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IX. Budget and Finance

The Council has learned with regret of the death of Mr. William A. Jump of the United States, a leading member of the Committee on Financial Control, in January, 1949, Mr. Jump was one of the founders of the Organization and a staunch believer in its ideals. He consistently served FAO, even during his last illness, and all those who were privileged to work with him are fully conscious of his whole-hearted devotion and tireless efforts in serving the Organization. The Council expresses its sorrow at the loss of a valued member and pays tribute to his memory.

1. Reports of the Committee on Financial Control

The Council has considered three reports of the Committee on Financial Control (CL 6/16, CL 6/17 and CL 6/26) on the Committee's activities since the last session of the Council, and has given particular attention to the following points:

  1. Contributions Outstanding

    The Council notes with appreciation the steps taken by the Director-General to secure payment of contributions in arrears. As negotiations are presently pending with regard to a number of such cases, the Council has agreed to postpone a more detailed consideration of the current status of contributions in arrears until the Committee on Financial Control is able to report thereon in more detail.

  2. Contribution by Saudi Arabia for 1948

    The Council approves the arrangement made by the Director-General, in consultation with the Government of Saudi Arabia, regarding that country's contribution for 1948. This was in pursuance of the recommendation of the Fifth Session of the Council, which decided that, inasmuch as Saudi Arabia joined FAO only in November 1948, payment of its full 1948 contribution would not be appropriate (Financial Regulation VII).

    Under the arrangement made by the Director-General, Saudi Arabia has paid, as its 1948 contribution, one-fourth of its normal annual contribution, or $1,250.

  3. Transfers in the 1948 Budget

    In conformity with Financial Regulation XIV (2) and (3), the Council has noted the transfers made by the Director-General either within Chapters of the Budget or from the Chapter for Contingencies. The Council requests that in future years a more detailed statement should be submitted on transfers from the Chapter for Contingencies and on the reasons for such transfers.

  4. Staff Assessment Plan

    The Council has agreed to defer consideration of the staff assessment plan until its November Session. Such a postponement will not involve undue delay since, in any case, the final decision rests with the Conference.

    Although the Council understands that the proposals submitted jointly by the Director-General and the Committee on Financial Control are intended to be in line with the plan already approved by the General Assembly of the United Nations, it requests that the plan be revised to include, if possible, desirable features of the United Nations plan such as provision for social equities in recognition of differing dependency status. This revised plan should be made available to the next session of the Council, together with information on the possibilities of making it retroactive for 1949. The Council also notes that should the plan come into force, it would be correct budgetary practice to include salaries in the budget at their gross levels.

2. Report of the Special Committee on Scale of Contributions and Currency Problems

The Council has received a report (CL 6/15) of its special Committee on Scale of Contributions and Currency Problems, which includes a proposed revision of the scale of contributions, and suggestions regarding a possible scheme whereby contributions of member countries might be paid at least partially in currencies other than United States dollars.

The Council wishes to commend the special Committee for its very comprehensive and valuable proposals, and recommends that the report be circulated to member governments with detailed explanation of the methods used in drawing up the proposed new scale, with the request that governments forward their views to headquarters not later than 15 September 1949. Thus the Committee will have time to consider the replies from governments and report its views thereon prior to the examination of the proposed new scale by the next session of the Conference.

3. Proposed Budget for the Fifth Financial Year

The Council has given detailed consideration to the Draft Budget submitted by the Director-General (CL 6/19), which is based upon his proposed Program of Work for 1950. Both have been calculated so as not to exceed an aggregate expenditure of $5,000,000.

In deciding to recommend this Draft Budget for consideration by the next Conference, the Council feels that while considerable improvement has been made in the presentation of the budget estimates, it would still appear desirable to supply more detailed information in subsequent budgets on proposed technical activities and their financial implications. In other words, information should be given that would better integrate the budget estimates within the proposed program of work. The Council also believes that it would be desirable to make available appropriate information on administrative cost, so that it would be possible to determine the proportion of the estimated budget to be allocated to administrative expenses.

The Council notes that no provision has been made for the continuation of certain activities which were the subject of much discussion at the last Conference, i.e. the Rome Library and the Legislative Service, which formerly were part of the International Institute of Agriculture. The Director-General has pointed out that the five-million-dollar limitation imposed upon his plan of expenditure has made it necessary to curtail the operational program he would have liked to submit, and therefore to suppress many desirable activities. On the basis of the information he has collected, the Director-General has come to the conclusion that the upkeep of the Rome Library and the continuation of the Legislative Service do not warrant a first priority. He would, however, have to point out to the Conference that any decision involving additional expenditures would have to be offset by corresponding economies, that is, by curtailing other budgeted activities.

The Council also suggests that the Yearbook of Agricultural Production and Trade should be published every year.

On the other hand, the Council notes that provision has been made for three sessions of the Council in 1950. The Council suggests that not more than two sessions should be held during that year, as there would be one Conference (and Council) session in November 1949 and another early in 1951, so that some savings might be possible under Chapter I.

Attention is also drawn to the fact that meetings of technical advisory committees, including the Technical Coordinating Committee, are rather expensive and of diminishing value, inasmuch as the Organization has now defined its activities and long-term objectives.

The Council agrees that consideration of thise issues is the function of the Conference and that the Council should confine itself to drawing the attention of member governments to them.

With regard to the income side of the Budget, the Council notes that the proposed scale of contributions, which will be before the next session of the Conference, would cover 100 percent of the expenditure budget as against the present scale of contributions which adds up to only 92 percent. It will, therefore, be open to the Conference to make appropriate decisions regarding the best methods for balancing the Budget, and this would presumably include consideration of the aggregate expenditure to be authorized for 1950.

The Council agrees that, in any event, the procedure adopted in previous years, of drawing upon the available cash surplus of preceding financial periods to cover income deficits, can not be continued much longer. There is a limit up to which such deficit financing can apply, and in the opinion of the Council, the limit will probably have been reached by the end of 1950.

The Council is also of the opinion that the next Conference should give direction to the Director-General on the level of expenditure to be assumed in drawing up the budget estimates for 1951, in the light of its action on the recommendations made by the Committee on the Scale of Contributions. It should be remembered that even if income and expenditure budgets are brought into line, it will not be possible for the program of work covered by the expenditure budget to be fulfilled if some member governments fail to pay the whole of their contributions.

With the foregoing observations, the Council recommends that the Draft Budget for 1950 as submitted by the Director-General be forwarded to member governments.

4. Audited Accounts for the Third Financial Year - 1948

The Council has received the Auditors' report on the Accounts of the third financial year, and notes with satisfaction that this report bears testimony to the efficient manner in which the funds of the Organization have been administered.

The Council recommends that the audited Accounts be approved by the Conference in the light of the following observations.

With reference to Exhibit II of the Accounts the Council draws attention to the fact that the last Conference adopted a revised text for Financial Regulation X, whereby “all receipts of money by the Organization (other than funds received for special purposes) shall be credited to the general revenue of the Organization and included in the accounts of the financial year in which they are received”. The Council therefore requests that an additional statement of income and expenditure during the third financial period be prepared for the next session of the Conference, including on the income side all contributions collected from member nations during 1948, even if the latter were payments in respect of previous years.

In the opinion of the Council, strict conformity with the revised regulation would make it possible to place before the Conference a simpler picture of the results of each financial year and would facilitate decisions regarding the funds of the Organization.

The Council also notes in the Auditors' report that 15 April, 1949 is quoted as being the date when the accounts were finally closed, instead of 10 April, 1949, as approved by the Fourth Session of the Conference (Financial Regulation XIV, 5). The Council suggests that this latter date should be adhered to.

With respect to investments, the Council notes that a proportion of the funds of the Organization have been invested in United States Treasury Bonds, maturing between 1964 and 1969. While some doubt is felt as to the advisability of investing in long-term securities, the Council notes that the funds thus invested are of a limited amount and will yield a rate of interest double that of other investments. The Council is also informed that these securities are negotiable on the market at face value.

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