Sixty-third General Assembly

Fifth Committee

13^th Meeting (AM)

UNDER-SECRETARY-GENERAL FOR MANAGEMENT BRIEFS FIFTH COMMITTEE ON UNITED NATIONS

FINANCES; SAYS MAIN INDICATORS FOR REGULAR, PEACEKEEPING BUDGETS ‘MIXED’

Committee Also Takes Up Progress Report on Adoption

Of International Public Sector Accounting Standards by United Nations

Presenting the financial situation of the United Nations to the Assembly’s Fifth Committee (Administrative and Budgetary) this morning, Angela Kane, Under-Secretary-General for Management, said that the main indicators were mixed and the final outcome for 2008 would depend on the action to be taken in the next few months by the countries owing some $756 million to the Organization’s regular budget and $2.9 billion to its peacekeeping accounts.

The position of the regular budget was uncertain, given the current and projected cash situation, she said. The amount of debt for the regular budget was highly concentrated, with 94 per cent being owed by the main contributor (the United States).  Depending on action yet to be taken on a national budget, the situation might worsen and the Organization might have to borrow $148 million from reserve accounts by the end of December.  Alternatively, if the major contributor paid the full amount of its 2008 assessment, the United Nations could have a positive cash balance at the end of the year.

Regarding peacekeeping operations, she said that, while unpaid assessments showed increases as compared to the end of 2007, the amount currently outstanding was below the October 2007 level.  The amount of $2.9 billion still outstanding was considerable.  Nevertheless, she anticipated ending 2008 with a lower amount of debt to troop contributors than at the beginning of the year.

Also this morning, the Committee took up the first progress report on the adoption of International Public Sector Accounting Standards (IPSAS) by the United Nations, which was introduced by United Nations Controller, Yun Yamazaki.  A related report of the Advisory Committee on Administrative and Budgetary Questions (ACABQ) was presented by the Chair of that body, Susan McLurg.

Commenting on those documents, the representatives of Antigua and Barbuda (on behalf of the “Group of 77” developing countries and China) and the Russian Federation welcomed the introduction of the International Standards as an opportunity to enhance the credibility, transparency and accountability of the Organization’s financial transactions and agreed that the transition to IPSAS would help to deal with current problems in the financing of United Nations work.  Both also emphasized the importance of ensuring that staff were fully trained in IPSAS prior to implementation.

The Russia Federation’s representative also had some concerns regarding the transitional process.  The first and most important one had to deal with the interrelationship of IPSAS and the enterprise resource planning system.  The final decision to approve the Secretary-General’s proposals for enterprise resource planning in its current form had not been adopted by Member States.  Most importantly, in his view, it was not a necessary condition for the IPSAS transition.  The strategy of the Secretariat to integrate the transitional IPSAS process in the enterprise resource planning would require careful consideration.

Also participating in the discussion were representatives of the United States and Singapore.

The Committee will take up its agenda item on the pattern of conferences at 10 a.m. Friday, 31 October.

Background

The Fifth Committee (Administrative and Budgetary) met this morning to hear a Secretariat presentation on the financial situation of the United Nations and to take up reports on the adoption of International Public Sector Accounting Standards (IPSAS) by the Organization.

In November 2005, the United Nations System Chief Executives Board for Coordination High-Level Committee on Management recommended that all United Nations system organizations adopt International Public Sector Accounting Standards effective no later than 2010, in the belief that a harmonized framework of IPSAS-compliant policies would improve the quality and credibility of financial reporting across the United Nations system and enhance the consistency of financial reporting, setting a common measurement basis for evaluating financial results system-wide.  The General Assembly approved IPSAS adoption in July 2006.  The first progress report on the adoption of International Public Sector Accounting Standards by the United Nations (document A/62/806) details progress made towards that end, up to 31 March 2008.

The Secretary-General reports that, since approval of the system-wide IPSAS project, progress has been most evident in the areas of project governance and organization, the development of IPSAS-compliant harmonized accounting policies and guidance, and communication and training.  For the United Nations system organizations to meet the 2010 target for IPSAS, significant progress is needed to introduce required information systems.  Within the United Nations itself, IPSAS adoption is linked to the system-wide timetable and the United Nations enterprise resource planning project (see document A/62/510/Rev.1).  IPSAS adoption is being targeted for as soon as the Organization’s information systems are upgraded to support it.

The Advisory Committee on Administrative and Budgetary Questions (ACABQ), in a related report (document A/63/496), notes the involvement of the Chief Executives Board’s High-Level Committee on Management and encourages the Secretary-General to continue to fully utilize the finance and budget network and relevant task forces to enhance coordination of all aspects of the transition to IPSAS, as well as the new standards’ implementation.  The Secretary-General should be requested to provide detailed information on the ongoing work in this regard in the second progress report on IPSAS, as well as in the next report of the Chief Executives Board.  The second IPSAS report should also provide an update on the status of consolidation or aggregation of the financial statements of the United Nations.

According to the report, the system-wide IPSAS adoption envisioned a “two-level” approach and phased implementation.  The two-level approach involved providing resources at both the system-wide level and individual organizational level.  At the system-wide level, harmonized IPSAS policies and guidance were developed through a consultative process; at the individual organization level, each entity was responsible for establishing its own project team and dedicating sufficient resources.  The phased implementation strategy recognized that some United Nations system organizations were at a more advanced stage of readiness for IPSAS than others and were targeting implementation effective 2008.  The majority of the organizations, however, were targeting IPSAS adoption effective 2010, or as soon as possible thereafter, and would benefit from the lessons learned.  The ACABQ supports this approach and encourages the Secretary-General to draw on the experiences of other organizations and entities, wherever feasible.

Noting that a common system-wide approach to training was being pursued, involving three phases -- a training needs assessment; the procurement of training packages; and the deployment of training -- the Advisory Committee stresses the importance of ensuring that staff are fully trained in IPSAS in advance of its implementation.  The ACABQ considers the Secretary-General’s approach to training prudent and emphasizes the need to continue efforts in this respect.

Further, the Advisory Committee finds that it may be advisable to implement IPSAS in 2012 rather than in the middle of the biennial budget period.  In this way, the financial statements for the biennium 2012-2013 could be prepared in accordance with IPSAS standards.  While recognizing that expenditure will likely accelerate as the implementation process progresses during the remainder of the biennium 2008-2009, the Advisory Committee nonetheless expresses concern regarding delays affecting the preparedness of the United Nations and the training of its staff.

The Advisory Committee recognizes the considerable task involved in the preparation and implementation of IPSAS and notes significant efforts under way.  It looks forward to the second progress report of the Secretary-General, as well as to the report of the Joint Inspection Unit on the system-wide preparedness of United Nations systems organizations for IPSAS.  The Advisory Committee recommends that the Assembly take note of the first progress report of the Secretary-General on the adoption of IPSAS by the United Nations.

Financial Situation of United Nations

ANGELA KANE, Under-Secretary-General for Management, said that the picture with respect to cash and debt to Member States was mixed, mainly due to borrowing for the regular budget.  Assessments and payments for the budget were both lower at 24 October 2008 than at 31 October 2007, by $174 million and $25 million, respectively.  The decrease in assessments for 2008 was the result of budget adjustments, primarily for special political missions, which had been incorporated in the 2007 assessments.  Unpaid dues were lower by $80 million, at $756 million, on 24 October 2008, compared to $836 million on 31 October 2007.  The number of Member States that had paid their regular budget assessments in full by 24 October was 133, 7 higher than at the end of October last year.  The corresponding figure for 31 December 2007 was 140.

As for the breakdown of the $756 million that remained outstanding at 24 October 2008, she said that the amount was highly concentrated, with 94 per cent being owed by a single Member State ( United States), and 6 per cent by remaining countries.  Clearly, the final picture for 2008 would largely depend on the action taken by those countries in the coming months.

Cash resources for the budget comprised the General Fund, to which assessments were paid, the Working Capital Fund, presently approved at the level of $150 million, and the Special Account.  The final position with regard to cash would also depend in large measure on the action to be taken by the countries with outstanding dues.  The current situation reflected a shortage for the regular budget, primarily due to special political mission expenditure levels during the first year of the current biennium, as well as the general weakening of the United States dollar as compared to budgeted exchange rates.  Depending on action yet to be taken on a national budget, the situation might worsen and the Organization might have to borrow $148 million from reserve accounts by the end of December.  Alternatively, if the major contributor paid the full amount of its 2008 assessment, the United Nations could have a positive cash balance at the end of the year.

Turning to peacekeeping, she said that the unpredictable nature of the demand for peacekeeping activities made it hard to predict financial outcomes.  In addition, peacekeeping had a different financial period, running from 1 July to 30 June rather than from 1 January to 31 December.  Assessments were issued separately for each operation, and since assessments could currently only be issued through the mandate period approved by the Security Council for each mission, they were issued for different periods throughout the year.  All that complicated a comparison between the financial situation of peacekeeping operations and those of the regular budget and the tribunals.

The total amount outstanding for peacekeeping operations at 24 October 2008 was over $2.9 billion, approximately $198 million higher than at the end of 2007, but $575 million below the level of 31 October 2007.  The current level of unpaid assessments was, in part, related to the peacekeeping financial cycle.  The $2.9 billion outstanding at 24 October included, in particular, assessments that had been issued on 26 September.  As with the regular budget, the unpaid portion of assessments was highly concentrated, with 62 per cent of the total from just two Member States ( United States and Japan) and another 21 per cent from four other Member States.  Due to the unpredictable amount and timing of peacekeeping assessments, it could be more difficult for Member States to keep fully current with their payments.  Therefore, she wanted to pay special thanks to the 31 Member States that had paid all peacekeeping dues outstanding, due and payable by 24 October 2008:  Australia; Austria; Azerbaijan; Brazil; Bulgaria; Burundi; Canada; Czech Republic; Denmark; Finland; Georgia; Germany; Guatemala; Ireland; Italy; Liechtenstein; Mexico; Monaco; New Zealand; Niger; Norway; Philippines; Republic of Moldova; Russian Federation; Samoa; Singapore; Slovenia; South Africa; Sweden; Thailand and the United Kingdom.

With some $3.1 billion cash balance for peacekeeping at 24 October, there were some restrictions on the use of those resources, she continued.  The General Assembly, in its resolutions on the financing of missions, routinely specified that no peacekeeping missions shall be financed by borrowing from other active missions, and the terms of reference of the Peacekeeping Reserve Fund restricted its use to new operations and expansion of existing ones.  Only some of the cash available in the accounts of closed operations was currently available for cross-borrowing.  At 24 October, cash in the accounts of active missions had totalled some $2.5 billion, the Peacekeeping Reserve Fund had $142 million and the accounts of closed missions had stood at $467 million.

Based on projected receipts and disbursements, cash available in peacekeeping accounts at the end of 2008 was expected to total just under $2.2 billion, she said.  Of the $522 million expected to be available in the accounts of closed missions, $295 million was set aside to pay for outstanding liabilities, such as troop and equipment payments.  That left only $227 million for possible cross-borrowing.  Cross-borrowing had been required in 2007 for five peacekeeping operations for a total of $50 million.  So far this year, cross-borrowing had been required for seven missions, for a total of $117 million.

As reported in May, the Organization had hoped to reduce its debt to Member States providing troops and equipment to peacekeeping operations to $728 million, she said.  Based on revised projections, it now appeared that the amount outstanding would be some $645 million at the end of the year.  New obligations in 2008 were up, due mainly to the deployment of the African Union-United Nations Hybrid Operation in Darfur (UNAMID), partly offset by a reduction of the authorized military strength of the United Nations Mission in Liberia (UNMIL), lower deployment in the United Nations Interim Force in Lebanon (UNIFIL) and termination of the United Nations Mission in Ethiopia and Eritrea’s (UNMEE) mandate.  The total number of troops and formed police units had risen from 74,578 at the end of 2007 to 79,047 at 30 September 2008.

In this connection, she said that delays in the receipt of contributions affected the Secretariat’s ability to make quarterly payments to troop contributors, as it had to first ensure adequate provision of cash resources to meet ongoing operating cost requirements.  Having said that, she wanted to reassure troop contributors that her colleagues and she monitored and reviewed the peacekeeping cash flow constantly, with a view to making quarterly payments as soon as sufficient cash was available.  For his part, the Secretary-General was committed to meeting the Organization’s obligations to Member States as expeditiously as possible.  Doing that would, however, depend on Member States meeting their financial obligations to the United Nations in full and on time, and on the finalization of memorandums of understanding with troop contributors for provision of equipment.

Regarding the International Tribunals for Rwanda and the former Yugoslavia, she said that their financial position remained “relatively acceptable” this year.  Assessments in 2008 were somewhat higher than in 2007, and the amount outstanding was slightly lower, by about $11 million.  The number of Member States paying their assessments for both tribunals in full by 24 October was 97, 5 more than on 31 October last year.  The final position of the tribunals would obviously depend on the payments by Member States during the balance of this year.

On the Capital Master Plan, she said that the total $1.9 billion budget of the project had been approved by the Assembly on 22 December 2006.  In accordance with the resolution, 180 Member States were under the multi-year payment systems and 12 Member States had opted for a one-time payment.  As of 24 October, payments totalling $766 million had been made against assessments due and payable, with $80 million still outstanding.  In addition, a number of States which had not opted for one-time payments had nevertheless made advance payments.

In conclusion, she paid tribute to those 31 Member States that had paid in full all assessments due and payable on 24 October.  Those were Australia, Austria, Azerbaijan, Brazil, Bulgaria, Burundi, Canada, Czech Republic, Denmark, Finland, Georgia, Germany, Guatemala, Ireland, Italy, Liechtenstein, Mexico, Monaco, New Zealand, Niger, Norway, Philippines, Republic of Moldova, Russian Federation, Samoa, Singapore, Slovenia, South Africa, Sweden, Thailand and the United Kingdom.  In order to maintain financial health of the Organization, it remained as critical as ever for Member States to meet their financial obligations to the United Nations in full and on time.  On behalf of the Secretary-General, she urged all Member States to endeavour to do so.

Introductions

YUN YAMAZAKI, Controller, introduced the Secretary-General’s report on the first progress report on the adoption of International Public Sector Accounting Standards by the United Nations (document A/62/806).  The World Food Programme (WFP) was implementing IPSAS in 2008.  Several other organizations were targeting 2010 for IPSAS implementation, while others had to wait until the underlying information technology had been updated.

At the United Nations itself, cross-functional working groups had been formed to create policy and guidance for the Organization, he continued.  The overall strategy was to integrate IPSAS into the implementation of enterprise resource planning.  The projects were being harmonized, so that enterprise resource planning would contain the elements required for IPSAS.  IPSAS modules should be in place by 2010.

To ensure that staff would be able to use IPSAS, 20 courses on awareness training and conceptual training were under development, he said.  Basic training would be computer-based.  More advanced courses would be taught by consultants.  Due to delays in IPSAS implementation, training would begin in 2009.

SUSAN McLURG, Chairman of the Advisory Committee on Administrative and Budgetary Questions, introduced that body’s first progress report on the adoption of IPSAS by the United Nations.  She noted that the United Nations has been collaborating with members of the United Nations Development Group Executive Committee on the development of harmonized financial regulations and rules to reflect the necessary changes required for the adoption of IPSAS for the five participating organizations:  the United Nations; the United Nations Development Programme (UNDP); the United Nations Children’s Fund (UNICEF); the United Nations Population Fund (UNFPA); and the World Food Programme.

Statements

GLENTIS T. THOMAS, (Antigua and Barbuda), speaking on behalf of the “Group of 77” developing countries and China, noted that, in its resolution 60/283, the General Assembly approved the adoption by the United Nations of the IPSAS, as well as the resources requested to begin the process of its implementation.  That decision had been taken in conjunction with the replacement of the Integrated Management Information System (IMIS) with a next-generation enterprise resource planning system.  The Group considered the adoption of IPSAS and the implementation of enterprise resource planning to be an opportunity to enhance the credibility, transparency and accountability of the Organization’s financial transactions.

IPSAS should be used to overcome problems in the existing accounting system, he said.  It must ensure that the financial statements of different entities of the United Nations system were consistent and comparable.  Therefore, IPSAS application should be uniform system-wide.  The Secretary-General, as Chairman of the Chief Executives’ Board, should continue to coordinate all aspects relating to the transition between systems.

He further noted the Secretary-General’s comment that, to meet the 2010 target for IPSAS adoption, progress must be made towards implementation of the required information systems, the establishment of detailed IPSAS-compliant procedures, and staff training by the end of 2009.  The Group emphasized the importance of ensuring that staff was fully trained in IPSAS prior to its implementation.  The Secretariat should make full use of resources provided in the past and current bienniums to carry out a comprehensive training strategy to minimize the risks involved in the transition process.

The timetable for IPSAS implementation should be realistic and synchronized with the introduction of the new information technology system, he continued, noting that a delay in funding enterprise resource planning would have a direct impact on the implementation of IPSAS.  He called on all Member States to provide adequate funding to all the Organization’s mandated activities, including its reform initiatives.

DMITRIY CHUMAKOV ( Russian Federation) said that his delegation welcomed the goals of increasing the quality, compatibility and reliability of the financial accounting in the United Nations system.  The transition to IPSAS would allow a common basis for assessing the results of the Organization’s financial work.  He also shared the hope, expressed by the representative of Antigua and Barbuda, that the transition to IPSAS would help to deal with current problems in the financing of United Nations work.  At the same time, he had some concerns regarding the transitional process.  The first and most important one had to deal with the inter-relationship of IPSAS and enterprise resource planning.  The final decision to approve the Secretary-General’s proposals for enterprise resource planning in its current form had not been adopted by Member States.  Most importantly, in his view, that was not a necessary condition for the IPSAS transition.  The strategy of the Secretariat to integrate the transitional IPSAS process in the enterprise resource planning would require careful consideration.

He also noted the special importance of teaching new methods of work.  From the Secretary-General’s report, it would follow that most allocations, including those for staff retraining, had not been used.  In 2009, the implementation rates might be stepped up, but he wanted to draw attention to the special significance of staff retraining in connection with the transition to IPSAS.  In that connection, he would appreciate receiving more detailed information on how the Secretariat was going to assess whether the level of training was satisfactory.  Bearing in mind the delays in using allocations, he supported the position of the Advisory Committee that it would be more appropriate to talk about transition no sooner than 2012, and not in the middle of the biennium in 2011.

THOMAS REPASCH ( United States) strongly supported implementation of IPSAS as an important advancement in the reform of the Organization.  He understood that it was a work in progress and looked forward to watching an efficient implementation process.

In paragraph 6 of the ACABQ report, he noted that the Secretariat was to present the General Assembly with proposals for IPSAS implementation in 2009 and wanted to know whether that would be during the sixty-third or sixty-fourth session.  Further, paragraph 9 of the report, suggested that IPSAS be implemented in 2012, rather than in the middle of a biennium.   He wanted to know what the Secretariat thought of that idea.

HOE YEEN TECK ( Singapore) noted that the Secretary-General’s first progress report on the adoption of IPSAS was dated April 2008, while ACABQ’s report was dated October.  Noting that there must have been developments between the two reports, he requested clarification as to why there had been no update to the Secretary-General’s report.

Responding to questions, the Controller said that the bodies involved with IPSAS had been meeting, and the project was a “work in progress”.  The basic information on the matter had been provided in the Secretary-General’s report, and he would be more than willing to provide updates on the developments since the issuance of the Secretary-General’s report.  When the report had been considered by the ACABQ, the representative of the Secretary-General had been in a position to provide additional information on the matter.

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