FC 102/18 |
|
FC 102/18 |
Hundred-and-second Session |
Rome, 5-9 May 2003 |
Split Assessments |
Proposed approach to split assessment - Quantification
1. In reports presented to the Finance Committee at its 95th Session in September 2000 [FC 95/9] and at its 100th Session in September 2002 [FC 100/4], the Secretariat brought to the attention of the Committee concerns related to the need to protect the Organization’s programme of work and budget (PWB) against the impact of exchange rate fluctuation. The reports highlighted the major problems affecting the PWB caused by exchange rate fluctuation as:
2. The problems within the biennium have been addressed through the forward purchase of the Euro requirement for the biennium at or close to the budgeted €=$ exchange rate. This eliminates the impact of exchange variance on current biennial expenditures. However, the use of fixed rate forward purchase contracts can be expensive in a period when Euro interest rates are lower than US dollar interest rates or when exchange rates fluctuate significantly, resulting in significant charges to the Special Reserve Account. In addition, the forward purchase solution does not address the between biennia problems resulting from the fixed US dollar level of, for example, a ZNG budget. A less expensive longer-term alternative is required to ensure that the Organization has the resources to carry out the approved programme of work.
3. Various solutions were examined including the use of forward purchase options and changing the Special Reserve Account to a replenishment facility. These solutions were considered too unpredictable and potentially expensive. A further solution, setting the € = US$ rate used in the budget at the rate achieved in the forward purchase contract, does not address the between biennia problems unless it is linked to eliminating the option of setting the budget at an absolute US$ level.
4. The most effective solution was determined to be a split currency system of assessment, whereby members would be assessed and make their contributions partially in US dollars and partially in Euros based upon an estimate of the dollar/euro balance of expenditures established by the Conference. The adoption of such an approach would protect the programme of work against exchange fluctuations both within the biennium and between biennia with limited risk and cost. Its adoption by FAO was recommended by the External Auditor (i.e. Cour des Comptes) in a report related to the Annual Report of Budgetary Performance presented to the Finance Committee at its 99th session in May 2002. The approach was also recommended by KPMG, an external consultant engaged by the Organization. The specific recommendations of the External Auditor and KPMG are contained in Annex 1.
5. A split assessment approach has been adopted by IAEA and UNESCO. In its consideration of the issue of split assessments at 100th session in September 2002, the Committee requested additional information on the experiences of IAEA and UNESCO as they relate to split assessments, along with information on UNIDO’s recent shift to full assessment in Euros and use of the Euro as its functional currency. Whilst each of the split assessment systems used by these organisations accomplished its primary purpose of protecting the organisation’s finances against the impact of exchange rate fluctuations without major cost, the systems used created problems for the organisation in administration. The approach recommended for FAO in the report attempts to respond to these problems. The information obtained from the three organisations is included in Annex 2.
6. Also, in its decision, noting the complexity of the subject and the need for the Conference to reach a decision in the context of the PWB 2004-2005, the Finance Committee requested that the Secretariat make a presentation to representatives of Member Nations prior to the Council meeting in October 2002 to foster a wider understanding of this issue. In response a presentation was made to Permanent Representatives to FAO in October 2002.
7. In its report to the Committee on the issue, the Secretariat indicated that they would examine the practical and operational issues related to the introduction of split assessments. The Committee agreed that the Secretariat should proceed with preparatory work in this regard with a view to reporting to the Committee at its 102nd Session in May 2003. The results of the Secretariat’s examination of the impact of split assessment strategy on the budget process and the changes necessary in Basic Texts and Conference Resolutions, follow below. The Secretariat’s initial examination of issues such as accounting treatment, internal and external reporting requirements, required accounting system changes and risk management strategy and policies, are outlined in FC 102/INF/18.
8. Finally, the Finance Committee at its 100th Session and the Council at its 123rd Session in its response to the Committee’s report noted that “there was general agreement the approved programme of work and budget should be protected to the maximum extent possible from the effects of fluctuating exchange rates” and that a decision needed to be taken at the next FAO Conference in November 2003 in the context of the PWB 2004-2005.
9. The aim of split assessments is to match income from assessed contributions as closely as possible to the currencies in which the largest portion of FAO’s expenditures are incurred - Euros and US dollars. This approach minimises the exchange gains and losses that arise when one currency must be converted to another to finance expenditure by obtaining income in the primary currencies in which costs are incurred. With split assessment, changes in purchasing power as a result of exchange rate fluctuations will be minimized so long as the expenditure forecast by currency is accurate.
10. The key to effective operation of a split assessment strategy is accurate analysis of expenditure by the currencies in which it is used. Success will depend on the ability to predict expenditures in each currency for the entire biennium.
11. The Secretariat is continuing the process of analysing the expenditure information available from the completed 2000-2001 biennium and from the 2002-2003 biennium to date, to achieve the most accurate possible estimate of expenditures incurred by currency. More accurate information has been made available through the accounting system on the split of staff costs, which had previously been based on budget data at standard cost level and has now been refined to take into consideration each individual element of staff compensation by item and location. In addition, non-staff expenditure for general overhead (telephone, utilities, postage and pouch); GIC pooled costs (printing, publications, translation); and temporary staff and overtime, which had not been included in the previous estimate, have now been analysed and incorporated into the projected split.
12. The emphasis is on the currency in which the amount of the transaction is fixed; that is, the currency in which the obligation exists. FAO has economic exposure to this currency which may be different from the currency of disbursement.
13. On this basis, the current estimates of expenditures by currency compared to the data included in the KPMG report are as follows:
Euro |
US dollar |
Other |
Total | |
KPMG Report |
39% |
32% |
29% |
100% |
Latest analysis |
42% |
39% |
19% |
100% |
14. The increase in the proportion of Euros is due in part to the more accurate analysis of staff costs by payroll item as well as recognition of the substantial Euro content of the various pooled costs, previously treated as US dollars being the currency used to charge programmes for the use of pool services. The increase in the estimated US dollar expenditure resulted from a more accurate treatment of the out-of-area adjustment for professional staff; adjustment of certain dollar-based entitlements (e.g. pension contributions, allowances, etc.); and a lower actual share of local general service salaries than assumed in the KPMG estimates which had been based on standard costs.
15. The Secretariat is analysing the information available to date for the 2002-2003 biennium to further refine these estimates. Staff are also involved in designing and developing accounting system reports and databases which will provide the essential information for use in projecting expenditure by currency as well as in the design of management reports which will enable the Organization to monitor expenditure patterns and respond early to variances which develop during a biennium. Various options are being explored for reporting purposes, each having associated accounting implications and it is therefore suggested that the 2004-2005 biennium be treated as a transitional biennium. This issue is discussed further in the Information document FC 102/INF/18.
16. In addition to the twelve countries now using the Euro, an analysis has been made of other currencies which presently track the Euro more closely than the dollar. Based on this review, income and expenditures in such Euro-linked currencies should be considered in the projection of the Euro portion of split assessment. Expenditure in these currencies amounted to 2% of total expenditures in the 2000-2001 biennium. Their inclusion would increase the projections of total Euro-based expenditure from 42% to 44% and reduce expenditure in “other” currencies from 19% to 17%.
17. Starting in the 2004-05 biennium, Members’ contributions would be assessed in two currencies, the Euro and the US dollar, with each Member paying a predetermined share in Euro and the balance in US dollars. Based on the review outlined above, the percentage of the budget required in Euros is 44%. The remaining 56% would be assessed in US dollars. Call for funds will include both the US dollar and the Euro assessment. Any partial payments received in the assessment year will be apportioned between the two currencies according to the proportion of the amounts assessed in the two currencies in that biennium.
18. Any balances in Euro which remain unpaid at year end would be converted into US dollars at a rate most beneficial to the Organization – budget rate, average UN official rate of the assessment year or UN official rate in effect on 31 December of the assessment year. According to Regulation 5.5, as of 1 January of the following calendar year, the unpaid balance of assessed contributions shall be considered to be one year in arrears. Obligations in arrears of Members and Associate Members will remain henceforth payable in US dollars only.
19. The provisions of the revised Regulation 5.6 will continue to apply to payments received in currencies other than the US dollar (as stipulated in the proposed revision of F.R. 5.7) although the wording has been revised to remove obsolete references to lire and streamlined to simplify the complex arrangements for payments in currencies other that US dollars and euros.
20. For the purpose of applying the sanctions envisaged by the basic texts for the non-payment of contributions (Loss of voting rights in the Conference under Article III-4 of the Constitution; Ineligibility for election to the Council under Rule XXII-5 of the General Rules of the Organization; Loss of seat in the Council under Rule XXII-7 of the General Rules of the Organization) contributions due for the two preceding calendar years will be calculated based on conversion of EURO amounts at the rate which was applicable at each year end to the conversion of the member’s arrears to US dollars (see revised Financial Regulation 5.7).
21. FAO’s current and proposed approach to budget presentation are as follows:
| Step | Current Approach | Proposed Approach |
| SPWB | Programme proposals are stated in US$ at constant cost using the same exchange rate for the base and the proposal | No change. |
| PWB as proposed | Programme proposals are shown with separately identified cost increases at the lowest programme level. All amounts are stated in US$ with the exchange rate the same for the base and the proposal | No change except that an estimate of the total appropriation and total Programme of Work split between Euro and US dollars would be provided. |
| PWB Approval | Budget as shown in the Appropriation Resolution is modified and approved at the Chapter level at an approved budget rate of exchange based on either the rate achieved through forward purchase or the spot rate on the date of adoption | Budget as shown in the Appropriation Resolution is not amended but approved at the Chapter level at same rate used in the base. The Resolution would include a statement of the absolute amount of Euros and US dollars required. The Resolution would provide that the rate to be used in the next biennium would be the average UN rate for the current biennium. |
| Base for the next budget | Immediately following the Conference, the budget is revised at the programme level to reflect the amounts approved by Chapter at the approved budget rate of exchange. The resulting budget is utilised in the subsequent budget as the base. | At 1 January of the new biennium, the programme level budget base would be revised to reflect the approved budget rate (average UN rate for the just completed biennium). The resulting budget would be published in the subsequent budget as the base and utilised in Statement IV of the Financial Statements. |
22. The fundamental difference in the current and proposed methodologies would be the elimination of the effect on assessed contributions of the budgeted exchange rate since total assessments would be approved as absolute amounts of US dollars and euros. The exchange rate is proposed to be updated biennially following approval of the budget which would be based upon the average UN official rate for the just completed biennium. The budgeted exchange rate would be utilised solely in the calculation of the base budget to be used for comparison to expenditure in Statement IV of the accounts and in the preparation of the budget for the following biennium.
23. Both UNESCO and UNIDO (prior to its switch to assessments solely in Euros) have maintained the same nominal exchange rate over many biennia. However, FAO prefers to have the approved budget exchange rate closer to the actual rate to minimize the variance between the actual and the nominal budget rate in order to reduce exchange losses or gains arising from uneven or mismatched currency flows which might require unplanned foreign exchange transactions. Also, since the consolidated figures in the budget will continue to be quoted in US dollars, they should be realistic in current terms for use in UN statistics on system-wide budgets. Therefore, it is proposed to move away from spot rates which may vary wildly and lead to very large movements from one biennium to the next in the value of the budget toward a two-year average which will be closer to actual and should avoid widely fluctuating amounts.
24. Attached as Annex 3 is a draft of the resolution for adoption by the Conference for 2004-05 under a split assessment strategy. The features of this resolution are a:
25. The Financial Regulations of the Organization currently provide for the assessment of members in a single currency, the US dollar. Annex 4 contains proposed changes to the Financial Regulations providing:
26. The Committee is requested to:
27. The Committee may wish to consider appending this document to its report.
The External Auditor (French Cour des Comptes) made the following points in regard to the Annual Report of Budgetary Performance for 2000-2001which were considered by the Finance Committee at its 99th session in May 2002:
The External Auditor noted two additional areas of concern for the Organization, clarifying that her comments were in the context of the 2000-01 audit exercise which was currently underway, but not yet completed:
- the need to understand the decline in income earned, including support cost reimbursements, miscellaneous income (including investment income flows) and sundry income (including exchange rate fluctuations); and
- the importance of reviewing the functional currency of the Organization and the means of protecting the Programme of Work from exchange rate fluctuations, noting, in particular the potential usefulness of split assessments in this regard
The secretariat confirmed that a comprehensive proposal would be presented in September 2002 on the Organization’s functional currency and means of protecting the Programme of Work from exchange rate fluctuations, based on external expert advice. The Committee stressed that this issue must be resolved, particularly in view of the near depletion of the Special Reserve Account and the Working Capital Fund.
The report of KPMG, a major international consulting firm with expertise in these areas, examined various options concluding that:
This option (split assessment) has the strong advantage of providing protection to FAO’s programme of work in the long run, so we believe the split assessment is the single most effective hedging strategy in FAOs.1
In its conclusions is stated that:
Based on the results of our analysis we believe the appropriate functional currency of FAO is presently the US dollar based on the existing nature of its operations. In order to reduce the Organization’s exposure to foreign exchange risk, we believe a split assessment strategy is the preferred solution.2
Staff of the Secretariat visited IAEA, UNESCO and UNIDO in response to a request of the Finance Committee made at is 100th session held in September 2002, for information related to IAEA and UNESCO’s experience with split assessments and UNIDO’s change of functional currency to the Euro. Each of the split assessment systems used by these organizations accomplished its primary purpose of protecting the Organization’s finances against the impact of exchange rate fluctuations without major cost. Each of the systems used is, however, different and has created problems for the Organization in administration, which are discussed below. The approach recommended for FAO in the report above attempts to respond to these problems.
Following is a summary of the information provided.
International Atomic Energy Agency – Vienna, Austria: IAEA’s split assessment system was introduced in 1986 to reduce the Agency’s exposure to the effects of currency exchange fluctuations on Regular Budget expenditure.
Budget: Each year the General Conference approves a budget for the Agency which is allocated in appropriation sections. The amount in each section comprises a US dollar component and a Euro component expressed as a US dollar equivalent on the basis of the average Euro to US dollar United Nations Rate of Exchange experienced during the budget year. Therefore, the precise level of budget in US dollars granted by the General Conference, expressed in US dollars, can only be determined at the end of the budget year.
Assessments: Member States are assessed in accordance with the scale of assessment fixed by the General Conference. Individual assessments are established with a component in US dollars and a component in Euros. These components are in direct proportion to the respective shares of the Regular Budget expenditure linked to the two currencies.
Accounting treatment of exchange gains and losses: The US dollar is the Agency’s functional currency and the US dollar is used in the presentation of the budget and financial statements. Transactions in currencies other than US dollars are recorded in the financial statements at the United Nations Official Rate of Exchange in effect on the date of the transaction. Realised exchange gains and losses resulting from the purchase of currencies and the liquidation of accounts receivable and accounts payable are credited or charged to miscellaneous income. Unrealised net gains resulting from the revaluation of cash (including deposits and investments) are recorded as a provision on the balance sheet, whereas losses are charged to miscellaneous income. Unrealised gains and losses resulting from the revaluation of unliquidated obligations are recorded as adjustments to the corresponding programme expenditure.
The IAEA approach of leaving the absolute amount of the budget undefined until the end of the fiscal year requires a substantial staff to administer and monitor expenditures to ensure that an excess of expenditure over budget authority does not result from operations. It also requires the periodic adjustments to allotments approved in financial plans which make it difficult for budget holders to ensure financial control.
United Nations EducationAL, Scientific and Cultural Organization, Paris France: UNESCO’s split assessment system was introduced in 1988 in response to a large deficit in the 1986-87 biennium resulting from adverse currency fluctuations.
Budget: UNESCO has a General Fund established for the purpose of accounting for the expenditure of the Regular Programme appropriation voted by the General Conference for a biennium in US dollars. A constant rate, which has not changed for three biennia, is used to translate Euro expenditures into US dollars. The budget is financed from assessments which were fixed in 2000-2001 and 1998-1999 at 61% in Euros and 39% in US dollars based upon the Secretariat’s analysis of expenditure patterns.
Assessments: Member states are assessed partly in US dollars and partly in Euros in a proportion determined by the General Conference. The proportion to be paid in Euros is fixed at the rate of exchange chosen to calculate the budget. Euro payments are credited in the accounts at the UN operational rate of exchange in the month of payment. Arrears assessed in euros at the end of each biennium are considered due and payable in US dollars, thereafter converted using the rate of exchange most beneficial to the organization - constant rate, average UN official rate for the biennium or UN official rate in effect in December of the second year of the biennium.
Accounting treatment: The US dollar is UNESCO’s functional currency and the currency of its budget and accounts. Budgetary income and expenditure in Euros is recorded in the accounts at the constant rate of exchange used to establish the budget. The difference between income and expenditure at the constant rate and the UN official rate of exchange is recorded in a currency clearing account. At the end of the biennium any balance in this account – negative or positive – is transferred to miscellaneous income which impacts on the amount available to members including early payment incentives.
Comment: The larger the variance between the constant budget rate and the UN official rate, the larger the potential adjustment charged or credited to the currency clearing account. In 2000-2001 the variance was $5.8 million eliminating the funds available in the early payment incentive scheme. In addition, recording budgetary expenditure in official accounts at the constant rather than the market rate (UN official rate of exchange) is contrary to the generally accepted principles of international accounting and makes use of the information difficult in inter-agency comparisons.
United Nations Industrial Development Organization, Vienna Austria: In 1988 UNIDO introduced a split assessment system in response to a large deficit caused by a decline in the value of the US dollar to the Austrian Schilling in the 1986-1987 biennium. When the split assessment system was operational it provided for:
Budget: Budget estimates were prepared in the currency considered best suited to the type of expenditure and converted to US dollars for budget presentation at a fixed rate which had remained constant since the inception of the split assessment system. Appropriations were established in the two currencies – one amount in Euros equal to requirements in Euros and the remainder in US dollars.
Assessments: When the split assessment system was last operational, in 2000-2001, members were assessed 18% in US dollars and 82% in Euros (Austrian Schillings - ATS). Obligations of member states were fixed in the two currencies. Members were able to pay their assessments in either currency. Any payment received was credited on a pro-rata basis to the US dollar or Euro (schilling) obligation at the UN official rate of exchange in effect at the time the payment was received. Outstanding obligations in Euros (schillings) were revalued periodically using the UN official rate of exchange.
Accounting treatment: Expenditure and income was recorded in the official accounts at the UN official rate of exchange and in a separate ledger for budgetary performance monitoring at the permanent fixed budget rate of US $ = ATS 12.90. The difference was treated as exchange gain and loss. The organization had no special reserve account or currency exchange account similar to FAO or UNESCO.
The system was replaced in the 2002-2003 biennium by a Euro only assessment and UNIDO’s functional currency was changed beginning in 2002-2003 from the US dollar to the Euro.
Comments: Since UNIDO’s budgetary expenditure was 82% in Euros and it is almost exclusively headquarters based, the Euro was its functional currency following the principles contained in the analysis performed by KPMG for FAO in 2002 which describes functional currency as “the currency of the primary economic environment in which an entity operates”. Also, the US dollars required were a relatively small percentage of total income and obligations and could be handled more easily utilising currency market instruments than through split assessment accounting. In addition, UNIDO was not faced with the problems between biennia caused by the imposition of a ZNG absolute dollar expenditure limitation.
Budgetary Appropriations 2004-05 | ||||
THE CONFERENCE | ||||
Having considered the Director-General's Programme of Work and Budget: | ||||
1. |
Approves a total net Appropriation of US$ 651 758 000 for the financial period 2004-05 | |||
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(a) Appropriations are voted for the following purposes: | |||
US$ |
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Chapter 1: General Policy and Direction |
51 823 000 |
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Chapter 2: Technical and Economic Programmes |
292 348 000 |
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Chapter 3: Cooperation and Partnerships |
120 819 000 |
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Chapter 4: Technical Cooperation Programme |
95 195 000 |
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Chapter 5: Support Services |
52 578 000 |
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Chapter 6: Common Services |
38 395 000 |
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Chapter 7: Contingencies |
600 000 |
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Total Appropriation (Net) |
651 758 000 |
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Chapter 8: Transfer to Tax Equalization Fund |
95 083 000 |
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Total Appropriation (Gross) |
746 841 000 |
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(b) The appropriations (gross) voted in paragraph (a) above, shall be financed by assessments on Member Nations, after deduction of Miscellaneous Income in the amount of US$ 6 695 000, thus resulting in assessments against Member Nations of US$ 740 146 000. In establishing the actual amounts of contributions to be paid by individual Member Nations, the assessment of each Member Nation shall be reduced by any amount standing to its credit in the Tax Equalization Fund provided that the credit of a Member Nation that levies taxes on the salaries, emoluments and indemnities received from FAO by staff members shall be reduced by the estimated amounts of such taxes to be reimbursed to the staff member by FAO. An estimate of US$ 3 000 000 has been withheld for this purpose. (c) The contributions due from Member Nations in 2004 and 2005 shall be paid in accordance with the scale adopted by the Conference at its Thirty-first session, which contributions, after the deduction of amounts standing to the credit of Member Nations in the Tax Equalization Fund, result in net amounts payable totalling US$ 648 063 000. (d) The contributions shall be split with 56% to be paid in US dollars and 44% in Euro, being US$ 364 235 000 and € 322 532 000. (e) The foregoing appropriations are calculated at the 2002-03 budget rate of €1 = US$ 0.880. The budget rate for 2004-05 will be set using an average of the UN official exchange rates for 2002-03 and a consolidated budget in the format required for Statement IV of the Accounts shall be presented to the Finance Committee at its next regular session following the adoption of this budget. | |||
5.1 The appropriations for a financial period, subject to related adjustments effected in accordance with Regulation 5.2, shall be financed by annual contributions from Member Nations and Associate Members. Contributions from Member Nations shall be assessed in accordance with the scale of contributions determined by the Conference, which scale shall not include contributions from Associate Members. Contributions from Associate Members shall as far as feasible be calculated on the same basis as contributions from Member Nations, the amount thus obtained being reduced by four tenths to take account of the difference of status between Member Nations and Associate Members, and shall be credited to Miscellaneous Income. Pending receipt of contributions, appropriations may be financed from the Working Capital Fund.
5.2 In the assessment of the contributions of Member Nations and Associate Members for each financial period, adjustments shall be made in respect of:
5.3 For determining the annual contribution of each Member Nation and Associate Member, the assessment of each such Member Nation and Associate Member for the financial period shall be divided into two equal instalments, one of which shall be payable in the first calendar year and the other in the second calendar year of the financial period.
5.4 At the beginning of each calendar year the Director-General shall:
5.5 Contributions and advances shall be due and payable in full within 30 days of the receipt of the communication of the Director-General referred to in Regulation 5.4 above, or as of the first day of the calendar year to which they relate, whichever is the later. As of 1 January of the following calendar year, the unpaid balance of such contributions and advances shall be considered to be one year in arrears.
5.6 Annual contributions to the budget shall be assessed partly in United States dollars and partly in euro. Each biennium, the Conference will determine the proportionate share of the budget payable by all Member Nations and Associate Members in United States dollars and in euro respectively. Unless the amounts assessed are received simultaneously and in full in the currencies in which they were assessed, credit for any partial payment shall be given against contributions due in proportion to the amounts assessed in both currencies. Annual contributions to the budget shall be assessed in United States dollars. To the extent that the Conference, after ascertaining in what currencies Member Nations and Associate Members propose to make their contributions in the ensuing financial period, finds that anticipated United States dollar income will be inadequate to meet estimated United States dollar expenditures of the Organization as determined by the Conference,Should a the Conference will determine the proportionate share of contribution that all Member Nations and Associate Members who do not pay their contributions in full in United States dollars shall pay in that currency. Each Member Nation orand Associate Member shall pay any the remainderpart of its current year contributions in a currency other than United States dollar or eurolire, or in its own currency which, for the purposes of its contributions to the Organization, it will the responsibility of that Member to ensure the free convertibility of that currency into United States dollars and/or Euro. must be freely convertible into lire, the convertibility being the responsibility of the contributing government. The exchange rates applicable to such contributionto partial payment or payment in other currencies as described in this paragraph rate shall be the marketofficial rates of the the Euro and the lire to theUnited States Dollar to the currency of payment dollar on the first business day in January of the calendar year in which the contribution is due, or the rate in effect on the day the payment is made, whichever is more favourable to the Organizationthe higher.
5.7 Obligations (of Member Nations and Associate Member Nations) in Euro which are considered to be in arrears in accordance with F.R. 5.5 shall be converted into US dollars at the rate most beneficial to the Organization applying either the budget rate of the assessment year, or the average UN operational rate for the assessment year or the UN operational rate in effect on 31 December of the assessment year. Such arrears shall thereafter be considered payable in US Dollars. For the purpose of determining loss of voting rights in the Conference, ineligibility for election to or loss of seat in the Council as foreseen in the Basic Texts of the Organization, contributions due for the two preceding calendar years will be calculated on the same basis as above. Payments received against arrears in freely convertible currencies other than US Dollars shall be converted using the market exchange rate of the currency to the US Dollar in accordance with the provision of the last sentence of F.R. 5.6.
5.8Obligations of Member Nations and Associate Members, including arrears of contribution, shall remain payable in the currency of contribution of the year in which they were due.
5.8 Any nation admitted to membership or any territory or group of territories admitted to associate membership shall pay a contribution to the budget for the financial period in which the membership or associate membership becomes effective. Such contributions shall be an amount determined by the Conference and shall begin with the quarter in which the application was approved. All new Member Nations shall be required to make advances to the Working Capital Fund in accordance with Regulation 6.2 (b) (ii).
5.9 Non-member nations of the Organization that are members of intergovernmental commodity groups; subcommittees, subsidiary working parties and study groups established by the Committee on Fisheries; or of bodies established by conventions or agreements concluded under Article XIV of the Constitution shall contribute towards the expenses incurred by the Organization with respect to the activities of those groups or bodies in an amount determined by the Director-General except as otherwise decided by the Conference or the Council.
5.10 The Council, at any of its sessions, may advise the Director-General as to any steps that ought to be taken in order to expedite the payment of contributions. The Council may submit to the Conference such recommendations in this regard as it may consider appropriate.
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1 Review of FAO’s Proposals for Protection of the Organization’s Programme of Work Against Exchange Rate Fluctuations And of its Functional Currency, KPMG, August 2002, P. 7.
2 Idem, P. 8.