2ND FLR., BLOOMINGDALE BLDG.
205 SALCEDO ST., LEGASPI VILLAGE
MAKATI, METRO MANILA 1200
PHILIPPINES
CABLE: ICLARM MANILA
TELEX: (ETPI) 64794 ICLARM PN, 4900010376 ICL UI (USA)
FAX: (63-2) 816-3183 TEL.: 818-0466, 818-9283, 817-5255, 817-5163
E-MAIL: (CGNET) ICLARM, (SCIENCENET) ICLARM. MANILA
ICLARM - INTERNATIONAL CENTER FOR LIVING AQUATIC RESOURCES MANAGEMENT
MC P.O. BOX 2631, MAKATI, METRO MANILA 0718, PHILIPPINES
VIA FAX TO (1-202) 473-3112 USA
02 December 1994
Mr Ismail Serageldin
Chair
Consultative Group on International Agricultural Research
Dear Mr Serageldin:
Re: ICLARM's budget
At the 6th Meeting of the Board of Trustees in Manila from 14-18 November 1994, the Board decided that I should write to you to outline the present difficult situation facing ICLARM because of the level and structure of its budget. In so doing, the Board stresses that the transition now occurring in the global status of living aquatic resources presents the CGIAR with many challenges and opportunities in its research and NARS partnership agenda. Knowledge of aquatic systems and how people can manage living aquatic resources lags far behind that of equivalent terrestrial systems. A research investment now could do much to assist better management and sustainable food security in the developing world.
Under the CGIAR '$270 million' vector, ICLARM's share is $4.8 million. Our total core is therefore the smallest of any center now operating in the System. In 1994, we estimate that our total budget will be $6.7 million, with $1.98 million (30%) being classified as complementary funds. As with all centers, ICLARM's core budget is split between unrestricted and restricted core components. In our case, the unrestricted core component, raised from 12 donors (see Annex 1) is $2.7 million (40% of total budget), the remainder being in restricted core (30% of total budget).
We are experiencing two sets of problems. The first set arises from the present size of the budget and the second from the low proportion of total budget in unrestricted core funds.
The consequences of the small size of the core and overall budget are:
· Limited program ability:
ICLARM has a limited ability to address its mission within the CGIAR.
· Limited infrastructure: At the present budget level, ICLARM cannot support research infrastructure comparable to other CGIAR (or NARS) centers.
· No gains from the present CGIAR funding drive: ICLARM is technically unable to win any of the matching World Bank funding attracted by the action to stabilize the CGIAR budget and fill the $270 million vector. This is because our $4.8 million of core funds is already over-subscribed.
· Disincentives to donors: Donors wishing to use their CGIAR funds to trigger the World Bank's matching 2:1 grants to the CGIAR are not attracted to ICLARM because the small ICLARM core is oversubscribed. No doubt some have directed their attention to other larger centers with a core funding gap and therefore the ability to trigger the matching arrangements.
· World Bank penalty for oversubscription: Because ICLARM's low core level for 1994 was filled, the World Bank ('donor of last resort') contribution dropped from $0.5 million in 1993 to $0.38 million in 1994. These funds were in unrestricted core. Therefore, ICLARM's own efforts to attract donors into unrestricted core (e.g., Japan) were partially offset by losses from the World Bank's contribution, leaving unrestricted core slightly lower than in 1993.
With respect to the structure of the budget, ICLARM's unrestricted core budget represents only 40% of total budget for 1994. Such a level is low relative to that in most other CGIAR centers and is small in absolute terms since it is a low percentage of a small overall budget. There are several difficulties which arise from this balance, as follows:
· Program instability:
Restricted core and complementary funds are of short term duration (from several months to 5 years at the maximum) and must be reapplied for or replaced to provide a stable research program, even if they cover core research projects. Program instability is magnified when the overall budget is small and therefore one substantial grant can make a big difference to the balance of efforts. ICLARM is presently experiencing extreme difficulty in the continuity of nearly its whole African effort which is centered in Malawi and for which the restricted core funds have now finished. New funds will not be available until 1996 from the most prospective donor yet I wish to keep the excellent team we have there together for the exciting next phase of this work under a SADC approved project. Our Bangladesh site faces the same problem in six months time.
· Payments in arrears: Restricted and complementary funds are only paid after the monies are expended and ICLARM therefore carries major outlays before it can recover them. Certain donors are in the habit of very delayed payments (often more than 90 days after accounts are rendered), thus exacerbating the cash flow problems. In addition, even unrestricted core funds arrive throughout the year (the latest notification from a donor was received in August 1994, for the 1994 budget year), further exacerbating cash flow problems.
· Multilateral vs bilateral votes of donors: Restricted core and complementary funds often come from the bilateral votes of donor agencies, not the multilateral votes which fund the main CGIAR activities. The bilateral sections have no special commitment to the CGIAR, sometimes knowing little about it and its research and NARS strengthening agenda. These sections therefore carry no responsibility for the CGIAR core agenda and are not obliged to provide support to the CGIAR agenda from their votes.
· Donor driven projects: Projects funded by restricted core and complementary grants tend to be strongly driven by immediate donor needs for overseas development assistance. This is not a negative aspect in its own right but when these funds control a majority of the work agenda, a center's ability to maintain strategic research programs is weakened. The research agenda runs the risk of looking more like a collection of independent, applied research projects. Strong strategic planning and selectivity of projects can help ensure that donor needs and program needs coincide.
· The costs of raising funds: Compared to the unrestricted core funds, considerably more time must be spent by the center in generating and defending the restricted and complementary projects although no "business development" budget has been allocated for this.
· Impacts on flexibility: The restricted core and complementary funds are dedicated to the commitments made to donors and should CGIAR and Center priorities change they cannot be diverted. For example, ICLARM would like to redirect efforts at present into high level policy research into the current world fisheries situation but cannot because all available resources are allocated to specific commitments.
· Overheads not fully funded: Most restricted core or complementary donors do not pay the full costs of the research projects. All, therefore, are subsidized to a greater or lesser extent by the small amount of unrestricted core. Many donors, including those who provide no unrestricted core, state they want to 'see ICLARM's commitment' to a project by a contribution from the unrestricted core. The subsidy of restricted and complementary projects from the small unrestricted core further inhibits the strategic research agenda.
As a partial solution, ICLARM is taking strong action to better manage its cash flows and projects, and plan its research agenda in line with best practices from developed world research institutes and consultancy companies. These include program strategic planning, identifying the full costs of projects, negotiating the price of projects so that an appropriate overhead is established, tightly managing expenditures and generally trying to improve efficiency and cut costs. It will take some years, however, to build up sufficient cash reserves to overcome cash flow problems because reserves can only be taken from the unrestricted core part of the budget and this is under tremendous pressure from unavoidable fixed costs (participation in CGIAR activities, Board, DG, senior management, core publications and minimal management and service costs), and project subsidies. We are not confident that donors will readily accept to pay a greater percentage of the real costs of projects, including overheads.
In addition to the management action we are already taking, we need to increase the percentage of core budget obtained in the unrestricted category in order to function as a full CGIAR center. Our other alternative is to become more like a consulting firm in operations, charging fall overheads and refusing work unless these conditions are met. Such a transition will take several years to achieve, would need seed funds to invest in setting up the mechanisms to compete with other consultancies, and could negate our role as a strategic research center.
I seek your advice on what ICLARM can do to help improve its funding situation. A number of options suggest themselves, including:
· an appeal to donors (I seek counsel on how best to do this);· mechanisms for tiding ICLARM over restricted core funding gaps such as we are now experiencing in Malawi;
· mechanisms for developing a sufficient reserve to improve our chronic cash flow problem, caused by late payments and the small unrestricted core from which we can carve out the reserve.
Any assistance or advice you could provide would be most welcome at this stage of ICLARM's development.
Yours sincerely,
MERYL J WILLIAMS
Director General
cc:
Executive Secretary, CGIAR
Chair, TAC
Executive Secretary, TAC
Chair, Finance Commitee
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