FC 109/28

Finance Committee

Hundred and Ninth Session

Rome, 9 – 13 May 2005

Review of the Payment of the European Community (EC) to Cover Administrative and Other Expenses Arising Out of its Membership in the Organization

Introduction and Background

1. At its 108th Session, the Finance Committee was advised by the European Commission (EC) of its intention to seek the agreement of other Members, to certain changes in the methodology used in the calculation of its contribution to FAO covering administrative and other expenses arising out of its membership of the Organization1. Before presenting a proposal to the next Conference in November 2005, the EC hopes that the proposed new methodology, presented below through the Secretariat, will benefit from the support of the Finance Committee.

2. It is recalled that the legal basis for the contribution paid by the EC, is contained in Article XVIII.6 of the Constitution which provides that:

“A Member Organization shall not be required to contribute to the budget specified in paragraph 2 of this Article, but shall pay to the Organization a sum to be determined by the Conference to cover administrative and other expenses arising out of its membership in the Organization (...)”

3. The 78th Finance Committee recommended to the 107th Council that no formula be used in the calculation of the EC contribution, but that a lump-sum be fixed by each Conference, based on the payment for the previous biennium, adjusted for the forthcoming biennial budget cost increase coefficient and movements in the euro/dollar exchange rate from one budget to the next. This methodology was endorsed by the 107th Council, approved by the 28th Conference in 1995 and has been applied consistently since then, the only change being that the 32nd Conference in 2003 fixed the sum to be paid in euro rather than in dollars.

Summary of the EC’s Proposal

4. The EC recognises that the current lump-sum methodology, adjusted to take due account of the present number of FAO Members, has merit in terms of its relative simplicity. The EC’s proposal also seeks a change in methodology regarding the adjustment of the sum to be paid from one biennium to the next. The EC asserts that it is no longer appropriate that the lump-sum be adjusted every two years through a formula related to “budget net cost increases” and “exchange rate adjustments” (US dollar versus euro). The EC proposes instead that an adjustment, which reflects the official cost of living increases in the euro area or in the host country, be made to update the lump sum payment from one biennium to the next. The Secretariat supports this proposal which would bring the adjustment formula more in line with a system of split assessment.

5. The Finance Committee is requested to endorse the revision to the methodology outlined above, before the matter is put before the 33rd Conference in 2005.


1 FC 108/26c