Fifty-Ninth General Assembly

Fifth Committee

51^st Meeting (AM)

CONTROLLER DESCRIBES IMPROVEMENTS IN UNITED NATIONS FINANCIAL HEALTH,

BUT SAYS SITUATION ‘REMAINS FRAGILE’, IN BUDGET COMMITTEE BRIEFING

Presents ‘Mixed’ Picture of Finances, with Focus on Assessments

Authorized, Unpaid Assessments, Cash Available, Debts to Member States

While there had been some improvements in the United Nations financial situation, the situation remained fragile, and it was essential that Member States meet their financial obligations in full and on time, United Nations Controller Warren Sach told the Fifth Committee (Administrative and Budgetary) this morning, as it began its twice-yearly consideration of the Organization’s financial health.

Presenting a “mixed picture” of United Nations finances at the end of 2004, with both positive and negative developments, he focused on four major indicators of the Organization’s financial situation, namely assessments authorized, unpaid assessments, cash available and debt to Member States.  Cash balances were higher than at the end of 2003 and unpaid assessments for the regular budget and tribunals were lower.  At the same time, however, unpaid assessments for peacekeeping were sharply higher and debt to troop and equipment contributors was also up.

The financial position of the international tribunals was much better today than in October when the Committee was last briefed, he said.  At that time, 113 Member States had owed some $80 million.  As a result of the financial shortfall, a recruitment freeze had been in effect.  By 31 December 2004, the shortfall had been reduced to $30 million, and significant payment by a number of Member States had made possible the end of the recruitment freeze.  The number of Member States that had paid their contributions to the two tribunals in full in 2004 had increased to 88 from 81 in 2003.  Welcoming these developments, he also cautioned against complacency.  While the number of Member States that had paid their assessed contributions in full had risen in 2004, it was still significantly less than the 124 Member States that had paid their regular budget assessments in full.

Trends in 2005 were also mixed, he said.  As of 30 April 2005, 43 Member States had paid their assessments to both tribunals in full, compared to 37 member States in the April 2004, and the total outstanding amount was down from $174 million as of 30 April 2004 to $150 million in 2005.  However, the total amount received by 30 April 2005 was also down, from $187 million in April 2004 to $175 million in April 2005.  While he welcomed those positive developments, much remained to be done to ensure the tribunal’s financial stability.  “After all”, he added, “of the 191 Member States, no fewer than 148 still had amounts outstanding for one or both tribunals at the end of April.”

Continuing, he noted that the receipt of contributions at the end of 2004 had also contributed to a slight improvement in the tribunal’s cash flow position.  Based on current trends, he anticipated a positive cash flow position until the final quarter with borrowing expected for the International Criminal Tribunal for Rwanda (ICTR) from October and for the International Criminal Tribunal for the Former Yugoslavia (ICTY) from November.  He currently projected a net negative cash balance of $24 million at 31 December.  Even that highly undesirable result depended on the Organization’s receiving further contributions in 2005 of some $90 million.  If the actual outcome approximated 2003, instead, the tribunals could end the year even further in debt, and, with the possibilities for cross-borrowing becoming ever more limited, it was essential that Member States make every effort to meet their financial obligations in full and on time.

The regular budget also presented a mixed picture, he said, with the number of Member States having paid their assessments in full by the end of 2004 falling to 124 from 131 by the end of 2003.  On a more positive note, however, the amount unpaid for the regular budget at the end of 2004 had fallen from $442 million to $357 million.  By 31 January 2005, 35 Member States had paid their assessed contributions in full.  That number had grown to 72 by 30 April 2005, compared to 77 by 30 April 2004.

Regarding cash flow, at the end of 2004, a total of $192 million had been available, he said.  That figure, however, comprised the General Fund and its related reserves, namely the Working Capital Fund, set by the General Assembly at $100 million, and the United Nations Special Account, which stood at $210 million.  A similar situation was expected at the end of 2005.  While the level of cash available for the regular budget activities at the end of 2004 was higher than projected in October, the Organization had been forced to cross-borrow from other accounts in November and was still using reserves at the end of the year.

Concerning projections for 2005 based on the past pattern of payments, including those of the major contributor, while he expected the situation to be somewhat better than in 2004, he still expected to cross-borrow from the closed peacekeeping operations and to draw on reserves from September.  “Our projections are crucially dependent on the actual amount and timing of payments by Member States.  If there are significant shortfalls or delays in payments, the actual outcome could involve even more cross-borrowing”, he warned.

Turning to peacekeeping, he said the level of assessments issued for peacekeeping operations in 2004 had more than doubled to over $5 billion.  That was due, in part, to new operations in Burundi, Côte d’Ivoire and Haiti, expanded operations in the Democratic Republic of the Congo, as well as to a technical issue related to peacekeeping assessment rates.  Normally, the bulk of peacekeeping assessments for the first half of 2004 would have been issued during the second half of 2003.  Since the Assembly had not fixed assessment rates for 2004 until the end of 2003, however, those assessments had been instead issued in early 2004.

Unpaid peacekeeping assessments at the end of 2004, at over $2.5 billion, were also more than double the level at the end of 2003, he noted.  As of 31 December 2004, Japan and the United States together accounted for almost $1.5 billion or 57 per cent of the total, with Ukraine, France, China and Germany also owing in excess of $100 million each.  Unlike assessments for the regular budget and the tribunals, peacekeeping assessments were issued throughout the year.  Despite that, at the end of 2004, 20 Member States had paid in full all their assessed contributions for operations due and payable.

At the end of 2004, total cash resources for peacekeeping activities, including the Peacekeeping Reserve Fund, had amounted to some $1.585 billion, he said.  Since the Assembly had ruled out cross-borrowing from active peacekeeping operations and had restricted the use of the Peacekeeping Reserve Fund, not all of that could be used for temporary cross-borrowing.  Of the almost $1.6 billion, only the $267 million in the accounts of closed peacekeeping missions was potentially available for cross-borrowing for the regular budget, the tribunals and active peacekeeping operations, and of that amount, $232 million had to be held to cover corresponding liabilities.  In addition, $140 million was available in the Peacekeeping Reserve Fund for new and expanded operations.

By 30 April 2005, payments of $1.466 billion had been received for peacekeeping operations and the amount outstanding, due and payable, had fallen to $1.207 billion, with only the United States and Ukraine still owing over $100 million, he said.  New peacekeeping assessments totalling over $1 billion had been issued on 27 April 2005 and were still within the 30 day due period.  While those payments mitigated somewhat the “bleak picture” at the end of 2004, the amount outstanding at the end of April was still over $2.2 billion.  Further, new assessments in 2005 of some $4 billion were expected.

Continuing, he said the Organization expected cash available for peacekeeping to total some $1.192 billion at the end of 2005.  Of that amount, $60 million was expected to be available in the Peacekeeping Reserve Fund, after taking account of new or expanded operations in the Sudan and the Democratic Republic of the Congo.  Of the $337 million in the accounts of closed peacekeeping operations, $219 million had to be held to cover corresponding liabilities, leaving only $118 million for possible cross-borrowing.  In addition to requirements for new and expanded missions, the Organization had to cross-borrow from the closed operations occasionally for a number of other active operations, as well as for the regular budget and tribunals.  Given the current fragile financial situation, the Secretary-General had proposed that the Organization retain the $93 million available in the accounts of closed operations.  As the Organization would only have $25 million to cover cross-borrowing requirements that were periodically much higher, he stressed the importance of that proposal.

Concerning debt to Member States, he said the October 2004 presentation had forecasted an increase in the amounts owed to troop and equipment contributors from $439 million at the beginning of 2004 to $605 million on 31 December 2004.  Events had turned out better, with the actual figure at $549 million.  The slightly better outcome in 2004 had been the result of new obligations being somewhat lower than expected and payments to Member States slightly higher.  At the end of 2004, payments for most missions had been generally running two months behind for troop costs and three to six months for contingent-owned equipment.

The current projection for 2005, he said, was that debt to Member States would be some $79 million higher than at the end of 2004.  New obligations were expected to grow, with the deployment of additional troops in the Democratic Republic of the Congo, full deployment in Haiti, Burundi and Côte d’Ivoire and the phasing in of troops in the Sudan.  “Of course, it also depends crucially on our receiving projected payments of assessed contributions”, he said.

On 30 April, 18 Member States had paid all their due and payable assessments for the regular budget, the tribunals and peacekeeping operations in full, not counting assessments issued on 27 April, which were still within the 30-day due period.  He thanked those States, namely Austria, Azerbaijan, Canada, Czech Republic, Denmark, Estonia, Finland, Hungary, Liechtenstein, Monaco, Netherlands, New Zealand, Norway, Singapore, Slovakia, South Africa, Sweden and Switzerland.  France and the United Kingdom had been added to the list in May, and Canada had just paid all assessments in full, including those issued on 27 April.

The financial picture at the end of 2004 was mixed, as were current projections for 2005, he concluded.  While he expected a healthier cash flow during most of 2005, he anticipated a negative cash position for the regular budget and the tribunals during the final quarter.  He also anticipated the need for borrowing from the Working Capital Fund, the Special Account and closed peacekeeping missions for the regular budget, the tribunals and some active missions during the year.  Debt to troop and equipment contributors was also expected to rise again and the scope for cross-borrowing was limited, as reserves were often depleted and cross-borrowing was restricted to the unobligated cash available in the accounts of closed peacekeeping missions.

The Committee will meet again at 10 a.m. Monday, 16 May.

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