Global Policy Forum

Investing in Budget and Finance

United Nations
March 7, 2006

To view whole report: Investing in the United Nations

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.

Figure 6
Both Member States and Secretariat are overwhelmed with the number of reports

Report load of the Fifth Committee at the fifty-ninth session of the General Assembly
Total: 275 in one year Reporting Unit: Number submitted
Peacekeeping Finance Division: 45 reports
Advisory Committee on Administrative and Budgetary Questions: 78 reports (16,000 pages)
Joint Inspection Unit: 13 reports
Board of Auditors: 21 reports
Office of Internal Oversight Services: 25 reports
Office of Human Resources Management: 13 reports
Programme Planning and Budget Division: 28 reports
Budget report: 35 sections (26,000 pages)
Other units of the Department of Management (and written responses to questions): 31 reports
Other departments: 21 reports
... and 80 Secretariat oral statements


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.


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.

More Information on UN Finance
More Information on UN Documents on the Financial Crisis
More Information on UN Reform


FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Policy Forum distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C § 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.