Organization of American States OAS QUARTERLY RESOURCE MANAGEMENT REPORT JUNE 30, 2010

Transcription

1 Organization of American States Original: English OAS QUARTERLY RESOURCE MANAGEMENT REPORT JUNE 30, 2010 An overview of the financial position of the funds administered by the General Secretariat for the first two quarters (January- June) of 2010 and status report on other management activities GENERAL SECRETARIAT (GS/OAS) 1889 F Street, N.W., Washington, D.C , USA (202) /

2 SECTION I MANAGEMENT DISCUSSION AND ANALYSIS 5 GS/OAS Resources at a Glance 6 Inflows from a Financial Perspective 8 Outflows from a Financial Perspective 10 Budget Execution 2010 Regular Fund Program-Budget 12 Status of Regular Fund Quota Contributions 14 Regular Fund Cash Balance: Liquidity Risk Assessment 16 GS/OAS Financial Investments 18 GS/OAS Improvements and Efficiencies 30 Status of Recommendations of the Board of External Auditors SECTION II 2010 OAS RESOURCES BY PROGRAM 36 All Programs 38 Program 1 - Office of the Secretary General (SG) 41 Program 2 - Office of the Assistant Secretary General (ASG) 44 Program 3 - Autonomous and/or Decentralized Entities 47 Program 4 - Secretariat for Legal Affairs (SLA) 50 Program 5 - Secretariat for Multidimensional Security (SMS) 53 Program 6 - Secretariat for Political Affairs (SPA) 56 Program 7 - Executive Secretariat for Integral Development (SEDI) 59 Program 8 - Secretariat for External Relations (SER) 62 Program 9 - Secretariat for Administration and Finance (SAF) 65 Other Activities SECTION III FINANCIAL STATEMENTS AND REPORTS 70 Combining Financial Statements 73 Regular Fund Budget Execution Status Report 75 Quota Payments 77 Compliance Report 80 Regular Fund Cash Flow: Liquidity Risk Assessment 82 Specific Funds: Statement of Changes in Fund Balance 111 Contributions to OAS Funds by Donor 114 Resolution CP/RES. 831 (1342/02) 118 Service and Revolving Funds 120 Indirect Cost Recovery (ICR) 122 Activities of the Offices of the General Secretariat in the member states.

3 COMPLIANCE WITH RESOLUTION AG/RES. 1 (XXXVIII-E/09) The quarterly resource management report is presented in compliance with resolution AG/RES. 1 (XXXVIII-E/09), by which the General Assembly resolves, through mandate: III.A.2.c. to request the General Secretariat (GS/OAS) to present its administrative and financial management reports to the CAAP on a quarterly basis. These reports should include: i. A discussion and analysis of the report at the management level that summarizes the financial situation of the General Secretariat; [See Section I] ii. Detailed financial reports, including budgetary execution of the Regular Fund and the Voluntary, Specific, Service (including ICR), and the Trust Funds. [See Section I page 5; Section II pages 36 to 37; and Section III ] Resolution AG/RES. 1 (XXXVII-E/09) also mandates: III.A.2.d to request the General Secretariat to provide the following reports on a semiannual basis: reports on other administrative aspects of the General Secretariat, such as the impact of human resource policies on geographic representation and gender equity and equality; performance evaluations of General Secretariat staff; the human resource plan; post audits;...personnel funded by specific funds;...[see Section II]...contracting mechanisms; travel expense control measures; and any other requested by the CAAP. [Presented separately] III.A.2.e. to report (on an annual basis) on resources allocated for compliance with the mandates of the member states of the Organization, listed by effective date, object of expenditure (e.g., travel, contracts)... [See Section I - page 8, and Section III page 73],...and responsible area of the Secretariat, taking into account the four pillars of the organization; a report on the activities of the Offices of the General Secretariat in the member states [See Section III - page 122],... a report on the income generated through the rental of conference rooms [Presented separately]...and the Hall of the Americas... [See Section III - Statement of Service and Revolving Funds page 118]...and a report on fundraising for external resources to support the activities of the Organization [Presented separately]...and other contributions to building maintenance and improvements... [See Section III - Statement of Service and Revolving Funds page 118]. III.A.2.b.ii. report (end of each fiscal year) containing fiscal year s actual disbursements for statutory adjustments of staff salaries as a result of the Organization s use of smart parity, variations between actual disbursement and estimated costs, suggestions to regularly address the financing of the variation. [Presented separately] III.B.19.a to instruct the General Secretariat to intensify its ongoing initiative aimed at controlling operating expenditures. This initiative should identify all cost mitigation and cost reduction opportunities and determine specific cost-control measures in the use of meeting, conference, and office resources and/or the purchase of inputs and materials. [See Section I - pages 18 to 29] III.B.19.b to highlight in the quarterly resource management reports presented to the Permanent Council examples of savings and efficiencies achieved through the implementation of these measures. [See Section I - pages 18 to 29]. This is in compliance with resolution AG/RES. 1 (XXXVIII-E/09) - Guidelines for the Program-Budget of the Organization for Adopted at the plenary session, held on September 30,

4 MANAGEMENT DISCUSSION AND ANALYSIS 4

5 The GS/OAS financial position can be presented from two perspectives: financial and budgetary, as shown in Table 1. The financial perspective is based on actual inflows and outflows of all funds of the Organization. Inflows under the Regular Fund include current quotas, quotas in arrears, interest income, rental space income, and miscellaneous income, received through the first semester of the year. Inflows under FEMCIDI include voluntary contributions from member states, interest and reimbursements. Inflows for Specific Funds include current year contributions for specific activities as mandated by donor agreements, interest income and transfers. Service Funds include Regular Fund transfers for basic infrastructure and common costs, tax reimbursements, indirect cost recovery and other income. Inflows for Other Funds (which include Medical Benefit, Rowe Pan-American and Trust for the Americas) vary depending on the nature for which these funds were established. On the outflows side, the Regular, Specific and Service Funds include expenditures, obligations, payroll encumbrances to year-end, transfers, and other decreases. Outflows under FEMCIDI include only non-payroll expenditures, obligations and transfers. Other Funds include only expenditures, transfers and may include unrealized loss from investments. For all funds, the ending balance represents the excess of inflows over outflows plus the beginning balances carried forward from the prior year. The budgetary perspective for the Regular Fund reflects the authorized appropriations for the 2010 cycle and does not show actual income collected. For FEMCIDI, it reflects the authorized appropriations for the 2010 cycle, which began on May 1, 2010 and will end on June 30, 2011, and does not show actual income collected, as shown under the financial perspective. The budget for Specific, Service, and Other Funds includes beginning balances, contributions, transfers, and miscellaneous income through the first semester of the year, reflecting funds available for programming. Execution for the Regular Fund and FEMCIDI includes expenditures and obligations for the current budgetary year. Execution for Specific, Service, and Trust Funds may include expenditures and obligations from prior budgetary years. In addition, execution under Other Funds may include unrealized loss from investments. Table 1 GS/OAS Resources (in millions of USD) From January 1, 2010 to June 30, 2010 ALL PROGRAMS FINANCIAL PERSPECTIVE Regular Fund Voluntary Funds (FEMCIDI) Specific Funds Service and Revolving Funds Other Funds (B) TOTAL 2010 BEGINNING BALANCE INFLOWS OUTFLOWS ENDING BALANCE (81.1) (1.7) (35.5) (13.9) (8.4) (140.6) (19.5) (3.4) BUDGETARY PERSPECTIVE Regular Fund Voluntary Funds (FEMCIDI) Specific Funds Service and Revolving Funds Other Funds TOTAL 2010 BUDGET EXECUTION VARIANCE (A) (A) Corresponds to 2010 Cycle (May 1, 2010 thru June 30, 2011) (B) Includes Medical Benefits Fund, Rowe Fund and Trust for the Americas. 5

6 Figure 1 Trend and Composition of Inflows by Fund (in millions of USD) From January 1 to June 30 TREND COMPOSITION Regular Fund % Total % Regular Fund Service and Revolving Funds FEMCIDI FEMCIDI 0.7 1% 0.4 Specific Funds Other Funds* Other Funds* 8.1 8% * Includes Medical Benefits Fund, Rowe Pan American Fund and Trust for the Americas Specific Funds % Service and Revolving Funds % Trend and Composition of Inflows by Fund As defined on page 5, inflows to the OAS include more than just quota payments or voluntary contributions. Figure 1 presents a comparative summary of all inflows through June 30 for various years for funds managed by the GS/OAS, and Trust funds for which the GS/OAS has a fiduciary responsibility. The administration of each fund is regulated by its own mandates, statutes or regulations. The GS/OAS Funds received approximately USD million (excludes inter-fund transactions of USD 8.7 million) during the first semester of The overall income in the first six months of 2010 has increased compared to last year, primarily due to a better timing of quota payments. Timing of the inflows to the Regular Fund have increased 10% compared to the same period from last year, mainly as a result of the quota payment received from Brazil. Member states have also confirmed their support to FEMCIDI through a gradual increase in the last year. For the first semester of the year, timing for the inflows for FEMCIDI have increased 75%, from USD 0.4 million in 2009 to USD 0.7 million in In addition, the tax equalization account has affected the overall inflows to Service Funds which have increased 25% when compared to the same period in 2009 due to the tax refund received from the United States. On the other hand, the chart provides mixed trends across individual funds. Contributions received by the GS/OAS to Specific Funds remain almost constant at USD 22.9 million compared to June However, this may not represent a real recovery in Specific Funds contributions. This semester, much earlier than anticipated (August or September), the GS/OAS received USD 3 million from the United States as its annual contribution to the OAS/DEMOC Fund.During this semester, overall funds have been received mainly from United States (USD 7.1 million), Canada (USD 5.5 million) and Spain (USD 1.6 million), directed primarily towards democracy governance, integral development and multidimensional security initiatives. Inflows attributed to Other Funds have decreased from USD 9.7 million in 6

7 Section I Inflows from a Financial Perspective 2009 to USD 8.1 million in 2010, mostly due to a decrease in contributions received by the Trust for the Americas and decreases in portfolio market values of the Medical Benefits Fund and Rowe Pan-American Fund. Contributions by Source of Financing By the first semester of 2010 (see Table 2), the United States was the major contributor to the GS/OAS (USD 31.4 million), followed by Canada (USD 16.4 million), Brazil (USD 6.6 million) and Mexico (USD 6.5 million). From the USD 31.4 million contributed by the United States to all funds, USD 23.6 million corresponds to the Regular Fund. In addition, from the USD 16.4 million contributed by Canada 66% constitutes quota payments to the Regular Fund and 34% represents contributions to Specific Funds. Mexico contributions of USD 6.6 million are mostly quota payments to the Regular Fund. Among Permanent Observers, Spain is at the top of contributors with USD 1.6 million in contributions to Specific Funds mainly to support sustainable democracy initiatives. Table 2 Contributions by Source of Financing - Top Donors (in millions of USD) From January 1, 2010 to June 30, 2010 Contributor Regular Fund Voluntary Funds (FEMCIDI) Specific Funds Trust for the Americas TOTAL United States Canada Brazil Mexico Argentina * Spain Venezuela * 1.2 Peru Colombia Chile Intl. Organization for Migration European Union CONAE Netherlands Other Member States Multiple Funding Sources & Others TOTAL * Although Voluntary Funds show zero due to rounding in millions, this corresponds to contributions of USD 10,230 from Argentina and USD 26,000 from Venezuela. 7

8 Outflows by fund Outflows for the Regular, Specific and Service Funds include expenditures, and obligations, less carry-over obligations, payroll encumbrances to year end, transfers, and other decreases. Outflows under FEMCIDI include only non payroll expenditures, obligations and transfers. Other Funds include only expenditures, transfers and may include unrealized loss from investments. 48.9% of total outflows, Performance contracts (Object 8) represents 16.0%, Other expenses (Object 9) represents 8.6%, which includes administrative and technical support, subsidies to the Inter-American Court of Human Rights, the Pan American Development Foundation and the Inter-American Defense Board. Figure 2 Outflows by Fund (in millions of USD) From January 1, 2010 to June 30, 2010 Overall outflows in GS/OAS funds totaled USD million through June 30, 2010; the total outflows has maintained its pace when compared to the same period last year, which totaled USD million. Figure 2 shows that Regular Fund outflows represent USD 81.1 million or 58% of the total; Specific Funds USD 35.5 million or 25%, and the Service Funds USD 13.9 million or 10%. These three funds combined account for 93% of the total GS/OAS outflows. Other Funds 8.4 6% Service and Revolving Funds % Voluntary Funds (FEMCIDI) 1.7 1% Regular Fund % Outflows by category As a service organization, the GS/OAS invests a significant amount of its income on salaries and contracts (Figure 3); Personnel (Object 1) represents Figure 3 Outflows by category (in millions of USD) From January 1, 2010 to June 30, 2010 Specific Funds % Total: USD Personnel Temporary Posts Fellowships Travel Documents Equipment, Supplies and Maintenance Building and Maintenance Performance Contracts 2010 USD USD USD Other expenses Other outflows 8

9 Disbursements by Location The General Secretariat executes numerous activities throughout its member states, requiring payment for goods and services in their corresponding local currencies. Figure 4 shows disbursements by location through the first semester of the year, totaling USD million. The majority of disbursements occur in Headquarters, mostly due to payroll expenses and infrastructure costs. Section I Outflows from a Financial Perspective In Latin America, a great majority of disbursements are related to the Mission to Support the Peace Process in Colombia (MAPP), demining and judicial facilitator activities in Nicaragua, and environmental and dialogue activities in Brazil. There were no disbursements for activities held in Canada or Chile. Disbursements in the Caribbean are also significant due to projects related to recovery efforts in Haiti. Figure 4 Disbursements by Location (in millions of USD) Belize Bahamas Honduras Dominican Republic Mexico 0.45 Costa Rica Saint Kitts and Nevis Guatemala 0.47 Panama 0.18 El Salvador Haiti Antigua and Barbuda 0.42 Suriname Nicaragua 0.98 Guyana Jamaica Dominica Colombia 1.82 Venezuela Santa Lucia Barbados Ecuador Saint Vicent and the Grenadines 0.13 Grenada Peru Trinidad and Tobago Bolivia Paraguay 0.28 Brazil 0.93 Argentina 0.69 Uruguay 0.56 Headquarters (DC) TOTAL DISBURSEMENT USD M 9

10 Approved Levels For 2010, through Resolution AG/RES. 1 (XXXVIII-E/09), the General Secretariat was authorized to execute up to USD 90.1 million for Regular Fund activities. Table 3 presents the 2010 original and modified appropriation and the corresponding sources of financing. Quota assessments represent 87% of the sources of financing for the 2010 appropriation. Table Appropriations and Financing (in thousands of USD) Original Modified Appropriations Personnel 58, ,022.8 Non personnel 32, , , ,125.0 Actual Projected Jun 30, 2010 Sources of Financing Quota Assessment 78, ,398.8 Administrative and Technical Support 3,282.6 Other Income 1,579.4 Reserve Sub fund 6,749.4 a b , , ,954.4 a) ICR Collection from Specific Funds (USD 2,500.0) and FEMCIDI (USD 782.6) b) Interest, rents, and refunds Transfers Between Programs As per Executive Order Rev. 3, changes in the organizational structure were approved as of October 1st, The Press Department is now under the Secretariat for External Relations and no longer under the Secretary General Office; The Secretariat of the Inter-American Committee on Ports (CIP) is under the Office of the Assistant Secretary General and no longer under Autonomous and/or Decentralized Entities; the Inter-American Children s institute is under Autonomous and/or Decentralized Entities and no longer under the Secretariat for Legal Affairs (see table 4). Furthermore as per article 104 of the General Standards, the General Secretariat requires prior approval from the Permanent Council for transfers between chapters that exceed five percent of the total Regular Fund resources approved for the chapter from which those resources are withdrawn and transferred. Pursuant to the General Assembly s decision to reduce the 2011 Regular Fund Budget, and to record termination commitments related to the reduction of posts, transfers of USD 3.3 million from various objects and programs are expected during the third and fourth quarters of the year. As a result, the approved budget for the termination account would increase from USD 1.3 million to USD 4.6 million (exceeding the five percent transfer threshold). Table 4 Transfers Between Programs (in thousands of USD) Original Appropriation AG/RES. 1 Modified Transfers January to Appropriation as of (XXXVIII E/09) June 2010 June 30, 2010 % PROGRAMS (a) (b) (c) (b/a) Secretary General 5,221.8 (776.7) 4, % Assistant Secretary General 17, , % Autonomous and/or Decentralized Entities 11, , % Secretariat for Legal Affairs 4,129.2 (1,349.6) 2, % Secretariat for Multidimensional Security 4, , % Secretariat for Political Affairs 5,012.5 (641.4) 4,371.1 Executive Secretariat for Integral Development 15,374.5 (16.8) 15, % Secretariat for External Relations 3, , , % Secretariat for Administration and Finance 11,432.2 (164.0) 11,268.2 Basic Infrastructure and Common Costs 12, , Grand Total 90, ,125.0 Regular Budgetary Execution by Program The 2010 Regular Fund Appropriation of USD 90.1 million has been executed in the amount of USD 81.4 million, or 90.3% of the appropriation, as of June 30, Execution includes expenditures, payroll encumbrances, and outstanding commitments through year-end. 0.1% 1.4% 10

11 Section I Budget Execution of the 2010 Regular Fund Program-Budget Seven out of ten programs have already executed over 90% of their corresponding appropriations (Figure 5). The lowest percentage of execution comes from Basic Infrastructure and Common costs at 81.1%, mainly due to a low execution in Terminations and Repatriations of 27.6% (USD out of USD 2,346.5), followed by the Executive Secretariat for Integral Development 82.7%, mostly due the low execution of the Department of Human Development, Education, and Culture of 76.4% (USD 6,591.4 out of USD 8,632.3). Table 5 shows the Regular Fund Budget versus Execution. Budget corresponds to the modified appropriation (per Table 4); Execution includes expenditures and obligations; and the balance is the remaining unliquidated appropriations as of June 30, As of June 30, 2010, only USD 8.7 million remained available for programming. Table 5 Budget vs Execution (in thousands of USD) As of June 30, 2010 Budget Execution Variance PROGRAMS (a) (b) (c) = (a) (b) Secretary General 4, , Assistant Secretary General 17, , ,388.0 Autonomous and/or Decentralized Entities 11, , ,428.8 Secretariat for Legal Affairs 2, , Secretariat for Multidimensional Security 4, , Secretariat for Political Affairs 4, , Executive Secretariat for Integral Development 15, , ,649.7 Secretariat for External Relations 5, , Secretariat for Administration and Finance 11, , Basic Infrastructure and Common Costs 13, , ,491.9 Grand Total 90, , ,731.2 Figure 5 Budgetary Execution by Program (in millions of USD) As of June 30, PRG 1 PRG 2 PRG 3 PRG 4 PRG 5 PRG 6 PRG 7 PRG 8 PRG 9 PRG10 Modified Appropriation Expenditures Obligations 11

12 Quota Contributions At the beginning of 2010, the GS/OAS had USD 79.4 million in quota receivables: USD 78.5 million from current year quota assessments and USD 0.9 million from quotas in arrears. As of June 2010, the GS/OAS has received USD 54.1 million in quota payments (68% of total quota receivable): USD 53.4 million for 2010 assessment and USD 0.7 million from quotas in arrears received from Grenada, Jamaica, Nicaragua and Venezuela. Member states are required by the General Standards to pay their quota assessments in full by January 1st of the calendar year, or otherwise submit a payment plan for the year. As of June 2010, from the outstanding USD 25.3 million quota receivable, USD 23.8 million are backed by current payment plans accepted by the GS/OAS from Jamaica, Nicaragua and United States, most of which is expected to be collected during There is no certainty as to when the difference of USD 1.5 million will be received. Under existing regulations, member states with outstanding arrears not backed by a payment plan are considered not current. Member states that pay their annual quota assessment by April 30 of that period are entitled to the following discounts: 3% of the amount paid by January 31, and 2% of the amount paid between February 1 st and April 30. In 2009, USD 460,732 in discounts were credited to member states for prompt payment, to be applied to their 2010 quota assessment. In 2010, Figure 6 Quota Receivable vs Quota Payments (in millions of USD) As of June 30 USD USD QR Quota Receivable QP Quota Payments Current Arrears USD USD USD 40.0 USD USD QR QP QR QP QR QP QR QP QR QP QR QP QR QP QR QP

13 Section I Status of Regular Fund Quota Contributions member states accumulated USD 540,351 in prompt payment credits, to be applied to their 2011 quota assessment. Detailed information of these prompt payment credits can be found in the Quota Payment Report in Section III. Arrears Arrears refer to prior years balances on quota assessments. As of January 1, 2010, quotas in arrears amounted to USD 0.9 million, mainly from Nicaragua (USD 0.3 million) and Venezuela (USD 0.5 million). In the first semester of 2010, USD 0.7 million were received in payments towards quotas in arrears, leaving an outstanding balance of USD 0.2 million. As illustrated in Figure 7, quotas in arrears are at the lowest level in the last eight years. Quota Compliance As of June 30, 2010, there were twenty four member states current with their Quota contribution to the Regular Fund, one member state considered current, and nine member states considered not current. This is in accordance with AG/RES (XXX-O/00), and as amended by AG/ RES.2157 (XXXV-O/05). See report on compliance below. At the time this report was published, the GS/OAS had received full payment of the 2010 assessed Quota from Ecuador, Paraguay and Uruguay, thus the status of these countries became current ; at the same time, Jamaica is not in compliance with its approved payment plan, thus it became not current. Figure 7 Quotas in Arrears (in millions of USD) As of June 30 Table 6 Summary on Compliance with Quota Contributions according to AG/RES (XXX-O/00), as amended by AG/RES (XXXV-O/05) As of June 30, 2010 USD Current Antigua and Barbuda Argentina Bahamas Barbados Belize Bolivia Brazil Canada Chile Colombia Costa Rica Dominica, Comm. Of El Salvador Guatemala Guyana Jamaica Mexico Panama Peru St. Lucia St. Vincent and the Grenadines Suriname Trinidad and Tobago United States YEAR Considered Current Nicaragua Not Current Dominican Republic Ecuador Grenada Haiti Honduras * Paraguay St. Kitts and Nevis Uruguay Venezuela * Note that effective July 5, 2009 as per AG/RES. 2 (XXXVII E/09), Honduras has been suspended from the exercise of its right to participate in the Organization of American States in accordance with Article 21 of the Inter American Democratic Charter. 13

14 REGULAR FUND CASH BALANCE: LIQUIDITY RISK ASSESSMENT Liquidity Risk Assessment: Figure 8 shows actual and projected cash balances for the Regular Fund. The Regular Fund cash balance is derived from a combination of inflows, primarily from quota receipts, and corresponding outflows in the form of payments. While the Regular Fund has a fairly predictable stream of expenditures throughout the year, the timing of inflows of cash do not directly correlate to the timing of these expenditures. As a result, the cash balance can fluctuate significantly during the course of the year. The Regular Fund began 2010 with a cash balance of USD 5.2 million. During the first six months the balance has been as low as USD 2.6 million and as high as USD 25.0 million During the first six months a total of USD 61.1 was received; of which, USD 53.4 million were quota payments (68% of the quota receivables for 2010). During the same period outflows totaled USD 53.1 million. At the end of June 2010, the cash balance is USD 13.2 million. Risk Factors The balance of the reserve subfund of the Regular Fund was USD 7.2 million at the beginning of the year. USD 6.7 million of this reserve is being used to finance current operations as approved in the 2010 Regular Fund Budget. As a result, the cash balance of the subfund is being depleted throughout the course of the year. Separation costs during 2010 are anticipated to reach USD 4.6 million, Figure 8 Regular Fund 2010 Actual and Projected Cash Balance (in millions of USD) Actual Projected (5) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec (3.8) (10) Projected 14

15 Section I Regular Fund Cash Balance: Liquidity Risk Assessment with most of these payments being made during the second semester. This reflects a net reduction of 45 positions in the 2011 Regular Fund Budget when compared to 2010 Regular fund Budget with the associated personnel separations taking place during The cost of these separations is projected to be absorbed as part of the execution of the 2010 Budget. Quota arrears are at historical lows with arrears balances at USD 0.9 million at January 1, As of June 30, 2010, USD 0.7 was collected, leaving a balance of USD 0.2. As a result, no significant cash inflows are expected from quota arrears during the second semester. All of these factors point to severe cash shortages that are expected to begin in October with current projections showing a cash deficit in the Regular Fund in November. These projections anticipate the timing and amount of quota collections according to member states payment plans and/or payment history during the past three years and it also anticipates full receipt of tax reimbursements from member states by October. 15

16 Outlook The International Monetary Fund (IMF) raised its forecast for 2010 global growth from 4.2% to 4.6%. The upward revision is due primarily to first-half global growth which has been somewhat stronger than anticipated. Nevertheless, the IMF maintained its 2011 forecast for world GDP growth at 4.3%, a forecast that would seem at odds with recent concerns that the world economic recovery is slowing. Acknowledging that the global economy is recovering faster than expected, the IMF hiked its 2010 forecast for growth in the U.S. and Brazil among other nations. While the economic growth outlook has generally risen over the past year, the outlook or concern for inflation has been decreasing. For example, consensus for the Consumer Price Index in 2010 has dropped to 1.7% (The consumer price index or (CPI) is a measure of the level of inflation. CPI measures how much the price of a basket of consumer goods has changed over a given time period). The latest consensus for 2011 predicts a CPI of about 1.5%. Meanwhile, investment markets continue to show little tendency to provide historical rates of return. On June 29th, the markets saw the benchmark 10-year Treasury note yield close at 2.97% and this marks the first time in 2010 that the yield dipped below 3%. This reduction in inflationary pressures and other stagnant investment market conditions directly impact the rate of return that the OAS can achieve on its investments. GS/OAS Investment Policy All of the cash available for use in carrying out the activities of the Regular Fund, Specific Funds, Voluntary Fund, Service Funds and certain Trust Funds of the OAS are consolidated in the OAS Treasury Fund. The General Secretariat administers the OAS Treasury Fund. Amounts not immediately required for operations are invested in accordance with the guidelines prescribed in the GS/OAS investment policy 1. GS/OAS applies a conservative risk profile in the management of assets in the OAS Treasury Fund. The investment policy requires that OAS invest in high quality instruments that preserve principal, maintain sufficient liquidity to meet forecasted cash needs, and deliver competitive returns subject to prevailing market conditions. The portfolio is also diversified in order to minimize credit risk and excludes the OAS from investing in complex derivative securities. As of June 30, the investment portfolio of the GS/OAS was comprised of the following (in millions of USD): Cash Equivalents (Money Market funds, Commercial Paper) 23.9 Government and Agency Bonds 26.5 Asset-Backed Bonds 14.4 Agency Backed Bonds 34.4 Corporate Bonds 27.5 Total USD On June 30, the OAS recorded in the GS/OAS Treasury Fund, 49,998 shares of Manulife Financial with a market value of USD 774,054. These shares, which were not previously recorded, were acquired in early 2000 when John Hancock converted its ownership structure from a mutual company to a publicly traded firm in a process commonly referred to as demutualization. It is the intent of the Organization to divest itself of this investment and record the proceeds as income to the Regular Fund in The OAS Treasury Fund does not contain the investments of the Retirement and Pension Fund, the Medical Benefits Fund or the Rowe Pan American Fund. These assets are managed by separate and independent committees operating under investment policies with risk profiles different from GS/OAS treasury management policy. 16

17 Section I GS/OAS Financial Investments At June 30, the Treasury Fund held USD million in cash and investments for the following funds (in millions of USD): Regular Fund 13.6 Specific Funds 89.0 Voluntary Fund (FEMCIDI) 8.8 Service and Revolving Funds 10.9 Trust Funds Operating Cash 4.4 Total USD USD million (83.4%) of the cash and investments of the Treasury Fund are under active management by Bank of America Global Capital Management. This segment of the OAS Treasury Fund serves as the repository for those funds whose operational requirements are greater than a year. As of June 30, the managed portfolio had an unrealized gain of USD 3.0 million. The remaining Treasury Fund assets (USD 21.1 million) are invested in short-term liquid assets such as money market funds and overnight repurchase agreements in order to meet projected short-term (1-3 months) cash requirements. Through June 30, the OAS Treasury Fund had an overall return of about 2.1%. 17

18 GS/OAS IMPROVEMENTS AND EFFICIENCIES The GS/OAS continues its efforts of improved efficiencies and austerity. The Resource Management Report for the three first quarters of 2009 (CP/ CAAP-3008/09, CP/CAAP-3015/09, and CP/CAAP-3032/09) outlined improvements and efficiencies for the quarters. The following section provides various examples of additional improvements and efficiencies through the first semester of DEPARTMENT OF FINANCIAL ADMINISTRATION AND MANAGE- MENT SERVICES (DFAMS) Foreign Currency Exchange Rates DFAMS has partnered with INTL Global Currencies, LTD (IGC), a firm that provides a variety of foreign exchange products and services including global payments in 170 countries. IGC specializes in providing foreign exchange and treasury services to international aid and development organizations, UN agencies and other financial institutions. By utilizing their services the OAS has ensured access to competitive conversion rates that are much more favorable than the sole source exchange rates received through local banks. Through the competitive bid process, DFAMS is ensuring that field projects get the maximum local funding possible. Thus far the pilot project has been implemented in Venezuela and Mexico. The experience at these sites has been quite encouraging; the rate of exchange has improved by almost three-fold in Venezuela and the OAS has made gains of just over 10% in Mexico. By implementing this change, local bank accounts are also no longer funded through the use of USD checks but are funded electronically, thereby reducing the risk associated with check transactions. Additionally, the funding of the local bank accounts is completed within three business days. Conversely, local banks may hold funds for up to 25 days until checks clear international financial markets before these funds are made available to the OAS offices local accounts. Better rates, reduced risk exposure and timelier access to funds are a combination that warrants the further deployment of this business process. In the coming months, DFAMS will be working with other OAS Country and Project Offices this implement this improved funding modality. Procure to Pay Business Process As we have communicated on past occasions, resource managers in each Secretariat, Department, and OAS Country/Project Office play a critical role in every phase of the management cycle. One of the financial functions that is carried out with greatest frequency, yet at the same time is one of the most critical tasks of the financial responsibilities is the procure to pay cycle. We understand that making measurable gains in the process flows will allow administrative personnel to focus on other aspects of their functions and become more productive. The Office of Procurement Services, The Department of Information Technology Services and the Department of Financial and Administrative Management Services have been working together in order to introduce an initial change in the current business process. At the end of the 2nd quarter approved purchase orders were sent directly and automatically from the Office of Procurement Services to the official address of OAS Country/Project Offices (OCO/PO). Initially, this modification only applies to those PO s commonly referred to as Electronic PO s and will speed up the time from PO approval to OCO/ PO authorization. Automated Compliance Mechanism for Donor Agreements DFAMS is in the process of developing an automated compliance mechanism for donor agreements. This new process will include a new Grants Module Action Request (GMA). The new GMA will include all financial and administrative aspects of an agreement to upload to OASES; this way compliance with the donor agreement s clauses and mandates can be monitored in OASES. 18

19 Section I GS/OAS Improvements and Efficiencies Expense Reporting Tool Every business trip begins with booking travel and ends when all travel expenses are reimbursed. DFAMS is currently in the design phase of implementing Concur Expense and Cliqbook: on-line tools that facilitate the travel and expense claim process. Cliqbook is a booking tool that, similar to Expedia or Travelocity, will enable OAS staff to compare flight options and book lodging with OAS preferred hotels during their missions. All the data captured during booking and throughout the business trip flows directly into the expense reporting process (Concur Expense), which means that the OAS staff will have a more efficient method of reporting and requesting reimbursements. It also means that the Organization will have greater visibility into travel spend and control over Organizational resources. The pilot phase of the implementation process is currently scheduled to be released to test areas during the last quarter of Financial and Administrative Framework Agreement (FAFA) with the EU The GS/OAS is working to establish a Financial and Administrative Framework Agreement (FAFA) with the European Union s Economic Commission (EC). If approved by the EC, FAFA will strengthen mutual cooperation through an umbrella agreement that facilitates and reduces the administrative cost of the negotiation, implementation and closing of projects. Future contribution agreements with the European Union would reflect the standard principles contained in this umbrella agreement. The GS/OAS submitted a first draft of the EC questionnaire with the required documentation. The EC has presented a response to the GS/OAS requesting additional information before the partnership can be approved. The GS/OAS expects to submit this information during April at the latest. More Useful Financial Statements SAF is preparing improved comprehensive financial statements for major Specific Funds, such as the OAS/CIDA Cooperation Plan and the Electoral Observation Mission (EOM) Fund. The emphasis of these statements has shifted from the usual focus on cash and the nine objects of expenditure to the appropriation level and budgetary execution. Program leaders and managers are now able to monitor execution levels against the multi-year plan submitted to the donor and make decisions accordingly. These statements are accessible in the Finance Portal on a monthly basis. SAF expects to publish additional statements emphasizing budgetary information in the upcoming months. International Public Sector Accounting Standards (IPSAS) The GS/OAS has redefined the terms of reference of the GS/OAS contract with our external auditors, Ernst & Young, to redirect audit funds and efforts from outdated agreed-upon procedures review to IPSAS-related advice. This was begun in the 2009 audit cycle. An initial meeting took place with IPSAS experts from Ernst & Young. In addition, to engage the external auditors and other experts in the transition to IPSAS, staff from across SAF and the OIG s office met with Ernst & Young in order to asses the Organization s needs to help it move forward, and how E&Y can better guide the GS/OAS in the implementation process. Further, E&Y intends to review and analyze all matters pertaining to the financial statements and the underlying processes that allow DFAMS to arrive at the figures that are published. During the second quarter of 2010, SAF offered an IPSAS training program through IBTCI, the firm that developed the UN training on IPSAS. The five courses covered were: a. Accrual Accounting Under IPSAS b. Accounting for Property, Plant and Equipment c. Accounting for Employee Benefits d. Advance Topics in Financial Reporting e. Prepare Accrual Based Financial Statements These courses were attended by 25 staff members per class from within and outside of SAF, including the OIG s office. In accordance with IPSAS and understanding that its adoption will be a gradual process, DFAMS has decided to adopt two initial changes to its financial statements. First, it will use cross-reference notes in the financial statements, which will enable general users to have additional information that expands and supports the financial statements. Second, moving forward, the sign $ will be substituted for USD, which clearly identifies the 19

20 Section I GS/OAS Improvements And Efficiencies functional currency of the financial statements as US dollars. SAF/DFAMS has given a presentation to the CAAP on IPSAS and no substantive objections surfaced. As we approach critical milestones in the process, SAF will consult with the political bodies. DEPARTMENT OF INFORMATION AND TECHNOLOGY SERVICES (DOITS) Systems Infrastructure Section SAF/DOITS is deploying new secure remote access software (SSL/VPN - Secure Socket Layer/ Virtual Private Network) which provides better administration and security, improving the availability of network services to remote users; 80% of the Country Offices are already using this enhanced platform. The strengthening of the performance and reliability in the platform is underway with the implementation of two new servers that are connected to the main OAS Storage infrastructure (Storage Area Network). These servers are being tested and full implementation is expected for the second semester of The implementation of video conference facilities in the Simon Bolivar Room started and is half way to its completion. SAF/DOITS envisions that by the end of September the representatives of the OAS member states will be able to conduct meetings thru videoconferencing in the Simon Bolivar Room. Systems Development Section The Content Management System for the Inter-American Commission of Human Rights (IACHR) was launched on April 12. This system allows the IACHR to manage electronically all the correspondence received from the petitioners and member states, speeding up the process of managing digitally all the documentation related to petitions and cases of human rights violations. SAF/DOITS continued the implementation of the External Virtual Community Platform and the following initiatives will be launched by the third quarter of 2010: Inter-American Teacher Education Network Portal (Community) for the Department of Human Development OAS Internship Program Community for the Department of Human Resources. Virtual Platform for the Electronic Municipal Project (MuNet) of the Department of State Modernization & Good Governance Campaign and Political Parties Financing Project for the Department of Electoral Observation and Cooperation. As part of SAF/DOITS activities to support OAS departmental goals through software applications/services, SAF/DOITS has continued the development of the following applications: The Inter-American Project Database for Haiti. The Enhancement to the Electoral Observers Management System (EOMS The Inter-American Commission on Human Rights (IACHR) Public Petition Portal. The Job Description Database System. Systems Security Section DOITS implemented a solution to prevent the involuntary access of OAS network users to fraudulent websites. Additionally, DOITS worked in conjunction with Information Security experts of the OAS member States (Argentina, Chile, Brazil and Venezuela among others) as part of the OAS Cyber security initiative lead by the Executive Secretariat of the Inter-American 20

21 Section I GS/OAS Improvements And Efficiencies Committee against Terrorism. As a result of this cooperative effort, DOITS was able to stop an attack directed to the OAS by a network of computer hosted in Latin America that sent more than 3000 attacks to OAS network on a single day. Software Quality Assurance Established the Project Status Integrated Report, which provides, within the department, internal visibility and sharing of the status of all projects under development. In addition, maintained up to date the Systems documentation repository, the roster of all pending applications requested by the areas, and the Inventory of all the applications installed in OAS. The OAS Software Development Framework (OAS-SDF) is being followed in various software development projects, and is continually adjusted with the feedback received by the IT staff. Project Leaders, Developers, Data Base Administrators and other roles involved in the software development process are receiving continuous training and assistance on the OAS-SDF. SAF/DOITS completed the Internal Audit Report of OASES Data Integrity test demanded in the OIG Audit Recommendation No 3 - SG/OIG/AUDIT-01/09 to fully confirm the integrity of the Award through Purchase Orders Expenditures processes in OASES. The Software Quality Assurance team worked with the Office of Procurement Services the Department of Financial and Administrative Management Services and end-users in the activity which resulted that no findings or defects were encountered. DEPARTMENT OF PLANNING AND EVALUATION (DPE) Mandates Management and Follow-Up During the second quarter of 2010, the DPE provided continuous technical support to the CAAP Working Group on Re-engineering as it analyzed alternatives to improve efficiencies and potentially reduce costs of the Organization. Part of this process included a new presentation of the Mandates Management Module, grouping the approximately 1,800 mandates into mandate groups. Planning and Follow/Up During the second quarter of 2010, the DPE received and processed an additional seven th Quarter Follow-up reports from various areas of the General Secretariat, bringing the total up to 65%. These reports update the level of achievement for every goal included in the area s operating plan. The DPE also assisted in the formulation of all 2011 operating plans, which included collecting information pertaining to Specific Funds; and published, distributed, and uploaded to the Intranet the 2010 Annual Operating Plan, in addition to collecting reports on the first quarter follow-up of this year from thirty-five (73%) areas. The DPE also began the formulation of the 2011 Proposed Program Budget to be presented to CAAP in July. Evaluation of Project Proposals The DPE, in its role as Technical Secretariat of the Project Evaluation Committee (PEC), continues to organize and facilitate meetings of the PEC Working Group and of the PEC. During this quarter, PEC has evaluated twenty four project proposals presented by the Secretariat of Multidimensional Security, the Secretariat of Political Affairs, the Secretariat of Integral Development, and the Inter-American Children s Institute. They are: 1. Sistematización de Prácticas Electorales Exitosas para la Organización del Día de la Elección (SPA1003) - Approved 2. Implementación de un Sistema de Gestión de Seguridad (ISO/IEC 27001) en la Corte Nacional Electoral (CNE) de Bolivia. (SPA1004) - Approved 3. BIDAL (Bienes Decomisados América Latina) - Fortalecimiento de los sistemas nacionales de investigación patrimonial, administración de bienes incautados y decomisados en América Latina. (SMS1004) - Approved 4. Foro Interamericano de Paz (SPA0915) - Approved 21

22 Section I GS/OAS Improvements And Efficiencies 5. Maritime Security Program (previously: Port Security Program) (SMS1003) - Approved 6. Program to Strengthen the Research Capacity of Health and Related Professionals on Drug Issues in Latin America (SMS1005) - Approved 7. Promoviendo municipios democráticos, inclusivos, eficientes y productivos. SPA0809-R2010 Approved 8. Curso Avanzado para Funcionarios de Gobierno Una Agenda Comercial para las Américas: El Programa de Doha para el Desarrollo y los Acuerdos de Comercio en el Hemisferio (SID0604-R10) - Approved 9. Critical Infrastructure Protection Tourism Security: Security for Major Events (SMS1009) - Approved 10. OAS Specialized National Workshops on Border Controls (SMS1011) - Approved 11. Aviation Security Program (SMS1013) - Approved 12. Critical Infrastructure Protection: Cyber Security Program (SMS1014) - Approved 13. Response to Emerging Terrorist Threats (Crisis Management) (SMS1015) - Approved 14. Critical Infrastructure Protection Tourism Security: Private and Public Partnerships (SMS1010) - Approved 15. Crimen, (In)seguridad Pública y Democracia en las Américas (SMS1016) - Approved 16. Plan de Asistencia Técnica para el Perú 2010 contra el Lavado de Activos y Financiamiento del Terrorismo (SMS1006) - Approved 17. Drug Treatment Training and Certification for Central America 2010 (SMS1007) - Approved 18. National Public Observatories in the Caribbean Region (SMS1008) - Approved 19. Metodología para la Observación del Financiamiento Político Electoral en las Misiones de Observación Electoral (MOEs) (SPA1006) - Approved 20. Operation and Management of the Regional Secretariat for Latin America and the Caribbean Region of the Renewable Energy and Efficiency Partnership (REEP) geared at promoting the creation and expansion of clean energy markets in the region (SID1003) - Approved 21. Proyecto de Desarrollo de Capacidades Institucionales para una Efectiva Protección de los Derechos Humanos de las Niñas, Niños y adolescentes de Haití (IIN1001) - Pending approval 22. Inter-American Program on Education for Democratic Values and Practices ( ) (SID1005) - Approved 23. Monitoring progress of the Environmental Cooperation Agenda in the DR-CAFTA countries (SID1004) - Approved 24. El Ciudadano y el Gobierno Electrónico en las Américas (SPA1005) - Approved Project Formulation and Follow-up The DPE has received and reviewed 32 proposals (profiles) and has continued advising other areas of the General Secretariat on using results-based project design methodology. DPE provided technical support for the formulation of 13 (thirteen) project documents presented by the Inter-American Commission of Women (CIM), the Secretariat for Political Affairs, Secretariat of Integral Development, Inter-American Court of Human Rights, and the Executive Secretariat of IACHR. Additionally, the DPE has received and reviewed 13 (thirteen) progress and final reports of projects executed since 2006 and funded by Spain. DPE has also prepared verification reports for those projects revised. Mid-Term Evaluation of Programs A medium-term evaluation of two projects that belong to PUICA (Civil Registries Strengthening Program) has been completed, and its preliminary results have been presented to the Department of State Modernization and Governance. The DPE is also coordinating a medium-term evaluation of six projects oriented to the Strengthening of the Inter-American Human Right System, executed by the Inter-American Human Rights Commission and the Inter-American Human Rights Court. These evaluations are carried out by external consultants and the final reports are to be delivered in July. During the second half of 2010, the DPE will coordinate the independent evaluations of two more programs/projects executed with resources from the Spanish Fund: a group of projects on Judicial Facilitators, in the secretariat for Legal Affairs, and a second group of projects on Electoral Technical Cooperation, in the Department of Electoral Cooperation and Observation. 22