C 2001/5


CONFERENCE

Thirty-first Session

Rome, 2 - 13 November 2001

AUDITED ACCOUNTS
FAO 1998-99

Table of contents


FINANCIAL STATEMENTS

Contents

Opinion of the External Auditor on the Financial Statements

Certification of Financial Statements

Statement of Income and Expenditure and Changes in Reserves and Fund Balances

Statements of Assets, Liabilities, Reserves and Fund Balances

Statement of Cash Flow

Status of Regular Programme Appropriations

Notes to the Accounts

Schedule of Assessed Contributions Outstanding for the Regular Programme

Status of Projects Funded under the Technical Cooperation Programme against 1998-99 Project Appropriation

Status of Projects Funded under the Technical Cooperation Programme against the 1996-97 Project Appropriation

REPORT OF THE EXTERNAL AUDITOR

 


CONTENTS

OPINION OF THE EXTERNAL AUDITOR ON THE FINANCIAL STATEMENTS

CERTIFICATION OF FINANCIAL STATEMENTS

STATEMENT OF INCOME AND EXPENDITURE AND CHANGES IN RESERVES AND FUND BALANCES

STATEMENT OF ASSETS, LIABILITIES, RESERVES AND FUNDS

STATUS OF CASH FLOW

STATUS OF REGULAR PROGRAMME APPROPRIATIONS

NOTES TO THE ACCOUNTS

SCHEDULE OF ASSESSED CONTRIBUTIONS OUTSTANDING FOR THE REGULAR PROGRAMME

STATUS OF PROJECTS FUNDED UNDER THE TECHNICAL COOPERATION PROGRAMME

AGAINST 1998-99 PROJECT APPROPRIATION AT 31 DECEMBER 1999

STATUS OF PROJECTS FUNDED UNDER THE TECHNICAL COOPERATION PROGRAMME

AGAINST 1996-97 PROJECT APPROPRIATION AT 31 DECEMBER 1999

 


FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS

FINANCIAL STATEMENTS 1998-99


OPINION OF THE EXTERNAL AUDITOR

My staff audited the accompanying financial statements numbered I to IV, the supporting schedule and status reports and the notes numbered 1 to 27 to the financial statements of the Food and Agriculture Organization of the United Nations for the financial period ended 31 December 1999. These financial statements are the responsibility of the Director-General of the Food and Agriculture Organization. My responsibility is to express an opinion on these financial statements based on the audit.

The audit was conducted in accordance with the Common Auditing Standards of the Panel of External Auditors of the United Nations, the Specialized Agencies and the International Atomic Energy Agency. These standards require that the audit be planned and carried out to obtain reasonable assurance that the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and evaluating the overall financial statement presentation.

As a result of this audit, I am of the opinion that the financial statements present fairly the financial position at 31 December 1999 and the results of the operations for the period then ended; that they were prepared in accordance with the Organization's stated accounting policies which were applied on a basis consistent with that of the preceding period, except for the changes, with which I concur, detailed in paragraphs 21 to 23 of my attached long form report; and that the transactions were in accordance with the Financial Regulations and legislative authority.

Pierre JOXE
Premier Président de la Cour des Comptes
de la République Française
External Auditor

27 February 2001

 


 

CERTIFICATION OF FINANCIAL STATEMENTS

 

The amounts shown in the
statements properly reflect
the recorded financial
transactions for the period:

 

___________________________

Approved:

 

_________________

Michael E. Ruddy
Consultant/Interim Director
Finance Division

Jacques Diouf
Director-General

February 2001

 


Statement I

STATEMENT OF INCOME AND EXPENDITURE
AND CHANGES IN RESERVES AND FUND BALANCES

For the biennium ended 31 December 1999
(US$ '000)

  Notes

Funds

Total

    General and Related Trust and UNDP 1998-99 1996-97
INCOME          
Assessment on Member Nations 4 637,323 - 637,323 629,446
Voluntary contributions 5 28,172 444,990 473,162 358,700
Funds received under inter-organisational arrangement 6 4,869 56,901 61,770 101,096
Jointly financed activities 7 24,382 - 24,382 25,302
Services rendered   10,325 - 10,325 5,552
Miscellaneous 8 65,255 16,424 81,679 63,965
Sundry 9 (12,085) - (12,085) 13,420
    758,241 518,315 1,276,556 1,197,481
EXPENDITURE          
Regular Programme   696,337 - 696,337 728,973
Projects   - 501,891 501,891 433,000
  10 696,337 501,891 1,198,228 1,161,973

EXCESS (SHORTFALL) OF INCOME OVER EXPENDITURE

  61,904 16,424 78,328 35,508
Redeployment and separation costs 3, 11 (10,576) - (10,576) -
Amortisation of after service liabilities 3, 20 (21,143) - (21,143) -
Staff related schemes 13, 20 (42,841) - (42,841) -
Provision for contributions 12 (15,279) - (15,279) 58,713
Deferred Income 3 (14,412) - (14,412) -
Transfer of Support Costs 3 - - - 1,874
NET EXCESS (SHORTFALL) OF INCOME OVER EXPENDITURE   (42,347) 16,424 (25,923) 96,095
Transfer of Interest to Donor Accounts 16 - (16,424) (16,424) -
Transfers from/(to) Reserves          
Working Capital Fund 21 (23,700) - (23,700) 700
Special Reserve Account 22 (25,154) - (25,154) 1,357
Fund balances, beginning of period   27,600 - 27,600 (70,552)
FUND BALANCES, END OF PERIOD   (63,601) - (63,601) 27,600

The accompanying notes are an integral part of the financial statements.

 


Statement II

STATEMENT OF ASSETS, LIABILITIES, RESERVES AND FUND BALANCES

As at 31 December 1999
(US$ '000)

   Notes

Funds

Tota
    General and Related Trust and UNDP 1998-99 1996-97
ASSETS          
Cash and term deposits   98,064 192,597 290,661 256,896
Investments 13 163,464 - 163,464 152,168
Contributions receivable 14 169,163 35,144 204,307 154,000
Less: Provision for delays of contributions 12 (169,163) - (169,163) (154,000)
Accounts receivable 15 55,389 - 55,389 39,537
    316,917 227,741 544,658 448,601
LIABILITIES          
Contributions received in advance 16 377 170,480 170,857 160,170
Unliquidated Obligations 17 39,177 71,005 110,182 59,387
Inter-fund balances 18 13,744 (13,744) - -
Accounts payable 19 54,352 - 54,352 25,956
Staff related schemes 20 161,366 - 161,366 125,436
Deferred Income 23 64,594 - 64,594 50,182
    333,610 227,741 561,351 421,131
RESERVES AND FUND BALANCES          

Working Capital Fund
21 23,756 - 23,756 49
Special Reserve Account 22 23,152 - 23,152 (179)
Fund Balances, end of period 24 (63,601) - (63,601) 27,600
    (16,693) - (16,693) 27,470
    316,917 227,741 544,658 448,601

The accompanying notes are an integral part of the financial statements.

 


Statement III

STATEMENT OF CASH FLOW

For the biennium ending 31 December 1999
(US$ '000)

  1998-99 1996-97
CASH FLOWS FROM OPERATING ACTIVITIES    
Net excess (shortfall) of income over expenditure (Statement I) (42,347) 96,095
Adjustment for interest receivable (25,829) (26,521)
  (68,176) 69,574
Increase in contributions receivable (50,307) 59,200
Increase in provision for contributions 15,163 (59,200)
Increase in accounts receivable (19,839) (4,794)
Increase in contributions received in advance 10,687 370
Increase in unliquidated obligations 50,795 (6,113)
Increase in deferred income 14,412 6,082
Increase in accounts payable 28,396 5,456
Increase in staff related schemes 35,930 (5,864)
  17,061 64,711
CASH FLOWS FROM INVESTING ACTIVITIES    
Increase in investments (11,296) (18,468)
  (11,296) (18,468)
CASH FLOWS FROM FINANCING ACTIVITIES    
Increase in Working Capital Fund 7 53
Decrease in Special Reserve Account (1,823) 488
Decrease in Support Costs - (1,900)
Decrease in provisions - (13,500)
Decrease in loans - (8,000)
Interest received 29,816 29,457
Interest paid - (359)
  28,000 6,239
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 33,765 52,482
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 256,896 204,414
CASH AND CASH EQUIVALENTS AT END OF PERIOD 290,661 256,896

The accompanying notes are an integral part of the financial statements.

 


Statement IV

STATUS OF REGULAR PROGRAMME APPROPRIATIONS

For the biennium ended 31 December 1999
(US$ '000)

Chapter  

Net Budget Appropriations

Other Credits

Original
Budget

Transfers

Modified
Budget

    Expenditure

Deferred Income (note 23)

Unutilised Balance

Modified Budget

Income

Unutilised Balance

1 General Policy and Direction 50,359 (800) 49,559       2,919 1,739  
2 Technical and Economic Programme 292,906 (6,600) 286,306 285,622   684 4,553 3,181 1,372
3 Development Support Programme 118,029 3,600 121,629 121,294   335 65,962 55,029 10,933
4 Technical Cooperation Programme 89,447 0 89,447 24,853 64,594 0 0 56 (56)
5 Support Services 57,496 1,500 58,996 59,640   (644) 8,632 6,644 1,988
6 Common Services 41,163 2,300 43,463 43,643   (180) 4,394 3,172 1,222
7 Contingencies 600 0 600 0   600 0 0 0
  TOTAL EFFECTIVE BUDGET 650,000 0 650,000 584,791
64,594
615 86,460 69,821 16,639
8 Transfer to Tax Equalisation Fund 91,780 (91,780)              
  Staff Currency Variance -     (10,509)   10,509      
    741,780 (91,780) 650,000 574,282 64,594 11,124 86,460 69,821 16,639

The accompanying notes are an integral part of the financial statements.

NOTES TO THE FINANCIAL STATEMENTS

1. THE ORGANIZATION

The Food and Agriculture Organization (the Organization), was established on 16 October 1945. Its headquarters are in Rome, Italy. The purpose of the Organization is to raise levels of nutrition and standards of living; secure improvements in the efficiency of the production and distribution of all food and agricultural products; better the condition of rural populations; and thus contribute toward an expanding world economy and ensure humanity's freedom from hunger.

The Organization's Programme of Work (Regular Programme) is approved by the Conference of Member Nations. The related budget appropriations voted are financed by annual contributions based on an assessment on Member Nations and Associate Members by the Conference. Unutilised appropriations at the close of the financial period are cancelled, except for the Technical Cooperation Programme (TCP) appropriation which remains available for obligations during the financial period following that for which the funds were voted.

Voluntary contributions for special purposes, which are consistent with the policies, aims and activities of the Organization, may be accepted by the Director-General and Trust and Special Funds established accordingly. In addition, the Organization receives funds under an inter-organizational arrangement with the United Nations Development Programme (UNDP) to participate as an executing agency for UNDP technical cooperation projects or act as implementing agency for UNDP funded projects executed by other executing agencies. Voluntary contributions and funds received include payment towards recovering certain costs relating to technical, managerial and administrative services (support costs) which are a necessary part of extra-budgetary projects.

In agreement with the main multilateral financing agencies for agriculture, the Organization provides investment support services under jointly financed missions to individual countries, for which it receives reimbursement of an agreed share of costs. The Organization also renders technical, management and administrative services to the UN/FAO World Food Programme (WFP) on a cost reimbursement basis.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Financial Period

The financial period is a biennium consisting of two consecutive calendar years.

Basis of Preparation

The financial statements are prepared under the historical cost convention and in accordance with applicable accounting standards.

Income

Income is recognised when the Organization becomes entitled to it with the exception of voluntary contributions and funds received under inter-organizational arrangement. This income is recognised proportionately with the degree of project activity completed as measured in terms of expenditure.

Expenditure

Expenditure is recognised as costs are incurred.

Equipment, Furniture and Vehicles

The cost of equipment, furniture and vehicles is fully expensed in the year of purchase.

Foreign currencies

The financial statements are expressed in US dollars. Income and expenditure in currencies other than US dollars are translated into US dollars at the UN operational rates of exchange which approximate the market rate in effect at the date of the underlying transactions. Assets and liabilities in currencies other than US dollars are translated at the UN operational rate of exchange in effect at 31 December 1999. Exchange differences are taken to the income and expenditure account.

Investments

Investments are stated at the lower of cost and market value determined on a total portfolio basis.

3. CHANGE IN ACCOUNTING PRESENTATION

During the financial period the Organization implemented a new accounting system as a result of which certain transactions and balances are no longer grouped or classified in the same way as the past. In addition, in order to follow better the applicable accounting standards the presentation of the accounts of the Organization has been changed as follows:

(i)     Voluntary Contributions and Funds under Inter-Organization Arrangements

Income from these sources is based on the amount of projects expenditure in accordance with the policy for recognising income described in Note 2 above. Previously, the calculation involved deducting from projects expenditure miscellaneous income (interest on donors unutilised cash balances).

(ii)     Redeployment and Separation Costs

Previously these staff costs were charged to the appropriation as expenditure. In view of Conference Resolution 7/97 (see note 11) the amount over and above the net budgetary appropriation approved for 1998-99 has been charged to the excess of income over expenditure for the biennium.

(iii)     Deferred Income

The unutilised appropriation for the Technical Cooperation Programme is no longer treated as a deduction from assessment income but as a charge to the General Fund.

(iv)     Support Costs

In the previous biennium the opening support costs balance of US$1.9 million was transferred to the General Fund and these transactions are now part of that Fund.

(v)     End of Service and Retirement Benefits

Previously the costs of after service medical care were charged to expenditure on a cash paid, rather than an accruals basis. The resultant unrecorded liability for After Service Medical Care is being amortised over 30 years.

(vi)     Staff Related Schemes

Staff fiduciary accounts were previously disclosed under Staff Related Schemes and are now reported under Accounts Payable (see notes 19 and 20).

(vii)     World Food Programme

The amount payable of $19.3 million to the World Food Programme, in respect of the investments held in respect of the Separation and Compensation Payments Schemes and After Service Medical Care, is no longer disclosed under FAO's Staff Related Schemes but under Accounts Payable as amounts owing to other UN agencies (see note 19).

4. ASSESSMENT ON MEMBER NATIONS

    1998/99   1996/97
1998/99 Regular Programme assessments     641,200
less:    Amount in respect of Tax Equalisation Fund   (2,500)   (2,200)

Discounts on Contributions received

  (977)   (3,411)

TCP Appropriation transfers

            -   (6,143)
    637,323   629,446

5. VOLUNTARY CONTRIBUTIONS

    1998/99   1996/97
(a)  General and Related Funds        

 Support Costs

  28,172   32,100

(b) Trust Funds and UNDP

       

 Donor countries

  256,739   242,844

 Donor institutions

  164,112   62,370

Multidonor projects

  24,139   21,386
    444,990   326,600
    473,162   358,700

6. FUNDS RECEIVED UNDER INTER-ORGANIZATIONAL ARRANGEMENT

    1998/99   1996/97
(a) General and Related Funds        
     Support Costs   4,869   16,296

(b) Trust Funds and UNDP

       
     Funds received under inter-organizational arrangement   56,901   84,800
    61,770   101,096

7. JOINTLY FINANCED ACTIVITIES

    1998/99   1996/97
FAO/World Bank Cooperative Programme     19,265

African Development Bank

  2,722   1,893

Asian Development Bank

  1,167   1,612

International Fund for Agricultural Development

  2,371   1,582

United Nations Capital Development Fund

  156   277

Others

       318        673
    24,382   25,302

8. MISCELLANEOUS

    1998/99   1996/97

(a) General and Related Funds

       

     Investment income

  49,423   15,800

     Bank interest

  9,405   4,921

     Bank interest payable

  -   (359)

     Lapse of Accrued liabilities

  4,795   6,663

     Other

  1,632   15,340
    65,255   42,365
         

(b) Trust Funds and UNDP Bank Interest

  16,424   21,600
    81,679   63,965

9. SUNDRY

    1998/99   1996/97
Government cash contributions     2,611

Information Products Revolving Fund

  2,061   1,661

Gains/(Losses) on exchange

  (17,353)   9,148

Sundries

  1,134            -
    (12,085)   13,420

10. EXPENDITURE

    1998/99   1996/97

(a) General and Related Funds:

       

     Staff salaries

  439,360   482,290

     Other human resources

  83,524   78,071

     Official travel

  49,762   29,170

     General operating expenses

  27,446   66,185

     Purchase of equipment

  49,420   29,471

     Sundries

  46,825   43,786
    696,337   728,973
         
    1998/99   1996/97
(b) Trust Funds and UNDP        

     Staff salaries

  112,286   186,200

     Other human resources

  72,714   17,600

     Official travel

  42,915   26,300

     General operating expenses

  26,234   27,900

     Purchase of equipment

  173,844   97,600

     Training

  25,662   43,300

     Contracts

  37,812   33,000

     Sundries

  10,424   1,100
    501,891   433,000
    1,198,228   1,161,973

The expenditure of the General and Related Funds above which amounts to $696.3 million includes $619.6 million in respect of the 1998/99 appropriation; $50.2 million in respect of 1996/97 TCP appropriation; $24.4 million in respect of Jointly financed activities; and $2.1 million in respect of the Information Products Revolving Fund.

11. REDEPLOYMENT AND SEPARATION COSTS

Conference Resolution 7/97 authorised the Director-General to spend up to $12 million for the purposes of meeting redeployment and separation costs over and above the net budgetary appropriations approved for 1998-99. The same resolution invited Members to also contribute voluntarily additional funds for this purpose and urged all Member Nations to pay their contributions promptly so as to reduce the burden on the accumulated deficit. As no voluntary contributions have been forthcoming, the related costs incurred have been charged to the General Fund.

12. PROVISION FOR CONTRIBUTIONS

    1998/99   1996/97
At 1 January 1998    

Assessment on Member Nations

  14,489   (58,713)

Government Cash Contributions

      790              -
    15,279   (58,713)

Provision no longer required

      (116)       (488)
At 31 December 1999   169,163   154,000

13. INVESTMENTS

    1998/99   1996/97

Compensation Plan

  17,334   17,800

Separation Payments Scheme

  64,838   80,600

After-Service Medical Care

  61,987   --

General Fund

  --   40,168

UN/FAO World Food Programme

    19,305     13,600
    163,464   152,168

The investments of the General and Related Funds are held by Northern Trust Company and managed by the Fiduciary Trust Company. The investments above have a market value of $244.1 million and include $19.3 million held on behalf of the UN/FAO World Food Programme.

14. CONTRIBUTIONS RECEIVABLE

    1998/99   1996/97
(a) General and Related Funds        
Assessment on Member Nations     136,685

Government cash contributions

  5,456   4,739

Working Capital Fund

  1,614   1,624

Special Reserve Account

     10,874      10,952
    169,163   154,000

(b) Trust and UNDP Funds

       

Voluntary contributions

    35,144               -
                               
    204,307   154,000

15. ACCOUNTS RECEIVABLE

    1998/99   1996/97
Accounts Receivable advances and prepayments   23,387   19,471
Other UN and non UN organizations   22,250   8,814
Accrued interest   2,113   6,131
Others   7,639   5,121
    55,389   39,537

16. CONTRIBUTIONS RECEIVED IN ADVANCE

    1998/99   1996/97
(a) General and Related Funds:        

Assessment on Member Nations

       377       2,270

(b) Trust and UNDP Funds:

       

(i) Voluntary contributions

  167,940   158,300

(ii) Funds received under inter-organizational arrangement

     2,540       (400)
    170,480   157,900
    170,857   160,170

Interest transferred to Trust Funds and UNDP donor accounts included above amounts to $16.4 million.

17. UNLIQUIDATED OBLIGATIONS

Unliquidated obligations include liabilities for the cost of personnel services incurred and contracts and purchase orders entered into at 31 December 1999. The increase in the amount outstanding at the end of the financial period is mainly attributable to an increase by some $44.9 million in the accrued expenditures of the Office of Special Relief Operations in respect of relief operations in Iraq.

18. INTER-FUND BALANCES

Inter-fund balances arise mainly from disbursements and reimbursements in the normal course of operations by the General Fund on behalf of Trust and UNDP Funds and vice versa.

19. ACCOUNTS PAYABLE

        1998/99      1996/97
Payroll accrual   -   7,090
Field disbursements   6,136   7,854
Other UN agencies   19,305   -
Pension and medical schemes   2,645   2,211
Staff fiduciary accounts   12,786   -
Others   13,480      8,801
    54,352   25,956

Staff fiduciary accounts

Staff fiduciary accounts represent funds related to the operation of the contributory medical and insurance arrangements for staff. The funds are used for related purposes such as settling claims received after the expiry of the medical and insurance contracts.

20. STAFF RELATED SCHEMES

    1998/99   1996/97
General and Related Funds        

Staff fiduciary accounts

  -   11,396

Separation Payments

  64,838   93,920

Compensation Payments

  17,334   18,139

Terminal Payments

  -   1,981

After Service Medical Care

      79,194               -
    161,366   125,436

Conference Resolution 10/99 approved, inter alia, that (i) any income generated from the investments held in respect of the Separation Payments Scheme and Staff Compensation Plan be applied to ensure the adequacy of those funds to extinguish the respective liabilities, (ii) should there be an excess in the investment income then this should in principle be earmarked for the After Service Medical Care liability (see note 25). The amount of the investment income earmarked to After Service Medical Care amounted to $42.8 million based on an actuarial review at 31 December 1999.

Separation Payments

Separation Payments are due to General Service category staff at Headquarters who are entitled to receive a separation payment equivalent to 1/13.5 of yearly salary for each year of service completed after 1 January 1975. Separation Payments are subject to actuarial review to ascertain the liabilities and recommend rates of contribution. The valuation method used is the projected unit cost method. The details of the last actuarial valuation as at 31 December 1999 are as follows:

    1999   1997

Principal actuarial assumptions to determine cost of benefits:

       

(i) Annual interest rate

  6.5%   8.5%

(ii) Future rate of salary inflation

  3.5%   5.5%

Actuarial present value of benefit obligation

  64.8   80.5

Compensation Payments

Compensation Payments are due to staff members and their dependants in case of death, injury or illness attributable to the performance of official duties and, in certain circumstances, to supplement the disability and survivors' pensions paid by the United Nations Joint Staff Pension Fund. Compensation Payments are subject to actuarial review to ascertain the liabilities and recommend rates of contribution. The valuation method used is the one-year cost method. The details of the last review as at 31 December 1999 are as follows:

    1999   1997
Principal actuarial assumptions to determine cost of expected claims:        

(i) Annual interest rate

  6.5%   8.5%

(ii) Annual cost-of-living increases in benefits

  3.0%   5.5%

Actuarial present value of expected claims

  17.3   17.9

After Service Medical Care

The After Service Medical Care Plan provides for worldwide coverage for necessary medical expenses of eligible former staff members and their dependants. After Service Medical Care is subject to actuarial review to ascertain the related liabilities and recommend rates of contribution. The valuation method used is the projected unit credit method. The details of the last review as at 31 December 1999 are as follows:

    1999   1997
(i) Interest rate     8.5%

(ii) Salary Inflation rate

  3.5%   5.5%

(iii) Medical Inflation rate

  5.0%   7.0%

Actuarial present value of expected claims

  188.8   195.1

Based on the above actuarial review the unrecorded liabilities for after service medical care at 31 December 1999 amounted to some $109.6 million (1997 - $195.1 million).

Terminal Payments

Terminal Payments relate to payment of accrued annual leave, repatriation grant, termination indemnity, the cost of repatriation travel and the removal of household goods for all eligible staff. Terminal Payments are subject to actuarial review to ascertain the related liabilities and recommend rates of contribution. The valuation method used is the aggregate cost method. The details of the last valuation as at 31 December 1999 are as follows:

    1999   1997
(i) Annual interest rate    

(ii) Future rate of salary inflation

  3.5%   5.5%

Actuarial present value of benefit obligation

  23.6   22.4

Based on the above actuarial review, the unrecorded liabilities for terminal payments at 31 December 1999 amounted to some $23.6 million (1997 - $20.4 million).

Pensions

The Organisation is a member of the United Nations Joint Staff Pension Fund (UNJSPF) established by the General Assembly of the United Nations to provide retirement, death disability and related benefits to staff of member organizations. The scheme is of the defined benefit type and the Organization's obligation is limited to specified contributions to the Fund.

21. WORKING CAPITAL FUND

    1998/99   1996/97
At 1 January 1998     696

Receipts from Member Nations

  7   53
Transfer from General Fund   23,700     (700)
At 31 December 1999   23,756         49

The purpose of the Working Capital Fund is to advance moneys on a reimbursable basis to the General Fund in order to finance budgetary expenditures pending receipt of contributions to the budget; finance emergency expenditures not provided for in the current budget; and make loans for such purposes as the Council may authorise in specific cases. The authorised level of the Working Capital Fund is $25 million in accordance with Conference resolution 15/91 of which the amount paid up is $23.7 million.

22. SPECIAL RESERVE ACCOUNT

    1998/99   1996/97
At 1 January 1998   (179)   690

Receipts from Member Nations

  75   488

Exchange differences on translation of foreign currencies

(17,353)

  9,148

Currency variance on staff standard costs

  10,509   1,495

Net transfer from/(to) General Fund

  30,100   (12,000)
At 31 December 1999   23,152       (179)

The purpose of the Special Reserve Account is to protect the Organization's Programme of Work against the effects of unbudgeted extra costs arising from adverse currency fluctuations and unbudgeted inflationary trends. The authorised level of the Special Reserve Account is set by Conference Resolution 13/81 at 5% of the effective working budget for the respective subsequent biennium. Net gains or losses on exchange in addition to the currency variance on staff standard costs are charged to the Special Reserve Account. The currency variance on staff standard costs represents the difference between staff costs expressed in US Dollars at the budget rate for the biennium (Lire 1690 to $1) and the UN operational rates at the time of payment.

23. DEFERRED INCOME

    1998/99   1996/97
At 1 January 1998   50,182   44,121

Add: 1998/99 Regular Programme assessment relating to TCP appropriation

  87,310   85,497

Less: Transferred to income in respect of expenditures incurred against:

       

(i) 1996/97 TCP appropriation

  (50,182)   (44,121)

(ii) 1998/99 TCP appropriation

  (22,716)   (35,315)
At 31 December 1999   64,594   50,182

24. FUND BALANCES, END OF PERIOD

    1998/99   1996/97
         

General Fund

  (63,601)   27,600

Information Products Revolving Fund

             -             -
    (63,601)   27,600

25. CONTINGENT LIABILITIES

FAO received an assessment for garbage collection tax from the Rome Municipality for 1995 of the Lire equivalent of $1.1 million representing an increase of 425% from the previous year. By Note Verbale of June 1995, FAO informed the Italian Permanent Representation of the impossibility of accepting such a request due to both legal and financial considerations. As of the end of 1999 the total garbage tax assessed on FAO amounted to $5.2 million which resulted in a contingent liability of $3.9 million since $1.3 million had already been accounted for. FAO has a legal obligation under provisions of relevant treaties to pay that portion of garbage collection tax that corresponds to the cost of the service rendered. Therefore, pending conclusion of an agreement with all parties involved, any amount charged by the Rome Municipality for garbage services rendered constitutes a potential liability for the Organization. Despite repeated efforts and discussions with Italian Authorities, the matter remains substantially unresolved.

26. FINANCIAL INSTRUMENTS

In November 1999, the Organization entered into a forward exchange contract for the purchase of its Euro requirements for the 2000/01 biennium. The total liability under this contract is $312 million payable in instalments of $13 million per month from January 2000 to December 2001. Based on the UN operational rate of exchange prevailing at 31 December 1999 (Euro 0.993 to $1), the dollar equivalent of the Euro to be purchased amounted to $296 million. The unrealised exchange difference at that date amounted to $16 million.

27. OTHER DISCLOSURES

Equipment, Furniture and Vehicles

The historical cost of fully expended FAO equipment, furniture and vehicles at the end of the biennium was as follows:

    1998/99   1996/97

General and Related Funds

  48,999   50,302

Trust and UNDP Funds

  101,915   104,027
    150,914   154,329

Voluntary Contributions-in-kind

The Headquarters premises in Rome are provided rent-free by the Host Country in accordance to the Headquarters agreement. It is estimated that the commercial rental value of the Headquarters and Field property is approximately $14.7 and $1.3 million per year respectively.

Non-convertible Currencies

At 31 December 1999, cash balances held in non-convertible currencies amounted to $3.0 million (1996/97 - $5.5 million).


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