UNITED NATIONS	HS
	Commission on Human Settlements	Distr. GENERAL HS/C/17/9/Add.1 7 April 1999 ORIGINAL: ENGLISH

The annex to the present note contains the report of the Advisory Committee on Administrative and Budgetary Questions (ACABQ) on its consideration of the proposed budget of the United Nations Habitat and Human Settlements Foundation for the biennium 2000-2001.

1. The Advisory Committee has considered the proposed budget of the United nations Habitat and Human Settlements Foundation for the biennium 2000-2001 (HS/C/17/9). During its consideration of the item, the Advisory Committee met with representatives of the Executive Director of Habitat.

2. The Advisory Committee welcomes the attempt made by habitat to improve the format and presentation of the budget document including the indication of the status of implementation of the recommendations of the Advisory Committee and those of the Board of Auditors. In particular, the Advisory Committee commends the Administration for attempting to prepare an integrated programme budget, combining in one document, resources for programme, support and administrative and management activities from all sources of funds. The Advisory Committee notes from paragraph 18 of the budget document that the budget has been prepared in accordance with the harmonized model. However, the Advisory Committee was informed by representatives of the Executive Director that they had not had full opportunity to review the new harmonized model presentation including agreed definitions and their application for UNDP, UNFPA, UNICEF and UNDCP. The Advisory Committee notes that the present budget document is not in full compliance and recommends that the content of the last reports by the above funds and programmes (DP/1997/23, DP/1998/32, DP/FPA/1998/10, E/ICEF/1998/AB/L.1 and E/CN.7/1997/14) and the related reports of the Advisory Committee (DP/1997/31, DP/1998/37, DP/FPA/1998/14, E/ICEF/1998/AB/L.2 and E/CN.7/1997/16) should be consulted before the preparation of the next budget document.

3. The Advisory Committee recommends further improvement in the present budget document. The executive summary should be more concise. To avoid excessive narratives, repetitions and potential confusion, information that is obvious from tables and can be read and understood from these tables should not be reproduced in the narratives. The purpose and heading of each table in the budget document should be clearly stated in the tables. The percentages of total resources should be replaced with the percentage change shown between initial and revised amounts and proposed amounts, for both income and expenditure. Part One on financial overview should be simplified by using the relevant table to explain income and financial trends and developments, resources mobilisation etc. Care should be made to distinguish between estimates of income and actual income that has been contributed for the financial period in question when dealing with revised and proposed budgets.

4. Table 2 of the budget document shows that the revised income for the Foundation for 1998-1999 amounts to $24,056,000, reflecting an increase of $3,386,000 (16%) when compared to the initial estimate of $20,670,000. The income projection for 2000-2001 amounts to $20,200,000.

5. The Advisory Committee notes the positive developments in the revitalization of Habitat. However, the revitalisation of Habitat is yet to be reflected in an appreciable and sustained increase in income contribution to the work programme of the centre and the Foundation. In this connection, the Advisory Committee notes the statement in paragraph 25 of the budget document that despite the positive assessment of increased confidence and the consequent expectation of additional contributions, the "Foundation remains exposed to risk of financial volatility and unpredictability. The increase in 1998-1999 was more significant and limited to the special purpose contribution. General purpose income declined over the past two bienniums, thus constraining the capacity to fund the Foundation budget and limited the flexibility to respond quickly to programme opportunities". That being the case, the Advisory Committee is of the view that the revitalisation process should provide the opportunity to streamline operations and reduce considerably over head expenditure so as to maximise the level of resources for projects and other substantive programmes.

6. As indicated in paragraph 40 and table 2 of the budget document, the revised total programme budget for 1998-1999 amounts to $22,808,300 reflecting an increase of $1,892,900 (9%), when compared to the initial estimate of $20,915,400. The revised amount for 1998-1999 includes $18,806,900 under programme budget, $1,548,000 under programme support and $2,453,400 for management and administration.

7. The Advisory Committee notes from table 2 of the budget document that the proposed budget for 2000-2001 amounts to $23,019,600 consisting of $19,111,100 under programme, $1,234,400 under programme support and $2,674,500 for management and administration.

8. A total of 27 posts are proposed for 2000-2001 (11 Professional and 16 local level posts under programme and 5 posts (2 Professional and 3 local level posts) are proposed under management and administration (table 7, HS/C/17/9). This reflects a reduction of one management and administration post from 1998-1999.

9. Management and administrative costs rose from the initial estimate of $1,589,000 for 1998-1999 to a proposed $2,674,500 in 2000-2001, reflecting a 68 per cent increase. The Advisory Committee notes that the increase is due to changes stated in paragraph 5 of the budget document. Staff and non-staff costs for information offices and all general operating expenditure previously budgeted under programmes have been shifted to administration and management. Two P-4 posts and one General Service post are now shown under administration and management and three posts (1 D-1, 1 P-5 and 1 P-4) are to be unfrozen in 2000-2001 (see paragraph 52, HS/C/17/9). Upon inquiry, the Advisory Committee was informed that the D-1 post will be occupied by a Chief Fund Manager and the incumbents of the P-5 and P-4 posts will perform functions in the area of sustainable urban development. With regard to the two P-4 posts transferred to administration and management, the Advisory Committee was informed that the incumbents will continue to work as Information Officers.

10. The Advisory Committee recommends that in future, the reasons for increases or decreases of expenditure should be clearly stated in the budget document. For example, in many instances, information in the narratives, for example, paragraphs 86-91 merely reproduce figures appearing in the tables without explanation of budget variances.

11. The Advisory Committee recalls that in its previous report, it recommended a clear identification of programme support charges. The response is indicated in paragraphs 28-29 and paragraph 3 of annex 1 to the budget document.

12. Table 2 of the budget document, shows no programme support in the initial 1998-1999 estimates. In the revised 1998-1999 budget the amount of $1,548,000 is shown for programme support at headquarters and an amount of $1,234,000 is shown for 2000-2001. In paragraph 29 of the budget document, the revised support charges for 2000-2001 are estimated at $1,300,000. The Advisory Committee points out that the amount of $1,234,000 relates to the budget expenditure while the amount $1,300,000 relate to income. The Advisory Committee notes that Habitat applies a standard of 13 per cent for programme support charges. However, the amount of $1,548,000 for 1998-1999 is exactly 10 per cent of special purpose funds income of $15,400,000. The corresponding figure for 2000-2001 is 9 per cent. Since thirteen per cent is charged, the Advisory Committee questions the variation of 3 per cent for 1998-1999 and 4 per cent for 2000-2001.

13. The Advisory Committee points out that the combined ratio of programme support and administrative cost to programme expenditure is 21 and 20 per cent for 1998-1999 and 2000-2001, respectively. The Advisory Committee recommends a careful monitoring of administrative and management costs to ensure that more resources contributed to the Foundation are available for projects.

14. The Advisory Committee notes from paragraph 55 of the budget document that a total amount of $1,402,900 is budgeted for 1998-1999 for UNON. The corresponding estimate for 2000-2001 is set at $1,850,000 (see paragraph 91, HS/C/17/9). In this connection the Advisory Committee recalls that when it examined the estimates for UNEP, it was informed that for 2000-2001 an amount of $2,468,700 was expected to be contributed to UNON by UNCHS. The representatives of the Executive Director confirmed that UNON had requested the higher amount. The Advisory Committee intends to review the UNON budget in the context of the proposed programme budget for the biennium 2000-2001. In the meantime, the Advisory Committee expresses its concern at the apparent lack of an agreed basis and procedure for determining the respective shares to be contributed by users of UNON services and facilities. The Advisory Committee notes from paragraph 85 of the budget document that "administrative services provided by UNON are mainly in the areas of accounting, staff administration, information technology and contracts and procurement services." It is not clear to the Advisory Committee how the cost of these services has been translated into the amounts budgeted for reimbursement. Therefore, there is need for a comprehensive assessment of the total cost of UNON and the respective workload related to user services.

15. Paragraph 30 of the budget document provides information on reserves and financial adjustments of the Foundation. The Committee points out that the General Assembly has yet to take a decision on the recommendation to write off the amount of $2,041,100 borrowed for the second United Nations Conference on Human Settlements (Habitat II). For its part the Advisory Committee has no objection to the write-off.

16. This is referred to briefly in paragraph 21 of the budget document. The Advisory Committee notes from paragraph 11 of the progress report of the Executive Director on activities of the United Nations Centre for Human Settlements (Habitat) (HC/C/17/2) that the recommendations on revitalisation relate, inter alia to planning, budgeting, performance reporting, financial and administrative concerns and organisational restructuring. The Advisory Committee will bear this in mind when it reviews section 13, Human Settlements, of the proposed programme budget for the biennium 2000-2001. In the meantime, the Advisory Committee recommends that in the next budget for the Foundation, information be provided on how the implementation of the revitalisation programme has affected the efficiency and productivity and financial situation of the Foundation.