FC 102/14


Finance Committee

Hundred-and-second Session

Rome, 5 - 9 May 2003

Proposal to Establish a Special Fund for Emergency and Rehabilitation Activities

Table of Contents


BACKGROUND

purpose of the proposed special fund

operation of the proposed special fund

Conclusion



1. It is proposed to establish a new special fund under Financial Regulation 6.7, to be known as the Special Fund for Emergency and Rehabilitation Activities. The purpose and operation of the proposed special fund are as follows.

BACKGROUND

2. The Organization has long recognized that special consideration applies to activities it undertakes in relation to emergencies and their aftermath. In 1973, a new service, the Office for Sahelian Relief Operations was established to implement short-term emergency relief operations in the Sahel-Soudanian region. The Office was expanded in 1975 to administer the increasing number of projects aimed at providing assistance in such conditions and was renamed Office for Special Relief Operations. Continued growth in these activities has led to review of the Organization’s administrative arrangements and most recently to the upgrading of the Special Relief Operations Service into a new division of the TC Department, the Emergency Operations and Rehabilitation Division (TCE) with a renewed mandate for such operations.

3. Besides organizational considerations, funding arrangements for projects dealing with emergencies also have special requirements, in particular the need to mobilize financial resources very rapidly in the face of urgent, sometimes desperate needs for assistance. TCE can fund assessment missions in these instances, as these are part of TCE’s core activities. Use of TCP funds may also allow initial rapid response to an emergency. The provision of necessary supplies on a larger scale, i.e. seeds, agricultural equipment or other inputs, must either await the receipt of donor funds or be financed from temporary funding, as now explained.

4. It is often weeks or even months before pledged donor funds become available, simply because of the time needed to complete formal procedures and transfer funds. An existing mechanism to anticipate the arrival of funds pledged by a donor and begin urgent action is to request an advance from the Central Emergency Revolving Fund (CERF) of the United Nations. This allows provision of funds to the Organization to initiate activities as soon as a donor has made a firm pledge for financial support. The Organization then repays the advance to the CERF on receipt of the related donor funds. The use of CERF funds thus allows early action provided a donor has pledged financial support.

5. Applying for CERF funds is limited to those cases where a donor has pledged funds and entails a time consuming procedure. Given the present size of FAO’s emergency programme and its continuing growth, the Organization has recognized the need for ready access to substantial funds to meet emergencies. This would enable the Organization to respond to urgent requests from countries in emergency even before arrangements had been finalized with interested donors. This kind of more rapid, substantial response would also satisfy the donor community’s expectations of the Organization’s role in such situations.

PURPOSE OF THE PROPOSED SPECIAL FUND

6. The proposed special fund will enable the Organization to rapidly initiate emergency operations by participating in inter-agency needs assessment and coordination activities, establishing an Emergency Coordination Unit (ECU) related to agricultural assistance with the necessary logistical equipment, preparing a programme framework and projects, and providing advance funding when a donor’s commitment has been obtained for procurement of inputs. Agricultural deadlines must be respected and time is often very short. Waiting for the transfer of donor funds often hinders the Organization’s capacity to provide assistance to farmers in order for them to replant in the first planting season after a disaster.

Advance funding

7. The Thematic Evaluation of Strategic Objective A3, examined the Organization’s approach to emergencies and made the following assessment and recommendations.

Extract from the Thematic Evaluation of the Strategic Objective A3 "Preparedness for, and effective and sustainable response to, food and agricultural emergencies”.

Recommendation 16: The Rapid Response Fund should be created, financed from the accumulated surplus on the Direct Operating Cost account for TCE projects or (with donor consent) from unspent project funds.

Recommendation 17: The Transition Fund should be established under the authority of the ADG, TC, financed like the above-mentioned Rapid Response Fund.

Emergency coordinators

8. The Thematic Evaluation also noted that the FAO emergency coordinators performed a valuable role in following-up all aspects of agricultural relief supply activities. It is accordingly proposed that the Special Fund should also be available, as required, to field emergency coordinators and/or provide continuity in the funding of the emergency coordinators where there is a gap in donor funding, thus enabling TCE, whenever needed, to avoid disruption in services provided by the Emergency Coordination Units (ECU).

Reimbursement of Contributions from the Direct Operating Cost Recovery Account

9. It is possible that, in a period of declining emergency activity, the balance in the Direct Operating Cost Recovery Account may be temporarily depleted so that there are insufficient funds to cover salary costs. At the same time, the Special Fund may be facing limited demand but be holding substantial resources. In such an event, it would be both desirable and reasonable to reimburse the Direct Operating Cost Recovery Account by transferring back some funds from the Special Fund.

OPERATION OF THE PROPOSED SPECIAL FUND

10. The proposal is to establish the Special Fund in lieu of the two funds recommended in the Thematic Evaluation, as endorsed by the Programme Committee. This Special Fund will have a target level of US$2 000 000 and be under the authority of the ADG, TC.

11. Funding is to come from the following sources:

CONCLUSION

12. The proposed fund is to be established under the provisons of Financial Regulation 6.7. Accordingly, it is within the authority of the Director-General to authorize the creation of the necessary Trust Fund account. However, in the interests of keeping the Finance Committee fully informed on matters of significant financial consequence, this document is provided to the Committee for its information and comment as Members deem appropriate.