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III. Administrative and Financial Questions

Financial Position of the Organization

The Council was gratified to note that during the last twelve months the financial position of the Organization had improved considerably. During 1950 the income of the Organization had been approximately $4,800,000 whereas the expenditure had been approximately $4,500,000, resulting in a surplus of about $300,000. Furthermore, the Council noted that during the first five months of 1951 the total contributions amounting to $2,603,770 exceeded those received during the same period in 1950 by nearly $300,000, a trend which the Council hopes will be continued.

Currency of Contributions

1. Utilization of Currencies

The Council noted that the Committee on Financial Control had examined the question of the use of currencies other than dollars. The Council recommends that the Director-General continue to use other currencies to the greatest extent practicable.

2. Dollar Requirements of the Organization

The Council noted that the Committee on Financial Control, with the concurrence of the Director-General, estimated that the annual dollar requirements of the Organization in 1952 and 1953 would not exceed $2,000,000.

3. Currency of Contribution Payments

The Council considered the amendment of Financial Regulation 5.5 recommended by the Committee on Financial Control8 and other proposals regarding the currency of contribution payments.

In an attempt to bridge the differences of opinion on this matter, the Council puts forward for the consideration of the Conference the following text, upon which an amendment to Financial Regulation 5.5 might be discussed:
“Annual contributions to the Budget shall be assessed in U.S. dollars. To the extent that the Director-General, after consulting with a representative number of Member Nations, finds that anticipated U.S. dollar income will be inadequate to meet estimated U.S. dollar expenditures of the Organization as determined by the Conference, each Member Nation shall contribute its proportionate share of its contribution in that currency. Each Member Nation may pay the remainder of its contribution in lire, or in its own currency which for the purposes of its FAO contributions must be freely convertible into lire, the convertibility being the responsibility of the contributing government. The applicable rate shall be the official rate of the lira to the dollar on the first business day in January of the year for which the contribution is assessed or the rate in effect on the day the payment is made, whichever is the higher.”
In presenting this amendment, the Council has no doubt that every member nation able to pay its contributions in U.S. dollars will continue to do so to the greatest extent possible.

8 The amendment recommended by the Committee on Financial Control reads as follows:

“5.5 Annual contributions to the budget shall be assessed in United States dollars. [In 1951, contributions shall be payable in United States dollars]. Each Member Nation shall make its contribution to the budget in its national currency which, for the purpose of its FAO contribution, must be freely convertible into lire, the convertibility being the responsibility of the contributing Member Nation, or at its option in United States dollars. The applicable conversion rate should be the official rate of the lira to the dollar on 1 January of the year for which the contribution is assessed or the rate ruling on the day the payment is made, whichever is the higher. Each Member Nation not paying its contribution in United States dollars may however, be required to pay such percentage of its contribution in United States dollars as may be determined by the Conference from time to time.

Working Capital Fund

1. Increase in Working Capital Fund

The Council, agreeing in principle with the recommendation of the Committee on Financial Control that the Working Capital Fund ultimately be $2,500,000, suggests that such a goal should be reached in stages. The Council does not recommend an assessment towards this goal for 1952 and 1953; rather it recommends that the Conference decide in accordance with Financial Regulation 6.5(b) that member governments' present surplus credits, as well as any such credit which might accrue from 1951 and 1952 surpluses, be retained in the Fund pending a decision on a new level and the resulting adjustments which would be required under Financial Regulation 6.2(b). The Council notes that if the Conference should decide to release the present surplus credits of member governments to them, the actual cash level of the Fund would be reduced to $1,372,634.21, since $377,365.79 in assessments required to bring the Fund up to $1,750,000 are yet to be advanced by member governments. The Council believes that this cash level is under the minimum required to ensure the financial stability of the Organization. With the retention of these credits the cash level of the Fund as of 15 May 1951 is $1,851,224.11. If there are surpluses in 1951 and 1952, the Fund can be augmented temporarily by such surpluses. The Council believes that with the payment of advances already assessed, and those to be assessed on new members, and the retention of the present surpluses, as well as any surpluses that may accrue in 1951 and 1952, a sizeable increase in the cash position of the Working Capital Fund can be accomplished without additional assessment within the next two years. In this connection, the Council draws the attention of member governments to the necessity of paying all advances due at the earliest possible date since the retention of the surplus credits of some member governments for maintaining or increasing the level of the Working Capital Fund can only be regarded as a temporary expedient.

2. Currency of the Working Capital Fund

The Council endorses the recommendation of the Committee on Financial Control that the Working Capital Fund should be kept in U.S. dollars, and that the following amendment be made to Financial Regulation 5.6:

“5.6. Advances to the Working Capital Fund shall be assessed in United States dollars and shall be payable in United States dollars.”

Scale of Contributions

The Council noted the report of the Special Committee on the Scale of Contributions

And requests the Director-General to circulate the report to member governments together with an additional appendix showing national and per caput incomes as published in the United Nations Statistical Papers, Series E, No. 1, upon which the calculations of the Committee were based.

The Council, while noting that the Committee had followed the instructions received, leaves the decision concerning the proposed scale to the Conference.

Utilization of the Payment of Contributions of New Members

1. The Council agrees with the Committee on Financial Control that the relevant sections of the Constitution, Rules of Procedures, and Financial Regulations, dealing with the assessment of governments whose application for membership has been accepted, are such that if a government delays presenting its Instrument of Acceptance of the Constitution as permitted in Rule XIX, paragraph 3, namely, for six months, the Organization would not only suffer financially but the assessment of contributions for the following year would not be on a 100 percent scale.

In order to overcome the undesirable result of the present provisions of the Constitution, Rules of Procedure, and Financial Regulations, the Council recommends the following:

  1. Amendments to be made to the Constitution as follows9:

    Article II (Membership)

    Paragraph 2

    The Conference may, by a two-third majority of the vote cast, decide to admit additional Members to the Organization, provided that a majority of the membership of the Organization is present. Membership shall [commence upon] become effective on the date [of deposit of an instrument accepting this Constitution as in force at the time] on which the Conference approves the application for membership.

    Article XVII (Budget and Contributions)

    Paragraph 3

    Each Member Nation shall upon [its acceptance of this Constitution] approval of its application pay as its first contribution a proportion, to be determined by the Conference, of the budget for the current financial year.

    9 Words in brackets to be deleted. New wording underlined.

  2. Amendments to be made to the Rules of Procedure, as follows:

    Rule XIX (Admission of New Members)

    Paragraph 1

    [Applications for admission to the Organization shall be addressed to the Director-General and shall be transmitted by him to Member Nations.] Any nation which desires to become a member of the Food and Agriculture Organization of the United Nations shall submit an application to the Director-General. This application shall be accompanied or followed by a declaration made in a formal instrument that the applicant accepts the obligations of the Constitution. This formal instrument shall reach the Director-General not later than the opening day of the Conference session at which the admission of the applicant is to be considered.

    Paragraph 2

    Any such application shall be transmitted immediately by the Director-General to Member Nations and shall be placed on the agenda of the next Conference session which opens not less than 30 days from the receipt of the application.

    Paragraph 3 [Paragraph 4]

    The first contribution of a new Member Nation shall be determined by the Conference [in connection with its acceptance of] at the time of its decision on the application for membership.

    Paragraph 4 [Paragraph 3]

    [Any decision by the Conference to accept an application shall be communicated to the applicant, which shall, as soon as possible and in any event within six months from its receipt, deposit with the Director-General an instrument of acceptance in accordance with paragraph 2 of Article II of the Constitution. If no such deposit is made, the application shall be considered as withdrawn, without prejudice to its resubmission to the Conference at a later session.]

    The Director-General shall inform the applicant nation of the decision of the Conference. If the application was approved, such notice shall also state the amount of the first contribution.

  3. Amendments to be made to the Financial REGULATIONS, as follows:

    Regulation V (Provision of Funds)

    5.8 Any nation admitted to membership in the Organization shall pay a contribution to the budget for the financial year in which the membership becomes effective. Such contribution shall be in an amount [equivalent to the remaining portions of its assessment for the year, prorated on a quarterly basis, beginning] determined by the Conference, and shall begin with the quarter in which the [instrument of acceptance was deposited, and computed on its percentage share of the scale of contributions] 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).

2. The Council agrees with the Committee on Financial Control regarding the utilization of the contributions of new members, in the year of their admission, received under the amended Article XVII, Paragraph 3, of the Constitution and Regulation V, Paragraph 5.8 of the Financial Regulations. It believes that the present procedure of placing such receipts in the General Fund is a sound one, as any surplus income at the end of the year will be credited to the Working Capital Fund in accordance with Financial Regulation 6.3 (d) and disposed of in due course in accordance with Financial Regulation 6.5 (b).

3. The Council also points out that these amendments will bring the FAO regulations more into line with those of the United Nations, in pursuance of the request of the Special Session of the Conference to that effect.

4. The Council suggests that the Director-General consider the advisability of informing all present applicants for membership in the Organization of the recommended constitutional and procedural amendments.

Utilization of Miscellaneous Receipts

The Council considers that the method followed by UN in handling miscellaneous receipts is a desirable procedure for FAO and should be adopted. Under the UN procedure, the amount of the appropriation is adjusted for estimated miscellaneous receipts for the coming year, and for supplementary appropriations, before the percentage contribution prescribed by the scale is applied to determine the amount of each individual member's assessment.

Accordingly, the Council recommends that the following amendments be made to the Financial regulations:

Regulation V (Provision of Funds)

5.2 In the assessment of the contributions of Member Nations, adjustments shall be made to the amount of the appropriations approved by the Conference for the following financial year in respect of:

  1. debits or credits in the Working Capital Fund resulting from the application of Financial Regulation 6.5 (a) or (b);

  2. estimated Miscellaneous Income for the year in respect of which the assessment of contributions is being made;

  3. supplementary appropriations for which contributions have not previously been assessed on the Member Nations.

Regulation VII (Other Income)

7.5 (a) Miscellaneous Income shall be estimated at the beginning of each financial year in connection with the formulation of the budget, and such estimated income shall be applied as an adjustment to the appropriation before the application of the scale of contributions for determination of Member Nations' assessment.

7.5 (b) If the actual Miscellaneous Income for the year either exceeds or is less than the Miscellaneous Income estimated for the adjustment above described, such excess or such shortfall shall be treated as a part of the operating surplus or deficit of that financial year, and shall be handled in accordance with Regulation 6.3 (b) and (d).

Financial Implications of the Conference's Decision on Date of Membership

As requested by the 1950 Special Session of the Conference, the Council has studied financial implications of the decision of the Conference regarding the interpretation of the date of membership, and finds that such an interpretation would result in the writeoff of an amount of $285,750, which is being carried on the books of the Organization as arrears of contributions for Colombia, Nicaragua, Panama, Peru, and Uruguay as detailed below:

Financial yearColombiaNicaraguaPanamaPeruUruguayTotal
First 1945/46$14,750$14,750$12,500$42,000
Second 1946–194739,750$3,75039,75033,000116,250
Third 194826,50026,50022,00075,000
Fourth 1949$2,50026,50029,000
Fifth 19503,00020,50023,500

If the Government of Peru does not deposit its Instrument of Acceptance before 31 December 1951, there will be a further write-off of $13,500 representing its contribution for the sixth financial year (1951). If, moreover, the Government of Peru does not deposit an Instrument of Acceptance with the Organization before the 1951 Conference session, the scale of contributions for 1952 and 1953 will not be on a 100 percent basis.

The Conference may therefore wish to give consideration to this matter at the appropriate time.

The Council endorses the proposal of the Committee on Financial Control that an amount of $5,592.15 appearing in the audited accounts and representing the unallocated shares of Colombia, Peru, and Uruguay in the funds turned over to FAO by the Interim Commission, be retained in the Working Capital Fund and be shared by all member nations which have as of 31 December 1951 paid their contributions in full for the first financial period, in the same ratio as their respective payments of contributions bear to the total contributions paid for that period.

Disposition of the Credits of Czechoslovakia and Poland in the Working Capital Fund

Noting that, in accordance with Financial Regulation 6.6 (b), the Director-General had withdrawn Czechoslovakia's share in the Working Capital Fund to meet part of its outstanding contributions

The Council requests the Director-General to take all possible steps to recover the balance of the outstanding contributions in arrears amounting to $141,291.50. In the case of Poland, the Council suggests that similar action be taken in due course.

Budget for 1952 and 1953

1. Income

In reviewing the draft budget proposed by the Director-General for financial years 1952–53, the Council observed that the Director-General had prepared a program for a total of $5,000,000 for each of these years, and had proposed, in addition, a contingency item of $525,000, representing a “reserve against unpaid and delayed contributions.” Inasmuch as this latter sum is a part of the budget, and is included in the total assessment of $5,500,000 which, if adopted, will be assessed against all of the member nations, the Council is of the opinion that the total budget should be presented in the usual budgetary form.

Accordingly, the Council requests the Director-General to prepare and submit to member nations, together with the draft budget proposed for 1952 and 1953, a supplement indicating the purposes for which the additional $525,000, when available, would be expended, and the order of priority.
Since it will be the responsibility of the Conference to decide the level of the assessment budget, the Council is of the opinion that it should also be left to the Conference to determine whether receipts over $5,000,000 shall be used for carrying out a supplementary program or shall accrue to the Working Capital Fund.

2. Expenditure

(a) With reference to the estimated expenditure given in the 1952 and 1953 budgets, the Council noted that the estimates included in Chapter I on sessions of the Conference and of the Council are tentative, as there is as yet no practical experience in the new headquarters in Rome on which close budgeting could be based. Accordingly, some savings may be made in this chapter which would be dealt with in accordance with the Regulations.

(b) A substantial amount of the estimated cost for documents appearing in Chapter III on Informational and Educational Services and Documents, is for Conference and Council documents. In a Conference year, a great part of the documents facilities will be used for Conference documents at the expense of the documents facilities for the technical Divisions.

The Conference may therefore wish to consider the documentation for future sessions with a view to reducing its size and range.

(c) The Council noted that many governments still have not adhered to the Convention on Privileges and Immunities. As a result, a number of staff members are still obliged to pay national income tax and are reimbursed by the Organization.

The Council accordingly draws the attention of the Conference to the desirability of urging member governments to adhere to the Convention and thus relieve the Organization of this expenditure.

(d) The Council noted the view of the Committee on Financial Control that the rate of appropriation for the Library in 1952 and 1953 may be lower than necessary to maintain efficient library service after it is fully and permanently established in its new quarters.

In this connection, the Council suggests that the Conference may wish to consider its policy regarding the maintenance and development of the Organization's library services in the future, taking into consideration the recommendation of the Working Party on the Program of Work and Associated Long-Term Problems contained in Paragraph 28 of the Working Party's Report.

Transfer of Headquarters and Internal Organization

The Council noted the interim report of the Director-General on the transfer of FAO's Headquarters from Washington to Rome and on internal organization.

It is understood that a more complete report will be circulated to member governments before the Conference session.

The Council commended the Director-General and the staff of the Organization for the efficient manner in which the transfer has been conducted. The Council also expressed its appreciation for the Italian government's generous assistance in facilitating the transfer and the installation of FAO in the present Building B, as well as for the work being carried out on Building A.

Nominations for Chairman of the Council and Director-General

The Council considered the Report of the Committee on Nominations for the Chairman of the Council and the Director-General, set up at the Tenth Session of the Council. The Council's recommendations will be submitted to the General Committee of the Conference in due course. In the meantime, the Council instructed its Chairman to communicate to member governments the decisions it had reached in respect to such nominations, in order to afford time for their consideration before the next regular session of the Conference in November 1951.

Expanded Technical Assistance Program

While noting that the Director-General has taken steps to ensure that FAO regular and Technical Assistance funds are being used respectively for the purposes for which they were provided, the Council will give further consideration to this matter at its next session in the light of information to be supplied by the Director-General.

Adoption by FAO of UN Salary, Allowance, and Leave System

The Council examined the information supplied by the Director-General on the proposed adoption by FAO of the UN Salary, Allowance, and Leave System, and agrees with the recommendation of the Committee on Financial Control that the Council sanction in principle the adoption of this scheme with a view to its coming into effect on 1 January 1952, subject to its being presented at the next Council session with a detailed analysis of the implications and repercussions of the scheme's adoption, together with a full statement of both short-term and long-term implications with regard to extra costs and savings. In particular the information should include statements showing how it is planned to transfer the present posts from the existing grades to the proposed new categories, and how the salaries of the staff in each division of the Organization would be affected by the adoption of the new system.

The required information should be submitted to the members of the Council well in advance of its Thirteenth Session.

The Council noted the action already taken by the Director-General in providing for the payment of education grants to (a) staff members sending their children to their home countries, and (b) staff members sending children under the age of 13 to “national” schools in the area where they are serving.

The Council recommends that the payment of transportation expenses once in a scholastic year for the outward and return journey of each child studying in his home country, as in effect in UN, should not be introduced by the Director-General until the next session of the Council has taken a decision on the whole question.

Similarly, the Council recommends that no further changes be made in the Staff Regulations of the Organization as far as they relate to the UN scheme, until the Council has finally decided this matter.
With regard to the system of limiting the education grant to staff members sending their children to “national” schools in the area where they are serving [part (b) above], the Council requests the Director-General to reconsider this matter so as to propose to the next Session a scheme which will avoid any discrimination arising from lack of certain “national” schools in the various areas where staff members may be called upon to serve.

Authentic Texts of the Constitution

The Council recommends to the Conference that the following additional Article be inserted in the CONSTITUTION :

Article XXI

“This Constitution has been approved in its English, French, and Spanish versions which shall be equally authentic.”
The adoption of this amendment will require formal approval of the French and Spanish texts of the CONSTITUTION by the Conference.

Amendments to the Rules of Procedure of the Council

The Council noted that as a result of the adoption of a biennial Conference system, certain minor amendments are required in the Council's Rules of Procedure. However, the Council decided to postpone making these amendments until after the next session of the Conference.

Amendments to the Financial Regulations

In pursuance of the request of the Special Session of the Conference to the Council, the Committee on Financial Control had reviewed the FINANCIAL REGULATIONS of the Organization and had recommended certain amendments.

The Council examined the proposed amendments and recommends their adoption by the Conference, with the exception of Regulation 5.5 which is discussed in the section entitled “Currency of Contributions” (page 24).

The proposed amendments are:

Regulation III (The Budget)

3.6 The Council shall prepare a report to the Conference on the estimates submitted by the Director-General. This report [which may contain alternative estimates] shall be transmitted to all Member Nations at the same time as the estimates.

Regulation VI (Funds)

6.7 [Subject to later approval by the Council and the Conference] Trust and Special Funds may be established by the Director-General to cover monies made available to the Organization for special purposes and such funds shall be reported to the Council. The purpose and limits of each such fund shall be clearly defined by the appropriate authority. Unless otherwise provided by the Conference, such funds shall be administered in accordance with the Financial Regulations of the Organization.

These proposed amendments together with other amendments to the Financial Regulations, as well as the reasons for divergence from UN regulations are shown in Appendix C, page 44.

Other Matters

1. The Council noted that:

  1. the Director-General had reported the establishment of a special fund (Farm Bureau Insurance Company);

  2. the Banca Commerciale Italiana had been designated as the depository of the Organization's funds in Italy;

  3. the Director-General had reported the Within-Chapter Transfers, Transfers to Contingencies Restricted, and Transfers from Contingencies in the 1950 budget;

  4. the Director-General had made shortterm investments of the Organization's funds, and expressed gratification that the anticipated income from these investments will amount to approximately $6,170 ;

  5. the Committee on Financial Control had amended its Rules of Procedure to be consistent with the introduction of biennial Conferences.

2. Format of Reporting Special Funds

Having examined the method of reporting of special funds proposed by the Director-General in consultation with the Committee on Financial Control, the Council approved the format used in the draft budget.

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