Table of ContentsRAP-806-

Section III. Key Budgetary Dimensions

Need for prudent management of resources

60.     As it was imperative to ensure that the eventually approved revised programme of work for the 2006-07 biennium be put on a firm financial basis as early as possible, provisional allotments for 2006 were issued in late 2005. These will be converted into more definitive allotments after consideration by the Committees of this revised PWB. The allotments for 2007 will depend in part on the decisions of the Council on further restructuring.

61.     Precautionary measures were instituted regarding the filling of posts and recruitment, so as not to preclude consideration of various options. Careful management of vacancies will need to continue well into 2006 and beyond. Furthermore, budgetary performance could be negatively affected by an unbudgeted increase in general service salaries once the ICSC takes a decision on the outcome of the recently completed place-to-place salary survey in Rome.

Flexibility in means of action
62.     In reviewing their budgetary proposals, all FAO units contributed in a tangible manner to progress in achieving the quantitative targets which had been emphasised in the reform proposals submitted by the Director-General and generally endorsed by the membership in terms of reductions in director level posts, an increase in the percentage of professional staff in decentralized locations and a better mix of staff and non-staff resources. The Director-General wishes to progress in the direction of the quantitative targets in a managed fashion. Clearly, the rate of progress is hampered by the approval of the 2006-07 budget at a level that is 9% below the Director-General’s proposals to the Conference. A managed progression also needs to be handled with sensitivity to the human implications and the social consequences of budget reductions and change.

Change management process
63.     In anticipation of the impact of reductions or reallocations of resources, a change management and communication process was put in place within the Secretariat, including an ad hoc Joint Advisory Committee on FAO Reform (JAC/FAR) and redeployment task forces established to deal with specific cases.

Resources and posts

Resource availability and integrated budget
64.     The following table provides an overview of the total resource availability, consisting of the net appropriations voted by Conference, other income, and voluntary contributions. It compares the 2004-05 PWB to the approved budget level for 2006-07.

Table 4: Overview of total resource availability
  2004-05 2006-07 Revised
Member Nations Net Assessed Contributions 739,905 759,700
Total Miscellaneous Income 9,195 6,000
Net Appropriations voted by Conference 749,100 765,700
Voluntary Contributions under Financial Regulation 6.7: To Other Income
Other Income credited to the General Fund in the Financial Accounts
World Bank 22,264 21,400
Other Financial Institutions 7,492 4,285
Technical Support Services 5,542 6,119
Project Servicing Costs and Administrative and Operational Support Services 31,897 37,945
Government Counterpart Cash Contributions 1,820 2,399
Terminal Reports 1,244 1,331
Other Items (e.g. Reimbursements for Administrative Services to WFP, CODEX, and transfers from the Capital Expenditure Account) 3,976 12,519
Total Other Income credited to the General Fund in the Financial Accounts 74,235 85,998
Other Income not credited to the General Fund in the Financial Accounts
Co-sponsors to Science Council 3,735 4,040
Direct Operating Costs charged to Emergency Projects 12,834 19,756
Other Items (e.g. Miscellaneous Secondments) 1,107 1,379
Total Other Income not credited to the General Fund in the Financial Accounts 17,676 25,175
Total Other Income 91,911 111,173
Resources Available for the Programme of Work 841,011 876,873
Voluntary Contributions under Financial Regulation 6.7: Trust Funds net of PSC Income
Other Trust Fund Projects 298,919 473,241
Emergency Projects 201,179 305,933
Total Estimated Trust Fund Income 500,098 779,174

65.     For 2006-07, the Conference voted a net appropriation of US$ 765.7 million; assessments amounted to US$ 759.7 million after deduction of Miscellaneous Income of US$ 6 million.

66.     Under the category Other Income credited to the General Fund, the main change is the increase under "Other Items" as a result of the increased transfer from the Capital Expenditure Account related to carry-forward from arrears.

67.     Under the category Other Income not credited to the General Fund, the main change is an increase under project servicing costs charged to emergency projects due to updated estimates based on recent trends and forecasts.

68.     Total estimated resources available for the biennium of US$ 1.7 billion are shown across the new chapter structure in the following table.

Table 5: Estimate of 2006-07 programme of work and trust fund activities by chapter
(All amounts in US$ 000)
  Regular Budget Trust Fund All Financing
Chapter 2006-07 Programme of Work Direct Support to Programme of Work Other Voluntary Contributions  
1 Corporate Governance 18,323 0 0 18,323
2 Sustainable Food and Agricultural Systems 220,196 122,245 459,360 801,801
3 Knowledge Exchange, Policy and Advocacy 219,433 35,611 105,216 360,260
4 Decentralization, UN Cooperation and Programme Delivery 253,596 2,630 50,234 306,460
5 Management and Supervision Services 130,708 1,159 2,719 134,586
6 Contingencies 600 0 0 600
8 Capital Expenditure 13,575 0 0 13,575
9 Security Expenditure 20,444 0 0 20,444
Total 876,873 161,645 617,529 1,656,047
Percentage by Source of Financing 53% 10% 37% 100%

69.     The programme of work comprises those activities to be funded from assessed contributions from Member Nations and from other income at the disposal of the Organization and/or managed closely with the Regular Budget Appropriation. Trust funds are voluntary contributions other than those included in the programme of work that provide direct support to implementation of activities planned under the programme of work, and other voluntary contributions that support technical and emergency assistance to governments.

70.     The following summary table provides a view of the programme of work, income, and the net appropriation at programme level.

Table 6: Regular Programme resource allocations by chapter and programme
  Chapter / Programme Programme of Work Less: Income Appropriation
1A Governing bodies 7,794 0 7,794
1B General direction 9,814 214 9,600
1X Programme Management 714 0 714
1 Corporate Governance 18,323 214 18,109
2A Crop production systems management 20,164 323 19,841
2B Livestock production systems management 8,498 433 8,065
2C Diseases and pests of animals and plants 23,870 423 23,447
2D Nutrition and consumer protection 23,695 1,428 22,267
2E Forestry information, statistics, economics, and policy 11,277 253 11,024
2F Forest management, conservation and rehabilitation 8,233 82 8,151
2G Forest products and industry 8,899 176 8,723
2H Fisheries and aquaculture information, statistics, economics, and policy 17,857 623 17,234
2I Fisheries and aquaculture management and conservation 12,912 482 12,430
2J Fisheries and aquaculture products and industry 9,248 880 8,368
2K Sustainable natural resources management 28,808 989 27,819
2L Technology, research and extension 10,012 4,044 5,968
2M Rural infrastructure and agro-industries 15,721 317 15,404
2X Programme Management 21,003 160 20,843
2 Sustainable Food and Agricultural Systems 220,196 10,613 209,583
3A Leveraging resources and investment 50,829 26,553 24,276
3B Food and agriculture policy 30,295 1,416 28,879
3C Trade and marketing 11,899 322 11,577
3D Agriculture information and statistics 10,719 136 10,583
3E Alliances and advocacy initiatives against hunger and poverty 12,588 941 11,647
3F Gender and equity in rural societies 9,400 528 8,872
3G Rural livelihoods 4,119 137 3,982
3H Knowledge exchange and capacity building 22,251 58 22,193
3I Information technology systems 28,952 0 28,952
3J Communication and public information 18,069 0 18,069
3X Programme Management 20,312 204 20,108
3 Knowledge Exchange, Policy and Advocacy 219,433 30,296 189,137
4A UN cooperation, integration and monitoring 13,912 1,048 12,864
4B Coordination of decentralized services 20,306 0 20,306
4C Food security, poverty reduction and other development cooperation programmes 86,092 22,933 63,159
4D Emergency and post crisis management 15,838 14,875 963
4E Technical Cooperation Programme 103,550 0 103,550
4X Programme Management 13,898 2,061 11,837
4 Decentralization, UN Cooperation and Programme Delivery 253,596 40,917 212,679
5A Oversight 11,260 454 10,806
5B Programme and budget services 7,013 822 6,191
5C Financial services 17,880 6,896 10,984
5D Human resources management and staff welfare 16,812 2,426 14,386
5E Procurement 8,901 3,240 5,660
5F Management of premises 33,454 1,159 32,296
5G Meetings and language services and protocol 7,882 126 7,756
5H Shared services 19,641 5,119 14,522
5X Programme Management 7,865 40 7,825
5 Management and Supervision Services 130,708 20,282 110,425
6A Contingencies 600 0 600
6 Contingencies 600 0 600
8A Capital Expenditure 13,575 8,851 4,724
8 Capital Expenditure 13,575 8,851 4,724
9A Headquarters security 7,989 0 7,989
9B Field security 12,455 0 12,455
9 Security Expenditure 20,444 0 20,444
Total   876,873 111,173 765,700

Budgetary implications across the organizational structure
71.     Results-based programme budgeting principles as applied by FAO focus on relating resources to programme entities and defining expected achievements. However, at a time when modified programme entities are presented under a new chapter structure, the organizational unit budgets can assist in understanding the composition of change. The organizational dimension also allows resource comparisons with the previous biennium, a comparison that is not possible with the new programme structure.

72.     Departments and independent offices are provided with an overall resource planning target. This is a basis of their detailed preparation of the revised programme of work, with budgets being assigned to programme entities and executing units. The resulting Regular Programme resources available to each organizational unit for execution of the revised programme of work in 2006-07 are presented in Annex V; a comparison with 2004-05 is also provided. The main shifts in resources are explained below.

73.     The multidisciplinary teams in the new subregional offices (which are costed for the full biennium to facilitate comparison) and the preservation of purchasing power in the network of country offices accounts for an overall shift in resources from headquarters to the decentralized structures. The decrease in executing resources of several headquarters divisions (for example, AGA, AGL, and TCI) coincides with the creation of posts in similar disciplines in the new decentralized locations. The reverse movement is also apparent, for example the growth in SDA, and the minimal decreases in AGS, ESA and TCA are counterbalanced by proportionately larger reductions in these disciplines in the regional or subregional offices.

74.     The Forestry and Fisheries Departments have each had minimal reductions applied to the resources they plan (US$ 0.3 million and US$ 0.5 million respectively). In the case of Forestry, a further shift of US$ 1.2 million executed by the department is due to the outposting of officers from headquarters to regional and subregional offices. However, as can be seen in Table 11 in the next section, the overall resources applied to work on forestry and fisheries (defined as the FO and FI department planning resources under all programmes and contributions from other executing units to the forestry and fisheries programmes) has actually gone up by 5% and 4% respectively.

75.     The variance in some units is due to the shift of organizational units or functional responsibility among departments, as described earlier. These include the move of the Food and Nutrition Division (ESN) to the Nutrition and Consumer Protection Division (AGN), the abolition of OCDS and allocation of some of its functions to AFDS, and the regrouping of advocacy and partnership functions from GID, SAD and TCDS to OFA.

76.     The significant reductions in AFS and PBE are due to the reallocation of security-related expenditure to the newly-created Security Expenditure Facility in Chapter 9. The large apparent increase in the FAOR budget is due to cost increases on posts in the country offices, mainly as a result of weakening of the US dollar.

Post summary
77.     The table below provides an overview of the evolution of budgeted posts by location and categories from the PWB 2004-05 to the Revised PWB 2006-07.

Table 7: Evolution of posts - post counts by grade category and location
Grade Category 2004-05 PWB Revised PWB 2006-07 Change % change
Director-level and above 143 122 (21) (15%)
Professional 850 797 (53) (6%)
Total Professional and above 993 919 (74) (7%)
General Service 959 872 (87) (9%)
Total HQ 1,952 1,791 (161) (8%)
Director-level and above 54 58 4 7% 
International Professional 269 242 (27) (10%)
National Professional 106 181 75 71% 
Total Professional and above 429 481 52 12% 
General Service 813 800 (13) (2%)
Total Decentralized 1,242 1,281 39 3% 
All Locations
Director-level and above 197 180 (17) (9%)
International Professional 1,119 1,039 (80) (7%)
National Professional 106 181 75 71% 
Total Professional and above 1,422 1,400 (22) (2%)
General Service 1,772 1,672 (100) (6%)
TOTAL 3,194 3,072 (122) (4%)
% Professional posts decentralized 30%  34%     

78.     The table shows an overall net reduction of 122 posts, entailing 161 net reductions at headquarters (comprising 74 professional/director and 87 general service posts) and a net increase of 39 posts in decentralized locations (comprising an increase of 52 professional/director and a decrease of 13 general service posts).

79.     Director-level and above positions have decreased by 17 positions overall, 21 at headquarters, a 9% reduction to this category of posts, while the number of national professional officer posts has increased by 71% since 2004-05.

80.     The percentage of professional staff in decentralized locations has increased from 30% to 34% with the implementation of the complete reform structure in Africa and Central Asia. There has also been a shift in the functional profile of decentralized professional posts, with more posts for agriculture, fisheries, forestry and investment and less for policy advice and sustainable development. The significant increase in national professional officers is due to replacement of some non-technical international posts in the regional and subregional offices and to substitute general service positions with NPOs in country offices.

Evolution of non-staff resources
81.     The evolution of non-staff resources is shown in the following table. The real reduction compared to the 2006-07 ZRG programme of work was more than fully met under staff resources, with the result that non-staff resources as a percentage of the programme of work increase from 33% to 35%. This is in line with the aim of the reforms to provide more flexibility in the means of action for delivering services to Members.

Table 8: Evolution of non-staff resources
Category 2004-05 PWB 2006-07 PWB ZRG (with cost increases) Change Revised PWB 2006-07
Staff Resources 553,880 606,890 (40,156) 566,734
Non-Staff resources 287,131 305,384 4,756 310,140
Total Programme of Work 841,011 912,274 (35,401) 876,873
Percentage non-staff 34%  33%    35% 

Estimate of one-time and transition costs

82.     The estimate of transition costs provided in document C 2005/3 Sup.1 Add. 1 has been updated to take account of the actions approved by the Conference at the budget level for 2006-07. One-time and transition costs are defined as the unfunded non-recurring costs to arrive at the required staffing and infrastructure to implement the revised programme of work.

Staff related one-time costs (training, relocation and separation costs)
83.     Training is an essential tool for successful implementation of reforms. Several different categories of staff – particularly FAO Representatives and staff to be deployed in subregional multidisciplinary teams – require retraining beyond regular and ongoing staff development. The training programme has been developed around three main modules: i) Investment Officer Training; ii) Policies and Strategies for Agricultural and Rural Development; and iii) FAO Representative Competency Development. Also foreseen is training for all new national professional officers and administrative officers. The total one time costs for training are estimated at US$ 1.8 million.

84.     When formulating their revised PWB proposals, FAO units took advantage to the extent possible of vacant posts, planned retirements of incumbents and redeployment opportunities, while taking due account of Members’ expressed priorities. However, the abolition of a number of encumbered posts will also be necessary.

85.     It is anticipated that many of the technical specialists affected by the reduction in posts and redistribution of tasks across the organizational structure will have skills that are suitable for assignment in the subregional multidisciplinary teams. The costs relating to the relocation of staff between headquarters and decentralized locations and within the regions are estimated at US$ 1.7 million. General service staff are almost exclusively locally-recruited and would only very exceptionally relocate between duty stations.

86.     While every effort will be made to redeploy most professional and general service staff to appropriate positions, there will be situations where severance of employment may be required. The Director-General will seek to reduce these costs by availing of the openings offered by current vacancies and retirements. In cases where no positions match the specific profile of staff members requiring placement, equitable terms and conditions for separation, based on the provisions of the Staff Regulations, would need to be offered to staff. Simultaneously, the Organization would actively assist affected local staff in finding suitable employment opportunities in other UN organizations.

87.     Total costs relating to relocation or separation of staff in decentralized offices including country offices are estimated at US$ 4.0 million, while for staff at headquarters it is estimated at US$ 3.3 million, for a total of US$ 7.3 million.

Other non-recurring costs for security, infrastructure and new processes
88.     As part of the requirements for the first step of the reform, in particular the streamlining of administrative procedures and the improvement of management processes, investments are required to improve management and communications-related software and set-up new offices.

89.     The Organization will negotiate arrangements with governments for security at new decentralized offices. Apart from the provision of suitable office space, the Organization will, in the first instance, appeal to the respective host governments to provide buildings and equipment that are compliant with Minimum Operational Security Standards (MOSS). The one-time security costs for fitting out MOSS-compliant premises for the implementation of reforms under way are estimated at US$ 1.0 million.

90.     It is estimated that US$ 1.4 million could be needed to supply the required physical infrastructure in the decentralized network, specifically to equip the new offices with vehicles, office equipment, furniture, and information technology-related systems, if they are not provided by the host governments concerned.

91.     There would be US$ 1.3 million of other costs needed to adjust management processes with the introduction of new tasks and structures. This includes updated versions of the Organization’s manuals and improved management and communications related software. Costs related to the HRMS project and support to the rollout of Oracle Financials to the regions, are included in the Capital Expenditure Budget proposals (Chapter 8).

Financing of one-time transition costs
92.     The above estimated one-time transition costs would be subject to revision and refinement during implementation. Beyond the precautionary measures already enacted, the Director-General is seeking US$ 15 million from Members wishing to support the process of change.

Table of ContentsRAP-806-