FC 100/7 (iii)


Finance Committee

Hundredth Session

Rome, 9 – 13 September 2002

Audited Accounts – FAO Commissary 2001

 

Attached for the information of the Finance Committee Members are the FAO Commissary’s Financial Statements for 2001

 

 


FAO STAFF COMMISSARY FUND
OPINION OF THE EXTERNAL AUDITOR
FINANCIAL STATEMENTS FOR THE PERIOD
1 JANUARY TO 31 DECEMBER 2001

I have examined the accompanying financial statements, as stated on the attached pages 1 to 10, comprising the income and expenditure statement, the balance sheet, the statement of cash flow and the notes to the statements of the Food and Agriculture Organization’s Staff Commissary Fund for the year ended 31 December 2001. These financial statements are the responsibility of the Staff Commissary’s management on behalf of the FAO Director-General. My responsibility is to express an opinion on these financial statements based on the audit.

The audit was conducted in accordance with the Common Auditing Standards of the Panel of External Auditors of the United Nations, the Specialised Agencies and the International Atomic Energy Agency. These standards require that the audit be planned and carried out to obtain reasonable assurance that the financial statements are free of material mis-statement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and evaluating the overall financial statement presentation.

As a result of my audit, I am of the opinion that the financial statements present fairly the financial position of the Staff Commissary Fund as at 31 December 2001 and the results of its operations for the period then ended, that they were prepared in accordance with the stated accounting policies and that the transactions were in accordance with the financial regulations and legislative authority.

 

Michèle Coudurier
Directrice
pour le Premier Président de la Cour des Comptes
de la République Française
Commissaire aux Comptes

10 July 2002

 

 


FOOD AND AGRICULTURE ORGANIZATION
OF THE UNITED NATIONS

STAFF COMMISSARY FUND ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2001

 

 

 

 

Submitted by: Approved by:
   
…………………………………. ………………………………….
C.I. Denny D. Alhéritière
Commissary Manager, AFSCM Director, AFS

10 July 2002

 

  

 


STAFF COMMISSARY FUND

I. Income and Expenditures Statement
for the year ended 31 December 2001

(all figures in Lit. ‘000)

  2001 2000
     
Sales 22,674,747 21,449,162
Less: Cost of Goods Sold (notes 1c and 12) 18,667,539 17,808,636
 
Gross Trading Surplus 4,007,208 3,640,526
 
Less: Operating Expenses
Personnel (note 2a and 2b)
Guard Services (note 2c)
3,119,725
48,000
2,923,993
46,000
Support Cost Reimbursement to FAO (note 3) 132,750 132,750
General Operating Expenses 213,598 191,238
Depreciation 129,436 162,465
Provision for Terminal Emoluments (note 4) (22,375) 12,199
 
  3,621,134 3,468,645
 
Operating Surplus/(Deficit) 386,073 171,880
Add: Other income (note 5) 177,105 72,734
      
Less: Contribution to Staff Welfare Fund (note 6) 226,747 214,492
Net Surplus/(Deficit) 336,431 30,122
  
Transfers (To)/From Reserves
  
(To)/From Working Capital Fund (note 7) (159,326) (93,886)
(To)/From retained Surplus (note 8) (177,105) 63,764


Notes 1 to 13 form an integral part of these accounts

 

 

 


STAFF COMMISSARY FUND

II. Balance Sheet at 31 December 2001)

(all figures in Lit. ‘000)

2001 2000
   
CURRENT ASSETS    
Cash at Bank and in Hand (note 9) 1,631,281 1,556,988
Stocks (note 10) 3,283,664 2,791,830
Sundry Debtors 80,809 43,447
 
FIXED ASSETS (note 11) 124,330 233,409
 
TOTAL 5,120,084 4,625,674
  
Less
CURRENT LIABILITIES
Creditors 1,318,857 1,142,758
Payable to Staff Welfare Fund (note 6) 70,747 66,492
  1,389,604 1,209,250
 
LONG TERM LIABILITIES
Terminal Emoluments Reserve (note 4) 357,873 380,248
 
TOTAL 1,747,477 1,589,498
 
NET ASSETS 3,372,607 3,036,176
   
Represented by:  
Working Capital Fund (note 7) 2,947,717 2,788,391
Retained Surplus (note 8) 424,890 247,785
 
  3,372,607 3,036,176
     

Notes 1 to 13 form an integral part of these accounts

 

 

 


STAFF COMMISSARY FUND

III. Statement of Cash Flow for the Year ended 31 December 2001

(all figures in Lit. ‘000)

   2001 2000
  
Net Cash Inflow/ (Outflow)    
from Operating Activities (note 13a) (14,556) 134,179
 
Return on Servicing of Finance
Interest Received
Exceptional Income ( note 5 )
108,407
800
96,665
 
Investing Activities
Payments to Acquire Tangible Fixed Assets (20,358) (32,069)
 
Increase/ (Decrease) in Cash (note 13b) 74,293 198,775
 


Notes 1 to 13 form an integral part of these accounts

 

 

STAFF COMMISSARY FUND
ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2001
NOTES TO THE ACCOUNTS
 
1.  Summary of Significant Accounting Policies
       
(a) Accounting Convention
The accounts have been prepared on an accrual basis under the historical cost convention.
     
(b) Depreciation
Depreciation is calculated using the straight-line method to write off the cost of fixed assets over their estimated useful life of five years. The first year’s depreciation of new assets is based on the actual number of months the asset has been in service.
 
  Note: Recognising that the Organisation estimates a useful life of four years for all computer equipment, all of the Commissary's computer equipment has been depreciated using a four-year straight-line method in 2001.
 
(c) Cost of goods sold and stocks
Stocks are stated at the lower of cost and net realisable value. Cost is comprised of cost of goods, write-offs, transportation, customs clearance and insurance premiums. The cost of stocks is determined using the first-in, first-out (FIFO) method.
 
(d) Foreign currencies
Assets and liabilities in currencies other than Italian Lira have been translated at the UN operational rate of exchange at 31 December 2001. Income and expenditure items have been recorded at the rate of exchange in effect at the date of transaction. Any eventual differences arising when payment is made are reflected under the income and expenditure statement.
     
2. Cost of Personnel
  (a) The accounts reflect payroll cost as charged by FAO. Provisions for terminal emoluments are made separately as explained in Note 4.
   
Payroll cost includes compensation for Commissary staff including two General Service staff members dealing with car import privileges. Their cost is absorbed by mark-ups on petrol coupons, ensuring thereby that Commissary customers not entitled to petrol do not subsidise the services of the Car Import Office.
 
In line with their existing job descriptions, both the Commissary Manager and the Assistant Commissary Manager spend some time with the supervision of the FAO catering operations.
 
It should be noted that personnel costs increased 8.3% in 2001, despite any increase in the size of the Commissary’s workforce. These increases were attributed to firstly to After Service Medical Plan accruals that were communicated to the Commissary in late 2001 and early 2002. And secondly, Commissary Management decided to set-up an GS staff language factor accrual pending a decision by the ILO’s Administrative Tribunal
     
(b) Following is a breakdown of staff costs
    2001 2000
      Lit. ‘000 Lit. ‘000
     
FAO Commissary Staff 2,328,467 2,256,538
Accrual FAO /After Service M.P. 103,861 --------
Accrual GS Staff Language factor 108,947 --------
FAO TAP Staff 288,496 338,113
COASE Staff 337,954 329,342
   
  Balance at 31 December 3,167,725 2,923,993
   

(c)

The Operating Expenses include a FAO back charge of Lit. 48,000,000 for guard services received in 2001.
   
3 Support Cost Reimbursement to FAO
   
At the Twenty-fifth session of the FAO Conference held on 11 – 30 November 1989, it was decided that the Commissary should reimburse FAO in respect of all services provided to the Commissary and that the related actual costs should be charged to the Commissary on an estimated basis henceforward. The Support Cost Reimbursement to FAO was made up as follows:
  
  2001 2000
  Lit. ‘000 Lit. ‘000
    
Electricity 20,580 20,580
Cleaning 24,220 24,220
Water 4,400 4,400
Heating 3,070 3,070
Garbage Collection 4,430 4,430
External Audit 25,350 25,350
Internal Audit 50,700 50,700
   
Total 132,750 132,750
       
4 Terminal Emoluments Fund
   
    At the Eighteenth session of the Committee on Financial Control on 17 – 22 May 1954 it was decided to create a Reserve for costs for terminal indemnities. Further to this, at the Sixty-first session of the FAO Finance Committee held on 14 – 25 September 1987, it was decided that the level of the Terminal Emoluments Reserve should represent 75 percent of the calculated expenses for repatriation grants and unused annual leave. At the Seventy-fourth session of Finance Committee held on 14 – 22 September 1992 it was decided, as the Commissary is a self-sufficient unit and is requested to operate without cost of the Organisation, to accrue in full for known liabilities in accordance with generally accepted accounting principles applicable to commercial concerns.
    The movements in the Terminal Emoluments Reserve during the year were as follows:
  2001 2000
      Lit. ‘000 Lit. ‘000
  
    Balance at 1 January 380,248 368,049
  Annual Charge (22,375) 12,199
   
Balance at 31 December 357,873 380,248
   
5 Income
    Other Income
  2001 2000
  Lit. ‘000 Lit. ‘000
   
Bank Interest 100,612 78,167
* Exceptional Income 800 ------
Profit/(Loss) on Exchange 75,693 (5,433)
Total 177,105 72,734
   
    * Trade-in value for exchanged salesroom equipment
   
6 Staff Welfare Fund
   
    In accordance with Conference Resolution 18/93, effective with the year ending 31 December 1992, the equivalent of 1 per cent of total sales of the Staff Commissary is paid to the Staff Welfare Fund.
   
    The composition of the account payable to the Staff Welfare Fund at 31 December 2001 and its movement for the year then ended were as follows:
    2001 2000
  Lit.‘000 Lit.‘000
    Balance at 1 January 66,492 65,270
    Add: Contribution to Staff Welfare Fund 226,747 214,492
    293,239 279,762
   
    Less: Amount paid during the year 222,492 213,270
   
    Balance at 31 December 70,747 66,492
   
7 Working Capital Fund
   
    At the Sixth session of the FAO Conference held from 19 November – 6 December 1951 it was decided that the Commissary should establish a fund for the purchase of stocks for the Commissary, the fund to be reimbursed from the proceeds of sale of such stocks.
   
    At the Ninety-second session of the Council held from 3 – 5 November 1987 it was decided that the Working Capital Fund should be maintained at a level of 12 percent of annual turnover. Subsequently at the Seventy-second session of the Finance Committee held from 16 – 26 September 1991, it was decided that the level of the Working Capital Fund should be increased from 12 percent to 13 percent of turnover.
   
    The movements in the Working Capital Fund during the year were as follows:
       
      2001 2000
      Lit. ‘000 Lit. ‘000
     
    Balance at 1 January 2,788,391 2,694,505
    Transfer To/(From) Working Capital Fund 159,326 93,886
   
    Balance at 31 December 2,947,717 2,788,391
   
8 Retained Surplus
    The movements on the retained surplus during the year were as follows
    2001 2000
    Lit. ‘000 Lit. ‘000
   
    Balance at 1 January 247,785 311,549
    Transferred To/(From) Retained Surplus 177,105 (63,764)
   
    Balance at 31 December 424,890 247,785
   
9 Cash at Bank and in Hand
    Cash at bank and in hand are made up as follows
    2001 2000
    Description Lit. ‘000 Lit. ‘000
   
    Cash at bank, current account 1,263,295 1,374,813
    Cash in hand 367,986 182,175
     
    Total 1,631,281 1,556,988
     
10 Stocks
Stocks are made up as follows:
    2001 2000
Description Lit. ‘000 Lit. ‘000
   
    Goods 2,804,595 2,490,357
    Petrol/Oil coupons 479,069 301,473
   
    Total 3,283,664 2,791,830
     
11 Fixed Assets
   

Figures in Lit. ‘000

 

Cost:

Improvements of Premises

Furniture Equipment Motor Vehicles Total
At 1.1.2001 112,730 317,168 893,372 212,163 1,535,433
  Additions 20,358 20,358
Disposals (17,120) (17,120)
   
  At 31.12.2001 112,730 317,168 896,610 212,163 1,538,671
  Depreciation:
  At 1.1.2001 96,568 310,826 716,617 178,013 1,302,024
  Charges for year 16,162 1,942 97,672 13,660 129,436
  Disposals (17,120) (17,120)
     
At 31.12.2001 112,730 312,768 797,169 191,673 1,414,340
Net Book Amount  
At 31.12.2001 4,400 99,441 20,490 124,331
At 31.12.2000 16,162 6,634 176,755 34,150 233,409
             
12 Write – Offs
The composition of the write-offs account at 31 December 2001 was as follows:
    2001 2000
    Lit.’000 Lit.’000
   
Goods write-offs 15,337 13,296
     
Total 15,337 13,296
         
    As of 31 December 1999, the write-offs have been included in the cost of goods sold as per Audit’s recommendation.
   
13 Statement of Cash Flows
(a) Reconciliation of Operating Surplus to Net Cash Inflow/(Outflow) from Operating Activities
  2001 2000
  Lit. ‘000 Lit. ‘000
  Net Operating Surplus 386,074 171,880
  Contribution to Staff Welfare Fund (226,747) (214,492)
  Depreciation Charges 129,436 162,465
  Profit/(Loss) on Exchange 75,693 (5,433)
  (Increase)/Decrease in Stock (491,834) 252,755
  (Increase)/Decrease in Debtors (45,157) 10,976
  Increase/(Decrease) in Current Liabilities 180,354 (256,171)
  Increase in Provision for Terminal Emoluments (22,375) 12,199
         
  Total (14,556) 134,179
   
(b) Analysis of Changes in Cash
  2001 2000
  Lit. ‘000 Lit. ‘000
 
  Cash at 1 January 2001 1,556,988 1,358,213
  Net inflow 74,293 198,775
  Cash at Bank and in Hand at 31.12.01 1,631,281 1,556,988

 

 


FAO STAFF COMMISSARY FUND

REPORT OF THE EXTERNAL AUDITOR

FINANCIAL STATEMENTS FOR THE PERIOD
1 JANUARY TO 31 DECEMBER 2001

Background

1. The FAO Staff Commissary was established in 1951 to facilitate duty free importation of goods by international staff under Article XII, Section 27 (j) (ii), and Annex D of the Headquarters' Agreement between the Government of the Italian Republic and the FAO. Access to the Commissary was given to all FAO staff members as of 1 December 1971, following an exchange of letters with the Italian Government, which stated that the agreed quantities of goods to be imported would be computed according to the total number of FAO staff.

2. Although the Commissary is part of the FAO, its accounts are not consolidated with the ones of the Organization for the biennium. They are in fact reported separately on a yearly basis and are presented in Italian Lire (Lit.) for the last time. These financial statements are the responsibility of the Staff Commissary’s management on behalf of the FAO Director-General. My responsibility is to express an opinion on these financial statements based on the audit carried out in accordance with the Common Auditing Standards of the Panel of External Auditors of the United Nations, the Specialised Agencies and the International Atomic Energy Agency.

Turnover

3. In 2001, the Commissary had a turnover of Lit.22.6 billion, which represented an increase of Lit.1.2 billion, or 5.7% compared to last year.

Operating Expenses

4. Personnel operating expenses amounted to Lit.3.1 billion in 2001, which represented an increase of 8.3% compared to 2000. As disclosed in Note 2a to the financial statements this was not due to an increase of the Commissary’s workforce, but to accruals of expenditures. As disclosed in Note 2b, Lit.103,861 thousands were accrued for After Service Medical Plan and Lit.108,947 thousands for the General Service Staff Language Factor. These accruals accounted for 87% of the total increase in personnel operating expenses.

Presentation of the Balance Sheet

5. As last year, Assets are presented in terms of decreasing liquidity, which is in line with the United Nations Accounting Standards (UNAS). They amounted to Lit.5.1 billion as at 31 December 2001, which represented an increase of Lit.0.5 billion compared to last year.

Stocks

6. Stocks amounted to Lit.3.28 billion at the end of 2001 and represented 64% of total assets. The physical stock count as at 31 December 2001 disclosed that the actual stock was Lit.23.4 million below what it should have been according to the permanent inventory. The stock losses in 2001 remained approximately the same as that of 2000 (Lit.23.5 million).

Funding of Working Capital Fund

7. In 2001, operations resulted in a net surplus of Lit.336.4 million. As the working capital fund had to be credited with Lit.159.3 million in 2001, to be maintained at a level of 13% of the annual turnover, according to a decision of the seventy-second Session of the Finance Committee, the transfer from the retained surplus amounted to Lit.177.1 million. As a result, the retained surplus reserve increased from Lit.248 million as at 31 December 2000 to Lit.425 million as at 31 December 2001.

Consolidation of the Commissary accounts into the FAO Financial Statements

8. Since the 1994-95 biennium, the FAO financial statements consolidate all the operations of the Organization regardless of their funding (Regular Budget or voluntary contributions). The FAO accounts are, however, not fully consolidated since the non-main stream activities of the Commissary (and the Credit Union) are still reported separately. I have not raised the issue previously because I considered that there were more pressing priorities for the Organization. It was raised by the Internal Audit, in 2001, that considered it sufficient to show a disclosure in FAO’s financial statements stating that the accounts of the Commissary (and the Credit Union) have not been consolidated and are reported separately. I concur with such a recommendation, which should be implemented for the 2000-01 FAO accounts.

9. For the future, however, I am of the opinion that the accounts of the Commissary (and of the Credit Union) should be consolidated with the ones of the FAO in order to produce truly consolidated financial statements. It was argued that the accounting principle of substance over form would justify a separate financial reporting for the non-main stream activities of the Organization. In my opinion, however, the Commissary is an integral part of the FAO. Subsequently, the final responsibility in case of its failure rests with the Organization. In my opinion, it would justify the consolidation of the Commissary accounts with the ones of the FAO.

10. My position was not shared by the Commissary management. The following was notably argued:

In my opinion, the decision to consolidate the account or not remains, however, with the Governing Bodies. I would, therefore, recommend that the advice of the Finance Committee be sought on this matter.

Acknowledgemnet

11. I wish to record my appreciation for the cooperation and assistance extended by the Director-General and the staff of the Organization during my audit.

 

Michèle Coudurier
Directrice
pour le Premier Présidentde la Cour des Comptes
de la République Française
Commissaire aux Comptes

10 July 2002