PROGRAMME. BUDGETARY. FINANCIAL AND ADMINISTRATIVE MATTERS

Progress Report on the Implementation of the Approved Programme Budget 1992-93¹

119. The Council considered the progress report on the implementation of the approved Programme Budget 1992-93, submitted by the Director-General through the Programme and Finance Committees. It welcomed the detailed review of the report undertaken by both Committees. In the light of the updated information on the financial situation of the Organization which it had just considered, the Council observed that prospects had significantly improved since this document was prepared.

-Background

120. At the outset of its discussion, the Council recalled the unique character of the last Conference's decisions on the Programme of Work and Budget 1992-93. Whereas it had approved a Programme of Work of US$676.9 million, the Conference had voted a "net base budgetary appropriation" of only US$645.6 million, i.e., leaving a gap of US$31.3 million in meeting the budgetary provision required for the implementation of approved activities.

121. The Council also recalled the Conference's explicit understanding that approval by consensus of Resolution 4/91 on the Programme of Work and Budget and Budgetary Appropriations 1992-93 was based on a specific commitment from the United States of America regarding the amounts and timing of its payments relating to current assessments and arrears. Accordingly, the Council expressed particular satisfaction with the steps taken by the United States of America to fulfil this commitment during the present calendar year.

122. Beyond the problems linked to the above gap, the Council observed that the progress report had also correctly highlighted compounded difficulties in the implementation of the Programme of Work, in particular due to shortfalls in the Support Cost income of the Organization. While noting that it would return to the latter issue under another agenda item, the Council was informed of the concrete measures introduced to balance expenditures under Support Cost allotments with reduced income levels.

-Assessment of the Action Taken

123. The Council commended the Director-General for his response to the Conference's directives, in a prudent and pragmatic manner. In particular, the Council was satisfied that all pertinent factors, positive as well as negative, had been addressed thoroughly in the determination of allotments for the year 1992. It concurred with the basic approach of (a) slowing down implementation at the beginning of the biennium, while attempting to protect essential priorities to the maximum extent possible, and (b) periodically reviewing developments as they effectively materialized, e.g., the payments of arrears, in order to progressively permit the full implementation of approved programmes.

124. The Council noted that the initial slow-down of implementation was achieved through a variety of ways, including deliberately keeping posts vacant for specific periods. It also noted that, in the great majority of cases, planned activities had been postponed as the preferred option to cancellation. It observed that, unavoidably, the technical and economic activities of the Organization had taken the brunt of reduced allocations, since it was not possible to apply such reductions to the same extent to the fixed infrastructure costs.

125. The Council supported the intent of management action to protect, as far as possible, the established priorities of the Organization from the negative effects of resource shortfalls. A few members expressed doubts, however, on the priority-setting process implicit in the activities selected for reduced implementation. In their view, a process could have been pursued more vigorously, in order to prune down activities of marginal interest, in the light of FAO's comparative advantage. Some members would have liked to see more details given in the report.

126. The majority of members expressed regret and concern about the impact of the reduced allotments, at a critical juncture of pressing requirements for assistance in all regions, while there was also a need to give further attention to the imperatives of sustainable development. They regretted that a number of priority sectors had been affected, including work on plant genetic resources, the Prior Informed Consent (PIC) clause, agricultural development policies, trade facilitation and trade policy, FAO's key information systems, fisheries and forestry, etc. Even such well-recognized cross-sectoral priorities as environment and sustainable development and women-in-development had not been immune from the reductions. Regarding geographical areas most in need of assistance, several members regretted more particularly the postponement of activities for the direct benefit of the Africa Region and the Small Island States.

127. A few members felt that the appropriation for the Technical Cooperation Programme (TCP) under Chapter 4 should also have been considered among the areas subjected to reduction, as leaving it untouched had implied sacrificing other equally valuable activities. Rebutting this view, the majority of the Council welcomed the fact that this appropriation had not been subject to reduction, stressing that this was consistent with the overwhelming support enjoyed by the Programme and their expectation that the level of the TCP be increased in future budgets, in accordance with Conference Resolution 9/89.

128. With regard to most recent developments, the Council welcomed the action to initiate filling of critical vacancies, in order to restore the Organizations's capital of expertise to the required level. The Council also noted the partial use of the 1992 installment of the payment of arrears from the United States, as mentioned in the report of the Programme and Finance Committees, in restoring planned activity levels in several priority areas, and in covering urgent infrastructure requirements which could not be further delayed. The Council noted that approval would be requested from the Finance Committee in due course for the inter-chapter transfers which would be required.

129. In the course of the debate, reference was made to proposals for the next Programme of Work and Budget. A few members pointed out that consensus approval of the present PWB had been facilitated by the observance of zero net real growth, coupled with significant absorption of non-discretionary cost increases, as was implicit in the terms of the related Conference resolution. These members mentioned their expectation that the next PWB would be based on the same approach, and that the net base appropriation level would constitute the budget base.

130. Many members underlined the understanding reached by the last Conference in this regard. They recalled, in particular, that the latter had stressed that the solution adopted for the Programme of Work and Budget 1992-93, resulting in a negative budget growth of 4 percent,

should be considered as an exceptional one, not setting a precedent for future Programmes of Work and Budget.

131. The Council accordingly agreed that the proposals for the next Programme of Work and Budget would need to be considered on their merits, within the established programme-budget process, starting with their examination in outline form by a joint session of the Programme and Finance Committees in early 1993.

-Conclusions

132. The Council concluded its discussion by stressing its strong hope that the more positive developments observed recently portended a phase of definitive recovery and renewed stability for the Organization, in respect of its financial situation. It accordingly urged the Director-General to continue his efforts to achieve maximum implementation of the approved Programme of Work, in the light of the resources made available to the Organization. In this connection, the Council looked forward to being apprised of the impact of further developments and the status of implementation of the Programme of Work.

133. The Council stressed that this prospect of recovery was still critically dependent on all Member Nations settling their contributions, both in relation to arrears and current assessments, promptly and in full. It, therefore, renewed its call on all Member Nations to do so.

Reports of the Sixty-fourth and Sixty-fifth Sessions of the Programme Committee²

134. As per established practice, the Council had the benefit of the views of the Programme Committee on a number of issues dealt with under other items of its agenda, which the Programme Committee had considered at its sessions, held respectively in May and September 1992, singly or jointly with the Finance Committee. Some members suggested that the nature of sessions of restrictive committees, such as the Programme Committee, be examined with a view to make them more open, for example, with the introduction of an observer system. The attention of the Council was drawn to the Rules of Procedure of the Programme and Finance Committees, which provided for such decisions to be taken by such committees.

135. Accordingly, the Council took note of other issues covered in the reports of the Programme Committee. It welcomed, in particular, the review of FAO programmes which the Programme Committee traditionally carried out in non-Conference years. In 1992, the Programme Committee had dealt with Programmes 2.1.1 to 2.1.5 of Major Programme 2.1: Agriculture; Major Programme 5.1: Information and Documentation, and Chapter 1: General Policy and Direction. It also noted that the Programme Committee had considered several reports of the Joint Inspection Unit, according to the arrangements for examination of such reports decided by the Council itself.

-Establishment of a Consultative Group on the Tropical Forests Action Programme (TFAP)

136. The Council considered the proposed establishment of a Consultative Group on the Tropical Forests Action Programme (TFAP) on the basis of its discussion and decisions at the Ninety-eighth, Ninety-ninth and Hundredth Sessions, the reports of the Sixty-fourth and Sixty-fifth Sessions of the Programme Committee and the report of the Third Session of the Ad Hoc Group on the TFAP, as well as the views of the Director-General and of the World Bank and the United Nations Development Programme (UNDP) on the Ad Hoc Group's recommendation with regard to the proposed establishment of a Consultative Group (CG).

137. The Council recalled that at its Hundredth Session it had decided to establish an Ad. Hoc Group to, inter alia, work out solutions for unresolved institutional issues, which would report its conclusions to the Programme Committee. The Council warmly commended the Ad Hoc Group and in particular its Chairman, Mr R. Rabe, for the hard work and constructive results attained in the compromise solution.

138. The Council was informed that the Programme Committee welcomed the compromise solution proposed by the Ad Hoc Group, noting that the proposed consultative mechanism would be established under Article VI.5 of the FAO Constitution. The Committee was concerned with the reservations expressed by the co-sponsors regarding their sponsoring the mechanism, but welcomed their willingness to participate in the mechanism and to continue to support the programme. It concluded that the proposed compromise offered a useful intergovernmental framework for consultation on the TFAP while providing the desired flexibility and allowing for participation by the co-sponsors and other TFAP partners. The Committee therefore had endorsed the proposal and referred it to the Hundred and Second Session of the Council for decision. However, it expressed the view that there was need for further clarification of the action to be taken by the Council, and of the guidance the Council should give to the proposed Consultative Group on the participation of Consultative Group members and on related matters.

139. The Council was informed that in response to the views of the Programme Committee, the Director-General, having reviewed the proposal of the Ad Hoc Group and considered the financial and administrative implications, encouraged the Council to: place a reasonable limit on the size of the proposed CG; limit the frequency of meetings to no more than one a year; consider his proposals for the composition of the CG, selection procedures and status of participants, and for the CG's terms of reference. The World Bank and the UNDP informed the Council that they would continue to be co-sponsors of the TFAP and would participate in the proposed CG if it were established, but could not be a co-sponsor of the CG itself.

140. The Council was also informed by the Chairman of the G-77 of informal discussions between representatives of the G-77 and the OECD Group where concern about the slow rate of implementation of National Forestry Action Plans had been expressed, and the importance of the availability of external funding to support the efforts of countries participating in the TFAP had been stressed. They considered it highly desirable that the UNDP and the World Bank should be fully involved in the TFAP and the CG, and that the Director-General should be encouraged to renew contacts with the executive heads of the World Bank and UNDP in this regard. The representatives also felt that the United Nations Environment Programme (UNEP) and the International Tropical Timber Organization (ITTO) should participate in the Consultative Group.

141. The Council noted the proposals which resulted from the informal contacts and generally agreed on the Director-General's proposals regarding size, frequency of meetings, composition and terms of reference. Recognizing, however, that the informal views of the representatives of the G-77 and the OECD Group needed further consideration, the Council decided to:

(a) encourage FAO Member Nations, through their representatives in the appropriate fora, to use their influence to encourage the World Bank, UNDP, ITTO, UNEP and other international organizations to support fully the TFAP as a sound framework for the sustainable development of the forestry sector, and the proposed CG as an advisory body;

(b) request the Director-General to renew contacts with the executive heads of the World Bank and UNDP with a view to their becoming full participants in the Consultative Group;

(c) empower the Independent Chairman of the Council in consultation with a small number of representatives of member countries to prepare a document enabling the Council to decide on the establishment of the TFAP/CG, preferably^* under Article VI.5 of the FAO Constitution. Special attention should be given to the selection of the initial participants in the Consultative Group and their subsequent rotation; and,

(d) have the Eleventh Session of the Committee on Forestry review the proposals of the Independent Chairman and present its recommendations to the Hundred and Third Session of the Council for decision.

Reports of the Seventy-third and Seventy-fourth Sessions of the Finance Committee3

142. Some members of the Council stated that in view of the heavy burden of responsibilities placed on the Finance Committee, it was their intention to have the structure, composition and working arrangements of the Committee reviewed at the next session of the Council.

Budgetary Matters

-Annual Report of Budgetary Performance to Member Nations

143. The Council expressed satisfaction that despite unbudgeted extra staff costs arising from higher than expected inflation, amounting to US$21 million, the Director-General had managed to maintain expenditure within the appropriation approved by the Conference. However, the Council expressed regret that it had been necessary to reduce expenditure under substantive technical and economic programmes in order to absorb these substantial unbudgeted costs.

Financial Matters

-Financial Position of the Organization

144. The Council reviewed the various Finance Committee reports on the financial position of the Regular Programme. It noted that the Organization had been able to reimburse the external borrowing (US$17 million) in February 1992 and refund the internal borrowing and advance from the Working Capital Fund (US$33 million) in March and May. It further noted that, as a result

Two members expressed the wish that the word "preferably" be replaced by the word "possibly".

of delays in the receipt of 1992 assessed contributions, the Organization had again been compelled to advance monies from the Working Capital Fund and Special Reserve Account in October and early November to meet disbursements.

-Incentive Scheme to Encourage Prompt Payment of Contributions

145. The Council recalled the decision of the Conference at its Twenty-sixth Session to test the discount scheme on an experimental basis. It noted the decision of the Finance Committee that, to give all Member Nations the opportunity to decide if they wished to participate in the scheme and enable conclusive results about the effectiveness of the scheme, all Members should be formally notified that the test would begin on 21 January 1993.

146. Some members expressed the view that an incentive scheme should be associated with some form of disincentives. In this regard, reference was made to the forms of punitive measures already included in the Basic Texts. However, some members considered that new penalty schemes would be counterproductive.

-Study of Alternative Mechanisms to Protect the Programme of Work and Budget from Exchange Rate Fluctuations

147. The Council was informed that the Finance Committee had reviewed an updated synopsis of the various mechanisms used by Organizations of the UN system to mitigate the effects of foreign currency fluctuations on their programmes. It noted with satisfaction the action taken by the Director-General to purchase lire on the forward market, and thereby protect the budget rate established by the Twenty-sixth Session of the Conference at 1 210 lire to the US dollar. The Council took note of the Finance Committee's general view that a solvent Special Reserve Account, supplemented when appropriate by forward exchange contracts, provided the best solution for FAO in the current circumstances. Several members, in taking the floor on this item, indicated that they would speak on the Special Reserve Account matter within the framework of a separate agenda item.

-Status of Contributions to the Budget4

148. The Council considered the financial position of the Organization which compared favourably with that of recent years. Satisfaction was expressed for the substantially improved rate of receipt of contributions and for the payments that had been forthcoming from the largest contributor. However concern was expressed for the longer term and emphasis was once again placed on the importance for all Member Nations, irrespective of size, to honour their financial obligations towards the Organization and to advise the Director-General of the expected timing and amount of payments. It was considered that only in this way could financial problems be avoided.

149. The Council noted the status of contributions at 13 November 1992 compared with the same date in 1991, as well as the details of amounts received from each Member Nation during 1992 and of outstanding contributions, as shown in Appendix E to this Report.

^a The Appendix E sets out full details of receipts during 1992.

^b Contributions in arrears include arrears payable under Conference authorizations by instalments due in

1992 (in 1991 in comparative figures) and in future years (on 1 January 1992 US$49 853.54 due in 1992 and US$213 941.52 in future years).

^c Of which US$550 000.00 relates to the Tax Equalization Fund.

^d Of which US$350 000.00 relates to the Tax Equalization Fund.

- Current Assessments(details of receipts and of amounts outstanding are listed in Appendix E)

150. The month-end cumulative percentages of 1992 assessments received during more than 10 months of 1992, as compared to receipts during the preceding four years, were as follows:

^aReceipts at 13 November; all other figures are at month-end.

151. At 13 November 1992 the position of Member Nations (and the number with arrears outstanding), with comparative figures at the same date during the four preceding years, was as follows:

152. The Council was informed that receipts at 13 November 1992 of the 1992 assessments were substantially higher than those of the four previous years compared.

153. However, only 54 Member Nations had paid their current assessments in full, while a further 20 had made a partial payment, leaving 86 Member Nations who had made no cash payment at all during 1992.

-Contributions in Arrears(Appendix E sets out details of amounts outstanding)

154. At 13 November 1992, a total amount of US$122 766 330.74 of arrears of contributions remained outstanding, including US$95 408 187.04 overdue from the largest contributor. Fifty-two Member Nations had made cash payments as at 13 November 1992, of which 20 had paid their arrears in full. Amounts of more than US$1 million were due from seven Member Nations, totalling US$113 913 829.10 and representing 92.79 percent of the arrears outstanding.

-Replenishment of the Special Reserve Account and Advances to the Working Capital Fund

155. Of the total amounts outstanding at 1 January 1992 of US$17 271 333 and US$6 819 044 respectively, 61 Member Nations had made cash payments as at 13 November 1992, leaving balances of US$8 843 378 and US$2 031442, respectively outstanding on 13 November 1992.

- Need for all Member Nations to Pay Current Assessment and Arrears

156. The Council expressed concern that, notwithstanding the Director-General's appeals to Member Nations for payment of their arrears and outstanding contributions, 107 Member Nations had made no payment or only partial payment of 1992 assessed contributions, and 70 Member Nations still owed arrears for 1991 and prior years.

157. The Council urged therefore all Member Nations to pay their outstanding arrears and current assessed contributions in full as soon as possible, in order to enable the Organization to continue to fulfil its mandate.

Personnel Matters

-Representation Allowances for Deputy Directors-General (DDG) and Assistant Directors-General (ADG)

158. The Council recalled that the general purpose of the allowance was to cover costs associated with the representational aspects of the work of senior UN officials and that the current levels were US$6 000 per annum for DDG and US$2 400 per annum for ADG.

159. It noted that the International Civil Service Commission (ICSC) had reported to the Forty-sixth Session of the General Assembly that it had concluded that the representation allowance was not susceptible to common system treatment and would best be handled by executive heads under guidance from the governing bodies of the respective organizations (UN General Assembly reference document: A/46/30).

160. In view of the fact that the representation allowances for ADGs and DDGs had not been revised since 1965 and 1974 respectively, the Council decided that an increase would be appropriate, for DDGs to US$13 000 and for ADGs to US$8 000 per annum; both to be effective 1 March 1992. Future revisions of these amounts would be made automatically, based on the percentage adjustment to the net base salary scale.

-Allowance for Chairman of Appeals Committee

161. The Council approved the Finance Committee's recommendation to increase the allowance of the Chairman of the Appeals Committee from US$5 000 to US$6 000 per annum effective 1 January 1993.

Remuneration and Conditions of Service of Staff 5

-Introduction

162. The Council recalled that the Conference at its Twenty-sixth Session in November 1991 had noted with concern the reported deterioration of the level of salaries and pension benefits, had commended the Director-General for his continued perseverance and efforts in the various fora to improve conditions of service of staff, had urged that the strong concern expressed by the Conference be brought to the attention of the General Assembly and its Fifth Committee and had requested that a status report be prepared for the Hundred and Second Session of the Council on any progress which had been achieved toward alleviating the described conditions.

163. In response to the request of the Director-General, the Council agreed to receive a statement from Ms Eldon, Secretary-General, UGSS, on behalf of the three staff bodies. Ms Eldon outlined the staffs concern over developments within the common system and their effect on conditions of service of FAO staff.

-Annual Reports of the ICSC and the UN Joint Staff Pension Board to the General Assembly and Summary of the Decisions Taken

164. The Council was informed that the major decisions taken by the UN General Assembly at its Forty-sixth Session (1991) pursuant to the Annual Report of ICSC were:

(a) the introduction of a revised scale of salaries for staff in the Professional and higher categories - with effect 1 March 1992. The new scale resulted from the consolidation of multiplier points of post adjustment on a no gain/no loss basis into net base salary which increased the scale by 6 percent;

(b) the granting of partial post adjustment increases if the full increase warranted by the movement of the post adjustment index would result in a level of the margin above the upper limit (120) of the range;

(c) the introduction of a revised scale of staff assessment rates for General Service staff with effect from 1 January 1992.

165. The Council noted that the General Assembly had approved effective 1 April 1992 the modified pension adjustment system as recommended by the Pension Board which, inter alia, would provide an income replacement ratio reasonably close to that in New York. This had been of concern to Geneva and Vienna based organizations, but would have no effect on Rome.

- Recent Developments in the Activities of the ICSC and the UN Joint Staff Pension Board and International Civil Service Commission

166. The Council was informed of the recommendations presented by the International Civil Service Commission (ICSC) to the Forty-seventh Session of the General Assembly (1992).

167. The Council noted the ICSC recommendations to increase the current net base salary scale by 6.9 percent through consolidation of post adjustment classes on a no gain/no loss basis, with effect from 1 March 1993; to increase as from the scholastic year in progress on 1 January 1993 the level of the education grant in areas where education-related expenses were incurred in Dutch guilder (by 13.2 percent), Finnish markka (by 11.1 percent), Italian lira (by 16.9 percent), UK pound (by 25.3 percent) as well as the US dollar (by 18.18 percent); and to increase the children's allowance from US$1150 to US$1 270 and the secondary dependant's allowance from US$300 to US$450 effective 1 January 1993.

168. The Council was informed that the ICSC had decided on several major amendments to the General Service salary survey methodology. These included the elimination from salary surveys of employers with fewer than 100 clerical and support employees, the inclusion of

employers whose base salary and related remuneration packages were 10 percent lower than the preceding ranked employer in the survey sample and elimination of the language factor.

169. Concerning the pensionable remuneration of General Service staff, the Council noted that the Commission had decided to introduce, effective 1 January 1994, a new methodology for deriving pensionable remuneration from net salary by using the staff assessment rate corresponding to 56.25 percent of the net salary and to change the interim adjustment procedure so that any future salary increases would be reflected on a one-to-one basis in the scale of pensionable remuneration.

-UN Joint Staff Pension Board

170. The Council noted that the Board had dealt extensively with the comprehensive review of the pensionable remuneration and consequent pensions of staff in the General Service and related categories. It noted that the views expressed by the groups represented at the Board on the methods for deriving pensions from new salaries were so different that the Board was unable to agree on any recommendations to be submitted to the ICSC for review.

-Further Developments with Respect to the Remuneration of the Professional and Higher Categories

171. The Council was informed that the Administrative Committee on Coordination (ACQ at its Second Regular Session of 1991 (24-25 October 1991) had decided that a comparative study was required of the conditions prevailing for staff in the Professional and higher categories at equivalent levels in the World Bank Group, the International Monetary Fund, the Organization for Economic Cooperation and Development, the European Economic Community and similar institutions. ACC, accordingly, had requested the International Civil Service Commission (ICSC) to undertake such a comparative study, with a view to reporting to ACC at its autumn 1992 session on proposals to be presented to the General Assembly at its Forty-seventh Session.

172. The Council was also informed that at its first regular session of 1992 (8-9 April 1992), the ACC once again had considered Professional remuneration issues and decided to request the ICSC to review the manner in which margin comparisons should be made in the context of those occupations for which the better-paying United States federal agencies were applying special rates. It had also reiterated its request to carry out a comparability study between United Nations pay levels and those of other international civil services, with a view to having the pay levels of these civil services reflected in the margin calculation.

173. In addition, ACC had decided to invite CCAQ to pursue its studies of the introduction of an additional grade in the Professional salary scale. In the meantime, ACC decided to propose to the General Assembly, through ICSC, increases of 3 and 5 percent at the "D" levels of the salary scale, as recommended by CCAQ.

174. The Council was informed that although the ICSC had recognized that the common system was less competitive than other international organizations and that the margin between UN and US pay was narrow at the D-l and D-2 levels, it decided not to pursue the aforementioned issues with the General Assembly. As regarded "special occupational rates", the Council noted that ICSC had invited the General Assembly to endorse, in principle, the introduction of these rates as a means of addressing recruitment and retention problems for some technical specialized fields.

175. In this regard, the ACC at its second regular session of 1992 (20-21 October), requested the General Assembly "to invite ICSC to pursue its examination of the competitiveness of the common system, and in particular that of staff in the Professional and higher categories, by considering as a matter of urgency and for consideration by the General Assembly in 1993, an updated application of the Noblemaire principle so that all relevant features of the highest paid civil service were taken into account, as well as remuneration levels offered by other international employers".

-Further Developments with Respect to the Remuneration of the General Service Category

176. With regard to the remuneration for staff in the General Service category, the Council noted the ICSC decisions to eliminate certain anomalies in the pension system by revising the methodology for determining the pensionable remuneration and consequent pension levels for staff in the General Service category. The Council also noted the ICSC revisions to the methodology for the conduct of salary surveys of the best prevailing conditions of employment at Headquarters duty stations. The Council was informed that the ICSC decisions would have a negative impact on future salaries and pensions of General Service staff and that, in fact, as a consequence of these decisions, the staff representatives had withdrawn from participation in ICSC.

177. In this regard, the ACC issued a strong statement to the General Assembly requesting that "ICSC recommendations on the methodology for determining pensionable remuneration be deferred until the results of using the new salary survey methodology were known".

-Conclusion

178. In light of the foregoing, the Council adopted the following Resolution:

Resolution 1102

REMUNERATION AND CONDITIONS OF SERVICE OF STAFF

THE COUNCIL,

Noting with general disappointment that despite expression of strong concern transmitted by the Conference in November 1991, the ICSC had decided to submit to the General Assembly recommendations which do not address adequately the basic issue of the loss of competitiveness of the remuneration of staff in the Professional and higher categories, but which will instead result in less favourable pensions and salaries for staff in the General Service category,

Recognizing the critical situation in respect of remuneration of staff and its negative consequences on the Organization's ability to recruit and retain high quality staff which is the most valuable asset on which the successful implementation of the Organization's programmes depends,

Recognizing the need for the requirements of the Specialized Agencies to be fully considered in the Common System decision-making process,

`
1. urges the governments of all Member Nations to give special attention to these concerns of the Organization;
2. requests the ICSC to pursue its examination of the competitiveness of the common system, in particular that of the staff in the Professional and higher categories, and submit recommendations as a matter of urgency for consideration by the General Assembly in 1993 by taking into account all relevant features of the highest paid civil service as well as remuneration levels offered by other international employers;
3. requests that the ICSC be informed of the general concern that any modification to the General Service salary and pension methodologies should be technically sound and should not result in an erosion of current conditions, and support for the ACC recommendation that the methodology for determining pensionable remuneration be deferred until the results of using the new recommended salary survey methodology are known.
4. requests the Director-General to transmit its views to the Secretary-General of the UN, as well as to the Chairman of the ICSC, with the request to draw these views to the attention of the Fifth Committee of the General Assembly in an appropriate manner.
5. hopes that effective action will be taken so as to preclude the necessity of considering alternative measures within the framework of the common system in order to redress the problem of recruitment, retention and motivation of high quality staff.

Audited Accounts

(a)Regular Programme 1990-916 and UNDP 1990-91⁷

(b)World Food Programme 1990-918

179. The Council noted with satisfaction that the opinions of the External Auditor on the financial statements of the Regular Programme and the UNDP for the biennium 1990-91 were not subject to any qualification.

180. The Council commended the External Auditor for the clarity of his report. It welcomed the timely and corrective action taken by management to resolve the problems related to the introduction of FINSYS/PERSYS.

181. The Council endorsed the recommendations of the External Auditor as outlined in paragraphs 37 and 38 of his Report on the Financial Statements of the Regular Programme, and emphasized the importance of those relating to the adequacy of the number of skilled computer staff for maintaining and enhancing the new system, as well as the recruitment of systems accountants into the Division of Finance. The Council stressed the need to resolve quickly the

remaining underlying system problems to achieve the original objectives of the new system and permit the timely production of reliable financial statements. In this connection, the Council was informed that a functional review of FINSYS/PERSYS was underway, which would be addressing the key areas of concern, including the items highlighted in the recommendations in paragraph 37 of the External Auditor's Report. The Council was further informed that a draft set of accounting standards drawn up by the Consultative Committee on Administrative Questions (Financial and Budgetary Questions) (CCAQ (FB)) was now before the Panel of External Auditors for review and comment. These standards provided, inter alia, for the inclusion of a statement on cash flow in the financial reports, which FAO intended to introduce into its financial statements for 1992-93.

182. With regard to the UNDP Accounts, the Council also endorsed the recommendations of the External Auditor. It further stressed the importance of the early conclusion of the Standard Basic Executing Agency Agreement with UNDP.

183. The Council agreed to forward the following resolution to the Conference for adoption:

DRAFT RESOLUTION FOR THE CONFERENCE

AUDITED ACCOUNTS

THE CONFERENCE,

Having considered the report of the Hundred and Second Session of the Council,

Having examined the following Audited Accounts and the External Auditor's Reports thereon:

Regular Programme 1990-91 C 935

United Nations Development Programme 1990-91 C 936

Adopts the above Audited Accounts.

184. The Council decided to defer discussion of Item 15.3, Audited Accounts of the World Food Programme 1990-91, to its Hundred and Third Session.

Support Cost Arrangements for FAO Trust Fund Programmes9

- Introduction

185. The Council recalled that this item was in response to the decision of the Twenty-sixth Session of the Conference in November 1991, that a study of arrangements for support cost reimbursements under the Trust Fund programme be undertaken, and that recommendations resulting from the analysis of this matter be submitted to the FAO Council at its Hundred and Second Session through the Programme and Finance Committees.

186. The document submitted to the Council covered the study undertaken by the Director-General as well as the report of an external consultant, David M. Griffiths & Associates Ltd. (DMG), which made suggestions for a revised regime of support cost reimbursements for projects financed from Trust Funds. The Council expressed its appreciation to the Director-General for the timeliness and scope of the study.

187. The Council recalled that one of the basic functions of the Organization, as prescribed in the Constitution, was to furnish such technical assistance as governments may request. It also recalled and reaffirmed the conclusions of the Conference at its Twenty-fifth Session in November 1989, on the Review of Certain Aspects of FAO's Goals and Operations, in the context of which it had recognized the catalytic importance of FAO's field operations to Member Nations, recipients and donors alike. In partnership with Member Nations, the Field Programme had given concrete expression to FAO's aims and objectives, and made its presence and impact felt in developing Member Nations.

188. The Conference had also endorsed the conclusion of the FAO Review that the Regular and Field Programmes were intertwined both in structure and functions. Through its technical support, the Regular Programme was making its technical and analytical work available to field projects and, in turn, was receiving data and feedback from the field to strengthen the technical contents of its own activities and to update its information bases.

189. The Council recognized that the study submitted to it took account of the United Nations Development Programme (UNDP) support cost successor arrangements and was based on a thorough identification of the nature and distribution of the costs incurred by FAO in the implementation of the Trust Fund programme. The Council noted with concern the extent and the increasing level of the gap between support costs and the reimbursement received.

190. The Council generally agreed with the objectives identified by the Director-General that any new arrangement should:

1. strengthen the Field Programme under Trust Funds by maximizing the response to the needs of recipient countries in terms of quality and appropriateness of the services rendered;
2. maximize the use of the Trust Fund resources in terms of economy, effectiveness and efficiency of the services provided, thus giving the best value for money to Trust Fund donors;
3. permit containment and reduction of the Regular Budget subsidy to me Field Programme, apportioning cost equitably between donors, recipient governments and FAO;
4. provide for reimbursement to be specifically related to the costs of the services defined in the project budget and agreed to by the donor, the recipient government and FAO;
5. permit optional approaches for specific types or groups of projects, thus reflecting the varied nature of Trust Fund programmes;
6. provide Trust Fund donors and recipient governments with a clearer presentation of the budgetary provision for support costs, transparency in the development of the rates, and a more complete accountability of the costs incurred;
7. accommodate all the above in a system and methodology which would be easy to understand and apply.

191. Differing views were also expressed, however, about the desirable extent of future Regular Budget subsidy. A view was expressed that the Regular Budget subsidy should not be decreased from its current level. A contrary view was also expressed by a few members that all costs relating to the Trust Fund programme should be covered by donors, regardless of whether they were fixed or variable.

192. The Council considered the recommendations advanced by the consultant, including a suggested methodology for the determination of rates and charges, their monitoring and their periodic revision. The Council noted that it was requested to provide its reactions and guidance, but that at this stage formal approval was not sought by the Director-General to these recommendations. The Director-General wished to take the views of the Council into account before making his proposals to the Council, through the Programme and Finance Committees.

193. In general, the Council expressed support for the analysis and the recommendations advanced by the consultant, which recognized that:

1. incremental costs should be fully borne by the sources funding the Trust Fund programme;
2. the principle of cost sharing to some extent was consistent with the fact that the Regular Programme benefitted from the Trust Fund programme, and
3. fixed indirect costs, such as those relating to central administrative support services, should continue to be covered under FAO's Regular Budget.

194. The consultant explained the reason why it had been recommended that fixed indirect costs continue to be funded from the Regular Budget. In their experience, the funding of essential fixed costs from a variable source of income could lead to serious financing problems, particularly in periods of wide variations in the overall volumes delivered and, therefore, in the support cost income earned.

195. The Council generally welcomed the conclusions and recommendations of the consultant, in particular concerning the methodology for the identification of actual costs and the rationale behind the application of various rates to the different levels and types of services which FAO could be called upon to provide. Several members raised some issues which they hoped would be addressed in the development of the Director-General's proposals. In particular, some members were concerned about the apparent complexity of the proposals, and asked that consideration be given to this point in developing implementation modalities. Furthermore, while recognizing that the impact of the proposals had been tested against a sample of 20 projects, as presented to the Programme and Finance Committees, several members asked that the implications of the new arrangements and their ease of application be subject to further study prior to implementation. It was also suggested that the Secretariat examine the manner in which the new arrangements would be applied to special cases, such as the Associated Professional Officer scheme, joint implementation with other international institutions and with Non-Governmental Organizations. The Council was assured by the Secretariat that these aspects would be addressed in the proposals which were to be developed and presented by the Director-General.

- Conclusion

196. The Council expressed appreciation for the prompt, thorough and transparent manner in which the study had been conducted and presented. In particular, it agreed with the Director-General's approach and in general with his objectives for any new arrangements. It felt that the study drew the attention of Member Nations to the key issues involved and generally welcomed the proposals of the consultant as a basis upon which new support cost arrangements might be developed. In the light of its debate, the Council invited the Director-General to submit his proposals for the implementation of a new support cost regime for Trust Funds, through the Programme and Finance Committees at their May 1993 session, to the Hundred and Third Session of the Council.

First Report on Unscheduled and Cancelled Sessions in the 1992-93 Biennium10

197. The Council recalled that the Director-General reported to it once a year on the unscheduled sessions approved and on the sessions cancelled.

198. The Council noted that between 1 January and 16 September 1992, 23 unscheduled sessions had been approved and 17 sessions had been cancelled. Details of the unscheduled sessions approved and of the sessions cancelled are given in Appendix F.

199. The Council noted that in future the information on unscheduled and cancelled sessions would be provided in the biennial Programme Implementation Reports.

Revised Calendar of 1992-93 Sessions of the Council and of Those Bodies which Report to the Council11

200. The Council approved the revised Calendar of Sessions for 1992-93 of the Council and of those Bodies which report to it, as given in Appendix G to this report.

¹ CL 1024; CL 10213; CL 10213-Sup.l; CL 10217 paras 1.1-1.16; C 102PV/11; CL 102PV/19.

² CL 1024; CL 10217; CL 10221; CL 10221-Sup. 1; CL 102PV/10; CL 102PV/19.

^* Two members expressed the wish that the word "preferably" be replaced by the word "possibly".

³ CL 1024; CL 10217; CL 102PV/10; CL 102PV/19.

⁴ CL 10217 paras 3.13-3.36; CL 102LIM/1; CL 102PV/10; CL 102PV/19.

⁵ CL 1024; CL 10217; CL 102LIM/2; CL 102LIM/2-Sup.l; CL 102PV/14; CL 102PV/17; CL 102PV/18; CL 102PV/19.

⁶ C 935; CL 10217 paras 3.37-3.42; CL 102PV/12; CL 102PV/19.

⁷ C 936; CL 10217 paras 3.37-3.42; CL 102PV/12; CL 102PV/19.

⁸ C 937; CL 10217 paras 4.5-4.8; CL 102PV/12; CL 102PV/19.

⁹ CL 10217 paras 1.17-1.29 and 3.63-3.65; CL 10218; CL 10218-Sup.l; CL 102PV/13; CL 102PV/14; CL 102PV/19.

¹⁰ CL 1027; CL 102PV/15; CL 102PV/19.

¹¹ CL 10214; CL 102PV/15; CL 102PV/19.