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GB.274/9/1 and Corr.
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NINTH ITEM ON THE AGENDA
Reports of the Programme, Financial and
Administrative Committee
First report: Financial and general questions
Contents
Programme and Budget for 1998-99
Follow-up on the report of the Chief Internal Auditor for the year ended 31 December 1997
Report of the Chief Internal Auditor for the year ended 31 December 1998
Follow-up on the report of the External Auditor on the accounts for 1996-97
Appointment of External Auditor
Report of the Building Subcommittee
Accrual accounting: Amendments to the Financial Regulations and Financial Rules
Other financial and general questions
Amendments to the Financial Regulations of the International Labour Conference
Amendments to the Financial Rules of the International Labour Office
1. The Programme, Financial and Administrative Committee of the Governing Body met on 9 March 1999 under the chairmanship of Mr. N. Akao, Chairman of the Governing Body. Mr. S. Marshall (Employer spokesperson) was the Reporter.
Programme and Budget for 1998-99
(First item on the agenda)
Position of accounts as at 31 December 1998
2. The Committee had before it a paper(1) containing information on the 1998-99 regular budget account and the position of the Working Capital Fund as at 31 December 1998.
3. Mr. Marshall, speaking on behalf of the Employer members, observed that a substantial amount of arrears of contributions had been received from several member States during 1998. They deserved to be commended for their efforts to bring their contributions up to date and he urged other member States to follow their example.
4. Mr. Blondel, speaking on behalf of the Worker members, remarked that budgetary expenditure to 31 December 1998 was less than half the approved budget for the 1998-99 biennium and the Workers were pleased to see the Organization in a reasonably healthy position. On the other hand, it was a matter for regret that because of unpaid contributions no fewer than 26 member States had lost the right to vote.
5. The representative of the Government of Canada expressed appreciation for the Office paper, but pointed out that income and expenditure figures in isolation were of limited value. It would be more useful in future if budgetary predictions for the same period could be given for comparative purposes to establish trends.
6. The representative of the Government of Panama drew attention to table 5 of the paper, which gave details of contributions received and owed from member States. The total outstanding at 31 December 1998 was quite high and he urged member States to settle amounts owing as soon as possible.
7. The representative of the Government of the United Kingdom agreed that it would be particularly useful in future to have a comparison between actual and budgeted levels of expenditure in table 2, including explanations for large variances.
8. The representative of the Director-General (the Treasurer and Financial Comptroller) reported that budgetary expenditure at 31 December 1998 was about 43 per cent of the total for the current biennium compared with about 38 per cent at the same point two years ago. An analysis of expenditure for the current biennium should also take into account the fact that original inflation estimates were too high and as a result savings of at least $12 million were expected up to the end of 1999. It was true, however, that some programmes were running behind schedule at the moment and the Director-General would be holding discussions with the programme managers concerned to see what measures were required so that their approved programmes could be delivered in full by the end of the biennium.
9. In recent biennia it had proved almost impossible to predict budgetary income and expenditure with any accuracy because of uncertainties over the receipt of budgetary contributions which affected the rate of programme delivery. Happily, this was not the case at present and it should be possible to give forecasts by major programme so that cases of slippage could be identified earlier. Corrective action could then be agreed where necessary in consultation with this Committee. Nevertheless, there were limitations on what the ILO's existing financial systems could produce. If funding was approved and a modern accounting and financial management system installed there would be a vast improvement in the timeliness of financial information provided by the Office.
10. The Committee took note of the Office paper.
Collection of contributions from 1 January 1999 to date
11. The Committee had before it a paper(2) giving details of regular budget contributions received since 1 January 1999.
12. The Treasurer reported that, since the preparation of the Office paper, contributions had been received from the following member States:
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Swiss francs |
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Colombia |
358,732 |
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|
Eritrea |
3,016 |
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Israel |
476,000 |
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|
Kenya |
23,353 |
|
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Oman |
52,000 |
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Poland |
1,465,821 |
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Romania |
216,640 |
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Russian Federation |
8,740,800 |
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Saint Vincent and the Grenadines |
3,386 |
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Total |
11,339,748 |
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This brought the total of 1999 contributions received so far to 103.5 million Swiss francs, representing 30.6 per cent of current year contributions due. At a comparable date in 1998 some 97.8 million Swiss francs had been received, representing 28.9 per cent of contributions due for that year. Colombia, Eritrea, Kenya, Romania, Poland and Saint Vincent and the Grenadines had now paid their 1999 contributions in full, which brought to 44 the number of member States that had fully paid their current year's contributions.
13. Mr. Blondel said that the Workers were pleased to note that the present position was a slight improvement over that of the previous year. It was disappointing, however, to see that some member States granted special arrangements by the Conference had failed to respect the terms of those arrangements and had thereby lost the right to vote.
14. The representative of the Government of Italy advised the Committee that payment of its current year's contribution had been delayed because the 1999 budget had only been approved by the Italian Parliament late in December, but the payment was now on its way.
15. The Treasurer, in reply to comments concerning the number of member States which had lost the right to vote, pointed out that the minimum rate of assessment for member States had dropped from 0.01 per cent in 1998 to 0.001 per cent in 1999 as a result of changes in the United Nations scale of assessments. Contributions from member States paying the minimum rate were now about 3,300 Swiss francs a year.
16. The Committee took note of the Office paper.
Follow-up on the report of the Chief Internal Auditor
for the year ended 31 December 1997
(Second item on the agenda)
17. The Committee had before it a paper(3) describing the Office's response to the report of the Chief Internal Auditor for the year ended 31 December 1997.
18. Mr. Blondel said that the Workers welcomed the report, which contained useful information on a number of matters investigated by the Internal Audit Section. Referring to paragraph 13 concerning payment authorizations, the Office should ensure that strong controls were in place to prevent abuse of travel authorizations and expense reimbursements. In view of the possibility of manipulation the Committee should have an assurance from the Office that proper internal controls were in place.
19. Mr. Marshall, for the Employers, said that the Internal Audit function was valuable in two respects, first as a management tool and second as a governance mechanism for the Governing Body. They particularly appreciated the detailed information on the action the Office had taken in response to the observations by the Chief Internal Auditor.
20. The Treasurer confirmed that Internal Audit reports did impose a discipline on the Office because follow-up action had to be reported to this Committee. In reply to the comment concerning travel authorizations, he assured the Committee that airline tickets issued by ILO headquarters for official travel were not transferable, could not be encashed and could not be downgraded or rerouted without reference to the ILO. Travel authorizations were already subject to a comprehensive system of checks and safeguards which minimized the risk of fraud. The Office always gave the most serious consideration to comments in these reports and took action where necessary.
21. The Committee took note of the Office paper.
Report of the Chief Internal Auditor
for the year ended 31 December 1998
(Third item on the agenda)
22. The Committee had before it a paper(4) containing the findings of the Chief Internal Auditor resulting from Internal Audit and investigation assignments undertaken in 1998.
23. Mr. Blondel said that the Workers welcomed the Office paper but were particularly concerned at the results of the IPEC review described in paragraph 22. He recalled that the Director-General, in his introductory budget statement the previous day, had indicated that the 1999 Conference would be discussing a new Convention on child labour, and that he had commissioned an external management review of the structures and processes by which the IPEC programme was managed. This was to ensure that the ILO could deliver a cost-effective programme and that it received adequate core funding from the ILO's regular budget. Paragraph 22 indicated a number of weaknesses in the management of the IPEC programme and this would be a matter of serious concern to donors. The Office should take remedial action at once and ensure that there were no grounds for criticism in future.
24. The representative of the Government of Germany expressed full agreement with the remarks of the previous speaker. Paragraph 22 raised a number of queries of interest to member States and particularly those contributing financially to the IPEC programme. On a number of occasions in the past his Government had emphasized the need to ensure that IPEC administration was able to meet the demands placed on it. Just recently the programme had attracted a number of sizeable contributions but it was clear that administrative resources had not been able to keep up with the sudden increase in projects. Administrative support for this programme should be reviewed as a matter of urgency and it was gratifying to hear that the Director-General was already planning to do so.
25. Mr. Marshall expressed the Employers' appreciation for the Office paper. Internal Audit was an important activity and it was reassuring to see that there were no major areas of concern. He noted the views expressed by the two previous speakers. IPEC was a high-profile activity and it was vitally important to ensure that it was not only working properly but seen to be working properly. It had already attracted large sums of money and the review recommended by Internal Audit should be carried out immediately, possibly with some element of tripartite consultation. The Employers expressed their full support for the continued decentralization of administrative activities, another topic referred to in the Internal Audit report, but if improvements in field procedures were to be maintained the Office would have to ensure that field offices were given adequate resources.
26. The representative of the Government of the United Kingdom joined previous speakers in expressing some concern about paragraph 22 of the Office paper, but it was difficult to judge from the paragraph alone exactly what the problems were in IPEC. Certainly it was a vital programme, one that was trying to attract extra-budgetary funding, and governments would be reluctant to contribute funds until there was a clear indication that these problems had been resolved. In the wider sense, Internal Audit was a valuable function, not only in terms of pure audit work but also in management evaluation, and its work could perhaps be expanded to look at other managerial problems such as questions relating to absorption capacity and the managerial aspects of human resource management policy.
27. The representative of the Government of Italy was rather alarmed at the contents of paragraph 22 in view of the extreme importance attached to child labour issues, not only by the Italian Government but by the Italian public in general. It was reassuring to hear that the Director-General had called for a review of IPEC programme management and the Committee would look forward to the results of this review in due course.
28. The representative of the Government of India, referring to paragraph 22 of the Office paper, said that as a participant in the IPEC programme it could regretfully confirm some of the concerns expressed regarding IPEC action programmes. It would be helpful if more information concerning the Internal Audit review could be made available but in any case these issues should be examined and action taken as soon as possible.
29. The representative of the Government of Canada expressed her concern also with the comments in paragraph 22 but would appreciate some information on whether the difficulties associated with the IPEC programme might also be associated with other technical cooperation projects.
30. Mr. Brett (Worker member) observed that the Office had just given its response to the report of the Chief Internal Auditor for the year ended 31 December 1997, but asked whether the Office could give some information now about action taken in response to the comments in the Chief Internal Auditor's report concerning the IPEC programme.
31. The representative of the Government of the United States expressed appreciation for the Office paper, which showed that extensive attention had been given to examining efficiency and effectiveness and to the adequacy of internal controls. The Internal Audit Section had covered a broad range of administrative areas, including procurement, travel and personnel appraisal and she associated herself with the comments of previous speakers concerning paragraph 22 of the report dealing with IPEC.
32. There were some suggestions which would further increase the transparency, the authority and the credibility of the Internal Audit function. The terms of reference for the Office of the Internal Auditor were found in ILO Circular No. 11, dated May 1981. Given the evolution of the oversight role in effective management over the past two decades, it would now be appropriate to review and update this circular and incorporate all facets of the ILO's oversight function into the appropriate financial rules and staff regulations. The ILO's oversight programme deserved to be commended but it could be strengthened in some areas. These included: the further strengthening of appointment and termination procedures for the Chief Internal Auditor in order to ensure the independence of that office; the improvement of mechanisms which monitor compliance with recommendations, follow-up actions and reporting -- summary statistical data on the status of recommendations would be particularly appreciated; the guaranteeing of protection from reprisal for employees; and the strengthening of the investigation component of the Internal Audit programme. United States representatives would welcome the opportunity to discuss this issue further with the Office and with the newly appointed Chief Internal Auditor.
33. The Director-General considered an efficient internal audit function a vital tool in managing an organization effectively. The Chief Internal Auditor's task was not simply to make negative comments but to cooperate with other sections of the Office and put forward recommendations to improve the functioning of the Organization as a whole.
34. During the transition period he had tried to gain a clearer understanding of current ILO activities, and he intended to call for a management audit of IPEC action programmes for the very reasons that had been referred to by previous speakers. The ILO needed to be organized in such a way as to be able to carry out major programmes effectively, and this in turn would determine how efficient the Organization was and the way in which it could carry out the services for which funding had been provided. It was important therefore to have a management audit of the current status of IPEC programmes as well as the Organization's ability to implement them. An assessment of the ILO's capacity to carry out approved programmes should be extended to technical assistance activities as well, because it was important to ensure that basic management structures existed from the outset rather than just build them up as funding became available.
35. Mr. Brett (Worker member) repeated his question regarding the discussions that had taken place between the Office and IPEC in respect of the comments made by the Chief Internal Auditor in his report.
36. The representative of the Director-General (the Treasurer and Financial Comptroller) stated that he had himself encouraged the Chief Internal Auditor to conduct the IPEC audit. Particular attention was being given to the audit findings and all the matters raised in the audit reports were being followed up carefully. The reports had been communicated by the Chief Internal Auditor to the IPEC secretariat for follow-up; one report exclusively concerning IPEC activities in a single country had been forwarded by the IPEC secretariat to the IPEC National Project Coordinator of the country concerned. A reply from the Coordinator was still awaited.
37. The Chief Internal Auditor confirmed that the IPEC audit took place in three countries and that the weakness identified on control and monitoring procedures related mainly to one country. He also confirmed that immediate action had been taken by management in consultation with IPEC. The Director of the office concerned had been asked to take appropriate action and submit a report, which was expected shortly. He also wished to reassure the Committee that the Internal Audit did not concern itself only with verification work but also with providing a management advisory service to improve the functioning of the Organization.
38. The representative of the Government of Germany thanked the Chief Internal Auditor for his statement. Although the audits had taken place in three countries, it was only in one particular country that difficulties and problems had been detected, and the clarification had been very useful as the wording of the report could be misinterpreted to mean that problems had been encountered in all the IPEC audits, rather than just one country. Even though the problems related to just one country corrective action was still required.
39. Mr. Blondel, speaking on behalf of the Worker members, said that the IPEC programme was an important one which had a direct impact on the ILO's reputation and was used to assess the ILO's overall organizational efficiency. IPEC programmes were not carried out exclusively by the ILO but involved other partners such as NGOs and other institutions which were not subject to same financial and administrative rules and regulations as the ILO. This in itself raised certain difficulties. The Director-General's proposals for a management audit of IPEC was therefore welcome because it was essential that, despite the difficulties involved, the ILO's image with respect to IPEC programmes should be one of complete transparency and correctness.
40. The Committee took note of the Office paper.
Follow-up on the report of the External Auditor
on the accounts for 1996-97
(Fourth item on the agenda)
41. The Committee had before it a paper(5) describing the Office's response to the report of the External Auditor for the 1996-97 biennium.
42. Mr. Blondel, on behalf of the Worker members, expressed appreciation for the Office paper which set out very clearly its response to a number of recommendations put forward by the External Auditor. Turning to recommendation 3, the Workers believed that allowing one month for the settlement of advances was necessary and agreed with the Office's comments. The Office was already complying with recommendations 7 and 8 but it should be extremely cautious in its response to recommendation 10, that the ILO should consider the possibility of introducing a time-recording system to monitor the amount of staff time spent on key activities. He expressed again the Workers' satisfaction at the Office's responses to the recommendations, because as the Director-General pointed out it was important for the ILO to derive full benefit from the work performed by the External Auditor.
43. Mr. Marshall said that the Employers welcomed the paper now before the Committee. The recommendations in paragraphs 6-14 had been overtaken to some extent by the strategic planning and budgeting process but the Employers believed that high priority should be given to issues of performance measurement and the monitoring, evaluation and reporting system. A programme and budget based on strategic objectives gave wide-ranging authority to the Director-General and it was in his interests as well as those of the Governing Body to ensure that these evaluation processes were working effectively. The Employers would look forward to future reports on these systems.
44. The representative of the Government of Canada agreed with the comments of previous speakers that proper follow-up to External Audit recommendations was a vital part of the process of good governance. Follow-up to the recommendations concerning the monitoring, evaluation and reporting system was also extremely important now that the ILO had adopted a strategic approach to the budgetary process focusing on strategic and operational objectives.
45. The representative of the Government of Panama supported the comments of previous speakers that follow-up to External Audit recommendations was an excellent way to control expenditure and improve efficiency throughout the whole Organization.
46. The representative of the Government of the United States expressed appreciation for the Office paper and strongly supported recommendation 11 on strengthening the oversight of MERS implementation. Programmes should be evaluated according to a standard methodology and he therefore expressed support for recommendation 13. As well, there should be specific criteria for determining the relevance and effectiveness of programmes so that decisions could be taken to modify, expand or terminate them as appropriate. The Office should keep the Governing Body informed of any problems which could delay a response to the External Auditor's recommendations.
47. The representative of the Government of Namibia pointed out that extra-budgetary donors often had their own methods for evaluating projects so the Office should be careful to avoid a duplication of work.
48. The representative of the Government of France also expressed appreciation for the Office paper, in which recommendations and responses were clearly set out and gave precise information on what the Office was doing. Some useful recommendations had been made concerning MERS, especially the suggestion for implementation to be monitored by a central unit. He expressed reservations about Recommendation 10, which suggested the introduction of a time-recording system. Such a mechanical process was not always appropriate but with this exception the document was a useful contribution to management in the ILO.
49. The Committee took note of the Office paper.
Appointment of External Auditor
(Fifth item on the agenda)
50. The Committee had before it a paper(6) proposing the appointment of the External Auditor and Deputy External Auditor.
51. Mr. Marshall, speaking on behalf of the Employer members, expressed his support for the decision in paragraph 4. In view of the changes that were taking place within the Organization as a result of the introduction of the new budgetary and strategic planning process, and the structural changes that would follow, consistency in the Office's approach in respect of the management of audit activities was necessary, particularly in respect of the External Auditor. Nevertheless, it was also valuable to review the appointments of external service providers from time to time in order to reconfirm that the best possible services were being received. For consistency purposes therefore, the current External Auditor, whose work was of an extremely high standard and who knew the ILO well, should be reappointed, but at some stage in the near future the Office should consider putting the external audit function out to tender to see whether there were others in the market that could provide an equal or better service.
52. The representative of the Government of India said that he was well aware that the practice in the ILO thus far had been to identify a new External Auditor only if the incumbent expressed a desire to discontinue his or her services. It had also been the practice to appoint the Auditor for four-year terms which were renewed one year in advance. He expressed his appreciation for the excellent work done by the current External Auditor and recognized the general sentiment supportive of the need for continuity at present. At the same time, he recalled that from available ILO records it appeared that, since 1937, Auditors-General from only three countries had held the post of ILO External Auditor. No doubt there was merit in emphasizing continuity and all holders of this post had deservedly enjoyed the confidence of the Governing Body in their professional competence, but an equally valid principle of audit and accounting practice would indicate the need for periodic change in incumbency, especially as the new Director-General has stressed the principle of transparency in all aspects of the work of the ILO. The office of the External Auditor was an instrument for ensuring transparency, efficiency and accountability in the Organization.
53. Those objectives could be best attained by following the principle of rotation in the appointment of the External Auditor and by establishing the practice of inviting bids for the post. The Office should prepare a comprehensive paper examining all aspects of institutionalizing the principle of rotation in the appointment of the ILO's External Auditor for the consideration of the Governing Body in November 1999. The Office should in this process consider the expertise available in the fields of audit and accounting in various countries across the globe, including developing countries.
54. The point for decision contained in paragraph 4 of the document under discussion could be deferred to the November 1999 session of the Governing Body without jeopardizing the interests of the Organization. However, based on the understanding that the Office would implement this proposal there would be no objection to the Committee adopting the point for decision with the amendment that the current External Auditor's term would be renewed for a period of two years from 1 April 2000.
55. Mr. Blondel, speaking on behalf of the Worker members, expressed concern regarding the proposal put forward by the representative of the Government of India. During the last Conference, in June 1998, the Workers had been most impressed by the competence of the External Auditor as well as his deep understanding of the ILO and its activities when he presented his report on the External Audit programme carried out in the 1996-97 biennium. The Workers supported the point for decision as it stood.
56. The representative of the Government of Germany, referring to the proposal put forward by the Government of India, stated that the External Auditor's task was to examine critical situations and make proposals as to how such situations could be improved. The External Auditor's proposals and recommendations were sometimes unpopular so it was important to ensure that it was not possible to simply replace the auditor whenever his comments were not appreciated by management. If a limitation on the term of office were to be introduced it should only be done when a new External Auditor had been identified so as to ensure that there would be no possible suspicion concerning the change. He expressed strong support for the point for decision in paragraph 4.
57. The representative of the Government of Japan, speaking on behalf of the Asian and Pacific Government members, said that although they supported the decision in paragraph 4, the proposal made by the Government of India should be given serious consideration.
58. The representative of the Government of China supported the decision in paragraph 4. He also supported the proposal made by the Indian representative on the appointment of External Auditors and hoped that the Office would prepare a detailed paper on that subject for discussion at the next Governing Body session.
59. The representative of the Government of Canada stated that in the interests of consistency the present External Auditor should be reappointed in the light of the many other changes taking place in the Organization. Perhaps in future it might be useful to invite tenders for the position but there should be no principle of automatic rotation.
60. The representative of the Government of Egypt supported the point for decision but believed that the proposal raised by the Government of India deserved consideration and should be studied at the Governing Body session in November.
61. The representative of the Government of Italy said that he was in favour of maintaining the present External Auditor and he supported the point for decision.
62. The representative of the Government of Bangladesh supported the point for decision but felt that the suggestions made by the Government of India merited examination.
63. The representative of the Government of the United States associated himself with the positions taken by the Employers, the Workers, Germany, Canada and Italy and he supported the point for decision contained in paragraph 4.
64. The representative of the Government of Panama expressed his support for the decision contained in paragraph 4.
65. The representative of the Government of Algeria supported the point for decision but considered that the proposal made by the Government of India should be carefully examined.
66. The representative of the Government of Sweden fully supported the decision contained in paragraph 4. The proposal made by the Government of India merited further consideration however since the concept of lifetime appointments was a dangerous one. The rotation of External Auditors could also result in a benefit to the Office since differences in the approaches adopted by various auditors could prove useful to the ILO.
67. The Chairman concluded that there appeared to be a consensus in favour of a paper from the Office on External Audit appointments to be considered at the November 1999 session of the Governing Body. The paper should contain information on the experience of other international organizations and, as suggested by several speakers, should give consideration to the proposal put forward by the representative of the Government of India.
68. The Committee recommends to the Governing Body that the holder of the office of Comptroller and Auditor-General of the United Kingdom and the holder of the office of Deputy Comptroller and Auditor-General of the United Kingdom be appointed as External Auditor and Deputy External Auditor respectively for a period of four years from 1 April 2000.
Report of the Building Subcommittee
(Sixth item on the agenda)
[69-74]
75. The Committee took note of the Office paper.
Accrual accounting: Amendments to the Financial
Regulations and Financial Rules
(Seventh item on the agenda)
76. The Committee had before it a paper(8) proposing amendments to the Financial Regulations and Financial Rules of the ILO in order to introduce accrual accounting procedures. The Committee agreed with the proposed point for decision.
77. The Programme, Financial and Administrative Committee recommends to the Governing Body that it --
(a) approve the amendments to the Financial Regulations set out in Appendix I to this report and submit the following draft resolution for adoption by the Conference at its next session:
The General Conference of the International Labour Organization,
Recognizing that amendments to the Financial Regulations are required to enable the Organization to follow the common accounting standards of the United Nations system;
Decides to make the following amendments to the Financial Regulations:
(a) Paragraph 5 of article 10 shall read:
5. All contributions due in a financial period shall be recorded as income in that financial period, and shall be accounted for in United States dollars at the budget rate of exchange for that financial period.
(b) Paragraph 1 of article 17 shall read:
1. Expenditure charged against the appropriations of a financial period shall consist of payments made during the financial period and unliquidated obligations as at the last day of the financial period. Such portion of appropriations as may be required to meet these unliquidated obligations shall remain available for twelve months at the end of which any remaining balances shall be credited to miscellaneous income.
(c) The present paragraph 2 of article 17 shall be deleted.
(d) The present paragraph 3 of article 17 shall be renumbered as paragraph 2 and shall read:
2. Obligations which could not be charged to the appropriations of the preceding financial period may, if the Director-General should so decide, be charged to the appropriations of the current financial period. Nevertheless, there shall be included in the budget for each financial period an item entitled "Unpaid liabilities" to which may be charged any payments of a similar character which it would not be appropriate to pay from any other item of the budget. Payment of obligations due in respect of transactions covered by the budget of any financial period preceding the last financial period shall be subject to the prior authorization of the Governing Body.
(e) Paragraph 4 of article 17 shall be deleted.
(f) Article 18 shall read:
1. The excess or shortfall of income over expenditure in any complete financial period shall be calculated by deducting budgetary expenditure from budgetary income with a financial provision being made for delays in the payment of contributions. Such provision shall amount to 100 per cent of the contributions unpaid at the date of the financial statements at the end of the financial period.
2. Any such excess of income over expenditure, expressed in Swiss francs calculated at the budget rate of exchange for that financial period, shall be used to reduce the contributions of Members in the following way: Members which paid their ordinary contributions in the financial period in which this surplus accrued shall have their share of the surplus deducted from their contributions assessed for the second year of the succeeding financial period; other Members shall not be credited with their share until they have paid the contributions due from them for the financial period in which the surplus accrued. When they have done so, their share of such surplus shall be deducted from their contributions assessed for the first year of the next financial period for which a budget is adopted after such payment.
(b) approve the draft amendments to the Financial Rules set out in Appendix II to this report, on the understanding that the amendments would only enter into force should the International Labour Conference adopt the resolution mentioned in (a) above.
Delegation of authority under
article 18 of the Standing Orders of
the International Labour Conference
(Eighth item on the agenda)
78. The Committee had before it a paper(9) on the delegation of authority to the Officers of the Governing Body for the duration of the 1999 Conference.
79. The Committee decided to delegate to its Officers (the Chairman and spokesmen for the Employer and Worker members of the Committee), for the period of the 87th Session (June 1999) of the Conference, the authority to carry out its responsibilities under article 18 of the Standing Orders of the Conference in relation to proposals involving expenditure in the 66th Financial Period ending 31 December 1999.
80. The Committee recommends that the Governing Body make a similar delegation of authority to its officers under article 18 of the Standing Orders of the Conference.
Other financial and general questions
(Tenth item on the agenda)
Financial arrangements for a commission of inquiry
concerning the observance of the Freedom of Association
and Protection of the Right to Organise Convention,
1948 (No. 87), and the Right to Organise and
Collective Bargaining Convention, 1949 (No. 98),
by the Government of Colombia
81. The Committee had before it a paper(10) proposing financial arrangements for this commission of inquiry.
82. The representative of the Government of Colombia, speaking on a point of order, asked whether it was appropriate for the Committee to discuss financial arrangements before a Governing Body decision to establish a commission of inquiry.
83. Mr. Blondel, on behalf of the Workers, did not believe that this constituted a breach of normal procedure. This Committee was concerned only with the financial aspects of the establishment of a commission of inquiry and any decision would only become operative if the Governing Body later decided in fact to establish such a commission. This was standard procedure and had been followed on several occasions in the past.
84. The Treasurer confirmed that the Committee was following normal procedure and in no way prejudging a decision by the Governing Body. If the Committee put forward a recommendation on financial arrangements at this point, the Governing Body would have the benefit of that knowledge when deciding whether to establish a commission of inquiry. In point of fact, no other procedure was possible because article 22, paragraph 3, of the Standing Orders of the Governing Body provided that: "The Governing Body shall take no decision regarding any proposal involving expenditure until that proposal has been referred in the first instance to the Programme, Financial and Administrative Committee. ..."
85. Mr. Marshall said that the Employers supported the point for decision.
86. The Committee recommends to the Governing Body that, should it decide to establish a commission of inquiry concerning Colombia --
(a) an honorarium at the rate of $300 per day be paid to each member of the commission of inquiry;
(b) the cost of the commission in 1999, estimated at $365,000, be financed by savings in Part I of the budget; and that the cost in 2000-01, estimated at $180,000, be financed by a provision to be made for this purpose in Part I of the Programme and Budget for 2000-01.
The United Nations Administrative Committee on
Coordination (ACC) -- Statistical report on the
budgetary and financial situation of organizations
of the United Nations system
87. The Committee had before it a paper(11) containing financial information on organizations in the United Nations system.
88. Mr. Blondel, for the Workers, observed that the latest ACC report was as long as the Office's covering note was brief, and contained a number of comparative tables on the financial situation of UN system organizations. The Committee rarely had an opportunity to compare the ILO directly with other UN organizations, and some conclusions were quite revealing. For example, annual budgetary expenditure in the current biennium was about $50 million below that in 1996-97. It was interesting also to look at changes in the scales of assessment for member States' contributions over the years. One of the most notable was that of Japan, which had increased considerably over the last five years to its present level of about 20 per cent. The reason for the budgetary decrease might well be related to exchange rate movements, but it would be useful to have some confirmation from the Office.
89. The Treasurer confirmed that the budget exchange rate in 1996-97 was 1.16 Swiss francs to the dollar and in 1998-99 was 1.46 Swiss francs to the dollar which meant that the nominal level of the budget for the current biennium was about $100 million less than 1996-97. He confirmed also that the current rate of assessment for Japan was just on 20 per cent.
90. The Committee took note of the Office paper.
Regional Meetings: Proposed new arrangements
91. The Committee had before it a paper(12) concerning new arrangements for Regional Meetings, put forward at the request of the Governing Body at its November 1998 session.
92. The representative of the Government of India said that the Office paper should be considered in the light of experience at the Twelfth Asian Regional Meeting held in Bangkok in December 1997, which as an experiment had been reduced to three days. At the time of the meeting the whole Asian region was suffering a financial crisis with large-scale job losses. The agenda for the meeting took no account of this state of affairs because it had not been discussed beforehand with governments and social partners in the region. Three days was far too short for participants from 40 countries to have serious discussions and draft conclusions on regional problems, and the facilities available for Government group meetings were inadequate. If any useful purpose was to be achieved by these meetings the agenda should be set in consultation with governments and social partners in the region, the interpretation and meeting facilities should be adequate for the number of delegates, and there should be sufficient time to adopt conclusions and report to a plenary sitting. He therefore suggested that Regional Meetings should be extended to five days and that additional costs should be financed by savings in Part I of the programme and budget.
93. The representative of the Government of Austria also favoured a duration of five days because meetings without conclusions and a report were hardly worth holding. Recent experience suggested that savings from shortening meetings had not been justified because the quality of work had deteriorated. and in any case such action ran counter to the philosophy of the ILO. It should be trying to improve working conditions generally and putting people under extreme pressure did not set a good example.
94. The representative of the Government of Japan recalled that the Committee had agreed at its previous meeting that facilities should be sufficient for all three groups to have their own group meetings. Regional Meetings should be organized to allow for a full discussion of all agenda items and, in view of the large number of member States in the Asian and Pacific region, she expressed her Government's support for Regional Meetings of four days' duration.
95. Mr. Marshall said that the Employers supported the decision in paragraph 8(a) of the Office paper, but recalled that the current Programme and Budget provided under major programme 30 for Regional Meetings of three days' duration with a single agenda item. Because of the extraordinary circumstances at the time of the last Asian Regional Meeting, it was clear that meeting arrangements should be more flexible. Probably the best course would be to approve an agenda first and then allocate reasonable time with an upper limit of four days for the completion of business.
96. Mr. Blondel said that the Workers still preferred to see the duration for Regional Meetings fixed at five days. If it was worth allocating more resources for group discussions then it was worth having meetings long enough to ensure full discussion of the issues. Furthermore, the duration should be the same for all regions, especially in view of the time between consecutive meetings, and it was not unreasonable to ask for reasonable working conditions in view of the importance of these meetings to the regional participants.
97. The representative of the Government of Algeria, speaking on behalf of the African Government members, also expressed support for a duration of five days for Regional Meetings. It was not worth jeopardizing the value and relevance of Regional Meetings just to save money, and he again expressed their strong support for meetings of five days' duration.
98. The representative of the Government of the United Kingdom agreed with the decision in paragraph 8(a) of the Office paper and also with earlier comments that there should be more advance consultation on the agenda to ensure that Regional Meetings were organized in the most efficient manner. On the other hand, none of the options in paragraph 8(b) were particularly attractive because, in normal circumstances, it should be possible to have a three-day meeting which produced conclusions and a report. However, in certain circumstances, such as those prevailing at the time of the last meeting in Bangkok, more time might be needed, so he would accept the proposal for a duration of up to four days if justified by the volume of work.
99. The representative of the Government of Swaziland expressed support for the remarks made on behalf of the African Government members. The last African Regional Meeting had been held five years previously, and there were many issues now deserving consideration. He supported Regional Meetings of five days' duration because it was hardly worth having meetings unless they could reach conclusions and present a report.
100. The representative of the Government of Bangladesh observed that three days was not sufficient for a serious meeting, and favoured extending their duration to five days.
101. The representative of the Government of Canada observed that this proposal was based on the experience of the Twelfth Asia and Pacific Regional Meeting, where several States were trying to come to grips with an economic crisis. This should not necessarily mean that there should be a formula or prescription for every Regional Meeting just because of that experience. As previous speakers had said, the organization of Regional Meetings should be determined by the agenda, and in most meetings three days should be sufficient. However, to allow for exceptional circumstances she would be prepared to approve a maximum of four days if justified by the volume of work. She expressed support for the proposal in paragraph 8(a) of the Office paper.
102. The representative of the Government of Germany associated himself with the remarks by the Governments of Canada and of the United Kingdom.
103. The representative of the Government of Egypt expressed support for the views put forward on behalf of the African Governments. Since Regional Meetings were held only once every five years and in view of the workload which accumulated during that period, a five-day meeting was not excessive.
104. The representative of the Government of the United States expressed support for paragraph 8(a) of the Office paper for the additional interpretation resources and meeting room, provided that funding came from within existing resource levels. Some Regional Meetings in the past had often lacked focus, and for the two forthcoming meetings the Office, together with governments and social partners, should work to define and focus these meetings so that they achieved concrete results related directly to the ILO's priority goals. Three days often would normally be enough but, depending on the agenda, a fourth day could sometimes be useful. When delegates travelled to a Regional Meeting they naturally wanted to make best use of the time. He therefore supported the proposal to extend meetings up to four days.
105. The representative of the Government of Hungary expressed support for the point for decision in paragraph 8(a) of the Office paper. For the duration of meetings, four days would probably be enough and he therefore endorsed the statements made by the representatives of the United Kingdom and Canada.
106. The representative of the Government of Korea also expressed support for the decision in paragraph 8(a) of the Office paper and preferred a duration of four days for Regional Meetings to allow adequate time for discussion, conclusions and a report.
107. The representative of the Government of South Africa expressed support for the comments of the coordinator of the African Government members. He agreed with the comments made by the representative of the Government of India, but added that in recent years the Organization's work had generated increased interest among many member States. African Regional Meetings in particular could expect larger delegations and this would justify meetings of five days' duration.
108. The representative of the Government of China supported the point for decision in paragraph 8(a) of the Office paper and the proposal that Regional Meetings should be of four days' duration.
109. The representative of the Government of Panama also expressed support for the proposal in paragraph 8(a) of the Office paper, but believed that three days should be sufficient for most Regional Meetings. This limit could, however, be extended if justified by the circumstances.
110. Mr. Blondel said that after further consultation and in a spirit of compromise, the Workers were now prepared to accept four days as the duration for Regional Meetings, even though their original preference for five days had found support among a number of Government representatives. However, in exceptional circumstances such as the recent Asian regional crisis, or where there was a heavy agenda, the meetings should be extended to five days.
111. Mr. Marshall expressed the Employers' appreciation for the compromise offered by the Workers. It was clear that arrangements should be flexible enough to cater for an agenda that recognized the particular circumstances of a region, but it was also important to understand clearly that extending the duration of tripartite Regional Meetings increased the costs of participation and this in turn could pose difficulties for some member States. However, the Employers could agree with the Workers' proposal that the duration for Regional Meetings be fixed at four days, but that in exceptional circumstances such as the recent Asian crisis there would be an opportunity for an application to the PFA Committee for an extension to five days, provided budgetary funding was approved. However, there should be flexibility in both directions so that meetings could be shortened to three days if appropriate.
112. The representative of the Government of Germany indicated his agreement with the compromise now being discussed by the Committee. However, clarification was needed on how decisions were to be taken about what constituted extraordinary circumstances and how any necessary financial approvals could be obtained in advance.
113. The representative of the Government of the United States associated himself with the remarks by the two previous speakers and suggested that in this context the word "exceptional" should refer only to something of region-wide effect, for example on the scale of the recent Asian financial crisis.
114. The Programme, Financial and Administrative Committee recommends to the Governing Body --
(a) that it decide that additional interpretation and meeting room facilities be made available to the Government group at Regional Meetings and that the resulting additional cost for the two meetings referred to in paragraph 7 of the Office paper, estimated at $22,000, be financed by savings in Part I of the Programme and Budget for 1998-99;
(b) that it decide to increase the duration of Regional Meetings to four days so as to enable the meeting to adopt conclusions and a brief report, provided that, in exceptional circumstances, this duration could be extended by one day subject to Governing Body approval and provided that any additional costs can be financed from savings in Part I of the programme and budget, or shortened by one day if the countries of the region so decide.
Geneva, 17 March 1999.
(Signed) S. Marshall, Reporter.
Points for decision:
Paragraph 68;
Paragraph 77;
Paragraph 80;
Paragraph 86;
Paragraph 114.
Amendments to the Financial Regulations
of the International Labour Organization
(Additions are shown in bold type; deletions are indicated by square brackets)
Article 10
...
5. All contributions [received] due in a financial period shall be recorded as income in that financial period and shall be accounted for in United States dollars at the budget rate of exchange for that financial period.
...
Article 17
[1. All payments in respect of transactions for which provision is made in the budget shall be charged to the accounts of the financial period during which the transactions take place if the payments are made not later than 31 January of the year following the close of said financial period.]
1. Expenditure charged against the appropriations of a financial period shall consist of payments made during the financial period and unliquidated obligations as at the last day of the financial period. Such portion of appropriations as may be required to meet these unliquidated obligations shall remain available for twelve months, at the end of which any remaining balances shall be credited to miscellaneous income.
[2. Persons to whom any payment is due in respect of a transaction in any financial period shall be requested to submit their accounts in good time before 31 January of the year following the close of said financial period, and shall, as far as possible, be tendered payment before that date.]
2.[3. Notwithstanding the provisions of paragraph 1 above, debts] Obligations which could not be [paid in time to be chargeable to the accounts] charged to the appropriations of the preceding financial period [owing to unavoidable delay in the presentation of settlement of accounts] may, if the Director-General should so decide, be charged to the [account] appropriations of the current financial period. Nevertheless, there shall be included in the budget for each financial period an item entitled "Unpaid liabilities" to which may be charged any payments of a similar character which it would not be appropriate to pay from any other item of the budget. Payment of [debts] obligations due in respect of transactions covered by the budget of any financial period preceding the last financial period shall be subject to the prior authorization of the Governing Body.
[4. Creditors who, after their attention has been called to the provisions of this article, neglect to present their accounts in time to allow for payment by the prescribed date, if they cannot be paid in the manner indicated in paragraph 3 above without preventing payment of creditors who satisfy the requirements of paragraph 3, shall be informed that their accounts cannot be paid until the necessary sum has again been appropriated by the Conference.]
Article 18
1. The excess or shortfall of income over expenditure in any complete financial period shall be calculated by deducting budgetary expenditure from budgetary income with a financial provision being made for delays in the payment of contributions. Such provision shall amount to 100 per cent of the contributions unpaid at the date of the financial statements at the end of the financial period.
2. [If the difference between budgetary income and expenditure in any complete financial period expressed in United States dollars constitutes a credit balance, the Swiss franc equivalent of the corresponding cash surplus] Any such excess of income over expenditure, expressed in Swiss francs calculated at the budget rate of exchange for that financial period, shall be used to reduce the contributions of Members in the following way: Members which paid their ordinary contributions in the financial period in which [the cash] this surplus accrued shall have their share of the [cash] surplus deducted from their contributions assessed for the second year of the succeeding financial period; other Members shall not be credited with their share until they have paid the contributions due from them for the financial period in which the [cash] surplus accrued. When they have done so, their share of such [cash] surplus shall be deducted from their contributions assessed for the first year of the next financial period for which a budget is adopted after such payment.
Amendments to the Financial Rules
of the International Labour Office
(Additions are shown in bold type; deletions are indicated by square brackets)
3.30 Miscellaneous Income
Miscellaneous income consists of the following categories of [receipts] income accruing to the ILO:
(i) [receipts from] interest income which [are] is not required to be credited to the fund from which [they derive] it derives;
(ii) [receipts] income from the sale of publications, including related royalties and fees;
(iii) the difference between gains and losses on exchange excluding gains and losses on exchange on valuations of budgetary income and expenditure and on the revaluation of regular budget assets and liabilities held in currencies other than the United States dollar;
(iv) amounts recovered in respect of payments effected by the Organization if received after the end of the financial period in which the related payment was made;
(v) cheques remaining uncashed for a period of twelve months after the date drawn where cancellation takes place in a different financial period;
(vi) any remaining balances of unliquidated obligations set up in the previous financial period; and
(vii) other [miscellaneous cash receipts] income.
3.31 Payments into Publications Revolving Fund
Up to 100 per cent of the [receipts] income from the sale of publications, including related royalties and fees, may be [paid into] credited to the Publications Revolving Fund at the discretion of the Director-General, and used in accordance with the separate rules governing the operation of the Fund approved by the Governing Body.
3.32 Treatment of [Receipts] Income from Rentals
[Receipts] Income from the rental of premises shall be [paid into] credited to the Building and Accommodation Fund, which may be drawn upon only with the authorization of the Governing Body for specific purposes relating to ILO premises, in particular to meet costs of construction, alterations, repairs and renewals. The [rentals received] rental income shall be credited to the Fund after deduction of an appropriate amount in respect of heating, lighting and other facilities and services covered by them, provided that [payment] expenditure and reimbursement for such facilities and services occur within the same financial period; the amounts deducted shall be credited to the budget provisions under which the [payments were made] expenditure was incurred. Otherwise the full amount of the [rentals received] rental income shall be credited to the Fund.
6.30 Time-Limits for Presentation of Claims
(b) Particular care shall be exercised to [prevent arrear claims being made after the close of the financial period] ensure that all unliquidated obligations are recorded within the appropriate financial period.
7.60 Time-Limits for Payments
(c) Payments made against the regular budget after [the date set for the closing of the accounts of a given financial period (normally approximately two weeks after the end of the period)] the end of a financial period are not allowed as a charge against that financial period unless unliquidated obligations have been set up in the accounts for the period in accordance with paragraph 1 of article 17 of the Financial Regulations.
7.70 Currencies of Accounting and Currency Conversion Rates
(c) [Contributions received] Income from contributions in a financial period shall be accounted for in US dollars as budgetary income at the budget rate of exchange between the US dollar and the Swiss franc for that financial period. Swiss franc expenditure shall likewise be accounted for in US dollars as budgetary expenditure at the budget rate of exchange. Any differences between the US dollar amounts so calculated and those calculated at the applicable United Nations accounting rate of exchange shall be recorded as gains or losses on exchange in an Exchange Equalization Account.