PROGRAMME, BUDGETARY, FINANCIAL AND ADMINISTRATIVE MATTERS

Reports of the Fifty-ninth and Sixtieth Sessions of the Programme Committee 1/

147. The Council recognized that a number of key issues which the Programme Committee had considered at its Fifty-ninth and Sixtieth Sessions of, respectively, May and September 1990, singly or jointly with the Finance Committee, were included in its own agenda under other items. The Council, therefore, considered the views of the Programme Committee in connection with its own discussion of these issues. Accordingly, the Council took note of the reports of the Programme Committee dealing with other matters, in particular the review of FAO programmes which the Programme Committee traditionally carried out in non-Conference years. In 1990 the Programme Committee had dealt with Major Programmes 2.2 - Fisheries and 2.3 - Forestry, Programmes 2.1.6 -Nutrition, 2.1.7 - Food and Agricultural Information and Analysis and 2.1.8 - Food and Agricultural Policy, primarily implemented by the Economic and Social Policy Department, and FAO's activities under Chapter 3 -Development Support Programmes.

148. In connection with selected points made by the Programme Committee in the reports of its May and September sessions throughout the course of this regular review, members provided additional comments on programmes of interest to them. In particular, comments were made on a number of fisheries activities, including improved capture fishery management to achieve the optimum production which could be usefully taken up for consideration in the rolling medium-term plan for the fisheries sector and at the forthcoming session of the Committee on Fisheries and during the consideration of the 1992-93 Programme of Work and Budget.

Operational Activities for Development 2/

149. The Council expressed general satisfaction with the document. It noted that the two subjects concerned, United Nations General Assembly (UNGA) Resolution 44/211, and the UNDP Governing Council "framework" decision on support costs (decision 90/26), were closely related. Moreover, the resolution reflected many of the themes highlighted in the conclusions of the Review of Certain Aspects of FAO's Goals and Operations, adopted by the Twenty-fifth FAO Conference in November 1989.

150. Concerning UNGA Resolution 44/211, the Council underlined its concurrence with and commitment to the resolution's main aims and objectives. These included the strengthening of technical support to operational activities from agencies such as FAO, the reinforcement of field office structures, greater decentralization and delegation of authority to the field, a more programme-oriented approach - in part through increased policy and sector review work by agencies such as FAO, and the more comprehensive utilization of national capacities - including increased national execution.

151. The Council expressed satisfaction with FAO' s active involvement in the important follow-up process to UNGA Resolution. 44/211 , in close collaboration with the Office of the Director-General for International Economic Cooperation. It was underlined that this implementation process should embrace a realistic timeframe, and fully utilize existing studies and analyses.

152. Turning to the framework support cost decision of the UNDP Governing Council, the Council generally recognized that this decision was aimed at providing the ways, means and resources whereby organizations such as FAO could move effectively to meet some of the main goals outlined in the UNGA Resolution, as well as in the conclusions of the Organization's own recently completed review process.

153. The Council underlined the importance of the decision's emphasis on maintaining the principle of the Tripartite Relationship in the system's operational activities, reflecting the multilateral character of UN technical cooperation. This was considered important in order to preserve and make better use of the substantial capital of operational expertise and experience which had been accumulated by FAO over many years, which should continue to be fully available to the developing countries. It was noted, however, that the new arrangements featured a trend away from project execution toward the provision of technical support services. Several members suggested that, because of its comparative advantage, FAO should be well-placed to provide such services on a more competitive basis.

154. The Council noted that the decision taken by the UNDP Governing Council was complex, and divided the new arrangements into three main elements. The first two, aimed at increasing technical support at. programme and project levels, were each to be funded with two percent of UNDP's programmable resources (over the Fifth Cycle, 1992-96), while the third element was for administrative and operational support to projects.

155. The Council noted that many parts of the decision had been left open for further definition and elaboration between UNDP and the five main agencies to which the decision inter alia applied: FAO, United Nations International Development Organization (UNIDO), International Labour Organisation (ILO), United Nations Educational, Scientific and Cultural Organization (Unesco) and United Nations Department of Technical Cooperation for Development (DTCD). This process covered parameters and procedures concerning all three elements which would have to be agreed upon to permit a consensus decision on the matter at the Governing Council's Thirty-eighth Session in June 1991.

156. In the above connection, the Council expressed its strong support for the active role FAO was playing, including its activity in inter-agency fora, in pursuing vigorously the follow-up process to the framework decision. It noted that FAO had already had a number of consultations with UNDP on the subject, including several meetings between UNDP and the five main agencies jointly. The most recent such meeting, in mid-November in Geneva, had been chaired by the UNDP Administrator.

157. The above notwithstanding, the Council expressed concern that the consultative process was not progressing at a sufficient pace, and that agreement was still lacking on many of the points left open by the Governing Council's framework decision. In particular, the Council urged that the consultations continue in order to resolve any divergences of view between UNDP and the agencies concerning the interpretation of key sections of Decision 90/26.

158. Regarding resources for the new arrangements, the Council emphasized that these should be funded fully as envisaged under the decision, if agencies such as FAO were to be able to move effectively in the directions implied by the decision itself and in UNGA Resolution 44/211. In this context, the Council noted the existing financial support for UNDP-funded projects from FAO's Regular Programme Budget. The Council agreed that the new arrangements should not result in a greater regular budget transfer in future.

159. The Council emphasized that, resources apart, the ways and means by which the new arrangements would be applied were of critical significance. These would need to be carefully worked out before an agreed proposal could be reached between UNDP and the agencies on the new system. The agencies involved were urged to accelerate their joint work. The Council noted that a full progress report on this was required to be submitted to the UNDP Governing Council's Special Session in February 1991.

160. The Council reaffirmed that it was the principal responsibility of the recipient governments to coordinate all external assistance. It stressed the importance of strengthening national capacities in moving toward national execution as the ultimate goal of technical cooperation. It also emphasized the importance of the special training programmes for national staff which FAO was undertaking in this context.

161. The Council expressed its support for a steady and gradual shift towards increased national execution based on local capacities and specific country circumstances. It was stressed that this should not be substituted by the increased execution activities of UNDP field offices, or by the UNDP Office for Project Services. It underlined that in undertaking the national execution modality, governments should continue to have unhindered and direct access to FAO's accumulated technical expertise and experience.

162. Some members expressed concern with the potential damage to FAO, and UN, development efforts as a whole, if the new UNDP support cost arrangements proved to be inadequately financed and/or improperly applied. Some other members noted that it was premature to make definite assessments of the financial implications for FAO resulting from the proposed successor support cost agreement. Concern was expressed by many countries over the possibility that FAO capacity to extend technical advice and support to the developing countries would be seriously eroded, and that the beneficial interplay and feedback between field and regular programme activities would risk being diminished.

163. The Council noted that over 420 FAO headquarters staff were currently supporting UNDP-funded operational activities, and that some 1 000 FAO field staff were engaged in such support at country level. It underlined that all efforts should be made to avoid any disruptive effects in the implementation of the new system to the support costs. In particular, any eventual shifts should not lead to additional charges to FAO's already strained Regular Programme Budget. The Council observed that there was a need for appropriate transitional arrangements when the new system was applied, as envisaged in the framework decision. The Director-General was invited to work out proposals with the Administrator of UNDP for appropriate transitional arrangements which could be put to the UNDP Governing Council in February or June 1991, in keeping with paragraph 20 of Governing Council Decision 90/26.

Reports of the Sixty-seventh, Sixty - eighth and Sixty-ninth Sessions of the Finance Committee 3/

164. The Council reviewed the three reports of the Finance Committee and noted with concern that the financial situation of the Organization had continued to deteriorate during the period from January to November 1990. Details are reported under paragraphs 200 to 211 below.

Financial Matters

- Programme and Budgetary Transfers in the 1988-89 Biennium

165. The Council was informed of the following Programme and Budgetary transfers :

      (a) US$3.6 million to Chapter 5 - Support Services from Chapter 2 -Technical and Economic Programmes.

      (b) US$1.4 million to Chapter 7 - Contingencies from Chapter 2 to cover the cost of the FAO Review.

      (c) US$1.6 million from Major Programme 5.1, Information and Documentation to Major Programme 5.2, Administration

- Annual Report of Budgetary Performance to Member Nations

166. The Council expressed satisfaction that despite unbudgeted extra Staff Costs arising from higher than expected inflation, amounting to USS25.2 million, and the cost of the FAO Review of USS1 985 000, the budgetary savings amounted to USS24 798 000.

- Progress Report on the Financial Position

167. The Council reviewed the various Finance Committee reports on the Financial Position of the Regular Programme. Due to the delays in the receipts of contributions from January to September 1990, the financial situation had deteriorated to the point where the Director-General had considered it necessary to borrow from internal sources in August.

168. A number of members stressed the necessity to receive cash flow forecasts and financial statements on a quarterly basis with breakdown at programme and subprogramme levels, and hoped that the Director-General would be responsive to their request.

-Contributions Outstanding and in Arrears (excluding WCF and SRA)

169. The Council was informed in each of the Finance Committee Reports that the contributions outstanding and in arrears were the highest on record for the corresponding time of the fiscal year, as follows:

- Working Capital Fund

170. The Council was concerned that the Working Capital Fund had been fully utilized in 1988-89 and brought forward to 1990 with a zero balance. At 17 September 1990 US$105 000 had been received from Member Nations in respect to the special assessments of 1988 and 1989 to increase the level of the Fund to US$20 million. US$1 917 000 was still owed to the Fund by Member Nations.

-Special Reserve Account

171. The Council noted with concern that the Special Reserve Account, that had been brought forward into 1990 with a balance of US$19 510 876, had been completely utilized by August 1990 to absorb the negative staff cost variance due to the unfavourable Lira/Dollar exchange rate and to maintain the operations of the General Fund.

-Cash Flow and Recourse to Borrowing

172. The Council noted and shared the grave concern expressed by the Finance Committee in September with the situation, in particular the extraordinary magnitude of outstanding contributions and arrears, which had led to internal borrowing in August and September in amounts totalling US$28 million and to the foreseen need for external borrowing thereafter.

173. With regard to external borrowing, the Council was informed that the Director-General, with no information on when further contributions might be expected and with the exhaustion of the amount available in the General Fund, had made strenuous efforts to avert the need for borrowing. In August 1990, he had issued a special and detailed report on the financial position and the status of contributions to all Member Nations. In addition to this information, the Director-General had expressly and specifically stated that the total amount due was US$300 million and that the estimated shortfall in further contributions to meet estimated expenditure to the end of the year was approximately US$45 million. He had said that all its available funds had been exhausted, and although expenditure was being limited, recourse would have to be made to internal borrowing in August. He had stated that if significant contributions were not received within the next month, external borrowing would be necessary in September. Accordingly, he intended to use his authority to borrow.

174. Since by September, his further appeal for payment of outstanding arrears and contributions had had no significant response, the Director-General had informed the Finance Committee that he had no alternative in October but to resort to borrowing externally from commercial banks. In October, he had then been obliged to exercise the authority to borrow externally in an amount of US$22 million, without limit as to time or amount ⁴given to him under the provisions of Council Resolution 280, as confirmed by Conference Resolution 14/83. However, since some contributions had been received soon after the resort to external borrowing, it had been possible to repay the external loan on 1 November 1990.

175. While some members expressed their serious concern with, or opposition to, borrowing and the associated interest costs paid or foregone, other members expressed their support for the necessity and propriety of the Director-General's action, which they considered to be the only course open to him in the circumstances.

- Review of the Effect of the Decision to extend the Coverage of the Terminal Payment Fund

176. The Council noted that despite the extension of coverage of the Terminal Payment Fund to also cover staff financed from the Trust Fund Support Cost, in addition to those financed from the Trust Fund Programme, the Fund had remained in a surplus position. It concluded that future funding of the Repatriation Grant payments was fully ensured.

- Measures Adopted by UN Agencies to Reduce the Impact of Currencies Instability on the Implementation of their Programme of Work and Budget

177. The Council was informed of the measures adopted by organizations of the UN system to protect the monetary value of their Programme of Work and Budget against fluctuations in the value of currencies, and requested the Finance Committee to monitor any future developments in this regard.

-Measures Adopted by UN Agencies to Encourage Prompt Payment of Contributions

178. The Council reviewed the document prepared by the Consultative Committee on Administrative Questions (Financial and Budgetary Matters CCAQ(FB)), which provided an exhaustive analysis of the various methods or schemes that the UN Agencies had considered or adopted with a view to encouraging prompt payment of assessed contributions by member countries.

179. Several members expressed interest in the subject and requested that further studies be made by the Finance Committee, including the proposed analysis of the system of discounts for early payment of current contributions.

- FAO Credit Union 1989

180. The Council took note of the Financial Statement of the Credit Union for the year ended 31 December 1989 and noted with satisfaction that the operation was run at no cost to the Programme of Work and Budget of the Organization.

- Trust Funds - Exemption of Project Servicing Costs

181. The Council was informed of the exemption of Project Servicing Costs on Trust Fund below the levels it originally set. It was satisfied that the Finance Committee had reviewed the reasons for which Project Servicing Costs were exempted.

182. The Council examined the results of the Cost Measurement System exercise for 1989. It noted that the 1989 support for UNDP and Trust Funds had increased substantially over 1988 as follows:

183. Having noted the reasons for such a change, the Council took note of the comparison between the total support costs and the related reimbursements as shown in the table below:

^aOf which US$2.1 represents a one-time exceptional reimbursement to compensate for the extraordinary exchange losses arising from the depreciation of the US Dollar, as per UNDP Governing Council decision 88/52.

^b Net of reimbursement for 1988 rent since a contribution of US$1 million was received from the Italian Government in 1989 for that purpose.

- Actuarial Review of Separation Payments Scheme

184. The Council noted the report of the Finance Committee regarding the actuarial review of the Separation Payments Scheme as at 1 January 1990.

185. The Council supported the decision that the funding rate should remain at 8 percent and that the proportion of separation payments for Rome General Service staff charged to the related budgets should also be kept constant at 33 percent.

186. The Council also took note of the Finance Committee's request that the actuarial review should continue to be performed every four years.

Personnel Matters

- International Civil Service ommission (ICSC) and Pension Board Matters 5

187. The Council was informed of the decisions taken at the Forty-fourth Session of the General Assembly (1989) with regard to personnel issues, and noted the consequential changes regarding the conditions of service of staff in the Professional and higher categories in the Staff Regulations effective 1 July 1990 which resulted from such decisions.

188. The Council noted the ICSC recommendations to introduce a revised rental subsidy scheme, to increase the current base floor salary scale by 8.5 percent, and to increase the level of the education grant in selected currency areas.It further noted that these recommendations were still subject to review and approval by the General Assembly at its Forty-fifth Session (1990).

189. The Council again referred ⁶ to the ICSC study on the practice by Member Nations to supplement payments or deduct amounts from the remuneration of their nationals employed by UN organizations. It noted that in view of the repeated request by ICSC to Executive Heads to gather information from their staff on this issue, an Administrative circular in addition to the one issued in 1987 was circulated to FAO staff, reminding them that the acceptance of supplementary payments was in contravention of Staff Regulations, and requesting staff in receipt of supplementary payments or affected by deductions from their remuneration to so inform the Organization.

190. On pension matters, the Council was informed that following a comprehensive review of pensionable remuneration of staff in the Professional and higher categories, the Pension Board had recommended to the Forty-fifth Session of the General Assembly the continuation of the methodology established in 1986 for the determination of pensionable remuneration.

191. The Council recalled that the UN General Assembly had established for the three-year period ending on 31 December 1990 special "floor" ratios to be applied to dollar pensions for deriving the amount of the local currency pension in several countries. In this context, the Council noted that the Pension Board had recommended to the Forty-fifth Session of the General Assembly the establishment of a personal "floor" amount for the base local currency pension corresponding to the amount which would have been received by the participant had he/she separated on 31 December 1990, on the understanding that such floor amount would be applicable only to participants retiring on or before 31 March 1992.

192. The Council noted that resulting from decision taken by the UN General Assembly in 1989, with regard to retirement age, Staff Regulation 301.095 would require amendment. The Council approved the following new text:

- Changes in Salary Scales and Allowances

193. The Council was informed that changes in the conditions of service of staff in the Professional and higher categories approved by the Fourty-fourth Session of the General Assembly were implemented in the July 1990 payroll.

194. The Council noted the developments in conditions of service of the staff which had been reviewed by the Finance Committee and in particular that, with regard to the post adjustment classification for Rome, in May 1990 there had been an increase of a partial class due to cost-of-living movement; and that in July 1990, twelve points of post adjustment were consolidated into the base salary. The Council also noted that an increase in the salaries for the General Service category had been granted effective 1 June 1990, in accordance with the current methodology which maintained General Service staff salaries in line with salaries paid by leading employers on the local market.

-Survey of General Service Salaries in Rome

195. The Council was informed of the report of the ICSC on the results of the General Service Salary Survey carried out in February and March 1990 in Rome, and the recommendations of the Finance Committee thereon. It also noted the report of the Director-General on developments since then and his recommendations.

196. The Council decided that a revised salary scale for General Service staff in Rome, as given in Appendix F to this report, be introduced by the Director-General with effect from the date he considered to be the most appropriate, in the light of the financial constraints.

197. The Council shared the concern of the Finance Committee about various aspects of the ICSC survey methodology that had contributed to the high level of the recommended salary increase. It also shared the Committee's concern about the dimension of the overlap in salary levels between the Professional and General Service categories.

- External Training Programme

198. The Council reviewed the information supplied to the Finance Committee regarding the External Training, Language Training and Professional Training for Agricultural Development Programmes and endorsed the proposals put forward.

- Statistics of Personnel Services

199. The Council noted the statistics relating to the number of established posts and other forms of personnel services which had been provided to the Finance Committee. The Council further noted the progress in the presentation, reliability and detail that had been made since the introduction of the automated computerized personnel system (PERSYS).

Financial Position of the Organization; Status of Contributions and Collection of Assessed Contributions (Outstanding and in Arrears) 7

- Status of Contributions to the Budget

200. The Council noted the status at contributions at 26 November 1990, compared to the end of November 1989, as follows, as well as the details of amounts received from each Member Nation during 1990, and of outstanding contributions, as shown in Appendix G to this Report.

^a1Appendix G sets out full details of receipts during 1990, (USS241 199 437.84) and outstanding contributions of all Member Nations.

^b1Contributions in arrears include arrears payable under Conference authorizations by instalments due in 1990 (in 1989 in comparative figures) and in future years (on 1 January 1990, USS43 943.96 due in 1990 and USS173 796.40 due in future years).

^cOf which USS350 000.00 relates to the Tax Equalization Fund.

^dOf which USS600 000.00 relates to the Tax Equalization Fund.

201. The Council noted that two of the major contributors had made sizeable payments to the Organization. These payments, it noted, would assist in alleviating the cash flow difficulties of FAO.

202. The Council expressed appreciation for all contributions received, especially from those members facing financial difficulties, but urged all members to pay their arrears and outstanding contibutions in full.

- Current Assessments (details of amounts received and amounts outstanding are listed in Appendix G)

203. The month-end cumulative percentages of 1990 assessments received during more than ten months of 1990, as compared to receipts during the preceding four years, were as follows.

Percentages of Current Assessments Received

Cumulative - year to date

^a2Includes USS17 354 871.34 (8.73% of 1987 assessments) as distribution of the cash surplus of the 1984-85 biennium applied as of 1 January 1987.

b2Receipts at 26 November; preceding years at month-end as well as at 31 December.

a3 To facilitate comparisons, applications of the cash surplus (9.20%) to the current assessments of 80 Member Nations are excluded from the Number of Member Nations.

- Contributions in Arrears (Appendix G sets out details of amounts outstanding)

207. In this connection, the Council noted with concern that at 26 November 1990, a total amount of US$132 006. 363.19 of arrears of contributions remained outstanding, including US$116 639 348.86 overdue from the largest contributor. As at 26 November 1990, 45 Member Nations had made cash payments, of which 29 paid their arrears in full. Amounts of more than US$1 million were due from 7 Member Nations, totalling US$128 473 192.90 and representing 96.5 percent of arrears outstanding.

-Replenishment of the Special Reserve Account and Advances to the Working Capital Fund

208. Of the total amounts due at 1 January 1990 amounting to US$3 490 067 and US$2 022 762, respectively, 34 Member Nations had made cash payments as at 26 November 1990, leaving balances of US$3 330 388 and US$1 866 562, respectively, outstanding on 26 November 1990.

- Need for All Member Nations to Pay Contributions

209. The Council was informed that 99 Member Nations had made no payment, or only partial payment of 1990 assessed contributions, and 47 Member Nations owed arrears for 1989 and prior years.

210. All Member Nations were therefore urged by the Council to pay their outstanding arrears and current assessed contributions in full as soon as possible, in order that the Organization could continue to fulfil its mandate.

211. Furthermore, in view of the critical financial position of the Organization, the Council requested all Member Nations to advise the Director-General, as soon as possible, as to the amounts and timing of their expected payment of the contributions and arrears outstanding, as this was essential for programme and administrative management.

Audited Accounts 1988-89 8 ^{9 10}

212. (a) Regular Programme 1988-898

         (b) UNDP 1988-89 9

         (c) World Food Programme 1988-89 10

213. The Council reviewed the reports on the above accounts. It noted that in the Report for each of the three Programmes, the External Auditor had expressed the opinion that the financial statements presented fairly the financial position at 31 December 1989 and the results of the operations for the biennium 1988-89, that they were prepared in accordance with the stated accounting policies, and that the transactions were in accordance with the Financial Regulations and legislative authority.

214. The Council endorsed the views of the Finance Committee and its recommendations and agreed to forward the following resolution to the Conference for adoption:

DRAFT RESOLUTION FOR THE CONFERENCE
AUDITED ACCOUNTS

THE CONFERENCE,

Having considered the report of the Ninety-eighth Session of the Council,

Having examined the following Audited Accounts and the External Auditor's Reports thereon:

Adopts the above Audited Accounts.

- Information Required by the Director-General from the World Food Programmes in order to Certify the Biennial Accounts for WFP for 1988-89

215. The Council noted that in January 1990 the Finance Committee had decided to address a formal request to the External Auditor to review the matter of the information that the Director-General might reasonnably require from WFP in order to certify the accounts, and to submit a report on this matter to the Director-General.

216. The Council noted with satisfaction that at its Sixty-eighth Session in May, the Finance Committee was informed that the report of the External Auditor had been received and that his recommendations had been accepted by both the Director-General and the Executive Director of WFP.

First Report on Unscheduled and Cancelled Sessions in the 1990-91 Biennium 11

217. The Council reviewed the annual report on the unscheduled sessions approved and on the sessions cancelled, which the Director-General had submitted to it for information purposes.

218. The Council noted that between 1 January and 1 October 1990, 27 unscheduled sessions had been approved and 18 sessions had been cancelled. Details are given in Appendix H to this report.

Revised Calendar of 1990-91 Sessions of the Council and of Those Bodies which Report to the Council 12

219. The Council approved the revised Calendar of Sessions for 1990-91 of the Council and of those Bodies which report to it, as given in Appendix I to this report.

¹CL 98/4; CL 98/18; CL 98/PV/12; CL 98/PV/19

² CL 98/4, paras 1.1-1.12; CL 98/18, paras 1.19-1.33; CL 98/24; CL 98/PV/10; CL 98/PV/ll; CL 98/PV/19.

³ CL 98/3; CL 98/4; CL 98/18; CL 98/PV/12; CL 98/PV/19.

⁴ CL 80/5, para 7

⁵CL 98/4, paras 3.51 to 3.56; CL 98/18, paras 3.66 to 3.75; CL 98/PV/12;

⁶CL 95/REP.

⁷ CL 98/18, paras 3.11-3.47; CL 98/LIM/l; CL 98/PV/12; CL 98/PV/19.

⁸ C 91/5; CL 98/18, paras 3.48-3.53

⁹ C 91/6; CL 98/18, paras 3.48-3.53

¹⁰ C 91/7; CL 98/3, paras 13-22; CL 98/4, paras 4.8-4.11; CL 98/18, paras 4.4-4.8

¹¹CL 98/7; CL 98/PV/17; CL 98/PV/19.

¹² CL 98/14- CL 98/PV/18; CL 98/PV/19 CL 98/PV/19.