FC 94/4(b)

Finance Committee

Ninety-fourth Session

Rome, 8 - 12 May 2000

Review of Support Costs:
Current Reimbursement Rates for Support Costs on Field Programmes and Other Voluntary Contributions



1. The Finance Committee at its 93rd Session received and reviewed a paper1 on the issue of Support Costs. It welcomed the broadly based review initiated in the paper and acknowledged the conceptual framework as a helpful basis for further development of proposals.

2. The Committee requested the Secretariat to provide information on various related areas. This paper deals with current reimbursement rates for support costs on field programmes and other voluntary contributions.


3. The following diagram portrays the full range of activities which may attract support costs and shows their potential relationship to the Regular Programme.

Matrix of Activities by Funding Source and Type2

Funding Source Technical Assistance (TA) Emergency Assistance Normative Programmes and Other R.P. Activities
  National Funding Donor Contributions Donor Contributions FAO R.P. Normative Activities inc. Commissions Jointly Funded Activities
Extra-budgetary UTF GCP, MTF and other TFs (inc. APOs in the field)
UN funds
World Bank and UN agencies: WFP and UNHCR
Trust Funds (inc. APOs at HQ)
UN Specialized Agencies
UNDP (e.g. contribution to TAC, etc.)
Regular Programme TCP
TCP FAO Regular Programme FAO Regular Programme

4. The shaded boxes in the above table reflect all of the activities where some type of support cost potentially exists and, therefore, where some form of reimbursement may be expected. The following notes describe the reimbursement rates for each category.

5. It should be noted that the scope excludes direct project costs for which changes are made by means of pro forma rates (e.g. terminal reports or thematic evaluation missions) - although these are mentioned in Annex III for completeness. These had been excluded by the External Auditor in his list of support cost categories whereas they are in reality direct project inputs.

Extra-budgetary Programmes

Annex I to this document summarizes the rates in tabular form.

Technical Assistance - National Funding

6. This involves Unilateral Trust Funds (UTF) where a government contracts with FAO to provide technical assistance. As Trust Funds, they are generally subject to the standard rates (see Annex II) although a new policy has been emerging for this category. The first was the agreement of the Finance Committee at its 79th Session that the nationally executed component of such projects should be charged at full incremental cost (i.e. the best approximation of actual variable indirect support costs) which was generally likely to be lower than the full 13 percent rate which would otherwise apply.

7. Similarly, the Committee at its 85th Session was informed of the application of this approach (i.e. full recovery of incremental costs) to the entire budget of a Unilateral Trust Fund for which FAO had been invited to tender (i.e. in this case a flat percentage rate was not considered by the donor to be an acceptable approach to the tender).

Technical Assistance - Donor Contributions

8. This represents the great bulk of extra-budgetary resources. The standard rates as described in Annex II apply to Trust Funds in this category. Exceptions to the provisions of Annex II are limited to those cases where the donor is prepared to fund as direct costs some portion of the "variable indirect costs". In such cases, the PSC rate is adjusted to reflect the amount covered under direct costs.

9. It should be noted from Annex I that projects funded by UN sources (e.g. UNDP, UNFPA, etc.) are subject to the support cost arrangements approval by their respective Governing Bodies. These reimbursement rates generally include some explicit or implicit cost sharing of support costs by both the funding and executing agencies.

Emergency Assistance - Donor Contributions

10. This primarily relates to the work of the Special Relief Operations Service (TCOR) which operates and manages the execution of emergency projects. Such projects are funded by Government donors, and sometimes by UNDP and/or IFAD. The policy for reimbursement of costs is that TCOR makes direct charges to projects sufficient to cover its entire costs (i.e. salaries of TCOR staff and of operating costs). These charges average 5 percent although they may be higher on occasion or lower where volumes are extraordinarily large (e.g. Screwworm, Iraq, etc.).

11. The underlying premise for this approach is that being "emergencies" and short-term in nature, they do not result in permanent increases in the Organization's administrative infrastructure.

12. Furthermore, TCOR covers variable increases in costs such as additional overtime or travel expenses in the Purchasing Services as and when necessary, but there is probably a relatively small amount of unrecovered variable indirect support cost which is very difficult to measure. However, this is a situation which the Governing Bodies have not sought to change over the years partly because of the absence of reliable data but - presumably, also because of the humanitarian nature of the work.

FAO Regular Programme (Normative) Activities

13. This category relates to voluntary contributions which represent direct support to a Regular Programme activity specifically mentioned in the Programme of Work and Budget. As indicated in para. 3(b) of Annex II, the reimbursement of AOS costs may be waived partially or in full where a voluntary contribution is to implement certain aspects of the Organization's Programme of Work. These cases are handled as exceptions and are reported to the Finance Committee each year. In recent times, a more or less standard approach has been adopted wherein a 6 percent rate is applied to projects which meet the requirements. This rate is based on the average indirect variable cost of supporting contributions to Headquarters or Regional Office based activities (as compared to the higher cost of technical assistance activities executed in the field).

14. A further exception is made for contributions to cover the travel cost of participants from developing countries to consultations or conferences on matters within FAO's mandate. In these cases, a full waiver is provided.

15. A further group of Trust Funds which fall within this category is where FAO, as part of its normative work, hosts and administers a statutory body such as a Commission, the costs of which are shared amongst members or participants. Over the years the treatment has not been consistent although for several biennia, the practice has been to try and identify a good estimate of the indirect variable support cost and charge that amount to the Commission. Thus, for example, the rate for the Indian Ocean Tuna Commission was set at 5 percent based upon this principle.

Jointly Funded Activities

16. This category covers partnership arrangements with United Nations organizations and other non-profit IGOs. No formal policy existed for this category and, in fact, a variety of arrangements have been approved over the years. In most cases involving United Nations agencies, the jointly funded activity is a cost sharing arrangement with no overhead recovery by any of the partners. The host organization, where one exists, rarely charges overheads although such costs may be recognized in the budgetary process as part of the cost-sharing formula.

Regular Programme

17. Certain technical assistance activities funded from the Regular Programme generate indirect variable support costs. There are basically three different forms of assistance involved: the Technical Cooperation Programme (TCP), the Special Programme for Food Security (SPFS), and Technical Support Services (TSS).

Technical Cooperation Programme and the Special Programme for Food Security

18. TCP and SPFS projects, like all field projects, incur incremental costs in the form of technical, administrative and operational support services. Thus, the variable cost of operations which arises from the volume of work on TCP and SPFS projects (e.g. in the Operations Division) needs to be accommodated in the financial management structure. It is, therefore, necessary that a mechanism be found to ensure that those units incurring such costs be reimbursed satisfactorily.

19. The question arises as to what extent such costs should be reimbursed. At one extreme, one could claim that full cost recovery is required. However, as full cost implies an allocation of fixed costs from certain administrative units, this would result in a form of double counting if, as is normal, these units were fully budgeted in the Programme of Work and Budget and then also received credits from another line in the Regular Programme for essentially the same costs.

20. It is for these reasons that the underlying principle, as approved by the Council at its 113th Session3 for all charges to field project activities funded from the Regular Programme, is to recover a reasonable estimate of the costs of the operational services provided to the project.

21. The current rate charged is 7 percent on SPFS and an equivalent amount on TCP, although the latter programme is charged on a scale which establishes a fixed amount for direct operating costs for project budgets which fall within a given range. A decision has already been made to adopt a percentage rate on TCP projects in the same manner as SPFS4, but has not yet been implemented for technical reasons.

Technical Support Services

22. Technical Support Services to projects involve the services provided by FAO technical staff in the following areas:

23. It is noted that these costs fall under the definition of direct project costs although certain aspects may have to be treated as "indirect" because of difficulty in tracking staff time on a project by project basis for activities such as technical backstopping.

24. It is also noted, as stated in the document presented to the Committee at its last meeting, that TSS is within the Organization's mandate which includes the function of furnishing technical assistance to Members and that TSS services are identified in the budget approved by the Conference. In stating this, it should be recognized that TSS is inherently cost shared; that is, some of it is paid for by the related projects and some is funded by the technical unit providing the service. The cost sharing can take the form a funding certain services from projects (e.g. field missions) and other services from the regular budget (e.g. desk work, general technical backstopping, etc.). In other cases, the donor may agree to fund the required number of working days, but insists that a reduced rate per day be applied, usually arguing that there is a shared benefit to the Regular Programme of Work. The various rates and approaches are included in Annex III.

25. Finally, TSS itself incurs its own overhead (i.e. beyond the direct cost of the professional staff) in the form of the cost of support staff, non-staff expenses, etc. The current policy is not to charge for these indirect costs which is also in line with the policy and practice of UNDP in relation to their equivalent of such services (UNDP/STS).


FC 94/4 (b) Annex I

Inventory of Support Cost Reimbursement Rates
(Administrative and Operational Support)


Description Rates Authority Comments


  • Technical Assistance - National Funding
Unilateral Trust Funds (UTF) 13% of project inputs except high proportion of contracts, equipment, supplies at 7% (see Annex II extract of MS 250 for detail) MS 250 Rate originally derived from UNDP Governing Council decision but is now standalone. Some exceptions for national execution and in approach to tenders.
  • Technical Assistance - Donor Contributions
UNDP - TRAC 10% of project inputs UNDP Governing Council As a general principle this rate was deemed to be approximately 50% of the full cost implying cost sharing between UNDP and the Organization
UN and UNDP Administered Trust Funds and those of other UN Bodies UNEP Country 13% Other 0 UNFIP 5% UNFPA Country 7.5% Other 0 UNCDF All 10% UNOCHA 10% except for emergencies GEF 10% but some waivers to 8% Subject to determination by the UNDP Governing Council or other relevant body Agencies tend to negotiate their own rates within a general umbrella of the UNDP Governing Council
Trust Funds - Associate Professional Officers 12% of expert costs MS 250  
Trust Funds - Host Government Contributions to HQ and Regional Office Infrastructure Zero - considered direct reimbursement of expenditures per F.R. 7.1 Agreement entered into with Host Government Examples include Italy and Chile
Trust Funds - Others including the Government Cooperative Programme (GCP) 13% of project inputs except high proportion of contracts, equipment, supplies at 7% (see Annex II extract of MS 250 for detail) MS 250 Rate originally derived from UNDP Governing Council decision but is now standalone
TeleFood Projects Zero Conference Resolution 3/97  
Money and Medals Project 5% on operations/production account. Zero on project accounts Internal policy decision New project operations have not been funded for several biennia
  • Emergency Assistance - Donor Contributions
Trust Funds - Emergency Projects Direct operating expenses at an average rate of 5% but lower on large projects Original established for Sahelian Relief Operations in 1975 and since reported as waivers to FC Some additional direct charges are made to projects as and when they are incurred.
  • Regular Programme Normative Activities
Trust Funds - Normative projects in direct support of the R.P. Generally 6% of project inputs - sometimes higher on projects which are part technical assistance and part normative Treated as waivers under MS 250 Trust Funds financing the attendance of developing country participants at Conferences (e.g. Leipzig, WFS) are waived to zero PSC
Secretariats of Commissions etc. Varies depending upon the agreement Usually stated in the articles of constitution or in the agreement for FAO to host the body (e.g.s.) Indian Ocean Tuna Commission at 5% Desert Locust Commissions at 13% or 7% European Foot and Mouth Commission zero %
UNDP SPPD (Support Services for Policy and Programme Development) Zero support costs but rate per month of US$ 14 000 includes the cost of support staff UNDP Governing Council This rate is implies some minimal cost sharing in that it does not cover the adminsitrative and operational costs of such activites
  • Jointly Funded Activities
UN Specialized Agencies (e.g. WHO, IAEA, etc.) and non-profit IGOs (e.g. CGIAR) Cost sharing amongst participating organizations generally including the principle that the host organization bears the overhead costs Memorandum of Understanding This category includes important programmes such as CODEX, the Joint Programme with IAEA and the Technical Advisory Committee of CGIAR
World Bank Originally direct costs including administrative costs but evolving into an all-inclusive rate per month for the service MOU with WB The all-inclusive rates fully covers direct costs
Investment Support Programme (ISP) 10% of expert costs for GOE of which FAO pays one third MOUs with Financing Institutions Not really project servicing cost as it does not contribute to overheads but rather to covers TCI's direct costs
  Ranges of rates approximating

7-8 % on average

FAO Council but with instructions to harmonize with TCP  
SPFS 7% of project inputs FAO Council but with instructions to harmonize with SPFS  


FC 94/4 (b) Annex II

Review of Support Costs - Current Reimbursement Rates for Support Costs on Field Programmes and Other Voluntary Contributions


Existing Policy on Waiver of Projet Servicing Costs

1. The policy for project servicing costs and their waiver is laid down in Manual Section 250, Technical Assistance under Funds-in-Trust Arrangements, Appendix A, para. 4 as follows:

2. In accordance with the standards established by the Director-General in implementing the directives of the Council, the guidelines for determining AOS costs rates are as follows:

  1. the established AOS costs rate of 13% is applied in all cases, except as indicated in paragraphs (b) to (f) below;
  2. in trust funds for associate experts' schemes, a rate of 12% is applied;
  3. where the "supplies/equipment" component represents an amount of 70% or more of the net project value (excluding AOS costs), a rate of 7% is applied to the whole project;
  4. where the "supplies/equipment" component represents an amount of 40% or more, but less than 70% of the net project value, AOS costs are established at 7% on "supplies" and "equipment" and at 13% on the other components;
  5. when, under the component for "contractual services", an amount is included for an item in which the responsibility of FAO is limited to transferring funds to the recipient government (or implementing agency as designated by the government) for construction of buildings, or for other project inputs performed under government (or agency) supervision and without the Organization being concerned in technical or substantive aspects of expenditure, a 7% rate may be applied to this element. The balance of project funds is then assessed in accordance with the formula set out in sub-paras. (c) to (d) above;
  6. only in exceptional circumstances, when a Trust Fund project represents a special contribution to implement certain aspects of the Organization's Programme of Work, there may be some justification for reducing, or in rare cases even waiving, AOS costs.

3. Paragraph 5 of the same section describes the procedures for waiver as follows:

  1. Authority to determine AOS costs rates is delegated to the Director, Office of Programme, Budget and Evaluation (PBE), in cases not covered by the guidelines in para. 4, and in all cases falling under paras. 4(e) and 4(f), the operating division must submit written proposals for the determination of AOS costs to the Director, PBE, with relevant supporting documentation, before any commitments are made or the Project Formulation Framework (PFF) or Project Document is circulated for required clearance.
  2. As mentioned in para. 4(f), the reducing or waiving of AOS costs will be agreed to only in exceptional cases. The Finance Committee at its 24th Session requested that up-to-date information be available at its sessions showing those Trust Funds on which the normal overhead charge of 13% is not paid.

4. Other exceptions were built up over the years for specific programmes. These were last listed in Appendix B of C 93/17 Trust Funds - Support Cost Reimbursements. These exceptions are briefly summarized below:

Special Programmes

5. Certain special programmes had benefited from partial waivers related to the nature of their activities. An example was the International Fertilizer Scheme which was subject to a levy of 5%. However, this scheme and other similar special programmes have almost completely wound down and, therefore, the waiver policy is only theoretical in nature at the present time.

United Nations Financed Activities

6. UN financed activities are subject to specific agreement with the agencies or programmes involved. The major examples are:

  1. UNDP: in accordance with the relevant decisions of the Governing Council of UNDP, the executing agencies receive reimbursement for administrative and operational support (i.e. currently at a flat rate of 10%);
  2. UNFPA: in accordance with the inter-agency agreement, 7.5% on country based projects and the full salaries of several posts created to provide technical support and mainstreaming of population issues within each specialized agency plus a provision for their administrative costs;
  3. Other agencies: other special arrangements exist for smaller programmes with UNCDF, etc. These are tending to follow with some time lag, the general evolution of support costs as determined by the UNDP Governing Council.
  4. Direct Contributions for the Reimbursement of Expenses.

7. There are some further cases which are judged not to fall under Manual Section 250. For example, where a partner is interested in covering the cost of some part of work being undertaken by FAO, it has not been the practice to treat these as Trust Funds, but rather as temporary accounts against which the related expenditure is offset. The amounts involved are generally small (i.e. less than US$ 100,000 per occasion) and seen as falling under Financial Regulations 7.1.a) which envisages direct refunds of expenditure separately from voluntary contributions.


FC 94/4 (b) Annex III

Rates for pro forma Charges for Direct Inputs to Projects


Description Rates Authority Comments
  • External charges
UNDP STS (ex TSS-2) US$ 9 500 per staff month charged UNDP Governing Council Seen as cost sharing with the full cost being approximately US$ 19 000/month when last measured
ATS – Advisory Technical Services to Trust Funds Charged a daily standard cost of staff member through secondment Agreement of donor as evidenced in Trust Fund project budget Can also involve separate special arrangements – e.g. separate sources of funds for project formulation
UNFPA Posts Actual cost of authorized posts Agreement with UNFPA Currently involves 6 Professional in HQs
Terminal Report Costs US$ 3 600 per project (1998 pro forma) to both UNDP and TF projects Project Budgets Pro forma rate – credits to Reporting Unit’s project. Pro forma costs reviewed annually. Can be higher for complex projects – not really support costs as it does not contribute to overheads
  • Internal charges
ATS Advisory Technical Services Cost of mission days at standard cost plus DSA and travel cost Council Applies to both TCP and SPFS
SSTS Standard Supervisory Technical Services including for LTUs (workpoints) Workpoints based upon schedule of tasks @ US$ 100 per point Council (for the principle – not the detail) Applies to TCP only
Terminal Reports Costs US$ 1 000 per project (TCP pro forma cost) Project Budgets Pro forma rate – credits to Reporting Units project – not really support cost as it does not contribute to overheads
Thematic Evaluation Charges US$ 1000 per project Project document Applies to TCP only

1 FC 93/4

2 A list of acronyms is given as an Annex to the first of this series of documents, FC 94/4 a).

3 CL 113/4 para. 53

4 CL 113/4 para. 53