FC 109/6

Finance Committee

Executive Summary

1. At its 108^th Session in September 2004 following discussion of the decline in the rate of receipt of contributions in recent years, and alternative measures which could be introduced to improve collection rates, the Committee resolved to review the matter in more detail at its May 2005 session with a view to making a comprehensive recommendation to the June 2005 Council.

2. At the same September 2004 session, the Committee also decided that the discount rates for the 2005 Incentive Scheme be set at zero. This proposal was subsequently noted by Council at its 127^th Session.

3. The purpose of this paper is two-fold:

1. To provide feedback to the Committee in relation to contribution collection rates during the first months of 2005 following the decision to set the Incentive Scheme discount rates at zero;
2. To update to 31 December 2004 the information provided to the Committee in
   FC 108/4 to assist the Committee in its discussions in relation to measures which could be introduced to improve collection rates.

4. Following discussion, the Committee may wish to make recommendations to Council regarding steps to be introduced to improve assessed contribution collection rates.

I. Introduction

5. At its one-hundred and eighth session in September 2004, the Committee reviewed document FC 108/4 “Analysis of Contributions Received and Proposals for Improvement” which had been prepared at the Committee’s request and discussed possible reasons for the general decline in the rate of receipt of contributions in recent years and ways to address the problem.

6. Fully recognizing that only through timely receipt of contributions could FAO meet operating cash requirements without recourse to statutory reserves or to external borrowing, the Committee discussed various alternative measures and additional sanctions which could be introduced to improve collections (including measures suggested in the past but not implemented) and resolved to review these in more detail at its May 2005 Session with a view to making a comprehensive recommendation to the June 2005 Session of Council. In this context, the Committee recognized the importance of drawing the attention of Council to the need for Member Nations to make timely payments of assessed contributions.

7. The Committee also reviewed document FC 108/5 “Incentive Scheme to Encourage Prompt Payment of Contributions – Determination of Discount Rate” and discussed the proposed rates of discount to be credited against 2005 contributions in US dollars and Euro and decided to propose to Council that both rates should be set at zero.

8. The purpose of the present paper is two-fold

• First, to provide feedback to the Committee in relation to the effects on collection rates during the first months of 2005 of the decision to set the Incentive Scheme discount rate at zero. This information is provided in paragraph 9 below, as at 28 February 2005. A working paper will be distributed to Committee members during the session with details of collections at 31 March 2005 as compared to collections of the same date in previous years. The working paper will also list those Member Nations who have fully paid their contributions during the first quarter of 2005 and would have been eligible for a discount in 2006.
• Second, to facilitate further review by the Committee of alternative measures and sanctions which could be introduced to improve collection, with a view to making a comprehensive recommendation to the June 2005 Session of Council. In this regard, document FC 108/4, is again made available for the consideration of the Committee and at paragraph 10 below, the graphs and tables included in FC 108/4 are updated to 31 December 2004.

II. Analysis of Impact of Zero Discount Rate and Update of Contributions received in 2004

a) Collection rates during the first months of 2005

9. The first two months of 2005 have shown a marked improvement in the percentage rate of collection of current assessments, with 21.63% of US$ and 11.79% of Euro current assessments having been received as at 31 January 2005, compared to 12.57% US$ and 2.66% Euro current assessment received at the same date in 2004 (the aggregate of US$ and Euro receipts is 16.22% at 31 January 2005 compared to 7.12% in January 2004). Also at 28 February 2005, the percentage collection rate was higher than at the same date in 2004: 27.52% of US$ current assessment and 15.84% of Euro current assessments received compared to 23.83% and 13.32% respectively in 2004 (the aggregate at 28 February 2005 is 21.10% compared to 18.05 % at month end in 2004).

b) Updated Graphs as of 31 December 2004

10. The following tables, included in FC 108/4 “Analysis of Contributions Received and Proposals for Improvement” have been updated to reflect data as at 31 December 2004.

* 2004 Euro receipts converted to US$ at budget rate (1€ = 1.19).

III. Conclusions and Recommendations

11. This paper provides feedback to the Committee in relation to the effects on collection rates during the first months of 2005 of the decision to set the Incentive Scheme discount rate at zero. This information is provided in paragraph 9 above, as at 28 February 2005. A working paper will be distributed to Committee members during the session with details of collections at 31 March 2005 as compared to collections of the same date in previous years. The data as at 28 February in the present paper shows an improvement in the collection rate despite a zero discount rate which seems to indicate that the Incentive Scheme does not have much impact in improving collection. However a final conclusion can be reached only once data as at the end of March is available. Accordingly, the Committee would need to consider the information which will be provided in the working paper as at 31 March 2005 for its final decision on the withdrawal of the Incentive Scheme.

12. Following discussion of the present document and of document FC 108/4 together with the updated graphs, the Committee may wish to make recommendations to the June 2005 Session of Council with regard to any further measures which could be introduced to improve collection.