C. FINANCIAL REGULATIONS

Regulation I: Applicability

Regulation II: The financial period

Regulation III: The budget

Regulation IV: Appropriations

Regulation V: Provision of funds

Regulation VI: Funds

Regulation VII: Other income

Regulation VIII: Custody of funds

Regulation IX: Investment of funds

Regulation X: Internal control

Regulation XI: The accounts

Regulation XII: External audit

Regulation XIII: Resolutions involving expenditures

Regulation XIV: Delegation of authority

Regulation XV: General provisions

Annex I: Additional Terms of Reference Governing External Audit¹

Regulation I
Applicability

1.1 These regulations shall govern the financial administration of the Food and Agriculture Organization of the United Nations.

Regulation II
The Financial Period

2.1 The financial period shall be two calendar years, in accordance with Article XVIII, paragraph 4 of the Constitution.

Regulation III
The Budget

3.1 The budget estimates shall be prepared by the Director-General.

3.2 The estimates shall cover income and expenditures for the financial period to which they relate, and shall be presented in United States dollars.

3.3 The budget estimates shall be presented on a programme-budget basis and divided into chapters and programme objectives, and where necessary into programmes and subprogrammes. The budget estimates shall include the programme of work for the financial period, such information, annexes or explanatory statements as may be requested on behalf of the Conference or the Council, and such further annexes or statements as the Director-General may deem appropriate.

3.4 The Director-General shall submit to the regular session of the Conference detailed budget estimates for the ensuing financial period. The estimates shall be dispatched to all Member Nations and Associate Members not less than 60 days before the date fixed for the opening of the session.

3.5 The Director-General shall arrange for the summary budget to be considered by the Council not less than 90 days before the date fixed for the opening of the regular session of the Conference.

3.6 The Council shall prepare a report to the Conference on the estimates submitted by the Director-General. This report shall be transmitted to all Member Nations and Associate Members at the same time as the estimates.

3.7 The budget for the ensuing financial period shall be adopted by the Conference at its regular session, after due consideration of the estimates.

3.8 Supplementary estimates to cover emergency expenditure in accordance with Regulation 6.3 may be submitted by the Director-General when and as he may deem necessary.

3.9 The Director-General shall prepare supplementary estimates in a form consistent with the estimates for the financial period and shall submit such estimates to the Conference and to the Council. The Council shall review such estimates and report thereon to the Conference.

Regulation IV
Appropriations

4.1

1. The appropriations voted by the Conference for the ensuing financial period shall constitute an authorization to the Director- General to incur obligations and make payments for the purpose for which the appropriations were voted, and up to the amounts so voted.
2. The Director-General may also incur obligations against future periods before appropriations are voted when such obligations are necessary for the continued effective functioning of the Organization, provided such obligations are restricted to administrative requirements of a continuing nature not exceeding the scale of such requirements as authorized in the budget of the current financial period.

4.2 Except as provided for in Financial Regulation 4.3 relating to the Technical Cooperation Programme, appropriations shall be available for obligations during the financial period to which they relate and unobligated appropriations at the close of the financial period shall be cancelled.

4.3 Appropriations voted by the Conference for the Technical Cooperation Programme, together with any funds transferred to the Technical Cooperation Programme under Financial Regulation 4.5 (b), shall remain available for obligations during the financial period following that during which the funds were voted or transferred. Appropriations unutilized at the close of the financial period following that during which the funds were voted or transferred shall be cancelled.

4.4 Such portion of appropriations as may be required to meet the outstanding legal obligations as at the last day of the financial period shall remain available for 12 months, except that in the case of outstanding legal obligations in respect of fellowships the portion of the appropriation required shall remain available until the fellowship is completed or otherwise terminated. At the end of 12 months, or in the case of fellowships at the termination of the fellowship, any remaining balances shall be credited to Miscellaneous Income of the current financial period. Any obligations (except for fellowships) remaining a valid claim at that time shall be charged against the appropriations of the current financial period.

4.5

1. Transfers within the same chapter of the budget may be effected by the Director-General. He shall report such transfers to the Finance Committee in instances where funds are moved from one Division (or equivalent unit) to another and where, in addition, the amount involved in each such transfer exceeds a specific sum established in accordance with the provisions of Financial Regulation 10.1 (a) and of the General Rules of the Organization.
2. 1. 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.
   2. 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.

3. 1. 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.
   2. Any savings which accrue during the operations of a financial period may be transferred by the Director-General to the Contingencies chapter. The transfer of such savings from Contingencies shall be subject to the approval of the Finance Committee or of the Council, as set out in Regulation 4.5 (b).

4.6

1. The Director-General shall so apportion and manage appropriations made for the financial period as to ensure that adequate funds will be available to meet expenditures during the entire financial period, and that the obligations and expenditures follow, in general, the financial plans contemplated by the Programme of Work and Budget approved by the Conference. There shall be no concentration of obligations or expenditure in any one calendar year, except as approved by the Conference, and under no circumstance shall any savings accruing during the financial period be used for any projects or activities which may involve additional obligations for Member Nations and Associate Members in future financial periods for the continuation of such projects or activities.
2. The Finance Committee shall review annually the Director-General's fund allotment and apportionment controls to determine that they meet adequately the objectives of this regulation.

Regulation V
Provision of Funds

5.1 The appropriations for a financial period, subject to related adjustments effected in accordance with Regulation 5.2, shall be financed by annual contributions from Member Nations and Associate Members. Contributions from Member Nations shall be assessed in accordance with the scale of contributions determined by the Conference, which scale shall not include contributions from Associate Members. Contributions from Associate Members shall as far as feasible be calculated on the same basis as contributions from Member Nations, the amount thus obtained being reduced by four-tenths to take account of the difference of status between Member Nations and Associate Members, and shall be credited to Miscellaneous Income. Pending receipt of contributions, appropriations may be financed from the Working Capital Fund.

5.2 In the assessment of the contributions of Member Nations and Associate Members for each financial period, adjustments shall be made in respect of:

1. estimated Miscellaneous Income of the financial period in respect of which the assessment of contributions is being made;
2. credits accruing to Member Nations as a result of the application of Financial Regulation 6.1 (b);
3. supplementary appropriations for which contributions have not previously been assessed on the Member Nations and Associate Members.

5.3 For determining the annual contribution of each Member Nation and Associate Member, the assessment of each such Member Nation and Associate Member for the financial period shall be divided into two equal instalments, one of which shall be payable in the first calendar year and the other in the second calendar year of the financial period.

5.4 At the beginning of each calendar year the Director-General shall:

1. inform Member Nations and Associate Members of their obligations in respect of annual contributions to the budget;
2. inform Member Nations of their obligations in respect of advances to the Working Capital Fund;
3. request Member Nations and Associate Members, as the case may be, to remit all contributions and advances due.

5.5 Contributions and advances shall be due and payable in full within 30 days of the receipt of the communication of the Director-General referred to in Regulation 5.4 above, or as of the first day of the calendar year to which they relate, whichever is the later. As of 1 January of the following calendar year, the unpaid balance of such contributions and advances shall be considered to be one year in arrears.

5.6 Annual contributions to the budget shall be assessed partly in United States dollars and partly in euro. For each biennium, the Conference shall determine the proportionate share of the budget payable by all Member Nations and Associate Members in United States dollars and in euro respectively, in accordance with the estimated expenditures in each of these currencies. Payments in United States dollars or euro shall be credited against the assessment in the same currency. Should an amount paid exceed what is owed in that currency, the excess shall be applied to the other currency assessment at the market rate on the date of receipt. Should a Member Nation or Associate Member pay any part of its current year contribution or arrears in a currency other than United States dollar or euro, it will be the responsibility of that Member Nation or Associate Member to ensure the free convertibility of that currency into United States dollars or euro. The exchange rate applicable to any payment in a non-assessed currency shall be the market rate of the euro or the United States dollar to the currency of payment on the first business day in January of the calendar year in which the contribution is due, or the rate in effect on the day the payment is made, whichever is higher.

5.7 Obligations of Member Nations and Associate Members, including arrears of contribution, shall remain payable in the currencies of assessment of the year in which they were due. For the purpose of determining loss of voting rights in the Conference, ineligibility for election to or loss of seat in the Council as foreseen in the Basic Texts of the Organization, contributions due for the two preceding calendar years shall be expressed in United States dollars, with any euro arrears calculated at the budget rate of exchange in the year of assessment.

5.8 Any nation admitted to membership or any territory or group of territories admitted to associate membership shall pay a contribution to the budget for the financial period in which the membership or associate membership becomes effective. Such contributions shall be an amount determined by the Conference and shall begin with the quarter in which the application was approved. All new Member Nations shall be required to make advances to the Working Capital Fund in accordance with Regulation 6.2 (b) (ii).

5.9 Non-member nations of the Organization that are members of intergovernmental commodity groups; subcommittees, subsidiary working parties and study groups established by the Committee on Fisheries; or of bodies established by conventions or agreements concluded under Article XIV of the Constitution shall contribute towards the expenses incurred by the Organization with respect to the activities of those groups or bodies in an amount determined by the Director-General except as otherwise decided by the Conference or the Council.

5.10 The Council, at any of its sessions, may advise the Director-General as to any steps that ought to be taken in order to expedite the payment of contributions. The Council may submit to the Conference such recommendations in this regard as it may consider appropriate.

Regulation VI
Funds

6.1

1. There shall be established a General Fund to which shall be credited receipts from contributions of Member Nations, whether current or arrears, Miscellaneous Income and advances made from the Working Capital Fund; and from which shall be made all general expenditures and reimbursements to the Working Capital Fund under Financial Regulation 6.5 (a).
2. Any cash surplus in the General Fund at the close of any financial period shall be allocated among Member Nations in accordance with the Scale of Contributions applicable to that period and, as of 1 January following the year in which the audit of the final accounts of the financial period is completed, shall be released and applied to liquidate, in whole or in part, first, any advance due to the Working Capital Fund; second, any arrears of contributions; and third, contributions for the calendar year following the year in which the audit is completed.

6.2

1. There shall be maintained a Working Capital Fund in United States dollars in such amount as the Conference shall determine from time to time for:
1. advancing moneys to the General Fund to finance budgetary expenditures pending receipt of contributions to the budget;
2. advancing moneys to the General Fund to finance emergency expenditures not provided for in the current budget;
3. making reimbursable loans for such purposes as the Council may authorize in specific cases. Advances made by the Working Capital Fund for these purposes shall be considered as forming part of the Fund.
2. The amount of the Working Capital Fund thus determined shall be contributed by Member Nations in United States dollars in accordance with the following provisions:
1. Member Nations shall be assessed as of 1 January 1956 in accordance with the Scale of Contributions for 1956. Any amounts standing to their credit in the Fund on 31 December 1955 shall be applied against this assessment.
2. A new Member Nation shall be assessed in an amount determined by the Conference. Unless the Conference decides otherwise, the amount of the new Member Nation's assessment shall be considered as an increase to the level of the Working Capital Fund.
3. The assessment of Member Nations in the Working Capital Fund, effected under subparagraph (i) above, shall not be changed by modifications in the Scale of Contributions or in the membership of the Organization, unless the Conference decides otherwise.
4. If the Conference decides to change the level of the Working Capital Fund, there shall be a reassessment.
5. Any reassessment shall be applied as from the first day of the financial period following the Conference determination and calculated in accordance with the Scale of Contributions of the financial period.
6. On reassessment, any excess of credits due to Member Nations shall be released immediately from the Working Capital Fund and applied (after any General Fund surplus has been released and applied in accordance with the provisions of Financial Regulation 6.1 [b]) first, to contributions in arrears; second, to current contributions; and third, refunded or applied against future contributions at the option of Member Nations.

6.3 Withdrawals from the Working Capital Fund for financing emergency expenditures shall be approved in advance by the Council.

6.4 Moneys provided by each Member Nation under Regulation 6.2 (b) shall be carried to the credit of that Member Nation in the Working Capital Fund.

6.5

1. Advances made from the Working Capital Fund to finance budgetary expenditure under Financial Regulation 6.2 (a) (i) shall be reimbursed from the General Fund as soon as feasible, but in any case within the next financial period, by programme adjustments if necessary.
2. Advances made from the Working Capital Fund to finance emergency expenditure under Financial Regulation 6.2 (a) (ii) shall be reimbursed by such method as the Conference determines.

6.6

1. Income derived from the investment of the Working Capital Fund shall be credited to the Miscellaneous Income of the Organization, and shall accrue to the General Fund.
2. If a Nation withdraws its membership in the Organization, any credit it may have in the Working Capital Fund shall be used towards liquidation of any financial obligation such Nation may have to the Organization. Any residual balance shall be refunded to the withdrawing Nation under such terms and conditions as the Conference may determine.

6.7 Voluntary contributions, whether or not in cash, may be accepted by the Director-General, and Trust and Special Funds may be established by him to cover moneys made available to the Organization for special purposes, provided that the purposes of such contributions and moneys are consistent with the policies, aims and activities of the Organization. The purposes and limits of any Trust and Special Funds shall be clearly defined. The acceptance of any such contributions and moneys which directly or indirectly involves additional financial obligations for Member Nations and Associate Members shall require the consent of the Conference. Trust and Special Funds and voluntary contributions shall be administered in accordance with the Financial Regulations of the Organization, unless otherwise provided for by the Conference. Trust and Special Funds shall be reported to the Finance Committee.

6.8 The Director-General may enter into agreements with governments and donors providing for technical assistance in the context of development projects to be executed/implemented by the beneficiary government or other national entity. Under these modalities, referred to below as projects under Partnership in Development Agreements, the following shall apply:

1. Where the funds are to be held and managed by the government or other national entity under national execution or implementation arrangements, FAO's participation shall be separately reported to the Finance Committee as Funds under Partnership in Development Agreements, and such funds shall not be included in the Financial Statements of the Organization.
2. Where the funds are to be held in trust by FAO and transferred to the government or other national entity for the implementation of agreed activities, the funds shall be reported to the Finance Committee in the Financial Statements of the Organization as Funds held in Trust on behalf of beneficiary governments under Partnership in Development Agreements and shall be subject to the internal and external auditing procedures of the Organization. Funds held in trust by FAO that are subject to national implementation shall be expended in accordance with the national regulations and rules of the implementing government and shall be subject to certification by the responsible national authorities, provided that the Director-General shall satisfy himself before entering into the agreement with the government that such regulations and rules are consistent with the Financial Regulations of the Organization and provide adequate controls over the expenditure of the funds. These projects under Partnership in Development Agreements shall be subject to audit at least once a year by an independent auditor appointed with the agreement of both the government concerned and the Organization in accordance with the respective agreements.

6.9 Reserve Funds may be established by the Conference.

6.10 There shall be established:

1. an Information Products Revolving Fund to which shall be credited the proceeds of sales of information products and the revenue from advertising in and sponsorship of such products, except that where extrabudgetary funds are used to finance those information products, the proceeds of sales may be credited to such funds. The Fund shall be used only for the following purposes:
1. to meet the direct costs of reproducing those information products for the sale of which there is a demand or reproducing new information products;
2. to pay, from within the resources available to the Fund, the direct costs, including costs of human resources and equipment, not covered by the Programme of Work and Budget, required for the sale and marketing of all such information products; and
3. to credit the originating divisions with such proportion of the proceeds credited to the Fund, up to 20 percent thereof, as may be determined by the Director-General, to be utilized within the biennium in which it is credited.

Any balance at the end of each financial period in excess of such sums as may be approved by the Finance Committee to cover commitments in respect of expenditures proposed by the Director-General for the following biennium shall be transferred to Miscellaneous Income.

2. a Revolving Fund for FAO Products and Related Services other than Information Products to which shall be credited the proceeds of sales of such products as well as proceeds derived from licensing and other arrangements for their use, except that where extrabudgetary funds are used to finance the development of such products, such proceeds may be credited to such funds. The Fund shall be used only for the following purposes:
1. to meet the direct costs of maintaining and further developing such products and making them widely available, and for developing new products;
2. to pay for direct costs of the production, sale and marketing of all such products, and protection of the property rights of these products.

Any balance at the end of each financial period in excess of such sums as may be approved by the Finance Committee to cover commitments in respect of expenditures proposed by the Director-General for the following biennium shall be transferred to Miscellaneous Income.

6.11 There shall be established:

1. a Capital Expenditure Account, which will be used for the purpose of managing activities which involve capital expenditure, defined as being:
1. expenditures on tangible or intangible assets with a useful life in excess of FAO's financial period of two years;
2. which generally require a level of resources which cannot be funded within the appropriation for a single biennium.
2. the source of funds will be:
1. Regular Programme Appropriations approved by Conference;
2. voluntary contributions;
3. recoveries from charges to users for the delivery of capital investment services.
3. the use of the Account will be authorized under Chapter 8 through approval of the Appropriations Resolution by Conference (Financial Regulation 4.1) or through the application of Financial Regulation 4.5 as regards budgetary transfers.

the balance on Chapter 8 of the budget at the end of each financial period shall be transferred to the Capital Expenditures Account for use in a subsequent financial period.

6.12 There shall be established:

1. a Security Account, which shall be used for the purpose of managing activities which involve security expenditure defined as being:
1. expenditures on Headquarters security provisions;
2. expenditures on Field security provisions to ensure in particular the Organization's participation in the UN security management system and compliance with its provisions for field security;
2. the source of funds shall be:
1. Regular Programme Appropriations approved by the Conference;
2. voluntary contributions;
3. expenditures of a capital nature, defined as expenditures with a useful life in excess of FAO's financial period of two years that also meet the definition of security expenditures as per sub-paragraph (a) above, shall be funded from the Security Account;

the balance of funds in Chapter 9 of the budget at the end of each financial period shall be transferred to the Security Account for use in a subsequent financial period.

Regulation VII
Other Income

7.1 Contributions from Associate Members and all receipts other than:

1. contributions from Member Nations to the budget;
2. direct refunds of expenditures made during the financial period;
3. advances by Member Nations to the Working Capital Fund or deposits to Trust and Special Funds and other receipts directly related to those funds;
4. proceeds of sales of information products and the revenue from advertising in and sponsorship of such products, and proceeds of sales of FAO products and related services, other than information products, developed by FAO, and proceeds derived from licensing and other arrangements for their use

shall be classed as Miscellaneous Income, for credit to the General Fund. Interest or other income derived from any Trust or Special Fund accepted by the Organization shall be credited to the fund to which it relates, unless provided for otherwise by the terms of the applicable Trust or Special Fund agreement.

7.2 Moneys accepted for purposes specified by the donor shall be treated as Trust or Special Funds under Regulation 6.7.

7.3 Moneys accepted in respect of which no purpose is specified shall be treated as Miscellaneous Income and reported as "Gifts" in the accounts of the General Fund.

7.4 Miscellaneous Income shall be estimated for each financial period. If the actual Miscellaneous Income for such period either exceeds or is less than the estimate, such excess or such shortfall shall form a part of the surplus or deficit of that financial period.

Regulation VIII
Custody of Funds

8.1 The Director-General shall designate the bank or banks in which funds in the custody of the Organization shall be kept.

Regulation IX
Investment of Funds

9.1 The Director-General may invest moneys not needed for immediate requirements seeking, wherever practicable, the advice of an Advisory Committee on Investments composed of not less than three and not more than five members appointed by the Director-General from persons outside the Organization having substantial experience in the financial sector.The investment of moneys standing to the credit of any Trust Fund, Reserve or Special Account shall be subject to any directives of the appropriate authority.

9.2 At least once a year the Director-General shall include in the financial statements submitted to the Finance Committee a statement of the investments currently held.

9.3 Income from investments shall be credited to the fund or account from which the invested moneys derive unless otherwise provided in the regulations, rules or resolutions relating to that fund or account.

Regulation X
Internal Control

10.1 The Director-General shall:

1. Establish detailed financial rules and procedures in order to ensure:
1. effective financial administration and the exercise of economy; and
2. effective custody of the physical assets of the Organization;
2. Except where advance or progress payments are specifically provided for in the contract, as may be required by normal commercial practice and the interests of the Organization, ensure that all payments are made on the basis of supporting vouchers and other documents which show that services or goods have been received and have not previously been paid for;
3. Designate the officers, and other persons as appropriate, who may receive moneys, incur commitments or obligations and make payments on behalf of the Organization;
4. Maintain an internal financial control and internal audit which shall provide an effective current examination and/or review of financial transactions in order to ensure:
1. the regularity of the receipt, custody, and disbursement of all funds and other resources of the Organization;
2. the conformity of commitments or obligations and expenditures with the appropriations or other financial provisions voted by the Conference, or with the purposes, rules and provisions relating to the fund concerned; and
3. the economical use of the resources of the Organization.

10.2 Commitments or obligations shall not be incurred and payments shall not be made unless an appropriate authorization has been made in writing under the authority of the Director-General.

10.3 The Director-General may make such ex gratia payments as he deems to be necessary. A statement of such payments shall be submitted with the final accounts.

10.4 The Director-General may, after full investigation, authorize the writing off of losses of cash, supplies, equipment and other assets, other than arrears of contributions. A statement of all such losses written off during the financial period shall be submitted to the External Auditor with the final accounts.

10.5 The Director-General shall establish rules for the procurement of equipment, supplies and other requirements, including rules governing the invitation of tenders.

Regulation XI
The Accounts

11.1 The Director-General shall maintain such accounts as are necessary and shall prepare final accounts for each financial period showing:

1. The income and expenditure of all funds;
2. The status of appropriations, including:
1. the original budget appropriations;
2. any supplementary appropriations;
3. the appropriations as modified by any transfers;
4. credits, if any, other than the appropriations voted by the Conference; and
5. the amounts charged against the appropriations and against any other credits;
3. Statements of assets and liabilities at the close of the financial period. He shall also give such other information as may be necessary, to indicate the current financial position of the Organization.

11.2 Besides the final accounts for the financial period, the Director-General shall prepare, where the nature of the accounts so warrants, or in exceptional cases as decided by the Finance Committee, interim accounts at the end of each of the intervening years.

11.3 Appropriate separate accounts shall be maintained in respect of all trust funds, reserves and special accounts.

11.4 The final and any interim accounts of the Organization shall be presented in United States dollars. The accounting records may, however, be kept in such currency or currencies as the Director-General may deem necessary.

11.5 The final and any interim accounts shall be submitted to the External Auditor not later than 31 March following the end of the period to which they relate.

Regulation XII
External Audit

Appointment

12.1 An External Auditor, who shall be the Auditor-General (or person exercising an equivalent function) of a Member Nation, shall be appointed in the manner and for the period decided by the Council.

Tenure of office

12.2 If the External Auditor ceases to hold the office of Auditor General (or equivalent function) in his own country, his tenure of office as External Auditor shall thereupon be terminated and he shall be succeeded as External Auditor by his successor as Auditor-General. The External Auditor may not otherwise be removed during his tenure of office except by the Council.

Scope of audit

12.3 The audit shall be conducted in conformity with generally accepted common auditing standards and, subject to any special directions of the Finance Committee, in accordance with the Additional Terms of Reference set out in Annex I to these Regulations.

12.4 The External Auditor may make observations with respect to the efficiency of the financial procedures, the accounting system, the internal financial controls and, in general, the administration and management of the Organization.

12.5 The External Auditor shall be completely independent and solely responsible for the conduct of the audit.

12.6 The Finance Committee may request the External Auditor to perform certain specific examinations and issue separate reports on the results.

Facilities

12.7 The Director-General shall provide the External Auditor with the facilities he may require in the performance of the audit.

12.8 For the purpose of making a local or special examination or of effecting economies of audit cost, the External Auditor may engage the services of any national Auditor-General (or person exercising an equivalent function) or commercial public auditors of known repute or any other person or firm who, in the opinion of the External Auditor, is technically qualified.

Reporting

12.9 The External Auditor shall issue a report on the audit of the financial statements and relevant schedules, which shall include such information as he deems necessary in regard to matters referred to in Financial Regulation 12.4 and in the Additional Terms of Reference.

12.10 The External Auditor's reports shall be transmitted through the Finance Committee, together with the audited financial statements, to the Council in accordance with any directions given by the Finance Committee. The Council shall examine the financial statements and the audit reports and shall forward them to the Conference with such comments as it deems advisable. The report on any interim accounts shall be submitted to the Finance Committee.

Regulation XIII
Resolutions Involving Expenditures

13.1 Before taking any decision involving expenditures, the Council or any commission or committee appointed by the Council or the Conference shall have before it a report from the Director-General on the administrative and financial implications of the proposals.

Regulation XIV
Delegation of Authority

14.1 The Director-General may delegate to other officers of the Organization such authority as he considers necessary for the effective implementation of these Regulations.

Regulation XV
General Provisions

15.1 These Regulations shall be effective from the beginning of the financial period following their approval by the Conference.

15.2 These Regulations may be amended by the Conference in the same manner as provided for amendments of the General Rules of the Organization (see Rule XLVIII).

Annex I

Additional Terms of Refernce Governing External Audit¹

1. The External Auditor shall perform such audit of the accounts of the Organization, including all Trust Funds and special accounts, as he deems necessary in order to satisfy himself:

1. that the financial statements are in accord with the books and records of the Organization;
2. that the financial transactions reflected in the statements have been in accordance with the rules and regulations, the budgetary provisions and other applicable directives;
3. that the securities and moneys on deposit and on hand have been verified by certificate received direct from the Organization's depositaries or by actual count;
4. that the internal controls, including the internal audit, are adequate in the light of the extent of reliance placed thereon;
5. that procedures satisfactory to the External Auditor have been applied to the recording of all assets, liabilities, surpluses and deficits.

2. The External Auditor shall be the sole judge as to the acceptance in whole or in part of certifications and representations by the Director-General and may proceed to such detailed examination and verification as he chooses of all financial records including those relating to supplies and equipment.

3. The External Auditor and his staff shall have free access at all convenient times to all books, records and other documentation which are, in the opinion of the External Auditor, necessary for the performance of the audit. Information classified as privileged and which the Director-General (or his designated senior official) agrees is required by the External Auditor for the purposes of the audit and information classified confidential shall be made available on application. The External Auditor and his staff shall respect the privileged and confidential nature of any information so classified which has been made available and shall not make use of it except in direct connection with the performance of the audit. The External Auditor may draw the attention of the Finance Committee to any denial of information classified as privileged which, in his opinion, was required for the purpose of the audit.

4. The External Auditor shall have no power to disallow items in the accounts but shall draw to the attention of the Director-General for appropriate action any transaction concerning which he entertains doubt as to legality or propriety. Audit objections to these or any other transactions arising during the examination of the accounts shall be immediately communicated to the Director-General.

5. The External Auditor shall express and sign an opinion on the financial statements. The opinion shall include the following basic elements:

1. the identification of the financial statements audited;
2. a reference to the responsibility of the entity's management and the responsibility of the auditor;
3. a reference to the audit standards followed;
4. a description of the work performed;
5. an expression of opinion on the financial statements as to whether:
• the financial statements present fairly the financial position as at the end of the period and the results of the operations for the period;
• the financial statements were prepared in accordance with the stated accounting policies; and
• the accounting policies were applied on a basis consistent with that of the preceding financial period;
6. an expression of opinion on the compliance of transactions with the financial regulations and legislative authority;
7. the date of the opinion;
8. the external auditor's name and position; and
9. should it be necessary, a reference to the report of the External Auditor on the financial statements.

6. The report of the External Auditor to the Conference on the financial operations of the period should mention:

1. The type and scope of his examination.
2. Matters affecting the completeness or accuracy of the accounts, including where appropriate:
1. information necessary to the correct interpretation of the accounts;
2. any amounts which ought to have been received but which have not been brought to account;
3. any amounts for which a legal or contingent obligation exists and which have not been recorded or reflected in the financial statements;
4. expenditures not properly substantiated;
5. whether proper books of accounts have been kept; where in the presentation of statements there are deviations of material nature from the generally accepted accounting principles applied on a consistent basis, these should be disclosed.
3. Other matters which should be brought to the notice of the Finance Committee, such as:
1. case of fraud or presumptive fraud;
2. wasteful or improper expenditure of the organization's money or other assets (notwithstanding that the accounting for the transaction may be correct);
3. expenditure likely to commit the Organization to further outlay on a large scale;
4. any defect in the general system of detailed regulations governing the control of receipts and disbursements or of supplies and equipment;
5. expenditure not in accordance with the intention of the Conference after making allowance for duly authorized transfers within the budget;
6. expenditure in excess of appropriations as amended by duly authorized transfers within the budget;
7. expenditure not in conformity with the authority which governs it.
4. The accuracy or otherwise of the supplies and equipment records as determined by stocktaking and examination of the records.
   In addition, the reports may contain reference to:
5. Transactions accounted for in a previous year concerning which further information has been obtained or transactions in a later year concerning which it seems desirable that the Finance Committee should have early knowledge.

7. The External Auditor may make such observations with respect to his findings resulting from audit and such comments on the Director-General's financial report as he deems appropriate to the Finance Committee or to the Council or to the Director-General.

8. Whenever the External Auditor's scope of audit is restricted, or whenever he is unable to obtain sufficient evidence, the External Auditor shall refer to the matter in his opinion and report, making clear in the report the reasons for his comments, and the effect on the financial position and the financial transactions as recorded.

9. In no case shall the External Auditor include criticism in his report without first affording the Director-General an adequate opportunity of explanation on the matter under observation.

10. The External Auditor is not required to mention any matter referred to in the foregoing which, in his opinion, is insignificant in all respects.

1 See Financial Regulation 12.3.