UN FINANCIAL SITUATION, SPENDING CAP, LIBERIA MISSION AMONG ISSUES DISCUSSED IN BUDGET COMMITTEE

Sixtieth General Assembly

Fifth Committee

56^th Meeting (AM)

UN FINANCIAL SITUATION, SPENDING CAP, LIBERIA MISSION

AMONG ISSUES DISCUSSED IN BUDGET COMMITTEE

While the United Nations financial situation at the end of 2005 had been “generally quite positive”, improvements were overshadowed by indications that the Organization had a long way to go before it could receive “a clean bill of financial health”, South Africa’s representative told the Fifth Committee (Administrative and Budgetary) this morning.

Speaking on behalf of the “Group of 77” developing countries and China, she said minor improvements achieved last year were overshadowed by indications that the financial position of the regular budget at 30 April had been weaker than it had been at the same date in 2005, with unpaid assessments up by over $200 million and actual payments down by $300 million.  Deeply apprehensive about the grave implication of the spending cap on the Organization’s financial health, the Group remained concerned over the policy of withholding financial obligations, creating a linkage with United Nations reform.

The deliberate withholding of funds budgeted for 2006 created an artificial political leverage that altered the established principles of governance on the basis of sovereign equality of Member States, she added.  At the time that the six-month spending cap had been imposed during the budget negotiations last fall, the Group had made it clear that it believed the cap would be automatically lifted when the Secretary-General made a request for the funds already approved to implement his mandate.  The Group did not recognize any link between the unprecedented decision to introduce spending cap and collective efforts to reform the Organization.

With several factors influencing the Committee’s debate in the past few months, the whole discussion on the Organization’s financial situation was completely irrelevant, India’s representative asserted.  It was odd that the Controller’s statement to the Committee last week, which covered the period ending 31 December 2005, made no reference of the single biggest issue regarding the Organization’s financial situation, namely the $950 million spending cap.  Imposed by the United States, Japan and the United Kingdom, on behalf of the European Union, on a reluctant membership, when it was a question of whether the United Nations would continue operating or shut down, the spending cap had opened up a new front of conflict, the effects of which were already all too apparent.

Addressing the issue of the spending cap, Austria’s representative, on behalf of the European Union, noted that limited spending authority was one of the elements of the budget resolution adopted by the Assembly last December.  At the end of the day, the resolution represented a balance of interests of all Member States and had been adopted by consensus.  As not a single State had abstained, the notion that a limited spending authority had been imposed by a single State or a group of States was simply incorrect.  He was well aware that certain countries and groups liked some elements of the budget resolution more and other elements less.  He was also fully aware of the position of the Group of 77 on the limited spending authority.  However, the idea that limited spending had been imposed was incorrect –- it was an outcome of various interests and had been reflected in a consensus resolution.

Recalling the statement delivered by her delegation on the adoption of the budget resolution, Jamaica’s representative said the question of the spending cap was critical to any discussion on the Organization’s financial situation.   The spending cap had been imposed by the States who held the purse.  It was total blackmail.  The Group had completely opposed the cap, but had not sought a vote, as there was much political pressure and talk of bringing down the Organization.  The Group had caved in at that time, but that would not happen again.

Egypt’s representative agreed with the representative Austria that the Committee had agreed to the spending cap by a consensus resolution.  While it was consensus at gunpoint, it was nevertheless consensus.  According to the budget resolution, the spending cap would be automatically lifted by the Secretary-General -- also by consensus.  The Committee needed to find a way to have discussions about when it would be appropriate to lift the cap and could not wait until the eleventh hour to discuss the matter.

Responding to the debate, United Nations Controller Warren Sach noted that the resources available within the spending cap were fully adequate to take the Organization through the end of June and into the first part of July.  Activities and programmes funded from the regular budget had not been delayed in 2006.  While the spending cap was a constraint on the Organization’s operations, it was not necessarily the most binding constraint facing it.  With unpaid regular budget assessments at the end of April at some $1.2 billion, the real constraint was the availability of cash.  Those assessments needed to be paid during the balance of the year to continue operations.  Lifting the cap alone would not solve the Organization’s financial problems, but would be one step.

Also this morning, the Committee began its consideration of the financing of the United Nations Mission in Liberia (UNMIL), with Catherine Pollard, Director of the Peacekeeping Financing Division, introducing the Secretary-General’s reports on the Mission’s financing, and Andrzej T. Abraszewski, Vice-Chairman of the Advisory Committee on Administrative and Budgetary Questions (ACABQ), introducing that body’s related report.

In other business, Jayantilal Karia, Director, Accounts Division, Office of Programme Planning, Budget and Accounts, and Officer-in-Charge of the Procurement Services, presented additional information regarding the Organization’s fact-finding into allegations of procurement irregularities.  A representative of the Office of Internal Oversight Services (OIOS) also made a statement on its comprehensive management audit of the Department of Peacekeeping Operations.

Also speaking today were the representatives of Canada (on behalf of Australia and New Zealand), Guyana (on behalf of the Rio Group), Japan, Republic of Korea, Malaysia, Pakistan, Bangladesh, China, United States, Cuba, Nigeria, Benin, Brazil and Singapore.

The Committee will meet again at a time to be announced.

Background

The Fifth Committee (Administrative and Budgetary) met this morning to continue its consideration of the United Nations financial situation.  The Committee heard a statement by United Nations Controller Warren Sach on the Organization’s financial situation last week.  [For a detailed summary of the statement, see Press Release GA/AB/3736 of 24 May.] 

The Committee was also expected to take up the financing of the United Nations Mission in Liberia (UNMIL).  In that regard, it had before it the performance report on the Mission’s budget for the period 1 July 2004 to 30 June 2005 (document A/60/645).  The total expenditure for UNMIL for the period 1 July 2004 to 30 June 2005 has been linked to the Mission’s objective through a number of results-based frameworks, grouped by components, namely ceasefire, humanitarian and human rights, security reform, peace process and support.

The budget for the Mission’s maintenance for the period 1 July 2004 to 30 June 2005 was set out in the Secretary-General’s report of 22 March 2004 (document A/58/744) and amounted to $839.71 million gross ($828.99 million net), including budgeted voluntary contributions in kind totalling $120,000.  It provided for 215 military observers, 14,785 military troops, 755 civilian police, 360 police in formed units, 635 international staff, 798 national staff and 431 United Nations Volunteers.

In its report of 14 May 2004 (document A/58/798), the Advisory Committee on Administrative and Budgetary Questions (ACABQ) recommended that the General Assembly appropriate $821.98 million gross for the period 1 July 2004 to 30 June 2005.  In its resolution 58/261 B of 18 June 2004, the Assembly appropriated some $821.98 million gross ($811.91 million net) for the Mission’s maintenance for that period.  The total amount has been assessed on Member States.

The Secretary-General requests that the Assembly decide that Member States waive their respective shares in other income for the period ending 30 June 2005 amounting to $27.3 million, and their respective shares in the amount of $19.6 million from the unspent balance of $81.02 million for the period ending 30 June 2005, to be applied to meeting the Mission’s current and future after-service health insurance liabilities.  The Assembly is also asked to decide on the treatment of the remaining unspent balance of $61.45 million for the period ending 30 June 2005.

The Committee also had before it the Secretary-General’s report containing the budget for the Mission for the period from 1 July 2006 to 30 June 2007 (document A/60/653), which amounts to $717.12 million inclusive of budgeted voluntary contributions in kind in the amount of $264,000.  The budget provides for the deployment of 215 military observers, 14,785 military troops, 1,115 United Nations police, including formed units, 599 international staff, 957 national staff and 278 United Nations Volunteers.

The total resource requirements for UNMIL for the financial period 1 July 2006 to 30 June 2007 have been linked to the Mission’s objective through a number of results-based frameworks, grouped by components:  ceasefire, humanitarian and human rights, security reform, peace process and support.  The Mission’s human resources in terms of number of personnel have been attributed to the individual components, with the exception of the Mission’s executive direction and management, which can be attributed to the Mission as a whole.

The report notes that the explanations of variances in resource levels, both human resources and financial resources, have, where applicable, been linked to specific outputs planned by the Mission.

The Secretary-General requests the Assembly to appropriate an amount of $716.85 million for the Mission’s maintenance for the 12-month period from 1 July 2006 to 30 June 2007 and assess that amount at a monthly rate of $59.74 million should the Security Council decide to continue the Mission’s mandate.

In its related report (document A/60/852), the ACABQ recommends that the estimated budget requirement of $716.85 million be reduced by $138,000.  The Advisory Committee recommends, therefore, that the Assembly appropriate an amount of $716.71 million for the Mission’s maintenance for the 12-month period from 1 July 2006 to 30 June 2007. The Advisory Committee also makes a number of observations and recommendations regarding the Mission’s administration and management and opportunities for further savings.

Regarding the Mission’s financial performance for 1 July 2004 to 30 June 2005, the ACABQ notes that the Secretary-General, in his report on liabilities and proposed funding for after-service health insurance benefits (document A/60/450), proposed a number of measures that needed to be taken to fund and account for the accrued liabilities for such benefits.  The measures provided, among other things, for the transfer of $250 million from unspent balances and savings on, or cancellation of prior period’s obligations of, active peacekeeping missions as at the end of the 2005 fiscal year.  Depending on what the Assembly decides, there may be a consequential impact on the Mission’s financing and other peacekeeping operations.

The ACABQ notes that the proposed budget for UNMIL for 2006-2007 amounts to $717.85 million gross, representing a decrease of some $5.56 million or 0.8 per cent, in gross terms over the amount of $722.42 million apportioned for the 2005-2006 period.  Upon enquiry, the Advisory Committee was informed that, should additional resources be required in connection with the Council’s decision to extend the increased ceiling of military personnel up to 30 September 2006, the Secretary-General would revert to the General Assembly with additional appropriation or commitment authority as necessary.

Regarding the financial impact of the temporary transfers of military personnel to the United Nations Operation in Côte d’Ivoire (UNOCI), the ACABQ recalls that, based on the Security Council decision that any personnel redeployed among missions should continue to be counted against the Mission to which they were transferred, resources approved for UNMIL would be used to support redeployments to UNOCI.  This would include, in particular, costs associated with the reimbursement of troop-contributing countries for troops, contingent-owned equipment and self-sustainment, as well as rations and fuel.  Logistical and administrative support requirements would be met from within the existing resources of UNOCI.  Additional requirements, if any, related to the extension of the increased ceiling of military personnel or to temporary transfers of military personnel to UNOCI, will be reported separately.

Regarding UNMIL’s financing for the period 1 July 2004 to 30 June 2005, the Advisory Committee recommends that the unspent balance of $81.02 million, as well as the income and adjustments in the amount of $27.3 million, be credited to Member States in a manner to be determined by the Assembly.

Financial Situation Statements

Providing an update to his statement, United Nations Controller WARREN SACH introduced several corrections to the report before the Committee, saying, in particular, that a list of Member States that had paid all their assessments in full should include Switzerland.

ENNO DROFENIK ( Austria), speaking on behalf of the European Union and associated States, noted that the financial situation had moderately improved and the number of Member States having paid their assessments in full had increased.  However, the Union was concerned that, by 30 April, the level of payments was down over $300 million and unpaid assessments were $200 million above the level of 2005.  The Organization was still in the first half of the year.  “We have to ensure that the Organization will have the necessary funds available to meet its obligations during the latter part of 2006”, he said.

Over the years, late payment and non-payment of dues had become a source of serious concern, he continued.  Non-compliance of Member States with their financial obligations endangered the cash liquidity situation of the Organization and resulted routinely in the need to cross-borrow from peacekeeping, as well as delay of payments to troop-contributing countries.  He urged all Member States to make a serious effort to make payments on time.

He added that, during the session, the Committee would be presented with a detailed reform report, including specific measures to encourage timely payment of contributions and improve availability of cash for peacekeeping operations.  The European Union would look positively at all efforts to improve the financial situation of the United Nations.

SHANNON-MARIE SONI (Canada), also speaking on behalf of Australia and New Zealand, said that the report on the financial situation of the United Nations allowed Member States to take a broader view of UN finances and assess how they, the Member States, were acquitting their responsibilities to the Organization.  Unfortunately, there was a trend that, year after year, the picture presented was not particularly positive.  While pleased to note that the financial situation in 2005 had been generally better than in 2004, she said that the good news should not obscure the fact that unpaid assessments for both the peacekeeping and the Capital Master Plan budgets had increased.  It was encouraging that the number of Member States -- 140 -- paying their regular budget assessments in full by year’s end had been the highest in at least five years.  However, 51 Members of the Organization had chosen not to comply with their obligations under the Charter, with three Members accounting for 85 per cent of the amounts outstanding.

Partway into 2006, the situation was not as positive, with payments received much lower and unpaid assessments much higher that at this time last year, she continued.  As the Secretary-General had noted in his report, the liquidity to ensure efficient, full and effective implementation of mandated programmes depended on the timely and full payment of assessments.  She hoped that Members would fulfil their Charter obligations at the earliest time possible, paying in full and without conditions, lest delivery of United Nations programmes in 2006 be compromised.

The peacekeeping budget situation was abysmal, with nearly $3 billion outstanding at the end of 2005 and only 22 countries having paid in full.  With peacekeeping missions increasing in number, size and complexity, it was essential that sufficient resources be provided for missions.  She urged the 169 countries that had not yet paid their 2005 assessment to do so in full and without conditions.  Not doing so put the United Nations military and civilian personnel on the ground, and the people they were trying to help, at risk, and contributed to the delays in reimbursing troop contributors.

Noting the Secretary-General’s proposal to retain $73 million in the closed mission accounts in order to manage cash shortfalls in other accounts, she said that the decision to retain funds continued to penalize those Member States that had paid their assessments, in order to manage the consequences of those who did not.  Continued retention of closed mission funds was a short-term solution to managing cash-flow problems, but it was a solution that the Secretary-General was forced to use to manage the fact that many Member States were not fulfilling their responsibilities.  If the Assembly wished to maintain its restrictions on cross-borrowing, then it must provide the liquidity for all peacekeeping missions and the Tribunals so that cross-borrowing needed not be an option.

While pleased that unpaid dues for the Tribunals had declined for the second year in a row, she still noted with concern that 98 Members had amounts outstanding.  The “honour roll” -- which contained just 18 countries -- was lamentably short for yet another year.  However, she noted that it included both developed and developing countries and countries from all continents, except one.  The delegations she represented looked forward to the day when that “honour roll” was no longer necessary, because all Member States had fulfilled their Charter obligations and had paid in full, on time and without condition.  Until that day came, however, she urged every Member State to aspire for inclusion on that list.

KAREN LOCK (South Africa), speaking on behalf of the “Group of 77” developing countries and China, said that now, more than usual, it was imperative to reflect on the collective efforts to ensure the financial health of the Organization.  The United Nations was discussing the financial situation of the Organization at a difficult time.  On 29 May, the Group had held a special ministerial meeting in Malaysia, noting with concern that the United Nations had been operating under the spending cap that limited the manner in which the Secretary-General had to implement his mandates.  The Group remained concerned over the policy of withholding financial obligations due to the United Nations and thereby creating a linkage with the reform of the Organization.  The deliberate withholding of funds budgeted for 2006 created an artificial political leverage that altered the established principles of governance of the United Nations on the basis of the sovereign equality of Member States.  The Group was deeply apprehensive about the grave implication of the spending cap on the financial health of the United Nations.

The spending cap had, regrettably, been imposed on the Organization during the budget negotiations in 2005, she continued.  At that time, the Group had made it clear that it believed the cap would be automatically lifted when the Secretary-General made a request for the funds already approved to implement his mandate.  The Group did not recognize any link between the unprecedented decision to introduce spending cap and collective efforts to reform the Organization.  Delegates had also been assured during the negotiations that the spending cap was not intended to harm the Organization.  The meeting in Malaysia had reaffirmed that the efforts to use the size of financial contributions to push for the adoption of certain proposals were counter-productive and violated the obligations of Member States to provide resources for the Organization, as enshrined in the Charter.  The Ministers had also reaffirmed that, to avoid a crisis, the limit on the expenditure of the Organization should be automatically lifted and urged all Member States to act accordingly.

While the financial situation at the end of 2005 had been “generally quite positive”, the improvements were overshadowed by indications that significant amounts were still owed to the Organization, and the United Nations had a long way to go before it could receive “a clean bill of financial health”.  Minor improvements achieved last year were also overshadowed by indications that the financial position of the regular budget at 30 April had been weaker than it had been at the same date in 2005, with unpaid assessments up by over $200 million and actual payments down by $300 million.  That was despite the fact that more Member States had paid in full at the same juncture a year ago.  The presentation indicated that those who had imposed the spending cap were placing an additional burden on the financing of the Organization by not paying their assessments in full and on time.

The Group would appreciate receiving more information on the expenditure pattern of the past five months, as well as the amount that had been expended so far.  She also sought assurances from the Secretariat that the implementation of the programmes and activities of the United Nations that were funded from the regular budget had not been delayed or scaled down in 2006.  Assurances were also needed that funds were not being diverted from so-called non-essential activities to finance other activities, in order to make ends meet until the Assembly received the Secretary-General’s request for the release of the remaining funds approved for 2006.

With respect to the Tribunals, she welcomed the indication that their financial situation had continued to improve.  However, it was a concern that more than half of the membership had not paid their dues to either of those courts in full at the end of 2005.  The Tribunals consequently remained in a difficult financial position and might continue with the unhealthy practice of cross-borrowing from closed missions to provide supplementary financing this year.  The Group welcomed indications that payments made by the Secretariat exceeded the projections made in October 2005 and thereby reduced the debt owed to Member States to $695 million.  That amount, however, remained high.  Every effort should be made to further reduce the amounts owed to Member States, while recognizing that there were exigent factors that could impact on the ability of the Secretariat to reimburse Member States in a timely manner.

In conclusion, the Group reaffirmed its commitment to meeting its legal obligations to bear the expenses of the Organization in accordance with the Charter.  She urged other Member States to join them in placing their commitment to the Organization on record.  Furthermore, while recognizing the need to extend sympathetic 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 assessments in full, on time and without conditions.  Member States should go beyond mere expressions of commitment to meeting their Charter obligations.  The support of the Organization depended not only on its political support, but also on the extent to which they ensured that it received adequate resources and reliable financing for the execution of its mandates and activities.

Speaking on behalf of the Rio Group, TROY TORRINGTON ( Guyana) said that the Controller’s report had been a sobering reminder that Member States’ common ambitions, as well as possibilities, were closely related consequence to the financial health of the Organization.  The Group noted, in particular, that, at the end of 2005, the financial situation of the United Nations had been generally quite positive, but that much work remained to be undertaken for the Organization to be given a clean bill of financial health.  Member States must direct their collective attention to ensuring a more promising financial outlook.  The Rio Group was heartened by the fact that a greater number of Member States had met their financial obligations in full at an earlier period.  On the other hand, the perspective, as outlined by the Controller, admitted a disconcerting fragility in the financial soundness of the Organization.  That placed the effectiveness of the United Nations in all its dimensions in greater peril.

During the current session, the Committee had a great opportunity -- in addition to updating the systems, processes and institutions of the United Nations through a wide-ranging and comprehensive reforms -- to also reform “the way we do business”.  It was necessary to seize the moment “to make it a watershed in the development of the UN by ensuring that the Organization is provided the necessary wherewithal in a predictable and sustainable manner to enable it to discharge its responsibilities in the most effective manner as an efficient modern entity”.

Members of the Rio Group had always made determined efforts to honour their financial commitments to the Organization, he said.  The Group endorsed the call for all Member States to pay their contributions in full and promptly to allow the Organization to smoothly operate within its mandate.  It was aware, in that regard, that some developing States faced economic constrictions that impeded them from honouring their obligations in a timely manner.  The United Nations needed to have reliable and foreseeable means and resources and should not be restrained by artificial limits to its expenditures on the approved budget for the present biennium.  He was encouraged by the fact that delays in the reimbursements to troop-contributing countries had continued to be reduced.  However, further efforts were needed in several peacekeeping operations, such as the United Nations Interim Administration Mission in Kosovo (UNMIK) and the United Nations Mission for the Referendum in Western Sahara (MINURSO), to avoid cross-borrowing between accounts.

In conclusion, he said that the financial health of the Organization was closely linked to its effectiveness.  The Group maintained a deep interest in the financial situation of the Organization and would, therefore, continue to work with all stakeholders to promote and achieve a more stable financial situation.

HITOSHI KOZAKI ( Japan) said that Member States’ commitment to pay their assessed contributions was essential to improving the financial situation of the Organization.  At the same time, it was equally important that the Organization maintain its budgetary discipline in order to achieve sound financial health.  Member States should exercise appropriate judgement when establishing new mandates that had resource implications and when deciding on how to efficiently and effectively utilize the Organization’s resources.  The current discussions on management reform and mandate review were, therefore, vital.  His delegation would continue to participate actively and constructively in those ongoing endeavours.

CHO HUYN (Republic of Korea) said his delegation was pleased to see several encouraging signs of improvement in the financial situation of the United Nations, including an increase in cash on hand in all areas, as well as the drop in unpaid assessments to both the Tribunals and the regular budget.  Another good sign was the lower-than-expected debt to Member States, as their contribution of troops and equipment was crucial to the functioning of the Organization.

Nevertheless, he said, the future financial situation of the United Nations remained uncertain.  The bulk of outstanding assessments in every category were owed by a small number of Member States on which the United Nations was especially dependent.  Payment of assessments was a responsibility of membership, and the Organization could carry out the decisions of Member States only if it received the necessary resources.  It was firmly hoped that, as the reform process moved forward, all Member States would feel increasingly confident that their contributions were well spent.

He said the Republic of Korea acknowledged its responsibilities in that regard.  Because of rapid increases in the peacekeeping budget and his country’s share of it, the Republic of Korea had not been able to keep up with its peacekeeping assessments.  The country had recently developed a payment plan to keep pace with future assessments while paying all outstanding peacekeeping assessments by the end of 2008.

JAIDEEP MAZUMDAR ( India) said the whole discussion and the statement by the Controller was actually completely irrelevant.  He would not make any prior statements about payment of dues, honour roles, the need to meet obligations and commitment to multilateralism, because of several factors that had influenced the Committee’s debate in the past few months.  It was odd that the statement on the financial situation, although it relates to period ending 31 December 2005, made no reference to the single biggest issue regarding the Organization’s financial situation, the spending cap imposed on 23 December 2005 -- by the United States, and Japan, with significant contribution of the United Kingdom acting on behalf of the European Union -- on a reluctant membership, when it was a question of whether the United Nations would shut down.  That had opened up a new front of conflict, the effect of which was all too apparent at the moment.

It had also raised serious issues regarding the expenditure cap, he added.  Member States who refused to lift the spending cap at the end of the month would be in violation of the Charter.  The General Assembly had approved a budget for the biennium.  His Government had paid their assessments in full for the entire year.  As those who had imposed the cap had not, they had no right to determine whether India’s contribution could be used by the Secretary-General.  If budget appropriation was divided into four parts, would the Organization work seamlessly without dislocations?  The issue needed to be probed.

RADZI RAHMAN ( Malaysia) said it was imperative for the United Nations to have a predictable, stable and adequate funding in ensuring the smooth functioning of the Organization’s work.  He was delighted to note that there was some positive development in the assessments and payments of the regular budget in December 2005.  The unpaid assessment as of 31 December 2005 amounted to $333 million, which was a reduction of $24 million.  He was deeply concerned, however, to learn that the financial position of the regular budget as of 30 April 2006 was weaker than it was last year.  Payments received by 30 April 2006 were over $300 million lower than it was on the same date last year, and unpaid assessed contributions were over $200 million higher on 30 April 2006 than last year.  Of the outstanding amount of $1.2 billion as of 30 April 2006, seven countries accounted for 94 per cent of the total.

Given the constraints and uncertainties of the current financial condition, he hoped that Member States concerned would fulfil their obligations in full, on time and without condition.  He was encouraged to note that there had been some improvement on the financial position of peacekeeping operations.  It was vital to provide adequate resources and tools to the peacekeeping operations to ensure that they were able to successfully carry out their mandates.  He welcomed progress achieved in resolving the outstanding amount of the Tribunals and hoped that that positive trend would continue.  On the Capital Master Plan, he shared the concern of many delegations that further delays in the implementation of the project would escalate the cost and have serious consequences on the Organization’s work.  Given the serious implications arising from such a project, he hoped that all Member States would be able to engage constructively in the discussion on the item and come to an acceptable agreement as soon as possible.

Reform was an evolving process that should be based on the collective views expressed by all Member States, he said.  He fully agreed that the rights, commitments and views of every Member State were equally important in that regard.  He strongly hoped that the decision taken in December 2005 for a six-month spending cap would not be a precedent.  On the upcoming request by the Secretary-General for further spending, he hoped that Member States would be able to adopt a budget for the rest of the biennium.  He believed that all decisions should be carefully analysed and considered, in order to avoid any consequences that would further divide the consensus of the Member States.  A healthy, stable financial position for the United Nations was essential in order to ensure that all operations were carried out in an expected time frame and efficient manner.  That would be crucial for the Organization to achieve a more desirable outcome.  He was also mindful of the difficulties faced by some Member States in setting their arrears.  It was his hope that those Member States would honour their assessed contributions and settle their arrears as expected by the Organization without conditions.

IMTIAZ HUSSAIN ( Pakistan) aligned himself with the position of the Group of 77 and China and said that, despite certain improvements, a dark cloud still hovered over the financial future of the Organization.  The obligation to pay on time and in full was a fundamental one, and he resented Member States using it as a bargaining chip.  That kind of conditionality was not justified, on any grounds.  It was not only unconstitutional, but also violated the rights of those who had paid in full.  The outstanding amounts in regular and peacekeeping accounts were disturbing.  That might affect all spheres of the Organization’s activities.

The absence of financial support forced the United Nations to resort to such emergency measures as cross-borrowing and impacted the mandates in various spheres, including development, he continued.  He looked favourably at the Secretary-General’s innovative proposals to ensure payment from countries who, “without any explicable reasons, indulged in the policy of withholding payments”.  So-called desire for emphasis on reform went hand in hand with meeting financial obligations to the United Nations on time.  Pushing for reform, while not settling the outstanding dues, was ironic and contradictory.  In fact, the only area that deserved urgent reform was that particular area.  It was necessary to put the United Nations on a solid and predictable financial footing.  He hoped the reform issues would go in that direction.

Mr. DROFENIK ( Austria) said that he wanted to address the statement by India’s representative.  In fact, limited spending authority was one of the elements of the budget resolution. At the end of the day, the budget resolution represented a balance of interests of all Member States and had been adopted by consensus.  Not a single State had abstained.  Therefore, a notion that a limited spending authority had been imposed by a single State or a group of States was simply incorrect.  He also addressed the proposal for informal consultations on the matter, saying that there was an agreement not to have them.  Now that a request had come to hold such consultations, the Bureau should discuss this issue.

MUHAMMAD A. MUHITH ( Bangladesh) aligned himself with the position of the Group of 77 and China and said he appreciated the fact that the financial situation as of 31 December had been generally positive.  However, much remained to be done before the Organization could get a clean bill of financial health.  As a country that paid its contributions in full and on time, Bangladesh was worried over the adverse situation resulting from non-payment of dues by Member States. All Member States must pay in full and time.  However, those who were temporarily unable to pay due to reasons beyond their control should receive sympathetic understanding.

SUN XUDONG ( China) fully supported the statement by South Africa on behalf of the Group of 77 developing countries and China and the need to lift the spending cap.

Mr. MAZUMDAR ( India) noted that, at the last formal meeting on another subject, he had said that he had long since ceased to be amazed.  Today, he had occasion to revise that opinion.  He was, indeed, amazed by Austria’s statement, when he had said that the spending cap was a consensus agreement of the entire membership.  That was the import of what he said.  While it was true that it was encapsulated in a General Assembly resolution, it was a condition that had been imposed by a small group of countries.

Ms. LOCK ( South Africa) said it was important that the Committee stood still and reflected on the matter before it.  Delegates could not selectively recall what had happened in December 2005.  She was being placed in a position where she had to repeat the Group’s position articulated by the Group’s former Chair at the time of the adoptions resolution.  At that time, the Group had made clear that it was faced with the option of calling for a vote and putting the United Nations in a financial crisis, a course of action that would not be useful to the reform.  The Group had reluctantly accepted the proposal to impose a spending cap, based on the understanding that it would automatically be lifted and that the intention was not to harm the United Nations or reopen the budget.

She said the Group had clearly stated its position at the resolutions’ formal adoption, namely that it found itself in an unfortunate position, where, despite strong reservation, the Group had decided not to call for a vote.  The budget appropriation resolution was very clear in that when the Secretary-General submitted requests, he would receive funds.  The Group’s understanding was that it was a one-time measure only that would not be repeated.  The Group was not trying to reopen any resolution and respected the fact that resolutions needed to be implemented.

NORMA ELAINE TAYLOR ROBERTS ( Jamaica) said South Africa had very accurately just referred to the negotiations last year on the spending cap.  A copy of the Group’s statement could be made available.  The question of the spending cap was critical to any discussion of the financial situation and was something that had to be addressed.  The Group directly opposed the cap.  The Group could have taken a decision as was recently taken, where some Member States who had not agreed with certain provisions had called for a vote.  One hundred thirty-two Member States could have done the same, because they opposed a provision that was against the United Nations Charter.  They had not done so.  Jamaica had all intentions of abiding by the provisions of that resolution.  She understood that, when the Secretary-General put forward his request for funding, it would be approved.

She said that was one of the reasons why it had been necessary to oppose small group decisions or agreed recommendations, because the commitment given behind closed doors had been symbolic and had been immediately revoked in the statements made in the plenary.  The decision had been imposed by States who held the purse.  It was a total blackmail.  The Group had totally opposed the cap, but had not sought a vote, as there was much political pressure and talk of bringing down the Organization.  The Group had caved in at that time, but that would not happen again.

KHUSHALI PARIKH SHAH ( United States) reserved future comments to another session, but agreed with the representative of Austria, who had a correct recollection that the budget resolution had been adopted by consensus.  She did not understand the need for informals on the subject, as she did not understand what they would accomplish.

PABLO BERTI OLIVA ( Cuba) wanted to make a statement at a later date, but supported India’s proposal to hold informals on the item.

Mr. DROFENIK ( Austria) said he had been misquoted previously, which he found deplorable.  He had not said that limited spending had been supported by all Member States.  He was well aware that certain countries and groups liked some elements of the budget resolution more and other elements less.  He was also fully aware of the position of the Group of 77 on the limited spending authority.  However, the notion that limited spending had been imposed was incorrect -- it was an outcome of various interests and had been reflected in a resolution that was adopted by consensus.

Mr. HUSSAIN ( Pakistan) supported the request for informals on the financial situation of the United Nations.  He also said that he saw some improvement in the second statement by Austria, whose representative had tried to improve his initial statement on the budget resolution.  Representatives of Jamaica and South Africa had correctly recalled the context of action on that text.  It had been a matter of good faith on behalf of the Group of 77, which, at the request of the Secretary-General, had agreed to a one-time unprecedented measure to avoid division among the Member States.  When the resolution was adopted, it was implied that, if and when the Secretary-General came to the Committee, his request would be approved.  Today, that raised some new doubts that the spending cap was not an ad hoc confidence-building measure, but part of the deliberate plan, which would undermine the trust within the Committee.  It seemed that having made a mistake in the past, some countries, including members of the Group of 77, would be more cautious in the future.  Additional conditionalities would undermine the routine and the normal work of the General Assembly.

NONYE UDO ( Nigeria) said that she only wanted to make several comments today.  She aligned herself with the position of the Group of 77 and China and noted that she had also heard two statements -- one modifying a previous one.  The modification probably represented what was meant to have been said in the initial statement, but was not.  The delegates should probably focus on the modified version.   Jamaica had suggested that it might be appropriate to circulate the statement of the Chair of the Group of 77 at the end of budget negotiations.  That would be appropriate, for it would put the whole discussion in a correct light.  Her delegation, for one, would definitely benefit from a refresher course.

She added that, for the record, her delegation shared the sentiments of India, supported by several other speakers.  Some pertinent points had been made, and Jamaica had made a point that she held dear.  However, only Nigeria could speak for Nigeria.  There could be various versions of what actually transpired, even within a small group.  Every delegation should be able to represent itself.  At this point, she reserved the right to speak on the agenda item again.

Mr. KOZAKI ( Japan) noted that many things had been said last year.  The record was available, and did not need to be repeated.  The discussion had taken a long time, and having it at the current point would not be constructive.  The Committee’s mood this morning was not very good.  While dialogue was important, it was necessary to think about having the best dialogue.

Mr. MAZUMDAR ( India) said the Committee’s hallmark was civility.  It would be a pity if that hallmark were to disappear.  He gently cautioned his friend from Austria in his choice of words.  An attempt had been made to defend the indefensible.  Japan had spoken of the need for dialogue.  He hoped it would not be a dialogue of the deaf, as it was proving to be.

YASSER ELNAGGAR ( Egypt) said he would attempt to bring back the Committee’s good mood.  The word “deplorable” had sentiment for his delegation, as it was in the same room that his Permanent Representative had, at the end of the first resumed session, said it was deplorable to use the word deplorable.  A discussion on the spending cap was important.  He agreed with Austria that the Committee had agreed to the spending cap by a consensus resolution.  While it was consensus at gunpoint, it was still consensus.  He was also happy that the spending cap would be automatically lifted by the Secretary-General, also by consensus.  That was what the resolution said.  Whether the Group’s statement last December needed to be circulated, the fact remained that the spending cap would be automatically lifted.  The question was when.  That was where a discussion was needed, and interaction with the Secretariat was important.  The Committee also needed to find a way to have discussions about when it would be appropriate to lift the cap.  It could not wait until the eleventh hour to discuss the matter.

Responding to the discussion, Mr. SACH, Controller, thanked delegates and noted from the Group’s statement that the ministers of the Group at a special meeting in Malaysia had reaffirmed the need to act to avoid a crisis in the United Nations.  That sentiment was very much supported in the Secretariat.  He noted the references to an item that was not actually central to the financial situation under agenda item 126, whereas the spending authority came up under item 124, as it was transacted under budget resolution 60/247 A.  Within that resolution, paragraph 3 authorized the Secretary-General to enter into expenditures of a first tranche limited to $950 million, as an exceptional matter.  The Secretariat was very closely monitoring the Organization’s financial situation.  He noted from the Group that there was interest in receiving more information on the expenditure pattern of the past five months.  The Organization did not have the whole picture covering all locations at the current stage.

The Secretariat had, however, been looking at expenditure rates, he said, and on the basis of four months of expenditure had concluded that resources available within the $950 million were fully adequate to take the Organization through the end of June and the first part of July.  The Secretariat would work closely to bring expenditure data for the first five months as soon as possible.  Later this month, the Secretariat would have firm expenditure figures for the first five months and a good basis for expenditures during June, which would be transformed into a document later in June.  At that time, the Secretariat would make the necessary recommendation and would hope to revert to a more normal pattern of financial control within the Organization.

On the question of budget management during 2006, he reassured the Committee that activities and programmes funded from the regular budget had not been delayed in 2006.  Financial control in a six month environment was more challenging than in a 12-month one.  Nevertheless, it was feasible to carefully monitor expenditures.  The Secretariat had not needed to make exchanges between essential and non-essential expenditures.  That said, he wished to draw delegates’ attention to the essentials of the financial situation paper before the Committee.  While the spending cap was a constraint -- the $950 million was a constraint on the good operation of the Organization -- it was not necessarily the most binding constraint facing the Organization’s operations from now to the end of the year.  The spending cap could be lifted by legislative action.

The real constraint was availability of cash, he said.  What cash the Organization did not have, it could not spend.  At the end of April, unpaid regular budget assessments were $1.2 billion.  Those assessments needed to be paid during the balance of the year to continue operations.  Lifting the cap alone would not solve the Organization’s financial problems, but would be one step.  The regular budget had a credit of $380 million at the end of April, which was enough to go through May, June and into July.

ERIC FRANCK SAIZONOU ( Benin) said that he had had no intention to take the floor today, because he had expected the Chair to determine the truth of some information that was not entirely accurate in a statement by the European Union, particularly regarding the stage of the debate on informals regarding the financial situation of the United Nations.  However, the Chair had not done that, so he just wanted to state the facts:  the discussion in the Bureau had been raised, but at no point had a decision been taken that the matter was settled and that no informals would be held.  The matter was still under discussion.

Mr. MAZUMDAR ( India) said that the Controller was not given to joking about things, so he had to just assume, in all seriousness, that the issue of the spending cap was not related to the financial health of the Organization, as it came under a different agenda item.  He would, of course, take that comment seriously, but remained convinced that the issue needed to be discussed.  He did not mind collapsing the two agenda items together.

Mr. ELNAGGAR ( Egypt) said that his intention today had been to keep the Committee in a good spirit, but Mr. Sach had spoiled that.  It was unacceptable for a Secretariat official to pronounce himself on the right of Member States to discuss anything at any point in time.  It was not up to the Secretariat to determine when and if Member States could discuss any issue.  “We want to discuss the spending cap whether the Secretariat officials like it or not, or want to take sides with any delegation in the room.”  Mr. Sach had said that the spending cap was basically a non-issue.  He wanted a written confirmation of that.  If Mr. Sach actually addressed the point that the problem was not with the spending cap, but the lack of payment of assessments, then that needed to be discussed and decision should be taken on that.  His delegation requested answers to questions by the Group of 77 and China in a formal meeting.

Mr. DROFENIK ( Austria) said that, as the representative of Japan had correctly pointed out, the Committee was not in a good mood today.  He also apologized to Egypt for having used the word “deplorable”.

Mr. ELNAGGAR ( Egypt) accepted the apologies and said that it had been his intention to bring back some good spirit, but in the Fifth Committee nobody could guarantee what could happen in the next five minutes.

Mr. SACH agreed it would be unacceptable for the Secretariat to make suggestions as to what Member States could discuss, but wanted to put on record exactly what he had said.  His statement had referred to the relevance of what had been produced in the financial situation report and why it had not addressed the spending cap.  Those were under different agenda items.  He also did not recall using the words “non-issue”.  He had said there was a difference -- one with regard to availability of funds and the other to the spending cap.

Introduction of Report

CATHERINE POLLARD, Director, of the Peacekeeping Financing Division, introduced the Secretary-General’s reports on the financing of the United Nations Mission in Liberia (UNMIL).

ANDRZEJ ABRASZEWSKI, of the ACABQ, introducing that body’s related report, said the ACABQ had recommended a small reduction.  The Advisory Committee had expressed concern about the treatment of general temporary assistance and quick impact projects.  In keeping with the original intent of such projects, overhead costs should be kept to a minimum and the level of posts reviewed.  Efforts should be made to identify implementing partners to share the burden of the cost of administering the project.

Ms. UDO ( Nigeria) said her delegation had only seen the ACABQ’s report yesterday and was still in the process of trying to digest it.  It was premature to make any comments on the report.  In that regard, she wanted the Chair’s guidance on how he intended to proceed.

Ms. LOCK ( South Africa), on behalf of the Group of 77, stressed the importance of the Mission in Liberia.  She realized the ACABQ was working under considerable time constraints and that a large regional group had not had a chance to thoroughly consider its report.  She would support the request for a brief opportunity for those delegations who wished to make formal statements in support of the Mission.

Ms. UDO (Nigeria), on behalf of the African Group, said the Group attached great importance to UNMIL and would not be in a position to recommend or approve any recommendations put forward by the ACABQ, as it had not yet studied the report.  She wanted to show maximum flexibility with regard to the programme of work and reserved the right to return to the issue with a formal statement on the item.  The Group did have difficulties with some of the issues and would highlight them during informal negotiations.  What had worked in the United Nations Mission in Sierra Leone (UNAMSIL) should also be applied to other missions.  She had taken due note of the statement of the Chair of the ACABQ.  The African Group could not express any position at the current time, but would study the additional information that the Secretariat would provide.  She reserved the right to return to the issue in the formal setting.

Ms. LOCK (South Africa), speaking on behalf of the Group of 77 and China and associating herself with the African Group, expressed firm support for United Nations activities in Liberia and wanted to make sure that the Mission received adequate financial support and would not support any decisions that would affect its activities.  She had listened to some of the comments by the ACABQ and reserved the opportunity to express position on them at a later date.  She wanted to make two observations on the procedures.  Understanding the difficulty of reserving services this week, as an exceptional measure she could go along with the proposal to proceed to informals, on the understanding that delegations could revert to the right to make a formal statement on the Mission,. However, if a formal request was made to keep the item open, it should be respected.  Adequate time should be given to careful consideration of peacekeeping budgets.  Sufficient time was also needed to study the documentation.

FERNANDO DE OLIVEIRA SENA ( Brazil) supported the African Group and the Group of 77 and reserved the right to pronounce on the Mission, which he fully supported.  He had some questions on the recommendations of the Advisory Committee and wanted more time to study them.

Procurement

As the Committee resumed its consideration of the administrative and budgetary aspects of peacekeeping, JAYANTILAL KARIA, Director of Accounts Division and Officer-in-Charge of Procurement Services, provided some additional information in connection with a series of questions posed during the Committee’s previous meeting.

To the question on the possible conflict of interest when procurement is under the charge and responsibility of the Controller, he said that there was potential conflict whenever a proposer of an action was to be engaged in the subsequent approval of administrative steps to implement the action.  Hence, in a situation where the Controller was the requisitioner of procurement actions, he should not be the recipient of recommendations from the Headquarters Committee on Contracts (HCC) to award contracts consequent upon the requisition.  To avoid the conflict, the Controller should not, and did not, approve any HCC recommendations for the Office of Programme Planning, Budget and Accounts requisitions.  That policy was adhered to and fully insulated the HCC’s independent role within the procurement cycle.  It applied equally to any requisitions that would be generated by a Chief Procurement Officer, whether that role was carried by the Assistant Secretary-General of the Office of Programme Planning, Budget and Accounts or of the Office of Central Support Services (OCSS).

On the implementation of the Deloitte recommendations, he said that the Procurement Service had undertaken a number of recommendations that were deemed as “immediate” by the external report.  Actions to implement the recommendations of Deloitte Consulting would be fully reported in the upcoming report on procurement, which would be submitted for editing and translation very shortly for subsequent presentation to the Fifth Committee later in June.  To another question, he answered that the review of internal controls conducted for the Procurement Service did not relate to General Assembly resolution 59/288.  Actions by the Secretary-General to implement the resolution would be detailed in his procurement report.

As to the comments in the Volcker report on procurement, he said that references to procurement irregularities appeared in the interim reports dated 2 February 2005, 29 March 2005 and 8 August 2005.  It was found that the selection of contractors did not conform to established financial and competitive bidding rules; there were consistent violations of prescribed procurement procedures, engagement in unfair practices, failure to appropriately document decision-making processes, non-compliance with procurement rules relating to qualifications of prospective contractors, and solicitation of a bribe by Mr. Yakovlev.  The link between the Volcker Commission findings and the present investigation was that the investigation was launched following the guilty plea by Mr. Yakovlev, which had resulted from a criminal investigation based upon evidence provided in the Volcker report.

Damage done to the United Nations reputation was difficult to assess in objective terms, he continued, as it was in many ways a matter of perception.  In any event, responsibility for the damage could not be determined prior to the completion of ongoing investigations.  In connection with the question as to what kind of information had been sought from Member States, he said that, in the conduct of investigations, it was necessary to seek information from many parties, including Member States and their law enforcement authorities.

One of the questions had been why the Under-Secretary-General for Management had shifted the responsibility from the Department of Peacekeeping Operations to the Office of Central Support Services, he said.  No responsibility had been shifted, and any determination of such responsibility would have to await the outcome of the investigations.  Likewise, no one had been blamed or disciplined.

He also provided details regarding specific additional staff requests made by the United Nations Procurement Service in the period from 2000 to 2003-2004 and said that United Nations Development Programme (UNDP)’s long-term agreements had been accessed to provide a systems study utilizing experts in procurement.  That was neither an audit nor an investigation and, as such, did not fall within the scope of either the Office of Internal Oversight Services (OIOS) or the Board of Auditors.  The firms shortlisted were Accenture, Arthur D. Little ( Sweden) and Deloitte Consulting.  The Fifth Committee had been provided with a briefing on the major findings of the Deloitte report shortly after it was issued.

To a question whether the ACABQ, the United Nations Procurement Service, and the OIOS had been given an opportunity to provide their views on the Deloitte report, he said that it was not established practice to request all parties to comment on draft consultancy reports.  However, during review, the stakeholders, including 34 staff of the Procurement Service, had been interviewed, as well as the Assistant Secretary-General/OCSS and a number of staff from the OIOS.  Deloitte was the only consultancy that had reviewed Procurement Service internal controls in depth.  A study by the National Institute of Governmental Purchasing on procurement had not focused on internal controls.  As to why the Deloitte report was used as a reference point, he said that it was the most thorough and up-to-date available review of United Nations procurement.  As the firm had specifically addressed internal controls, it was prudent and good risk-management strategy to use the findings of that consultancy as a benchmark to further improve the internal controls within Procurement Service.

On the authority for the Deloitte study of the Office of Programme Planning, Budget and Accounts and several other questions, he said that the study had been commissioned by the Secretariat following a repeated request by the General Assembly that an external review be conducted of the Accounts Division.  The scope had been broadened to cover all of the Office, in light of the absence of such an external review for many years.  It had been competitively bid under established rules and procedures and not connected with other consultancy contracts.

Turning to how the Assembly had been informed of the findings of various commissioned audits and investigations, he said that the Board of Auditors’ reports had been issued and discussed in detail with both the ACABQ and the Fifth Committee.  The Board could not include in its own reports the conclusions by the OIOS and other experts, unless such conclusions were final.  By the time the Board had finalized its report, the OIOS reports had not been finalized.  The Deloitte report had only been finalized and issued on 6 December, at which time the Board had been well into the reporting phase of its peacekeeping audit.  Nevertheless, the Board of Auditors had summarized the key findings of that report in paragraph 67 of its report contained in document A/60/5/Vol.II).

A representative of the Office of Internal Oversight Services (OIOS) thanked Member States for showing confidence in OIOS work and assigning it the challenging mandate of carrying out the comprehensive management audit of the Department of Peacekeeping Operations.  The assignment had been instrumental in highlighting the roles that oversight could play in improving the Organization’s work and enhancing its efficiency and effectiveness.  Delegations had raised a number of questions that warranted serious and frank discussion of the roles of management, internal audit, the Board of Auditors and other external review entities, in improving the Secretariat’s overall internal control environment.  Some of the OIOS findings and methods had been challenged in the process.  The OIOS did not agree with those comments which questioned the professionalism of its audit work, in particular the Peacekeeping Department’s comprehensive audit.  The OIOS consistently strived to attain the highest levels of professionalism in the performance of its audits and in reporting audit results.

In that regard, he noted that the OIOS, along with other United Nations internal audit bodies, had adopted the Professional Practices Framework of the Institute of Internal Auditors as its guide to operations.  One of the standards stated that, in performing their work, internal auditors should be independent and objective.  The Oversight Office took that standard very seriously and could unequivocally state that, in conducting the comprehensive Peacekeeping Department management audit, standard had been fully complied with.  The Oversight Office could also state that all conclusions drawn from the audit were the result of applying those standards regarding the professional conduct of audits.  That was critical, as Member States would not find its audit reports useful unless their conclusions were based on objective analysis and the application of professional standards.

There had also been some questions regarding the role of the OIOS in assessing internal controls in areas audited, he said.  In that regard, he stressed that all audit assignments included a review of the internal controls of the areas being audited.  Any internal control weaknesses found during audits were routinely brought to the attention of management for corrective action.  Regarding the statement that internal controls were embedded in rules and procedures, which for United Nations procurement were the Financial Rules and Regulations, the Oversight Office agreed with that statement and had stressed that reform of the Financial Regulations and Rules to suit the particular circumstances of peacekeeping operations was not warranted, as the rules provided the required principles and framework for transparency and accountability without prohibiting flexibility, as and when needed.  Internal control as a concept began with the organizational culture as a basis for control and responsibilities.

RAZIFF ALJUNIED ( Singapore) would have to look the response and come back to it.  On the briefing on the Deloitte consulting report, while there might have been a meeting, it had been held at an unfortunate time when another important issue was being held at the same time.  He did not have a full understanding of the report.  The findings had not been clear, and the Committee had not been provided with a proper analysis.  He was confused with the response to question 13 and needed further explanation in that regard.

Mr. KARIA noted that, as far as the findings of the Deloitte report, 14 findings had been detailed in the report.  Some had been classified as requiring immediate implementation, some were medium term, and others were long term.  The management had addressed those classified as immediate issues.  Full details were provided in the report currently being prepared, which detailed all the findings, including what had been done and what was planned for the future.

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For information media • not an official record