The Council at its Tenth Session considered the Headquarters Agreement (CL 10/7) negotiated by the Director-General with the Italian Government and, as authorized by the Fifth Session of the Conference --
-- Decided to ratify this Agreement on behalf of FAO.
The Agreement will enter into force upon an exchange of notes between the Director-General and the duly authorized representative of the Italian Government, and the Council --
-- Authorized the Director-General to proceed with this exchange of notes after ratification by the Italian Parliament.
The Council recorded its appreciation of the generous and sympathetic co-operation accorded by the Italian Government at every stage of the negotiations leading to completion of the Agreement, and in all other matters connected with the establishment of the permanent headquarters in Rome.
The Council also considered the Third Report of the Headquarters Advisory Committee, and came to the conclusion that the major difficulties involved in the establishment of permanent headquarters were now settled. The Council did, however, draw the attention of the Special Session of the Conference to certain remaining issues in connection with financing the move, which are discussed below in the section “Financial Matters.”
The following matters, which were referred to the Conference by the Tenth Session of the Council, are noted here for record purposes. The actions of the Special Session of the Conference concerning them are set down in the Report of the Special Session of the Conference.
In accordance with the Financial Regulations, the Council reviewed the report of the External Auditor on the annual audit of accounts for the Fourth Financial Year. The Council --
-- Recommended that the Conference approve these accounts.
The Ninth Session of the Council had viewed with great concern the financial situation of the Organization. The reason for their concern lay in the fact that the payments of contributions were far from adequate. It then appeared that since the Organization has no reserves beyond its Working Capital Fund, the present financial year was likely to end with a substantial deficit which would weigh heavily on next year's program.
The anticipated budget deficit for 1950 was then estimated at not less than $500,000. Accordingly, the Council instructed the Director-General to keep 1950 expenditures to a total of not exceeding $4,800,000. To meet the deficit, the Ninth Session of the Council recommended use of the surplus of the Pension Fund Set-Aside (then estimated at $240,000) and a temporary withdrawal from the Working Capital Fund, the latter to be replaced through special provision in the 1951 budget.
During the ensuing months, the cash situation has improved and it now appears that the 1950 financial operations will close with a much smaller deficit. Through 27 October 1950, contributions paid during the current financial year total $4,577,000. Additional payments of contributions may be made before the end of the year. It now appears that these together with miscellaneous receipts may increase total receipts during the year to a figure approximating estimated total expenditures. As of 27 October 1950, the over-all financial situation for 1950 appears to be as follows:
| Anticipated Expenditures | $4,800,000 | |
| Anticipated Receipts: | ||
Contributions Received (current and arrears) | $4,577,000 | |
Anticipated Receipts in 1950 from contributions from present and new members | 135,000 | |
Miscellaneous Income | 38,000 | 4,750,000 |
| Amount required from Pension Fund Set-Aside | $ 50,000 | |
Headquarters removal costs. The Council considered the possible ways of meeting the deficit in the headquarters removal estimates reported to it by the Committee on Financial Control and the Headquarters Advisory Committee.
In reviewing the latest estimate of the Director-General on removal expenditures -- amounting to $1,586,500 -- the Council noted that the resources available to meet these expenditures from unspent balances of the Second and Third Financial Years, and from the United Nations loan, amounted to only approximately $1,225,000, leaving a balance of approximately $361,500.
The Council further noted that the Committee on Financial Control and the Headquarters Advisory Committee had reviewed in detail the estimates presented by the Director-General, and had concluded that they were reasonable.
The Council noted that of the removal estimates given, that relating to income tax reimbursement ($71,000), may not be required, since legislation is pending in some member governments which, if adopted, would relieve the Organization of this obligation. The Council expressed the hope that legislation will be enacted, so that the Organization may avoid reimbursement for income tax payments. In any event, this amount would not actually be expended until the early part of 1952. In addition, some portion of the estimate of recruitment costs of new international staff ($ 193,000), may not be required until 1952; however, the exact amount of the item which might be deferred could not be estimated.
The Council noted that the estimate for Conference facilities ($76,500) represents the procurement of furniture and furnishings for the Conference Room in Building “A.” The item therefore differs from the other items of removal costs, which do not involve the acquisition of capital assets.
The Council believed that no recourse to extra-budgetary measures would be required to meet the estimated deficit of $361,500 in removal costs, as the following items may be made available therefor:
Balance of Pension Fund Set-Aside | $205,000 | |
1951 budgetary provision to cover previously estimated deficit for 1950 | 100,000 | |
Miscellaneous Receipts in 1951 | 25,000 | $ 330,000 |
| Estimated Deficit | 361,500 | |
| Balance Required | 31,500 |
Other resources available to the Organization in 1951 appeared to provide sufficient funds to cover this balance. These include:
savings in salaries resulting from application of the cost-of-living differential for international staff; and
lapses to be expected due to delays in recruiting new staff after the removal of headquarters.
Appeal to member governments on payment of contributions. The Council was pleased to see the improvement in the financial condition of the Organization during the past six months. While this has resulted in part from action taken by the Director-General to reduce the operating deficit of the current financial year, a major factor is the response member governments have made to appeals for payment of contributions in arrears. The Council --
-- Expressed its appreciation for this effort by member nations to meet outstanding financial obligations to the Organization, but, because substantial sums are still due, requested members still in arrears to pay all outstanding contributions on as early a date as possible.
In view of the extraordinary cash requirements of the Organization in 1951, due to the necessity of meeting part of the headquarters removal costs as well as the regular program budget from payments of contributions, the Council --
-- Urged all member nations to make arrangements to pay 1951 contributions as soon as possible after 1 January 1951.
If this were not done, the Organization would face great difficulties in meeting unusually large cash needs during the first four months of the year. The Council pointed out that avoidable delays in payment of contributions could not be permitted to impair effective and expeditious accomplishment of headquarters removal plans, or otherwise embarrass the Organization in meeting its financial obligations.
The Ninth Session of the Council had invited the Committee on Financial Control to investigate and report upon suitable methods of securing outstanding contributions, and suggest penalties to be applied in the case of countries whose contributions are substantially in arrears.
After giving careful consideration to the proposals submitted by the Committee on Financial Control, the Council believed that to deny voting privileges in the Conference and membership in the Council to countries in arrears for the preceding financial year (instead of for the preceding two full years) would not realize the results desired.
Analysis of the 1949 arrears shows that the major portion of the arrearages have resulted from factors which would probably not be responsive to these penalties and that the contributions of very few countries were likely to be affected. Therefore, the Council was of the opinion that no change should be made in the Constitution or in the Rules of Procedure to modify existing provisions.
However, the Council endorsed the recommendation of the Committee on Financial Control that the services of the Organization to member countries whose contributions are in arrears for the preceding two full years should be limited, and therefore --
-- Recommended to the Conference the adoption of the following resolution:
“THE CONFERENCE --
-- Requests the Director-General to refrain, in principle, from sending missions or experts to, or holding meetings or conferences financed from its regular budget in member countries of FAO whose contributions are in arrears for the preceding two full years, except when he is satisfied that such refusal would be directly prejudicial to the interests of neighboring member countries or to the Organization as a whole;*
-- Requests the Director-General, in addition to the relevant information furnished to the United Nations for its press releases, to dispatch to all member governments, in the usual manner, quarterly statements showing contributions received and all contributions in arrears;
-- Calls the attention of member governments concerned to the desirability of taking such steps as may be necessary or appropriate to permit each such member government to meet the payment of its contribution immediately it is due.”
* The Representative of Chile reserved his position on the first part of the resolution.
The Council --
-- Further decided that, in principle, it would not appoint to its own committees representatives of member governments whose contributions are in arrears for the preceding two years.
The Council recommended to the Conference --
-- The creation of a Special Fund, in conformity with the Financial Regulations, for the acceptance of an amount of $15,000 from the Williams-Watterman Fund Committee to support the expenses of an international team of experts which would report on rice enrichment in all its aspects, this Special Fund to be administered in accordance with the Financial Regulations of the Organization.
Since this activity will be carried on through the Special Fund and thus will not be reported on in the regular budget of FAO, the Council --
-- Requested the Committee on Financial Control to work with the Director-General in the development of appropriate ways of reporting on this and like extra budgetary activities as an annex to the regular budget and program of work.
The Council examined the latest statement on receipts and expenditures during the first nine months of 1950. The Council noted that the surplus of current assets taken over from the IIA and CIS Liquidation Fund as at 30 June 1950 totalled $71,640.95. From this amount, $30,000 will be used in accordance with the resolution of the Fifth Session of the Conference to maintain the Rome Library during 1950. The same resolution directed that the balance be earmarked for any necessary maintenance of the Library in 1951. Accordingly, the Director-General has planned to utilize an additional $30,000 for this purpose in 1951.
The Council pointed out to the Conference that the available balance is in excess of what was considered to be necessary to support the maintenance of the Library in Rome in 1951. Therefore the Council --
-- Recommended that not only the balance of $ 11,640.95, but also any other funds realized from this source in the future should be used specifically to provide for additions to the library and to continue through 1951 the legislative services in their present reduced form.
The attention of the Council was drawn to a resolution before the present General Assembly of the United Nations, which has already been adopted by the Joint Coordinating Committee, to make the advice of the United Nations Investment Committee available to specialized agencies. The Conference it was thought, might wish to consider this United Nations action and determine whether it is desirable to amend the proposed Financial Regulations in order to permit the Director-General to consult with the United Nations Investment Committee on FAO's investments. The Council felt that this consultation should not be made mandatory since, especially in short-term investments, quick action is frequently required in order to obtain desirable advantages and benefits. In future, some short-term investments may have to be made in lire, on which action the Organization may obtain expert local advice.
In noting the report of the Committee on Financial Control on the 1951 Program of Work and Budget, some members felt that the Council at its Tenth Session should review the budget and program of work as well as the report of the Committee on Financial Control thereon, as they had views differing from the recommendations made by the Committee of Financial Control. However, in view of the time limitations and because a review of the budget by the Council at this time would duplicate a Conference review, it was agreed to adhere to the decision of the Ninth Session of the Council and to leave examination of the budget to the Conference.
(a) In conformity with the resolution adopted by the last session of the Conference, and the instructions of the Ninth Session of the Council, the Special Committee on the Scale of Contributions had drawn up a revised scale for 1951, obtained by eliminating from the previous scale the adjustment known as “Step 7” and by providing for changes in membership. However, the Special Committee recommended that a further step be taken by eliminating also the “agricultural factors”, and it had accordingly drawn up a second scale, which it recommended for adoption in 1951 (C50/10). Certain members of the Council considered that the Committee had gone beyond the intention of the Ninth Session of the Council in recommending a scale for 1951 in which agricultural factors are eliminated. Strong objections were recorded by a few members of the Council against both scales, which they considered to differ widely from those obtaining in the United Nations and other specialized agencies. Other members of the Council favored the scale recommended by the Special Committee for 1951.
The Council noted the request of the Government of India that the question of a fundamental revision of the scale of contributions be considered at the Special Session of the Conference.
The Council did not enter into substantive debate on these questions, but --
-- Recommended that the Report of the Special Committee and the request of the Government of India be placed on the provisional agenda of the Special Session of the Conference.
In order to facilitate consideration by the Conference, the Council obtained from the secretariat a table showing in detail the differences between the 1951 scales presented by the Special Committee and the scale used in 1950.
(b) The Special Committee submitted a Supplementary Report, in which it drew attention to the fact that for further study of a more fundamental revision of the scale, it requires guidance from the Conference on points of basic policy.
The Council --
-- Recommended that this matter also be placed on the provisional agenda of the Conference.
The Council gave consideration to the unexpected situation brought up before the last Session of the Conference in connection with the voting rights of governments, original members of the Organization, which ratified their signature to the Constitution at a comparatively recent date or which have not as yet ratified.
This matter is basically one of legal interpretation of the Constitutional position of some governments in relation to their membership in FAO. But it must be considered in the light of many factors, other than purely legal, particularly in relation to the arguments adduced last year by the Conference. Because of its undoubted complexity, and because the scope and time limits of the Special Session would not permit a thorough consideration of the issue, the view was advanced that the matter could be postponed until the next regular session of the Conference. The question of voting rights at the Special Session, it was thought, could be made the subject of an interim arrangement.
The Council, however, felt bound to draw attention to the fact that the present position gives rise to several uncertainties affecting the finances and accounts of the Organization. Some of these points had already been raised by the Committee on Financial Control (C50/10). The situation could be resolved only in the light of the decisions ultimately made by the Conference.
In this respect, the Council pointed out that there is a distinction to be made between three of the countries on the one hand, which have already ratified the Constitution, i.e., Colombia, Nicaragua, and Uruguay, and two other countries, Panama and Peru, which have not yet ratified and whose position on the matter implies that they do not yet consider themselves members of FAO. This distinction being made, the uncertainties arising out of the issue are as follows:
the uncertain position concerning the treatment in the accounts of arrears hitherto attributed to the members concerned,
the uncertain position concerning assessments of contributions for the latter two countries for the forthcoming year,
the uncertain position concerning the calculation of equities in the Working Capital Fund, and
the uncertain position concerning the treatment in the accounts of contributions made by Panama in the first three financial years.
As regards the third point, the Council drew to the attention of the Conference the fact that continued uncertainty affects the possibility of any final settlement of the outstanding questions on the Working Capital Fund.
As regards the fourth point, the Council expressed the opinion that, since the Government of Panama placed no restriction at the time of payment on the use of the monies paid to the Organization in the first three financial years, it is now too late to place these funds in a suspense account.
In reviewing the renewed recommendations of the Committee on Financial Control (C50/12), the Council endorsed points (1) and (2) of the proposals relating to travel and per diem arrangements. However, some doubts were felt as to the adequacy of the proposed amount for a representation allowance (point 3).
The Council noted and concurred in the suggestion of the Committee on Financial Control that the determination of the effective date of the changes in the terms of appointment should be made by the Conference.
At its Tenth and Eleventh Sessions, the Council also took the following actions on financial matters.
The Council at its Tenth Session noted the within-chapter transfers in the 1949 and 1950 budgets, including the transfer from the unrestricted contingencies of the 1950 budget as reported by the Director-General. The Council also noted the transfers to the restricted contingency in 1950 and observed that they resulted from lapses in personnel appointments and from specific reductions made by the Director-General in accordance with the recommendations of the Ninth Session of the Council.
At its Tenth Session the Council --
-- Endorsed the action of the Committee on Financial Control in authorizing the Director-General to open bank accounts with the Banco Boavista S.A., Rio de Janeiro, and Lloyds Bank, Ltd., Delhi.
The Council deferred action on the request of the Director-General for authorization to open new bank accounts in Italy and the United States of America because of the move to Rome, as it was explained that such accounts would not have to be opened until early in 1951. The Council noted that the adoption of new Financial Regulations by the Conference would permit the Director-General to open new bank accounts without the prior approval of the Council and that if the new Financial Regulations were not approved, he would have the opportunity of obtaining authority at the Council session to be held immediately after the Special Session of the Conference.
At its Tenth Session the Council --
-- Endorsed the action of the Committee on Financial Control in approving general regulations for the administration of the funds for special co-operative projects of the International Rice Commission in conformity with the Financial Regulations
At its Eleventh Session the Council, in accordance with the Financial Regulations --
-- Adopted rules concerning the specific delegation of powers to the Committee on Financial Control. (See Appendix C, page 37.)
At its Tenth Session the Council --
-- Approved the appointment of Sir Frank Tribe, Comptroller and Auditor General of the United Kingdom, as the External Auditor of the Organization, as recommended by the Director-General and concurred in by the Committee on Financial Control.
The Council at its Tenth Session noted the report of the Director-General on the acceptance of a gift from the Experimental Scientific Institute for Tobacco, Rome, in conformity with the Financial Regulations.
The Council at its Eleventh Session referred the following questions to the Committee on Financial Control for consideration, and requested the committee to report to the Council thereon:
Date of membership -- to study the financial implications of Conference decision as to the interpretation of date of membership;
Financial Regulations -- (a) to continue the study of the Regulations with the aim of achieving the greatest warranted degree of conformity with the United Nations and other specialized agencies;
(b) to study the problem of utilizing the payment of contributions of new members in the financial year of admission to membership.
Currency of Contribution payments -- (a) to study the prospective requirements of the Organization for United States dollars and currencies of other member nations from the time of arrival in Rome and in subsequent years with a view to economizing dollar expenditures;
(b) to study the problem of losses which may arise from fluctuation of exchanges rates in relation to the payment of contributions;
(c) to obtain and consider the views of the Italian Government thereon; and then
(d) to consult the experience of other United Nations agencies in soft currency areas; and
(e) to prepare a draft of regulations regarding payment of contributions, to be applicable commencing with 1952 for the consideration of the next session of the Conference.
(f) to study the question of the currency of contributions to the Working Capital Fund subsequent to 1951.
In accordance with the Rules of Procedure, the Council at its Tenth Session --
-- Selected the following members as the Nominations Committee of the Special Session of the Conference: Belgium, Chile, Haiti, Indonesia, Mexico, Pakistan, Portugal, Sweden, Syria, Turkey, United Kingdom.
The Council, noting the recommendation of the Special Session of the Conference regarding the need to continue the preparation of a revised scale of Contributions, at its Eleventh Session --
-- Decided to reappoint its Special Committee on the Scale of Contributions and to give it the following composition: Australia, Belgium, Brazil, Egypt, France, Greece, India, Ireland, Sweden, Union of South Africa, United States of America.
The Council was instructed by the Special Session of the Conference (a) “to take early steps with a view to presenting to the Conference a nomination for the office of independent Chairman of the Council” and (b) “to take appropriate steps to present nominations for the post [of Director-General] at the next regular session of the Conference”.
Accordingly, at its Eleventh Session the Council --
-- Decided to set up a Special Committee on Nominations, to be composed of the members of the Council for Chile, France, India, and the United States of America, which would meet under the chairmanship of Viscount Bruce of Melbourne. The Committee was requested to present the nominations for the consideration of the Council.
In conformity with the Financial Regulations, the Council at its Eleventh Session --
-- Reappointed Mr. Anwar Niazi of Egypt as Chairman of the Committee on financial Control, and
-- Decided that the following four persons “in the government service of member nations, elected for their special competence in financial administration,” would be the members of the committee for the ensuing year: Alan Christelow (United Kingdom), J.B. Pinheiro (Brazil), Ralph Roberts (United States of America), and B.K. Nehru (India).
In view of the special difficulty arising from the impending transfer of headquarters to Rome, it was understood that, in accordance with Rule II, paragraph 7 of the Rules of Procedure for the Committee on Financial Control, alternates would be selected in such a way as to enable the Committee to continue its operations in Rome after the transfer.
At its Eleventh Session the Council --
-- Reappointed the Committee on Relationships with International Organizations, as set up by its Eighth Session, the Committee's membership consisting of representatives of the following member nations: Belgium, Burma, Egypt, Italy, United Kingdom, United States of America, and Venezuela.
The Council at its Eleventh Session --
-- Requested the Director-General to convey its gratitude to His Excellency Henrik de Kauffmann, Ambassador of Denmark to the United States, for serving as Chairman of the Appeals Committee for the past two years, and to ascertain whether he would be prepared to remain in office until the transfer of Headquarters to Rome.
The Council further --
-- Requested the Director-General to ascertain whether His Excellency B.R. Sen, Ambassador of India to Italy, would accept an appointment to this office as from 1 April 1951.
The Eleventh Session of the Council --
-- Authorized the secretariat to proceed with the preparation of the French and Spanish texts of the Constitution, Rules of Procedure, and Financial Regulations, as amended by the Special Session of the Conference, and to consult with appropriate members of the Council so that the next regular session of the Conference may adopt authentic French and Spanish texts.
The Council was informed at its Eleventh Session that negotiations were still in progress with the United Nations concerning the time and manner of FAO's joining the United Nations Administrative Tribunal.
The Council at its Tenth Session considered a suggestion that all member governments should participate in instituting a special “FAO Week” for the purpose of securing world-wide understanding of FAO's objectives and work. The Council, noting that such a proposal would require co-ordination with any United Nations plans in such a connection, referred the suggestion to the Conference for consideration at a future session.
The Council decided to hold its next session at the Headquarters in Rome, beginning 11 June 1951.
