Worst Liquidity Crisis in Recent Years Undermining United Nations Mandate Delivery, Controller Warns, as Fifth Committee Reviews 2018-2019 Regular Budget Performance

GA/AB/4348
18 December 2019
Seventy-fourth Session, 19th Meeting (AM)

Worst Liquidity Crisis in Recent Years Undermining United Nations Mandate Delivery, Controller Warns, as Fifth Committee Reviews 2018-2019 Regular Budget Performance

The United Nations ability to carry out its mandate has been constrained by cash shortages in 2018 and 2019, its top official for accounting-related activities warned the Fifth Committee (Administrative and Budgetary) today, as the representative of the Russian Federation challenged the way the Organization is managing the liquidity crisis.

Introducing the Secretary-General’s second performance report on the programme budget for the 2018‑2019 biennium, Chandramouli Ramanathan, United Nations Controller and Assistant Secretary‑General for Programme Planning, Finance and Budget in the Department of Management Strategy, Policy and Compliance, said that the regular budget operations are facing the worst liquidity crisis in recent years.  Structural rigidities — such as the use of average vacancy rates and limitations on transfers of funds across budget sections and budget classes — have exacerbated the management of resources, making it more difficult to mitigate the negative impact of cash shortages on mandate delivery.

Several measures were undertaken during the biennium to manage the crisis, he explained, such as postponing non-post expenditures and slowing the hiring of staff throughout 2019.  “This undermines mandate delivery and goes against our efforts to focus more on results and less on inputs,” he said.

The Russian Federation’s delegate pointed out that the cash ratio in November 2019 has improved from 2018, asking the Controller to clarify if the Organization’s financial situation was indeed worse than the previous years.  He also argued that borrowing funds from accounts of closed peacekeeping operations violates the United Nations Financial Regulations and Rules, also asking the Controller to provide calculations of the savings from so-called austerity measures that are negatively impacting activities of delegations.

Mr. Ramanathan said he wishes to put to rest the notion that this year’s cash situation is better than last year, explaining that the cash ratio does not represent the actual cash balance.  Last month, the cash deficit was $520 million, worse than the $488 million deficit in October 2018.  If measures to manage the cash shortages had not been taken, the deficit would have reached $600 million in September, disrupting operations during the General Assembly.

He explained that borrowing from closed peacekeeping missions is a last resort, but not a violation of the Financial Regulations and Rules.  As of today, the cash deficit stands at $221 million and after paying salaries and benefits in December, he will be left with only $13 million in cash, with bills piling up.  Additional receipt of the assessed contributions is necessary to keep the Organization in reasonable shape without risk of default, he stressed.

Delegates then considered the financing of the International Residual Mechanism for Criminal Tribunals in the United Republic of Tanzania.  Speaking on behalf of the African Group, Botswana’s representative supported the Secretariat’s proposed requirements of $103 million for 2020 before recosting, or $106 million after recosting.

The observer for the State of Palestine, speaking on behalf of the “Group of 77” developing countries and China, also backed the Secretariat’s proposed budget, subject to some upward adjustments for staffing and strengthening the administrative, finance and human resource functions at the Mechanism’s Arusha branch.  The Group would like more information about efforts to house the Residual Special Court for Sierra Leone at the Mechanism’s Arusha branch.  The Group disagrees with some Advisory Committee recommendations related to the reduction of resources earmarked for fugitives, general temporary assistance in Arusha and travel.

The delegate of the United Republic of Tanzania said he shares the Advisory Committee’s concern about the continued paradox regarding the allocation of resources levels between The Hague and Arusha, compared to the workloads between the two branches.

Mr. Ramanathan introduced the Secretary-General’s reports regarding the Mechanism’s second performance report for the 2018‑2019 biennium and the proposed budget for the Mechanism in 2020.  The final level of expenditure for the Mechanism for 2018‑2019 totals $185.43 million gross, a decrease of $10.29 million, due mainly to fluctuations in currency exchange rates.

Cihan Terzi, Chair of the Advisory Committee on Administrative and Budgetary Questions (ACABQ), introduced its related report, which recommends several reductions, including a $3.3 million decrease related to the possible apprehension of a fugitive.  The resources, he said, should be requested when the fugitive is apprehended.

Delegates also heard the introduction of reports by Mr. Ramanathan and Mr. Terzi, respectively, on the financing of the United Nations Mission for Justice Support in Haiti (MINUJUSTH) for the period from 1 July 2019 to 30 June 2020.

Andreas Mavroyiannis (Cyprus), Fifth Committee Chair, said that delegations have reached agreement on only 3 of 48 items, with only three working days left before the closure of the current session.

The Fifth Committee will meet again to conclude its work at a date and time to be determined.

Programme Budget for Biennium 2018-2019

CHANDRAMOULI RAMANATHAN, United Nations Controller and Assistant Secretary‑General for Programme Planning, Finance and Budget in the Department of Management Strategy, Policy and Compliance, introduced the Secretary-General’s report titled “Second performance report on the programme budget for the biennium 2018‑2019” (document A/74/570), noting that it provides an estimate of the anticipated final level of expenditure and income based on actual expenditure for the first 22 months and projected requirements for the last 2 months.

For the expenditure sections, the proposal remains within the approved appropriation of $5.87 million, he said.  The final level of income is estimated at $572.1 million, reflecting an increase of $8.7 million.  Although there are no changes to the overall level of appropriation, the estimates reflect increases related to commitment authorities and unforeseen and extraordinary expenses at $27.7 million and increases related to post incumbency at $69.1 million, which are fully offset by lower requirements for non-post resources at $84.1 million and changes in currency exchange rates and inflation at $12.6 million.

Budget implementation in 2018‑2019 has not been driven solely by programme planning, but by the availability of cash at hand, he continued.  Several measures were undertaken during the biennium to manage the liquidity crisis by aligning expenditures based on liquidity, including postponing non-post expenditures and slowing the hiring of staff throughout 2019.  This undermines mandate delivery and goes against efforts to focus more on results and less on inputs.  The regular budget operations are facing the worst liquidity crisis in recent years.  Structural rigidities, such as the use of average vacancy rates and the limitations on transfers of funds across budget sections and budget classes, have exacerbated the management of resources, making it more difficult to mitigate the negative impact of cash shortages on mandate delivery.  The General Assembly is being requested to suspend, until the financial situation has improved, the application of credits in relation to $25.19 million resulting from the surrender of appropriations for the biennium 2016‑2017.

CIHAN TERZI, Chair of the Advisory Committee on Administrative and Budgetary Questions (ACABQ), introduced that body’s related reports (document A/74/583), recognizing that the liquidity challenge has continued and therefore recommending that the General Assembly approve the proposed temporary suspension of the surrender of the unspent 2016‑2017 appropriations for the 2020 financial year.  Regarding the measures taken to address this liquidity challenge, the Advisory Committee recommends that comprehensive information on the impact of these measures, as well as the related postponement of expenditures, will be included in the next relevant report.

DMITRY S. ALYAKIN (Russian Federation) noted that the cash ratio in 2019 has improved from 2018, as shown in the related ACABQ report.  In November 2019, it was 0.7, but it was negative a year earlier.  With 96.1 per cent of the assessed contributions received by the Secretariat, the outstanding contributions amount to $112 million.  At the end of 2017, the deficit amounted to $121 million, with 95.3 per cent of the assessed contributions received.  He asked the Controller to confirm that the Organization’s financial situation in 2019 is no worse than in 2017, when the so-called austerity measures — which have affected the work of delegations — were not yet introduced.

Citing the ACABQ report, he said that, at the end of November, the Controller had $198 million in the special account and $187 million as cash balances for closed peacekeeping operations, asking the Controller to disclose the cash balances of closed tribunals.  By adding this amount to the combined balance of the special account and the accounts of closed peacekeeping operations amounting to $385 million, his delegation can draw a conclusion about the total amount of reserves available for critical and urgent needs.  The Controller already borrows funds from accounts of closed peacekeeping operations in violation of the United Nations Financial Regulations and Rules, he said, asking the Controller to provide calculations of the savings received by the Secretariat as a result of applying each of the so-called austerity measures.

In response, Mr. RAMANATHAN said that the cash ratio is an indication of the financial situation, but not a substitute for the actual cash balance.  Last month, the cash deficit was $520 million, worse than the $488 million deficit in October 2018.  By the end of November 2019, more cash came in.  If measures to manage the cash shortages had not been taken, the deficit would have reached $600 million in September and would have disrupted operations during the General Assembly.  He said that the borrowing from closed peacekeeping missions is a last resort, but not a violation of the Financial Regulations and Rules.  As of today, the cash deficit stands at $221 million and after paying salaries and benefits in December, he will be left with only $13 million in cash, with bills piling up.  Additional receipt of the assessed contributions is necessary to keep the Organization in reasonable shape without being in default.  He said he wishes to put to rest the notion that the cash situation in 2019 is better than in 2018.

International Residual Mechanism for Criminal Tribunals

Mr. RAMANATHAN than introduced the reports of the Secretary-General on the second performance report of the International Residual Mechanism for Criminal Tribunals for the biennium 2018‑2019 (document A/74/566) and the proposed budget for the Mechanism in 2020 (documents A/74/355 and Corr.1).  The final level of expenditure for the Mechanism for 2018‑2019 totals $185.43 million gross, a decrease of $10.29 million, due mainly to the strengthening of the United States dollar against the euro and decreases related to post and non-post resources, offset in part by the depreciation of the United States dollar against the Tanzanian shilling and a net increase in inflation.

The Secretary-General has proposed $103.69 million in resources requirements for the Mechanism in 2020, an increase of $5.65 million, he said.  The proposed budget includes a total of 186 posts and other staffing requirements for ad hoc functions.  The increase is mainly due to additional requirements for the branch in Arusha related to judicial activities, including one contempt case in 2018, and a provision for pretrial proceedings in the event of the arrest of one of the three remaining fugitives wanted by the International Criminal Tribunal for Rwanda.  The increase is partly offset by a net decrease in requirements relating mainly to a reduction in judicial activities at the branch in The Hague.

Mr. TERZI then introduced the Advisory Committee’s related report (document A/74/593) and said the Advisory Committee recommends that the General Assembly approve a final appropriation for the 2018‑2019 biennium of $185.43 million gross for the Mechanism.  Regarding the proposed 2020 budget, the Advisory Committee recommends the approval of the Secretary-General’s proposal for post resources.  On non-post resources, the Advisory Committee recommends a reduction of $3.3 million related to the possible apprehension of a fugitive, as the resources should be requested when the fugitive is apprehended.  The Advisory Committee also considers that the request for the number and duration of general temporary assistance positions is not fully justified and recommends a reduction of $1.63 million.  Under travel on official business, the Advisory Committee recommends a reduction of $62,900.

NADA TARBUSH, observer of the State of Palestine, speaking on behalf of the “Group of 77” developing countries and China, noted that the Secretary-General is proposing resources of $103.7 million for the Mechanism’s maintenance, before recosting, for the two branches in Arusha and The Hague, as well as for internal oversight and support functions in New York.  The Group supports the Secretariat’s proposed budget, subject to some upward adjustments for subjects related to staffing and strengthening the administrative, finance and human resource functions in the Arusha branch.  The Group will present a proposal for negotiations during informal deliberations.  While noting progress in gender balance and the equitable geographical representation in the two branches, the Group notes there is still room for improvement.  This would include increasing women’s representation at the professional level, including the P-5 level, and balancing resource allocation between Arusha and The Hague to match the workload.  The Group is concerned that resources remain concentrated in The Hague while the workload remains higher in Arusha.

The Group is interested in learning about the steps taken so far to house the Residual Special Court for Sierra Leone at the Mechanism’s Arusha branch without undermining the mandates of each of the entities and accounting for the financial difficulties facing the Special Court, she said.  The Group disagrees with some Advisory Committee recommendations related to the unjustified arbitrary reduction of resources in the provisions for fugitives, general temporary assistance in Arusha and travel.

KATLEGO BOASE MMALANE (Botswana), speaking on behalf of the African Group and aligning himself with the Group of 77, renewed the African Group’s strong commitment to the Mechanism.  The African Group appreciates the information contained in the Board of Auditors’ report and encourages the Mechanism to keep implementing all outstanding Board recommendations.  He noted that, in 2020, other than ongoing activities related to witness protection, preservation of archives and the supervision of the enforcement of sentences, the Mechanism will also focus on its mandated activities concerning the trial of one contempt case and tracking the remaining fugitives of the Rwanda Tribunal, which represents an increased workload and resource requirements for the Arusha branch.  The Group supports the proposed requirements of $103 million for 2020 before recosting, or $106 million after recosting, to implement mandated activities which represent a net increase of $5.6 million compared to base resources for 2019.  He noted that the higher cost is due to the increase in judicial activities in the Arusha branch.

The African Group strongly believes that the Mechanism must be provided with the full resources it requires to conduct its mandated judicial activities, he said, adding that failure to provide sufficient resources for 2020 will only increase the Mechanism’s financial requirements in the future.  Turning to the Mechanism’s support for the Residual Special Court of Sierra Leone, he said that part of a sustainable financial solution is to house the Special Court in the Mechanism’s Arusha facilities while ensuring the independence of each of the entities.  The African Group has difficulty understanding some of the Advisory Committee’s recommendations regarding cuts in resource requirements and agrees with the Secretary-General that adequate financing is critical to maintain the Mechanism’s role in international law and security.  Appropriate and adequate resources should be allocated to the Mechanism to account for its unique nature and ongoing liquidity challenges.

SONGELAEL WILSON SHILLA (United Republic of Tanzania), aligning himself with the Group of 77 and the African Group, reaffirmed his country’s support for the Mechanism as part of its support for the work of the United Nations and multilateralism.  He shared the Advisory Committee’s concern about the continued paradox regarding the allocation of resources levels, compared to the workloads between the two branches.  In 2018, the United Republic of Tanzania expressed concern about the need to strengthen administration, finance and procurement capacities in Arusha.  As a first step to address the gaps, a temporary D-1 post was established in Arusha.  In this same understanding, the United Republic of Tanzania expected additional requirements would be proposed by the Secretary‑General for 2020 and they were not.

It is unfortunate that the current proposal lacks several key issues, he said.  The United Republic of Tanzania will again do its part by contributing to specific proposals to strengthen capacity in Arusha in the areas of administration, budget and finance, procurement, human resources and information technology, with a view to increasing efficiencies and effectiveness in mandate delivery.  He said that the Mechanism has increased its security in Arusha to comply with established procedures and standards, encouraging continued similar efforts.  While supporting several Advisory Committee recommendations, the United Republic of Tanzania has some reservations on the reduction of resources, as outlined by the Group of 77, particularly regarding the Arusha branch.

Financing of United Nations Mission for Justice Support in Haiti

Mr. RAMANATHAN introduced the Secretary-General’s report titled “Budget for the United Nations Mission for Justice Support in Haiti (MINUJUSTH) for the period from 1 July 2019 to 30 June 2020” (document A/74/532), noting that the estimated resource requirements of $49.5 million for the maintenance of the Mission for the 2019/2020 period represent a decrease of 59.3 per cent or $72 million from the approved resources for the 2018/2019 period.  The proposed resource requirements consider the actual drawdown of formed police units, the gradual downsizing of civilian personnel and the closure of camps and other liquidation activities.

Mr. TERZI, Chair of ACABQ, introducing that body’s related report (document A/74/589), recommended reducing the proposed resource requirements for MINUJUSTH by $327,200.  Considering that the Mission ended on 15 October and the resource requirements for its successor operation include the provision of 13 individual police officers and 2 Government-provided personnel, the Advisory Committee recommends a reduction of the amount of resources proposed for the deployment of 11 United Nations police personnel and 2 Government-provided personnel for MINUJUSTH for the period from 16 October to 31 December.

For information media. Not an official record.