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FAO - FC 100th Session
FC 100/6


Finance Committee

Hundredth Session

Rome, 9-13 September 2002

Financial Highlights

Table of Contents



I. Introduction

1. The Financial Highlights Report shows, at a summary level, the results for the first six months of the current biennium as of 30 June 2002. The report is organized to show:

II. Regular Programme

2. Contributions received for the Regular Programme during the 6-month period to 30 June 2002 improved by 1% over the comparative period of the last biennium. Regular Programme expenditures for the 6 month period, including $ 11.7 million of TCP expenditure, totalled $151.9 million.

3. The net result of the Regular Programme expenditures and income is a deficit of $5.2 million, which increases the accumulated deficit on the General Fund to $80.6 million. However, based on planned full spending of the Regular Programme budget, it is expected that the biennium’s activities will result in additional charges of some $14 million to recognize the non funding of past after service medical care liabilities. This would further weaken the Organization’s financial position and increase the current deficit on the General Fund balance to some $89.4 million. The growing deficit, as shown in the Highlights Report, is being funded to the extent possible by other reserve accounts (the Working Capital Fund and Special Reserve Account, both undergoing depletion) and balances on net assets (for example, undisbursed obligations and TCP appropriations).

4. Miscellaneous income is normally made up of investment income, bank interest and other miscellaneous income. The loss in this income category is mainly due to net losses of $2 million in the long-term investment portfolio. This portfolio experienced ongoing volatility and the further decline of most equity markets together with an appreciation of the Euro against the USD. The portfolio’s return for year ending 30 June 2002 was –8.4% compared to the selected benchmark of –5.28% for the same period.

III. TCP

5. Total TCP expenditure in the first 6 months of the year amounted to $11.7 million, nearly all for the 2000-01 appropriation. The balances at 30 June 2002 available for the 2000-01 and 2002-03 TCP appropriations are $66.1 million and $46.1 million, respectively. Movements during the period are as follows :

TCP deferred income
Appropriation
2000-01
Appropriation
2002-03
TOTAL
 
US$ millions
US$ millions
US$ millions
TCP Appropriation (Chapter 4.1)
89.1
46.2
135.3
less: Expenditure prior biennium
11.4
0.0
11.4
Balance as at 1 January 2002
77.7
46.2
123.9
Current expenditure
11.6
0.1
11.7
Balance of appropriation as at 30 June 2002
66.1
46.1
112.2

IV. Extra budgetary activities

6. The income and expenditure figures for Trust Fund and UNDP are in line with the plan. As noted in the past, the increasing focus in recent years is in the area of emergency assistance and the Iraq Oil for Food programme.

V. Reserves and Fund Balances

General fund

7. The accumulated deficit of the General Fund for this biennium is expected to deteriorate further by some $14 million due mainly to the amortization of after-service medical care liabilities, i.e. the deficit of $75.4 million at 1 January 2002 is expected to reach $89.4 million. As a consequence of the decisions by the Conference (C 97/102) not to budget for past after-service medical care charges in the last two biennia (98/99 and 00/01) some $35.2 million have been applied against the General Fund.

8. It is important to note that certain major assets and liabilities are not shown on the financial statements, in line with UN accounting practices or FAO Financial Rules. More specifically, as at the date of the previous audited accounts :

Special Reserve Account (SRA)

9. In accordance with Conference Resolution 13/81, the purpose of the SRA is to protect the Organization’s Programme of Work against the effects of unbudgeted extra costs arising from adverse currency fluctuations and unbudgeted inflationary trends. Net gains or losses on exchange as well as the currency variance on staff standard costs (i.e. the difference between the US dollar value of staff costs expressed at the budget rate for the biennium and the UN operational rate at the time of payment) are charged to the SRA.

10. The SRA is authorised at a level of 5% of the effective working budget, i.e. $32.5 million, and the outstanding contributions at 30 June 2002 stood at $10.5 million. The balance of the SRA was $0.5 million at 30 June 2002, and movements during the period are as follows :

Special Reserve Account Movements in 2002
US$ millions
Balance as at 1 January 2002
0.5
Receipts from Member Nations
0.0
Net exchange gain on translation of foreign currencies
0.4
Currency variance on staff standard costs
(0.4)
Balance as at 30 June 2002
0.5

11. Conference Resolution 13/81 states :

“ 4. ... notwithstanding the provisions of Financial Regulation 6.1 (b), such portion of the Cash Surplus in the General Fund at the end of 1980-81 and of any subsequent biennium as is required to bring the level of the Special Reserve Account to five percent of the effective working budget for 1982-83 and for any subsequent biennium shall be withheld and credited to the Special Reserve Account.
 
5. Authorizes the Director-General, in the event that a cash surplus should not arise at the end of any biennium adequate to bring the Special Reserve Account to the level specified in paragraph 4, to apply to the Special Reserve Account, notwithstanding financial Regulation 6.1. (a), any sums received in the subsequent biennium in payment of arrears of contributions for previous biennia.
 
6. Requests the Director-General, in the event that the Special Reserve Account, replenished in accordance with the foregoing paragraphs, should not attain the aforesaid level of five percent of the total effective working budget for the subsequent biennium to submit proposals to the Conference, through the Finance Committee and Council, concerning the ways and means of bringing the Special Reserve Account up to the level of five percent of the total effective working budget for the subsequent biennium.”

12. However, before acting on Resolution 13/81, the Secretariat is examining the options open to the Organization, particularly in the light of the next steps to be taken with regard to the recommendations of the Finance Committee on the proposal to protect the Programme of Work through split assessments (see FC 100/4). Until such time, the Organization will work with the current reduced Special Reserve Account balance.

Working Capital Fund (WCF)

13. The Working Capital Fund balance of $15.5 million at 30 June 2002 is less than its paid up balance of $23.7 million due to an advance of $8.3 million as authorised by Conference Resolution 3/99 to be reimbursed on the eventual receipt of arrears from the major contributor. Movements during the period are as follows :

Working Capital Fund Movements in 2002

US$ millions

Balance as at 1 January 2002
15.5
Receipts from Member Nations
0.0
Balance as at 30 June 2002
15.5

VI. Cash Flow

14. The Cash Flow statement, appendices 1 and 2 show the cash position and forecast of the Organization for the year 2002 for both the Regular Programme and the Trust and UNDP funds. The documents also compare the actual cash position for the first six months of the year 2002 to the relevant monthly planned collections and disbursements and forecast for the remaining six months of the year.

15. The document assumes that the donors’ contributions and disbursements will follow the prior years’ trend. In this connection, in the case of Regular Programme it is assumed that TCP disbursements will average $4.5 million per month. Furthermore, the Regular Programme plan for the second half of the year 2002 assumes that in July 2002 FAO will collect $55.5 million and that the major contributor will pay its yearly contribution in two parts, October ($60 million) and December ($12.5 million). It is highlighted that in case of delay in receiving the above contributions, the Organization will be exposed to severe liquidity problems, requiring recourse to borrowing.

FOOD AND AGRICULTURE ORGANIZATION
FINANCIAL HIGHLIGHTS
FOR SIX MONTHS TO 30 June 2002
(US$000)
 
Actual
Plan
Actual
 
Regular Programme excluding TCP
TCP
Extra Budgetary (Trust Funds + UNDP)
TOTAL
Total
Balance
Previous Period 30 June 2000
INCOME FOR THE PERIOD
  
        
Assessments:
Member Nation Assessments
276,304
46,228
322,532
Less: Amounts not received
(157,993)
(157.993)
Add: Arrears Received
7,688
7,688
Total Assessments Received a/
125,999
46,228
172,227
161,266
10,961
159,934
Voluntary Contributions received
4,415
115,580
119,995
146,918
(26,923)
142,051
Jointly Financed Activities
7,520
7,520
6,944
576
8,525
Services Rendered
328
328
2,794
(2,466)
2,500
Miscellaneous
(1,309)
1,259
(50)
1,674
(1,724)
17,080
Sundry
2,947
2,947
0
2,947
3,210
Total Income
139,900
46,228
116,839
302,967
319,596
(16,629)
333,300
EXPENDITURE FOR THE PERIOD
Regular Programme
140,065
11,797
151,862
181,321
29,459
150,862
Projects
121,832
121,832
138,275
16,443
157,088
Others
Redeployment and separation costs
0
0
0
0
1,819
Amortization of after-service medical care liabilities
3,532
3,532
3,700
168
3,453
Staff related schemes
0
0
0
0
8,679
Sundry
1,442
1,442
0
(1,442)
4,839
Total Expenditure
145,039
11,797
121,832
278,668
323,296
(44,628)
326,740
Transfers to Reserves
55
55
Total Expenditure after Transfers to Reserves
145,094
11,797
121,832
278,723
NET EXCESS / (SHORTFALL) OF INCOME OVER EXPENDITURE
(5,194)
34,431
(4,993)
24,244
RESERVES AND FUND BALANCES (beginning of period)
(75,419)
77,721
167,541
169,843
RESERVES AND FUND BALANCES (end of period)
(80,613)
112,152
162,548
194,087
               
a/ Arrears of Members' Contributions (prior biennia) amounted to $155.6m
b/ As per Conference Resolution on amortization of after-service medical care liabilities over 30 years
c/ This transfer will be reflected at the end of the year when the actuarial valuation results will be available

FUND UTILIZATION

 
Balance
Changes
Balance
 
01-Jan-2002
Period-to-date
30-Jun-2002
Net change in Assets transferred to Fund accounts:
Working Capital Fund
15,482
9
15,491
Special Reserve Account
457
66
523
General Fund - Regular Programme
(75,419)
(5,194)
(80,613)
Sub-total
(59,480)
(5,119)
(64,599)
General Fund – TCP
77,721
34,431
112,152
Total Equity
18,241
29,312
47,553
Represented by
  
  
  
Net Assets
65,739
9,171
74,910
Less: Unliquidated Obligations
(47,498)
20,141
(27,357)
 
18,241
29,312
47,553
 
 
 
Donor Funds (Trust Funds & UNDP)
167,541
(4,993)
162,548
Represented by
Net Assets
277,484
(18,214)
259,270
Less: Unliquidated Obligations
(109,943)
13,221
(96,722)
167,541
(4,993)
162,548

 


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