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Exhibit I - BALANCE SHEET - DECEMBER 31. 1947
Exhibit II - SUMMARY STATEMENT OF INCOME AND EXPENSE OF THE SECOND FINANCIAL PERIOD
Exhibit III - STATEMENT OF CONTRIBUTIONS
Exhibit IV - STATEMENT OF EXPENSE BY BUDGET CLASSIFICATION FOR THE SECOND FINANCIAL PERIOD
Exhibit V - SUMMARY OF TRANSACTIONS OF THE STAFF PROVIDENT FUND FOR THE SECOND FINANCIAL PERIOD
Exhibit VI
Exhibit VII - ANALYSIS OF TRANSACTION OF THE WORKING CAPITAL FUND FOR THE SECOND FINANCIAL PERIOD
Exhibit VIII - STATEMENT OF EXPENSE BY PROGRAM CLASSIFICATION FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1947

American Security Building
Washington 5, D. C.
June 15, 1948

To the Council of the Food and Agriculture Organization of the United Nations
1201 Connecticut Avenue, N. W.,
Washington, D. C.

Dear Sirs:

In accordance with instructions we have made an examination of the books and records of Food and Agriculture Organization of the United Nations, for the twelve months ended December 31, 1947, and submit herewith our report thereon together with the following exhibits:

At the second session of the Conference held in September 1946 the second financial period was extended to run from July 1, 1946, to December 31, 1947, a period of eighteen months. We have previously, under date of May 7, 1947, submitted a report on our examination of the records, together with cash receipt and disbursement statements, for the sex months ended December 31, 1946. However, in order to reflect the transactions for the entire second financial period, the statements attached include income and expense for the sex months ended December 31, 1946.

Scope of Examination

Our examination was made in accordance with generally accepted auditing standards and included such tests of the accounting records and other supporting evidence and such other procedures as we considered necessary in the circumstances, but did not include a detailed audit of the cash and other transactions.

Transactions of the Rome office of the Organization were examined by other independent accountants, and the amounts of receipts and expenditures reported by them were reconciled with amounts entered in the records maintained at Washington.

Cash in United States banks at December 31, 1947, we. reconciled with balances reported directly to us by the depositaries and the Washington petty cash fund was counted in the course of our examination.

Auditing tests and cheeks were made of the amounts due from staff members for travel advances and loans, including a test confirmation of balances as at December 31, 1947.

A confirmation was obtained direct from the Treasury Department of the United States with respect to the United States Certificates of Indebtedness owned at December 31, 1947.

We examined correspondence on file in respect of recorded contributions from member nations, but we did not confirm the amounts of the contributions by direct correspondence with the members.

Balance Sheet

Cash in Banks and on Hand

Cash in banks and on hand as at December 31, 1947, as recorded in the books is summarized below:

The above Rome office cash includes 704,383 61 It. fire converted at approximately 583 It. fire to the dollar, the then current rate of exchange.

Receivables from Member Nations

The amounts of $65,750.00 and $1,518,925.00 shown on Exhibit I as contributions receivable for the first and; second financial periods, respectively, represent contributions allocated to member nations which were unpaid as at December 31, 1947. A reserve for contributions receivable in the amount of $1,584,674.00 was set up as at December 31, 1947, by a charge to income and as a result thereof the contributions receivable appear on the balance sheet as at that date at a nominal value of $1.00. It is expected, however, that collection will be made of! all these outstanding amounts. As at April 30, 1948, a total of $709,475.00 had been collected, $22,250.00 on contributions outstanding for the first financial period and $687,225.00 for the second financial period.

United States Treasury 7/8 % Certificates of Indebtedness

In April 1947, $1,500,000.00 face value United States Treasury 7/8% Certificates of Indebtedness were purchased at a cost of $1,501,409.10. As at December 31 1947, interest in the amount of $9,843.75 had accrued on these securities, and this amount is included in the balance sheet under the caption accrued interest receivable. The net amount of $8,706.23, representing accrued interest less $322.76, interest purchased, and $814.77, premimum applicable to 1947, appears as income on Exhibit II.

Accounts Receivable

The amount of $20,375.01 shown on the balance sheet as accounts receivable represents refunds duo from travel agencies and from other international agencies for expenses incurred on their account. An amount of $14,989.67 due from Thomas Cook & Son included in the above was collected early in January 1948.

Advances to Staff Members

Advances to staff members in the amount of $72,493.99 represent monies advanced to staff members who are traveling, loans to staff members for payment of income taxes which ultimately are to be borne by Food and Agriculture Organization, and other miscellaneous advances.

Furniture, Equipment and Automobiles

Furniture, equipment and automobiles were purchased during the period at a cost of $170,096.05 and were fully depreciated by charge to expense, the amount of which is included on Exhibit II in office and operational expense. There was no inventory of furniture and fixtures available for our inspection as at December 31, 1947, but we were informed that the Organization is in process of taking one in 1948 and that inventory records will be established and maintained in the future.

Accounts Payable and Accrued Expenses

In accordance with Regulation XIV, paragraph 5, of, the Financial Regulations, there has been included in accounts payable at December 31, 1947, $247,182.39 which represents payments made in January 1948 in respect of transactions for which provision was made in the 1947 budget and for which the expense was incurred prior to December 31, 1947. At a meeting Of the Council of Food and Agriculture Organization on April 5, 1948, the Council approved the report of the Committee on Financial Control which recommended that unliquidated liabilities as at December 31, 1947, which were unpaid as at January 31, 1948, should be included in the accounts for the second financial. period under the appropriate budget headings. Accordingly, an amount of $223,673.00 representing additional liabilities, estimated and actual, applicable to the second financial period which were not paid during January 1948 is also included in accounts payable shown on the attached balance sheet. In so far as we could ascertain within the scope of our examination, all liabilities of material amount at December 31, 1947, were recorded on the books as at that date.

Special Grants

United Nations Relief and Rehabilitation Administration Grant: Under date of February 19, 1947, Food and Agriculture Organization entered into an agreement with United Nations Relief and Rehabilitation Administration under which UNRRA agreed to advance the sum of $600 000.00 to Food and Agriculture Organization (and any further sums which were authorized by the Central Committee of the Council of the Administration) in ret turn for which Food and Agriculture Organization, with. in the limit of the funds made available, would continue the advisory services in the field of agricultural rehabilitation hitherto provided by UNRRA. As at December 31, 1947, a total amount of $1,140,400.34 had been received from UNRRA under this agreement and $173,970.64 had been expended, leaving a balance of $966,429.70 as shown on Exhibit VI.

Venezuelan Development Corporation Grant: At the request of the government of Venezuela the Organization has sent a technical mission to that country. All expenses of this mission are to be borne by the Venezuelan government and under date of December 26, 1947, an amount of $10,000.00 was received from Venezuelan Development Corporation as an advance payment on account of expenses to be incurred by the mission. At December 31, 1947, $300.47 had been expended, leaving a balance of $9,699.53 as shown on Exhibit VI.

Working Capital Fund

Regulation XI of the Financial Regulations provides that the unspent balance of the budget for the first financial period shall constitute the nucleus of the Working Capital Fund and at the third session of the Conference the Committee on Financial Control stated in its report accompanying the auditors report for the first financial period that arrears of contributions for the first financial period received after June 30, 1946, should be added to the Working Capital Fund. Accordingly, contributions for the first financial period collected in the second financial period, amounting to $158,875.00, have been added to the Working Capital Fund as shown on Exhibit VII attached. The uncollected contributions at December 31, 1947, for the first financial period, $65,750,00, will be credited to this fund when received.

The budget for the second financial period approved at the second session of the Conference of Food and Agriculture Organization included a provision for transfer of an amount of $557,400.00 from surplus to the Working Capital Fund. It is the intention of the Organization to transfer this amount out of subsequent collections of contributions for the second financial period.

Surplus

The balance in the surplus account as at December 31, 1947, $145,400.50, represents the excess of income over expense of the second financial period. This amount will be increased by subsequent collections of contributions receivable for the second financial period. As mentioned previously in this report, an amount of $557,400.00 has been marked for transfer to the Working Capital Fund.

Income and Expense

The statement of income and expense, Exhibit II attached, shows an excess of income over expense of $145,400.50 for the second financial period, July 1, 1946 to December 31, 1947, after deducting provision for uncollected contributions of $1,518,925.00. The expenses are classified according to the budget for the second financial period approved by the second session of the Conference. A comparison of the actual expenses with the approved budget is shown on Exhibit IV. The expenses shown on this statement for the period July 1, 1946, to December 31, 1946, include actual cash disbursements for that period as shown in our report dated May 7, 1947, plus amounts paid in 1947 for expenses which were incurred in the 1946 period.

A statement of expenses for the twelve months ended December 31, 1947, classified according to program is shown on Exhibit VIII. Similar classifications were not maintained prior to 1947.

Staff Provident Fund

The Staff Provident Fund, which was set up pending the establishment of a permanent pension system, had a balance of $421,495.10 at December 31, 1947. This balance was represented by $231,113.36 on deposit at the Riggs National Bank in the Provident Fund account and $190,381.74 due from General Funds on deposit at the Riggs National Bank in the regular account

Contributions to the Fund era deducted from the salary of full-time, permanent employees at a rate of seven and one-half percent of salary. An equal amount is contributed by the Organization. At December 31, 1947, an additional amount of $124,883.85 was charged to expense and provisionally added to the balance of this fund. This represents an additional sex and one-half percent contributed to bring the Organization contribution to the fourteen percent which would be required should Food and Agriculture Organization join the Staff Pension Scheme of the United Nations.

Internal Audit

In accordance with Regulation XVI of the Financial Regulations, an internal audit section was established during 1947 and started to function in the latter part of the year, but due to lack of staff a full internal audit program could not be carried out in 1947. We understand that the staff has now been augmented and that the internal audit program will be extended to include all transactions recorded in the accounts of the Organization and to maintain records of all commitments and their conformity with the approved budget.

The records appeared to be generally well maintained land, to the extent which we had occasion to observe, the underlying documents were found in order. During the course of our examination certain weaknesses in accounting procedure and internal control were noted) and discussed with Organization officials Our recommendations with regard to these matters are incorporated in the letter of transmittal accompanying this report.

We are pleased to acknowledge the courtesies extended to our representatives by officials and employees of the Organization throughout the course of the examination.

Yours very truly,
PRICE, WATERHOUSE & Co.

Exhibit I - BALANCE SHEET - DECEMBER 31. 1947

Liabilities, Working Capital Fund and Surplus

Exhibit II - SUMMARY STATEMENT OF INCOME AND EXPENSE OF THE SECOND FINANCIAL PERIOD

July 1, 1946 to December 31, 1947

Exhibit III - STATEMENT OF CONTRIBUTIONS

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