59. The financial context against which the 2002-03 Programme of Work and Budget is being developed, is summarised below.

General and Related Funds Equity Position at 31 December 1999

US$ million

Working Capital Fund


Special Reserve Account


General Fund Balance/Accumulated Deficit


Total Reserves and Fund Balances at 31 December 1999


Working Capital Fund

60. The purpose of the Working Capital Fund (WCF), which is specified in Financial Regulation 6.2, is primarily to advance monies on a reimbursable basis to the General Fund in order to finance budgetary expenditures pending receipt of contributions to the budget, and to finance emergency expenditures not contemplated in the current budget.

61. In accordance with Conference Resolution 15/91, the authorised level of the WCF is US$ 25 million, receipts from Member Nations to the WCF in 1998-99 have been negligible, and contributions receivable from Member Nations remain at US$ 1.6 million. During 1998-99, all amounts previously advanced by the WCF to the General Fund were repaid, and the WCF was not utilised for any of the other purposes for which it was established.

Special Reserve Account

62. In accordance with Conference Resolution 13/81, the purpose of the Special Reserve Account (SRA) is to protect the Organization's Programme of Work against the effects of unbudgeted extra costs arising from adverse currency fluctuations and unbudgeted inflationary trends. Net gains or losses on exchange as well as the currency variance on staff standard costs (i.e. the difference between the US dollar value of staff costs expressed at the budget rate for the biennium and the UN operational rate at the time of payment) are charged to the SRA. The SRA can also advance monies on a reimbursable basis to the WCF.

63. The SRA is authorised at a level of 5% of the effective working budget, or US$ 32.5 million and the contributions receivable at 31 December 1999 stood at US$ 10.9 million. During 1998-99, all amounts previously advanced by the SRA to the General Fund (US$ 32 million) were repaid, and US$ 1.9 million, representing a portion of unbudgeted inflationary cost of a retroactive 4% increase in Headquarters general service salaries, was charged to the SRA. The balance on the SRA was US$ 23.1 million at 31 December 1999.

General Fund

64. Receipts from current assessments on Member Nations, miscellaneous income, support cost reimbursements, income from jointly funded investment activities and technical support services comprise the source of funding for the Programme of Work and are credited to the General Fund. The related expenditures to execute the Programme of Work are charged to the General Fund.

65. In arriving at the General Fund balance at the end of the financial period, account is also taken of receipts against past assessments on Member Nations, and any indebtedness of the General Fund to the WCF and the SRA. Also taken into account are charges or credits outside the Programme of Work that are authorised by the Governing Bodies, such as the impact, under Conference Resolution 7/97, of redeployment and separation costs amounting to US$ 10.6 million. Other charges outside the Programme of Work include the amortisation of after service medical liabilities, and movements arising from the actuarial revaluation of staff related schemes, which are now charged on an accruals basis.

66. The Audited Accounts for 1998-99 show a deficit under the General and Related Funds of US$ 63.6 million. This is an improved situation compared with the record deficit of US$ 113.6 million as at 31 December 1995. However, it marks a deterioration since the end of the 1996-97 biennium, when the deficit stood at US$ 28 million, and earlier estimates of the accumulated deficit of US$ 38.4 million as at 31 December 1999, made prior to completion of the latest actuarial valuations for staff related schemes.

67. The Council will recall that the Programme of Work and Budget (PWB) 2000-01 incorporates a provision for the cost of medical benefits, including after service medical coverage, for current staff. The 2002-03 budget will continue to provide the necessary after service medical coverage, for current staff, based on the latest actuarial valuations while the liability for past services will continue to be amortised in the accounts of the Organization over a period of 15 biennia.

68. The weaker equity position in 1998-99 arises mainly from the amortisation of after service medical liabilities of US$ 21.1 million in 1998-99. In addition, surplus income generated from investments held in respect of the Separation Payments Scheme and Staff Compensation Plan, amounting to US$ 42.8 million, has been transferred in accordance with Conference Resolution 10/99 to After Service Medical Care. The positive result of this action is its contribution to the decline in the related unrecorded liabilities to US$ 109.6 million as at 31 December 1999 compared with US$ 195.1 million in 1997. However, lacking any specific plans to ensure the funding of After Service Medical Care, the problem remains largely unresolved in financial terms.

69. It is emphasised that the accumulated deficit of US$ 63.6 million is fully covered by arrears in assessed contributions. At 31 December 1999, these stood at US$ 151.2 million, out of which US$ 94.5 million being due from the largest contributor. It, therefore, follows that if all outstanding arrears were paid in full, the Organization would have a substantial cash surplus.

70. It is difficult to determine the evolution of the accumulated deficit in 2000-01 and the likely position at the end of the present biennium. The outcome could be heavily influenced by the net receipt of assessed contributions (i.e. both current assessments and arrears). In addition, the following factors influence the result:

  1. the extent to which full implementation of the 2000-01 authorised budget of US$ 650 million is achieved as planned;
  2. it is foreseen that the US$ 9 million authorised by the 1999 Conference for meeting redeployment and separation costs will be spent;
  3. the amortisation of after service medical liabilities will continue in 2000-01; and
  4. the overall result will be influenced by investment income on assets held for staff related schemes and the next actuarial valuation of these schemes.

Use of Arrears

71. By Resolution 3/99, the Conference established the framework for the eventual use of arrears in case of significant payments, particularly from the major contributor.

72. The decision of the United Nations General Assembly at the end of the year 2000 to adopt a substantially modified scale of contributions for the 2001-2003 period, which had immediate implications for the FAO scale of contributions, as set out in Conference Resolution 9/99, has removed a significant obstacle to the payment of arrears due by the major contributor.

73. However, at the time of writing this document, there was still some uncertainty on timing and amounts of arrears payments by the major contributor. Moreover, the weaker financial position than that previously foreseen, as reflected in the accumulated deficit at 31 December 1999 of US$ 63.6 million, implies that a more limited use than originally anticipated can be made of arrears payments.