Assessed and voluntary contributions

(A)     Currency of contributions

(A1)     At the 5th, 8th and 11th sessions (April 1949, February 1950 and April 1951: CC/A.5/SR.2 and 3; CC/A.8/SR.6; CC/A.11/SR.3; CO-ORD/PREP/118, item B.1; CO-ORD-PREP/R.176, items A and B; and CO-ORDINATION/R.93, section B.III) members agreed to exchange information with a view to facilitating the collection in soft currencies of a proportion of budget contributions. At the 8th session the Committee agreed to recommend that ACC should draw the attention of Governments to certain points (selection of a few currencies only chosen according to defined criteria) and to undertake certain further steps (consultation with IMF, clarification of some legal points, initiation of agreements with Governments on the convertibility of currencies).

(A2)     At the 12th session (April 1952: CO-ORDINATION/R.124, section II.A.8), UN, having successfully concluded an agreement with the United Kingdom for the convertibility into other specified soft currencies of contributions received in pounds sterling, made available to CCAQ the relevant exchange of correspondence. The Committee agreed in principle that all organizations should be free to seek from the Governments concerned permission to use the most favourable rates, particularly where dollars were to be sold, and that those rates should be the same for technical assistance operations and for normal budget purposes.

(A3)     For arrangements under which assessed contributions are expressed and collected in the organization's main currencies of expenditure ("split assessment" schemes), see Section 16.4.

(B)     Scales of contributions

(B1)     At the 8th session (February 1950: CC/A.8/SR.6 and CO-ORDINATION/R.176, item A.4) the Committee was informed of the decision of the General Assembly to place at the disposal of the agencies the UN Committee on Contributions to advise on the scales of contributions. Agencies agreed to make use of this facility.

(B2)     At the 67th session (September 1987) the Committee held an exchange of information on the position taken by certain groups of Member States on the level of their assessed contributions. It was noted that the independent establishment of scales of contributions in organizations following the UN scale would involve substantive extra costs (ACC/1987/12, para. 25).

(C)     Common collection of contributions

(C1)     At the 5th session (April 1949: CC/A.5/SR.2 and 3 and CO-ORD-PREP/118, item A.2) the Committee discussed the possibility of common collection of contributions. It preferred an alternative proposal that the agencies should supply to UN in December of each year a schedule showing the amounts requested from each Member Government for the following year. This information would then be annexed by UN to its request for contributions, thus indicating to national treasuries the total contributions to be made by their countries to international organizations.

(C2)     At the 11th session (April 1951: CC/A.11/SR.1 and 2 and CO-ORDINATION/R.93, section B.1) the Committee maintained its previous conclusion that it would be premature to seek common collection, the major obstacles thereto being the difference in membership of the agencies and the absence of a satisfactory solution as regards acceptance of contributions in national currencies.

(D)     Publicity on collection of contributions

(D1)     This was discussed at the 8th, 9th, 11th, 12th and 13th sessions (February and July 1950; April 1951; April and September 1952). At the 8th session (COORD-PREP/R.176, item A.4.c) it was agreed to send to UN monthly reports on the status of the collection of contributions to be used for press releases and other distributions by UN. At the 11th session, in connection with press releases, only FAO, UNESCO and WHO expressed willingness to develop joint texts through UN (CO-ORDINATION/R.93, section B.1).

(E)     Effects of currency instability on the real value of contributions

(E1)     For this subject, including a proposed system of indexation of contributions, discussed at the 43rd session, see Section 16.4.

(F)     Incentives and penalties to encourage prompt of contributions

(F1)     At the 56th session (March 1982) the Committee held an exchange of information on the possibility of charging interest on unpaid contributions, and on other means of improving the organizations' cash position (ACC/1982/6, paras. 39-41).

(F2)     At the 60th session (March 1984), the Committee noted measures introduced by FAO in 1983 to attenuate the effect of delayed receipt of assessed contributions: these measures provided for the distribution of the 1982-1983 cash surplus under conditions involving an element of incentive for prompt payment (ACC/1984/10, para. 38).

(F3)     At the 63rd session (September 1985) the Committee was informed of an incentive scheme under consideration in ICAO to encourage the prompt payment of assessed contributions through the distribution of certain interest earnings, relatively larger amounts being envisaged for distribution to Member States which paid in the early part of the financial year (ACC/1985/17, para. 37).

(F4)     At the 66th session (March-April 1987) the Committee was provided with details concerning the ICAO incentive scheme, adopted with effect from 1 January 1987, together with data on its experience with the scheme for the first quarter of 1987. The Committee noted then a similar scheme was being proposed in WMO and was under study in UNESCO and WHO; outside the system, OAS and OECD had already introduced incentive schemes (ACC/1987/6, para. 17). At the 67th session (September 1987) ICAO indicated that its experience up to that time had been generally positive, but that it had not been possible to quantify this experience with precision (ACC/1987/12, para. 26).

(F5)     At the 69th session (September 1988) the Committee concluded that so far the effects of incentive schemes were difficult to identify; it asked its secretariat to obtain data on experience in the organizations with both incentive and penalty schemes (ACC/1988/13, paras. 43-46).

(F6)     At the following (70th) session (March 1989) the Committee reviewed information prepared by its secretariat on incentive schemes in effect in organizations for the prompt payment of assessed contributions, and the experience gained with them so far. It agreed that a similar presentation should be made each year at its autumn session, starting in 1990 (ACC/1989/7, paras. 43-47).

(F7)     A review at the Committee's 75th session (September 1991) of the incentive and penalty schemes introduced to speed up payments showed that the latter continued to generate a higher percentage collection; the impact of incentive schemes was more problematical (ACC/1991/18, paras. 47-49).

(F8)     A further review at the Committee's 77th session (August-September 1992) revealed that the two existing penalty schemes continued to be very effective; the effectiveness of the incentive schemes in operation remained doubtful or difficult to determine except in one case. FAO intended to test a discount scheme in 1993 (ACC/1992/25, para. 28). The review held at the 79th session (August-September 1993) showed that the collection rate had deteriorated in the case where results had been relatively favourable previously and that the new scheme tested had had little impact (ACC/1993/23, para. 49).

(F9)     As has been the practice at its fall sessions, CCAQ(FB), at its 81st session (August - September 1994), reviewed the functioning of incentive and penalty schemes. It considered that, in view of the largely unchanging nature of the information provided, the published review could usefully be incorporated in the update of the study on budgeting methods (cf. 16.3, para. 25) (ACC/1994/15, para. 30).

(F10)     At its 89th session (February 1999: ACC/1999/6, para. 43) the Committee was briefed by organizations which had changed or were proposing to change regulations and/or procedures governing voting rights in order to encourage Member States to make contributions on time.

(F11)     At its 90th session (August-September 1999: ACC/1999/14, para. 6) the Committee had an extensive discussion of budgetary issues facing the organizations of the United Nations system. Organizations with assessed contributions continued to face considerable budgetary pressures, which were reflected in their budgets for 2000-2001. Some voluntarily-funded organizations also reported a decline of funding. The level of arrears was discussed and information exchanged on recent steps taken with regard to incentives for prompt payment and sanctions (including loss of voting rights) for late payments.

(G)     Arrears of contributions

(G1)     At the 11th session (April 1951: CC/A.11/SR.2 and 3; CO-ORDINATION/R.93, section B.II) the Committee considered (a) the establishment of an effective budget level in the light of arrears, and (b) methods of dealing with arrears as such and with actual cash deficits.

(G2)     As regards (a), General Assembly resolution 311 (IV) called on agencies to live within their anticipated contributions. CCAQ agreed with the purposes of the resolution in so far as they related to abnormal arrears problems (inactive Members), but suggested that ACC call the attention of ECOSOC to the fact that the effectiveness of any organization would suffer considerably if the implementation of the programme should become dependent upon the accidental arrears of some Member States.

(G3)     As regards (b), the Committee considered methods of temporary financing of arrears and the funding of long-standing arrears, as well as the related question of the surrender of budget surpluses.

(G4)     Interested in achieving uniformity with regard to the surrender of budget surpluses and the funding of arrears, the Committee considered an Australian proposal (submitted to the UN General Assembly in 1950 and referred through ACC to CCAQ) relating to the creation of a reserve for contributions in arrears. It thought that the proposal was difficult of uniform interpretation and, in terms of accounting, unnecessarily complicated. The same purposes could be achieved in simpler ways, e.g. deferment of the distribution of budget surpluses to coincide with the time of determination of recognized arrears.

(G5)     The majority of the Committee, however, felt unable at that time to recommend any change in the current procedure, by which only cash surpluses were surrendered, and considered favourably a proposal put forward by ICAO (establishment of a Working Capital Fund and of a fund for arrears of contributions), explained in fine of section B.II of the CCAQ report.

(G6)     Among possible measures against defaulting Members the Committee considered:

     (a)     Loss of voting rights: the Committee decided not to make a recommendation for reducing the period of arrears after which voting rights would be lost;

     (b)     Loss of membership of governing bodies: the Committee did not feel that it could propose a uniform approach to this measure, given the known differences in the structure and functions of the principal governing bodies.

     (c)     Payment of interest: the Committee did not consider it possible at that stage to make a definite proposal;

     (d)     Suspension of activities and services: the Committee concluded that it could make no recommendation concerning suspension of activities and services in arrears cases. It wished, however, to be informed of future developments in those cases where provision for such sanctions existed.

(G7)     At the 14th session (1953): CO-ORDINATION/R.142, section B.a.7) the Committee further reviewed the matter of the treatment of surpluses at the request of ACC, but concluded that it called for no immediate action.

(G8)     At the 41st session (March 1975: CO-ORDINATION/R.1088, para. 39), following an exchange of views on the difficulties that organizations were experiencing in collecting contributions, CCAQ agreed that organizations should exchange information quarterly on the status of collection of contributions and arrears. The CCAQ secretariat subsequently distributed a list of the officials in each organization to whom the other organizations should forward this information.

(G9)     At the 49th session (September 1978) CCAQ agreed to discontinue these arrangements, on the understanding that each organization would provide such information to others on request (CO-ORDINATION/R.1307, para. 49).

(G10)     At a special session held in June 1982, the Committee drew up a draft statement for ACC on problems of cash flow and liquidity in the organizations of the UN system, as well as a background statement on the organizations' cash flow and liquidity problems, in response to a request contained in ACC decision 1982/10 (ACC/1982/17, paras. 5 and 6 and annexes I and II). ACC having requested a revised draft statement at its second regular session of 1982 (July 1982), a revision taking account of its comments was agreed by CCAQ at the 57th session (September 1982). The statement was intended for the governing bodies of individual organizations and for central policy-making organs but might, if this was judged appropriate by individual organizations, be dispatched directly to Member States, accompanied by any supplementary information and/or proposals judged appropriate (ACC/1982/25, paras. 41 and 42).

(G11)     For the regular reporting arrangements on the collection of assessed and voluntary contributions which grew out of the ACC statement, see Section 17.6.

(G12)     At the 58th session (March 1983) CCAQ noted a reference to the problem of delays in the payment of contributions in General Assembly resolution 37/128, which invited the governing bodies of the specialized agencies and IAEA to encourage Member States to make timely payments. The Committee reviewed follow-up action in individual organizations (ACC/1983/11, para. 41).

(G13)     At the 64th session (March 1986), the Committee was asked by UN to provide a comprehensive analysis of the financial crisis confronting UN, which had implications for the entire system, and any suggestions that CCAQ might have for action. It reviewed the situation on the basis of written material including data on the current position under the UN regular budget and a note setting out the views of FICSA. The financial problem had arisen essentially from aggravation of the already serious financial position of UN by two pieces of US legislation enacted late in 1985: the "Kassebaum Amendment" (Section 1.51 of the Public Law 99-93, the 1986 State Department Authorization Act), which limited US contributions to 20 per cent of the assessed budgets of UN and its specialized agencies in the absence of a system of weighted voting on budgetary matters, and the "Gramm-Rudman-Hollings Act" (Public Law 99-177, the Balanced Budget and Emergency Deficit Control Act of 1985), which called for automatic cuts in spending if federal budget deficits were expected to be higher than those specified for each fiscal year. The combined effect of this legislation for UN was difficult to foresee, but withholdings in US contributions for 1985 and 1986 could come to a total of some $80 million according to estimates made in mid-February 1986.

(G14)     Having reviewed the initial steps taken by UN to respond to this situation, the Committee examined the outlook for other organizations. Those which had assessed budgets to which the USA was the major contributor expected serious budgetary cash problems, although the way in which the legislation would be applied as between organizations could not be predicted. Smaller organizations with assessed budgets to which the USA was not the major contributor would be affected principally by the Gramm-Rudman-Hollings Act, as would organizations financed by voluntary contributions. The consequences of the legislation contravened treaty obligations of Member States of organizations with assessed budgets and could disrupt the implementation of core programmes approved for implementation under regular budgets. This problem could be compounded by other foreseeable difficulties, such as unbudgeted extra costs arising from the depreciation of the US dollar and possible losses of support-cost income due to decreases in the income of funding programmes. The application of the Gramm-Rudman-Hollings Act to these programmes could impair the system's ability to deliver technical co-operation and humanitarian aid.

(G15)     CCAQ believed that organizations expecting serious cash flow problems should take preliminary economy measures or at least develop well-considered contingency plans, although the application of economy measures could lead to unintended and serious delays in programme implementation. Such measures should be accompanied by further efforts to improve effectiveness and efficiency, and measures affecting conditions of service should be the subject of staff-management discussions. Finally, governing bodies should be informed of the financial problems foreseen in order that Member States might reach decisions on steps to protect the integrity of approved programmes (ACC/1986/4, paras. 25-40).

(G16)     The Committee continued its review of the financial position of the UN and other organizations at the 65th session (September 1986), in accordance with a request in ACC decision 1986/12, and reported its findings to ACC. After recalling the reasons for and extent of the problem, the Committee noted relevant events since its last session. It then indicated that at the time of its session UN had difficulty in forecasting its possible cash position during the coming months or for the remainder of the current biennium, but that action by the General Assembly on the recommendations of the Group of High-Level Intergovernmental Experts appointed by it to review the efficiency of the administrative and financial functioning of the UN (the "Group of 18") might influence the collection of contributions; in the meantime the proposed programme budget for the biennium 1988-1989 was being drawn up on the basis of the assumptions in the medium-term plan for the period 1984-1989. Of the specialized agencies, UNESCO had already made programme reductions taking account of the withdrawal of the USA and other countries; WHO had proceeded to a freeze of activities at the Headquarters, regional and country levels to meet the shortfall expected; ILO intended to submit a package of programme adjustments to its Governing Body; and FAO planned to implement its 1986-1987 programme as approved. Among the programmes financed from voluntary contributions, UNDP and UNICEF faced the possibility of a significant reduction in receipts, and UNFPA did not expect to receive any contributions from the USA in 1986 as a result of a policy decision taken by the US Government (ACC/1986/12, paras. 42-48).

(G17)     A further discussion of the current financial difficulties of organizations of the system was held at the 66th session (March-April 1987), during which the position of each of the organizations was reviewed separately. The problems which had at first confronted UN in particular were now arising for other organizations to which the United States was a major contributor, all of which had taken such remedial measures as were open to them. The Committee considered that the non-payment of assessed contributions reflected decisions that were entirely political; they had been taken in spite of governments' freely-assumed responsibilities under the organizations' constitutional instruments. The resulting shortfalls in receipts had been aggravated for organizations whose headquarters were in Europe by a significant decline in the value of the US dollar. Activities financed by voluntary contributions appeared to have been less affected than those financed under assessed budgets (ACC/1987/6, paras. 18-23).

(G18)     At the 67th session (September 1987) it was noted that ACC had decided (decisions 1987/2 and 1987/3) to submit a report to the General Assembly at its 42nd session, dealing with the current financial difficulties and their implications for programme and operational activities in the short and the medium term. In addition, CCAQ(FB) had been requested by the Organizational Committee to make arrangements for the exchange of information among the organizations on a number of technical matters related to the financial difficulties. Observing that this request, as well as the one sent to organizations to obtain material for the report envisaged by ACC, would cover much of the same ground as other collections of financial information in the system, the Committee expressed the view that there would be merit in co-ordinating such action. It asked its secretariat to draw up an inventory of the types of data regularly requested and to explore with the secretariats concerned the possibility of developing single formats and arranging for single collections of data. The Committee would then examine the possibility of concentrating financial data and maintenance arrangements in a single place (ACC/1987/12. paras. 27-33).

(G19)     In response to the Organizational Committee's request, which called for both factual and prospective information, the Committee drew up data concerning organization's budgets for the next financial period and measures taken or under consideration that would affect procedures for the formulation and adoption of budgets. The Committee feared that the remaining, prospective, information requested could lend itself to serious misinterpretation. The real cash situation of organizations could not be readily tabulated. If it were, a number of explanatory notes would have to be added, and even then a reliable picture would hardly emerge. A clearer picture could be obtained from prose narratives of the kind provided by organizations for the report to be submitted by ACC to the General Assembly (ibid., paras. 32-35).

(G20)     In response to a further request from the Organizational Committee, CCAQ at the 68th session (March 1988) examined the financial situation of each of the organizations represented and was informed of existing or planned measures to reduce cash problems. It concluded that the main causes of current cash problems continued to be (a) withholdings and delayed payments of contributions, and (b) the depreciation of the US dollar. Some organizations faced both types of difficulties while others were affected much less seriously. Measures taken, or envisaged, to offset the effect of withholdings and delayed payments of contributions included incentive schemes for prompt payment (see section F above), increases in working capital funds, increases in external borrowing authority, the establishment of reserve accounts for unpaid contributions and, on the expenditure side, reduced staff costs through attrition or agreed terminations. Their impact varied. Schemes to penalize late payment of assessed contributions (see section F above) had not been supported in most governing bodies to which they had been proposed (ACC/1988/5, paras. 29-32).

(G21)     The Committee returned to the above issues at its 69th session (September 1988). It observed that delayed receipt of contributions was a problem for all organizations with assessed budgets. It appeared that where improvements had been achieved they were due in the first instance to intensified collection efforts; the effects of incentive schemes were difficult to identify. CCAQ asked its secretariat to obtain data on experience with such schemes as well as with penalty arrangements (ACC/1988/13, paras. 43-46).

(G22)     At the 71st session (September 1989) the Committee formulated a draft statement for ACC on the financial difficulties arising from the failure of some Member States to pay their assessed contributions promptly and in full (ACC/1989/15, para. 55). ACC adopted the statement as decision 1989/26.

(G23)     At the 71st session (September 1989) the Committee noted that curtailment of the period after which failure to pay contributions led to loss of voting and other rights was one of the measures in effect or being considered to encourage prompt payment (ACC/1990/12, para. 38).

(G24)     Reviewing the current financial situation of organizations at its 73rd session (September 1990) CCAQ noted that there had been no significant improvements in the collection of contributions in organizations with assessed budgets, and in the absence of large contributions several of them would have to make use of borrowing facilities in the latter part of the year. Attention was called to several existing or proposed measures to encourage prompt payment, additional to those described in documents before the Committee; they included discounts, the acceptance of contributions in non-convertible currencies (to the extent that these could be used), and curtailment of the period after which failure to pay contributions led to loss of voting and other rights (ACC/1990/12, paras. 36-38).

(G25)     At the 75th session (September 1991) the Committee noted that non-receipt of assessed contributions had made or was likely to make it necessary for many organizations to resort to borrowing earlier than in any previous year. Payments were now being received by some organizations at increasingly late dates from an increasing number of large contributors (ACC/1991/18, paras. 47-49).

(G26)     Following a request by the Organizational Committee, the Committee at its 76th session (March 1992) reviewed information on the payment of assessed contributions by three States formerly part of the Soviet Union - the Russian Federation, Belarus and Ukraine, along with measures taken or envisaged to take account of non-payment in 1991 and possible non-payment in 1992. It was agreed that ACC might wish to consider requesting the UN Secretary-General to write to the heads of state of those countries to remind them of their financial obligations vis-à-vis the UN system, to seek payment of outstanding arrears and to request information on the expected timing of payments for 1992 (ACC/1992/11, paras. 31-35).

(G27)     In the course of the review of organizations' financial situation held during the 79th session (August-September 1993), UNDP informed the Committee that during the year it had made a sharp downward revision in its income estimates, as a result of reductions in the contributions of several donors and the strengthening of the US dollar vis-à-vis the currencies of other donors. UNDP field offices had been advised to assume that only 75 per cent of established IPFs for the Fifth Programming Cycle would be available (ACC/1993/23, para. 47).

(G28)     At its 80th session (February - March 1994), CCAQ(FB) discussed the problems arising from the significant drop in income as a result of the financial situation described by UNDP at the last session, and of a major shift to national execution (ACC/1994/5, para. 52).

(G29)     The United Nations, at CCAQ(FB)'s 83rd session, informed the Committee about two working groups which had been established to review the financial situation. The first, the Ad Hoc Intergovernmental Working Group on the Implementation of the Principle of Capacity to Pay, had completed its work and produced a report containing substantive recommendations concerning changes in the methodology for the establishment of the scale of contributions. The second, the High-level Open-ended Working Group on the Financial Situation of the United Nations, had been meeting intensively throughout 1995, discussing all aspects of issues bearing on the financial situation including inter alia payment of contributions in full and on time; the problem of arrears in the payment of contributions; the cash flow situation; the procedure for the approval of peace-keeping budgets and appropriations; and the methods of calculating the scale of assessments. It is expected that the High Level Working Group will continue its work, with a view to making recommendations to the General Assembly at its fiftieth session (ACC/1995/20, paras. 59 to 60).

(H)     Changing Nature of the balance between regular and voluntary funding in organizations

(H1)     At its March 2002 session (CEB/2002/3, para. 36) HLCM decided to include in its agenda an item on the changing nature of the balance between regular and voluntary (sometimes referred to as extra-budgetary) funding in organizations, which was having an important impact in both the management and programme areas, including inter alia concerns for staffing, the independence and impartiality of the international civil service and contractual arrangements. It requested the secretariat with all urgency to make proposals as to how best such a matter should be treated in the future.

(H2)     At its October 2002 session (CEB/2002/5, paras. 25-29) HLCM was briefed on the major concerns and themes for further study in respect of the changing nature of the relationship between regular (approved) and voluntary (supplementary) funding of organizations, identified by a working group set up for the purpose. The Group had examined: (a) terminology; (b) the extent of approved programme budgets versus supplementary funding; (c) the extent to which supplementary funds were earmarked by donors; (d) the potential for distortion of organizations' programme priorities; (e) the advent of voluntary contributions from non-state donors and the ethical or political issues these may raise; (f) programme support costs; and (g) donor requirements in relation to reporting-auditing-presentation of accounts, etc.

(H3)     The group had gone on to identify areas which warranted closer examination in order to address concerns for distortion and to meet other requirements as follows: (a) the need to assure governance and oversight by the whole membership over programmes/projects funded through voluntary contributions; (b) the importance of greater central management of fundraising initiatives; (c) the need for a reappraisal of programme support costs charged as well as for greater consistency and coherence across the UN family when negotiating these with donors; and (d) a streamlining of donor reporting requirements.

(H4)     HLCM welcomed the thrust of this initial review which was timely, particularly in view of the emerging positions of member states and other donors on the matter, and recognized that while individual organizations' situations differed, voluntary or supplementary funding was increasing and that the trend to earmark these funds was having an impact on the management of programmes. It noted that some organizations had successfully managed to link voluntary contributions to the themes of activities/programmes approved by their legislative organs rather than to specific projects. It agreed that predictability of funding – or lack thereof – had important implications for the management of organizations not only in financial terms but also for staffing and contractual arrangements and that greater information sharing and cooperation should be established across the UN system for dealing with donors on programme support costs and reporting arrangements. HLCM concluded that this matter warranted bold approaches and requested the CEB secretariat to bring together multi-disciplinary focus groups for further reflection, especially as regards: (a) the determination of minimum standards for the receipt and management of voluntary funds, (b) conditions for earmarking, (c) a reappraisal of programme support costs formulae and (d) the rationalization of the plethora of reporting requirements.

(H5)     At its June 2003 session (CEB/2003/3, paras. 29-31) HLCM reviewed a report on the impact on management and programme of the changing relationship between regular and voluntary funding and received an in-depth briefing on UNICEF's successful conclusion of an agreement in the UNICEF Executive Board to a methodology for determining programme recovery costs. Four areas, namely: the determination of minimum standards for the receipt and management of voluntary funds; conditions for earmarking; a reappraisal of programme support costs formula; and the rationalization of the plethora of reporting requirements had been focused on for further work. HLCM: (a) enthusiastically endorsed the proposals to pursue further work in a working group(s) and invited the secretariat to set up these arrangements as soon as possible; (b) considered that the nature of work in the four areas was so interlinked that it should be pursued by one group if possible; (c) congratulated UNICEF for the successful determination of a methodology that should become a major input to the working group; (d) also expressed appreciation to JIU for its report on programme support costs, which had been useful for organizations and formed the basis for the Committee's ongoing work in this area; and (e) invited the working group to bring forward proposals for revising the UN/European Union (EU) agreement on support costs, especially in the context of multi-donor arrangements in that agreement.

(H6)     At its February 2004 meeting (CEB/2004/HLCM/12/Rev.1, paras. 37-38) the FB Network was briefed on the recent meeting of the HLCM's Working Group on the impact on management and the programme of the changing relationship between Regular and Voluntary funding that had been held in Paris in February 2004. Discussions centred on the report of the Working Group to the March session of the HLCM and two issues were of particular concern. Firstly, the increasing number of UN staff being funded from extrabudgetary resources resulted in a risk that staff might not be treated equitably. There were also management issues for programme, HR and FB management. There was, therefore, a need to consider this issue holistically, reflecting on both HR and FB management implications. Secondly, it was recognized that the growth in extrabudgetary funds had resulted in increased donor reporting requirements and that steps could be taken to streamline this area. The Network, noting the conclusion of the HLCM's Working Group, agreed that: (a) there was a need to apply a uniform treatment of staff whose positions were funded from extrabudgetary income and that this issue should be coordinated with the HR Network; (b) the single audit principle should be adhered to in the face of the growing number of requests from donors for separate audits; and (c) there was a requirement to standardise the timing, and not just the format, of financial reports.

(H7)     At its 7th session (March 2004: CEB/2004/3, paras. 22-24) HLCM was presented by WHO, as Chair of the Working Group, with a document (CEB/2004/HLCM/R.3) on the impact on management and programmes of the changing relationship between regular and voluntary funding. Most organizations now had a core fund and some mechanism for dealing with the increasing amount of other voluntary funding. The Working Group had made a number of recommendations based on an analysis of the issue from a management perspective. At its meeting in Paris in February 2004, the group had discussed issues of: (a) the programme implications of a shift in balance between the two types of funding; (b) the need for the rationalization of reporting requirements and, in particular, the progress that had been made through the UNDG towards a simplified reporting system and its applicability to the UN system as a whole; (c) agreement on the basic principles produced by the FB Network Working Group on programme support costs, namely, that fixed costs were to be excluded from the recovery mechanism and that direct support functions clearly attributable to a project should be charged to a project's budget.

(H8)     Committee members spoke in support of the document and also of the work of the FB Network on support costs. It was important that all organizations apply a common approach to resource mobilization, thus preventing situations whereby donors were able to negotiate bilateral agreements with organizations on a competitive basis. Pressures on areas such as HRM and the equitable treatment of staff, when faced with fluctuating financing, required ongoing consideration and flexible solutions. The Committee: (a) agreed (i) that results achieved through the UNDG process should be widely shared throughout the system; (ii) that the FB Network should look into the possibilities of instituting a simplified financial reporting system throughout the UN system, taking as a basis the work of the UNDG in this area; and (iii) that, as a part of this effort to simplify reporting and formats, the FB Network should look into the possibility of simplifying and standardizing inter agency reporting or encourage the agreement among agencies that they all accept reports in the format in which they were provided by the reporting agency, which would greatly reduce transaction costs; (b) supported the direction being taken by the FB Working Group on support costs and encouraged it to continue its work expeditiously, including the question of the programme support costs to be charged in projects involving more than one organization of the UN system; (c) requested the Working Group to provide a short paper for the next session of the Committee, for transmission to the Board, on the issue of acceptance of contributions to which donors attach conditions concerning procurement and staff recruitment; (d) reaffirmed the principle of single audit by the UN Board of Auditors or those external auditors appointed by each respective organization and the need to ensure that this principle was respected without exception in all agreements (including their implementation) with donors; (e) requested HR managers in the UN system to look into issues related to the implications of the growth of voluntary contributions in relation to the management of human resources, including the reconciliation of the principle of the equitable treatment of staff with the unpredictability of funding, the need to adjust staffing levels to changing skill requirements and fluctuations in resource levels; (f) agreed that it would be useful for organizations to try to develop a common approach to individual donors, or groups of like minded donors, and requested the CEB secretariat to organize a networking event for this purpose which could include those responsible for fund raising; and (g) asked the CEB secretariat to bring to the attention of the HLCP the fact that governing bodies in organizations throughout the system already had the possibility of laying down the policy framework for all activities (for instance, in programme budgets, medium term plans, strategic policy frameworks, multi year frameworks, etc.) and that such frameworks should be used to manage programmatic issues arising from the changing relationship between regular and voluntary funding.

(H9)     At its September 2004 video-conference (CEB/2004/HLCM/28, paras. 3-5) the FB Network took note that HLCM had decided on a number of steps to be taken for the further examination of the issues arising out of the changing relationship between Regular and Voluntary funding; but it also specifically had requested a paper on the issue of acceptance of contributions to which donors attached conditions concerning procurement and staff recruitment. The matter was of inter agency concern because if one organization was perceived by donors to be more susceptible than others to such pressures, it encouraged similar pressures to be put on other organizations. The Network was informed that, following consultations with members of the HLCM working group, at its eighth session HLCM would consider a document providing a draft policy statement for endorsement which focused on the specific issue of contributions to which donors attached conditions that affected procurement and staff recruitment.

(H10)     Regarding other related work items under this heading, the Network noted (a) the simplification and standardization of financial reporting systems throughout the UN system or agreements among agencies that they would accept reports in the format in which they were provided by the reporting agency, with UNFPA as the lead agency; (b) common donor reporting this initiative should be incorporated into the work described above; (c) support costs on extra budgetary activities UNESCO, the lead agency, was undertaking a cost measurement study.

(H11)     At its 8th session (October 2004: CEB/2004/6, paras. 21-23) HLCM considered a document that included a draft policy prepared by the secretariat following extensive consultations with the Working Group established at the Committee's session in June 2003 (see para. (H5) above). Following a wide ranging discussion, including the concern expressed by several organizations that the policy should not impinge on the arrangements that organizations had with donors regarding junior professional officers and associate experts, the Committee decided under its own authority to adopt the following statement:

"HLCM recommends that all organizations not accept contributions to which donors attach conditions that affect procurement and staff recruitment. While accepting that Executive Heads need to retain the authority to grant exceptions when circumstances so warrant, it recommends that waivers to this policy be kept to a strict minimum; for example, such contributions should only be accepted in cases where they are clearly in the best interests of the organization and do not contravene the organization's competitive procurement and recruitment policies."

The Committee also decided that the secretariat should continue to monitor developments, so as to determine the need to revise the policy in light of work being undertaken on frameworks for managing voluntary contributions.