Despite Recurring Liquidity Issues, Cash Balances Positive for Regular Budget, Peacekeeping Operations, Tribunals, Management Chief Tells Fifth Committee

GA/AB/4320
7 May 2019
Seventy-third Session, 34th Meeting (AM)

Despite Recurring Liquidity Issues, Cash Balances Positive for Regular Budget, Peacekeeping Operations, Tribunals, Management Chief Tells Fifth Committee

As its regular budget continues to face severe liquidity issues, the United Nations is depending on Member States meeting their financial obligations in full and on time to deliver on its mandate, the head of the Organization’s management department told the Fifth Committee (Administrative and Budgetary) today as she laid out the Organization’s semi-annual financial situation.

Jan Beagle, Under-Secretary-General for Management Strategy, Policy and Compliance, stressed that a sound cash flow is essential for the Organization’s smooth functioning.  “For our part, the Secretariat is committed to using the resources entrusted to it in a cost-effective and efficient manner, and to provide information to Member States with utmost transparency,” she added.

She provided an overview of the Organization’s finances by focusing on four main financial indicators:  the amounts of assessed contributions; unpaid assessed contributions; available cash; and outstanding payment to Member States.  While the cut-off date for inputs for the presentation was 30 April 2019, Ms. Beagle provided updates throughout her presentation.

At the end of 2018, cash balances were positive for peacekeeping operations and tribunals, but the regular budget experienced cash shortfalls.  “The regular budget has been facing severe liquidity issues in recent years, with cash deficits occurring earlier in the year, becoming larger, and lingering for longer periods,” she said.  At the end of October last year, the regular budget deficit reached its highest at $488 million, following shortfalls starting as early as the end of May.  In October, the reserves of $353 million had been completely exhausted.  The cash position improved to $484 million by 30 April 2019 thanks to assessed contributions paid by Member States in the first quarter, she added.

Turning to the peacekeeping budget, whose calendar year starts on 1 July and ends on 30 June, she said that $1.5 billion was outstanding at the end of 2018.  Of the new assessments of $3.3 billion issued by 30 April, $2.7 billion has been received with $2.1 billion outstanding.  As of 30 April, 45 Member States have paid peacekeeping assessments in full, seven more than the previous year.

The Secretary-General is committed to meeting obligations to Member States providing troops and equipment as expeditiously as possible, as the cash situation permits, she said.  The Secretariat continues to monitor the peacekeeping cash flow situation and attach high priority to maximize the quarterly payments based on the available cash and date.  “To do so, we depend on Member States meeting their financial obligations in full and on time, and also on the expeditious finalization of MOUs [memorandum of understanding] with contingent-owned equipment contributors,” she added.

Regarding the International Tribunals, as of 30 April, 65 Member States have paid their assessed contributions in full, with outstanding assessments tallying $90 million.

Following her presentation, the Fifth Committee considered the Board of Auditors’ report on peacekeeping operations for the 1 July 2017 to 30 June 2018 period.  Introducing the document, Peter Korn, Director of External Audit of Germany and Chair of the Board’s Audit Operations Committee, said it contains 52 new recommendations, compared with 75 in last year’s report.  Summarizing key findings, he noted the audit uncovered several weaknesses.  On performance measurement and review of peacekeeping missions, he said data collected so far does not allow comparison of performance between missions.  

The Board also examined how troop-contributing countries are selected for peacekeeping missions and found that is done on an informal basis, with no documentation of established criteria that would ensure that the best offer was selected.  While the performance of contingents varies when confronted with violence to civilians, troop-contributing countries still get the same level of reimbursement per soldier deployed, as reimbursement is based on numbers, not performance.  “The Board holds that the United Nations should be able to pay reimbursement according to the performance it receives for the money it spends,” he said, adding that the Administration has accepted the recommendation.

The observer for the State of Palestine, speaking on behalf of the “Group of 77” developing countries and China, noted that as of 31 January, none of the Board’s 17 main recommendations to the Administration had been fully implemented.  The Group is also concerned, among many points raised by the Board, that weaknesses in the overall compliance control of ammunition management put peacekeepers’ work and security at risk.  Moreover, there are shortcomings regarding the accuracy and reliability of the reporting of contingent-owned equipment and troop strength, as well as imperfections in the supply chain management and procurement processes.

The United States’ representative welcomed the Board’s conclusion that all peacekeeping operations remained financially stable within the reporting period, with enough cash resources to sustain core operations, and supported its call for a more standardized, transparent approach to evaluating and prompting good performance in peacekeeping.  She pointed out that many issues identified by the Board are mutually reinforcing.  “The Organization’s full and timely implementation of the Board’s recommendations will result in demonstrable improved mandate delivery and enhanced resource utilization effectiveness,” she said.

Pedro Guazo, Director of the Finance Division of the Department of Management Strategy, Policy and Compliance’s Office of Programme Planning, Finance and Budget, introduced the Secretary-General’s report on implementation of the Board’s recommendations for peacekeeping operations in 2017/18.  Cihan Terzi, Chair of the Advisory Committee on Administrative and Budgetary Questions (ACABQ), introduced its related report.

Also speaking today were the representatives of Japan and the European Union.

The Fifth Committee will reconvene at 10 a.m. on Wednesday, 8 May, to take up cross-cutting issues related to peacekeeping financing, as well as financing of several individual services and operations, namely the United Nations Logistics Base at Brindisi, the United Nations Interim Security Force for Abyei (UNISFA), the United Nations Mission for Justice Support in Haiti (MINUJUSTH), the United Nations Multidimensional Integrated Stabilization Mission in Mali (MINUSMA) and the United Nations Support Office in Somalia (UNSOS).

Improving the Financial Situation of the United Nations

JAN BEAGLE, Under-Secretary-General for Management Strategy, Policy and Compliance, briefing on the current financial situation of the United Nations, said that the regular budget has been facing severe liquidity issues in recent years, with cash deficits occurring earlier in the year, becoming larger, and lingering for longer periods.  At the end of October last year, the regular budget deficit reached its highest at $488 million, following shortfalls starting as early as the end of May.  In October, the reserves of $353 million — $150 million from the Working Capital Fund, and $203 million from the Special Account — had been completely exhausted.  That left the deficit at $135 million, which was covered by borrowing from the accounts of closed peacekeeping operations. 

At the end of 2018, the regular budget cash shortfall was $323 million.  The cash position improved to $484 million by 30 April 2019 thanks to assessed contributions paid by Member States in the first quarter, she said.  Of $2.85 billion in assessments for 2019, up $362 million from the 2018 level, payments of $1.7 billion have been received as of 30 April, with 89 Member States having paid their dues to the regular budget in full, one more than the same date last year.  Since the cut-off date, China and Uzbekistan have paid in full.  Unpaid assessments amounted to $1.7 billion, including previous year’s balance of $529 million, as of 30 April.

Turning to the peacekeeping budget, whose calendar year starts on 1 July and ends on 30 June, she said that $1.5 billion was outstanding at the end of 2018.  Of the new assessments of $3.3 billion issued by 30 April, $2.7 billion has been received with $2.1 billion outstanding, including the prior years’ balance of $1.5 billion as well as $205 million in unpaid assessments for the United Nations Organization Stabilization Mission in the Democratic Republic of the Congo (MONUSCO).

As of 30 April, 45 Member States have paid peacekeeping assessments in full, seven more than the previous year.  Since the cut-off date, Italy and Jamaica have also paid in full.  As of that date, $339 million was owed to Member States for troops and formed police units.  For contingent-owned equipment claims, $584 million was owned for active missions and $86 million for closed missions.  The Secretary-General is committed to meeting obligations to Member States providing troops and equipment as expeditiously as possible, as the cash situation permits.  She said that the Secretariat continues to monitor the peacekeeping cash flow situation and attach high priority to maximize the quarterly payments based on the available cash and date.  “To do so, we depend on Member States meeting their financial obligations in full and on time, and also on the expeditious finalization of MOUs [memorandum of understanding] with contingent-owned equipment contributors.”

Regarding international tribunals, the total contributions outstanding for the Tribunals was $90 million as of 30 April, with 173 Member States having paid their dues in full for the International Criminal Tribunal for Rwanda, 130 Member States doing so for the International Criminal Tribunal for the Former Yugoslavia and 67 Member States for the International Residual Mechanism for Criminal Tribunals.  As of 30 April, 65 Member States have paid their assessed contributions in full for all the Tribunals, and the cash position is currently positive. 

Overall, 40 Member States have paid all their assessments in full as of today.  The financial health of the Organization depends on Member States meeting their financial obligations in full and on time, and a sound cash flow is essential for the Organization to deliver on its mandates, she said, stressing:  “The Secretariat is committed to using the resources entrusted to it in a cost-effective and efficient manner, and to provide information to Member States with utmost transparency”.

Reports of the Board of Auditors

PETER KORN, Director of External Audit of Germany and Chair of the Audit Operations Committee, Board of Auditors, introduced that entity’s report titled “Financial report and audited financial statements for the 12-month period from 1 July 2017 to 30 June 2018 and Report of the Board of Auditors — Volume II, United Nations peacekeeping operations” (document A/73/5 (Volume II).  He said the Board issued an unqualified opinion on the financial statements pertaining to peacekeeping operations as of 30 June 2018.  [The report states that the peacekeeping budget for the financial year 2017/18 was $7.50 billion, down 5.2 per cent from the previous year.  Expenditures decreased by 4.9 per cent to $7.42 billion while an amount of $0.07 billion went unutilized.]  He remarked that the 2017/18 financial statements were the first to be prepared without data imported from the legacy asset management system Galileo, a commendable milestone in the deployment of the Umoja resource management planning software.  The report contains 52 new recommendations, compared with 75 in last year’s report, he said, adding that out of a total of 198 recommendations in the four preceeding financial years (2012/13 to 2015/16), 168 — or 92 per cent — have been implemented, 14 are still under implementation and one is still not implemented, while 15 were overtaken by events.

Summarizing key findings, he said the audit uncovered several weaknesses in the integration of asset data from Galileo to Umoja, including incomplete physical verification and counting of assets and challenges in the identification of non-serialized equipment.  On performance measurement and review of peacekeeping missions, he said data collected so far does not allow comparison of performance between missions.  The Board also examined how troop-contributing countries are selected for peacekeeping missions and found that is done on an informal basis, with no documentation of established criteria that would ensure that the best offer was selected.  The Board also found that critical information was not shared within the Administration.  In addition, while the performance of contingents varies when confronted with violence to civilians, troop-contributing countries still get the same level of reimbursement per soldier deployed, as reimbursement is based on numbers, not performance.

A special performance-related issue is hidden caveats, which become apparent when a contingent commander refused an order by a mission’s Force Commander, he continued.  Such hidden caveats, rarely reported, have no effect on reimbursements nor on the selection of future troop-contributing countries, he said, adding that the Administration tacitly accepts hidden caveats as only a few countries are deemed willing to deploy troops in the most dangerous situations.  Hidden caveats are not reported because missions feel this might spark tensions with the respective contingent’s home country or that they might lose the contingent altogether.  “The Board holds that the United Nations should be able to pay reimbursement according to the performance it receives for the money it spends,” he said, adding that the Administration has accepted the recommendation.

Turning to contingent-owned equipment and troop strength reporting, he said current guidance on ammunition shelf life and ammunition levels is inadequate, allowing for different interpretations by missions and troop contributors, notably concerning ageing ammunition.  Under the current system, he added, there are no controls to prevent duplicate submission of claims for expended ammunition.  The Organization also has no control on whether reimbursement claims for expired ammunition and explosives are justified.  The Administration has agreed to establish a compliance control after the Board found six units from five different troop-contributing countries with expiration dates that pre-dated their deployment.  He added that while reimbursements are based on actual troop strength reported from field missions, the Board found inaccuracies in troop strength reports.  The Administration has agreed to develop guidance in that regard.  He went on to state that last year’s recommendations on air operations have not been implemented.

PEDRO GUAZO, Director, Finance Division, Office of Programme Planning, Finance and Budget, Department of Management Strategy, Policy and Compliance, introduced the Secretary-General’s report titled “Implementation of the recommendations of the Board of Auditors concerning United Nations peacekeeping operations for the financial period ended 30 June 2018” (document A/73/750).  The Board noted that of the 75 recommendations it issued in 2016/17, a total of 52 per cent had been implemented, 47 per cent were under implementation and 1 per cent had not been implemented as of 30 June 2018.  He said that out of the 51 recommendations which the Board assessed to be under implementation or not implemented, the Administration has requested the closure of 16, with the others still in progress as of January 2019.

CIHAN TERZI, Chair of the Advisory Committee on Administrative and Budgetary Questions (ACABQ), introduced its related report (document A/73/857), saying its comments on the Board of Auditors’ findings are provided in its report on cross-cutting issues related to United Nations peacekeeping operations (document A/73/755) and in its respective reports on individual peacekeeping missions.

NADA TARBUSH, observer for the State of Palestine, speaking on behalf of the “Group of 77” developing countries and China, noted that the new format of the Board’s reports, more results-oriented than the previous parameters, will help improve the Fifth Committee’s ability to identify and cope with the challenges related to the work of the Organization on peacekeeping missions.  Noting that as of 31 January, 50 of the 52 recommendations of the Board to the Administration had remained in progress and none of its 17 main recommendations had been implemented in full, she emphasized that this low rate of implementation raises concern.  The Group is also concerned that implementation of certain recommendations has been deferred or altogether abandoned due to perceived or expected outcomes of the management reform.  But the Board’s recommendations and the management reform should be regarded as complementary, she stressed.  The Secretariat must enhance its efforts to fully implement the Board’s recommendations that have been endorsed by the General Assembly.

The report highlights that the full use of Umoja’s capabilities in the administration of peacekeeping funds remain a challenge to be overcome, she said.  Improvements are also still needed to rectify weaknesses in budgeting and budgetary reporting, as well as to create a more efficient and reasonable management of air operations.  The Group is also concerned, among many points raised by the Board, that shortcomings regarding the physical verification of items compromise the reliability of data in relevant statements; a lack of a comprehensive, unified policy for strategic review of peacekeeping operations compromises the factual evaluation of mandate implementation by relevant stakeholders; and weaknesses in the overall compliance control of ammunition management put peacekeepers’ work and security at risk.  The Group is also concerned about the accuracy and reliability of the reporting of contingent-owned equipment and troop strength as well as imperfections in the supply chain management and procurement processes. The Group seeks clarification on the capital ratios structure and whether the Board was able to explain the liquidity problem faced by United Nations peacekeeping.  Due to the Organization’s unique situation, liquidity, expressed as the cash ratio, is perhaps one of the best measures of its financial health.

JAN DE PRETER, European Union, said that the Board helps drive the United Nations system to operate more transparently and cost-effectively, welcoming the attention given by the Board to the issue of peacekeeping performance, including the matter related to contingent-owned equipment, troop and asset management, procurement and management processes.  The European Union has been a strong supporter of the United Nations reform and the Action for Peacekeeping agenda, and it agrees with the Board’s stance on continuing work towards more efficiency, effectiveness, transparency and accountability for better mandate delivery on the ground.  Notably, the European Union supports the Board’s call for an updated procurement framework, with a focus particularly on sustainable practices and simplified, more nimble procedures.  The European Union also appreciates the Board’s reiteration of its recommendations, including one on air operations.

CAROLYN STRAINIC (United States) said that the Board, through its outputs, provides valuable insight into issues related to the effective, efficient functioning and reform of United Nations peacekeeping operations.  Her delegation looks forward to discussing the Secretariat’s progress in implementing the Board’s previous recommendations, including those related to inventory and property management, enterprise risk management and business process improvement.  The United States is also pleased to note the Board’s conclusion that all peacekeeping operations remained financially stable within the reporting period, with enough cash resources to sustain core operations, and supports the Board’s call for a more standardized and transparent approach to evaluating and prompting good performance in peacekeeping.  She urged the Secretariat to accelerate its efforts to address the Board’s concerns, particularly improving the quality and timeliness of performance-related reporting to the relevant United Nations bodies.  Many issues identified by the Board are mutually reinforcing and therefore its recommendations must be implemented in parallel in a harmonized manner.  “The Organization’s full and timely implementation of the Board’s recommendations will result in demonstrable improved mandate delivery and enhanced resource utilization effectiveness,” she said.

TOMOYA YAMAGUCHI (Japan) welcomed the Board’s conclusion that the financial position of peacekeeping operations was sound during 2017/18, with sufficient resources to sustain core operations.  Japan will continue to fulfil its obligation as a major financial contributor to the United Nations.  His delegation supports the Board’s observations as they help explain the challenges related to some important aspects of the work of peacekeeping operations, such as asset management, cost recovery, the comprehensive performance assessment system, review of the ammunition guidelines and the use of air operations budgets.  He noted that of the 75 recommendations for the 2016/17 fiscal year, 39 have been fully implemented, representing a 52 per cent rate of implementation, stressing that Japan welcomes the efforts by the Secretary-General to improve this rate.

For information media. Not an official record.