Sixty-first General Assembly

Fifth Committee

6^th Meeting (AM)

DEVELOPMENT ACCOUNT FINANCING, CONSTRUCTION IN ADDIS ABABA, VIENNA

 

AMONG ISSUES TAKEN UP BY BUDGET COMMITTEE

 

The Fifth Committee (Administrative and Budgetary) this morning took up several reports under its 2006-2007 budget agenda item, focusing on the financing of the Development Account, construction of additional facilities in Addis Ababa and Vienna, and the contingent liability reserve for the United Nations Postal Administration.

The Development Account -- created in 1997 to fund technical cooperation projects for the benefit of developing countries -– attracted particular attention today.  In a report before the Committee, the Secretary-General responded to a request to provide recommendations on how additional resources in the region of $5 million could be added to the Development Account.

The representative of the United States said that the Assembly had intended the Account to be funded through savings achieved by gains and productivity, and her delegation had expected that the Secretary-General would identify ways for the United Nations to operate more efficiently, freeing up resources.  However, the report stated that there was no reliable method to determine the cost of outputs and services and, therefore, efficiency savings could not be identified.  Also, according to that document, programme managers often retained efficiency savings to meet their own requirements.  But, if there was no method to determine efficiency savings, then what “savings” were being utilized by the managers?  Her delegation had long advocated for a cost-accounting system in order to allow for that type of information to be known, and supported the adoption of International Public Sector Accounting Standards in order to move in that direction.

The representative of South Africa, speaking on behalf of the “Group of 77” developing countries and China, said the objectives for the funding of the Development Account had not been fulfilled.  No additional sources of funding for transfer to the Development Account, in addition to the original “down payment” of $13 million, had been identified, contrary to the purpose of the account.

She added that the problem was ensuring there was a system for transfer of resources once a productivity gain was identified, as programme managers had the prerogative to determine the use of such savings.  She called for suspension of financial regulations regarding the return of regular budget surpluses to Member States, so that a share of surpluses could be transferred to the Development Account.  She also expressed surprise at the Advisory Committee on Administrative and Budgetary Questions’ (ACABQ) reference to the recosting of the Development Account as a “one-time exercise”, contrary to the provisions of resolution 60/246.  Member States had made development a priority, and the Development Account paid for an invaluable service, she said.

[According to the Advisory Committee’s report, the Assembly, in its resolution 60/246, had requested that the Development Account be recosted for the biennium 2006-2007.  As indicated in paragraph 21 of the Secretary-General’s report, the results have led to an initial appropriation of some $13.95 million, as compared with $13.06 million in previous bienniums.  The Advisory Committee pointed out that the Account recosting was a one-time exercise approved by the Assembly; any decision to continue beyond the current biennium would, therefore, require further decision by that body.]

Several speakers, including the representative of Pakistan, supported the recosting of the Development Account to identify additional sources of funding, as the utilization of system-wide savings proved unreliable to deal with the varied demands.  He also expressed sympathy with the idea of removing hurdles to the use of budget surpluses for the Development Account, because no other sources had been identified.

However, the representative of Canada, also speaking on behalf of Australia and New Zealand, agreed with ACABQ that recent recosting for the biennium 2006-2007 should be understood as a one-time decision.  Since the Development Account was funded through savings -– essentially things that were not being done –- she wondered about the technical basis to recost a pool of money representing activities that no longer took place.

She added that the Development Account was marginal in terms of United Nations development finance.  It had been established as a solution to a particular negotiating problem about 10 years ago.  All delegations could reflect upon the question of whether the approach taken then, based on concerns about budget cutting that were never realized, represented a sustainable and meaningful element of the Organization’s development architecture for the future.

Also today, as the Committee examined progress in the construction of additional facilities in Addis Ababa and Vienna, several speakers thanked Ethiopia for its allocation of land for additional office facilities for the Economic Commission for Africa (ECA), and Austria for taking responsibility for €52.5 million in finances for additional conference facilities at the Vienna International Centre.  They also noted the cost-sharing ration for the remaining €2.5 million cost of that project, and sought regular updates on removal of asbestos at the Vienna facility.  Additional questions were also asked about the timetable of the projects, the appointment of a project coordinator and the bidding for construction in Addis Ababa.

Regarding asbestos, a representative of ACABQ, Andrzej Abraszewski, who introduced that body’s reports today, said that, on many occasions, the Advisory Committee had expressed concern on the presence of asbestos in United Nations buildings and its potentially damaging health effects.  ACABQ had been informed that Austria’s Government intended to remove all asbestos from the existing Centre in Vienna between 2008 and 2010, and that additional facilities under construction would then be used as “swing space”.  The same was expected to be completed in Addis Ababa in 2010.

In connection with a proposal to establish a contingent liability reserve for the United Nations Postal Administration to protect against potential losses caused by bulk mail, Finland’s representative, who spoke on behalf of the European Union and associated States, sought continuation of a search for options other

than the establishment of a liability reserve, as a working capital fund already existed.

Also participating in the work of the Committee were representatives of Angola (on behalf of the African Group), Nigeria, Ethiopia, Japan and Iraq.  The Secretary-General’s reports before the Committee were introduced by Sharon Van Buerle, Director of the Programme Planning and Budget Division.

The Committee will continue its work at 10 a.m. on Tuesday, 17 October.

Background

The Fifth Committee (Administrative and Budgetary) met this morning to consider a series of reports on the 2006-2007 budget agenda item.

The Secretary-General’s report on construction of additional office facilities at the Economic Commission for Africa (ECA) in Addis Ababa (document A/61/158) contains an update on the latest developments in that regard.  According to the document, additional land has been allocated for the project by the host country, and actions have been taken to coordinate with the Government of Ethiopia to finalize the amendment to reflect as much in the host country agreement.

The Secretary-General also reports that, during the reporting period, the project time schedule was revised in connection with the expansion of the original to include the construction of the two additional floors simultaneously with the originally approved project.  Final construction documents are now being completed.  It is anticipated that the selection of a general contractor will be finalized by the first half of 2007 and that construction work will commence immediately thereafter.  The total estimated cost of the project in the amount of some $11.38 million remains unchanged, as approved by the General Assembly in section VII of its resolution 60/248.

The Advisory Committee on Administrative and Budgetary Questions (ACABQ), in a related report (document A/61/362) recommends that the Assembly take note of the report of the Secretary-General.  ACABQ notes that the Secretary-General has presented a breakdown of the cost plan in the amount of some $11.38 million, as approved by the Assembly in section VII of its resolution 60/248 of 23 December 2005.  The previous cost plan had projected expenditures in the amount of about $8.99 million, of which $7.71 million, requested by the Secretary-General in 2001, was approved in Assembly resolution 56/270.  The cost increase is related to the expansion of the scope of the project to include the construction of two additional floors, to be completed simultaneously with the originally approved four floors.  ACABQ was assured that no further cost increases were anticipated.

The Committee also had before it the Secretary-General’s report on construction of additional conference facilities at the Vienna International Conference Centre (document A/61/166), which provides a progress update and information about the cost-sharing arrangements between the United Nations and the three other organizations located at the Centre.  Working groups made up of representatives of the Austrian Government, as well as consultants and experts from the organizations located in the Centre, have been meeting regularly.  The United Nations Industrial Development Organization (UNIDO) was designated as the focal point to represent the interests of the organizations in the realization of the new conference building.  A building permit for the new conference facility was obtained in July 2006, and preparatory work on infrastructure for the construction is under way.  The report anticipates that the original timeline and costs for the construction and delivery of the new conference facility would be respected, with the new conference facility due to be available in 2008.

The agreement with the Austrian Government to provide a new conference facility sets a ceiling for the project at €52.5 million, of which the United Nations and the three other organizations located at the Centre would collectively contribute €2.5 million, payable in the biennium 2008-2009.  An agreement on the cost-sharing arrangement has been reached with the participating organizations.  The United Nations share of the costs for the construction of the new conference facility amounts to €100,000, payable in 2008.  The maintenance and operation costs of the new conference facility would be shared using the present cost-sharing principle, which is based on actual usage.  The related financial requirements would be dealt with, along with other common support costs, in the context of the proposed programme budget for the biennium.

The related ACABQ report (document A/61/361) notes that the new conference facility in Vienna would serve as a “swing space” from 2008 to 2010, when asbestos is due to be removed from the existing conference building.  Upon inquiry, the Committee learned that asbestos removal was being undertaken by the Austrian Government and would not affect the total project cost.  The Committee would welcome updates on asbestos removal in future reports of the Secretary-General on construction of additional conference facilities.

In the report on a contingent liability reserve for the United Nations Postal Administration (UNPA) (A/61/295), the Secretary-General recommends that the creation of a reserve by the General Assembly to cover the cost for postal services for previously issued UNPA stamps.  The waiver of financial regulations to allow the funding of the reserve by transferring the balance of net income of postal services to the reserve (until a ceiling level of $3.3 million is reached) is also recommended.

The reserve is needed because agreements with the postal services of the United States, Switzerland and Austria authorize UNPA to produce and sell United Nations stamps, for which the respective post offices would be reimbursed when the UNPA stamps were used.  The vast majority of stamps are purchased by collectors and not used for mailing purposes.  But, in some cases, bulk mailers use United Nations stamps to save postage costs for mailing their letters and catalogues or for filling their sales orders, accounting for an average of $752,595 (10 per cent of sales) per year.  If UNPA stamps were to decline in value significantly, increased attempts by bulk and mass mailers to purchase collections of United Nations stamps at significant discounts and present them for mailing can be expected, increasing postal charges to UNPA.  While UNPA has taken measures to prevent bulk mailing using its stamps, the creation of a reserve to provide for this liability is recommended.

In that connection, ACABQ (document A/61/480) notes that, over the past 20 years, UNPA has paid an average of 12.2 per cent of its income of $249.2 million to respective postal services where it operates (United States, Switzerland and Austria), and that the other 87.8 per cent could constitute contingent liability in view of the theoretical possibility that remaining sold stamps would be presented for mailing.

ACABQ sees merit in the Secretary-General’s proposal to establish a reserve for contingent liabilities for postal services for previously issued UNPA stamps, as recommended by the Board of Auditors and the Office of Internal Oversight Services (OIOS).  Such liabilities should be gradually built up by transferring the balance of the net income of postal services until a ceiling level of $3.3 million is reached.  In order to reach the target of $3.3 million, it would be prudent to consider further streamlining UNPA operations, if possible, and providing requisite service with even greater efficiency.

The Secretary-General’s report on the identification of additional resources for the Development Account (document A/61/282) has been prepared in compliance with paragraph 14 of General Assembly resolution 60/246, by which the Secretary-General was requested to provide recommendations on how additional resources in the region of $5 million could be added to the Development Account.  The Account was created in 1997 to fund technical cooperation projects for the benefit of developing countries.  Its initial funding-level was established on the basis of savings from reductions in administration and other overhead costs identified in the Secretariat from the reform programme of the Secretary-General.  The Assembly also established the savings identified at that time as the base level of funding, noting that future savings could be added to the account.

According to the report, “savings” in the amount of $5 million are difficult to identify, and any decision to increase funding for the Development Account would have be taken in the light of competingpriorities for the use of the Organization’s overall budget.  In fact, experience shows that programme managers have invariably tended to retain savings to meet their own requirements.  There are also financial regulations in place regarding return of regular budget surpluses to Member States.  Those have, on occasion, been suspended as a measure to deal with the Organization’s financial problems, or in order to finance specific activities related to the reform of intergovernmental machinery or restructuring of the Secretariat.

The ACABQ, in a related report (document A/61/479), notes from the Secretary-General’s report that the characterization of the initial indicative target of cumulative savings of some $200 million for the Development Account as “overambitious” has been borne out.  Responding to the Secretary-General’s referral to the possibility of “suspending the provisions of financial regulations 5.3 and 5.4 in respect of any surpluses (unencumbered balances) under the regular budget arising at the end of a financial period for the purpose of transferring a share of such funds to the Development Account”, the ACABQ states that the matter would, as a matter of policy, be for the Assembly to decide.

ACABQ further notes that, in its resolution 60/246, the Assembly also requested that the Development Account be recosted for the biennium 2006-2007.  As indicated in paragraph 21 of the Secretary-General’s report, the results have led to an initial appropriation of some $13.95 million, as compared with $13.06 million in previous bienniums -— an increase of $889,100.  The recosting took into account annual prevailing rates of inflation of 3.2 per cent for 2005 and 3.5 per cent for 2006, resulting in increments of $418,000 and $471,100, respectively.  The Advisory Committee points out that the Account recosting was a one-time exercise approved by the Assembly; any decision to continue beyond the current biennium would, therefore, require a further decision by that body.

Introduction of Documents

SHARON VAN BUERLE, Director of the Programme Planning and Budget Division, introduced the Secretary-General’s reports before the Committee.

The ACABQ reports were introduced a member of the Advisory Committee, ANDRZEJ ABRASZEWSKI, who noted, in connection with the construction of additional conference facilities at the Vienna International Centre, that the construction project was to be undertaken by the host country, Austria, under cost-sharing arrangements with the United Nations Office at Vienna and three other organizations.  As a condition of those arrangements, the four contributing entities would own all new furniture and equipment, but be responsible for future maintenance and replacement costs.

He added that, on many occasions, ACABQ had expressed concern on the presence of asbestos in United Nations buildings and its potentially damaging health effects for all those present in the buildings.  The Advisory Committee had been informed that the host country Government intended to remove all asbestos from the existing centre between 2008 and 2010, and that additional facilities under construction would then be used as “swing space”.

The same was expected to be completed in Addis Ababa in 2010, he continued.  In connection with additional office facilities for ECA, he said that the Advisory Committee had expressed concern over a steady increase by close to $4 million in construction and related cost estimates,.  The ACABQ had now received assurance that no requests for additional funding would be forthcoming.

Statements

KAREN LOCK ( South Africa), speaking on behalf of the “Group of 77” developing countries and China, said that the objectives for the funding of the Development Account had not been fulfilled.  No additional source of funding for transfer to the Development Account, in addition to the original “down payment” of $13 million, had been identified, contrary to the purpose of the account.  She took note of the difficulties in identifying new funds referred to by the Secretary-General, as well as the guidelines issued by the General Assembly.  However, the problem was ensuring there was a system in place, so that a transfer of resources occurred once a productivity gain was identified, as programme managers had the prerogative to determine the use of such savings.  She called for suspension of financial regulations 5.3 and 5.4, so that a share of surpluses could be transferred to the Development Account.  She expressed surprise at ACABQ’s reference to the recosting of the Development Account as a “one-time exercise”, as the Member States had not discussed that when negotiating the methodology of recosting.  She said that Member States had made development a priority, and the Development Account paid for an invaluable service.

She trusted that the appointment of a project coordinator for the construction project at ECA would be finalized.  She acknowledged the invaluable contributions of the Government of Ethiopia to that project, as well as the Government of Austria for its contribution to the work at the Vienna International Centre.  She sought more information about the modalities for the proposal and impact on the financial rules and regulations from the establishment of a contingent liability reserve for UNPA.  She sought clarification on how UNPA could streamline its operations in order to reach the target of $3.3 million for the reserve, as well as further elaboration of the measures UNPA needed to undertake to show a profit at the end of the current biennium.

SINIKKA KOSKI ( Finland), speaking on behalf of the European Union and associated States, thanked Ethiopia for its allocation of land for additional office facilities for ECA, and Austria for taking responsibility for €52.5 million in finances for additional conference facilities at the Vienna International Centre.  She also welcomed the cost-sharing rations for the remaining €2.5 million cost for that project, and sought regular updates on removal of asbestos at the Vienna facility.

She said the Union sought continuation of a search for options other than the establishment of a contingent liability reserve for UNPA to protect against the actual and potential losses caused by bulk mail, as a working capital fund already existed.  She thanked the authorities of Switzerland for reaching an agreement with the United Nations regarding commercial mail.

Finally, she said 94 projects implemented or still in progress with funds from the Development Account contributed to follow-up processes of United Nations conferences, including the Millennium Development Goals.  She warmly welcomed the local expertise, analysis process, development planning and encouragement of interagency cooperation of those projects.  She noted that additional savings for the Development Account had not been identified, but that savings identified before were utilized by programme managers for other tasks.  She, therefore, hoped to clarify the identification of savings.

Ms. IZATA ( Angola), speaking on behalf of the African Group, reiterated the importance of construction of additional office facilities at ECA.  She appreciated that two additional floors would be constructed in addition to the four already approved, and that ECA could finalize selection of a general construction contractor by the first quarter of 2007.  There was no anticipated increase to the total estimated project cost, which she welcomed.  She also conveyed appreciation to the Government of Ethiopia for the additional land allocation and other support rendered to ECA.

Regarding the Development Account, KHUSHALI SHAH ( United States) said that the Assembly had intended for the Account to be funded through savings achieved by gains and productivity.  Her delegation had expected that the Secretary-General, in response to the Assembly’s request in resolution 60/246, would provide Member States with ways for the United Nations to operate more efficiently, thereby freeing up resources.  However, the report before the Committee stated that there was no reliable method to determine the cost of outputs and services and, therefore, efficiency savings could not be identified.  Also, according to that document, programme managers often retained efficiency savings to meet their own requirements.  In that connection, she had a question: if there was no method to determine efficiency savings, then what “savings” were being utilized by the managers?

Her delegation had long advocated for a cost-accounting system in order to allow for that type of information to be known, and supported the adoption of International Public Sector Accounting Standards in order to move in that direction, she said.  Since it was difficult to identify savings due to productivity gains, the Secretary-General had concluded that other mechanisms should be used to fund an increase in the Development Account.  Her delegation continued to review the Secretary-General’s conclusions and recommendations and would reserve further comments and questions for the informal discussions.

APEKSHA KUMAR (Canada), also speaking on behalf of Australia and New Zealand (CANZ), said that from CANZ standpoint, suspension of financial regulations 5.3 and 5.4 in order to finance an increase in the Development Account was not a way forward.  Money paid by Member States towards the running of the Organization should be returned to Member States when it was not fully expended by the Organization.  Unspent balances were not a vehicle for programme funding.  The fact that the report did not contain information on the impact of the Development account activities should be taken into account in any future discussions of funding arrangements.

Concerning recosting, she agreed with ACABQ that recent recosting for the biennium 2006-2007 should be understood as a one-time decision.  Since the Development Account was funded through savings -– essentially things that were not being done –- she wondered about the technical basis to recost a pool of money representing activities that no longer took place.  While the delegations she represented would be prepared to join others in deciding now not to recost in the future, they were also open to making that decision in the context of the budget for 2008-2009.

She added that the debate on Development Account financing was not a proxy for a wider understanding of the commitment of delegations to the financing of United Nations development activities.  Indeed, the Development Account was marginal in terms of United Nations development finance.  It had been established as a solution to a particular negotiating problem about 10 years ago.  All delegations could reflect upon the question of whether the approach taken then, based on concerns about budget cutting that were never realized, represented a sustainable and meaningful element of the Organization’s development architecture for the future.

Mr. VIRK ( Pakistan) said that the operations of the Development Account were an integral part of the Department of Economic and Social Affairs’ technical cooperation activities.  The Account’s core objectives were capacity-building via individual economic and technical cooperation projects at the subregional, regional, and interregional levels, and it was a valuable complement to, and not a substitute for, other development activities.  He said projects relating to advancement of women, sustainable development, trade, partnerships and information and communication technology had been executed by the United Nations Conference on Trade and Development (UNCTAD), the United Nations Environment Programme (UNEP), the United Nations Office on Drugs and Crime (UNODC), the Department of Economic and Social Affairs, and the United Nations Human Settlements Programme (UN-HABITAT).  He said it was vital to identify predictable financing, as many projects ended up orphaned.

He supported the recosting of the Development Account to identify additional sources of funding, as the utilization of system-wide savings had proved unreliable in dealing with the varied demands.  He expressed sympathy with the idea of removing hurdles to the use of budget surpluses for the Development Account, because no other sources had been identified.  He reiterated that savings should not come at the cost of normal programme activities or result in unnecessary downsizing, although all United Nations departments and offices should continue to enhance efficiency in delivering their mandated programs and services with the target of $200 million for the Development Account in mind.  He also added that socio-economic development was one of the key pillars of the United Nations, and there was a stark contrast between the amount spent in that area and that spent on the maintenance of peace and security.  Increases in the Development Account could contribute to meaningful and significant national efforts to implement internationally agreed development goals, such as the Millennium Development Goals. 

He also expressed support for construction of additional office facilities for the Vienna International Centre and ECA.  He agreed that the ECA project should add two additional floors, and appreciated the allocation of land by the Government of Ethiopia.  He hoped other host countries would take similar gestures wherever construction projects were planned.

NONYE UDO ( Nigeria) aligned herself with the position of the Group of 77 and China and said that the issue of the construction of additional office facilities in Addis Ababa had been before the Committee for some time now.  Member States had patiently followed the developments in that regard over the years.  She welcomed the fact that the allocation of additional land by the Government of Ethiopia had been formalized with the granting of the title deed.  There was no doubt that, given the demonstrated ongoing cooperation between the United Nations, through ECA, and the Government of Ethiopia, the remaining issues of design and construction of an alternative public access road to the premises would soon be concluded.  Her delegation had taken due note of the comment that “it is understood that the Addis Ababa municipality has been requested to fund the construction of the alternative access road”, and asked for clarifications regarding the approach the United Nations had adopted in similar instances in other cases.  She also asked for an actual project schedule for the commencement and completion of the construction.  Howe many firms had been retained for the bidding exercise?  Was it reassuring that the cost of the project of some $11.38 million remained unchanged?

Turning to the construction of additional conference facilities at the Vienna International Centre, she welcomed the contribution of the host Government and concurred with ACABQ that the removal of asbestos should be an integral part of the project.  Concerning UNPA, her delegation took note of the proposals and would seek further clarifications in informals.

On the Development Account, she said that Nigeria supported every effort that would lead to an increase of resources for the Account.  Recosting was a technical adjustment the Fifth Committee made to the budget as and when necessary.  That should not be confused with a clear mandate of the General Assembly on the need to credit the Development Account with surpluses.  Surpluses resulting from efficiency gains identified in the context of budget performance reports should be credited to the Account.

HAILIE SELASSIE GETACHEW ( Ethiopia) associated himself with the positions of the Group of 77 and the African Group and said that his Government had always cooperated with the United Nations, including by allocating additional land for the construction of additional facilities for ECA in Addis Ababa.  He was confident that all the remaining issues, including the alternative access road, would be finalized in the near future.  His Government intended to continue cooperating with the United Nations, through ECA, in the future.

KEIKO KURODA ( Japan) was concerned with the net loss for the United Nations Postal Administration in New York, and sought to know if there were lessons learned in Geneva or Vienna that could help resolve the problem.  She was concerned about using exceptions to financial regulations as easy solutions.

She was also cautious of recosting the Development Account, as it was not savings, and could not be based for the account.  She said recosting was a one-time exercise, and any change should be in accordance with financial regulations.

Mr. BANDAR ( Iraq) supported the substance of the statement on behalf of the Group of 77 by South Africa and appreciated the efforts by the Government of Ethiopia regarding the construction of additional facilities in Addis Ababa.  More details were needed on current activities in that regard, which the Fifth Committee should be aware of.

Responding to questions from the floor regarding the United Nations Postal Administration, Ms. VAN BUERLE said that changes that had been made included development of marketing plans, investigation of new markets, introduction of personalized stamps sales and the creation of a new website.  The operations in Europe had been restructured and consolidated, and were now to be administered from Vienna.  Outsourcing had also been investigated, but not pursued.  The number of posts at UNPA had been reduced.

On the ECA project, she said that, based on the information in the report, construction there should start in April-June 2007 and, if all went well, she hoped it would be completed by March 2009.  As for the bidding, five companies had expressed interest, and now efforts were being made to expand that list to create a broader pool of applicants.  A vacancy for the project coordinator had been closed and the selection process was under way.

Ms. UDO ( Nigeria) asked for clarification on why there were plans to expand the pool of construction companies beyond the five already identified, such as whether the five companies were unsuitable, or if there was a mandate to consider more companies.  She also wanted to know whether the construction schedule was now technically behind schedule, and said the General Assembly should be kept more informed if that was the case.

Ms. VAN BUERLE answered that no decision had been made as to whether the five companies were suitable, but that the magnitude of the construction made it reasonable for the Organization to consider more companies to assure better competition and scope.  She said that the construction schedule was now being finalized and evaluated, and may need to be adjusted, which had been taken into consideration.  However, she said that the existing timetable was to be honoured and it was, therefore, on schedule.

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