FC 97/6

Finance Committee

Table of Contents

A. Regular Programme

B. TCP

C. Extra budgetary funding

D. Net Equity Position

Conclusion

FINANCIAL HIGHLIGHTS for eighteen months to 30 June 2001

1. The Financial Highlights Report is a new report for the Finance Committee presented for the first time at the May 2001 session. It is designed to show, at a summary level, the financial highlights of the Organisation.

2. In terms of the vertical structure of the report, there are three groupings of data:

• income and expenditure by source of funds - Regular Programme (RP) appropriations excluding Technical Cooperation Programme (TCP), the RP-TCP appropriations and extrabudgetary funds - Trust Funds and UNDP coming to a total fund presentation;
• the plan (budget) for particular sources of funds where the budget for trust funds represents the expenditure plan formulated by project managers as opposed to expenditure ceilings budgeted for the Regular Programme; and,
• balances for the comparative period in the previous biennium

A. REGULAR PROGRAMME

3. As the statement shows, the Financial Position of FAO has strengthened in the first eighteen months of this biennium when compared with the close of the last biennium. The General Fund has improved from a US$63.6 million deficit position to a deficit of US$40.8 million. The impact of the deficit on the liquidity of the General Fund is mitigated by the accumulated funding earmarked for the TCP projects which grew from $64.6 million at the end of the last biennium to $106.7 million at 30 June 2001. However, most of the improvement in the General Fund excluding TCP this biennium is a function of income for the first eighteen months of the biennium reaching 73.6% of the plan (PWB) whereas RP expenditure only accounted for 62.4% of the plan. If the PWB is fully implemented in support of the Regular Programme, and below the line costs (staff-related schemes and after service medical medical costs) are in line with the last biennium, the deficit in the General Fund should be back in the order of US$50 to US$60 million unless budgeted expenses are offset by arrears payments. Clearly, the financial situation is no longer one where shortfalls in contributions can be absorbed by the Working Capital or Special Reserve Funds.

B. TCP

4. At the end of 1999 the TCP unutilised appropriation carried forward totalled $64.6 million to which was added the appropriation of $89.2 million for the 2000/01 biennium, for total funding of $153.8 million for this programme. During the first eighteen months of the current biennium some $47.1 million was disbursed on TCP projects, leaving a balance available for TCP at 30 June 2001 of $106.7 million.

C. EXTRA BUDGETARY FUNDING

5. The income and expenditure figures for Trust Fund and UNDP exceeded the plan by some $98 million and $104 million respectively. The main reason for the variance is due to the higher than expected delivery on the Iraq Oil for Food programme which amounted to some $204 million in the eighteen months to 30 June 2001.

D. NET EQUITY POSITION

6. The results of the first eighteen months of this biennium show that the equity position of the General Fund has improved when compared to 1999 as the General Fund balance has dropped from a deficit position of $63.6 million to a deficit of $40.8 million. If assets earmarked for TCP projects are taken into account the equity position moves to a surplus of $124.3 million at 30 June 2001 compared with $47.9 million at the end of 1999.

7. Funds held in trust with respect to extra-budgetary contributions totalled $147.5 million as shown in the statement. If non-cash charges are set aside, the figure is in the order of $251 million.

8. It is important to note that several major assets and liabilities are not shown on the financial statements under standing UN accounting practices or by FAO Financial Rules approved by the Council. More specifically, the largest asset the Organisation has - arrears of $132 million - are carried on the books at zero value so as not to treat unpaid assessments as income. Under UN accounting practices the full liability for after service payments - some US$85 million - is shown as a footnote to the Financial Statement.

Conclusion

9. Clearly, unless the payment of accumulated donor arrears can be anticipated FAO will continue in a weak financial position with the Working Capital and Special Reserve Funds insufficient to keep the General Fund out of deficit. If expenditure on TCP projects were to surge, FAO would not have sufficient funds to get through the biennium. Steps need to be taken to improve the flow of arrears and/or to increase the Working Capital available to the Organisation to cover unpaid contributions.

a/ Regular Programme excluding TCP
b/ Arrears of Members' Contributions (prior biennia) amounted to $131.9m
c/ Includes investment income (long-term) in addition to budgeted miscellaneous income prescribed by Conference Resolution
d/ As per Conference Resolution on staff redeployment costs
e/ As per Conference Resolution on amortisation of After-service medical liabilities over 30 years
f/ As per Conference Resolution on transfer of investment surpluses to After-service medical scheme
g/ Plan and Previous Period biennial data is apportioned to match the 18 months period of this report
h/ Includes a notional contribution of $84m deriving from amounts committed but unpaid (unfunded) in respect of the TF Iraq Oil for Food operations