198. The Council welcomed the introductory statement by the Director-General, which centred on the background considerations and the main external factors which had influenced the formulation of his proposals, as contained in the Summary Programme of Work and Budget document.
199. The Council also took note with interest of the detailed accounts given by the Chairmen of the Programme and Finance Committees, regarding the deliberations of these Committees on the Summary, in joint session as well as separately. In this connection, the Council expressed its appreciation of the thorough review of the proposals made by these Committees, within their respective mandates. It considered that the results of these reviews, as contained in the reports of the Programme and Finance Committees and in the report of their joint sessions, represented, as in the past, a valuable contribution to its own discussion of the subject.
200. The Council noted the improvements in the Summary Programme of Work and Budget document, especially the expanded information in the annex. While the basic purposes of the Summary required that it be concise and indicate only the broad approach and focus of the proposals submitted by the Director-General for the next biennial budget, the Council was appreciative of the greater details on the shifts of resources and programme changes. In sharing this opinion, some members expressed the view that these changes were a step in the right direction but that the search for further improvements should continue to be actively pursued.
201. The Council recognized that the general approach in the formulation of proposals for 1988-89 was broadly similar to that adopted for the two previous biennia, i.e. ensuring some limited real growth of FAO’s technical and economic programmes, primarily through transfer of resources from other areas. This had enabled the Director-General to limit the request for a net overall programme change to 0.48 percent over the re-costed 1986-87 base.
202. The Council further noted that the key aspects in this general approach were the continued application of policies of increased efficiency, streamlined procedures and activities, economies in administration, reduced expenditure on established posts and enhanced computerization and automation. While fully supportive of this attention to economy and efficiency, the Council agreed that individual perceptions of this general approach by Member Governments and their reactions to the proposals submitted by the Director-General, could not always coincide and were closely linked to the views expressed on the overall budget level, as reported below.
203. The Council considered in this connection that attention to effectiveness and efficiency in the functioning of the Organization could not be construed as the sole responsibility of the Secretariat. Member Governments themselves had a significant role to play in permitting economies through restraint in their demands on the Organization’s services, and in shaping their requests to the Organization in a consistent and pragmatic manner.
204. A number of members recommended and emphasized the need for consideration by the Ninety-second Session of the Council, and possible decision by the Twenty-fourth Session of the Conference on if, when and how reforms in the planning, programming and budgeting processes proposed, enacted, or under study in the UN or other organizations of the UN System would be reflected in the FAO. On the assumption that the Conference may agree on initiative on reform, these members also recommended that the Conference consider the establishment of an independent high-level group to conduct a comprehensive review of FAO, including its long-term strategies and priorities, its organization and management, and its relationship with other UN organizations. The majority of members considered that these matters were not on the agenda and that they could not be considered unless presented in accordance with established procedures. Some members expressed the view that these matters, even though not formally on the agenda, were central to the whole process of framing the Programme of Work and Budget. By majority vote, the Council decided that this matter could not be discussed as it was not on the agenda. The majority of members were also of the view that FAO had proven to be an efficient and responsive organization in its management and operations and that its already existing mechanisms could undertake such reforms as might be necessary. The view was also expressed that the issue of reform or review of FAO could only be considered after the UN General Assembly had taken a considered view on the nature and scope of the reform in the economic and social sectors of the United Nations. The Council agreed that proposals relating to reforms or review were matters for consideration and decision by the Conference, and that it was for the Conference to decide on the need, the scope, the methodology and the mechanism of such a reform or review.
205. The Council agreed that the selection of priorities in the Summary followed the prior guidance of and recommendations from FAO Regional Conferences and the full range of technical advisory bodies. In like vein, the choice of priorities faithfully reflected the recommendations and decisions of the Council and Conference themselves, and the results of the in-depth reviews undertaken by the Programme Committee.
206. The Council emphasized the importance of the organic and dynamic links between FAO’s technical assistance activities at field level and its Regular Programme. The close relevance of FAO’s field activities to requirements in recipient countries and efficiency in field operations were heavily dependant on the solidity, breadth and quality of the Regular Programme.
207. The Council in general reiterated its endorsement of a judicious and cost-effective policy of decentralization of FAO’s activities at regional and country levels. The Council considered that the corresponding organizational arrangements, which had formed part of FAO’s structure for some considerable time, had repeatedly proven their validity. In this connection, many countries underlined the positive benefits they derived from the presence of FAO Representatives, through more intimate and direct links with FAO’s Regular Programme activities and the more effective implementation of field projects. They welcomed the fact that a moderate increase in the number of country representations proposed for 1988-89 was in order to meet pressing requests from Member Governments which had not been able, so far, to take advantage of the establishment of a Country Office.
208. Some members, however, stressed that they saw scope for consolidation and streamlining in the current pattern of FAO’s established offices outside Headquarters. In view of possible economies, they urged that this aspect be carefully studied and decided upon by the FAO membership as a whole. Given the present tight budgetary context affecting FAO’s Regular Programme, they could not see their way to supporting the proposed increase under Major Programme 3.4: FAORs.
209. The Council recalled the unanimous recognition, as expressed at the last Conference, of the role of the Technical Cooperation Programme (TCP) within FAO’s overall developmental action. Many members expressed regret that no net increase of resources had been proposed for the TCP. In their view, the Programme’s proven record of responsiveness to urgent requirements and the catalytic value of the inputs it enabled to provide to recipient countries at critical stages of the implementation of their development plans, would have fully warranted at least a nominal programme increase. In this connection, they expressed the wish that such a nominal increase could be incorporated in the full Programme of Work and Budget.
210. Other members, while appreciative of TCP’s positive contribution to development and recognizing the importance attached by beneficiary countries to the objectives and impact of the Programme, drew attention to unexpended balances of the TCP appropriation and to overall budgetary constraints, which in their opinion strongly militated against any net increase.
211. The Council generally endorsed the shifts made and the balance of proposed activities, as described in the Annex to the Summary Programme of Work and Budget, subject to the qualifications and preferences regarding specific activities which members expressed individually. In particular, the Council gave its full support to the implementation of the Tropical Forestry Action Plan (TFAP) at regional and country levels, through the proposed adaptation of the recommendations of the plan to specific situations, and to the critical coordinating and catalytic role of FAO in this regard.
212. The emphasis on biotechnology applications to food and agriculture and corresponding activities programmed for 1988-89, were also especially welcomed. The further strengthening of the Global Information and Early Warning System was endorsed. Follow-up to the implementation of the Strategy and Action Programmes adopted by the World Conference on Fisheries Development and Management remained of primary importance.
213. In terms of cross-sectoral priorities, the Council fully supported the continued attention to the special requirements of small farmers and of rural women, through transfer of appropriate technologies, programmes designed for their improved access to inputs and greater recognition in policy advice and in the formulation of national development plans.
214. The Council largely endorsed the preferred means of action which permeated the proposals, namely the enhancement of information systems and data bases, training and the promotion of economic and technical cooperation among developing countries.
215. In discussing the Summary for 1988-89, the Council recalled the financial difficulties affecting the implementation of the Programme of Work and Budget for the current biennium, which had led to programme adjustments amounting to US$ 25 million, and which it would address in a comprehensive manner under item 18 of its agenda. It expressed deep concern at the pervasive effects of these adjustments, which could well extend beyond the close of the 1986-87 biennium.
216. The Council was unanimous in reiterating the constitutional obligations of all Member Nations to forward their contributions to the Regular Budget promptly and in full and renewed its appeal to all Member Nations which had contributions outstanding for 1987 and arrears relating to prior years to settle these obligations without delay. It took note of information provided by the delegation of the main contributor country and by the Secretariat with regard to current action under way to restore sufficient funding to meet the obligations of that country to the Regular Budget of FAO.
217. Some members considered that expectations of a likely continuation of such difficulties into 1988-89 made it desirable to prepare a Programme of Work and Budget with a lower budget level, or alternatively including a contingency plan which would permit the Programme of Work to be implemented in the light of contributions actually received. They accordingly suggested that the Director-General consider submitting the full Programme of Work and Budget proposals on these lines.
218. The vast majority of the Council, however, did not agree with this approach. In their view, this was tantamount to disregarding the constitutional requirements of all Member Nations to honour their obligations in full, and to put the implementation of the full Programme of Work, as approved by the Conference on an ill-assured legal basis. Consequently, no hypothesis or projection of financial difficulties could be accepted by them as a principle.
219. The Council resolved that, even if the present financial difficulties were to continue, the Conference would need to give the necessary authority and flexibility to the Director-General for the implementation of the Programme of Work and Budget it would eventually approve for 1988-89, along the lines of the authorization given to the Director-General by the Council itself at its Ninetieth Session, to take action as appropriate in the current biennium.
220. The Council noted that the provision for cost increases had been calculated on the basis of the approved methodology and was very moderate in order to provide for the most realistic estimate but, at the same time, sufficient protection to approved programmes, against factors beyond the Organization’s control. The provision would be reviewed and revised as necessary for the full Programme of Work and Budget in the light of most recent information.
221. The Council welcomed the further reduction in the number of established posts and in corresponding expenditure in proportion to total expenditures.
222. The Council further noted that the eventual effective working budget for 1988-89 at the current exchange rate of Lire 1 300 to US$ 1 would be US$ 492 million. It recognized that in view of the upheaval of exchange rates world-wide, the impact on contributions from individual member countries, in terms of their national currencies, would be far from uniform. While those member countries, the. currency of which had appreciated considerably against the US dollar in the last eighteen months, were likely to pay substantially less, and some would end up paying more or less the same amount, most members would have to face significant increases in their assessed contributions.
223. Members of the Council expressed differing reactions to the eventual budget level proposed in the Summary. In stating their reaction, many representatives addressed separately the issue of the real programme increase and the nominal increase in dollar terms.
224. As regards the real programme increase, a few members reiterated their advocacy of zero programme or real growth throughout the UN System together with maximum absorption of non-discretionary cost increases, and urged the Director-General to aim at this objective in the full Programme of Work and Budget.
225. The majority of the Council however supported the Director-General’s proposals. A large portion of this majority would have wished the real programme increase to be higher, in view of the extent of requirements for and dependence on FAO assistance for agricultural, forestry and fisheries development. They drew attention to the fact that the approved Programme of Work and Budget for 1986-87 was not being implemented in full due to force majeure and that the modest net increase proposed could not even remedy the programme adjustments made in this biennium.
226. As regards the eventual budget level in dollar terms, some members indicated that they would not be in a position to agree to it, or would reserve their position until the Conference. Some indebted developing countries expressing concern as to the impact of the proposed budget increases on their impoverished economies, reserved their position on the budget level.
227. The majority of the Council however expressed their support for the eventual budget level, which they stressed was the natural and logical consequence of their support to the proposed Programme of Work.
228. Despite these differing views on the budget level, the Council expressed the hope that all Member Nations would find it possible to approve the full Programme of Work and Budget 1988-89 by consensus, as sought by the Director-General. It accordingly recommended that the Director-General proceed to finalize his proposals for the full Programme of Work and Budget, on the basis of the Summary and taking into consideration the reactions of the Council on the Summary.
229. The Council expressed its appreciation of the work accomplished by the Programme Committee at its Fifty-second Session, and was pleased to note that the Committee’s debates had taken place in an atmosphere of excellent cooperation among Members and open and frank discussion with the Secretariat.
230. Having considered the Programme Committee’s views on the Summary Programme of Work and Budget 1988-89 during its own debate on that item, the Council confined its specific comments to the other matters contained in the Programme Committee’s report.
231. The Council noted that in examining the second set of programme adjustments, totalling slightly over US$ 5 million, the Programme Committee had taken into account also those adjustments of US$ 16.4 million which the Council had itself already considered and approved, as well as the action in hand to bring total savings related to the 1986-87 budgetary exercise to US$ 25 million. The Committee’s views thus related to the impact on the programme of the entire package of adjustments. The Council shared the Committee’s concern that the enforced economies could not but affect the programmes and activities to which priority was attached by the Governing Bodies.
232. The Council also noted the Committee’s views on seven reports of the Joint Inspection Unit (JIU), which the Committee had examined on its behalf during its Fifty-second Session.
233. The Council noted with appreciation the positive assessment by the Joint Inspection Unit of cash management in the United Nations and four specialized agencies (FAO, ILO (International Labour Office), Unesco (United Nations Educational, Scientific and Cultural Organization), WHO). It also supported the Committee’s conclusions with regard to the report on field representation of organizations in the UN System.
234. The Council discussed the Reports of the Fifty-ninth and Sixtieth Sessions of the Finance Committee and took note of the Committee’s deliberations on all matters. Several matters required discussion and/or decision by the Council. The results of the Council’s deliberations on these matters are included the succeeding in paragraphs.
235. The Council noted the response of the Finance Committee to the observations made by the JIU concerning the steady and gradual increase in FAO Representations at country level. A few members expressed concern at the cost of these Representations compared to the programmes they delivered. However, the majority of members supported the opinion of the Finance Committee that the JIU Report too much emphasis had been placed on the operational se provided by country representatives who in addition had many other responsibilities.
236. The Council took note of the Annual Report on Budgetary Performance to Member Nations regarding 1986 and the views of the Finance Committee thereon.
237. The Council, on the proposal of the Finance Committee, adopted the following resolution:
Resolution 2/91
APPOINTMENT OF THE EXTERNAL AUDITOR
THE COUNCIL,
Noting that the Finance Committee recommends the re-appointment of the Comptroller and Auditor-General of the United Kingdom as External Auditor the Organization;
Recognizing the advisability of continuity In the function of External Auditor during this period of financial difficulty as well as the useful services rendered by the present External Auditor;
Decides to re-appoint the Comptroller and Auditor-General of the United Kingdom as External Auditor of the Organization for a further period of two years commencing with the audit of accounts for the year 1988 and requests the Director-General to formulate and submit for Its consideration alternative for future appointments.
238. The Council recalled that the Director-General had offered to submit a document on programme delivery costs for consideration by the Finance Committee, following discussion of this issue at its Ninetieth Session
239. The Council took note that the Finance Committee had expressed satisfaction with the contents of this document, and that the adoption of a relatively straightforward methodology had permitted it to review administrative overhead costs related to FAO’s Regular Programme. It also noted the agreement of the Finance Committee that the overhead of 18.8 percent for Regular Programme delivery, given the characteristics of the Organization, seemed to be commendable.
240. Among other findings, the Council further noted that the comparison made between two biennial periods (1980-81 and 1986-87), showed a welcome trend of reduction of administrative support expenditures, in relation to those for substantive activities. During the Council discussion, the view was expressed that the concept of programme delivery costs was liable to different interpretations. While one definition was to take it as the proportion of administrative support expenditures in relation to total expenditures, other definitions were also possible, as evidenced in a recent JIU Study dealing with another organization of the UN System.
241. Some members requested that in view of their interest in the matter, the issue of programme delivery costs be included in the provisional agenda of the next session of the Council; and the Council noted that this would be done. The Council also noted that the subject would be included in the agenda of the next session of the Finance Committee at the request of a member of the Committee.
242. The Council noted the status of contributions at 24 June 1987, compared to the same date in 1986, as follows, as well as the details of amounts received from each Member Nation during 1987 and of outstanding contributions, as shown in Appendix E to this Report.
| 1987 | (for comparison) 1986 | |
| US$ | US$ | |
| Amounts outstanding at 1 January | ||
| Current assessments | 198 575 000.00 c | 198 575 000.00 c |
| Contributions in arrears | 78 069 434.69 b | 24 210 846.98 b |
| Total | 276 644 434.69 | 222 785 846.98 |
| Receipts 1 January to 24 June | ||
| Current assessments | 121 042 668.60 d | 80 729 097.50 |
| Contributions in arrears | 25 436 336.83d | 6 132 065.07 |
| Total | 146 479 005.43 a d | 86 861 162.57 |
| Amounts outstanding at 24 June | ||
| Current assessments | 77 532 331.40 a | 117 845 902.50 |
| Contributions in arrears | 52 633 097.86 a | 18 078 781.91 |
| 130 165 429.26 a | 135 924 684.41 |
1 CL 91/6, paras. 3.34 to 3.42; CL 91/LIM/1; CL 91/PV/15; CL 91/PV/16; CL 91/PV/19.
a Details of amounts received from each Member Nation during 1987 (cash receipts and cash surplus distributions) and of outstanding contributions, are shown in Appendix E.
b Contributions in arrears include arrears payable under Conference authorizations by instalments due in 1987 (in 1986 in comparative figures) and in future years (on 1 January 1987 US$ 41 490.63 due in 1987 and US$ 194 479.26 due in future years); details are set out in Appendix E, footnote 5 arid the last page.
c Of which US$ 575 000.00 relates to the Tax Equalization Fund.
d Receipts include release on 1 January 1987 of cash surplus of 1984-85 biennium: US$ 17 330 539.34 (8.73%) applied to current assessments and US$ 11 739 809.66 to arrears.
(details of amounts received from each Member Nation and of outstanding contributions are shown in Appendix E)
243. The position at 24 June 1987 of Member Nations’ 1987 assessments (and the number of Member Nations with arrears), with comparative figures at the same date during the preceding four years, was as follows:
| Number of Member Nations | ||||||
| Current Assessments | Arrears | |||||
|
% Received |
Paid in Full | Part Paid | No Payment | Total | ||
| 1987 a | 60.96 | 54 | 15 | 89 | 158 | 53 |
|
1986 |
40.65 | 43 | 29 | 86 | 158 | 56 |
| 1985 b | 50.51 | 47 | 23 | 86 | 156 | 52 |
| 1984 | 51.90 | 48 | 31 | 77 | 156 | 53 |
| 1983 c | 47.23 | 45 | 21 | 86 | 152 | 44 |
244. The month-end cumulative percentages of 1987 assessments received during the first five and a half months of 1987, as compared to receipts during the preceding four years, is shown in the following statistics.
Percentages of Current Assessments Received
(Cumulative - year to date)
| 1987 a | 1986 | 1985 b | 1984 | 1983 c | |
| % | % | % | % | % | |
| January | 10.41 | 10.37 | 24.69 | 6.28 | 4.63 |
| February | 24.25 | 15.89 | 28.25 | 8.73 | 18.81 |
| March | 32.40 | 24.50 | 30.95 | 14.21 | 26.52 |
| April | 44.75 | 30.26 | 37.31 | 27.09 | 32.74 |
| May | 49.62 | 36.10 | 47.89 | 30.92 | 45.58 |
| June | 60.96 d | 40.67 | 51.35 | 51.90 | 48.08 |
| July | - | 62.48 | 59.63 | 55.42 | 51.87 |
| August | 63.00 | 60.14 | 57.44 | 53.06 | |
| September | 63.40 | 63.33 | 60.66 | 55.33 | |
| October | 64.75 | 73.52 | 86.34 | 75.17 | |
| November | 65.86 | 91.35 | 91.44 | 89.0.9 | |
| December | 66.96 | 92.50 | 92.60 | 93.81 |
a Includes US$ 17 330 539.34 (8.73% of 1987 assessments) as distribution of the cash surplus of the 1984-85 biennium applied as of 1 January 1987; to facilitate comparisons, applications to the current assessments of 64 Member Nations are excluded from the number of Member Nations.
b Includes US$ 41 005 487.00 (20.72% of 1985 assessments) as distribution of the cash surplus of the 1982-83 biennium applied as of 1 January 1985; to facilitate comparisons, applications to the current assessments of 84 Member Nations are excluded from the number of Member Nations.
c Includes US$ 345 595.00 (0.19% of 1983 assessments) as distribution of the cash surplus of the 1980-81 biennium applied as of 1 January 1983; to facilitate comparisons, applications to the current assessments of 54 Member Nations are excluded from the number of Member Nations.
d Receipts at 24 June 1987; preceding years at 30 June.
245. The Council was informed that receipts of 1987 assessments so far totalled US$ 121 042 668. This figure took account of the fact that US$ 17 330 539 from the cash surplus of the 1984-85 biennium had been credited to 1987 assessments by countries that had not deferred application of their portion of cash surplus. Receipts had attained a much more favourable level (60.96 percent) than on the same date in any of the preceding four years. The Council appreciated this positive response of many Member Nations to the appeal of the Ninetieth Session of the Council (November 1986), which had again been drawn to the attention of Member Nations by a personal telegraphic communication of the Director-General during February 1987, for early payment of 1987 contributions, given the very difficult financial situation the Organization was facing.
246. Eighty-nine Member Nations, including the largest contributor, however, had made no cash payment against their 1987 assessments. The shortfall of contribution income during this biennium to date, amounting to US$ 105 954 583 and representing 26.68 percent of assessed contributions in 1986-87, arose primarily from non-payment of US$ 87 937 868 due from the’ largest contributor. Outstanding assessed contributions for the 1986-87 biennium of eleven other Member Nations were in excess of US$ 1 million each and totalled US$ 26 million.
247. In this connection, the delegation of the largest contributor advised the Council that its Government remained committed to pay its assessed contributions to UN organizations and that the Administration had requested full funding of 1987 contributions to these organizations in its fiscal year 1988, beginning 1 October 1987. A payment of US$ 20.6 million towards the 1986 contribution for FAO was also expected from the largest contributor later in the year.
248. The Council recalled that, in accordance with the Financial Regulations, assessed contributions of all Member Nations to the budget of the Organization were due and payable in full at latest by the end of February each year. As a consequence, and because full implementation of the approved Programme of Work and Budget depended on prompt receipt of contributions, the Council appealed to all Member Nations which had not yet fulfilled their financial obligations to the Organization to arrange to remit amounts due at the earliest possible date.
249. The Council was pleased to note that 20 Member Nations (Angola, Bahamas, Belize, Botswana, China, Colombia, Cyprus, Democratic People’s Republic of Korea, France, Haiti, Honduras, Iceland, India, Italy, Jordan, Malta, Netherlands, Niger, Philippines and Rwanda) had responded positively to the appeal of the Council with regard to deferring or relinquishing their share of the cash surplus of the 1984-85 biennium. As a result of these Member Nations making payment in full of their assessed contributions, the financial position of the Organization would be improved during 1987 by US$ 5 686 427. The Council welcomed statements by Malaysia and Tanzania that they would also defer their share of the surplus and once again appealed to all Member Nations to try to follow that good example.
(details of outstanding contributions are shown in Appendix E)
250. The Council noted with concern that 53 Member Nations had arrears of contributions outstanding, relating to 1986 and prior years, totalling US$ 52 633 097 and representing the highest amount of arrears outstanding on this date, on record. Bearing in mind that nearly US$ 38 million related to the largest contributor and the assurances of payment as set out in paragraph 247 above, the Council urged all other Member Nations with arrears outstanding to make every effort to remit these long overdue amounts without further delay, since the Organization depended on these revenues to meet its commitments.
251. The Council noted with special concern that seven Member Nations (Antigua and Barbuda, Burundi, Ghana, Guinea-Bissau, Guyana, Romania and Saint Lucia) were in danger of losing, their right to vote at the coming Session of the Conference in accordance with Article III.4 of the Constitution, which provided as follows:
"Each Member Nation shall have only one vote. A Member Nation which is in arrears in the payment of its financial contributions to the Organization shall have no vote in the Conference if the amount of its arrears equals or exceeds the amount of the contributions due from it for the two preceding calendar years. The Conference may, nevertheless, permit such a Member Nation to vote if it is satisfied that the failure to pay is due to conditions beyond the control of the Member Nation."
252. In addition, five Member Nations (Central African Republic, Chad, Comoros, Democratic Kampuchea and Paraguay) did not qualify to vote under the above Article, nor had they met their commitments under Conference authorizations permitting them to pay their arrears of contributions in annual instalments.
253. Only three of the 12 Member Nations (Chad, Guinea-Bissau and Saint Lucia) had communicated with the Organization to date with regard to the settlement of their arrears.
254. Noting that the Director-General had already twice drawn the attention of these Member Nations to the problem, and had urged them to regularize their positions as soon as possible, the Council made a special appeal to these twelve Member Nations to arrange to pay the amounts required without further delay, so as to ensure their right to vote at the Conference. The Council also requested them to inform the Organization immediately of the reasons for non-payment to date and, at the same time, to confirm their intent and the expected timing of payment.
255. The Council took note of the proposal on this matter by the Finance Committee, which was in response to the request of the Ninetieth Session of the Council (November 1986) that a recommendation go forward to the Conference in November 1987 for its decision. The Finance Committee proposal would involve the following changes to the provisions of Financial Regulation 6.1(b), which related to the allocation among Member Nations of any cash surplus, and the distribution thereof:
i) only among those Member Nations which had paid their assessed contributions in full by the end of the biennium, and
ii) on a weighted basis, in accordance with the amount and the timing of payment of their contributions to the Organization during the biennium;
256. The Council, recalling the extensive deliberations on this matter over the last several years, by the Finance Committee, the Council and the Conference, observed that the proposed changes might serve as an incentive for Member Nations to pay their contributions more promptly, and, at the same time, provide a more rational and equitable allocation of cash surpluses in the future.
257. Reservations were expressed by a number of members, however, on the basis that especially developing countries which, for reasons beyond their control, could not meet their financial obligations to the Organization within the biennium, would be denied in future a part of cash surpluses which they had received in the past. Some of these members felt that the measures would further penalize developing countries already facing serious economic difficulties and would not address the main cause of FAO’s financial problems. One member pointed out that its payment pattern was solely a consequence of legislative practices, which would not be altered, and therefore the changes would not serve as an incentive to pay their contributions more promptly. Notwithstanding these reservations, most members considered that the changes offered a positive approach to the long standing problem of delayed payment of assessed contributions.
258. In conclusion, the Council endorsed the Finance Committee proposal and requested the Committee at its next Session to prepare a draft Resolution for consideration by CCLM, the Council and the Conference.
259. The Council noted the information reported by the Finance Committee regarding the payment of assessed contributions and was provided with a cash flow forecast to 31 December 1987. The cash flow forecast included a substantial reduction in miscellaneous income from the amount budgeted, losses resulting from the reduction in the value of the Dollar as against the Lire in excess of the funds available in the Special Reserve Account and substantial shortfall in expected payment of contributions by Member Nations. The Council noted that the Director-General had decided on programme adjustments in the amount of US$ 25 million.
260. The Council reviewed the cash flow forecast to 31 December 1987 which included the following information updated to reflect the current information:
| Payments | ||||
| Total Receipts (incl. contrib., arrears and Misc. Income) | 1986/87 TCP | Regular Programme (excl.TCP) | 1986/87 Surplus/ Decifit | |
| US$’000 | ||||
| Cash Flow | 395.8 | (23.1) | (327.0) | 45.7 |
| 1985 Interest Accrual | (7.3) | (7.3) | ||
| 1987 Interest Accrual | 1.6 | 1.6 | ||
| Outstanding Obligations | (7.0) | (23.6) | (30.6) | |
| Unobligated TCP 1986/87 | (31.3) | (31.3) | ||
| Deficit on Special Reserve Account | (6.0) | |||
| Funds required to replenish the Special Reserve Account at present level of the budget | (21.9) | |||
| Estimatted total shortfall at 1 January 1988 | (49.8) | |||
261. The Council was informed by the delegation of the largest contributor of its intention regarding the payment of its assessed contribution for the 1986-87 biennium which included confirmation of its intention to pay its entire assessed contribution.
262. The Council noted that the estimated budget deficit would amount to US$ 21.9 million while the unpaid assessed contributions for the 1986-87 biennium would amount to US$ 53.6 million as of 31 December 1987, The Council recognized that the Director-General had taken all appropriate measures to implement the Programme of Work and Budget in circumstances which were unprecedented and put FAO’s financial viability under extreme stress.
263. The Council was informed that as a result of the unfavourable movements in the UN rate of exchange for the Lire compared to the established budget rate of 1 760, the Special Reserve Account had accumulated losses on staff costs for the period to 31 March 1987 of US$ 15 million and that it was estimated that the whole balance of US$ 21.9 million would be used up by July 1987 should the trend of the Lire rate of less than 1 300 to the Dollar persist. Under such circumstances the estimated deficit on the Special Reserve Account resulting from losses on staff costs could be in excess of US$ 6 million.
264. The majority o members felt that the Director-General had responded very well to current exceptional financial difficulties and supported the economy measures which had been taken with a view to minimizing adverse effects on the implementation of the Programme of Work and Budget, and avoiding any reduction in the Technical Cooperation Programme which many members, particularly developing countries, considered as a vital component of FAO’s effective and direct action in member countries. The Council noted that the cash flow forecast with the deficit of US$ 21.9 million would imply the use of the Working Capital Fund in order to cover disbursements related to outstanding obligations and unobligated Technical Cooperation Programme 1986/87 allocations.
265. Many members expressed their concern at the budget cuts which affected the technical programmes and stated that if a normal financial situation had existed such reductions would not need to have been made.
266. The delegation of the Host Country expressed serious concern regarding the severe programme adjustments which would reduce the Programme of Work and Budget by US$ 25 million and expressed the strong wish that such budget cuts should not affect fundamental activities of the Organization. In this regard this delegation suggested that individual Members Nations might consider providing special contributions up to roughly an amount of 5 percent of the current budget level in order to reduce the budget deficit, and eventually to permit the reactivation of certain activities which had had to be sacrificed in the programme adjustments, and declared that it intended to pursue this proposal with the Organization. This statement was supported by several members.
267. The Council recalled that, at its Ninetieth Session in November 1986, it had considered and approved a set of programme adjustments in relation to the Programme of Work and Budget 1986-87, to yield savings of US$ 16.4 million. Subsequent adverse developments in the Organization’s financial situation had necessitated the enactment, in early 1987, of further adjustments totalling slightly over US$ 5 million, as reported in document CL 91/17. In addition, the Council was informed that savings related to the 1986-87 budgetary exercise would reach a total of US$ 25 million. The Council recognized that these actions were in accordance with the flexibility it had accorded to the Director-General to face the actual evolution of FAO’s budgetary and financial position.
268. The Council reiterated its regret at the magnitude of programme adjustments enacted and the deleterious impact on the Programme of Work and Budget for the current biennium which could well extend into the next biennium. It expressed the hope that such drastic action would prove retrospectively to represent a temporary feature in the history of FAO and that the implementation of its approved programme could soon be put on a secure footing.
269. While sharing in this expression of regret, some members felt that the magnitude of possible shortfall in income against expenditure regarding the 1986-87 budgetary exercise, may require yet further savings.
270. The Council studied in detail the three alternative measures which had been retained by the Finance Committee and arrived at the following conclusions:
271. Under this proposal the Conference would delegate authority to the Council to decide on possible deferment of the distribution of cash surplus until the subsequent Session of the Conference, should the Organization be affected by a substantial delay in receipt of contributions during any individual biennium.
272. Several members expressed reservations on this proposal considering that it would result indirectly in an increased payment for current assessment against which such surplus would have otherwise been credited. The Council nevertheless recognized that this proposal only meant a delay in the distribution of the cash surplus which would be credited thereafter as soon as so decided by the Council or the Conference.
273. The Council by majority therefore supported the adoption of this proposal and requested the Finance Committee to prepare, at its next Session, a draft resolution for consideration by CCLM, Council and Conference along the lines of the Resolution 14/83 adopted by the Conference in 1983 on this subject.
274. The Council noted that most of the Miscellaneous Income earned derived from interest on available funds and that estimating such type of income was hazardous in view of the many uncertainties regarding payment of contributions and level of interest rates.
275. The Council, therefore, recognized that the present FAO practice of deducting estimated Miscellaneous Income to arrive at assessed contributions was not prudent, as the experience of this biennium had evidenced.
276. Some members suggested that this uncertainty could be overcome by making very conservative estimates of income. The Council, nevertheless, recognized that under present procedures a shortfall in actual Miscellaneous Income placed in jeopardy the full execution of the approved Programme of Work and Budget.
277. A number of members expressed reservations since this proposal would have a one-time effect of increasing the level of contributions. Accordingly, they considered it would be appropriate to retain the present practice.
278. Because of the importance of the need to improve budgetary procedures and avoid the present uncertainties, the Council referred the matter to the Finance Committee for further study. In the interim, the Council asked the Director-General to prepare conservative estimates of Miscellaneous Income for the purpose of determining the level of payment of contributions from Member Nations.
279. The Council recognized unanimously that the current financial situation of the Organization was severely affected by factors which were not likely to be all resolved in the short term.
280. The Council noted that no precise conclusions could be drawn on the level of the Working Capital Fund from the comparison with the other organizations of the United Nations System as some organizations had higher and some lower levels. However, it recognized that the current level of the Working Capital Fund was inadequate to perform satisfactorily its functions as stipulated in Financial Regulation 6.2.
281. Some members questioned the need for any increase in the level of the Working Capital Fund. Some other members, while agreeing to a modest increase of the Working Capital Fund to US$ 20 million, suggested that the Finance Committee might further examine proposals for financing this increase to reduce the impact on Member Nations’ assessments and further review the financial provisions governing access to the Working Capital Fund. A few members also expressed reservation on adoption of a second incremental increase in the level of the fund. However after full discussion the majority of the Council endorsed the proposal by the Finance Committee to increase the Working Capital Fund from its present level of US$ 13.25 million to US$ 20 million as from 1 January 1988 and US$ 26 million as from 1 January 1990.
282. The Council therefore requested the Finance Committee to prepare a draft Resolution for consideration by CCLM and the Council at its next Session and submission to the Conference for adoption.
283. In addition to the above measures, several members expressed the view that the use of a basket of currency, such as the European ECU, or the IMF Special Drawing Rights (SDR), as a monetary unit for the Organization budget could be of advantage in reducing the impact of currency fluctuations on the implementation of the Programme of Work and Budget and therefore suggested further study of this subject by the Finance Committee at an appropriate time.
284. The Council, noting the comments of the Finance Committee concerning the proposed FAO Scale of Contributions for 1988-89, recalled that the Eighth Session of the FAO Conference (1955) had passed a Resolution establishing that FAQ Scales of Contributions in the future should be derived directly from the UN Scale of Assessments. In the interim, the FAQ Conference had reviewed this practice several times, confirmed its validity in all cases, and had adopted FAQ Scales of Contributions on this basis. The FAQ Scale for 1988-89, as recommended by the Finance Committee and shown in Appendix F, had been derived directly from the UN Scale of Assessments in force for the three-year period 1986/88, as adopted by UN General Assembly Resolution 40/248 of 18 December 1985.
285. Some members expressed reservations with regard to the use of the UN Scale, since it did not reflect the most recent economic positions of Member Nations, and requested that FAO refer these observations to the UN Committee on Contributions and that the Finance Committee examine this matter again at its next session. Another member noted that this Scale did not adequately take into account equitable burden sharing. Notwithstanding these reservations, most members of the Council acknowledged that the UN Committee on Contributions was the most qualified body for assessing Member Nations’ real ability to pay. They also recognized that departure from the practice of deriving the FAO Scale directly from the UN Scale would involve additional costs for FAO, duplication of the work of the UN Committee on Contributions, and would have undesirable repercussions throughout the UN System. In addition, it would lead the Governing Bodies of FAO to dedicate an inordinate amount of time on this administrative matter in efforts to develop a viable alternative.
286. As a consequence, the Council recommended the following draft resolution for adoption by the Conference:
DRAFT RESOLUTIQN FOR THE CONFERENCE
SCALE OF CONTRIBUTIONS 1988-89
THE CONFERENCE,
Having noted the recommendations of the Ninety-first Session of the Council;
Confirming that as in the past FAO will continue to follow the United Nations Scale of Assessments subject to adaptation for the different membership of FAO;
1. Decides that the FAQ Scale of Contributions for 1988-89 should be derived directly from the United Nations Scale of Assessments in force during 1987;
2. Adopts for use in 1988 and 1989 the Scale as set out in Appendix F of this report.
287. The Council was informed of the various items reviewed by the Finance Committee in respect to the recommendations and decisions made by the International Civil Service Commission in 1986. It was further advised of the effects of these on salary scales and allowances and was also informed that the UN General Assembly approved new staff assessment rates for the General Service category to be implemented effective 1 January 1987. However, as in the past this review of the staff assessment rates for the General Service category had been referred to the Council for review and approval. The Council adopted the Director-General’s proposal that the new rates be used as of the date of the first revision to the salary scale subsequent to approval by the Council.
288. The Council expressed keen interest in various personnel matters under consideration and praised the Organization, for its efforts in handling the difficult situation which has arisen due to the increasing erosion in the salaries of Professional staff. This erosion in salaries of Professional staff, recently aggravated by currency fluctuations, and uncertainties about other conditions of employment, had made the retention and recruitment of qualified staff more difficult, particularly at the field level, thus hampering programme execution. The Council urged Member Nations to be alert to the economic difficulties faced by the staff of the Organization and to the need to safeguard their conditions of employment, and to be responsive to discussions on such matters before the other competent bodies within the Common System.
1 CL 91/3; CL 91/6, paras 1.1-1.14, 2.7-2.167 and 3.5-3.21; CL 91/PV/9; CL 91/PV/10;CL 91/PV/11; CL 91/PV/12; CL 91/PV/13; CL 91/PV/19.
2 CL 91/6; CL 91/17; CL 91/PV/16; CL 91/PV/19.
3CL 91/6, paras 3.22-3.27 and Appendix A; CL 91/PV/15; CL 91/PV/16; CL 91/PV/19.
4 CL 91/6, paras 3.132-3.136; CL 91/PV/15; CL 91/PV/16; CL 91/PV/19.
5CL 91/4; CL 91/6; CL 91/PV/15; CL 91/PV/16; CL 91/PV/19.
6 CL 91/6, paras 3.73-3.76; CL 91/PV/15; CL 91/PV/16; CL 91/PV/19.
7 CL 91/6, paras 3.43-3.51; CL 91/17; CL 91/PV/15; CL 91/PV/16a; CL 91/PV/19.
8 CL 91/17; CL 91/PV/15; CL 91/PV/16; CL 91/PV/19.
9 CL 91/6, paras 3.52-3.72; CL 91/PV/15; CL 91/PV/16; CL 91/PV/19.
10 CL 91/6, paras 3.77-3.81; CL 91/PV/15; CL 91/PV/16; CL 91/PV/19.
11 CL 91/6, paras 3.82-3.93; CL 91/PV/15; CL 91/PV/16; CL 91/PV/19.
a See page 39.
b See page 39.
