INVESTING IN THE UNITED NATIONS
For a Stronger Organization Worldwide
Report of the
Secretary-General
V. Investing in budget and
finance
70. Budgetary and financial arrangements
underpin the functioning of the United Nations.
First and foremost, it is imperative that Member
States pay their contributions in full and on
time. The quality of the decisions Member States
take on how best to deploy resources is also
critical. Yet as the world and our mission change,
as overall spending grows and as knowledge of
international management best practices widens,
our budget and finance functions have not kept
pace.
Context and challenges
71. Past reforms have aimed at improving the
system of budgeting, the cycle of budget
preparation and review and the management of trust
funds. Recent improvements notwithstanding, our
current budgetary and financial arrangements do
not properly enable the Secretariat to do its job.
Key challenges include those described below.
72. An inflexible budget implementation process
that limits the ability of the United Nations to
allocate funds strategically for operational
needs. Although previous reforms have enabled
greater upfront focus on indicators of performance
and the potential impact of a given programme or
function, the new methodology has not led to any
significant shift in the way Member States review
the Secretary- General's budget proposals or
assess how budgeted money was spent. The budget
process is hampered by debate on line-item
details, too much iteration within a lengthy
review period and a paper-intensive approach. The
preparation of the budget currently begins 15
months ahead of each biennium, which is too far in
advance to respond to the fast-changing nature of
United Nations business and can lead to resources
being misaligned with actual needs. The majority
of our finance staff are employed in supporting
this cumbersome process, leaving little capacity
for proactive financial planning and analysis in
support of programme goals.
73. Highly restricted authority of the
Secretary-General to shift resources to meet
emerging needs. The ability of the
Secretary-General to shift money between
programmes and reallocate posts without Member
State approval is weaker today than before 1974,
when the need for such flexibility was far less.
Recognizing the need for greater fluidity, Member
States agreed in 2003 to grant the Secretary-
General, on an experimental basis, the ability to
move up to 50 posts within the biennium. But this
concession has proved both insufficient and
unwieldy, in part because of the large number of
restrictive conditions imposed and the absence of
any authority to reclassify positions according to
need.
74. No single, coherent and commonly understood
notion of accountability for programme
performance. The achievement of programme
objectives has few consequences for resource
allocation, work planning or assessments of
managerial performance.
75. Cumbersome practices emerging from the
Financial Rules and Regulations. As we move from a
centrally controlled institution to a more
decentralized one, we may need to revisit the
rules themselves in a more fundamental way.
Adoption of the International Public Sector
Accounting Standards by the United Nations, which
will be sought from Member States later in 2006,
would require significant adaptation of the
Organization's Financial Rules and Regulations.
76. Insufficient transparency and availability
of relevant financial information to provide clear
guidance either to Member States or to Secretariat
managers on the Organization's financial picture.
An archaic and fragmented IT infrastructure,
outdated manual processes and fragmented accounts
in peacekeeping and trust funds create delays but
also, more importantly, prevent the collection and
tracking of key data needed for management
decisions and proper oversight and audit.
77. Among many examples of these problems, let
me cite the following:
(a) The Secretariat delivers many thousands
of pages of reports to the Fifth Committee each
year, many of them overlapping in content
(see figure 6); for example, during the
fifty-ninth session of the General Assembly, 275
separate reports were delivered;
(b) Budget preparation precedes - and does
not incorporate - the lessons of the programme
performance report on the previous budget
period;
(c) There are more than 150 separate trust
funds and 37 individual peacekeeping special
accounts, each with its own support arrangements
and costs;
(d) Inadequate working capital funds cover
just two or three weeks of United Nations
operations;
(e) Cash flows are slow and unpredictable,
with less than half the amount assessed for the
regular budget received within the first
quarter. For peacekeeping assessments, which are
issued throughout the year, significant payments
take several months and the total amount
outstanding usually stands at between $1 billion
and $2 billion;
(f) The formal budgetary discretion of the
Secretary-General has remained unchanged for
more than 30 years;
(g) Less than half of the 30 offices and
departments in the Secretariat have specific
units or staff dedicated to programme
evaluation.

Vision
78. My vision is of a United Nations that has
addressed these fundamental problems and in which:
(a) There will be a flexible and
strategy-focused budgeting process, building on
the earlier reforms that implemented
results-based budgeting within the Secretariat;
(b) Member States and the Secretariat will
strike the right balance between control and
managerial freedom, and between the direction
and guidance provided by Member States and the
flexibility needed by the Secretariat to fulfil
those wishes. Thus, the Secretariat will have
the authority needed to deploy and shift
resources to implement effectively the mandates
given to it by the Member States;
(c) There will be clear links between
performance and resource allocation, enabling
the best possible stewardship of Member State
investments in the United Nations. This would
give Member States greater confidence in the
transparency and availability of relevant
information on which to base their decisions,
enable them to hold managers accountable for
specific results and assure them that their
financial contributions are being used in an
efficient manner.
79. The proposals set out below are meant as
first steps towards this vision.
Proposals
Proposal 16
In the area of strategic budgetary planning
and implementation, I propose that:
- The Member States and the Secretariat work
together to find ways to further increase the
strategic nature of the budgeting review, reduce
duplicative, detailed and labour-intensive
processes, and align key inputs across the
regular, peacekeeping and extrabudgetary
processes.
- The budget cycles be shortened and aligned
with the calendar year. Regular budget
preparation and adoption should be shortened to
12 months, and all stages of the budget review
process should take place during the main part
(September through December) of the regular
sessions of the General Assembly. The
peacekeeping budgetary cycle would be aligned
with the calendar year.
- Budget appropriation be consolidated from
the current 35 sections into 13 parts.
- Posts be approved in aggregate numbers and
grouped into four broad grade categories. The
Secretariat would submit an indicative staffing
table for information purposes only. The
Secretary-General should have the authority to
redeploy posts as necessary, and to reclassify
up to 10 per cent of posts within each broad
category within a given budget period.
- The Secretary-General be given the
authority, within a given budget period, to use
the savings from vacant posts, with a value not
to exceed 10 per cent of the overall post
budget, for emerging priorities or unanticipated
activities.
Proposal 17
In the area of financial management
practices, I propose that:
- Peacekeeping accounts for separate field
missions be consolidated into a single set of
accounts and reports, starting in 2007, to
improve cash management and operational
flexibility.
- A new policy be introduced in July 2006,
replacing four existing administrative
instructions, to govern the streamlined
management of trust funds. Key objectives would
include simplified rules and procedures, the
introduction of a single, consistent and
flexible trust fund category, and the
establishment of a new standard for support
costs, lower than the current 13 per cent, to
bring it more in line with the fee structure in
force in the United Nations funds and
programmes.
- The ceiling of the commitment authority
granted by the General Assembly for peacekeeping
operations be increased from $50 million to $150
million and de-linked from a specified number of
Security Council decisions.
- The level of the Working Capital Fund for
the regular budget be increased from $100
million to $250 million.
- Budget surpluses, including those from
peacekeeping operations, be retained for use in
subsequent periods, pending Member State
approval.
- A separate fund be created to cover
unanticipated expenditures arising from exchange
rate fluctuations and inflation, to be financed
through the transfer of budget surpluses.
- Interest be charged on arrears in a Member
State's assessed contributions.
Proposal 18
In the area of performance evaluation and
reporting, I propose that:
- United Nations activities in the areas of
performance measurement be given increased
resources but also rationalized.
- Monitoring and evaluation tools be reformed
and synchronized so that their results can be
evaluated in the formation of the subsequent
budget.
- The budget and planning process be
explicitly linked to the results of performance,
work planning and the assessment of managerial
performance in order to ensure the effective
stewardship of resources provided by Member
States.
- A new annual report be introduced (see more
detailed discussion in sect. VI below), along
with other steps to consolidate and simplify
financial reporting.
* * *
80. Re-engineering the financial platform of
the Secretarial around these key principles of
transparent budgeting and results and flexible but
accountable management will require a process of
continuous change. The experience of the United
Nations in funds and programmes shows that
re-engineering core business processes of this
kind requires changes in attitude and culture that
cannot be achieved overnight. In particular,
managers must learn to take responsibility and to
master ICT-based management systems.
|