ORGANIZATIONAL PERFORMANCE

19. It should be noted that while the Programme Implementation Report (PIR) draws information from the unaudited FAO financial accounts¹ and the underlying accounting records in setting out details of resources and expenditures, for the most part it is not intended to be an accounting document.

20. Information provided in this section of the report includes evolution of resources, the cost of field programme support, the extent of technical support provided to the field programme by FAO technical officers, a progress report on the implementation of FAO's language policy, personnel developments and summary information on outputs. Further analysis of the implementation of outputs specified for the technical programmes in the Programme of Work and Budget (PWB) 2000-01 is provided at programme level in the next section of the PIR on Summary of Programme Implementation. Detailed information on all of the outputs in the PWB 2000-01 and the status of their implementation has been placed on the FAO Internet site at http://www.fao.org/pir .

EVOLUTION OF TOTAL RESOURCES

21. Expenditure in 2000-01, as reported in the financial accounts for 2000-01 by source of funds, is presented in Table 2.1 under the accounting categories of General and Related Funds and Trust Funds and the United Nations Development Programme (UNDP):

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

TABLE 2.1. EXPENDITURE SUMMARY BY SOURCE OF FUNDS (US$ MILLION)

* Includes items such as the 2000-01 expenditure against the 1998-99 Technical Cooperation Programme (TCP) appropriation, adjusted by the unspent TCP appropriation from 2000-01 which can be spent in 2002-03, financial services provided to WFP, the expenditure of the Information Products Revolving Fund and government cash counterpart contributions to country offices.

22. Total expenditure in 2000-01 was US$1,304 million, US$105 million (8.7 percent) higher than 1998-99. Expenditure levels of the past two biennia are illustrated in Figure 2.1.

• Expenditure under General and Related Funds is primarily funded from the Regular Programme appropriation, which was constant in nominal terms. This expenditure declined 3.7 percent, partly on account of staff cost savings arising from favourable currency effects. Moreover, the Director-General's decision to cover US$8.4 million in staff redeployment and separation costs, advanced from the Working Capital Fund, effectively offset the surplus balance against the budget. The remaining components also show a decline of 5 percent for jointly funded investment activities, 6 percent for Trust Funds support cost reimbursements and 45 percent for UNDP support cost reimbursements.
• Under Trust Funds and UNDP, the main area of increased expenditure was emergency operations, which increased by 70 percent from US$175 million in 1998-99 to nearly US$325 million in 2000-01, largely as the result of a US$100 million increase to US$249 million in the Iraq Oil for Food Programme, and about a US$50 million increase in other emergency operations. Trust Funds expenditure (excluding emergency projects) increased slightly by about 1 percent, while UNDP project expenditure declined by 41 percent in 2000-01 compared with 1998-99.

23. The 2000-01 programme of work included the projected availability of resources from other income, which comprises voluntary contributions that are largely at the disposal of the Organization and managed closely with the regular budget appropriation. The inclusion of other income in the programme of work provides a more complete picture of the resources associated with the work being undertaken. However, changes in income versus the budgeted levels during programme implementation require corresponding changes in expenditures in order to conform to the approved budgetary appropriation, adding some uncertainty and complexity to the financial management of the budgetary appropriation.

24. Expenditures to implement the programme of work versus the final 2000-01 budget are shown in Table 2.2. Expenditure totalled US$705.5² million against a corresponding budget of US$725.2 million. Income earned was US$67.2 million against an income target of US$75.2 million, a shortfall of US$8 million. Overall net expenditure against the Regular Programme appropriation of US$650 million was US$638.4 million.

25. Significant shortfalls in income occurred under Major Programme 3.2: Support to Investment, mainly the result of FAO/World Bank Cooperative Programme income projections which did not materialize, Major Programme 3.3: Field Operations and Chapter 6: Common Services, where support cost reimbursements from Trust Funds and UNDP were less than projected. In many programmes, the shortfall in income reimbursements was mitigated by a positive staff cost variance and avoided the need for the transfer between chapters of the PWB, which in the past has often been required.

26. The staff cost variance is the difference between budgeted and actual staff costs in a biennium. For the 2000-01 biennium there was a positive staff cost variance of US$21.3 million. The main reasons for the positive variance were presented to the Finance Committee in September 2001 and indicated that the favourable result for the biennium arose from the combination of several distinct factors:

• higher than expected favourable exchange rates between the US dollar and the currencies in FAO duty stations outside headquarters, with the depreciation in local currencies against the US dollar not counterbalanced by local inflation adjustments;
• lower than budgeted salary increases in FAO duty stations, including headquarters general service salaries, which were dependent on decisions by the International Civil Service Commission (ICSC);
• a change in the accounting policy for terminal payment costs, which was adopted after the PWB 2000-01 was finalized;
• a lower biennial liability for after service medical coverage for the Organization than was budgeted in the PWB 2000-01.

27. Staff cost variance was closely monitored during the 2000-01 biennium and some additional divisional allotments for high-priority activities were provided in a planned fashion, mainly to the technical departments, when the estimated surplus warranted such action. However, as the staff cost variance was sensitive to matters outside the Organization's direct control, prudence was required in committing additional funds against a forecasted positive variance.

28. Most of the underlying causes of difference between the actual and standard unit costs of staff are beyond the control of the allottees and depend, for example, on exchange rates at non-headquarters locations, decisions of the International Civil Service Commission, and so on. Therefore, in the summary tables preceding each programme in the summary of programme implementation section of the PIR, information is provided on expenditure both before and after staff cost variance.

TABLE 2.2. BUDGETARY PERFORMANCE, 2000-01 (US$ 000)

29. The total of expenditures under the main chapters of the PWB are summarized in Figure 2.2. The technical work of the Organization accounted for 78 percent of expenditure in 2000-01, distributed as follows:

• 41 percent under Chapter 2: Technical and Economic Programmes
• 24 percent under Chapter 3: Cooperation and Partnerships
• 13 percent under Chapter 4: Technical Cooperation Programme

30. The share of expenditure between headquarters and the decentralized offices is shown in Figure 2.3. Headquarters accounted for 65 percent of total expenditures in 2000-01, down from 68 percent in 1998-99. Regular Programme funded field programme expenditures for the Technical Cooperation Programme (TCP) and the Special Programme for Food Security (SPFS) increased to 12 percent in 2000-01 from 10 percent in 1998-99 and FAORs increased to 9 from 8 percent. Regional Offices remained at 10 percent, Subregional Offices at 3 percent and Liaison Offices at 1 percent. As these figures show, headquarters remains the dominant source of expenditures for the Organization, despite the extensive decentralization that has taken place since 1994.

31. A breakdown of expenditure in relation to Chapter 2: Technical and Economic Programmes is shown in Table 2.3. The Major Programmes ended the biennium with a surplus of US$6.4 million, utilizing 97.8 percent of the resources approved in the PWB. The surplus would have been substantially higher, given the distribution of US$8.1 million of the staff cost variance to this chapter. However, once the magnitude of the positive staff cost variance became known in the latter part of the biennium, and in view of the wishes of the governing bodies to give priority to the technical and economic programmes, a substantial portion of the available funds was redirected to the technical programmes in Chapter 2. This had the result of reducing the surplus balance and, in the case of Major Programme 2.4: Forestry, resulted in the final expenditure exceeding the resource level of the programme of work.

TABLE 2.3. BUDGETARY PERFORMANCE FOR CHAPTER 2:TECHNICAL AND ECONOMIC PROGRAMMES, 2000-01 (US$ 000)

32. The final column of Table 2.3 shows expenditure under the field programme, which comprises all technical assistance and emergency assistance activities funded through extrabudgetary sources, and Regular Programme funded technical assistance and emergency projects under the TCP and SPFS. Attention is drawn to the distinction between extrabudgetary resources, which refer to all non-Regular Programme sources of funds and related expenditures in the financial accounts of the Organization, and the field programme, which refers to the expenditure relating directly to FAO's implementation of technical assistance projects. In this context, the World Health Organization (WHO) share of the Joint FAO/WHO Food Standards Programme (Codex Alimentarius) is part of extrabudgetary resources, but is not part of the field programme. Conversely, the TCP and the provision for the SPFS are funded from the Regular Programme but are included as part of the field programme.

33. The ratios of 2000-01 expenditure of the field programme and the Regular Programme funded programme of work for Chapter 2: Technical and Economic Programmes are shown in Table 2.4. Field programme expenditures were more than twice those of the programme of work. However, there were significant differences between the Major Programmes. Major Programme 2.1: Agricultural Production and Support Systems accounted for 70 percent of total field programme expenditures in 2000-01 and had the highest ratio, with field programme expenditure over five times that of the programme of work. It should be noted, however, that the ratio would fall to 2.5 if the effect of the Iraq Oil for Food Programme were excluded. Major Programme 2.4: Forestry, also had a relatively high ratio, with expenditure on the field programme 2.1 times that of the programme of work. On the other hand, expenditure on the field programme for Major Programme 2.2: Food and Agricultural Policy and Development was only about a third that of the programme of work. The ratio was also less than 1.0 for Major Programme 2.3: Fisheries.

Table 2.4. RATIO OF FIELD PROGRAMME AND PROGRAMME OF WORK EXPENDITURES UNDER CHAPTER 2:TECHNICAL AND ECONOMIC PROGRAMMES, 2000-01

* To avoid distorting the ratio, the Regular Programme funded programme of work for Chapter 2 comprises all Regular Programme expenditure excluding SPFS project delivery, which amounted to US$9.3 million in 2000-01. SPFS delivery is included under the column headed Field programme.

¹ FC 99/5, Financial Outturn of the 2000-01 Biennium

² Expenditure of US$705.5 million against the final 2000-01 budget compares with US$669.8 million reported as General and Related Funds expenditure in the draft financial accounts (see Table 2.1). The former figure comprises only those items of expenditure in the financial accounts that are chargeable to the 2000-01 Programme of Work and Budget. Specifically:

• it excludes US$24.0 million of 2000-01 currency gains on staff costs which are chargeable to the Special Reserve Account under Conference Resolution 13/81;
• it excludes US$1.9 million of expenditure incurred by the Information Products Revolving Fund as a separate fund is established for this purpose under Financial Regulation 6.9; and
• it adjusts the expenditure of the TCP so that the entire 2000-01 appropriation of Chapter 4 is assumed to be spent, since unutilized balances will remain available for obligations in 2002-03, in accordance with Financial Regulation 4.3.