United Nations

GA/AB/3562
9 May 2003

Briefing Fifth Committee on UN Financial Situation, Under-Secretary-General for Management Says 2002 Was Good Year, But Uncertainties Remai

Concern Expressed at Decrease in Number of States Paying Budget Dues in Full

NEW YORK, 8 May (UN Headquarters) -- The year 2002 could be considered a financially good year, but with some uncertainties appearing on the horizon, Under-Secretary-General for Management Catherine Bertini said, as she presented her first statement on the financial situation of the United Nations in her new capacity to the Fifth Committee (Administrative and Budgetary) this morning.

Customarily presented to the Committee twice a year -- in autumn and then in spring -- the statement provided an overview of the actual results of last year and projections and challenges for the Organization as it moved forward into 2003.

At some $1.4 billion, cash on hand at the end of 2002 was the highest in the last seven years, Ms. Bertini said. Unpaid assessments, although still substantial, were also significantly lower at year-end, amounting to $1.68 billion, compared to $2.11 billion last year. That figure was the lowest in seven years, as were amounts due to Member States, which had been reduced to $701 million, compared to $748 million at the end of 2001.

Two unfortunate trends were emerging, however, she cautioned. Cash levels for the International Tribunals were slipping a little more each year, leading to cross-borrowing from closed peacekeeping missions; and fewer Member States (117) had paid their dues in full by the end of the year -- a serious setback in the progress achieved between 1994 and 2000.

It was significant that while the aggregate level of unpaid contributions had dramatically decreased, the remaining arrears were concentrated in a few Member States, she pointed out. Specifically, three Member States owed 84 per cent of outstanding regular budget amounts; five Member States owed 84 per cent of outstanding assessments for the International Tribunals; and 10 Member States owed 77 per cent of the outstanding peacekeeping assessments. For example, for the regular budget, at the end of 2002, the United States owed 62 per cent of the $305 million due to the United Nations; Brazil owed 12 per cent; and Argentina owed 10 per cent of the total. Sixty-nine other Member States had total outstanding amounts of $48 million, or 16 per cent.

Overall, the financial situation for 2003 was continuing the progress achieved over several years, but it was important not to let the present course change, she said. It was up to Member States to reverse some of the negative trends mentioned today. Her "wish list" for the financial stability of the Organization envisioned 191 Member States paying their dues on time; accelerated payments of dues paid late in the year; and full payment by year-end in all cases.

Also this morning, as the Committee concluded its consideration of a number of issues related to the financing of peacekeeping operations, several delegates questioned the feasibility of consolidating the accounts of various peacekeeping operations, asking for a clearer explanation of the merits or demerits of the proposed system. Responding to their questions, the United Nations Controller, Jean-Pierre Halbwachs, noted that last year the General Assembly had asked the Secretariat to explore the possibility of consolidating peacekeeping accounts. The Member States had been provided with several possible options in that regard.

Statements were made by representatives of Morocco (on behalf of the "Group of 77" developing countries and China), Cuba and the Russian Federation.

The Committee will begin its consideration of the administrative and budgetary aspects of peacekeeping financing at 10 a.m. Monday, 12 May. It is also expected to take up several issues under the programme budget for the current biennium.

Briefing by Under-Secretary-General for Management

Presenting the financial situation of the United Nations to the Fifth Committee (Administrative and Budgetary), the Under-Secretary-General for Management, CATHERINE BERTINI, said that the aggregate cash balance at the end of 2002 was the highest ever; the level of unpaid contributions had dramatically decreased; and significant progress had been made in reducing debt to Member States.

The analysis of 2002 showed that it could be considered a financially good year, but with some uncertainties appearing on the horizon. At some $1.4 billion, cash on hand at the end of 2002 was the highest in the last seven years. Unpaid assessments, although still substantial, were significantly also lower at year-end 2002, amounting to $1.68 billion, compared to $2.11 billion last year. That figure was the lowest in seven years, as were amounts due to Member States, which had been reduced to $701 million, compared to $748 million at the end of 2001.

The higher available cash was the result of a higher than projected level of payments, she said. In 2002, total receipts of over $4 billion exceeded the total amount assessed by 112 per cent. The amount of actual regular budget cash of $35 million, however, had been achieved despite smaller payments than forecast from the United States, Brazil and Argentina and fewer numbers of Member States paying their yearly assessment in full. It was due to lower net disbursements than initially projected that instead of ending the year with no cash, the Organization had been able to end it with a small amount of regular budget cash.

As for peacekeeping cash, she said that 2002 had ended at $1.36 billion. With disbursements higher and 2002 pay-down of debt to Member States larger, the Organization had nevertheless remained at a level slightly higher than 2001. For the Tribunals, the year had ended in a negative $1 million cash position, against a forecast of a positive $10 million. That worrisome trend needed to be watched, as cash levels were slipping a little more each year, leading to cross-borrowing from closed peacekeeping missions at year-end. Unpaid assessments were not going down.

Turning to the aggregate level of assessments and the debt of Member States, she said that unpaid amounts had significantly decreased from $4.3 billion in 2001 to $3.6 billion in 2002. The regular budget assessment was $1.15 billion in 2002 -- a slight increase from previous years. Assessments for the International Tribunals in 2002 had also increased slightly (by $20 million) to $ 199 million.

Peacekeeping assessments issued during 2002 totalled some $2.25 billion, a significant decrease from the $3.04 billion for 2001. That was due in large part to uncertainty about the effective rates of assessment for peacekeeping in 2003 following admission of two new Member States and the Assembly's review of the rates of two other countries during 2002. As a result, peacekeeping assessments for the periods following 31 December 2002, that could otherwise have been issued during 2002, had been deferred until the beginning of 2003.

In 2002, only 117 Member States had paid their regular budget contributions in full, she said. That presented a serious setback in the progress achieved between 1994, when only 75 Member States paid in full, and 2000, when 141 Member States had paid in full. She urged all Member States to meet their obligation to pay in full and on time. Of those owing some $305 million in regular budget assessments at the end of 2002, the United States owed $190 million or 62 per cent; Brazil owed $37 million, or 12 per cent; and Argentina owed $30 million or 10 per cent, with 69 other Member States having total outstanding amounts of $48 million, or 16 per cent.

Also in a sluggish position were arrears for the International Tribunals, she continued, which totalled $43 million at the end of 2002. For 2002, 133 Member States had unpaid Tribunal assessments, but five Member States -- United States, Russian Federation, Brazil, Argentina and Republic of Korea -- accounted for the largest amounts. Each of the five owed between $3 million and $12 million, which together amounted to roughly 84 per cent of the total uncollected amount. A total of $7 million was owed by 128 other Member States, or 16 per cent. Peacekeeping arrears, on the other hand, provided a more positive picture, for they had significantly decreased to the best number in many years -- $1.34 billion. She hoped that decline would continue. At 31 December 2002, the breakdown of unpaid assessments showed the United States owed $536 million, or 40 per cent, nine of the 14 other major contributors owed $494 million, or 37 per cent, and 161 others owed a total $305 million, or 23 per cent.

Thus, while the aggregate level of unpaid contributions had dramatically decreased, she continued, the remaining arrears were concentrated in a few Member States. Specifically, three countries owed 84 per cent of outstanding regular budget amounts; five Member States owed 84 per cent of outstanding assessments for the International Tribunals; and 10 Member States owed 77 per cent of the outstanding peacekeeping assessments.

At the same time, it was important to recognize the Member States, which had paid their assessments in full last year -- despite the fact that peacekeeping assessments were issued not once, but throughout the year. The countries that had paid for all years, and for all types of assessments included Angola, Australia, Botswana, Cameroon, Canada, Czech Republic, Denmark, Finland, France, Ireland, Kuwait, Latvia, Lithuania, Madagascar, Monaco, Norway, Seychelles, Sierra Leone, Singapore, South Africa, Sweden, Tuvalu and the United Kingdom. It was a pleasure to recognize them.

As for debt to Member States for 2002, she said that determining the amount of debt the Organization planned to pay was not a simple exercise, which took into account the status of certification claims submitted by troop-contributing countries. Nonetheless, the Secretary-General wanted the Member States to be fully informed on the matter and had directed the Secretariat to reimburse them as quickly as possible.

At the beginning of 2002, the Organization had owed $748 million, mostly for contingent-owned equipment. At the end of 2002, the debt stood at $703 million -- $45 million less than the amount owed at the beginning of the year. During the year, the Organization had made substantial progress in paying down troop debt and, to a lesser extent, amounts owed for contingent-owned equipment. Overall, $745 million had been paid, an amount almost equivalent to the debt level at the beginning of 2002.

Turning to the financial situation in 2003 in the context of the challenges and reform expectations to be met, she said that much needed to be accomplished this year, but to make further progress, Member States must provide the means. The Organization's scorecard over the first four months of 2003 showed cash collections for the regular budget that were somewhat better than last year: this year, 76 Member States had paid in full so far, compared with 70 at the end of April in 2002. The amount of payments received in the first four months of the year had also increased, totalling $635 million, $218 million ahead the results at the same time last year.

As for the regular budget cash balances over the past six years, figures for 1999, 2001 and 2002 reflected steady continuing progress with earlier contributions from a number of States -- less holding back of assessed contributions. The projected regular budget cash balances maintained that positive trend with only November currently forecast to be in deficit. That was due to uncertainties about the timing of some major contributions expected during the last quarter of the year, including the United States. Nevertheless, she did expect to end the year with a positive regular budget cash balance, currently estimated at $44 million -- a good result if those projections proved correct.

Regarding Tribunals, she said that their cash availability was based on an assessment level of $217 million for 2003. Starting the year with a negative cash balance of $11 million, it had been necessary to borrow from closed peacekeeping missions in January. Cash availability during the course of 2003 was forecast to even out, however, with a positive balance of $3 million at year-end. Peacekeeping assessments for 2003 were projected to total $2.1 billion -- $100 million less than 2002. A corresponding reduction in receipts, along with our continuing commitment to paying down debt to Member States, was expected to reduce available peacekeeping cash to $929 million. That projected balance was broken down between cash in active missions ($427 million), cash in inactive missions ($339 million) and the peacekeeping reserve fund ($163 million).

That breakdown was important, because there were significant restrictions on the use of a large part of those funds. The General Assembly had decided that there should be no borrowing from active peacekeeping missions, and resolution 47/217 provided that the peacekeeping reserve fund may only be used for the requirements of new and expanded peacekeeping operations, pending the receipt of assessed contributions. Accordingly, only the cash balance in inactive missions could currently be drawn on to meet temporary cash shortfalls in other accounts. Of the $339 million available in the closed missions, $169 million was currently being considered in the performance reports of the closed missions. If that amount were to be returned to Member States, that would leave only $170 million in cash for temporary cross-borrowing when the Tribunals or an active peacekeeping mission ran out of cash.

In light of this, and as a matter of prudent financial management, the Secretary-General was proposing that the application of the relevant financial regulations and rules be suspended, and the amount be retained in respect of the closed missions currently under your review, so that the Organization could retain a degree of financial flexibility until the financial situation improved.

The combined picture at the end of 2003 for peacekeeping, regular budget, Tribunals and -- for the first time -- the capital master plan cash showed a significant reduction from a high of some $1.4 billion to $990 million. The year-end cash balance projected for the capital master plan was forecast to be $14 million. The Organization intended to make significant payments to Member States in 2003, keeping up the momentum achieved in 2002 and, in fact, going beyond what had been accomplished last year. It expected to be able to pay some $939 million in certified troop- and contingent-owned equipment claims. With projected additional claims of $731 million, the end result, at 31 December 2003, should be a significant lowering of debt to $495 million -- $129 million for troops and only $366 million for contingent-owned equipment.

That positive projection reflected in part faster processing of contingent- owned claims, she said. In its turn, that was expected to result in a reduction of peacekeeping cash balances. Overall, at the end of 2003, the United Nations should be current with troop debt and averaging six months time delay at June 2003.

In conclusion, she offered the Committee her "wish list" for the financial stability of the Organization, which envisioned 191 Member States paying on time; accelerated payments when Member States paid late in the year; and full payment by year-end in all cases. Overall, though the financial situation was continuing the progress made over the last several years, it was important not to let the present course change. It was up to Member States to reverse some of the negative trends mentioned today.

Financing of Peacekeeping Operations

AICHA AFIFI (Morocco), on behalf of the "Group of 77" developing countries and China, said peacekeeping was an important function of the Organization, and all peacekeeping activities must be provided with adequate resources. Regarding the feasibility of consolidating the accounts of the different peacekeeping operations, more clarification on the issue was needed so that the Group could make an informed decision.

She asked the Secretariat and the Advisory Committee on Administrative and Budgetary Questions (ACABQ) to answer several questions, including what would be the impact each of the three options proposed in the Secretary-General's report on the status of reimbursement to troop-contributing countries. Also, how would voluntary contributions by individual Member States to peacekeeping operations be addressed if the accounts were consolidated?

The Group also wished to know what implications the three options would have, if any, on the provisions of Article 19 and the envisaged role of the Committee on Contributions in that regard. She also wondered about the possibility of bi-annual assessments to Member States to overcome legislative or procedural problems associated with national financial regulations and the delinking of assessments from Security Council mandates. How would the three options affect the timely funding of operational activities of the various peacekeeping operations?

Apart from alleviating the workload of the Contributions Section of the Department of Management and facilitating planning for Member States, she asked if there would be additional benefits for consolidating peacekeeping budget accounts. She also wondered if there would be any cost savings for the Secretariat. A mock demonstration of consolidated accounts using each of the three options, taking into account the current income, expenditures, assets and liabilities of each peacekeeping operation, would be useful. As the approach outlined in the report was not compatible with current financial procedures, how would the financial rules and regulations have to be amended if any of the three options were accepted?

ILEANA BARBARA NUÑEZ MORDOCHE (Cuba) said the consolidation of peacekeeping accounts was a highly complicated issue. A substantive report, which outlined both the positive and negative aspects of the proposal, was needed. Peacekeeping financing was not a simple matter. The political will of Member States in the Security Council, particularly the five permanent members, determined the mandate, structure and composition of missions. The impact of other Member States was zero. An approach requiring greater flexibility in the use of resources should have as a corollary greater participation on the part of the General Assembly in the composition of the operations. If there were a ceiling, the Secretary-General could transfer resources from one section to another without prior Assembly approval. Such an approach would trespass on the Assembly's prerogatives, and she could not support that.

She said the consolidation would remove transparency from legislative procedures and the Assembly's monitoring process. Why were delegates being asked to change existing practice? It seemed that certain prerogatives would be given to the Secretariat. She asked the Secretariat to discuss both the advantages and disadvantages of its proposals.

VLADIMIR IOSIFOV (Russian Federation) said the creation of consolidated accounts would simplify only internal accounting procedures. He could not see any advantage for Member States. The consolidation might negatively impact the payment of contributions. For a number of Member States, the issue was linked to serious political problems. The creation of such an account would make it more difficult to follow the expenditures of each operation. It would also lead to a loss of control on the part of Member States on the funds they were providing, as well as a loss of transparency and appropriate accounting for the expenditure of financial resources.

The argument that the consolidation would help Member States better plan their assessments to the various peacekeeping operations would lose significance, he said. Beginning this year, the Secretary-General had started issuing annual reports with detailed overviews of the financial situation of the different peacekeeping operations. That useful report contained information Member States needed to plan their level of financial participation in United Nations peace operations.

JEAN-PIERRE HALBWACHS, United Nations Controller, said that while he could not answer the long list of questions on the spot, he would like to offer a clarification. The Secretariat, he noted, had not come up with the idea of consolidation. Last year, the General Assembly had asked the Secretariat to look into the matter and see if it was possible. Instead of simply replying "no", the Secretariat had thought it should offer a number of elements to be examined. It was not pushing for the consolidation. On the contrary, the Secretariat was happy with the current situation. He was not asking the Assembly to endorse anything.

At the conclusion of the meeting, the Committee decided not to hold, in its informal consultations this morning, a discussion on a chapeau for all draft resolutions on active peacekeeping operations.

In that connection, the representatives of Venezuela, Morocco (on behalf of the Group of 77 and China), Greece (on behalf of the European Union) and Belgium, in his capacity as coordinator of that agenda item, made brief statements.

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