I have pleasure in submitting to the Council, through the Programme and Finance Committees, the Summary Programme of Work and Budget (SPWB) for the biennium 2006-07, which will serve to implement the first two years of the Council-approved Medium Term Plan. The reaction of the Council, as well as the pertinent advice from its Technical Committees, will guide the preparation of more detailed proposals in the full Programme of Work and Budget (PWB), to be considered by the FAO Conference in November.
This SPWB has been redesigned to fulfill Members’ expectations for a reduction in length of planning documentation, focusing on the main policy issues and resource implications. Building on these efforts, I hope that the Council will be able to encourage the Secretariat to substantially streamline the length and content of the full PWB 2006-07, in line with similar efforts of other organizations of the UN system.
A key feature of this SPWB is the identification of and response to internal and external factors that may have a major influence on budgetary, financial and operational performance in 2006-07. I draw your attention to two proposals that will help address specific financial and operational risks:
in the spirit of the guidance previously provided by the Council, to revise the treatment of forecasts of Miscellaneous Income in order to fully fund the budgetary appropriation until such time as the Organization returns to a stronger financial position; and
the creation of a new budgetary chapter on Security Expenditure to improve financial management, visibility and accountability for the security and safety of staff and assets.
Ongoing risk management in other areas complements these proposals - for example, the operationalization of the Capital Expenditure Facility. The search for efficiency savings also continues unabated, presently covering matters such as human resource management processes, identification of outsourcing and off-shoring opportunities, use of new publication, printing and distribution technologies, streamlining regional and country level administrative activities, savings in governance and higher support cost recoveries. Success in some of these areas will depend in part upon decisions by governing bodies.
Members will certainly recognize the evolving environment and the collective efforts to improve the Organization’s relevance and effectiveness. The decision of the Council at its last session to undertake an independent external evaluation of FAO could lead to strategic, programmatic and institutional changes after 2006-07. In the meantime, tangible progress is being made in a number of areas in full consultation with Members. The Organization is responding to the Independent Evaluation of Decentralization, strengthening the efficiency of the Technical Cooperation Programme, improving priority setting in the technical and economic programmes, mainstreaming auto-evaluation and applying the new programming model for non-technical programmes to extend results-based management processes in FAO. At the same time, due account must be taken of the momentum of UN system reform initiatives under way, including arrangements for closer cooperation at country level and more concerted action to support the implementation of the Millennium Development Goals.
This SPWB provides a high-level biennial financial plan based on the priorities already approved by the Council in the Medium Term Plan 2006-11. It is the first major opportunity to logically and rationally reconcile the demands Members place upon the Organization with the resources that the Conference will make available for 2006-07 through the budgetary appropriation. In response to the request from the last session of the Council, this document presents three resource “scenarios” for the next biennium: Real Growth (RG), Zero Real Growth (ZRG) and Zero Nominal Growth (ZNG).
I must unequivocally emphasize that the US$ 51.2 million, or 6.4% real reduction in the present biennium has already left several areas of the Organization’s substantive work, including its decentralized structure seriously under-funded. Successive budget reductions have resulted in significant under-investment in institutional infrastructure. Moreover, the intrinsic costs of serving Members and being a part of the United Nations family continue to escalate, such as the expenditure on security and safety of staff and assets. In the meantime, to be realistic, new efficiency savings beyond the present levels of US$ 120 million per biennium already implemented compared with 1994, cannot be expected to be a major source of savings in 2006-07. I must also stress that over the years, harsher budget decisions have been implemented at FAO when compared to other organizations.
Consequently, even a ZRG budget level in 2006-07 will fail to meet the expectations of many Members. While resources for regional policy advice and to the Finance Division to ensure adequate controls have been restored within ZRG, as requested by the Programme and Finance Committees, our activities at country level – the sharp end of putting our normative work into action - are nowhere near commensurate with the effective demand for FAO’s involvement.
For this reason, the RG scenario proposes an overall real increase of US$ 30.9 million. It is bolstered by US$ 8 million compared with the MTP to provide for additional capacity building in the application of international regulatory frameworks, for capital expenditure and for the safety and security of staff and assets.
The ZNG scenario implied the need to identify real cuts totaling US$ 43 million, based on current estimates of anticipated cost increases, i.e. an average reduction of 5.7 % for the biennium. The overall effect, when combined with the previous negative or stagnant growth, puts into serious question the capacity of the Organization to fulfill its mandate and meet the complex and varied needs of its Members.
The substantial erosion of the Organization’s budget over the past decade is illustrated by the fact that even the approval of a RG scenario would leave the Regular Programme some 16% below the inflation-adjusted level of resources in 1994. As is my firm duty as Executive Head, I have consistently and most forcefully expressed concerns about FAO not being able to meet well recognized challenges and satisfy the expectations and demands from its Members in areas where the Organization has a clear comparative advantage. Clear examples of such expectations of FAO’s action are in relation to food security, to the alarming threats to natural resources, to emerging food safety problems and, of course, to emergencies, in particular, as a result of transboundary pests and diseases such as avian influenza and desert locusts. I have difficulty reconciling this long period of stagnation in resources with the fact that this Organization deals with the most important economic and social sector, for hunger and poverty reduction in developing countries.
I also appreciate the concerns of Governments about eventual increased assessments and their prerogative to determine what is most important for the respective Member Nations in the realm of external relations. However, I hope that the context of expectations, challenges and emergencies facing FAO is convincing enough for you to value the relatively modest collective investment you would make by agreeing on a Regular Budget more in tune with demands. My most sincere personal hope at this juncture is that the membership sees its way to reversing a damaging trend of budget decisions.
I look forward to the reactions of the Committees and the Council to this Summary, to guide the preparation of the proposals in the full PWB.