Concerns over Growing Shortfall in Regular Budget Aired as Fifth Committee Discusses United Nations Financial Situation
Speakers Also Examine Progress in Implementing Public Sector Accounting Standards
Delegates at the Fifth Committee (Administrative and Budgetary) voiced their concerns with the financial shortfall facing the Organization’s regular budget before sending the General Assembly a draft resolution on programme planning that laid out priorities for the 2018-2019 biennium.
Delegates also noted the ways in which the Organization’s use of International Public Sector Accounting Standards (IPSAS) nearly a decade ago had improved its financial accounting and reporting activities.
Yukio Takasu, Under-Secretary-General for Management, provided an update of the Organization’s financial position since a presentation was made by Bettina Tucci Bartsiotas, Assistant Secretary-General and Controller of the Office of Programme Planning, Budget and Accounts, at their 5 October meeting. At that time, Ms. Bartsiotas indicated the regular budget’s cash shortfall tallied $344 million as of 30 September.
While the Organization had received $1.5 million for the regular budget from five Member States since the 5 October meeting, the reserve fund was now exhausted, Mr. Takasu told delegates. He was very concerned that the regular budget’s financial situation was worsening. Significant payments were necessary or the Organization would face significant difficulty.
China’s representative said it was worrying that arrears owed to the regular budget and peacekeeping operations had reached $3.43 billion, a higher level than for the same time last year. China was particularly concerned with the regular budget’s cash gap of $344 million, far larger than the levels logged in at the end of September 2015 and year-end 2015.
Senegal’s delegate said his country, despite its economic situation, had made all its financial commitments to the Organization, being one of the countries paying its full contributions on time in the past few years. “Do we really need to state this again?”, he asked the Fifth Committee, stressing the difficulty the Organization faced in carrying out its work with financial shortfalls.
Singapore’s representative, speaking on behalf of the Association of Southeast Asian Nations (ASEAN) and associating his remarks with the “Group of 77” developing countries and China, also was concerned about how the increase in the regular budget’s unpaid assessments would impact the Organization’s cash position as the year came to an end.
ASEAN welcomed the Secretariat’s efforts to slash, by nearly half compared to last year, the outstanding payments to countries which had contributed troops, police and equipment to United Nations peacekeeping missions. Chad’s delegate, speaking for the African Group, said the Group also was concerned by delays in paying monies owed to troop-contributing countries.
The Fifth Committee’s approval of the draft resolution on programme planning follows their deliberation on the issue - a critical process in the United Nations shaping of its regular budget – at their 30 September meeting. They considered various reports, including the report of the Committee for Programme Coordination, the main subsidiary organ of the Economic and Social Council and the Assembly for planning, programming and coordination. The Coordination Committee, which held its most recent meeting from 31 May to 24 June 2016, is involved with the regulations and rules governing programme planning, the programme aspects of the budget and the monitoring of implementation and the methods of evaluation.
The Fifth Committee also discussed the ninth progress report on the adoption of IPSAS by the United Nations. Thailand’s representative, speaking for the Group of 77, welcomed progress in implementing the accounting standards, but requested concrete examples of those improvements. The Group also stressed the need to address the high-level risks related to data transfers across multiple systems.
The report was introduced by Pedro Antonio Guazo, Officer-in-Charge of the Office of Programme Planning, Budget and Accounts, who outlined progress made to introduce a statement on internal control, the ongoing update of the IPSAS policy framework, preparation of corporate guidance and the finance manual, management of IPSAS benefits and the deployment of Umoja to support asset accounting in field missions. Although the IPSAS unit would be decommissioned by the end of its project cycle in December 2017, a supporting structure would still be needed, he said, adding that a review would help identify which residual functions should be institutionalized.
Carlos Ruiz Massieu, Chairman of the Advisory Committee on Administrative and Budgetary Questions (ACABQ), said that body would consider the proposed IPSAS-supporting structure when assessing the Secretary-General’s relevant budget proposal. Welcoming the reported improvements, he stressed that managers had an important role to play in delivering the benefits of IPSAS throughout the Organization. He also noted the progress made in developing the Umoja Business Planning and Consolidation Module and the Umoja Asset Accounting Process, and trusted that the gains in those areas would not be jeopardized by the problems experienced in other Umoja processes.
At the beginning of the meeting, Fifth Committee Chair Inga Rhonda King expressed, on behalf of the Bureau, the Secretariat and the Fifth Committee, condolences to the royal family, Government and people of Thailand on the passing earlier in the day of King Bhumibol Adulyadej.
Also speaking today were representatives of the European Union, New Zealand (also on behalf of Canada and Australia), Cuba, France, Japan and Angola.
The Fifth Committee will reconvene at 10 a.m. on Monday, 17 October, to discuss the Capital Master Plan and take action on a draft resolution regarding the Report on the Office of Internal Oversight Services (OIOS).
International Public Sector Accounting Standards
PEDRO ANTONIO GUAZO, Officer-in-Charge, Office of Programme Planning, Budget and Accounts, introduced the ninth progress report on the adoption of the International Public Sector Accounting Standards (IPSAS) by the United Nations (document A/71/226). The report focused on IPSAS sustainability, strengthening of internal controls, benefits realization and the enhancing of Umoja, the Organization’s enterprise resource planning system, as the backbone for IPSAS-compliant accounting and reporting. He noted that all the financial statements for 2014 and 2015 had received unqualified audit opinions. Progress had been made to introduce a statement on internal control, the ongoing update of the IPSAS policy framework, the preparation of corporate guidance and the finance manual, the management of IPSAS benefits and the deployment of Umoja to support asset accounting in field missions.
The IPSAS unit would be decommissioned on 31 December 2017, he continued, adding that it had been recognized that there was a need to maintain a supporting structure within the Organization to ensure the long-term sustainability of IPSAS compliance. To that end, a review had been undertaken to identify residual functions that should be institutionalized, he said, underscoring that those functions would be financed from currently approved resources. The IPSAS implementation project indicative budget was $27 million and the expenditure to 30 June 2016 was $24 million. An additional $2.5 million had been approved under the 2016/2017 Support Account for Peacekeeping Operations, in combination with the already approved $1.24 million regular budget resources for the 2016-2017 period.
CARLOS RUIZ MASSIEU, Chairman of the Advisory Committee on Administrative and Budgetary Questions (ACABQ), introduced that body’s related report and said the Advisory Committee welcomed the reported improvements in United Nations financial accounting and reporting resulting from the implementation of the international standards, and expected the improvements would lead to greater efficiency, effectiveness and accountability in the management of the Organization’s resources. The Advisory Committee continued to stress that managers had an important role to play in delivering the benefits of IPSAS and implementing the internal control framework under development throughout the Organization.
The Advisory Committee noted the progress made in developing the Umoja Business Planning and Consolidation Module and the Umoja Asset Accounting Process, both of which would significantly help strengthen Umoja’s use as the backbone for IPSAS-compliant accounting and financial reporting, he said. The Advisory Committee trusted that the gains in those areas would not be jeopardized by the problems experienced in other Umoja processes. Finally, the Advisory Committee recognized the need to maintain a supporting structure within the Office of Programme Planning, Budget and Accounts to drive the international standards’ sustainability activities beyond December 2017, when the current IPSAS project team would be dissolved. The Advisory Committee would consider the proposed supporting structure and its related resource requirements when it considered the relevant budget proposal of the Secretary-General.
SIRITHON WAIRATPANIJ (Thailand) spoke on behalf of the “Group of 77” developing countries and China, welcoming the progress made in implementing the international standards over the past year and expected those improvements would lead to even greater efficiency, effectiveness and accountability in the management of the Organization’s resources. The Group looked forward to receiving detailed information on the implementation of a provision in which the accountability of senior managers for the sustainability of IPSAS was included in the individual compacts signed between the senior managers and the Secretary-General. The Group would like concrete examples of the various improvements, such as the improved stewardship of assets and liabilities; the availability of more comprehensive information on costs; improved consistency and comparability; and increased transparency and accountability. It also believed future reporting should be clearer on the improvements attributed to the Umoja-related system enhancements and those attributed to the standards’ adoption.
Turning to the strengthening of internal controls, the Group noted progress in the development of an internal control framework, including that all heads of departments, offices and missions would be required, amongst others, to submit an annual assurance statement affirming that internal controls were present and functioning in their respective areas of responsibility. The Group expected the strengthening of internal controls would be treated as a management responsibility and not just a financial reporting exercise and every effort would be made to train and equip managers with the necessary tools to create, monitor and report on internal controls. The Group also noted the progress made in strengthening Umoja as a backbone for accounting and reporting compliance with IPSAS, particularly the automation of the financial statement process. The Group stressed the need to fully address the concerns raised in the previous periods over the high level of risk related to data transfer across multiple systems for the purpose of preparing financial and other statements. The Group believed efforts should be made to ensure the sustainability of IPSAS-compliance was not compromised by issues relating to Umoja’s implementation.
Improving Financial Situation of United Nations
YUKIO TAKASU, Under-Secretary-General for Management, provided an update of the Organization’s financial position since its presentation last week by Bettina Tucci Bartsiotas, Assistant Secretary-General and Controller of the Office of Programme Planning, Budget and Accounts. In addition, the Committee now had the Report of the Secretary-General on the Financial Situation (document A/71/440) before it. Mr. Takasu said the Organization had received $61.3 million from 30 Member States since the 30 September 2016 cut-off date. It had received $1.5 million for the regular budget from five Member States; $59.7 million from 27 Member States for peacekeeping operations and $31,700 from four Member States for the international tribunals. He thanked the Member States for their positive action.
Ms. WAIRATPANJ (Thailand) speaking again for the Group of 77, took note that the level of unpaid assessed contributions for the regular budget in 2016 was $136 million higher than the outstanding level in 2015. She expressed concern that the cash position of the regular budget was projected to suffer from “severe” cash problems, unless sufficient contributions were received. While the Group of 77 appreciated the efforts in moving forward with outstanding payments, it remained concerned with the negative effects attached to delays in reimbursing troop-contributing countries and stressed the need for more dedicated efforts to reimburse Member States. In conclusion, the Group strongly urged all Member States to pay their assessed contributions, but strongly rejected all “unilateral coercive measures” which obstructed, and sometimes impeded, payments of the Group to the Organization.
BURHAN GAFOOR (Singapore), associating himself with Group of 77, and on behalf of the Association of Southeast Asian Nations (ASEAN), noted that as of 30 September, 126 Member States had paid their regular budget assessments in full. However, he expressed concern about the increase in the amount of unpaid assessments for the regular budget and the impact that would have on the Organization’s cash position in the closing months of the year. While ASEAN sympathized with the predicament faced by some States, particularly developing countries, it encouraged all those with unpaid assessments to meet their financial obligations in full, on time and without preconditions. Also, ASEAN welcomed the Secretariat’s efforts in reducing the quantum of outstanding payments to Member States contributing troops, police and equipment to United Nations peacekeeping missions by close to half the amount owed in 2015, a significant reduction.
Ms. GRANT, European Union, expressed concern that the level of unpaid assessments to the regular budget was higher this year than last and fewer Member States had paid in full. The Controller had clearly stated the situation would lead to severe cash problems in the final months of 2016 unless sufficient contributions were made. The European Union encouraged Member States to pay their assessed contributions in full and as soon as possible. She noted that a small number of Member States were responsible for a large proportion of unpaid assessments to the regular budget and called on them to make their payments a priority. Significant arears persisted in the peacekeeping budget and negatively impacted the Organization’s ability to meet its obligations to Member States that provided troops and equipment. The European Union commended the projected progress this year in lowering the level of year-end outstanding payments to those Member States, but more progress was necessary. While noting the progress in receiving assessed contributions for international tribunals, she also noted the ongoing difficulties in securing voluntary contributions for tribunals not included in the assessed costs.
GEORGE HAMPTON (New Zealand), also speaking on behalf of Canada and Australia, welcomed the assessment by the Assistant Secretary-General that the Organization’s financial situation was sound. However, he expressed concern about the increasing dependence on budget reserves and that current cash shortfalls would present severe problems if outstanding assessed contributions were not paid in a timely manner. He urged all 67 Member States that had not yet done so to pay their assessed contributions without delay and expressed concern about the flow-on effects of the almost $1.2 billion in unpaid assessed contributions. Troop- and police-contributing countries, as well as those providing specialized equipment, were forced to shoulder that financial burden. He commended the Secretariat for continuing to prioritize swift payment despite difficulties caused by late-paying Member States.
He went on to caution that as reserve funds were nearly exhausted, the Organization faced the risk of severe cash problems if sufficient contributions were not received. The Working Capital Fund was established to provide advances to bridge the period before contributions were received, but that liquidity mechanism could only function properly if contributions were paid on time and in full. He expressed concern about the increasing reliance on the Fund and the Special Account each year, with the cash shortfall growing from $31 million in 2013 to $344 million at the end of September. Canada, Australia and New Zealand would continue to pay their dues in full, on time and without condition, and urged all Member States to do the same. He encouraged all those eligible to make use of the Organization’s mechanism to assist States in addressing arrears by submitting multi-year payment plans.
JAVIER ENRIQUE SANCHEZ AZCUY (Cuba), associating himself with the Group of 77, said consideration must be given to the special situations experienced by some developing countries which prevented them from fulfilling their financial commitments to the Organization, regardless of their political will. He called for effective and efficient management of the Organization’s financial resources, considering that the contributors were adopting austerity measures. Despite obstacles faced, his country remained fully committed to multilateralism, demonstrated by its active involvement in United Nations works and its political will to meet its financial responsibilities. However, that will was hampered by the economic, financial and commercial blockade the United States had imposed on Cuba. A year after the re-establishment of diplomatic relations between the two countries, progress had been achieved in some areas, but the blockade remained in force and continued to hamper Cuba’s economic functioning. Despite having the resources to contribute, Cuba had had to overcome many obstacles to make its United Nations contribution effective.
BACHAR BONG ABDALLAH (Chad), speaking for the African Group, said a number of Member States had paid in full, but that the Group remained concerned that the Organization would not receive all its assessed contributions on time. Countries which had the capacity to settle their arrears remained a “burden” and they must meet their commitments. Furthermore, his Group was also concerned by delays in paying monies owed to troop-contributing countries.
VANESSA GOURET VERSCHUEREN (France) said her country had paid most of its assessed contributions but was on the list of Member States in arrears because of its financial commitments to certain peacekeeping operations. France’s commitment to the United Nations did not need to be proved, she said, adding that her country considered the financial health of the Organization paramount and was concerned with the funding levels of some of its missions. France would therefore make a payment of $240 million for the financing of peacekeeping organization by the end of October. After that payment, not only would her country have paid all of its assessed contributions, but also submitted $62 million in early contributions.
FU DAOPENG (China) said he was pleased to note that 126 Member States had paid their assessed contributions in full under the regular budget and 25 Member States had fulfilled their financial commitments to the peacekeeping budget. It was worrying, however, that the total amount of arrears owed had reached $3.43 billion, a higher level than the same time last year for both the regular budget and the peacekeeping budget. His delegation was particularly concerned that the regular budget had a cash gap of $344 million, which was far larger than levels both at the end of September last year and by the end of last year. China called on Member States to effectively honour their financial obligations by paying all their assessments on time, in full and without any conditions.
KATSUHIKO IMADA (Japan) said that his country had fulfilled its assessment obligation despite long-standing financial difficulties. When the Secretariat presented a resource requirement and the General Assembly deliberated on that requirement, the common objective should be to establish realistic levels of resources needed to implement mandates. The General Assembly would soon be dealing with issues related to support for a series of high-level commitments. The Committee’s most important role was to scrutinize the potential additional requirements of the current budget and the next biennium budget outline. In that role, the Committee must strictly adhere to budgetary discipline.
Mr. AGUSTO (Angola) said his delegation was concerned with the risk of possible cash problems that could arise by the end of 2016. Angola encouraged the Secretariat to closely monitor the cash position as well as the progress of Member States who would have to honour their contributions in the coming months. Angola was encouraged by the fact that the overall level of available reserves was sufficient to cover at least six weeks of regular budget operations, he said, adding that his country invited the Secretariat to “carefully” manage the remaining reserves of $7 million and to review the adequacy of those reserve levels.
CHEIKH TIDIANE DEME (Senegal) said his country took note of the good financial situation of the United Nations but that it did not hide the reality that all assessed contributions had not been paid. If that trend would not be stopped, the situation would become untenable and the Organization would face severe cash problems by the end of the year. Despite its economic situation, Senegal had made its duty to honour all of its financial commitments to the Organization, being one of the countries paying its full contributions on time in the past few years. “Do we really need to state this again?”, he asked the Committee, highlighting that it would be difficult for the Organization to carry out its work when faced with financial shortfall. To that end, the United Nations should improve financial collection and demonstrate imagination in order to bolster the effectiveness of its work, he said. Furthermore, the large number of Member States who were not up-to-date with their payments to peacekeeping missions would impact troop-contributing countries. Those were primarily developing countries that depended on the contributions, he stressed, urging the United Nations to be more diligent in collecting payments to avoid penalizing troop-contributing countries.
Mr. TAKASU, responding to delegates’ concerns, thanked them for their comments and expressed the Secretary-General’s gratitude for their extraordinary efforts in making their payments despite competing national concerns. He was very concerned that the regular budget’s financial situation was becoming worse. The larger financial picture presented last week had not changed and reserves were exhausted. Significant payments were necessary or the Organization would face significant difficulty.
He noted the two financial issues facing peacekeeping operations: contributions due from Member States and the payments owed by the Organization to troop-contributing countries. Some rates of assessments for peacekeeping operations had been levied recently and it was difficult for those Member States to make immediate payments. That included some of the countries with the largest outstanding assessments for peacekeeping: Italy, France, Japan and the United States. He said the Organization’s outstanding payments to Member States were a very important issue and the Secretariat was making every effort to make those payments to troop-contributing countries.
Programme Planning
The Fifth Committee approved by consensus a draft resolution on programme planning (document A/C.5/71/L.4) that sought the Assembly’s endorsement of priorities for the United Nations for the biennium 2018-2019.
According to the Fifth Committee’s text, the priorities for the upcoming 2018-2019 session would include promotion of sustained economic growth and sustainable development, in accordance with the Assembly’s relevant resolutions and recent United Nations conferences; maintenance of international peace and security; development of Africa; promotion of human rights; effective coordination of humanitarian assistance efforts; promotion of justice and international law; disarmament; and drug control, crime prevention and combating international terrorism in all its forms and manifestations.
The draft also endorsed numerous conclusions and recommendations made by the Committee for Programme and Coordination during its fifty-sixth session, held from 31 May to 24 June of this year. That included recommendations on the United Nations programme performance for the 2014-2015 biennium; the biennial programme plan as reflected in the proposed programme budget for the biennium 2016-2017; and the proposed strategic framework for the 2018-2019 period.
The resolution also asked the Secretary-General to prepare the proposed programme budget for the 2018-2019 biennium on the basis of these priorities and the strategic framework as adopted in the present resolution. The Fifth Committee also endorsed the conclusions and recommendations of the Programme and Coordination Committee on evaluation, part of its report on the annual review of the report of the United Nations System Chief Executives Board for Coordination for 2015; and the United Nations system support for the New Partnership for Africa’s Development. It decided not to take a decision on the content of part one: plan outline of the proposed strategic framework for the 2018-2019 period, and asked the Secretary-General to ensure the timely implementation of the above-mentioned recommendations.