Rome, 9 - 11 November 1999
REPORT OF THE NINETY-THIRD SESSION OF THE FINANCE COMMITTEE, 13 - 17 September 1999
Member Nations Eligible for Discount at 31 March 1999
Report of the Ninety-third Session of the Finance Committee
- Programme of Work and Budget 2000-2001 5 - 10
- Programme and Budgetary Transfers in the 1998-1999 Biennium 11 - 14
- Support Costs 15 - 19
- Financial Position of the Organization - Financial Position as
- Scale of Contributions 2000-2001 38
- Incentive Scheme to Encourage Prompt Payment of Contributions
- Amendment of Financial Regulations 6.9 and 7.1 to provide for the
- Charter for the Office of Inspector-General 46 - 48
- Status Report on the Year 2000 Issue 50 - 51
50 - 51
13 - 17 September 1999
1. The Committee submitted to the Council the following report of its Ninety-Third Session.
2. The following representatives were present:
|Chairperson:||Mr Julian A. Thomas (South Africa)|
|Vice-Chairperson:||Mr Luigi M. Fontana-Giusti (Italy)
Mr Roberto O. Villambrosa (Argentina)
Ms N. Gangadharan (India)
Mr Horacio Maltez (Panama)
Mr Lubomir Micek (Slovak Republic)
Ms Ekhlas Fouad Eltom (Sudan)
Ms Laurie J. Tracy (United States of America)
3. Mr Samba Moomi Te Avelela (Democratic Republic of Congo) was regretfully unable to attend this session.
4. Ms Neela Gangadharan attended in place of Ambassador Kalarickal P. Fabian as representative of the Government of India on the Finance Committee.
5. The Committee considered the Director-General's proposals for the Programme of Work and Budget 2000-2001, contained in document C 99/3. It acknowledged the presentation of the zero nominal growth (ZNG) scenario, in addition to the zero real growth (ZRG) and real growth (RG) scenarios, which was in accordance with the recommendations of the Council.
6. The Committee welcomed the shorter length of the document and the presentation of additional information on the Organization's Internet website. Several Members urged the Secretariat to continue with efforts at making the document more concise, while focusing on essential information.
7. The Committee considered and endorsed the cost increase calculations as well as the assumptions on which these were based. It recalled that the cost increase estimate was based on a Lira/US Dollar exchange rate of Lira 1 800 to US$1 and that this would be revised to reflect the Lira/US Dollar exchange rate on the day the Appropriation Resolution was put before the Conference. It noted that the impact of this was an estimated increase/decrease of approximately US$3.3 million for every movement of Lira 25 in the lira/US Dollar exchange rate.
8. The Committee also noted that the introduction of differentiated professional staff rates by location under cost increases had caused some redistribution of the proposed 2000-2001 budget between programmes. It recognized that the implication of this was that programmes which had a higher than average number of decentralized professional staff, such as Major Programme 3.4, FAO Representatives, received a larger share of cost increases in 2000-2001.
9. The Committee also took note of the impact of the revised distribution of Administrative and Operational Support Services (AOS) income on the Appropriation by chapter, as described in paragraphs 11 to 14 of the document.
10. The majority of Members sought a real growth budget, in recognition of the demands placed on the Organization. One Member supported a ZNG budget level. The Committee recalled that the budget level would also be discussed at the Joint Meeting of the Programme and Finance Committees.
11. The Committee considered the request of the Director-General contained in document FC 93/3 for authorization of budgetary transfers under Financial Regulation 4.5.
12. The Committee recalled its deliberations on the Annual Report of Budgetary Performance1 at its Ninety-second Session in May 1999 and the subsequent endorsement of the report by the Council. It noted that the proposed transfers were consistent with that report except that approval was also sought to transfer up to US$3 million into Chapter 5, with resources being transferred from Chapter 2.
13. The Committee unanimously regretted the need to effect transfers from Chapter 2, which represented the core substantive work of the Organization, to the administrative activities of Chapters 5 and 6. It urged the Secretariat to manage the Organization's affairs so as to minimize or preferably eliminate such transfers in the future.
14. Following the endorsement of the Finance Committee's report on this matter at the 116th Session of the Council and recognizing the reasons for the proposed transfers, the Committee approved the transfer of up to US$11 million from Chapter 2, Technical and Economic Programmes, to Chapter 1, General Policy and Direction (US$1 million), Chapter 3, Cooperation and Partnerships (US$4 million), Chapter 5, Support Services (US$3 million), and Chapter 6, Common Services (US$3 million). It noted that there could be some variation to the figures proposed and accepted that the exact amounts be reported to the Finance Committee at its first session in 2000.
15. The Committee considered the progress report on the work being undertaken on the overall question of support costs and welcomed the broadly based review initiated in the paper, as well as the significant progress made in reducing the cost of supporting field programmes.
16. It acknowledged the conceptual framework proposed in the document as being a helpful basis for further development of the proposals and took note of the consistency of the approach taken and data presented with previous cost studies involving UNDP and other United Nations Specialized Agencies.
17. Many members suggested that a simplified approach to support cost recovery rates was highly desirable so long as such rates were based upon a clear understanding and sound and consistent definition of the indirect support costs to be recovered.
18. The Committee recognized both the complexity and importance of the subject matter and agreed to set aside additional time to deliberate on this item at its first session in 2000.
19. It recalled the considerable information available from past and current documents but requested the Secretariat to provide, in consolidated form, the information sought by members during the discussion. The Committee also requested, where possible, that this be progressively submitted to the Committee Members well before the meeting in May 2000.
20. The Committee was informed of the proposed budget of the European Commission for the Control of Foot-and-Mouth Disease. The 2001 budget was an estimate as it had not been approved by the Thirty-third Session of the Commission. It would be discussed at the Sixty-third and Sixty-fourth Sessions of the Executive Committee and approved by the Thirty-fourth General Session of the Commission in April 2001.
21. The Committee was informed that the Organization contributed through its Regular Programme to the activities of the Commission by providing premises for the secretariat, fax and telephone facilities and, as and when required, the services of responsible officials with regard to financial matters. The estimate for the Regular Programme input to the activities of the Commission was US$50 000, which excluded office space provided.
22. The Committee was informed of the proposed budget of the Regional Animal Production and Health Commission for Asia and the Pacific (APHCA) which had been prepared in accordance with the relevant provisions in the agreement establishing the Commission.
23. The Committee was informed that in view of the economic difficulties affecting many countries in the region, the approved scale of contributions for 2000 and 2001 included no increase. These contributions were approved by the 23rd Session of the Commission in September 1999.
24. The Committee took note of the document prepared by the Secretariat and examined the annual budgets of the Desert Locust Commissions:
25. After a short debate, it approved the annual budgets of the three FAO Desert Locust Commissions.
26. The Committee considered the financial position of the Organization at 13 September 1999 and noted that 57.63 percent of current assessments had been received. Fifty-nine Member Nations had paid their current assessments in full while a further 22 Members had made partial payment whereas 94 had made no payment as yet towards their 1999 assessment. The Committee noted that rate of receipt of contributions compared favorably with the same date last year. The Committee was, however, concerned over the number on Member Nations with arrears and, in particular, the forty-four countries that risked losing their right-to-vote at the Conference later in the year. Accordingly, it renewed its appeal to all Member Nations with contributions outstanding to pay their assessed contributions and arrears in full as soon as possible.
27. The Committee requested clarification on the cashflow prospects for the remaining months of the biennium. The Secretariat explained that if all receipts take place as envisaged, no bank borrowing would be necessary. In the event that the cashflow should not materialize as forecast, then the Working Capital Fund would be drawn down first. Should this not be adequate, then the Special Reserve Account and Staff Fiduciary Accounts would be drawn down before reverting to external borrowing, for which bank credit lines were already established.
28. The Committee reviewed the Financial Statements of the Credit Union for the year ended 31 December 1998 and approved the accounts. The Committee requested and received clarifications on a number of issues, including the increase in operating expenses, provision of premises, changes in cash and investments, regulation and oversight, loan loss experience and membership eligibility.
29. The Committee reviewed the Financial Statements of the Commissary for the year ended 31 December 1998 and, in approving the accounts, requested clarification of some of the points raised in the External Auditor's Report. It noted that measures were being taken to reduce even further inventory discrepancies, which were substantially lower than in the private sector, and looked forward to being informed of the effectiveness of such measures.
30. The Committee also noted that similar treatment was being given to the Credit Union and the Commissary concerning the exemption of rent.
31. The Committee will be kept informed on the actions taken by the Commissary Management regarding recommendations made by the External Auditor.
32. The Committee was informed of the Trust Funds projects for which Project Servicing Costs had been fully or partially waived during the period 1 June 1998 through 31 May 1999.
33. The Committee inquired into the basis for the waivers and why in other cases no waiver was granted. The Secretariat explained that waivers were granted under existing authority and in accordance with Financial Regulation 6.7. In practice, waivers were usually partial and granted for projects in support of Regular Programme activities. The level of project servicing costs applied in these cases was generally six percent, designed to recover incremental costs but not administrative costs that were incurred irrespective of the additional activities.
34. The Committee considered the status of implementation of the various recommendations and noted that, as requested at its Ninety-second Session, a third column had been incorporated in the paper containing the comments of the External Auditor in relation to actions taken by the Secretariat in respect of the individual External Audit recommendations.
35. The Committee requested clarification in relation to individual recommendations and related actions taken which were provided by the Secretariat and External Auditor. The Committee indicated that, in view of actions taken, recommendations on the following matters need not be reported as continuing: currency exchange arrangements, audit of field transactions, personnel related liabilities and Telefood. Nevertheless, the Committee stressed its continuing interest in these matters.
36. The Committee requested that all other recommendations and comments on actions taken should be carried forward into the Progress Report to be presented to the Ninety-fourth Session of the Finance Committee as the effects of actions taken would not be clear until that time.
37. The Committee also requested that:
38. The Committee reviewed the theoretical scale of contributions with the maximum contribution rate reduced from twenty-five to twenty-two per cent, as contained in Appendix I of this report.
39. The Committee reviewed the results of the Scheme in 1999 and confirmed the rate of 1.24 percent suggested by the Director-General for use in determining the amount of discount of each Member Nation (see Appendix II) which had paid its contributions before 31 March 1999.
40. The Committee noted that there was a growing need for the establishment of a new Revolving Fund for FAO Products and Related Services, under Financial Regulation 6.9, along the same lines as the existing Information Products Revolving Fund, to allow for the proceeds derived from such products to be ploughed back into their maintenance and further development. Examples of such products, developed by FAO staff within the framework of its approved programes, were the Microbanker software and the new Coconut Water Processing Technology. The Committee further noted that the problem had been initially raised during the Programme Committee's discussion of the Programme Evaluation Report for 1998-99 and that the proposals submitted by the Secretariat to amend Financial Regulation 6.9 to provide for the establishment of such a new revolving fund, with consequential amendments to Financial Regulation 7.1 were in response to the Programme Committee's invitation.
41. The Committee approved the proposed amendments for onward transmission to the Council for its endorsement and to the Conference for eventual adoption. In so doing, the Committee noted that the development of such FAO innovated products should continue to be related to the achievement of the institutional objectives of the Organization, that the Organization should not be tempted to duplicate the role of the private commercial sector and that arrangements for the exploitation of such products should be in line with the aims of the Organization, such as ensuring that such products are made widely available to developing countries or sectors at accessible prices. In this context FAO intellectual property in such innovations could be a useful tool.
42. The Committee expressed the wish to monitor the implementation of the new revolving fund and to receive periodical reports to that effect. It noted the desirability of avoiding the proliferation of separate Funds. In this context, experience in the implementation of the proposed new fund might demonstrate the eventual need to streamline the provisions of Financial Regulation 6.9 relating to revolving funds. The Committee noted that the proposal would be considered by the next session of the CCLM before reaching the Council.
43. The Committee took note of the information provided in document FC 93/13 and the verbal information provided by the Director, Personnel Division and the Chief, Social Security Branch.
44. The Committee took note of the information provided in document FC 93/14 and the verbal information provided by the Personnel Division.
45. The Committee took note of the information provided in document FC 93/15 and the verbal information provided by the Director, Personnel Division. The Committee appreciated the additional information provided and looked forward to further improvements in the presentation of data. The Committee requested more detailed reports on FAO's gender balance.
46. The Inspector-General introduced the Charter, concluding that it was intended to meet the operational needs of FAO and the expectations of member nations. He noted that it was consistent with and even exceeded the international standards of the profession of internal auditing.
47. The Committee welcomed the initiative. It discussed the importance of independence and objectivity of the Inspector-General. The Committee felt that independence would be strengthened through consultation with the Director-General on the plan of work, rather than approval. The Committee stressed the significance of the Inspector-General's discretionary ability to bring any report to the attention of the Finance Committee as an important step forward in improving reporting of oversight, and suggested that other interested member states also be given access. The Committee noted that the Director-General ensured implementation of recommendations as appropriate and understood that in certain cases recommendations might be implemented in different practical but equally effective ways. The Committee welcomed the new requirement for consultation with the Finance Committee on the appointment and separation of the Inspector-General, and suggested that the mechanisms for such consultation process could include the possibility of developing a job description or a vacancy announcement and making it available to member states.
48. The Committee requested that its suggestions for amendments to the Charter be taken into account by the Inspector-General in finalizing the Charter for inclusion as an annex to the functional statement of the Office of the Inspector-General, which formed part of the Organization's administrative manual.
49. The Committee took note of the information provided by and the recommendations of the Joint Inspection Unit contained in the following documents:
50. The Committee considered the status of the various Year 2000 activities and complimented the Organization for the progress made and for a report which provided a good description of the effort and costs involved. The Committee recognized the concern expressed by the Year 2000 Project Co-ordinator regarding the spate of new issues which were still being identified by Microsoft and other software vendors. It took note of the fact that while it was still possible to correct all the issues so far identified, if this trend continued, there might come a point at which new future items would have to be prioritized and only the most severe and urgent ones corrected.
51. The Committee:
- expressed appreciation at the increased co-operation between the three Rome-based agencies on Y2K matters;
- requested that, in view of the wide interest in this project, a further status report on the Year 2000 be presented to the Council meeting preceding the Conference in November;
- expressed compliments for the brochure on "Food, Agriculture and the Millennium Bug"; and
- stressed the importance of continuing this awareness campaign.
52. The Committee considered the document (WFP/EB.3/99/3-A) submitted to it for discussion and recommendations to be presented to the Executive Board at its Third Regular Session in October 1999.
53. The Executive Director, Ms Catherine Bertini, introduced the WFP budget for 2000-2001 and explained that the projections were in line with the estimates contained in the Strategic and Financial Plan (SFP) 2000-03. In formulating the budget, the Executive Director cited the new features resulting from: (i) the introduction of revised Resource and Long-Term Financing (R<F) policies, including the elements that dealt with cost re-categorization and a single across-the-board indirect support cost (ISC) rate; (ii) incorporation of comparative data over three consecutive biennia; and (iii) a presentation of data, particularly for the treatment of support costs, in accordance with the budget harmonization initiative arising from United Nations (UN) reform.
54. The Committee expressed appreciation for the concise and well-balanced format of the document, as it afforded clear insight into the methodology employed to prepare the budget and gave a detailed and concentrated account of how WFP's resources were foreseen to be used in the coming biennium and from where those resources were expected to come. The Committee noted that the overall themes and directions of the budget were well-connected to the strategic framework laid out in the Strategic and Financial Plan (SFP) 2000-2003. The Committee urged the Executive Director to submit future budgets in a similar condensed and informative manner with the possible inclusion of a brief highlight section on the budgetary impact regarding WFP's means of responding to large-scale extra-ordinary relief operations, both in terms of resource mobilization efforts and reaction on the ground.
55. The Committee sought and received responses on clarifications concerning: (i) the de-obligation process and its impact on transport and other costs; (ii) reasons behind volume fluctuations in programme categories, particularly in development; (iii) the implementation strategy, including budgetary support, for recommendations associated with the Food Aid and Development review; (iv) the means for determining ISC rates; (v) how WFP estimated commodity values; (vi) the implications of R<F policies on budget preparations; (vii) the influence of cash and in-kind contributions on the budget; (viii) decentralization with emphasis on ensuring that responsibility and delegated authority accompanied such initiatives; (ix) UN common house; (x) the presence and role of Junior Professional Officers (JPO) in WFP and their prospects for employment in the organization; and (xi) WFP's overall training strategy.
56. In summing up, the Committee expressed its appreciation to the Executive Director and her staff for the further insight and responses given to the clarifications sought and decided to recommend to the Executive Board that it approve the Executive Director's proposals contained in the Executive Board Action section on page 3 of the WFP 2000-01 Budget document.
57. The Committee considered document WFP/EB.3/99/3-C which was prepared in response to the decision of the Executive Board 97/EB.A/8 and which set out the financial liabilities of WFP for After Service Medical Benefits and provided options for the funding of these liabilities.
58. The Committee asked questions on the proposal and on the approaches taken on this issue by other organizations in the UN system. Some members stated that they were not in a position to provide guidance on this subject until further information, including the views of the UN Advisory Committee on Administrative and Budgetary Questions (ACABQ), was provided for consideration by capitals. The Committee also sought the views of the External Auditor who agreed that the recognition of the liabilities in the Financial Statements was desirable and transparent.
59. The representatives of WFP responded to the questions raised and advised that further information on comparative approaches in the UN system as well as the report of the ACABQ would be presented to the Executive Board.
60. The Legal Counsel advised that under the WFP General Regulations, the Executive Board had the full authority to exercise intergovernmental supervision and scrutiny of all aspects of the WFP Fund. The General Regulations required the Board to draw on the advice of ACABQ and the FAO Finance Committee on all matters relating to the financial administration of WFP. In the absence of substantive advice proffered by one of these bodies, it would be for the WFP Executive Board to decide whether or not to proceed with the matter.
61. The Committee concluded that it was not in a position, due to the reasons stated in para. 58 above, to endorse the proposals of the Executive Director to recognize the After Service Medical Liabilities in the Financial Statements.
62. The Committee decided to defer consideration of this item to its next session.
63. The Committee was informed that the Ninety-fourth Session was tentatively scheduled to be held in Rome from 8 to 12 May 2000. The final dates of the Session would be decided in consultation with the Chairperson.
1 Doc. FC 92/4
Proposed Scale of Contributions 2000-2001 with the "Ceiling Rate" reduced to 22 percent (2000-2001 Scale with "Ceiling Rate" at 25 percent shown for comparative purposes)
Proposed Scale a/
Proposed Scale b/
|Antigua and Barbuda||0.002%||0.002%|
|Bosnia and Herzegovina||0.005%||0.005%|
|Central African Republic||0.001%||0.001%|
|Congo, Democratic Republic of||0.007%||0.007%|
|Cook Islands c/||0.001%||0.001%|
|Democratic People's Republic of Korea||0.016%||0.015%|
|Iran, Islamic Republic of||0.168%||0.162%|
|Korea, Republic of||1.052%||1.011%|
|Papua New Guinea||0.007%||0.007%|
|St Kitts and Nevis||0.001%||0.001%|
|St Vincent & Grenadines||0.001%||0.001%|
|Sao Tome and Principe||0.001%||0.001%|
|Saudi Arabia, Kingdom of||0.588%||0.565%|
|The Former Yugoslav Rep of Macedonia||0.004%||0.004%|
|Trinidad and Tobago||0.017%||0.016%|
|United Arab Emirates||0.186%||0.179%|
|United States of America||22.000%||25.000%|
|a/ Derived directly from the UN
Scale of Assessments for 2000 as adopted by General Assembly Resolution 52/215 of 22
December 1997 and adjusted pro-rata to accommodate a "ceiling rate"
of 22 percent.
c/ The Secretariat of the UN Committee on Contributions advised that the "theoretical probable" rate of this member of FAO, which is not a member of the UN, would be the minimum rate, i.e. 0.001 percent.
d/ The contribution rates of these two members of FAO which are not members of the United Nations, are derived from the percentages at which they are called upon by the UN to contribute to certain UN activities.
No. of days
|Papua New Guinea||22,340.50||10-Mar-99||22||67.72|