General, several of which are proposed to be regularised in the PWB 2002-03. The transfer into Chapter 3 is necessitated by the substantial effect of the deficit on support cost reimbursements (currently estimated at US$ 7.7 million for the biennium) on this chapter. Finally, the transfer into Chapter 5 is required due to incremental costs associated with the Oracle project and AFF restructuring. The amount is consistent with information provided to the Joint Meeting at its September session8.

23. Half of the approved budget for Chapter 7, which provides US$ 600 000 for Contingencies, is planned to be spent. As stated in Financial Regulation 4.5(c) (i), "the expenditure of any sum (or part thereof) which may have been voted in the budget to cover unforeseen contingencies may be effected by the Director-General." The contingency funds will be used to help offset some incremental Oracle costs in Chapter 5.

24. The level of transfers may yet be influenced by:

25. A formal request for transfers between chapters will be submitted at the next session in September 2001.


26. Financial Regulation 4.5(a) requires certain transfers between divisions within the same chapter to be reported.

27. In this connection, it is noted that, during 2000, in order to better align technical expertise in the decentralized locations:

28. As intimated to the Conference in 1999, further transfers between divisions are foreseen in the context of restructuring of the TC Department, to strengthen its capacity to develop, coordinate and monitor the field programme and reverse the current declining trend in non-emergency field activities funded from external sources. The restructuring will primarily affect the Field Operations Division (TCO) and the Office of Assistant Director-General (TCD), but may also extend to the Policy Assistance Division (TCA) in the latter part of 2001. The proposals will be reflected in the Programme of Work and Budget 2002-03.


29. At its November 1999 session, the Conference authorised the advance of funds from the Working Capital Fund up to an amount of US$ 9 million to cover redeployment and separation costs to complete restructuring pending the eventual receipt of assessed contributions in arrears from the major contributor9.

30. Major restructuring actions in 2000-01 include the abolition of the Management Support Units at Headquarters and the creation of a centralised Management Support Service (MSS); the implementation of new arrangements for the field programme (affecting both Headquarters and decentralized offices); and the restructuring of AFF.

31. Based on current estimates, some 243 staff members are potentially eligible for incurring redeployment and separation costs under the US$ 9 million authority. However, 129 cases have been settled at no cost to the authority, essentially through placements to budgeted posts. Consequently, a total of 114 cases will need to be resolved at some cost to the US$ 9 million authority.

32. Of these 114 cases, 86 were resolved in 2000. A sum of US$ 3.6 million has been charged to the US$ 9 million authority in 2000, mainly in salary costs for staff members awaiting redeployment, in addition, termination indemnities amounting to US$ 1.2 million have been settled, bringing the total redeployment and separation costs for cases resolved in 2000 to approximately US$ 4.8 million.

33. In view of the foregoing, funds provided under the US$ 9 million authority are expected to be almost fully exhausted in 2000-01.


34. At its May 2000 session, the Finance Committee enquired whether, under the terms of Financial Regulation 4.5(b), it could take the initiative of proposing transfers from one chapter of the budget to another10.

35. Following advice from the Legal Counsel, it is noted that transfers between chapters of the budget are effected upon proposal by the Director-General and that, while the Finance Committee and the Council have the power to approve those transfers, Financial Regulation 4.5(b) is not intended to confer upon the Finance Committee any power of initiative on the matter. A power of initiative of the Finance Committee on the matter would extend beyond its prerogatives of control over the financial administration of the Organization and conflict with the management authority of the Director-General to direct its work, including the execution of the budget. This arrangement is in line with the financial procedures and practices of other organizations of the United Nations system, for example, with Financial Regulation 4.5 of the United Nations and Financial Regulation 4.5 of the World Health Organization.


36. This report is submitted for information purposes. The Committee is requested to:




 Table 5. 2000 Regular Programme Expenditure Summary (excluding MP 4.1)
(US$ 000)


2000 Oracle Appropriation

2000 Financial Performance

2000 Balance vs. Appropriation

% Calendarised Appropriation Spent in 2000

Staff Costs





Other Human Resources










Other (Incl. Internal Transfers)





Total Non-staff





Total Expenditure





Less External Income





Net Expenditure





Staff Costs

37. From 2000, all charges for staff costs against divisional budgets have been made at standard rates that take account of the grade and duty station of the staff member. This ensures that allottees are not held accountable for unit cost variations that are outside their control, arising from matters such as changes in salaries and allowances determined by the International Civil Service Commission (ICSC) and exchange rate variations.

38. Differences between the overall standard costs and actual Regular Programme costs are monitored by the Office of Programme, Budget and Evaluation and will be charged in the financial accounts over all programmes in proportion to the amounts incurred at standard rates. Based on current trends, the actual costs incurred in the biennium should be lower than the standard rates applied against the budget. However, this forecast is tentative and will need to be monitored in the light of exchange rate movements during 2001, and the results of Headquarters salary surveys of professional and general service staff which are due shortly.

39. The total staff appropriation, which includes professional and general service staff costs, was underspent by approximately 8.5% (US$ 19.7 million) in 2000, principally reflecting professional staff vacancies. Some of staff savings were necessary to compensate for the reduced levels of External Income. Other savings were generated, via reduced allotments, for application of resources to under-budgeted programmes and activities.

Non-staff Components

40. Approximately 96% of the non-staff appropriation was spent in 2000, reversing the trend of the past biennium when non-staff expenditure exceeded the appropriation. This is likely to be due to the introduction of the automatic carry-over of divisional under-spending, via the allotments, into the second year of the biennium, which has reduced the pressure on allottees to commit funds in the final two months of the year in favour of spreading their expenditure plans into the first part of 2001.


1  Other Income is further described in paragraphs 7 through 10.

2  The breakdown of the approved budget between 2000 and 2001 takes account of the timing of the Regional Conferences and the FAO Conference in the first and second year of the biennium respectively, and assumes that all other programmes incur expenditures evenly throughout the biennium.

3  In arriving at the 2000 Appropriation for Other Income, adjustments have been made 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 audited accounts of the Organization.

4  Emergency projects are carried out by the Special Relief Operations Service (TCOR). They have shown a substantial rise in delivery due to the Oil for Food programme in Iraq. FAO earns Direct Operating Costs from emergency projects, which are excluded from the tabulated support cost reimbursement figures as the policy for reimbursement of cost is that they should cover TCOR’s direct costs.

5  It is recalled that in the 1998-99 accounts, an under-recovery of US$ 3.9 million was recorded under jointly financed investment activities.

6  The Appropriation as revised constitutes the approved budget by chapter following re-programming of resources to reflect the adoption of the budget at an exchange rate of Lira 1875 to the US Dollar (document FC 94/5 refers).

7  Document JM 2000/3, FAO’s New Financial System and Procedures, refers.

8  Document JM 2000/3 refers.

9  Conference Resolution 3/99 refers.

10  Financial Regulation 4.5(b) reads as follows:

    4.5(b) (i) Transfers from one chapter of the budget to another relating to expenditures which would not involve additional financial obligations for Member Nations and Associate Members, either current or future, may be effected by the Director-General after having obtained the approval of the Finance Committee, or by the Council between sessions of the Finance Committee.

    4.5(b) (ii) Transfers from one chapter of the budget to another, other than those for which the Finance Committee has authority, may be effected by the Director-General after having obtained the approval of the Council.