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Chapter 8: Capital Budgeting

(all amounts in US$ 000)
  Major Programme 2004-05 Programme of Work ZRG 2006-07 Programme of Work ZNG 2006-07 Programme of Work RG 2006-07 Programme of Work Trust Fund
81 Capital Expenditure 0 9,095 9,095 13,195 0
Total 0 9,095 9,095 13,195 0
Programme Change from 2004-05 Programme of Work at Chapter level 9,095 9,095 13,195  

499.     Conference Resolution 10/2003 established a Capital Expenditure Facility to integrate capital expenditure planning into FAO’s budgeting and financial framework. It designated Chapter 8 of the PWB for the purposes of defining and authorising capital expenditures for the biennial period covered by the Programme of Work.

500.     The capital plans for 2006-07 totalling US$ 9,095,000 are drawn from those presented in the Medium Term Plan 2006-11, with further breakdown of proposals provided under the heading Administrative Information Systems Projects. The table below presents the capital expenditure proposals and a description of each item of planned expenditure follows it. The compulsion for budgetary realism has precluded proposals for other essential investments in institutional infrastructure under ZRG, as it would not be feasible to support them without additional assessed or voluntary contributions.

Capital Expenditure Proposals for 2006-07 (US$ 000)

Programme Entity Description Item Cost Total
Programme 811 Telephony Services   150
PE 811P1 HQ and Regional Office PABX Systems 150  
Programme 812 Shared Data Services   1,545
PE 812P1 Corporate Administrative Applications 950  
PE 812P3 Server Software and Client Access Licenses for HQ and ROs 595  
Programme 813 IT Support to Meetings   1,000
PE 813P1 HQ Meeting Room Systems 1,000  
Programme 814 Administrative Information Systems Projects   6,400
PE 814P1 Human Resources Management System Project (HRMS) 5,800  
PE 814P2 Field Accounting System (FAS) 500  
PE 814P4 Electronic Document Management System 100  
Total Planned Capital Expenditure in 2006-07 9,095

Programme 8.1.1: Telephony Services

501.     The major piece of equipment under this heading is the private automatic branch exchange (PABX) which operates the telephone service within headquarters. It was installed in 1994, and will require replacement within 2008-09, when it is anticipated that a new-generation PABX could be selected using Voice-Over-Internet Protocol (VoIP) technology. US$ 150 000 will be invested during 2006-07, allowing various steps to be taken towards the transition to VoIP, so that experience can be gained with the technology prior to the major investment foreseen in the 2008-09 biennium. Some of these steps will be taken in Regional Offices whose PABXs are far smaller than headquarters and are, therefore, more suitable as test-beds.

502.     The expectation from these interim steps is to achieve cost containment for voice telephone calls in an increasingly decentralized Organization in which communications costs otherwise would continue to grow rapidly.

Programme 8.1.2: Shared Data Services

503.     Server hardware has an economic life in FAO of four years (one year longer than the industry norm). US$ 150 000 is planned to be invested in the next and every subsequent biennium to replace obsolete servers which support administrative systems. On average, this will represent half the server resources in this area.

504.     A practice of regular, planned replacement of life-expired servers will provide a more reliable and better performing information systems infrastructure, underpinning the delivery of services to the technical divisions and offices of the Organization.

505.     In addition to corporate administrative applications servers, entity 812P1 also deals with the corporate administrative applications software upgrades. The Atlas software package was introduced in May 1999 to provide travel accounting and information functions in the Organization. Although it has been maintained on a regular basis to incorporate improvements and additional functions for FAO, it has not kept pace with changing FAO business requirements. An investment of US$ 800 000 will be required for the replacement of the travel system and upgrading of its supporting infrastructure to provide for projected capacity and growth. The new application will address best practice business needs in travel processing and respond to External and Internal Audit recommendations that require major changes to the current system. It will take advantage of new technologies and support the streamlining of operations as well as the expansion of its use.

506.     Programme Entity 812P3 deals with Server Software and Client Access Licenses. On many of its servers, FAO currently uses Microsoft Windows 2000 Server software, and for email, Microsoft Exchange 2000. Both will go out of mainline vendor support in 2006, which will expose the Organization in terms of functionality, security/privacy, and service continuity. To avert this, FAO will invest US$ 595 000 to adopt new versions on some or all servers now running Windows and Exchange in 2006, though it is expected that open-source solutions will be adopted for some types of workload currently performed on Windows. Every client computer accessing a server running Windows has a “Client Access License” to do so, and if the server software is upgraded, this must also be upgraded.

507.     The budgetary provision will cover server and client access licenses for headquarters and regional office users, support staff training, user training, and the project work involved in migration to newer versions and/or to alternative approaches, including compatibility checking.

508.     The expected benefits from an ongoing program of keeping within supported software versions are reduced exposure for the Organization in terms of functionality, security/privacy, and service continuity.

Programme 8.1.3: IT Support to Meetings

509.     The communications systems in Headquarters meeting rooms cover audio-visual hardware and simultaneous interpretation (SIE) equipment. Following the initial installations which have been funded by sponsoring governments, there has been no provision for periodic update or replacement of equipment. The major investment of US$ 1 million will overhaul meeting room equipment and ensure the continuation of reliable audio-visual and SIE services.

Programme 8.1.4: Administrative Information Systems Projects

510.     The additional functionality that will be provided by the Oracle HRMS under entity 814P1, such as in the areas of competency development, e-recruitment and performance management, as well as replacement of the legacy mainframe Human Resources and Payroll systems, has a central role in future human resource management. It is a major undertaking which is in mid-stream, with completion expected in the 2006-07 biennium. In view of the importance attached by the governing bodies and the Secretariat to completing this project, US$ 2.5 million has been added to the proposal in the SPWB to almost fully meet the funding requirements; the shortfall of US$ 1 million will continue to be sought through cost savings.

511.     The aim of the Field Accounting System (FAS) replacement project under entity 814P2 is to implement a financial system that meets FAO Representations’ needs. The key to realising this lies in providing tools and timely information for financial management and decision-making. Both the technology and the business needs of the decentralized offices have significantly evolved over the last 5 years, since FAS was first deployed. The need for a system that provides enhanced functionality, robustness, security, better reporting and greater flexibility is supported by the observations of the External Auditors and internal reviews, including those conducted under the auspices of the Field Programme Committee. The new financial system will be based on industry standards and will take advantage of up-to-date technology. This initiative is in mid-stream with completion expected in the 2006-07 biennium, for which US$ 500,000 has been allocated.

512.     Entity 814P4 will develop a system for maintaining paper records electronically, thereby significantly reducing the paper-flows within the Organization and enabling the use of, for example, electronic sign-off procedures on HR related actions. It would also create efficiencies through ease of archiving and retrieval of records. The Electronic Document Management System (EDMS) is a desirable complement to the HRMS, but it is not possible to cost it at this stage. An amount of US$ 100,000 has, therefore, been made available to undertake a study and prepare a business case for the initiative.

Real Growth Scenario
513.     Under RG, the HRMS and FAS projects would receive additional funds to provide for some project contingency funds and undertake further development work, and resources would be allocated for development work under the EDMS project.

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