The Council has examined the financial implications of the move to Rome in the light of the reports of the Director-General (CL 9/8 and CL 9/12), the Headquarters Advisory Committee (CL 9/9 and CL 9/11), and the Committee on Financial Control (CL 9/10), together with the revised financial estimates presented by the Director-General (CL 9/24) on the cost of removal and the costs of operating in Rome.
The Council stresses the desirability of reducing to the minimum the costs of transferring FAO's headquarters to Rome, and especially the costs in dollars. In particular, the Council considers that the Organization should not meet the costs of transferring to Rome the automobiles owned by members of the staff.
In the light of its critical examination of the Administration's estimates of the cost of transfer, and believing that the cost of installation of equipment for simultaneous interpretation, estimated at $43,500, should not be regarded as a charge to removal costs, the Council is of the opinion that approximately $1,250,000 will probably prove adequate to cover the costs likely to be incurred in 1951. Taking into account the decision of the Conference that the unspent balance of the second and third financial years (now estimated at approximately $420,000) should be used to defray in part the expense connected with the transfer of headquarters to Rome, a balance of approximately $800,000 will have to be provided from other sources.
The Council considers that the most practical way of obtaining this amount is for the Director-General to apply to the United Nations for a loan from its Capital Working Fund, to be repaid over a period of four years.
The Council therefore recommends that the Director-General should forthwith apply, through the Secretary-General of the United Nations, to the United Nations General Assembly for authority to be given to the Secretary-General to grant a loan of approximately $800,000 to FAO.
At the same time, the Director-General should take advantage of the very generous offer of the Italian Government to consider the possibility of making such a loan to FAO and should enter into negotiations with that government to obtain terms as favorable as possible. In the event of a loan being granted by the United Nations, it would then be unnecessary for FAO to take advantage of this further instance of the generosity of the Italian Government, which has already helped in many ways to facilitate the early transfer of FAO to Rome. If, however, the loan from the United Nations is not available, or if it is granted for a shorter period than four years, the Director-General should then take advantage of the offer of the Italian Government so that the repayment liabilities of the Organization, in respect of any sums borrowed, do not exceed $ 200,000 a year, whether the loan is provided wholly by the United Nations, partly by the United Nations and partly by the Italian Government, or wholly by the Italian Government.
The Council also recommends that the Director-General should pursue his negotiations with the Italian Government as far as possible short of final agreement so that the Conference in November 1950 can take a decision on the loan to be made and the source from which it should be obtained.
The report on the loan negotiations should be circulated to member governments in compliance with the resolution of the Fifth Session of the Conference.
Recurring Costs in Rome
The Council has also examined the costs of operating in Rome, and the savings likely to accrue as compared with the costs of operating in Washington. So far as the Council is able to estimate from the figures available, it considers that the savings likely to be achieved as a result of the transfer from Washington to Rome will be approximately $ 400,000 for a full year's operation. This estimate is based upon the assumption that the salaries and allowances of the internationally recruited staff will be reduced by 12 percent and the salaries and allowances of locally recruited staff will be kept at a rate of approximately 22 percent below the present Washington scale, with some provision for a flat allowance for semi-locally recruited staff. 3
The Council has also examined the Director-General's estimate of annual dollar requirements after the establishment of FAO headquarters in Rome and concludes that on the basis of an annual budget of $ 5,000,000 a sum of approximately $ 2,100,000 will be required in dollars.
The Council is unable to approve the Director-General's proposal to permit all international and semi-local staff to draw up to 20 percent of their salary in dollars, and 30 percent in the currency of their country of residence. In modification of such a proposal the Council considers that the following principles should apply: 4
3 Belgium, Brazil, Pakistan, and Yugoslavia reserve their position regarding the proposal to establish three separate classes of staff on different salary bases, with individual members of the different classes carrying out substantially similar duties.
4 Australia, Belgium, Brazil, India, and Yugoslavia reserve their position regarding the proposal to differentiate between nationals of hard and soft currency countries in regard to the percentage of salaries payable in dollars.
Nationals of hard currency countries will be entitled to receive up to 20 percent of their salaries in United States dollars and an additional 30 percent in United States dollars, if they so require. These amounts will be paid into the bank accounts of such staff members in their home countries.
The Director-General is authorized to apply the above conditions of salary payments to staff members who are permanent residents of hard currency countries (including those who have entered the United States on immigration visas) upon application and investigation of circumstances.
Nationals of soft currency countries
old staff (in the employ of the organization at the time of the move) will be entitled to receive up to 20 percent in dollars,5 upon justification of their established commitments in hard currency countries, and up to 50 percent in the currency of their home country less the percentage of dollars granted to them, if they so require, and
New staff will be entitled to receive up to 20 percent in the currency of their home country and an additional 30 percent in the same currency, if they so require.
All the remaining parts of salaries of staff members serving in Rome will be payable in lire.
The Council approves the remaining provisions of the Director-General's proposal concerning contributions to the Pension Fund, salary payments during home leave, education allowances, and terminal payments.6
Collection of Contributions
For the year 1951 the Council considers that contributions should be assessed and paid in United States dollars. For subsequent years, the Council considers that contributions should continue to be assessed in dollars. As far as payments are concerned, the Council has considered various schemes referred to it by the Headquarters Advisory Committee and the Committee on Financial Control for providing the dollars required by the Organization. It recommends that
Each member government should make its contribution in its national currency which, for the purposes of its FAO contribution, must be freely convertible into lire, the convertibility being the responsibility of the contributing government. However, each member government may be required to pay such percentage of its contribution in United States dollars as may be determined by the Conference from time to time.7
5 Australia and India reserve their positions regarding percentage of salary payable in dollars.
6 The representatives of France and Brazil record their objection to the payment of the same terminal payments to personnel resigning because of the move to Rome as to those who are terminated by the Organization.
7 The United States of America, Canada, Mexico, India, Pakistan, and the United Kingdom reserve their positions on this recommendation.
Budget and Accounts
The Council notes that Financial Regulation II provides that the budget and the accounts of the Organization shall be compiled in the currency of the country in which the Organization has its seat, and that similar reference is made in Regulation VIII (1).
The Council endorses the Director-General's recommendation that
to guarantee to the Organization the maximum amount of financial stability which is necessary for its world-wide activities,
to avoid the maintenance of records in multiple currencies and the increased administrative costs thereby entailed, and
to permit FAO to prepare the comparative financial statement which it is called upon to develop as one of the Specialized Agencies of the United Nations
the budget and accounts of the Organization should for the time being, continue to be maintained in United States dollars, and that the Financial Regulations should be amended accordingly.
The Council has examined the present financial situation of the Organization in the light of the report of the Committee on Financial Control, and also the Committee's proposal that the Director-General be requested to administer the program of the Organization so that expenditures in the current and succeeding financial year should not exceed in total the reasonably forseeable income during these two years.
The Council is impressed by the seriousness of the position, the importance of introducing maximum economies into the operations of the Organization during 1950, and the necessity for planning a budget for 1951 which not only makes appropriate provision for the first yearly instalment of the repayment of a loan necessary to remove the headquarters to Rome, but also for the avoidance of a deficit for the two-year period 1950–1951.
The Council recommends that, in reducing the staff to keep expenditures within foreseeable income the Director-General shall, wherever possible, subject to the technical qualifications required, utilize the existing staff of the Organization in carrying out the program of expanded technical assistance when such funds are made available, instead of recruiting additional staff for this new work. This should mitigate to some extent the reduction in staff which the Director-General will find inevitable as a result of the economies which he will feel compelled to undertake.
After considering all aspects of the problem, the Council recommends that the Director-General should forthwith review the 1950 budget and should adopt all possible measures of economy to ensure that the deficit at the end of the year is as small as possible. In this connection he should
endeavor to reduce expenditures with the object of not exceeding a ceiling of $ 4,800,000 expenditure by the end of the year;
take immediate action to terminate, so far as this can be done without prejudice to the Organization's essential activities, those members of the staff who, for various reasons, will not be transferred to Rome. Such action, while not involving any substantial saving during 1950 owing to the terminal and other payments due to the individuals concerned, will provide economies in 1951.
The Council recommends that in framing the budget for 1951 the Director-General should
while assuming that the budget of the Organization will continue to be $ 5,000,000, plan the expenditure so that it does not exceed the expected income of the Organization, and that he assume an income figure of $ 4,500,000;
prepare the budget in such form as to set out the additional activities which could be undertaken (either in the restoration of cuts involved in reducing the total expenditure to $ 4,500,000, or alternatively substituting other important services) if the actual income of the Organization were $ 5,000,000;
provide as a first charge in the budget for 1951 a sum of $ 200,000 to represent the first repayment instalment on such loans as may be necessary to finance the move to Rome;
provide as a second charge on the 1951 budget such sum as is necescessary to ensure that the Working Capital Fund does not fall below $ 1,500,000 at the end of 1951 (without regard to possible increase of the Working Capital Fund), the sum of $ 240,000 from the Pension Fund set-aside being used to reduce the 1950 deficit in accordance with such procedure as the Conference, on the recommendation of the Committee on Financial Control, may decide;
take full advantage in planning the 1951 budget of all economies deriving from the transfer to Rome, so as to ensure the maximum amount of technical work at the lower costs of operation at the new headquarters;
closely review all costs of the Organization, including administrative expenses, with a view to securing the greatest possible economies consistent with the maintenance of efficiency;
consider, in the adoption of such economies as may be necessary in framing the budget in accordance with this resolution, the desirability of maintaining activities and services of a general or regional character at the expense of those of value to one or two countries;
consider economies which might result from possible reductions in expenditure including, but not limited to, the following fields of activity which have been particularly referred to in the Council's deliberations:
Direct technical services, such economies as may be necessary being so planned as to minimize as far as possible any reduction in the agricultural work of the Organization:
prepare a detailed report, with the assistance of the Committee on Financial Control, on the finances of the Organization, and on the effects upon FAO activities of the reduction involved in a budget based upon the principles set out in this resolution, such report to be submitted to the Council and Conference, together with the proposed budget for 1951;
The Council, in endorsing the proposal of the Committee on Financial Control, recommends to the Conference the adoption of a permanent policy for carrying out the Organization's program of work in accordance with the approved budget for each financial year, but within the foreseeable income of that financial year. Any exception to the policy should be permitted only on direction of the Conference or such other authority as it may designate from time to time.
The Council further recommends that the Committee on Financial Control shall collaborate continuously with the Director-General and advise him in the carrying out of the above policy, and that the Committee shall be temporarily strengthened for this purpose by suitable nominees of the Governments of Australia, France, and Canada, without cost to the Organization. This Committee should meet in Washington as early as possible after the end of the present Council session.
The Committee on Financial Control shall also consider and propose for consideration of the next Conference the methods of securing outstanding contributions from member countries and suggest penalties to be applied in the case of countries whose contributions are substantially in arrears.
The Council further suggests that, if circumstances render it possible, the Chairman of the Council should make his experience available to the Committee on Financial Control, meeting in Washington this summer, and advise in the preparation of its recommendations on the financial position and policy of the Organization.
The Council further calls upon member governments:
to pay all arrears of contributions without further delay;
to pay their 1950 contributions as soon as possible;
to take special measures to ensure that their 1951 contributions are paid on the earliest possible date in that year;
to consider all other possibilities of assisting the Organization to carry out its work during the coming year.
Staff Pension Fund
The Council notes that following the authorization of the last Conference the Director-General has completed negotiations with the United Nations and has affiliated the FAO staff with the Joint Pension Fund of the United Nations as of 1 April 1950.
In accordance with Article 21 of the Joint Staff Pension Regulations, the Council appoints Dr. Henry H. Lichtenberg, Chief Medical Consultant of FAO, Washington, D.C., and Mr. B.K. Nehru (India) as members of the Staff Pension Fund Committee, and Miss Carol Laise (U.S.A.) and Mr. E. Perez-Cisneros (Cuba) as alternate members. The Council considers that it is necessary to take this action, reserved otherwise for the Conference, in order to enable the Staff Pension Committee of FAO to commence its functions immediately. Retroactive approval by the next Session of the Conference is requested.
Disposition of the Balance of the Pension Fund Set-Aside
The Director-General has reported the possibility of approximately $ 240,000 being available from the set-aside fund, after meeting the requirements on behalf of staff members who have joined the Pension Fund retroactively, providing for certain administrative expenditure incidental to joining the United Nations Pension Fund, and providing for a reserve of $ 30,000 for staff members terminating before the expiration of five years.
The Council recommends that the above balance of approximately $ 240,000 be used to reduce the 1950 cash deficit under such procedure as the Conference may decide on the recommendation of the Committee on Financial Control.
Contributions in Arrears
The Council notes that delay in the payment of governments' contributions has necessitated the liquidation of certain interest-bearing investments of the Organization and is also creating cash deficits. The Council is in agreement with the recommendation of the Committee on Financial Control that this matter should be especially called to the attention of all member governments whose contributions are in arrears. In addition, the Council agrees with the recommendations of the Director-General (CL 9/15) that the following steps should be taken:
that the United Nations be asked to include in its press releases on contributions information on the status of contributions for FAO;
that the Director-General, after obtaining legal advice regarding the interpretation of the Rules governing the rights of members whose contributions are in arrears, shall send the special communication recommended by the Committee on Financial Control to all FAO governments whose contributions are in arrears. The letter shall emphasize the responsibility of membership and shall also refer to the relevant section of the Constitution concerning loss of voting rights and to the Rule providing that Council members should not continue to hold office, or governments be eligible for election to the Council, if their contributions are in arrears for more than two years. The letters should also invite governments to inform the Director-General of their plans for paying their arrears of contributions and when legislative action, if required, can be expected.
Salary Differentials and Per Diem Rates Due to Devaluation
The Council notes the action taken by the Director-General in compliance with the recommendations of the Fifth Session of the Conference on application of minus salary differentials and reduction of per diem rates due to devaluation. It also notes with approval that the per diem rates of the Organization are now in conformity with those of the United Nations and most of the other specialized agencies, and that the list of areas to which reduced rates apply will be kept under constant review and amended as and when circumstances require.
Transfers in the 1949 and 1950 Budgets
The Council approves the between-chapter transfer in the 1950 budget reported by the Director-General, noting that this transfer results from the action of the Fifth Session of the Conference suggesting the transfer of the Internal Auditor from the Administrative Division to the Director-General's Office. The Council also notes the within-chapter transfer reported by the Director-General through the Committee on Financial Control, referring to certain rearrangements within the budget of the Rural Welfare Division. Furthermore, the Council notes the within-chapter transfers in the 1949 budget as reported by the Director-General.
The Council notes the report of the Director-General (CL 9/15) on the status of his negotiations with the United Nations made at the request of the Fifth Session of the FAO Conference concerning the time and manner of FAO's joining the United Nations Administrative Tribunal which has been established to advise on appeals from staff members.
The Council notes the Director-General's report (CL 9/15) on negotiations being conducted by him concerning the selection of an external auditor under the joint system of audit of the United Nations and specialized agencies. It understands that FAO and UNESCO are now consulting with European member governments to ascertain whether they would be able to release their Auditors-General for this function.
Quarterly Statement of Expenditure
The Council notes the Director-General's quarterly statement of income and expenditure for the first quarter of 1950 (CL 9/23).
Format of 1951 Program of Work and Budget
The Council approves the joint proposal of the Director-General and the Committee on Financial Control on the format of the 1951 program of work and budget (CL 9/18). The Director-General is requested to keep this question under continuous review with the object of providing the Conference with as much information as possible on the cost of individual projects and the changes in grading of staff members in the different divisions. He is also requested to show in the 1951 budget those additional projects which could be undertaken if the Organization's income were $ 5,000,000 and not $ 4,500,000.
Working Capital Fund
After considering the recommendations of the Working Party on the Working Capital Fund and the report thereon submitted by the Committee on Financial Control, the Council concludes that it would be undesirable to increase the Fund at this time to the $2,500,000 level proposed. However, the Council refers the matter back to the Committee on Financial Control and requests that it work with the Director-General in the development of recommendations along the following lines for consideration at the next Conference:
that the Conference consider raising the level of the Working Capital Fund in 1951 to $ 1,750,000; 8
that the additional funds be advanced by member governments as recommended by the Working Party on the Working Capital Fund, the existing credits in that fund to be applied against the additional assessments of the respective member governments.
8 Australia, France, and India reserve their position on point (1) of this recommendation.
It is recognized that such action, if approved by the Conference, will not result in all member governments then sharing in the Working Capital Fund in exact proportion to the existing scale of contributions. It should be contemplated that any remaining excess credits of member governments will continue as part of the Fund, to be taken into consideration at a subsequent time when the permanent level of the Fund is determined. In the development of recommendations, due consideration should be given to make less burdensome the payments by governments having no credit or very small credits in the Working Capital Fund, by allowing them more than one year within which to meet their assessments.
With the following qualifications, the Council recommends to the Conference a revision of the Financial Regulations to carry out the recommendations of the Working Party on the Working Capital Fund:
In the preparation of such revised Regulations for review by the Committee on Financial Control, the Director-General is requested to provide that use of the Working Capital Fund to meet unforeseen or extraordinary expenditures or to cover deficits in the regular operating budget be restricted to cases of extreme emergency and then only with the prior approval of the Council.
Such Regulations should provide that withdrawals from the Working Capital Fund shall be reimbursed in such manner and under such conditions as the Conference may determine from time to time.
The Committee on Financial Control should examine the proposals of the Australian Government for a reserve for contributions in arrears. These proposals are contained in document CL 9/WP 3 Rev., and have not been considered in detail by the Council.
In recognition of the foresight, leadership, and outstanding contribution of David Lubin to international co-operation in the field of agriculture, the Council recommends that the FAO library, when it is consolidated and moved into the new building in Rome, be named “The David Lubin Memorial Library”.
The Council requests the Director-General to so inform members of the David Lubin family and, subject to the approval of the Conference, to consult with representatives of the Italian Government who are preparing the plans for Building A to assure an appropriate inscription or other permanent designation for that portion of Building A which will be provided for library facilities.
When deciding that in principle its regular sessions should henceforth be held biennially, the Fifth Session of the Conference noted that this decision would involve a revision of the Constitution, Rules of Procedure, and Financial Regulations of the Organization. It also noted that Conference procedures required clarification. With this twofold purpose in mind the Conference asked the Director-General to prepare for such a revision and report thereon to the Council.
The Director-General has submitted a detailed study of the various aspects of this revision, requesting the Council to give guidance on the policy issues which arise.
This matter has been given careful consideration by a subcommittee of the Council, and on the latter's suggestion the Council decides to appoint a drafting committee to be composed of the representatives of Cuba, France, the Netherlands, the United Kingdom, the United States of America, and Venezuela. It refers to this committee the memoranda submitted by the Director-General as well as the report of its own subcommittee as amended by the Council (CL 9/13, 17, 19, 20 and 28). The terms of reference of the committee will be to draft during the forthcoming months the actual texts of the amendments to be submitted for approval to the Special Session of the Conference next November. The Council further authorizes the Director-General to circulate these amendments to member governments, within the provisions of Rule XXIII, without prior submission to the Council, since the principles have been laid down by the Council (CL 9/28).
The Council agrees with the Director-General that the adoption of the system of biennial sessions of the Conference requires no additional delegation of powers from the Conference to the Council.
However, to meet the difficulty arising out of the fact that the Director-General may not be in a position to submit to a biennial session a fully detailed budget and program of work covering the two succeeding financial years, the Council recommends that the Director-General present to the Conference a detailed budget for the first financial year and as detailed a budget as possible for the second financial year. The latter would be supplemented midway during the biennial period by an operational budget and program of work showing in detail the Director-General's plans for spending the monies already made available by the Conference for the second financial year. This operational budget and program would be reviewed by the Council, which would thus have all the relevant information when considering the transfers of funds from Chapter to Chapter which might be required.
The Council also recommends that provision be made for the annual review of the world food situation and of national plans and programs being held in the interim years at an appropriate session of the Council. This will be in accordance with the responsibility of the Council for keeping the world food and agriculture situation under constant review.
The Council recommends that the terms of office of members of the Council be extended from three to four years, with one-half the members retiring at each regular session of the Conference. The Council has considered the means by which the transition to the new system from the present one could be made and recommends the adoption of the formula outlined in Annex B.
The Fifth Session of the Conference decided that the next regular session of the Conference should be held in April 1951, but empowered the Director-General with the approval of or on the direction of the Council to convene the Conference in regular session in November 1950, if there appeared to be matters of importance connected with the removal of headquarters to Rome which called for decision. The Council in considering the timing and character of the next session has had in mind not only this recommendation but also the difficulties inherent in the period of transition from annual to biennial sessions and in the transfer of headquarters. The Council considers that it is impracticable to hold a Conference in April 1951 since the arrangements for moving the headquarters would be well advanced by that time, if not already in progress. Therefore, the alternative would be to hold the regular session in November 1950.
The Council, however, is faced with considerations which make it impracticable to hold a full regular session in 1950. The changes that are taking place at present in the whole machinery of the Organization are such that the Director-General will not be in a position to submit in time all of the relevant information it would be entitled to expect at a regular session. Furthermore, there is no provision in the budget for such a session.
It will be necessary, however, to make further financial and administrative provision for carrying on the work of FAO during 1951, since the provisional arrangements made by the Fifth Session of the Conference would be inadequate to cover the whole of 1951 and in fact the financial regulations require the adoption of a budget by the Conference for that year.
In the light of these considerations, the Council concludes that a special ness session should be held in Washington on or about 6 November 1950. Such a session can be held in conference space provided gratis by the United States Government, so that the total cost can be kept within the available funds of $ 30,000. This implies a Conference composed of small delegations, not organized into the usual commissions, and not lasting longer than a week to ten days. The agenda for this Session of the Conference will be limited to the essential financial and administrative matters and to any other urgent questions which may arise requiring decisions by the Conference.
The Council approves the following provisional agenda for the Special Session:
Procedure and Cognate Matters
Election of Officers
Adoption of the Agenda of the Session
Program of Work and Budget for 1951
Any Necessary Business Connected with Technical Assistance
Financial Questions Requiring Urgent Decision
Constitutional and Procedural Questions
Amendments of Constitution, Rules of Procedure, and Financial Regulations
Admission of New Members
Appointment of Chairman of Council and Director-General, and Election of Council Members
Administrative Action Required by the Activities of FAO
Other Questions Requiring Urgent Decision
Date and Place of the Next Regular Session of the Conference
Items 1 and 8 cover normal matters of procedure.
Item 2. The general orientation of the work program and the general levels of expenditure for 1951 have had preliminary discussion by the Council and, in accordance with Financial Regulation I, paragraph 3, the Council delegates to its Committee on Financial Control consideration of the detailed budget which the Director-General will prepare. Subsequently, it will be circulated to member governments not less than 60 days in advance of the Special Session.
Item 3 provides for consideration of any administrative and budgetary matters connected with the technical assistance program that may be required at the time of the Special Session.
Under Item 4 certain financial matters will come up for consideration, such as the Working Capital Fund and the Scale of Contributions. In so far as the latter is concerned, the consideration at this session should be limited to the readjustments necessary for 1951 - the elimination of Step 7 in the Scale, the withdrawal of two members, and the assessment of new members. Any more fundamental revision of the Scale would have to be postponed until the next regular session.
Item 5 provides for consideration of the revision of the Constitution, Rules, and Regulations, as requested by the Fifth Session of the Conference. It also includes the question of the appointment of the Chairman of the Council and the Director-General, and the election of the Council members. These matters would have had to be dealt with had there been a regular session of the Conference in 1950, or in April 1951.
Item 7 allows for the submission by governments of any urgent problems which may arise in the interim period requiring urgent decisions by the Conference, for instance, commodity problems. It is understood that governments requesting the consideration of such items will submit them not less than 30 days before the opening of the Conference in order that delegates may receive instructions.
It will be for the Special Session to determine when the next regular session shall be held. The Council suggests that this should be not later than November 1951. This would be the first of the biennial sessions, since two full years will then have elapsed since the Fifth Session.
The Council notes the application for membership in FAO of the Hashimite Kingdom of the Jordan, of 21 December 1949, which in accordance with Rule XX has been circulated to member governments and placed on the agenda of the Special Session of the Conference, to be convened in November 1950.
The Council notes with regret the notice of withdrawal of Czechoslovakia of 27 December 1949, and the notice of withdrawal of Poland of 25 April 1950.
The Council considers it unnecessary to hold a full session prior to the Special Session of the Conference. It will, however, meet for two days in advance of the opening of the Conference to discharge its functions as required by the Constitution and Rules.
Immediately following the Special Session of the Conference, the Council will hold a full session at which it will conduct a review of the world food situation and commodity problems, and begin the review of the long-term program of FAO. At this time the Council will also take account of the decisions of the Conference regarding finance and the arrangements for the move to Rome.