Fifty-seventh General Assembly

Fifth Committee (Resumed)

51^st Meeting (AM)

FULL, TIMELY PAYMENT OF MEMBER STATES’ DUES ESSENTIAL TO UNITED NATIONS’

FINANCIAL HEALTH, DELEGATES STRESS IN BUDGET COMMITTEE

Decline in Number of States Paying in Full,

Increase in Total Arrears Represent Worrying Trend

Speakers in the Fifth Committee (Administrative and Budgetary) this morning welcomed the fact that the Organization’s financial situation had continued to improve during 2002, but cautioned against excessive optimism in that respect, stressing that full and timely payment of Member States’ dues to the United Nations remained the basis for its financial health.

As the Committee discussed the financial situation of the United Nations following the presentation by the Under-Secretary-General for Management on 8 May, many delegates pointed out that the improved stability during 2002 had mostly resulted from substantial payments of arrears by major contributors, in particular the United States.  However, the good news should not obscure the fact that the number of Member States paying their budget assessments in full by the end of 2002 had fallen to 117.  Along with the increase in total arrears for the regular budget, that represented a worrying trend. 

The representative of Australia (also speaking on behalf of Canada and New Zealand) said there was an obvious disconnect when Member States advocated that the United Nations take on important additional tasks in peace and security, economic development and global cooperation, without those Member States paying their share of the costs.  It was striking that a small number of States were responsible for the vast majority of outstanding assessments.  Those countries could do much to improve the Organization’s financial situation simply by fulfilling their obligations.  The 23-member “honour roll” of countries that had paid their dues in full was lamentably short, and every State should aim to be on the list. 

Another emerging concern was the high number of Member States that had failed to pay their assessments for the two Tribunals.  That had resulted in a negative cash balance of $1 million at the end of 2002, instead of a projected amount of $10 million.  Several speakers said that while the level of outstanding peacekeeping assessments had fallen during 2002, it was still unacceptably high at more than $1.3 billion. 

Despite the reduction in the level of the Organization’s debt to Member States participating in peacekeeping operations, the representative of Morocco (on behalf of the “Group of 77” developing countries and China) also expressed concern over the high levels of amounts payable to troop-contributing countries, particularly for contingent-owned equipment.  All outstanding amounts, including those dating back many years to developing countries, should be paid as a matter of priority, he said. 

Worried about the continued practice of cross-borrowing from peacekeeping accounts to cover other needs, many speakers advocated exploring more equitable and innovative means to finance the Organization’s cash-flow deficits and to find a durable solution to the problem.  They were prepared to discuss the Secretary-General’s request that $169 million in the closed mission accounts be retained in order to help manage cash shortfalls in other accounts, including those of the Tribunals, but expressed concern that such a decision would penalize those who had paid their assessments in order to manage the consequences of non-payment by others.

In this connection, the representative of Greece (on behalf of the European Union and associated States) said the retention of funds would not provide a solution to the problem.  It would only temporarily rectify the situation created by late or partial payment of assessments.  At that stage, it was important not to lose sight of the fact that combined cash projections for the end of the year pointed to a perennial cash-flow problem for the Organization.

The Russian Federation’s representative insisted that it would be premature to celebrate the Organization’s improved financial situation, given the Secretary-General’s proposal to temporarily suspend certain financial regulations for the reimbursement of credit to Member States for closed missions.  Such proposals were hardly encouraging and would hardly induce Member States to pay their contributions in a timely manner.

The representative of Japan added that as a matter of principle, any need for new financing should be accommodated through strict prioritization and reallocation of resources to priority activities from those that had become obsolete or ineffective, while maintaining the principle of zero nominal growth.  The present scale of assessments was posing increasing challenges to his country, and the understanding of Japan’s taxpayers must be obtained if the country was to continue paying contributions of the size it was paying.  While Member States had agreed that the elements and criteria of the current methodology would be fixed until 2006, his Government would have to react strongly if other States tried to reopen discussions on modification of the methodology. 

Also this morning, as the Committee concluded its consideration of a series of reports on the administrative and budgetary aspects of peacekeeping financing, speakers debated the size of the proposed budget for the peacekeeping support account and took up various post- and non-post requirements for the Department of Peacekeeping Operations and the Office of Internal Oversight Services.  Also highlighted in the discussion were the issues of gender mainstreaming, both at Headquarters and in the field, and the proposed expansion of the role of the United Nations Logistics Base at Brindisi, Italy, in connection with the implementation of the newly introduced concept of strategic deployment stocks.

Also participating in the debate were representatives of the Republic of Korea, India, China, Switzerland, South Africa, Jordan, Pakistan, United States, Peru (on behalf of the Rio Group), Algeria, Cuba, Philippines and Nigeria.

Statements were also made by the Under-Secretary-General for Management, Catherine Bertini; the Chairman of the Advisory Committee on Administrative and Budgetary Questions (ACABQ), Conrad S.M. Mselle; and the Director of the Peacekeeping Financing Division, Catherine Pollard.

The Committee will take up a new series of reports on peacekeeping financing at 10 a.m. Monday, 19 May.

Background

The Fifth Committee (Administrative and Budgetary) this morning was expected to discuss the financial situation of the United Nations following the presentation on 8 May of a statement on the matter by the Under-Secretary-General for Management, Catherine Bertini (see Press Release GA/AB/3562).  The Committee also intended to continue its consideration of various peacekeeping management and financing reports introduced last Monday (see Press Release GA/AB/3563 of 12 May.)

Statements

ADAMANTIOS TH. VASSILAKIS (Greece), speaking on behalf of the European Union and associated States, said the statement on the financial situation enabled Member States to assess the financial balance of the Organization and made them aware of any difficulties and the reasons behind them.  Healthy finances were essential for the functioning and effectiveness of the United Nations.  He noted with satisfaction that 2002 could be considered a financially good year, consider that year-end cash was the highest in the last seven years, and unpaid amounts were the lowest in the same time period.

However, the analysis of the year showed that cash for the Tribunals was in a negative $1 million position, against a forecast of a positive $10 million, he said.  That was a cause for concern as it had led, for the first time, to cross- borrowing from closed peacekeeping missions.  It was essential that the work of the Tribunals had full backing of the United Nations membership.  That might also be better achieved if the Assembly had a better opportunity to discuss the two Tribunals, rather than the usual end-of-year rush to agree on financing.

Another alarming trend, he continued, was that only 117 Member States had paid their regular budget contributions in full, compared with 135 in 2001 and  141 in 2000.  He also noted that arrears in the regular budget had increased in 2002.  The Union stressed the importance of all Member States paying their contributions in full, promptly and without conditions.  Financial stability was essential if the Organization was to fulfil the mandates entrusted to it.  That was why the Assembly needed to continue its consideration of ways to encourage full and timely payment.  Member States could not be complacent about the situation.  Provision of relief under Article 19 of the Charter existed for those who needed it, but for the rest, payment of assessments in full and on time was an obligation.

While encouraging the Organization to concentrate its efforts on timely reimbursement of troop-contributing countries, the European Union recognized that prompt reimbursements were only achievable if Member States fulfilled their Charter obligations.  He welcomed the progress achieved in 2002 in reducing amounts owed to Member States for troops and equipment, exceeding the projection made in last October’s presentation.

Concerning 2003, he noted the positive expectations that the year would end with a regular budget cash balance of $44 million.  However, projected year-end cash balance for the Tribunals was limited to $3 million.  Furthermore, available peacekeeping cash was expected to decrease.  In view of the fact that no  borrowing could occur from active peacekeeping missions, there was a proposal that $169 million, considered in performance reports of closed missions, were not returned to Member States, bur retained so they could be utilized for temporary cross-borrowing.  That issue needed to be further examined during the session.

However, he noted that any decision in favour of retention would not be a solution.  It would only temporarily rectify the situation created by late or partial payment of assessments.  At this stage, it was important not to lose sight of the fact that combined cash projections for the end of the year pointed to a perennial cash-flow problem for the Organization.

MOHAMED BENNOUNA (Morocco), on behalf of the “Group of 77” developing countries and China, said the Group was pleased to note that 2002 could be considered a financially better year as total receipts of some $4 billion exceeded the total amount assessed by some 12 per cent.  In spite of that progress, however, some uncertainties were on the horizon.

Regarding peacekeeping cash, he said the year 2002 had ended at $1,363 million, which was a somewhat higher level than at the beginning of the year.  In spite of higher disbursements, the balance remained higher than the year 2001.  While there had been a modest reduction in the amounts owed to troop- contributing countries at the end of 2002, he was concerned at the continuing high levels of amounts payable to troop-contributing countries, particularly for contingent-owned equipment.  All outstanding amounts, including those dating back many years to developing countries, should be paid as a matter of priority.

Concerning the International Tribunals, he regretted that the year 2002 had ended in a negative cash position of some $1 million against a forecast of a positive $10 million.  At the end of 2002, some 133 Member States had not paid their contributions to the Tribunals in full.  He was concerned with indications that cash levels were slipping each year, forcing the Organization to cross-borrow from closed peacekeeping accounts.

The Group remained concerned with the practice of cross-borrowing as it hampered the Organization’s ability to pay Member States for troops and contingent-owned equipment, he said.  The unhealthy practice should not be allowed to continue indefinitely since it had negative effects on the financial capacity of concerned countries and placed undue financial stress on them.  It was time for the Secretariat to explore more equitable and innovative means to finance its cash flow deficits in the Tribunal budget and to find a durable solution to the problem.  In that regard, a comprehensive study to explore alternatives to the practice of cash-borrowing was needed.

Regarding the forecast for reimbursements of debt owned to Member States, he welcomed the Secretariat’s intention to make significant payments during 2003.  The Group was pleased that the Secretariat expected to pay $939 million in troop cost and certified contingent-owned equipment claims and to improve the timeliness of the process.

He reaffirmed the legal obligations of Member States to bear the expenses of the Organization in accordance with the United Nations Charter.  While recognizing the need to extend understanding to those temporarily unable to meet their financial obligations as a consequence of genuine economic difficulties, the Group urged all Member States to pay their assessed contributions in full, on time and without conditions.

The Secretariat, he said, should make more efficient use of resources in a transparent manner.  Programme managers might need to demonstrate greater accountability in the use of available resources so that the United Nations could meet the new challenges of the millennium.  Recognizing that the United Nations had twin responsibilities -– peace and security, and development –- increasing importance had been accorded to peace and security, as reflected in substantial increases in peacekeeping budgets.  Development activities were equally important and must be accorded equal –- if not greater –- emphasis.  

DAVID DUTTON (Australia), also speaking on behalf of Canada and New Zealand, said the delegations he represented were pleased to see that the Organization’s financial situation had continued to improve during 2002.  The largest factor had been the payment by the United States of a substantial proportion of its arrears.  He welcomed that country’s efforts to rectify its long-standing debts to the United Nations and encouraged it to complete the payment of all its arrears.

However, that good news should not obscure the fact that a larger number of Member States had not met their obligations to the Organization in 2002 than in 2001, he said.  The fall –- to 117 -– in the number of Member States paying their regular budget assessments in full by the end of the year, as well as the increase in total arrears for the regular budget, was worrying.

The number of Member States not paying their assessments for the two Tribunals was also emerging as a serious concern, he added.  Only 58 States had paid their assessments in full during 2002, leaving 133 with arrears at the year-end.  While the level of outstanding peacekeeping assessments had fallen during 2002, it was still unacceptably high at more than $1.3 billion.  He would appreciate having a list of the nine major contributors, after the United States, who collectively owed half a billion dollars for peacekeeping.

He said that the “honour roll” -– which contained just 23 Member States -– was lamentably short.  However, it was noteworthy that it included both rich and poor countries from every continent, but one.  Every Member State should aim to be on the list.  There was an obvious disconnect when Member States advocated for the United Nations to take on important additional tasks in peace and security, economic development and global cooperation, without paying their share of the costs.  It was striking that a small number of States were responsible for the vast majority of outstanding assessments, and those countries could do much to improve the Organization’s financial situation simply by fulfilling their obligations.  He called on all Member States to meet their obligations under Article 17 of the Charter in full, on time and without conditions.

He also noted the Secretary-general’s request that $169 million in the closed mission accounts be retained in order to help manage cash shortfalls in other accounts.  His delegation was concerned that a decision to retain the money would penalize those who had paid their assessments in order to manage the consequences of other Member States not meeting their obligations.  Funds owed to member States which were up-to-date should be returned to them, in accordance with the Organization’s rules and regulations.  At this stage of the issue’s consideration, he did not believe the Committee had sufficient information to make a decision.  In particular, he was interested in establishing what was an appropriate level of cash reserves for peacekeeping for the rest of this year.

Fortunately, the forecasts for 2003 indicated continued improvement in the financial situation, he said.  The increased level of regular budget payments so far this year was an encouraging sign.  But clearly, the health of the United Nations’ financing depended on Member States.

SHINICHI IIDA (Japan) said he was pleased to note that the Organization’s financial situation was improving.  Japan was contributing greatly to that trend, given that its rates of assessment for the regular budget, the peacekeeping budgets and the budgets of the two International Tribunals were quite high -- around 20 per cent.  He emphasized Japan’s efforts to fulfil its financial obligations despite its dire economic and fiscal straits.  A strict rationalization of expenditures was called for in order to further improve the Organization’s financial situation.  In deciding budget levels, it was important to consider not only General Assembly mandates but also the affordability of Member States.

The present scale of assessments was posing increasing challenges to Japan, he said.  The understanding of Japan’s taxpayers must be obtained if Japan was to continue to pay contributions of the size it was paying.  As a matter of principle, any need for new financing should be accommodated through strict prioritization and reallocation of resources to priority activities from those that had become obsolete or ineffective, while maintaining the principle of zero nominal growth.

Japan was concerned that the total 2004-2005 programme budget might surpass preliminary estimates due to rates of exchange, he said.  The possibility of establishing a mechanism to absorb such an expansion should be pursued in accordance with General Assembly resolution 41/213 and decision 57/574.  Regarding the scale of assessments, Japan fully understood that Member States had agreed that the elements and criteria of the current methodology would be fixed until 2006.  However, his Government would have to react strongly if action were taken by other Member States to reopen discussions on modification of the methodology.  Continued efforts should be exerted to make the financial burdens on Member States more rational.  Thus, the scale of assessments for 2007 should be thoroughly examined at an appropriate time.

Regarding the peacekeeping budget, he urged the members of the Security Council, when making decisions entailing budgetary requirements of peacekeeping operations and political missions, to fully consider the views of non-Council members.  Although non-Council members were not part of the decision-making process, such decisions affected the financial burden they would have to shoulder.  On the Secretary-General’s proposal to suspend the application of relevant financial rules and to retain the amount in respect of closed missions, he was ready to consider the matter when the Committee took up the performance reports of closed missions.

He was concerned that the budgets of the two Tribunals had greatly increased since 1999, and might have grown out of proportion to their actual activities.  It was imperative that the Tribunals preserve present budget levels as ceilings, while pursuing more transparency and efficiency, including the optimization of defence costs.  The Tribunals, especially the Rwanda Tribunal, had not presented appropriate completion strategies.

SUN JOUN-YUNG (Republic of Korea) also welcomed the fact that the overall financial situation of the Organization had steadily improved in the last three years.  However, it was too early to be complacent over that achievement, as there were still some worrisome trends to note.  The number of Member States paying their regular budget assessments in full had decreased to 117 in 2002, and the deficit of cash flow in the regular budget had made cross-borrowing from the peacekeeping accounts unavoidable.

He also noted with concern that the resources for cross-borrowing had continuously declined due to the dwindling cash balance of the concluded peacekeeping missions.  In addition, the proposed level of resources for the 2004-2005 biennium amounted to $2.9 billion before recosting, which represented a sharp increase from the initial approve amount of $2.7 billion for 2002-2003.  Pending a thorough analysis of resource allocation to all sections of the budget, he stressed the importance of budgetary discipline and the need to mainstream the concepts and techniques of results-based budgeting. 

Turning to the peacekeeping budget, he said that the scaling down of peacekeeping operations would certainly make it easier for States to fulfil their share of financial obligations, especially for those countries currently going through economic and financial difficulties.  In contrast, the budgets of the two Tribunals had continued to grow.  The long-term cost of enforcement of sentences would be a significant factor for further increases.  More attention should be paid to the management issues of those institutions.  He also underscored the need to develop realistic completion strategies and implement them faithfully.  The legal aid systems of both Tribunals needed to be improved to curb the soaring costs and prevent over-expenditures by defence counsel.

Peacekeeping operations should be adequately financed, effectively organized and efficiently managed, he said.  He was concerned over continued deficiency and weakness in the administrative and financial management of peacekeeping operations, as pointed out by recent reports of the Board of Auditors, the Office of Internal Oversight Services, and the Advisory Committee on Administrative and Budgetary Questions (ACABQ).  Further measures needed to be explored to bring about cost savings, particularly in the areas of procurement, asset and inventory managements, air operations, information technology and human resources management.  In parallel, the audit and investigation functions in the field missions should be strengthened.

Regarding the pattern of cash deficit and cross-borrowing, as well as delays in settling the debt owed to Member States, he said Member States must pay their contributions in full, on time and without conditions.  His Government remained firmly committed to the financial stability of the Organization.  As of 30 April, the Republic of Korea had made its full payment for 2003 regular budget.  Although named as one of the major countries in arrears with the Tribunals last December, his country had paid all its outstanding balances in March.  For peacekeeping, his Government was taking measures to eliminate its $20 million arrears as soon as possible.

GENNADY M. GATILOV (Russian Federation) said the Organization had retreated from the brink of the financial abyss, which was so perilously close to throughout the 1990s.  The situation on the whole could be described as stable.  According to the three major financial indicators, at the end of 2002, the best results in the past seven years had been achieved.

Certain problems still persisted, however, he said.  The Organization’s debt to troop-contributing countries was considerable.  It would be premature to celebrate the Organization’s improved financial situation, given the Secretary-General’s proposal to temporarily suspend certain financial regulations for the reimbursement of credit to Member States for closed peacekeeping missions.  Such proposals were hardly encouraging and would hardly induce Member States to pay their contributions in a timely manner.

It was important not to lose momentum, he said.  Russia had made and would continue to make efforts to support the Organization.  It had discharged in advance its obligation to fully pay its arrears over a period of seven years to the regular and peacekeeping budgets by paying, in 2001, a total of some

$102 million.  In 2002, the Russian Federation had transferred some $55 million to the United Nations.  This year, it had already paid more than $35 million, including today’s payment of $4.2 million under current assessments for peacekeeping operations.  The Russian Federation had not been in arrears for almost two yeas to the regular and peacekeeping budgets.  The faithful payment by Member States of their obligations was the main prerequisite for ensuring the Organization’s financial stability and normal functioning. 

JAIDEEP MAZUMDAR (India) said it was encouraging to see the improvement in the financial situation of the United Nations in 2002 as compared with the previous year.  It needed to be borne in mind, however, that aggregate assessments in 2002 were lower as compared to 2001 by as much as $634 million.  Therefore, the improvement in the level of unpaid assessments of $422 million might, in fact, be illusory.  One illustration of that was the marked fall in the number of Member States who had paid their assessments in full for the regular budget.  That underlined the need for Member States to pay their assessed contributions in full, on time and without conditions.  It was reassuring that the total arrears were concentrated in a few Member States.

He noted with appreciation that some progress had been made in reducing the amount due to Member States from $748 million at the end of 2001 to $701 million at the end of 2002.  However, the situation would have been different if additional obligations during the year had not been less by $31 million that what had been projected.  Outstanding dues of $701 million were not inconsiderable, and over 80 per cent of that was owed to developing countries, which could hardly afford to be perpetual creditors to the United Nations.  Noting the Secretary-General’s target of reducing outstanding dues further to $495 million by the end of this year, with an expected delay of six months in reimbursements, he felt that with present systems and resources, a target of three months’ delay was achievable.

His delegation would carefully examine the proposal to suspend the application of relevant financial regulations in respect of closed missions in order to retain cash balances with the Organization.  Besides the fact that his delegation had repeatedly spoken against the practice of cross-borrowing, such a measure should not adversely affect the payment of outstanding dues to States in respect of closed missions.  In that connection, he noted with concern that cross-borrowing had been now used even to finance shortfalls in the accounts of the Tribunals.  Last year, his delegation had called for concrete proposals to minimize cross-borrowing.  He regretted that no such proposals had been forthcoming.

As for the prognosis of the financial health of the Organization for the current year, he took heart from the fact that both the number of Member States, which had paid their assessments to the regular budget in full, and the amount of payments in the first four months had been significantly higher than last year.  He hoped that trend would continue for the rest of the year.

SUN XUDONG (China) was pleased to learn that the United Nation’s financial situation was gradually taking a turn for the better.  The Organization was some $218 million ahead as compared with last year.  Improvement in the United Nations financial situation would contribute to its more powerful role.  Finance was an important part of the Organization’s functioning, and without a solid financial base, a greater role for the Organization would be nothing more than empty talk.

The United Nations’ improved financial situation was reflected by the fact that some Member States were paying their arrears, and that progress had been made in reimbursement of debt to Member States, he said.  China was grateful for that good news.  China was a large and responsible country, and despite its limited capacity to pay, China would take steps -- in real terms -- to contribute to the Organization’s solid financial foundation.  To maintain the momentum in the improved situation, he urged all Member States to fulfil their financial obligations under the Charter so that the United Nations could better serve humankind on a healthy financial footing.

ANJA ZOBRIST RENTENAAR (Switzerland) said her delegation was pleased that the financial picture for 2002 had improved in recent years.  She hoped that the positive trend would continue.  Although the overall level of unpaid assessments was considerably lower than last year, the consequences for the Organization were much more serious when the amounts outstanding were concentrated in a few Member States.  She was also concerned that a mere 117 Member States had paid their regular budget contribution in full last year.  That represented a serious setback in the progress achieved in the last few years.

On the other hand, she was encouraged to learn that the unpaid peacekeeping assessments were at the lowest level in many years, despite the fact that it was a challenge and a big administrative burden to keep track of the various assessment letters issued throughout the year.  There was room for further improvement in that area.  The issue of consolidating the peacekeeping accounts was, therefore, of particular interest to her delegation.

There was one more cloud on the horizon, she continued.  It concerned the negative cash position of the International Tribunals, leading to cross-borrowing from closed peacekeeping missions.  Her delegation would keep that matter under close review when considering the proposal to set aside a certain amount of the cash balance of closed missions in order to retain some degree of financial flexibility.  Without losing sight of the need for efficiency and value for money, Member States had a shared imperative to put the Organization on a secure financial footing.  It was, therefore, of utmost importance that countries lived up to their collective responsibility as laid down in the Charter.  Her delegation would like to acknowledge the efforts of all Member States to pay their contributions in full, on time and without conditions, enabling the Organization to move forward with its work around the globe.

KAREN LOCK (South Africa) said she was encouraged by the assurances that the United Nations was in a better financial position today than it was a few years ago.  She was especially pleased to note that the combined year-end cash balance for the regular budget was no longer in deficit, as had been the case from 1996 to 1998, and that it was the highest in the last seven years.  However, no one could feel completely comfortable with the fact that fewer Member States had paid their regular budget contributions in full in 2002 as compared to the three preceding years.

Regarding the financial status of the two International Tribunals, she was concerned that as many as 133 Member States were unable to pay their assessments by year-end and that, as a result, the Tribunals had to start a new year with a negative cash position.  The Tribunals had and would continue to do a great deal to contribute to national reconciliation and the maintenance of peace and security.  Member States had a collective responsibility to ensure that reconciliation prevailed and that justice was rendered to the victims of the 1994 genocide in Rwanda and the violations of international humanitarian law committed in the former Yugoslavia.  The success of the Tribunals depended not only on Member States’ political support, but also on the extent to which Member States ensured adequate financial and administrative resources.

Her delegation was concerned with the practice of cross borrowing from the peacekeeping budget to finance expenditures under the regular and Tribunal budgets, which, in turn, affected the Organization’s ability to pay Member States for troops and contingent-owned equipment.  Many of the Member States were from Africa and other developing countries.  She recognized, however, that the United Nations required sufficient and predictable financial resources to effectively carry out its mandates.

MOHAMMAD TAL (Jordan) welcomed the fact that the financial situation of the United Nations had improved in 2002.  While he appreciated the improving cash balance as a result of better payment of dues last year, he was very concerned over the large debt to Member States.  He understood the financial difficulties experiences by a number of governments, but urged all countries to pay their assessments on time, in full and without conditions.  Following the improvement in the financial situation, the amount of debt to Member States still stood at over $700 million.  Some of that went back a number of years.  That made it difficult for many countries, in particular, the developing ones, to participate in future peacekeeping operations.

Another issue of concern was the cross-borrowing from closed peacekeeping operations to finance the budgets of the two Tribunals, the cash balance of which was minus $1 million.  He did not find any justification for such practice and called for all necessary information to be provided to Member States in that regard, including the legislative mandates, which allowed such a practice.  In light of the lack of financial resources for some mandated activities of the organization and further dependence on cross-borrowing from peacekeeping, he requested a study and review of cross-borrowing and its effect on the United Nations’ ability to carry out its peacekeeping activities.

AIZAZ AHMAD CHAUDHRY (Pakistan) noted with satisfaction that the United Nations’ financial situation had eased.  Unpaid assessments had declined; cash on hand at the end of 2002 was at the highest point in the last seven years; and the debt owed to Member States had declined.  He hoped the healthy trend would continue and that the Organization come out of its perennial financial problems. 

While the situation had improved, the Organization had not yet entered into a comfort zone, he said.  For example, some $703 million was owed to Member States at the end of 2002.  The number of Member States paid in full for their regular budget assessment had come down from 135 in 2001 to 117 in 2002.  Such figures indicated that there was no room for complacency about the Organization’s financial health.

The high levels of debt owned to Member States had a particularly heavy cost for countries such as Pakistan, which provided troops for United Nations peacekeeping operations, he said.  Pakistan had repeatedly expressed concern at the continuing high level of debts owed to Member States.  It had also expressed concern over the practice of cross-borrowing from peacekeeping funds.  The Secretariat should explore other more practical and innovative ways to finance its cash-flow deficits.

He noted the Secretariat’s intention to reimburse substantial amounts for troop costs and certified contingent-owned equipment.  Having participated in several peacekeeping operations, Pakistan had always responded to calls for the United Nations to play its role in the maintenance of international peace and security.  While the Committee discussed the United Nations financial situation each year, its discussion did not find a concrete expression in the form of a decision or resolution.  Such important discussions should not be lost, and possibility of instituting some follow-up on the issue should be explored.

THOMAS A. REPASCH (United States) said he was very pleased to learn that the 2002 year-end cash balance had reached a seven-year high point, while both the level of unpaid assessments and debt to Member States had decreased.  The Organization had reached a level of financial stability not previously enjoyed in recent years.  He expected that with continued careful management and steady contributions by Member States, that positive trend would continue.

He went on to say that the improved financial situation was at least partly the result of his country’s payment last year for the regular budget, peacekeeping and the Tribunals that amounted to nearly $1 billion.  The United States was committed to paying its obligations and expected to make additional payments in the near future.  He commended the Member States which had paid their current assessments in full.  He was also pleased that amounts owed to Member States for troops and equipment had been reduced considerably by the end of 2002 from the September projection.

He said the overall positive developments achieved in 2002 could and must be maintained to ensure the financial and operational viability of the Organization.  That would require a continued and concerted effort both by Member States and the United Nations.  Payment of assessments, combined with effective financial management and firm setting of priorities, would make for an even more stable financial environment this year and in the years to come.

MARIA ARCE DE GABAY (Peru), on behalf of the Rio Group, said she was pleased to see that the three main indicators of the Organization’s financial monitoring had shown improvement.  The total and unconditional payment of assessments was the only way to maintain the United Nations’ financial situation.  Encouraging all Member States to fulfil their obligations, she recognized the special situation of several Member States that impeded them from completing their financial obligations to the Organization.

She said the Group had always demonstrated a firm commitment to peace and security, participating in most active peacekeeping operations.  While she was encouraged that the Organization’s debt to Member States had been reduced from $748 million for 2001 to $701 million for 2002, the Group requested that pending payment balances, including those dating back, owed to developing countries, be paid.  The Group also hoped that the practice of cross-borrowing from the peacekeeping budget for regular budget expenditures would end.

ABDELMALEK BOUHEDDOU (Algeria) said his delegation subscribed to the statement made on behalf of the Group of 77.  He noted the improvements in all three areas, which indicated the financial health of the Organization -- cash on hand, arrears, and debt to troop-contributing countries.  However, it was necessary to refrain from excessive optimism, for the basis of the financial health of the United Nations remained vulnerable when Member States did not fully discharge their obligation under the Charter to pay their dues.  There was no other solution to the financial difficulties than full and timely payment of assessed contributions to various budgets of the United Nations.

The data provided to the Committee by the Under-Secretary-General for Management showed that the improvements last year were essentially due to a large number of States discharging their duties before the Organization, he continued.  The financial situation at the end of this year would depend on the same factor.  It was necessary to make sure that the Organization did not have to resort to cross-borrowing to improve liquidity and ensure financing of the Tribunals and certain peacekeeping missions.

Regarding the debt to troop contributors, he welcomed the progress in reimbursement and the encouraging signs of falling debt.  The Organization was mostly up to date in its payments to troop-contributing countries and had reduced its debt for contingent-owned equipment.

AICHA AFIFI (Morocco), on behalf of the Group of 77 and China, said that in continuation of the Group’s statement on the Organization’s financial situation, she wished to make additional comments on troop-contributing countries and contingent-owned equipment because of the high importance that the Group attached to the subject.  The Group welcomed the fact that the financial situation of peacekeeping operations for 2001-2002 had improved and that unpaid assessed contributions were at the lowest level in five years.  While the year 2002 could be considered a better year, that had not translated into any significant improvement in the timeliness of payment to troop-contributing countries, in particular, for contingent-owned equipment reimbursement.

She noted with concern that substantial obligations to Member States for reimbursement of troop costs and contingent-owned equipment remained unpaid.  While the liabilities for troop costs had been reduced in 2002, those for contingent-owned equipment and self-sustainment had shown a marked increase.  As the core situation had improved, any delay could only be ascribed to processing of claims.  As the largest dues by the United Nations were to troop-contributing developing countries, concerted efforts should be made to remove impediments to the speedy processing and settlement of dues.  Given the limited financial capacity of developing countries, an early settlement of payments for troop costs and contingent-owned equipment would facilitate and enhance their participation in United Nations peacekeeping operations.

The Group noted with concern that as of December 2002, 117 Member States had paid their contributions to the regular budget in full, compared to 135 in 2001, she said.  That had forced the Secretariat to practise cross-borrowing from closed peacekeeping accounts to subsidize the cash-flow deficit for the International Tribunals.  Cross-borrowing adversely affected the United Nations’ ability to meet its dues to Member States for peacekeeping operations and resulted, in particular, hardship to troop-contributing developing countries. 

It was time that the Secretariat explored more innovative ways to finance its cash-flow deficit, she said.  Secretariat targets for paying troop-cost reimbursements should be further reduced to three months.  Amounts owed to developing countries for troops and contingent-owned equipment should be settled as a matter of priority.

Responding to statements and questions from the floor, CATHERINE BERTINI, Under-Secretary-General for Management, thanked the delegates for their encouraging and constructive comments.  She assured them that the Organization would not be complacent in its approach to financing.  While the progress achieved was good news, much still remained to be done, and she looked forward to working with Member States to turn around the negative trends and maintain the thrust forward.  The issues related to the administration of peacekeeping, and specific concerns about the Tribunals’ management would be taken into account.

Responding to a question regarding the countries that had not paid their peacekeeping dues, she said that out of 15 major contributors, five had paid in full as of December.  France, Canada, Russian Federation, United Kingdom and Australia were the full payers.  The 10 countries with arrears as of 31 December were the United States, Japan, Italy, China, Spain, Brazil, Argentina, Republic of Korea, Germany and the Netherlands.  Some had made significant payments this year.

Regarding payments for contingent-owned equipment and troops, she said the main reason for the different levels of reimbursement lay in the requirements for showing specifics of what was owed for contingent-owned equipment.  It was easier to account quickly for the number of troops.  Proper accounting was needed for contingent-owned equipment reimbursements to be made.  The Secretariat was committed to making all payments as quickly as possible, however. 

The issue of cross-borrowing was of great concern, she continued.  Actually, 2002 was not the first year when the Organization had had to resort to cross-borrowing for the Tribunals.  That had also been done in 2001.  The Secretariat always disclosed such borrowing.  Next week, on the issue of closed missions, more detailed information would be presented to the Committee on that matter.  As for other options, that needed to be discussed, but she did not know what else could be done, except for more Member States to pay on time.  She also objected to the references to “the Secretariat’s” cash-flow deficits, for those were deficits of the Organization financed by Member States and supported by the Secretariat.  If all assessments were paid, then, collectively, “we” would not have a cash-flow deficit.

CONRAD S.M. MSELLE, Chairman of the Advisory Committee on Administrative and Budgetary Questions (ACABQ), said that to assist the Committee in scheduling reports for consideration next week, the ACABQ would consider the reports on the field assets control system (document A/57/765) and on temporary assignment of staff in peacekeeping missions (document A/57/787) in the context of the review of the 2004-2005 proposed programme budget.  The Advisory Committee would take into account the comments and decisions the Fifth Committee might wish to make on the two reports at the current resumed session.

The ACABQ had had a preliminary exchange of views on the rates of reimbursement to governments of troop-contributing countries, he said.  The General Assembly had, at one time, referred that subject to the Working Group on reform of procedures for determining reimbursement of contingent-owned equipment.  The report contained proposals, which should be handled directly by the Fifth Committee and by representatives of troop-contributing countries.  The Advisory Committee would not submit a report on the matters.

He said he had stated on 5 May that there were 15 reports the ACABQ had not yet considered.  He had just referred to three of those reports, and he would report to the Committee as soon as the other 12 reports were scheduled for consideration.  He would respond in informal meetings to the comments raised by the representative of the United States at the forty-ninth meeting.

Peacekeeping Administration, Financing

Ms. AFIFI (Morocco), speaking on behalf of the Group of 77 and China, said the support account played a vital role in ensuring that field operations received adequate support and guidance from Headquarters.  While the number and size of peacekeeping operations were being reduced, the Secretary-General had requested a 15 per cent increase in expenditure for the support account, and, in that regard, the Group intended to carefully consider various proposals.  Despite efforts to improve the budget’s presentation in the context of results-based budgeting, there was a need for the Secretariat to fully justify its budget requirements as far as expected accomplishments were concerned.

She noted with concern persistent problems in recruitment and placement in the Department of Peacekeeping Operations and other support account posts.  Continuous dependency on temporary staff as a result of not filling many of the support account positions was neither cost-effective nor performance-efficient.  While concerned about continuing delays in filling positions, she was encouraged by the Secretariat’s efforts to hire qualified candidates as soon as possible.  She hoped that those efforts would produce results in the near future.  The Group had requested the Secretary-General to fully comply with the provision contained in paragraph 15 of resolution 56/293 while filling those posts.

Concerning gender mainstreaming, she said that the Group looked forward to receiving further information on how it was being implemented in the field, as well as at Headquarters.  The Group also noted that the proposed United Nations Logistics Base (UNLB) budget would have an increase of 63 per cent.  Increasing resources for the Base together with the implementation of strategic deployment stocks should contribute to improving the overall organization of peacekeeping logistics and creating a basis for effective future operations.  The Group welcomed the consolidation of posts of resident auditors in peacekeeping missions under the support account as a logical step.  On the increase of the Office of Internal Oversight Services posts proposed under the support account, the Group looked forward to further discussions on those proposals.

On death and disability benefits, she said that the new methodology for settlement of claims had simplified the process.  As a result, almost all claims were now finalized within three months from the date of submission.  There was, however, a need to continue simplifying the documentation required for processing those claims as a way of honouring those who put their lives on line to ensure peace and security for millions around the world.  The Secretariat should continue to assist Permanent Missions and work closely with military advisers of the troop contributors to provide them with assistance, whenever necessary.  Given the sensitivity of the matter and the progress achieved, the Group would like the report to continue to be issued on a biennial basis.

As for mission-liquidation activities, while noting that the recommendations of the Oversight Office were at various stages of implementation, the Group remained concerned that some activities had been going on for at least three years.  The lack of systematic planning and monitoring mechanisms for liquidation not only caused delays, but also contradicted the overall reform efforts under way at the United Nations.  It was also a source of concern that the Department of Peacekeeping Operations did not accept the recommendations of the Office of Internal Oversight Services to adopt a detailed liquidation plan setting out tasks and implementation time frame, since it was the only way to remedy the deficiencies from which the current process suffered.

The Group attached great importance to the issue of procurement, she said.  Clearly defined guidelines were needed for letters of assist, which would provide for transparency in selecting the providing governments and ensure competitiveness in the provision of goods and services.  It was also necessary to increase procurement opportunities for developing countries to ensure their widest participation.

Mr. MAZUMDAR (India) said gender mainstreaming was an important function that had to be built into the entire system of recruitment and placement.  He was sceptical that the mere creation of a post for gender advisory functions in the Peacekeeping Department would result in greater gender mainstreaming.

On the rationale for the nearly fourfold increase in the support account resources provided for the Oversight Office, he said the consolidation of 27 posts of resident auditors to the support account was a logical step.  He expected that it would not result in the perpetuation of posts even when mission mandates were terminated.  However, with the decrease in the number, scale and complexity of several peacekeeping operations, he was unconvinced that there was a need for an increase in of the number of Oversight Office posts financed from the support account of the projected magnitude.

On the Logistics Base at Brindisi, he concurred that a comprehensive examination should be made of the merits of establishing a global procurement hub for all peacekeeping missions at Brindisi, transferring both post and non-post resources financed from the support account at Headquarters and retaining only a few posts in New York for policy and liaison functions.  He proposed that all support account posts and non-post resources at Headquarters pertaining to the Logistics Division be considered for relocation to Brindisi, as well as for communications and information technology services.  As the Logistics Base was emerging as a global hub, it would be logical to prepare such a comprehensive proposal and to submit it in the context of the next budget.

WANG XINXIA (China) supported the position of the Group of 77 and said that the next budget of the support account should build on last year’s budget and realize further improvements to achieve clear objectives and expected results.  Her delegation endorsed the recommendations of the ACABQ in that context.  While the total peacekeeping resources for 2003/2004 showed a decrease, the 2003/2004 budget for the support account largely had maintained last period’s amount, with a 14.8 per cent increase.  That increase was due to the changes in standard salary costs, the inclusion of posts of resident auditors previously funded from individual missions’ budgets, and the establishment of a regional investigator capacity in Nairobi and Vienna and additional posts at Headquarters to augment the guidance and support provided to missions.  In her view, incorporation of resident auditors into the support account was useful for effective supervision and better control of recruitment.  However, whenever a mission was terminated, the number of auditors should be adjusted accordingly.

Oversight function ensured efficiency in peacekeeping, and she supported strengthening regional oversight capacity, but the number of auditors added should correspond to the level of resources.  As investigations resulted from actual occurrences, it was difficult to project future requirements on the basis of past experience, and she believed that the Office of Internal Oversight Services could follow the approach of obtaining expertise “as required”. 

Turning to the report of the Oversight Office on the policy and procedures of recruiting of staff for the Department of Peacekeeping Operations, she said that following an audit, the Oversight Office had pointed out some problems in that respect, including the overly long time frame for recruitment.  Among the Office’s recommendations, was a review of the Department’s current composition in terms of geographical distribution.  Also recommended were steps to recruit representatives from unrepresented and under-represented countries.  She wanted more information to be provided regarding the implementation of that recommendation.

Ms. LOCK (South Africa) said that her country attached great importance to the activities of the Organization in the field of maintenance of international peace and security and would continue to pay its peacekeeping contributions in full, on time and without conditions.  Significant progress had been made through the Brahimi report to enhance the capacity of the United Nations Headquarters to plan and manage peacekeeping operations in all their aspects.

The time had now arrived to make concerted efforts to ensure that those changes were translated into effectiveness and efficiency in the field, she said.  It was in that context that her delegation would consider the requirements for the support account for the next financial period.   While sharing the view that future levels of the support account should be adjusted if the overall level of peacekeeping operations continued to decline, her delegation would like to approach each of the resource and staffing requests on its own merit. 

South Africa attached great importance to the oversight functions and would be interested in pursuing the merits of the Secretary-General’s requests to establish a regional investigation capacity in Africa and Europe in informal consultations, she said.  She also concurred with the ACABQ recommendations regarding the transfer of 27 auditor posts for consolidation under the support account, with the proviso that the number of posts would be adjusted once a mission’s mandate was terminated. 

Her delegation had consistently stressed the importance of gender mainstreaming, and she supported the request to establish a gender adviser post within the Peacekeeping Best Practices Unit.  The Organization should follow a comprehensive approach to gender mainstreaming, and she trusted that the Department of Peacekeeping Operations would continue to pursue the objectives of gender mainstreaming in close cooperation with the Office of the Special Adviser on Gender Issues and Advancement of Women. 

Member States shared the responsibility to ensure that the Secretariat had adequate personnel, material readiness and funding to deploy peacekeeping operations within the agreed time frames for rapid deployment, she continued.  Therefore, she supported the recommendations of the ACABQ for the financing of the UNLB for the next financial period, as well as the Secretary-General’s request for the validity period of the resources approved for the establishment of the strategic deployment stocks to be extended to 30 June 2004.  She also looked forward to receiving at the appropriate time the information on the award of contracts for procurement for the strategic deployment stocks to all Member States, in particular, to developing, least developed and African countries.

Turning to the reports on contingent-owned equipment, she said that the new methodology represented a significant improvement over the previous system.  The effectiveness of the contingent-owned equipment system was not solely dependent on the Secretariat, however, and it should continue working closely with troop-contributing countries to ensure that memorandums of understanding were concluded and endorsed by respective parties prior to the deployment of national contingents to missions. 

She hoped the measures taken by the Secretariat to streamline the claims process would contribute to improving the timeliness of certification and reimbursement to troop contributors.  To that end, she looked forward to the implementation of the plan to process all claims for major equipment and self-sustainment with a turnaround period of three months.  Her delegation would also be interested in further pursuing the merits of the proposal to make pre-deployment visits mandatory.

ORLANDO REQUEIJO GUAL (Cuba) said he appreciated the Secretariat’s efforts to improve the presentation of the budget within the context of the results-based budgeting technique, which should become a tool for measuring the Secretariat’s commitment to achieving the goals set forth.  As such, it was necessary to perfect the technique.  Budgeting must be a useful fool for field missions, as well, and he endorsed the Board of Auditor’s recommendations in that regard. 

It would be a good idea for the Joint Inspection Unit to submit to the General Assembly at its fifty-ninth session an assessment of how the budgeting technique was being used in peacekeeping activities, he said.  The assessment should include proposed remedies, should they be necessary, including those that would ensure accountability on the part of programme managers in implementing results-based budgeting.  The study should also give particular emphasis to defining objectives and forecasted achievements.

In using the budgeting tool, it was necessary for the General Assembly to perform a more supervisory role, so it could assess how forecasts had been achieved, he said.  He did not agree with the ACABQ’s recommendation.  Information on savings and surplus should be a part of the official report submitted to the General Assembly and not merely restricted to the Fifth Committee.

Regarding trust funds related to peacekeeping, he welcomed observations in the Board of Auditors report on the status of trust funds and endorsed observations made by other delegations about their being a thorough audit of them.  He hoped the Office of Internal Oversight Services study would be available to the Assembly at its fifty-eighth resumed session.

He endorsed the comments of the ACABQ and the Board of Auditors on contingent-owned equipment.  In view of their importance, pre-deployment visits should be mandatory, and the resolution adopted by the Committee under agenda item 126 should include such a provision.  Clarification was needed, however, on the real capability to carry out such inspections in the upcoming financial year. 

Regarding the recruitment of civilian staff, Cuba was concerned with persistent irregularities in the recruitment and management of staff.  He had noted the practice of recruiting staff at a level lower than what had been approved. 

On procurement and contract management, he was awaiting the adoption of a code of ethics and declaration of independence of staff in the procurement process.  It would also be a good idea to study the possibility of not letting participate in the bidding, or rescind the contracts with enterprises that had contracted Secretariat staff, or used their services in obtaining the contract. 

MARIA ROSARIO AGUINALDO (Philippines) said her delegation attached great importance to the development of gender mainstreaming.  There was much scope for capacity-building activities for peacekeeping staff.  She supported the Secretary-General’s observations in the gender mainstreaming report, in particular, the need for a dedicated gender advisory capacity at the senior level in the Department of Peacekeeping Operations.

NONYE UDO (Nigeria) associated herself with the position of the Group of 77 and China and said her country supported efforts to maintain peace and security all over the world, without which the efforts to achieve sustainable development had little chance for success.  She congratulated all Member States that had made timely and full payments to peacekeeping budget.  The improvement in the Organization’s finances were impressive and should be sustained.

Her delegation attached particular importance to gender mainstreaming and believed that extra focus should be placed on that issue in peacekeeping missions.  She also underscored the need for coordination between the Gender Unit and the Office of the Special Adviser for Gender Issues.  Regarding the posts for resident auditors, she welcomed the Office of Internal Oversight Services’ efforts to enhance the effectiveness of oversight and would be willing to discuss the request along with the ACABQ recommendations on the matter.

She added that the expansion of the role of the United Nations Logistics Base in connection with the introduction of the strategic deployment stocks was an innovative idea, which Member States supported with payments.  She was ready to extend the validity of resources approved by the Assembly to the end of June 2004.

CATHERINE POLLARD, Director of the Peacekeeping Financing Division, responding to delegate’s comments, said she would appreciate the Committee’s further guidance in improving the budget’s presentation for future submissions.  Regarding the requirement for resident auditors in the Middle East, she said audit coverage for peacekeeping missions there was currently carried out by trips of auditors from Headquarters.  Those trips could only be taken once every three to four years.  To audit missions such as the United Nations Interim Force in Lebanon (UNIFIL), United Nations Disengagement Observer Force (UNDOF), and the United Nations Peacekeeping Force in Cyprus (UNFICYP), once a year, it was important that the Oversight Office conduct value-for-money and information and communications technology audits, which were more resource consuming than routine compliance audits.  The deployment of resources close to area operations was more efficient in terms of travel costs and would provide flexibility in planning of audit assignments.

At the time of preparing the proposals for the support account, it appeared that the best location would be Kuwait, she said.  However, given developments in the region, circumstances had changed for the location of the office, but circumstances had not changed in terms of the need for a regional presence.  An alternative site would be Cyprus.

On resident investigators, she said the concept of investigators was grounded in requirement for two central locations.  The Department of Peacekeeping Operations had provided caseload statistics to justify two regional offices, one in Vienna responsible for peacekeeping missions in Europe, Central Asia and the Middle East, and one in Nairobi to handle peacekeeping missions in Africa.  If only one office was created -- in Nairobi – the Office of Internal Oversight Services would be able to handle the current caseload numbers in African peacekeeping missions, but not any of the remaining 91 matters currently open in other peacekeeping missions.

Regarding requirements for three posts for the Executive Office, the Office of Internal Oversight Services had 16 posts funded from the support account.  The Department of Peacekeeping Operations was proposing bringing 27 posts for resident auditors, which were currently spread among the various operations.  In addition, the Peacekeeping Department was proposing the establishment of 22 new posts as elaborated in the support account.  To add 27 posts to be administered by the Oversight Office would create an increase in the workload of the Executive Office of the Oversight Office, including travel arrangements for auditors and investigators.  There were currently no posts funded from the support account for the Executive Office of the Office of Internal Oversight Services.  The administrative work for 27 posts being consolidated in the support account was being done by the Peacekeeping Department. 

Regarding resident auditors transferred from peacekeeping missions, she said that three posts were being abolished as a result of the drawdown of the United Nations Mission of Support in East Timor (UNMISET) and closing of the United Nations Mission in Bosnia and Herzegovina (UNMIBH).  A new P-5 post for the audit of the United Nations Interim Administration Mission in Kosovo (UNMIK) was proposed to regularize a post that was available to the Oversight Office through ad hoc arrangements.  It had been proposed that a new P-4 post for the audit of the United Nations Organization Mission in the Democratic Republic of the Congo (MONUC) be redeployed from UNMIBH, and a new P-3 post for the audit of the United Nations Mission in Sierra Leone (UNAMSIL) was proposed for redeployment from UNMISET.

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