Proposed Compensation Package for United Nations System Draws Mixed Reviews, as Budget Committee Considers Impact on Staff Pay, Benefits, Recruitment
The Fifth Committee (Administrative and Budgetary) today began examining the proposed compensation package for the United Nations system, including a more performance-linked pay system, a single pay scale for staff with or without dependents, as well as implementation of the new retirement age of 65 for existing staff by 1 January 2017.
The new package proposed by the International Civil Service Commission, the first major reassessment for Professional staff in 26 years and the “fruit” of three years of discussions, also included changes to education grants, benefits for field staff and relocation allowances.
Kingston Rhodes, Commission Chair, said that the review identified some problems concerning pay, including fewer increases for staff at higher step levels within a pay grade, an excessive emphasis on seniority rather than performance as the determinant of pay, and most importantly, a dual salary scale that differentiated rates based on whether staff were single or had dependents.
The proposed package received mixed responses, with Japan’s representative stating that it had several significant strengths over the current one, including streamlined allowances and a compressed salary scale that paid staff for their “capability” instead of their “family situation”.
Some delegates felt the new package had fallen short of sweeping changes, but still pushed for its early adoption. Member States “should not let this opportunity pass,” said the representative of the European Union, noting that the Commission’s recommendations should have been much bolder, pointing particularly to the failure to address underperformance, the still very generous education grants, and the automatic annual step increases.
“The package is a small step in the right direction, not the giant leap we were hoping for,” the representative of the United States said. Yet, change must start somewhere, and it would be best to adopt the package in the current session, as there would be opportunities to improve it over time, she added.
Ian Richards, President of the Coordinating Committee for International Staff Unions and Associations of the United Nations System, said that if implemented, the new system would damage the living standards, working conditions and family lives of thousands of staff working in the most dangerous locations. The Union, representing 60,000 staff around the world, was deeply concerned that redefining dependency status meant that cuts fell hardest mainly on single mothers. “This jars with efforts by the Secretary-General to promote a policy that supports career development for women,” he said. The Commission needed more time to examine the negative impacts on staff and the risks to the effectiveness of the agencies, he concluded.
South Africa’s delegate, speaking for the “Group of 77” developing countries and China, said any changes to the package should be made in compliance with the Noblemaire principle of Professional staff salaries being on par with those of the civil service of the Member State with the highest civil service pay levels. He called for greater efforts to recruit women from developing countries and implement more suitable recruitment policies to promote diversity in the common system.
Morocco’s delegate said the change in the education grants could turn the lives of some families upside down. Some changes were unfair, and there were draconian cuts that would impact people disproportionately, including the most vulnerable civil servants coming from developing countries and staff facing the hardship of working in the field, he said.
Bettina Tucci Bartsiotas, Assistant Secretary-General and Controller, noted that the Commission had estimated that fully implementing the review’s recommendations would lead to a net reduction of $113.2 million per year for the entire United Nations common system. Based on a head count, $19.6 million would correspond to the Secretariat, if immediately and fully applied. Yet with transitional measures and the time needed by the Secretariat to make necessary amendments to the Staff Rules and Regulations and changes to the Umoja enterprise resource planning system, the overall reduction for the 2016-2017 biennium was estimated to total $1.1 million, she said.
In other business, the Fifth Committee delegates aired their concerns over the management of the $53 billion United Nations Joint Staff Pension Fund. Speaking on behalf of the Group of 77 developing countries and China, South Africa’s representative reaffirmed the Assembly’s prerogative on the Pension Fund’s administration. The Group of 77 was concerned about recent media reports of possible fraud and would seek an update of recent audit or investigations surrounding these reports. Considering the high value of the Pension Fund’s investment portfolio, the Group backed the Advisory Committee’s call to the Secretary-General to create a comprehensive anti-fraud policy to better address fraud risk.
The United States delegate commended the Investments Management Division’s work on fraud prevention and also supported the Advisory Committee’s recommendation that the Pension Fund should have a comprehensive anti-fraud policy. That would complement the regular audits and oversight provided by the Office of Internal Oversight Services (OIOS) and the Board of Auditors.
Olusoji Adebowale Adeniyi, Chairman of the United Nations Joint Staff Pension Board, set forth the Pension Fund’s administrative expenses as he introduced the Board’s report. Ms. Bartsiotas introduced the Secretary-General’s report on the administrative and financial implications stemming from the Board’s report and Mr. Ruiz Massieu introduced the Advisory Committee’s related report.
The Fifth Committee also looked at two budget financing mechanisms: the use of the contingency fund and the limited budgetary discretion mechanism, which were part of the proposed programme budget for the upcoming 2016-2017 budget cycle.
Ms. Bartsiotas introduced the Secretary-General’s report, which reviewed the use of the contingency fund and Mr. Ruiz Massieu introduced the Advisory Committee’s related report, which stressed the contingency fund was an essential budgetary instrument to seek additional resource requirements. Ms. Bartsiotas also introduced the Secretary-General’s report on limited budgetary discretion, saying the mechanism had the potential “to create a win-win situation when speed was of the essence.” Mr. Ruiz Massieu introduced the Advisory Committee’s related report.
Also speaking today were Diab El Tabari, President of the Federation of International Civil Servants’ Associations, and Dimitri Samaras, President of the United Nations International Civil Servants Federation.
The representatives of the United Republic of Tanzania (on behalf of the African Group), Switzerland (also on behalf of Liechtenstein) and the Republic of Korea also spoke.
The Fifth Committee will reconvene at 10 a.m., Thursday, 19 November to discuss construction and property management and the long-term accommodation of the United Nations Headquarters, issues which were part of the 2016-2017 proposed programme budget.
Common System: Compensation Package Review
KINGSTON RHODES, Chair of the International Civil Service Commission, introduced that body’s report for the year 2015 (document A/70/30), noting that it contained the “fruit” of some three years of intensive work on comprehensive review of the staff compensation package. The Commission had been created in 1974 to serve the common system of United Nations organizations by developing a single unified international civil service through the application of common personnel standards, methods and arrangements. With the passage of time, the Organization’s mandates continued to expand, with more entities joining the system. The Commission must satisfy a vast number of interlocutors with competing needs and expectations. This year’s report was somewhat different from past ones because this was the year the Commission was asked to present its final recommendations on the common system compensation package.
In 2013, the mandatory age of separation for staff recruited after January 2014 was established at 65, he said. Last year, the General Assembly approved the application of that age for staff hired before 2014, with the implementation date pending. The Commission was now recommending that the change take effect within 2016 or at the latest by 1 January 2017. In the course of the review, the Commission identified some practical problems with the present compensation system, including inconsistent pay ranges, an elusive or unclear market reference point and overlapping benefits. It also identified some strategic problems, including narrow grade spans at higher grades, an excessive emphasis on seniority rather than on performance as the determinative basis of pay, and most importantly, a salary scale historically differentiated according to single and dependent rates.
“Our most important recommendation and greatest departure from the past is a single unified salary scale for staff in the Professional and higher categories,” he said, citing the single scale proposed to replace the dual scale, one for staff with dependents and the other for singles. The new approach would include a separate dependent spouse allowance, at a rate of 6 per cent of net remuneration for a dependent spouse, and changes in child dependency allowances. Grade spans would be 13 steps for P-1 through D-1, and 10 steps for D-2 levels. Savings accruing from those changes would be used to fund an incentive scheme, including cash awards for exceptional, meritorious performance, and a recruitment incentive scheme, where needed. A transitional allowance would apply for staff with non-dependent spouses and single parents to avoid a sudden reduction in net remuneration.
The report also detailed the proposed changes to education grant, including a global declining scale scheme consisting of seven brackets applicable at all locations to replace the multiple/currency system currently based on 15 zones. Boarding expenses had come under review, with reimbursement approved only in cases when there was no other choice but to send children away from the duty station for education. On field package, he said, the changes were proposed to simplify and ensure a more fit-for-purpose scheme and concerned the hardship allowance, the non-family service allowance, the mobility incentive and accelerated home leave travel. The new package for relocation would be streamlined to reflect real costs, including relocation travel, relocation shipments and settling-in grants.
BETTINA TUCCI BARTSIOTAS, Assistant Secretary-General, Controller, introduced the Secretary-General’s statement on the “Administrative and financial implications of the decisions and recommendations contained in the report of the International Civil Service Commission for the year 2015” (document A/C.5/70/3).
The Commission had estimated that fully implementing the review’s recommendations would lead to a net reduction of $113.2 million per year for the entire United Nations common system. Based on a head count, $19.6 million would correspond to the Secretariat, if immediately and fully applied. Yet with transitional measures and the time needed by the Secretariat to make necessary amendments to the Staff Rules and Regulations and changes to Umoja, the newly deployed enterprise resource planning system, the overall reduction for the 2016-2017 biennium was estimated to total $1.1 million.
The recommendation regarding new salary scales for locally recruited staff in New York would impact the proposed programme budget for 2016-2017, with an estimated reduction of $16 million, she said. That was because the salary scales of existing General Services staff would be frozen, not reduced. The current proposal programme budget included a recosting element of 2.3 per cent for General Services staff salaries in New York to cover projected inflation during 2016-2017. This projected recosting would not materialize if General Service salaries in New York were frozen. The overall net reduction of $16.8 million would be applied to the revised estimates for the 2016-2017 budget cycle, which would be issued early next month.
The Commission recommended that a higher mandatory age of separation be implemented in 2016, which would impact the implementation of the proposed programme budget for 2016-2017, she said. The budget included a proposal to abolish or freeze posts, some of which were projected to be vacant, including as a result of planned retirements. To the extent to which such planned retirements would not be taking place, and to the extent to which the proposed budget was endorsed by the Assembly, programme managers would need to identify alternative measures to maintain the proposed budget level.
CARLOS RUIZ MASSIEU, Chairman of the Advisory Committee on Administrative and Budgetary Questions (ACABQ), introduced the Advisory Committee’s related report on the financial implications of the decisions and recommendations contained in the report of the International Civil Service Commission for the year 2015 (document A/70/7/Add.4). The Secretary-General’s statement provided information on the Commission’s recommendations relating to the mandatory age of separation; the comprehensive review of the common system compensation package; the review of the base/floor salary scale; and the survey of best prevailing conditions of employment for General Service and related categories of New York, Kingston and London.
He said the Advisory Committee pointed out that the financial implications for the proposed programme budget for the biennium 2016-2017 “should not be reflected in the revised estimates: effect of changes in exchange rates and inflation for the biennium 2016-2017”, so as not to anticipate the Assembly’s decision on the Commission’s recommendations. If the Assembly approved the Commission’s recommendations, the Secretary-General should update the Assembly on the financial implications before the Assembly’s decision on the proposed 2016-2017 programme budget.
DIAB EL TABARI, President of the Federation of International Civil Servants’ Associations said that the compensation review exercise had the potential to be an important, once-in-a-generation opportunity to modernize conditions of service. But after having reviewed the final outputs of the process, the Federation concluded that the proposed package risked weakening the United Nations and its workforce, and represented a step backward for many women as it focused excessively on cost-cutting. Suggestions overheard in the corridors in New York that the United Nations could get by with a “second tier” workforce in the future were worrisome. Adopting the package in its current format would lead to a reduction in skills and expertise across entities, missed opportunities to advance gender equality in the workforce, retention challenges and the related costs of increased turnover, and reduced value for money. The freeze on allowances for General Service staff was no longer required and could be lifted. Implementing the Commission’s conclusions regarding New York salaries would adversely affect recruitment in New York. Implementation should be put on hold and a new salary survey should be conducted.
The Federation believed that it was appropriate and in the interests of the Organization to enable continued service up to the age of 65 years; the co-existence of a number of different separation dates was discriminatory, he said. Turning to the issue of the excessive and abusive use of non-staff personnel contracts, he said that their increased use – to account for as high as 70 per cent of the total workforce in some United Nations system organizations - to deliver core functions was of extreme concern for staff representatives, as it should be for the governing bodies of the organizations, as their use had devastating effects on organizational climates. An undisciplined and unprincipled search for the lowest possible human resources price tag would drive the United Nations system down and compromise its ability to deliver on its mandate – possibly “beyond a very dangerous breaking point” where the essence of the international civil service would be lost.
IAN RICHARDS, President of the Coordinating Committee for International Staff Unions and Associations of the United Nations System, said that the Union represented 60,000 staff across the Organization’s common system, with many in the deep field. The Commission’s review was intended to produce a revised system that should support the delivery of the mandates of the United Nations system organizations. Regrettably, the report presented today had failed to meet that objective. If implemented, the new system would damage the living standards, working conditions and family lives of thousands of staff working in the world’s most dangerous locations as well as those who supported them.
Staff experiencing a three-year pay freeze were now facing real cuts to salary and allowances, he said, noting that the review proposed some increases on paper, generally for single staff with no dependents, but their gains would be wiped out by the changes to step progression. It was deeply concerning that the redefinition of dependency status meant that cuts fell hardest on single parents, who were mainly women. “This jars with efforts by the Secretary-General to promote a policy that supports career development for women,” he said. In addition, the proposals removed accelerated home leave under which staff and their families in C to E duty stations received an annual ticket to travel home, often for medical check-ups and to purchase basic staples, including children’s clothes and other items hard to obtain in post.
The proposals cut the mobility allowance for staff moving the most, sending the wrong signal to staff at a time when the Secretary-General and many other Executive Heads were putting in place managed mobility programmes, he said. Tying step progression to periods of two years after step 7, rather than to annual performance reviews, would undermine the link between salary progression and performance. In an organization where many staff joined at the P-2 or P-3 level and retired at P-5, and promotions were few, salary progression through steps remained an important motivating factor. The Commission’s report noted that the United Nations net remuneration was 2 per cent above the equivalent of pay for United States Government staff. Yet, the United States Government Accountability Office had certified the total compensation of the United Nations and that of United States staff were broadly comparable.
On the mandatory age of separation, some of the most experienced and productive staff were still required to retire at 60 or 62, in contrast to the comparator service, which had no retirement age at all, he said. The Union supported the proposed implementation date of no later than 1 January 2017 for staff being able to choose to retire at 65. Some agencies stated that now was not the right time as the proposal would upset their workforce planning. But 71 per cent of retirees were rehired. The Union also received reports of Executive Heads using their discretion to either extend staff beyond retirement age or rehire them. The Commission needed more time to examine the negative impacts on staff and the risks to the effectiveness of the agencies, he concluded.
DIMITRI SAMARAS, President of the United Nations International Civil Servants Federation, noted that the United States Government Accountability Office found in a 2014 report that the United Nations and United States Government offered generally similarly benefits and allowances to their employees. The Federation saw no logical basis for the Commission to recommend any deviation from the current compensation package, which it regarded as already “fit for purpose.” The Federation conceded the United Nations staff could not be isolated from the economic downturn faced by many Member States. The Federation was concerned the proposed compensation package disproportionately impacted field staff serving on the front line to carry out the Organization’s peace-keeping mandate.
The recognition of mobility through the current system should not be replaced by one that did not reflect accurately, or compensate the number of relocations undertaken by staff members in the performance of his or her duty, he said. The proposal for single parent staff was regretted because it verged on discrimination, if not actually constituting discrimination. Regarding the education grant, the Federation believed the Commission’s report had ramifications that needed additional analysis. The Federation hoped the Fifth Committee would find it useful to refer the matter back to the Commission for additional review.
LYLE DAVIDSON (South Africa), speaking on behalf of the Group of 77 developing countries and China, said it was an important year for the common system, as the Commission had taken three years to develop a total review of the compensation package after consultations with all interested parties and stakeholders, including representatives of agencies, funds and programmes. The Group stressed the importance of providing recognition to all staff serving in the United Nations common system. The Group of 77 had scrutinized the recommendations to ensure the implementation of Member States’ mandates was not negatively affected, the United Nations could still attract the best and brightest professional and personnel from around the globe, and staff morale was not negatively impacted. The Group also wanted to ensure compliance with the Noblemaire principle when discussing any changes to the common system.
The Group of 77 recognized the important role played by staff unions and had taken many of their concerns into account, particularly the dependency package for single parents, he said. The Group would seek more clarification from the Commission. The Group was very concerned about the Organization’s insufficient progress to achieve gender balance, especially at the D-1 level and above. The Group supported the Commission’s recommendations meant to improve women’s representation in the Organization. Greater efforts should be made to recruit women from developing countries and implement more suitable recruitment policies to promote diversity in the common system.
JUSTIN KISOKA (United Republic of Tanzania), speaking on behalf of the African Group, aligned itself with the remarks of South Africa on behalf of the Group of 77, and said the African Group gave great importance to the welfare of staff across the world. It was examining the report and its implication for staff and organizations. It would make specific contributions during the informal consultations.
FRANCESCO PRESUTTI, a representative of the European Union, said the reports acknowledged that the present compensation system had remained mostly unchanged for more than 25 years, while individual elements had been reviewed separately in a fragmented way. A comprehensive review was long overdue and the European Union had heard from many organizations that the current package had become increasingly problematic for their budget sustainability. Eight organizations had urged the Commission to go ahead with in-depth reform. The European Union was pleased that the Commission members had been able to present a comprehensive set of recommendations. It was the Member States’ joint responsibility not to let this opportunity pass. A new compensation package would bring the approach of all organizations, in respect of staff compensation of the common system, into the twenty-first century.
The Commission’s recommendations should have been much bolder in rethinking the traditional approaches to the compensation system, he said. He pointed particularly to the incomplete proposals on performance management, which did not address underperformance, the still very generous education grants compared to the situation found in other international organizations and national diplomatic services, the continuation of rewarding historical moves, and the automatic annual step increases. The proposed package was a delicate compromise that attempted to strike a balance among the concerns of all stakeholders. The European Union welcomed the United Nations System Chief Executives Board for Coordination’s (CEB) endorsement of the Commission recommendations and noted the issues the Board raised. Yet it saw no reason to question the overall package of recommendations made by the Commission after three years of work by experts in all organizations. The European Union would also look into other issues, such as the mandatory age of separation and the conditions of service of the General Services and other locally recruited staff.
MATTHIAS DETTLING(Switzerland), also speaking on behalf of Liechtenstein, said that, with the Commission’s review being presented, it was now incumbent upon Member States to consider the proposed package of recommendations by that body. His delegation was interested in the link between the new system, and performance management and staff mobility. During informal consultations, his delegation would seek a better understanding of how the new system would incentivize good performance and manage underperformance, and how it would be able to meet the demands for a more mobile workforce. His delegation was also interested in the recruitment incentive that would assist organizations in hiring experts in highly specialized fields.
ISOBEL COLEMAN (United States) said that the review marked the first time in 26 years that the package for Professional staff had been reassessed. To date, the governing councils of a full one-third of United Nations common system organizations had noted that rising staff costs were having a considerable impact on their financial sustainability, urging the Assembly and the Commission to consider the need for greater vigilance over increases in staff costs across the common system. While the proposed package met the core objectives of being simpler, more modern and cost-effective than the current one, the review could have gone much further. The proposal left intact the mobility allowance, an unnecessary incentive for international professional staff, which by definition must be mobile. She applauded the introduction of a modern performance pay element, but expressed disappointment that the new package started biennial step increases in Step 7, not in Step 1. The package also left some significant elements, like the education grant, largely untouched. “The package is a small step in the right direction, not the giant leap we were hoping for,” she said.
Some critiques of the new package were unpersuasive, with little evidence that the new field package would negatively impact field work or that the new salary scale unjustly enriched Director-level staff over Professional-level staff. But change must start somewhere, and it would be best to adopt the package in the current session, bearing in mind that the Commission planned regular opportunities to improve it over time, and robust transitional measures had been included to minimize risks. The alternatives were fraught. Re-opening the package would produce unintended consequences, and delaying a decision would postpone needed financial relief to many organizations and prevent all organizations from taking advantage of an improved package. Her delegation supported an increase in the mandatory age of separation in principle but had significant concerns about the recommended implementation, as its financial implications effect on ongoing strategic workforce planning efforts and ability to be applied across the system in a compressed time frame remained unclear at this stage.
LEE EUNJOO (Republic of Korea) welcomed the recommendations by the Commission but said there was room for further improvement to make the package more robust and relevant. In particular, the performance management scheme to effectively address the issue of underperformance remained an important area of concern. Regarding the statement of the Chief Executives Board on the outcome of the comprehensive review, concerns expressed by that body could be refined over time after carefully reviewing the credibility of their arguments.
KEISUKE FUKUDA (Japan) said that the new package had several significant strengths over the current one, including streamlined allowances and a compressed salary scale that paid staff for their capability instead of their family situation. His delegation was highly interested in the results of the two global surveys conducted by the Commission, which indicated that money was not the main motivating factor for attracting and retaining staff in the common system. In that regard, it was important to ensure work-life balance and provide development and career opportunities. He expressed a concern that the implementation of mandatory retirement age of 65 for staff hired before 1 January 2014 was expected to have a negative impact on the proposed programme budget for 2016-2017, as well as on the promotion of gender parity, diversity and rejuvenation programmes.
HICHAM OUSSIHAMOU (Morocco) said his country fully appreciated the concerns of the staff unions and endorsed the statements made by the Group of 77 and the African Group. He noted the Commission’s report and commended its work. There were several recommendations that were striking for their scope and consequences on people’s lives. He pointed to the recommendations regarding compensation for the dependents of single parent staff members and grants and reimbursement for education. The change in the educational grants could turn the lives of some families upside down. Some changes were unfair. There were draconian cuts that would impact people disproportionately, including the most vulnerable civil servants coming from developing countries and staff facing the hardships of working in the field. They could fall victim to the trap of corruption. People who worked in comfortable conditions in developed countries were not impacted in the same way. The changes would hinder the Organization’s ability to attract employees and make it more difficult to attract women at a time when the Organization was trying to do so and achieve gender balance.
Administrative Expenses of United Nations Joint Staff Pension Fund
OLUSOJI ADEBOWALE ADENIYI, Chairman of the United Nations Joint Staff Pension Board, presented the report of the Pension Board on the administrative expenses of the Pension Fund (document A/70/325). The Pension Fund was administered by the Pension Board in line with the Fund’s Regulations as approved by the Assembly. Any decisions regarding the Fund must be considered with a clear understanding of the very long duration of its liabilities as well as the Fund’s operating horizon, which serviced staff members as participants for 17 years on average during their active service, and then for another 25 or more years during their retirement and the life of the surviving spouse.
The Fund’s operational and financial situation was very strong at a time when most defined benefit plans were struggling, he said. Serving slightly over 195,000 active participants, retirees and beneficiaries as of 31 December 2014, the core business of the Fund was paying benefits and servicing its clients. The 2016-2017 budget as approved by the Board totalled $178.21 million, and included $90.36 million for administrative costs, $83.86 million for investment costs, $2.89 million for audit costs, and $944,200 for Pension Board expenses. It should be noted that adjustments made by the Group resulted in an essentially zero growth budget, with only a 0.2 per cent increase over the 2014-2015 biennium.
Turning to the issue of the implementation of the Integrated Pension Administration System (IPAS), he said that IPAS should not be confused with the implementation of Umoja. It was never expected that the Fund would be in a position to abolish posts as a result of IPAS implementation. Rather, its purpose was to build capacity to respond to the demands of a burgeoning membership. He urged the Secretariat management to take all steps needed to ensure that changes to the retirement age did not affect the pension payroll of the Fund’s 72,000 beneficiaries. All expected efficiency gains related to IPAS were achieved and exceeded through savings against recurring contractual services and infrastructure in information technology. The Board of Auditors had raised in the ACABQ and the Fifth Committee the question of the routing of its report on the Pension Fund. Not having received any formal proposal from the Board of Auditors, the Pension Board had not discussed any such proposal, and consequently had not reached any conclusion or position on the matter.
Taking the floor again, Ms. BARTSIOTAS introduced the Secretary-General’s report on administrative and financial implications arising from the report of the United Nations Joint Staff Pension Board (document A/C.5/70/2). The programme budget for 2016-2017, containing a provision of $13.8 million, was prepared before the Pension Fund’s budget had been finalized. The current provision would cover only a 62.2 per cent share, based on the number of participants. The latest information showed the programme budget share had increased to 64.4 per cent, requiring an upward adjustment of $493,600. If the Assembly approved the Pension Board’s recommendations and proposals, an additional appropriation of $493,600 would be required under section 1 of the proposed programme budget for 2016-2017. That amount would be charged against the contingency fund.
Mr. RUIZ MASSIEU introduced ACABQ’s seventh report on the proposed programme budget for the biennium 2016-2017, on the administrative expenses of the Pension Fund (document A/70/7/Add.6), which contained the revised budget for 2014-2015, and the budget estimates for 2016-2017. He detailed the Committee’s recommendations on the establishment of new posts proposed for 2016-2017. The Committee shared the concern expressed by the Board regarding the high number of vacant posts, he said, especially at the senior management level, and urged the Pension Fund to fill those posts expeditiously. Without sufficient support information, ACABQ was not in a position to recommend approval of the Secretary-General’s proposal for an additional $493,000 under the 2016-2017 regular budget due to the Pension Board’s recommendations on the United Nations share of the Pension Fund’s administrative costs.
ACABQ noted that the Pension Fund’s investment performance in 2014 and so far in 2015 had been below its long-term policy benchmark, he said. Concurring with the related recommendations of the Board of Auditors, ACABQ also encouraged the Pension Fund to continue exploring opportunities for geographical diversification while keeping in mind the key criteria of safety, profitability, liquidity and convertibility. The establishment of a comprehensive anti-fraud policy to address the risk of investment management fraud should also be considered.
The Pension Fund should take advantage of the enhanced capabilities of the Integrated Pension Administration System (IPAS) to identify further efficiencies and savings in the Pension Fund’s client service operations, he said. With regard to the procedure for the submission of the report of the Board of Auditors on the financial statements of the Pension Fund to the Assembly, the Advisory Committee saw merit in the Board of Auditors’ view that it should be presented directly and separately to the Assembly through the Advisory Committee. But ACABQ also noted that the Pension Board had not taken a position on the matter.
KAREN LINGENFELDER (South Africa), speaking on behalf of the Group of 77, reaffirmed the prerogative of the Assembly on matters related to the Fund as per the given mandate, and noted that the total assets of the Fund at the end of 2014 amounted to $53.1 billion, with total liabilities of $217.4 million, resulting in net assets available for benefits of $52.9 billion. For the year 2014, the Group noted that the return on investment of 3.2 per cent was below the stipulated benchmark of 3.7 per cent. Turning to the proposed budget for the biennium 2016-2017, the Group noted that the budget proposal provided for the establishment of an additional 20 posts for the Fund Secretariat and an additional post for the Investment Management Division, bringing the total staffing capacity for the Fund over the next biennium to 279.
Regarding the request in Assembly resolution 68/247B, the Group would seek clarity on the outcome of the annual assessment and any mechanisms developed to evaluate performance, he said. Aware that managing fund assets of $54 billion was a complex task, the Group was concerned about recent media reports of possible fraud and would seek clarity, including an update of recent audit or investigations undertaken in that regard. Considering the high value of the Pension Fund’s investment portfolio, the Group backed ACABQ’s call on the Secretary-General to create a comprehensive anti-fraud policy to better address fraud risk. Emphasizing the need for the timely and full implementation of all recommendations of the Board of Auditors, the Group also shared the Advisory Committee’s views on the need to rectify the current existing anomalies in all future Board of Auditors’ reports on the Pension Fund and stressed that the issues related to reporting on those documents remained the sole prerogative of the Assembly, as the Pension Board was a subsidiary organ of the Assembly.
JUSTIN KISOKA (United Republic of Tanzania), speaking on behalf of the Africa Group, aligned his remarks with the Group of 77, and reaffirmed its position on defending the interests of the beneficiary of the Pension Fund and the need to diversify the Pension Fund’s investments to developing countries, particularly in Africa. The African Group also reaffirmed the need to respect the prerogative of the Assembly and the subsidiary organs of the Assembly, including the Board of Auditors and the Pension Board. On this issue, the African Group stressed the need to immediately rectify existing anomalies regarding the consideration of the Board of Auditors reports on the Pension Fund. This could be done by ensuring the separate reports were submitted to the Assembly, through the Advisory Committee, and copies continued to go to the Pension Board for their deliberations on matters within the Pension Board’s mandate. The African Group would also be paying close attention to this and other matters, including those related to fraud in the Pension Fund.
CHERITH NORMAN (United States) said she was pleased the Pension Fund’s net assets totalled $52.8 billion and it continued to diversify its investments to ensure solid returns. She commended the Pension Fund for its improvement in the implementation rate of Board of Auditors’ recommendations and following up on the recommendations in a timely manner. Out of 12 outstanding recommendations, 75 per cent had been fully implemented and 25 per cent were now being implemented, a significant increase from last year. She reiterated some concerns made by the Board of Auditors. A primary concern was the need to integrate many different technology platforms and systems. The Board noted the real rate of return on the Fund’s investments was below the benchmark set for both 2014 and the most recent five-year period. The Pension Fund should take more steps to improve its internal investment process, and could explore alternatives to mitigate foreign exchange losses, which had increased substantially in 2014. The United States commended the Investments Management Division’s work on fraud prevention and supported the Advisory Committee’s recommendation that the Pension Fund should have a comprehensive anti-fraud policy. That would complement the regular audits and oversight provided by the Office of Internal Oversight Services (OIOS) and the Board of Auditors.
Utilization of Contingency Fund
Ms. BARTSIOTAS introduced the Secretary-General’s report on review of the experience of the utilization of the contingency fund (document A/70/395), noting that it described the background of the fund’s creation for the 1990-1991 biennium, the size of the fund over the past 14 biennia, and its utilization. The fund continued to be set at 0.75 per cent of the overall level of resources approved in the budget outline, and had reached $41.7 million for the 2016-2017 biennium. Although the utilization of the fund had remained within the approved levels, recent experience indicated that additional appropriations were approved outside of the fund for 2006-2007, 2012-2013 and 2014-2015.
Mr. RUIZ MASSIEU introduced the ACABQ’s related report (document A/70/7/Add.7), reiterating its previous recommendation that “it is the responsibility of the Secretary-General, as chief administrative officer of the Organization, to ensure that the proposed programme budget presented the fullest possible picture of the Organization’s requirement for any given biennium”. The contingency fund was an essential budgetary instrument for addressing additional resource requirements. In the event of any constraints faced, the Secretary-General should bring those matters to the attention of the Assembly. The Advisory Committee recommended that the Assembly take note of the report.
Limited Budgetary Discretion
Taking the floor again, Ms. BARTSIOTAS introduced the Secretary-General’s report on limited budgetary discretion (document A/70/396) and said the mechanism had the potential “to create a win-win situation when speed was of the essence.” The fact that it had not been used during the current and last biennia meant the mechanism was being managed prudently and only applied when all the principles of the Assembly and criteria set by the Secretary-General had been followed. The report reflected the Secretariat’s effort to refine those criteria and distinguish it more clearly from other mechanisms the Secretary-General could use to seek additional resources, particularly arrangements of the Contingency Fund or Unforeseen and Extraordinary Expenses. The Secretary-General saw merit in continuing the discretionary authority as it would be a necessary option to overcome unforeseen obstacles to fully implement existing mandates or enable the resumption of operations in a safe and secure environment after a natural or manmade disaster.
Mr. RUIZ MASSIEU then introduced the Advisory Committee’s report on limited budgetary discretion (document A/70/7/Add.5) and noted the mechanism had been used on eight occasions over the course of three biennia between 2006 and 2011, and remained unused since then. The Advisory Committee noted the Secretary-General’s efforts to refine the criteria for using the mechanism and encouraged the criteria to continue to be refined as the principles contained in Assembly resolution 60/238 were strictly applied. The Advisory Committee noted the mechanism continued to be authorized only an experimental basis and the $20 million ceiling had never been fully used.
Other existing mechanisms were used to respond to recent crises, such as the Ebola outbreak in Western Africa and the consequences of the Storm Sandy at United Nations Headquarters in New York, he said. For that reason, the ACABQ was not convinced the mechanism continued to have merit, particularly compared with other funding mechanisms. While questioning its ongoing utility, the ACABQ recommended the Assembly authorize the mechanism’s exceptional continuation only for the biennium 2016-2017. If he considered the mechanism’s use was required beyond this date, the Secretary-General should give the Assembly a comprehensive justification for its subsequent retention.