United Nations

GA/AB/3535
7 November 2002

ELIMINATION OF WASTE, ENHANCEMENT OF PRODUCTIVITY
COULD SAVE UNITED NATIONS $56 MILLION, SAYS
OFFICE OF INTERNAL OVERSIGHT SERVICES

NEW YORK, 6 November (UN Headquarters) -- During the past year, the Office of Internal Oversight Services (OIOS) not only produced 2,357 recommendations to improve internal controls and enhance efficiency and effectiveness, but also exposed waste and fraud in the Organization, recommending actions which could save the Organization approximately $56 million, the Fifth Committee (Administrative and Budgetary) was told this morning.

Introducing the Secretary-General’s report on OIOS activities, Under-Secretary-General for Internal Oversight Services Dileep Nair said that the Office’s audits, inspections and investigations addressed such administrative problems as management efficiency, poor deployment of staff and improper use of resources. Seven OIOS audits had resulted in reports to the Assembly on a wide range of topics, such as the 0United Nations International Research and Training Institute for the Advancement of Women (INSTRAW) and oversight activities concerning the Office of the Iraq Programme and the United Nations Compensation Commission.

Also introduced this morning were reports on the United Nations common and pension systems, and a document on the need to determine peacekeeping assessments of two new Member States: Switzerland and Timor-Leste.

Introducing this year’s report of the International Civil Service Commission (ICSC), its Chairman, Mohsen Bel Hadj Amor, stressed the paramount importance of the reform of the current pay and benefits system undertaken by the ICSC. Such a review was part and parcel of the overall administrative and organizational reform of the Organization. The new system must reward staff members’ contribution to the work effort.

Another system in need of revision was the current job classification, which was seen as a major stumbling block in moving towards new initiatives, he said. Its focus on job equity as opposed to contribution equity was not in tune with today’s realities. Among the Commission’s initiatives, he singled out introduction of broad-banded salary structures and an assessment of the Organization’s management capacity, as well as recommendations on conditions of service of international staff and other matters regarding the coordination of civil service regulations throughout the United Nations system. Among the issues addressed in the report were the level of base salaries and education grants, review of children’s and secondary dependant allowances, and the amount of hazard pay in the field.

Introducing the report of the Board of the United Nations Joint Staff Pension Fund, its Chairman, Jean Larivière, said that despite concerns over the Fund’s investment performance over the last two years, it had a surplus due to a very positive long-term return. However, the total investment returns for the years ending on 31 March 2001 and 31 March 2002 were minus 15 per cent and plus 0.7 per cent, respectively. The real rates of return after adjustment were minus 17.4 and minus 0.8 per cent, respectively. The total annualized real rate of return for the biennium was minus 7.5 per cent.

The Director of Investment Management Service, Henry L. Ouma, presented information regarding the Fund’s investments, saying that due to market volatility and a broad correction in global equity markets since the peak in March 2000, by the end of March 2002, the market value of the Fund’s assets had decreased from $26.06 billion to $21.79 billion -- a decline of $4.27 billion, or 16.4 per cent. The market value of the Pension Fund had declined to some $19.91 billion as at 30 September.

He went on to say that the long-term objective of the Fund was to achieve a real, or inflation-adjusted, rate of return of 3.5 per cent. Within the past 10 years, the Fund had achieved that objective in eight out of 10 years. The annualized 10-year nominal return was 7.9 per cent, while the real rate of return was 5.3 per cent.

Other documents before the Committee were introduced by Deputy Secretary-General Louise Fréchette; the Chairman of the Advisory Committee on Administrative and Budgetary Question (ACABQ), Conrad S.M. Mselle; and the Chief of the Contributions Service and Secretary of the Committee on Contributions, Mark Gilpin.

In other business, Safety and Security Chief Michael McCann responded to concerns expressed by the delegate of Singapore about new security measures in connection with the heightened threat to the Organization.

Several delegations questioned the Committee Chairman on the question of adjusting meeting schedules during the month of Ramadan.

The Committee will continue its consideration of the OIOS report and the United Nations common and pension systems at 10 a.m. on Friday, 8 November.

Background

This morning, the Fifth Committee (Administrative and Budgetary) was expected to take up its agenda items on the United Nations common and pension systems, as well as the annual report of the Secretary-General on the activities of the Office of Internal Oversight Services and peacekeeping assessments of new Member States.

Common System

The first document on this agenda item is the 2002 report of the International Civil Service Commission (ICSC) document A/57/30), which contains its latest recommendations concerning conditions of service of international staff, their remuneration and other matters regarding the coordination of civil service regulations throughout the United Nations system. Among the issues addressed in the report are the level of base salaries and education grants, review of children’s and secondary dependant allowances, and the amount of hazard pay in the field.

The review of the pay and benefits system is seen by the Commission and the bodies of the common system as an important element of the framework for human resources management. The incongruity between the design of the current pay and benefits system and the demands of a modern workforce has been highlighted repeatedly over the past decade. According to the report, the ICSC agreed on the time frame for implementing the review, deciding that the new system should be based on a common standard, rewarding contribution and validating competencies. The review should include a revision of the current job classification system; introduction of so-called "broad banding"; and introduction of a Senior Management Service, which would play an important role in building leadership and management capacity in support of the major reform within the Organization.

The report explains that the objective of the review is a competitive system to attract and retain high-quality staff. The broad banding system puts grades into broad salary groups with no steps between the minimum and maximum pay for the band. It permits managers to shift the duties and responsibilities of their staff to meet new requirements and priorities. It accommodates the simplification and streamlining of the job classification system, requiring a more generic description of the work at each level. Accordingly, it reduces the focus on job classification and the need for numerous job classification specialists. Lateral job changes are made without the need to reclassify jobs.

The report also contains proposals for a new design of a "credible and reliable performance system that is acceptable to all parties", which, according to the ICSC, is an absolute necessity in moving forward with broad banding and/or pay-for-performance systems. The Commission concludes that a pilot study should be conducted of one broad-banded model and related pay-for-performance system.

One of the Commission’s recommendations in connection with the conditions of service is the proposal to implement, effective 1 March 2003, a differentiated real increase of the base/floor salary scale to bring to the desired level the net remuneration margin, which measures the relationship between United Nations net salaries and those of United States civil servants.

The scale is set by reference to the salary scale of the comparator civil service in Washington, D.C. Periodic adjustments are made to the scale on the basis of a comparison of net base salaries of United Nations officials at the midpoint of the scale (P-4, step VI, at the dependancy rate) with the corresponding salaries of their counterparts in the United States federal civil service. The ICSC was informed that, in view of an increase of federal civil service salaries in Washington, D.C., as of 1 January 2002, a 5.6 per cent adjustment of the United Nations salary would be necessary in 2003 in order to keep the base/floor scale in line with the comparator.

Also before the Committee was a statement by the Secretary-General on the administrative and financial implications of the ICSC decisions and recommendations (document A/57/450), in particular, their implications for the 2002-2003 budget. The document states that it was estimated that the ICSC recommendation regarding a salary increase to bring the United Nations salaries in line with those of United States federal officials would cost the Organization some $89.22 million annually, including net remuneration increase of $84.13 million; mobility/hardship allowance of $4.19 million and scale of separation payments amounting to $808,000. The total financial implications for the United Nations regular budget for a 10-month period from March to December 2003 have been estimated at $20.43 million.

Also, following the approval of the ICSC recommendations on refinements to and modification of the methodologies used in conducting surveys of best prevailing conditions of employment at Headquarters and other duty stations, the Commission in 2002 conducted surveys of the conditions of service for the General Service and related categories in Vienna and Geneva and the language teachers in Geneva. Following such a survey, the Commission recommended a new salary scale for General Service staff in Vienna and revised rates for dependency allowances. The revised rates have been implemented effective 1 April 2002. The annual financial implications in that regard have been estimated at $393,000. For the biennium 2002-2003, the costs amount to $689,300.

The Commission has also recommended similar increases for Geneva-based organizations, the annual financial implications of which have been estimated at $5.57 million. The annual financial implications for the United Nations regular budget have been estimated at $1.62 million. Related additional costs for the current biennium have been estimated at $3.23 million. And finally, the report indicates that the ICSC recommendations concerning changes in hazard pay and education grants would cost the Organization some $342,500 and $366,700, respectively.

The total requirements under the regular budget resulting from the recommendations of the ICSC have been estimated to amount to some $25.06 million, net of staff assessment. The increased requirements for staff assessment, which are estimated at $4.62 million, would be met from an equivalent increase in the amount of income from staff assessment. The decision to be taken by the Assembly in this regard will be taken into consideration when computing the first performance report for the current biennium.

Having considered those financial implications, the Advisory Committee for Administrative and Budgetary Questions (ACABQ) in its report (document A/57/7/Add.9) states that it has no technical objection to the estimates of requirements under the regular budget resulting from the recommendations and decisions of the ICSC.

By a related note (document A/C.5/57/16), the Secretary-General transmits to the Assembly a statement adopted by the High-Level Committee on Management at its fourth session (7-8 October 2002), on behalf of the United Nations System Chief Executives Board for Coordination. The Committee on Management welcomes the proposals put forward by the ICSC to reform the Organization’s pay and benefits system. In particular, the executive heads consider the development of a more flexible job classification system and creation of a senior management service to be among the most crucial elements of the Commission’s reform proposals.

According to the document, more than ever before, international organizations are competing with a broad array of institutions for staff of the highest competence. It is imperative that this reality be reflected in the formula used to set pay in the United Nations system. The General Assembly and the executive heads have repeatedly requested that the existing imbalances in the current margin at different grade levels be addressed, not least in order to recognize and strengthen managerial capacity. The executive heads, therefore, fully support the recommendation of the ICSC to restore the margin to its desirable mid-point by granting a differentiated salary increase for the Professional and higher categories.

The document concludes that the dangers of not reforming the system far outweigh the challenges associated with implementing these initiatives. The executive heads call on the General Assembly to request the Commission to give the highest priority to completing its work on improving the conditions of service of United Nations employees.

Pension System

Before the Committee was a report of the United Nations Joint Staff Pension Board on the United Nations Joint Staff Pension Fund (document A/57/9). The report is submitted by the Board following its fifty-first session, in July 2002. The major items dealt with by the Board included actuarial matters; management of the investments of the Fund; revised budget estimates for the biennium 2002-2003; and the size and composition of the Board and its Standing Committee.

During the biennium ended 31 December 2001, the number of participants in the United Nations Joint Staff Pension Fund increased by 16.2 per cent and the number of periodic benefits in award increased by 7.0 per cent. On 31 December 2001, the breakdown of the periodic benefits in award was as follows: 15,558 retirement benefits, 10,726 early retirement benefits, 6,509 deferred retirement benefits, 7,687 widows’ and widowers’ benefits, 8,049 children’s benefits, 845 disability benefits, and 42 secondary dependants’ benefits. In the course of the biennium, 8,630 lump-sum withdrawal and other settlements were paid.

During the same two-year period, the principal of the Fund increased by 11.8 per cent. The investment income of the Fund during the period amounted to $2,233,551,857. After deduction of investment management costs amounting to $38,010,173, net investment income was $2,195,541,684.

The Board of Auditors has audited the financial statements of the United Nations Joint Staff Pension Fund for the biennium ended 31 December. The Board recommends that the Pension Fund ensure that the accounting of expenditures is in compliance with the United Nations system accounting standards; improve staffing and day-to-day supervision; and consider all assumptions over a reasonable period of time prior to deciding on adjustments to the level of contributions or benefits under constant resources.

Annex XVI of the report contains a draft resolution proposed for adoption by the General Assembly. By its terms, the Assembly would approve the changes in the benefit provisions of the Regulations of the Fund to eliminate the limitation on the right to restoration for existing and future participants. It would also approve changes in the pension adjustment system, to apply cost-of-living adjustments to deferred retirement benefits as from age 50, and to apply cost-of-living differential factors to deferred retirement benefits as from the date of separation.

Further to the draft, the Assembly would approve the increase in resources under administrative costs for the biennium 2002-2003 from $29,943,800 to $30,123,000 and approve the increase in the size of the Board from 33 members to 36, with the allocation of the three additional seats to the United Nations.

There was also a report of the Secretary-General on Investments of the United Nations Joint Staff Pension Fund (document A/C.5/57/11). The report describes the economic and investment conditions that prevailed in the reporting period ended 31 March 2002 and provides information on the investment returns, diversification of the investments and the development-related investments of the Fund. The statistical data are based on the audited financial statements for the calendar years 2000 and 2001 and on the unaudited appraisals ended 31 March 2002.

The Fund experienced its first negative return in 18 years during the first year of the biennium. The management adopted a more defensive asset allocation by reducing exposure to equities, increasing exposure to bonds and real estate, as well as substantially increasing exposure to short-term investments.

After the end of the biennium, the economic and investment environment did not improve. The value of the Fund continued to decline, but remained relatively stable compared to the decline in the financial markets. This was due to the extent of diversification of the investments of the Fund. Such broad diversification is usually helpful in a volatile environment such as has been experienced by the Fund.

Another document before the Committee was a report of the Advisory Committee on Administrative and Budgetary Questions (ACABQ) on the United Nations pension system (document A/57/490), submitted after its consideration of the report of the United Nations Joint Staff Pension Fund. The Committee stresses the importance of ensuring that the fiduciary responsibility of the Secretary-General, under the regulations of the Fund, to take decisions on the investments of the assets of the Fund should under no circumstances be compromised.

In the opinion of the Advisory Committee, it should be understood by all that use of the results of the study and any subsequent executive action taken further to it, remain the responsibility of the Secretary-General as the one with fiduciary responsibility for the investments of the Fund. The Advisory Committee suggests that, in future, in order to ensure cost-effective use of the administrative resources of the Fund, requests for reviews and studies be clearer regarding the basis for the request, and that they be specific as to the objective of the study or review and the results expected.

OIOS Report

Another document before the Committee was a note by the Secretary-General (document A/57/451), by which he transmits to the Assembly the eighth annual report of the Office of Internal Oversight Services (OIOS), covering activities for the period from 1 July 2001 to 30 June 2002.

According to this document, during the period under review, the OIOS responded with determination to calls by Member States for better use of financial resources by focusing its services to instil a greater sense of accountability throughout the Organization. Seven OIOS audits resulted in reports to the Assembly on a wide range of topics, such as the United Nations International Research and Training Institute for the Advancement of Women and oversight activities concerning the Office of the Iraq Programme and the United Nations Compensation Commission.

OIOS management consultants are contributing to the Secretary-General’s comprehensive reform efforts and, at his request, are carrying out assignments on administrative duplication and human resources management reform. A follow-up review of mission subsistence rates at peacekeeping missions showed that the implementation of OIOS audit recommendations resulted in net projected annual savings of $25.5 million. With its qualitative assessments of programme performance, a report on programme performance of the United Nations for the biennium for 2000-2001 produced by the OIOS was an important step towards implementing results-based reporting in the Organization.

Among individual investigations mentioned in the report is the case, which produced evidence that some police monitors at the United Nations Mission in Bosnia and Herzegovina had used the services of women and young girls working as prostitutes in the Mission area. However, there was no prima facie evidence of widespread involvement by the monitors in the trafficking of women and young girls. The OIOS recommendations issued in connection with the case are in the process of being implemented by the Department of Peacekeeping Operations.

An investigation into the allegations of sexual exploitation of refugee girls and women by aid workers in refugee camps in West Africa run by the Office of the United Nations High Commissioner for Refugees (UNHCR) has confirmed that such exploitation exists, but is not widespread. The information gathered suggested that young female refugees resorted to prostitution or sexual relationships with aid workers as a result of extreme poverty. However, cases of rape and other involuntary sexual contact with refugees were also found. The OIOS will present its findings and recommendations in its report to the General Assembly when the investigation is completed.

An audit of United Nations Joint Staff Pension Fund contribution remittances by member organizations revealed that more than $33 million in contributions were under-remitted or remitted late during 1999 and 2000, resulting in lost interest income of over $400,000, which had not been recovered by the Fund.

On the whole, during the past year, the OIOS issued 2,357 recommendations to improve internal controls and correct underlying obstacles to organizational efficiency and effectiveness. Of these, 51 per cent have already been implemented. Some 30 per cent of all recommendations were classified as critical to the Organization, calling for improvements to productivity, savings and recoveries and accountability for fraud, waste and abuse, among other things. The OIOS also exposed waste and fraud in the Organization and recommended actions, which, if implemented by programme managers, would save the Organization approximately $56 million.

Administrative and Budgetary Aspects of Financing of United Nations Peacekeeping Operations

Before the Committee was a letter dated 17 October 2002 from the Acting President of the General Assembly addressed to the Chairman of the Fifth Committee (document A/C.5/57/15). It transmits a letter from the Secretary-General dated 14 October 2002 addressed to the President of the General Assembly, concerning the rates of assessment for Switzerland and Timor-Leste for the financing of peacekeeping operations.

The letter states that, in light of General Assembly resolution 57/1 of September 2002 on the admission of the Swiss Confederation to membership in the United Nations, and resolution 57/3 of 27 September 2002 on the admission of the Democratic Republic of Timor-Leste to membership in the United Nations, the Assembly will need to consider the placement of these two new Member States under the system of levels established by its resolution 55/235 for the purpose of establishing their rates of assessment for peacekeeping operations.

The letter proposes that this question be considered under item 126 of the agenda of the fifty-seventh session of the General Assembly, entitled "Administrative and budgetary aspects of the financing of the United Nations peacekeeping operations".

Introduction of Reports: United Nations Common System

MOHSEN BEL HADJ AMOR, Chairman of the International Civil Service Commission (ICSC), introduced the Commission’s report for 2002 (document A/57/30). He said that reform of the current pay and benefits system was of paramount importance as part and parcel of the overall administrative and organizational reform efforts of the common system. The current system was based on a principle of equity -– largely defined by equivalent work duties and responsibilities. Equity defined by level of contribution to the work effort was not a part of the current definition. If the objectives of the current review were to be met, then a revised pay and benefits system must permit rewarding a staff member's contribution to the work effort.

Furthermore, the current job classification system was seen as a major stumbling block in moving towards new initiatives. Its focus on job equity as opposed to contribution equity was not in tune with today's realities. The current classification system should be revised to function at a more generic level, but maintaining and clearly specifying grade-determining factors. The job classification system should also be designed to support revised salary structures tailored to meet the needs of the organization of the common system. The introduction of broad-banded salary structures would, therefore, be possible.

A starting point in improving organizational efficiency would be an assessment of management capacity, particularly as it related to driving organizational change, he continued. A frequently heard complaint was that management styles in the United Nations common system were not in concert with the market-driven and less hierarchical world around it -- a world where team building, accountability and devolution of responsibility represented prevailing concepts. The creation of a system that strengthened the management capacity of organizations by fostering managerial excellence, that enabled them to attract and retain managers of high quality, was essential in driving organizational change and improving organizational performance.

A number of other activities and reviews were also undertaken for the report, dealing with such subjects as staff mobility, net remuneration margin, education grant and dependency allowances and hazard pay. The report’s proposals provided a much-needed basis for the improvement of organizational performance, he said. Taken together, they represented a fundamentally new way of managing staff and reflected measures being undertaken by Member States on all continents. The international civil service, like the United Nations system itself, must remain efficient, dynamic and evolving, reflecting today’s fast-paced, constantly changing world.

LOUISE FRÉCHETTE, Deputy Secretary-General of the United Nations, presented a statement adopted by the High-Level Committee on Management at its fourth session on behalf of the United Nations System Chief Executives Board for Coordination to the Committee, contained in document A/C.5/57/16. She said the ICSC played a key role in supporting the process of reform. Changes were being made throughout the United Nations system to modernize human resources management, to build results-oriented cultures, and to promote accountability, continuous learning and managerial excellence. Executive heads were keenly aware that the capacity to attract, develop, motivate and retain high-quality staff would be a crucial factor in the success of that transformation.

The United Nations common system needed a pay and benefits system that supported those objectives. However, the current system fell short. Executive heads had repeatedly expressed their concern over its lack of competitiveness, flexibility and responsiveness. United Nations organizations were no longer competitive in the international public labour market. The issue was not whether someone could be recruited, but whether the best person could be recruited. The current pay system did not contribute to improved performance or to more effective management.

It was not only the executive heads that held those convictions, she continued. Member States had also emphasized the importance they attached to those goals. In resolution 55/258, the Assembly had endorsed the recommendation of the ACABQ that a competitive package of conditions of service was a prerequisite to the successful achievement of human resources reform. The executive heads welcomed these proposals and looked forward to working with the Commission to gradually implement them. They also strongly supported the ICSC’s recommendation that there be a differentiated salary increase for the Professional and higher categories.

United Nations Pension System

The Chairman of the United Nations Joint Staff Pension Board, JEAN LARIVIERE, introduced that body’s report. He said that the Fund’s latest actuarial valuation had revealed a third consecutive surplus, which amounted to 2.92 per cent of pensionable remuneration at the end of 2001. That surplus was the result of the difference between the calculated rate of contribution required for actuarial balance between liabilities and assets (20.78 per cent of pensionable remuneration) and the present contribution rate of 23.7 per cent. The Fund’s consulting actuary had noted that the required contribution rate could be expected to increase because of asset losses that had not yet been fully reflected in the current valuation.

The cumulative annualized total rate of return for the 42-year period ending 31 March 2002 had been 8.5 per cent, he continued, representing a yearly real rate of return of 3.9 per cent after adjustment by the United States consumer price index. While concern had been expressed over the investments’ performance over the last two years, a very positive long-term return was the major contributing factor responsible for the Fund’s current surplus. However, the total investment returns for the years ending on 31 March 2001 and 31 March 2002 were minus 15 per cent and plus 0.7 per cent, respectively. The real rates of return after adjustment were minus 17.4 and minus 0.8 per cent, respectively. The total annualized real rate of return for the biennium was minus 7.5 per cent.

Regarding the Fund’s operational expenses, he said that the Assembly had approved its budget totaling $74.3 million for 2002-2003, consisting of $29.9 million for administrative costs, $43.4 million for investment costs, and $1 million for audit. The Board, however, had since approved additional resources under administrative costs, reflecting a total increase of $179,200. Those expenses related to required recalculation of benefits due to an International Labour Organization (ILO) tribunal judgement and to a retroactive change in local salary scales, which would involve approximately 12 months of general temporary assistance. Another factor was implementation of the recommendations of the working group, which undertook a fundamental review of the Fund’s benefit provisions and economy measures.

Following a review by the working group, the Board recommended several of the following measures to strengthen human resources management and enhance the mobility of staff and portability of pensions: to apply cost-of-living adjustment to deferred retirement benefits from age 50, rather than 55; to apply cost-of-living differential factors as from the day of separation; and to eliminate the limitation on the right to restoration of prior service. The whole cost of the package approved by the Board was 0.54 per cent of pensionable remuneration. The Board was also recommending amendments to the regulations in respect of the commutation of the minimum benefit amounts (rising the ceiling to $1,000 from $300) and the provisions governing extended leave without pay periods (setting a maximum of three years when pension contributions are not made concurrently).

Regarding former participants of the Fund from the former Soviet Union, he said that the Permanent Representative of the Russian Federation had provided details regarding the implementation of internal decrees 229 and 27, which would supplement the national pensions of former participants and also provide for retroactive payments to deal with arrears. During the Board’s discussions, it was stressed, however, that ultimately, the economic benefits from the funds transferred by the former United Nations Joint Staff Pension Fund participants to the State should go to those former participants. The Board noted that the Foreign Minister of the Russian Federation had recognized that the current situation was not adequate, as he had indicated that his Government was considering adopting additional measures to improve the situation of the former participants. The Board decided to ask the Secretary-General to continue to seek a satisfactory resolution to the matter.

Introducing a related ACABQ report, the Chairman of that body, CONRAD S.M. MSELLE, said that the ACABQ agreed with the cautious approach taken by the Board in connection with the outcome of the latest actuarial evaluation. The trend so far did not call either for a reduction in the rate of contribution or a change in the current actuarial model. It was necessary to watch the situation closely.

The market value of the Fund had dropped more than 16 per cent as a result of volatile markets and negative returns, he continued. In that connection, the Advisory Committee agreed with the Board that it was necessary to avoid confusion in matters concerning the investments of the Fund. Under no circumstances should the fiduciary responsibility of the Secretary-General to take decisions on the investments of the assets be affected.

On administrative matters, the Advisory Committee agreed with the recommendations of the Pension Board regarding an increase in the resources under administrative costs in the 2002-2003 biennium. The ACABQ also comments on alternative internal audit arrangements, including possible establishment of a separate unit within the Fund’s secretariat, cautioning against a hasty decision in that respect. Before the current arrangements were modified, the cost-effectiveness of such a change needed to be thoroughly analysed. The ACABQ also recommended that the Board of Auditors carry out the assessment of capacity and professional expertise required for the OIOS to provide internal audit services for the Pension Fund, in accordance with widely accepted industry standards. Finally, the Advisory Committee recommended that the Assembly review the manner in which members and alternate members representing the General Assembly were elected to the Staff Pension Committee under the regulations of the Fund.

The Director of Investment Management Service, HENRY L. OUMA, introduced the Secretary-General’s report on the investments of the Pension Fund, saying that, mainly as a result of a broad correction in global equity markets since March 2000, by the end of March 2002, the market value of the Fund’s assets had decreased from $26.06 billion to $21.79 billion -– a decline of $4.27 billion, or 16.4 per cent. The negative performance of equities was partially offset by positive performance in all other asset classes. The performance of the real estate portfolio was particularly strong. The high level of short-term holdings helped to preserve the principals of the Fund during the period of high market volatility.

With the markets remaining very volatile, he continued, the market value of the Pension Fund, which had been $21.79 billion on 31 March 2002, had declined to some $19.91 billion as at 30 September. That decline could almost entirely be attributed to a decrease in underlying value of assets, which was partially offset by currency movements. Of the overall 8.6 decrease in the total portfolio, approximately negative 11.2 per cent was attributed to market effect and positive 2.6 per cent to currency movements, mostly from the appreciation of the euro against the dollar.

He went on to say that the long-term objective of the Fund was to achieve a real, or inflation-adjusted, rate of return of 3.5 per cent. Within the past 10 years, the Fund had achieved that objective in eight out of 10 years. The annualized 10-year nominal return was 7.9 per cent, while the real rate of return was 5.3 per cent. During September 2002, the Fund’s equity portfolio had declined by 25 per cent, while the Morgan Stanley Capital Index-World had declined by 28.8 per cent. Thus, the Fund had outperformed that index by 3.8 per cent. At the same time, the Fund’s bond portfolio (with a performance of 13.6 per cent) had underperformed respective indexes of the United States dollar, euro, pound sterling and yen by some 1.3 to 7.6 per cent.

Activities of OIOS

DILEEP NAIR, Under-Secretary-General for Internal Oversight Services, introducing the report of the Secretary-General on the activities of the Office, said that the OIOS was enhancing the focus of its oversight services to ensure more effective and efficient use of the Organization’s resources and to instil a greater sense of accountability. OIOS’ audits, inspections and investigations addressed administrative problems such as management efficiency, poor deployment of staff and the improper use of resources. Evaluations undertaken by the OIOS had also invoked broader assessments of the following subprogrammes: General Assembly and Economic and Social Council affairs, and Economic and Social Council support and coordination subprogrammes.

Continuing, he highlighted several OIOS achievements during the reporting period. For example, seven OIOS audits had resulted in reports to the General Assembly, covering a wide range of topics such as the International Research and Training Institute for the Advancement of Women (INSTRAW), the Integrated Management Information System (IMIS), and the United Nations Compensation Commission. Furthermore, a follow-up review of mission subsistence rates at peacekeeping missions showed that the implementation of OIOS audit recommendations had resulted in net projected annual savings of $25.5 million, and the merger of four oversight functions within the OIOS into the new Monitoring, Evaluation and Consulting Division had energized cross-disciplinary teamwork in the areas of monitoring, inspection, evaluation and management consulting.

The OIOS would apply a risk-assessment methodology in its 2003 work programme and develop an oragnizational integrity strategy aimed at strengthening the prevention of fraud, corruption and other malfeasance in the Organization, he said. That would help the OIOS to plan and carry out oversight assignments more effectively in the face of its growing oversight responsibilities. The OIOS was also applying its internal management-consulting resources to meet new demands for services and strengthen its support for self-evaluation activities carried out by programme managers.

Financing of United Nations Peacekeeping Operations

The letter on this item was introduced by the Chief of the Contributions Service and Secretary of the Committee on Contributions, MARK GILPIN. He said that by the terms of resolution 55/235 of 23 December 2000, 10evels of contribution to peacekeeping operations had been established for Member States. The resolution also provided for transitional measures for Member States that faced difficulties. In its resolution 55/236, the Assembly had welcomed the decision of a number of Member States to be placed in higher levels than indicated by the criteria in resolution 55/235.

The two resolutions, however, did not directly address the question of new Member States, he continued. For the new States admitted in 2002 (Switzerland and Timor-Leste) to be included in the relevant assessments for peacekeeping during the current biennium, it would be necessary for the Assembly to place them in relevant levels. The criteria provided that permanent members of the Security Council should be placed in level A, the least developed countries in level J, and countries included in level C in the annex to the relevant resolution should be placed in level C. All others should be placed in either levels B or D to I, based on their gross national product (GNP) according to the data used in the scale of assessments for 2003. The average per capita GNP of Members of the United Nations, based on the data for 1993-1998, was $4,797. The corresponding figures for Switzerland and Timor-Leste for the same years were $39,447 and $387, respectively. Based on that, Switzerland should be placed in level B and Timor-Leste in level I.

Other issues to be considered in that regard were the new Members’ contributions to the peacekeeping reserve fund and strategic deployment stocks arrangements. It was also not clear if the provisions of resolution 56/292 regarding the arrangements for strategic deployment stocks, including the possibility of transfer of respective shares of Member States in the cash balances of two closed peacekeeping missions, applied to States admitted to membership after the adoption of that resolution. The Fifth Committee might wish to recommend an appropriate decision to the Assembly.

Other Matters

GERARD WEI HONG HO (Singapore) raised his delegation’s concerns at the strengthening of security measures. The implementation of new security measures had brought with it certain inconveniences, for example, the garage entrance outside the Delegates’ Entrance had been closed, so that when Mission vehicles came by they were not allowed to wait. If the ambassador was delayed, the car would have to go all the way round and come back in again. Furthermore, the entrance on 42nd Street was now much narrower, so movement was restricted. Security measures were implemented with the right intentions, but their implications might not go down too well. There had not been enough consultation with the users of the Building, and there appeared to be no existing mechanism for such consultation.

Comments by United Nations Security Chief

The Chief of the Security and Safety Service, MICHAEL McCANN, said that his Service should probably do a better job of communicating its needs and asking for Member States’ support. The threat to the United Nations was significant, however, and the Security Service was taking precautions. Recently, there had been a number of incidents, including one when a person fired at the Building, and there were cases when mentally unstable people had appeared at the complex. A large number of demonstrations were held in front of the complex and the United States Mission. With several important issues being discussed at the Security Council, a number of unauthorized demonstrators had had to be escorted out of the Building. Several people were prosecuted for unauthorized trespassing. Under those circumstances, it was important to find a balance between achieving a proper level of security and avoiding inconveniencing the users of the buildings.

After additional funding for safety and security was received, certain improvements had been made, he said. For example, public access to the plenary was closed when the Assembly was meeting. There were also plans to build a partition in front of the public balcony in the plenary hall. Additional security personnel were being recruited, and several officers had already been hired. A number of officers at entry points had been increased, and many staff were working overtime.

Because of concern over the increased number of demonstrations, an entry into the garage was closed to prevent unauthorized entry into the Building. A response team had been established. The library entrance had been reopened, however. He would look into the complaint by the representative of Singapore and try to eliminate inconveniences as much as possible, without compromising security.

Organization of Work

The representatives of Saudi Arabia, Libya, Syria, Egypt, Sudan, Jordan, Iran, Algeria, Morocco, Bangladesh and Indonesia requested that the Board rearrange the work of the Committee during the month of Ramadan, and end afternoon sessions at 4:30 p.m.

The CHAIRMAN of the Fifth Committee replied that the situation this year was slightly different from last year. This year, for example, there were no meetings after 6 p.m. There were also different requirements of Member States, and he would not be able to come up with a solution that was completely acceptable to all.

The representative of Morocco said that her delegation was aware of the difficulties. However, the Third Committee had already decided on the proposal made by delegates to end the meetings at 4:30 p.m.

The CHAIRMAN responded that the Third Committee would finish its work well before 6 December, and that, therefore, its time constraints were not the same. Comparisons should not be made with any other Committee or any previous year.

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