| CL 119/19
|
| CL 119/19
|
Hundred and Nineteenth Session |
Rome, 20 - 25 November 2000 |
Use of Arrears |
III. Past Uses of Arrears in Derogation of Financial Regulation 6.1(b)
IV. Possible Scenario for 2000-01
V. Pre-Existing Authorization for the Use of Cash Surpluses
VI. New Authorization for the Use of Cash Surpluses
Biotechnology and Biosecurity - US$ 5,600,000
Genetic and Other Natural Resources - US$ 3,800,000
Multilateral Trade - US$ 2,600,000
World Food Summit Follow-up - US$ 1,900,000
Data, Statistics and Analysis - US$ 3,400,000
Fisheries Plans of Action and Other Normative Work - US$ 2,900,000
Information Technology (IT) Infrastructure to Support Technical Work
- US$ 4,100,00
WAICENT Enhancement Strategy - US$ 6,000,000
Extending Language Coverage - US$ 3,800,000
Corporate Administrative Systems - US$ 11,000,000
Ugrading of Physical Facilities in Headquarters - US$ 2,100,000
Support to Decentralized Offices - US$ 2,800,000
1. At its Thirtieth Session in November 1999, the Conference adopted Resolution 3/99 (copy annexed) in which it noted that additional funds may become available to the Organization during the biennium 2000-01 in the form of payments of arrears of contributions, in particular by the major contributor, and further authorized:
"the Director-General, notwithstanding Financial Regulation 6.1, to use part or the whole of the balance of such payments of arrears for the following purposes, after providing for the implementation in full of the Programme of Work and Budget for the 2000-01 biennium under Resolution 2/99, and to carry forward such funds to the following biennium if necessary, subject to the receipt of such arrears and prior review of priorities by the Programme and Finance Committees and subsequent approval of those priorities by the Council:
(a) One-time activities of high priority and of the technical programmes of the Organization; and/or
(b) One-time expenditures of a capital nature for improvement to the Organization's infrastructure including its communication capacity with Members".
2. This document is provided to facilitate the prior review of these priorities by the Programme and Finance Committees and the subsequent eventual approval by the Council. The substance of paragraphs 4 to 14 was already submitted to the Conference at its 30th Session but is repeated here as background for Members of the Committees on the legal and financial framework for this proposal as well as to provide an update on the balances of the Accumulated Deficit and the Special Reserve Account to 31 December 1999.
3. Payments of arrears are contributions to the Organization and are subject to the normal rules regarding the use of contributions, as set out in the Basic Texts. These rules include the condition that the contributions should be used for the purposes which the Conference decides in the context of the biennial budget.
4. In practice, arrears are received in every biennium, are credited to the General Fund and are used to fund expenditures under the current appropriation. Under normal circumstances, there is little or no imbalance in that the arrears received in any one biennium are largely offset by the non-payment of current assessments. Historical trends indicate that the receipt of arrears in any single biennium is generally slightly less than the accumulation of new arrears. This situation would change if there were to be a major payment of arrears in a given biennium, resulting in income exceeding the authority to spend set out in Financial Regulation 4.1(a)1 and the relevant Appropriation Resolution.
5. Financial Regulation 4.1(a) does not in any way restrict the authority of the Director-General to allocate funds against the accumulated deficit accrued over past biennia. The authority to use arrears to cover the accumulated deficit arises from the appropriations in respect of the previous biennia in which the accumulated deficit was incurred. The restriction built in Financial Regulation 4.1(a) would, however, apply to the use of arrears exceeding the sum of the appropriations voted for the present biennium plus the accumulated deficit. Unless otherwise decided by the Conference, any such excess would constitute a surplus, to be disposed of in accordance with Financial Regulation 6.1. Financial Regulation 6.1(b) provides that "Any cash surplus in the General Fund at the close of any financial period shall be allocated among Member Nations in accordance with the Scale of Contributions applicable for that period ... ".
6. It should be noted that the Conference has made decisions in derogation of Financial Regulation 6.1(b) for a number of different purposes, as summarized below:
7. There is the possibility that the largest contributor could make a payment of arrears in this biennium although the amount cannot be foreseen. However, the total amount outstanding from that contributor as at 31 December 1999 was US$ 95.4 million.
8. Any payment of arrears exceeding the amount needed to offset arrears in the payment of current contributions, would first be used for any or both of the following two purposes consistent with the existing legal framework described above.
9. Any payments of arrears can be used to offset the accumulated deficit from previous biennia without further authorization from the Conference. According to the latest draft financial statements for 1998-99, the accumulated deficit stood at US$ 38.4 million as at 31 December 1999. However, as has already been decided by the Conference, the reduction of the accumulated deficit need not be the first call on the use of arrears.
10. The methodology approved by the Conference in Resolution 3/99 for the allocation and use of arrears is to apply a portion of arrears paid by the major contributor to the reduction of the accumulated deficit and then to utilize the balance as authorized by the resolution. The amount allocated to the accumulated deficit would be in the proportion of arrears paid by the major contributor to the total arrears in assessed contributions of the major contributor. For example, if the major contributor paid 40 percent of its arrears in assessed contributions, then the amount necessary to reduce the accumulated deficit also by 40 percent would first be applied for that purpose.
11. Conference Resolution 13/81 requires inter alia that: "Notwithstanding the provisions of Financial Regulation 6.1(b), such portion of the Cash Surplus in the General Fund at the end of 1980-81 and of any subsequent biennium as is required to bring the level of the Special Reserve Account to five percent of effective working budget ... should be withheld and credited to the Special Reserve Account."
12. The Special Reserve Account had a balance of US$ 23.8 million as at 31 December 1999.
13. Five percent of the effective working budget, based on the budget for the current biennium, is US$ 32.5 million, implying a shortfall in the Special Reserve Account of US$ 8.7 million. Any receipts of arrears resulting in a cash surplus would have to be applied to the replenishment of the Special Reserve Account. This clause will come into effect only when the accumulated deficit has been eliminated.
14. Should the major contributor pay its entire arrears, these would be applied:
On this basis, the amount available for expenditure (from US arrears alone) would be just under US$ 50 million.
15. The Conference has requested the Programme and Finance Committees to review the priorities for the use of arrears on areas of a one-time nature and the Council to subsequently approve those priorities. The following is a summary of the proposed one-time expenditures:
Estimated Cost of Proposed One-Time Expenditure
| Item | Estimated Cost |
|
| 1. | Biotechnology and Biosecurity | 5,600 |
| 2. | Genetic and Other Natural Resources | 3,800 |
| 3. | Multilateral Trade | 2,600 |
| 4. | World Food Summit Follow-up | 1,900 |
| 5. | Data, Statistics and Analysis | 3,400 |
| 6. | Fisheries Plans of Action and Other Normative Work | 2,900 |
| 7. | IT Infrastructure to support the Technical and Other Work of the Organization | 4,100 |
| 8. | WAICENT Enhancement Strategy | 6,000 |
| 9. | Extending Language Coverage | 3,800 |
| 10. | Corporate Administrative Systems | 11,000 |
| 11. | Upgrading of Physical Facilities in Headquarters | 2,100 |
| 12. | Support to Decentralized Offices | 2,800 |
| Total | 50,000 |
16. The proposed actions and their relationship to the Strategic Framework 2000-15 are further described below.
17. The additional resources will contribute to Strategic Objective B1 concerning international instruments for the safe use of agricultural goods and to C2 in the adoption of appropriate technologies. The activities would include:
18. This will boost under-resourced but important support to the achievement of Strategic Objective B1 as regards safe international trade in pesticides, Strategic Objective D2 as regards the conservation of genetic resources and mountain environments as well as strengthened assessment of forest resources and other areas as called for under Strategic Objective E2.
19. The current re-opened trade negotiations have generated significant demand for FAO's services. A positive response to Strategic Objective B1 in its promotion of food and agricultural trade is required and would include:
20. In addition to greater support for the mid-term review of performance against the WFS target, directly mandated under the Plan of Action of the WFS and Strategic Objective E3, these resources would enhance the implementation of national Food Insecurity and Vulnerability Information and Mapping Systems (FIVIMS) in direct support of the achievement of Strategic Objective A2 in identifying and targeting vulnerable groups. The activities would include:
21. In direct support of Corporate Strategy E (Information) responding to known concerns about the quality and scope of current statistical collections as well as their use in analytical work, it is proposed:
22. One-time resources to accelerate work on major activities currently constrained by a lack of resources. These activities would contribute largely to Corporate Strategy C in creating sustainable increases in the supply of food from fisheries as well as conserving existing marine resources (D2). In particular, it would allow:
23. Capital inputs to the IT infrastructure would directly contribute to the Organization's response to its corporate strategy on information and assessments (E) by upgrading its technical systems and of the support infrastructure to the latest technical standards. It would include:
24. This corporate asset, which represents a great part of FAO's response to Strategic Objective E1 An integrated information resource base, with current, relevant and reliable statistics, information and knowledge made accessible to all FAO clients, needs constant attention. Added value and greater access could be achieved with an influx of one-time resources:
25. The Governing Bodies have made it clear that they expect equitable treatment of all five official languages in the work of the Organization. However, there are a number of major reference works and frequently used documents which do not exist in all five languages. Proposals include:
26. These systems are the keystone to the cross-organizational strategy on Continuing to Improve the Management Process. An allocation of arrears would allow related development work, which has been severely constrained by a lack of resources, to be completed more rapidly. The major elements are:
27. While not directly contributing to a specific strategic objective, priority to these works reflects positively upon the safety and morale of staff. The proposed works include:
28. Given that these offices now comprise one third of FAO professional capacity, it is critical that the infrastructure provided meets operational needs. Works include:
29. The Director-General seeks the endorsement by the Programme and Finance Committees and the approval by the Council of the proposed priorities detailed above. In doing so, he draws the attention of Members to the fact that he cannot anticipate the level of the amount to be received (if any) and therefore cannot provide priorities tailored to precisely what amount will be available.
30. He would welcome Member's views on this issue and, in particular, any views they may have for implementation of the proposed uses of arrears in the event that the amount received is less than the total defined above. From his own perspective, he wishes to indicate the importance of resolving and advancing the Oracle implementation and therefore this is an area to which he would accord high priority, at least for a part of the total amount proposed for this purpose.
RESOLUTION No. 3/99
Use of arrears and of advances from the working capital Fund
THE CONFERENCE,
Noting the continued pressure to constrain public expenditure and the consequences for the Organization's assessed contributions,
Recognizing that the demands placed upon the Organization in respect of its programmes exceed the level of the effective working budget as defined in its Programme of Work,
Noting that the Director-General has, as a consequence, been unable to accommodate a number of important capital and other one-time expenditures under the budget as approved by the Conference,
Noting that additional funds may become available to the Organization during the biennium 2000-2001 in the form of payments of arrears of contributions, in particular by the major contributor,
Notwithstanding the continuing generous support of Trust Fund donors to the work of the Organization and recognizing that some of the purposes mentioned below may benefit from voluntary contributions,
(Adopted on 19 November 1999)
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1 Financial Regulation 4.1(a) reads as follows: "The appropriations voted by the Conference for the ensuing financial period shall constitute an authorization to the Director-General to incur obligations and make payments for the purpose for which the appropriations were voted, and up to the amounts so voted."
