RESOURCE MANAGEMENT. (d) Budget considerations for Note by the Secretary-General SUMMARY

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E COUNCIL 28th extraordinary session Agenda item 4(d) 23 October 2015 Original: ENGLISH RESOURCE MANAGEMENT (d) Budget considerations for 2015 Note by the Secretary-General SUMMARY Executive summary:

It has been assessed that, in the absence of any unforeseen expenditure, the expenditure outturn for 2015 will be contained within the approved appropriations of the regular budget and other

1 E COUNCIL 28th extraordinary session Agenda item 4(d) 23 October 2015 Original: ENGLISH RESOURCE MANAGEMENT (d) Budget considerations for 2015 Note by the Secretary-General SUMMARY Executive summary: This document updates the overview of the Organization's budget prospects for 2015 which was presented by the Secretary-General, in document C 114/4(e), to the Council's July session this year. It has been assessed that, in the absence of any unforeseen expenditure, the expenditure outturn for 2015 will be contained within the approved appropriations of the regular budget and other budgetary Funds. Strategic direction: 4 High-level action: Planned output: Action to be taken: Paragraph 20 Related documents: Resolution A.1063(28); C 114/4(e) and C 113/WP.2. Introduction 1 The Secretary-General's initial review of the Organization's budget prospects for 2015 was presented to the 114th session of the Council based on expenditure for the first three months of this year. This document presents an updated review of the budget performance and prospects on the basis of actual outturns for three quarters to 30 September It will be recalled that, by resolution A.1063(28), the Assembly, at its twenty-eighth session, approved a total appropriation for the regular budget for the current biennium of 64.3 million, representing 3.4% above that of the previous biennium of 62.2 million. In annual terms, an appropriation of million was set for 2014 on the basis of Zero Nominal Growth (ZNG), while the appropriation for 2015, of million, reflected Zero Real Growth (ZRG) of 2.9% on the 2014 appropriation. In addition, the Assembly also approved the budget for other budgetary Funds of the Organization, amounting to million for the biennium, representing a reduction of 3.4% on the last biennium's budget. However, the Council will recall

2 Page 2 that the budget of the Headquarters Capital Fund for 2015 was revised by C 113 (document C 113/WP.2 refers) to urgently launch the project to replace the sound and simultaneous interpretation systems in the Main Hall and in Committee Rooms 9 and 10. A summary of the appropriations approved under all Funds, including the regular budget, is displayed in table 1 below. Table 1 Appropriations for 2014 and Total Annual changes Annual changes Biennial changes Regular budget (i) 31, % 32, % 64, % Other Funds total (ii). Trading Fund 5, % 5, % 11, % Headquarters Capital Fund - A.1063(28) % % 1, % Revised Headquarters Capital Fund - C 113/WP % 2, % 3, % Termination Benefit Fund % % 1, % Training and Development Fund % % % Technical Cooperation Fund 5, % 4, % 10, % Total other Funds - A.1063(28) 12, % 12, % 25, % Revised Total other Funds - C 113/WP.2 12, % 14, % 27, % TOTAL (i+ii) 44, % 47, % 91, % Review of pay and price factors 3 The approved budget for the current biennium was based on the forecast movements of economic indices in the United Kingdom (UK) economy and currency fluctuations between the pound sterling and the United States (US) dollar. The actual in-year expenditure level reflects movements of the external pay and price factors in the UK economy and also in the salaries and allowance levels set by the International Civil Service Commission (ICSC) and approved by the General Assembly of the United Nations (UN). Table 2 below summarizes the latest available indices on the UK economy, published by the UK Government Office for National Statistics, and the actual movement of the UN operational rate of exchange since January 2014, while chart 1 illustrates the longer-term movement of those indicators. Table 2 Trends of economic indicators Assumption Jan May Oct Average Jan May Latest* UK Average Weekly Earnings (AWE) 1/ UK Average Retail Price Index (RPI) 2/ USD/GBP exchange rate 3/ / 12-month percentage changes of total pay measured monthly for average weekly earnings per job in the UK. The latest figure used here was for July / Annual inflation rate measured by 12-month percentage changes. The latest figure was for August / United Nations operational exchange rates (1GBP expressed in USD), the latest of which was for October * Source of AWE and RPI: UK Office for National Statistics (AWEand RPI are updated monthly) Actual The annual inflation rate measured in terms of Retail Price Index (RPI) was 1.1% in the month of August 2015, whilst the annual increase in total pay (i.e. including bonuses) measured by the Average Weekly Earnings (AWE) Index increased to 3.7% in July from a low of 1.1% in February this year. Meanwhile, the value of the pound sterling against the US dollar slid to $1.515 in October, from a high in July last year of $1.70, making an average for this year of $1.525 to 1.

Changes in RPI and AEI/AWE (%) Exchange rate ($/ ) Page 3 Chart 1 Movement of the budgetary assumption indicators (Jan. 2012 to Sept. 2015) 6.5 6.0 5.5 5.0 $/ Exchange 1.68 1.67 1.65 AWE 4.5 1.63 4.

7 0.7 1.48 0.0 0.1-0.5 J 2012M M J S NJ 2013M M - J S NJ 2014M M J S NJ 2015M M J S -1.0-1.5-1.4 1.70 $1.72 $1.70 $1.68 $1.66 $1.64 $1.62 $1.60 $1.58 $1.56 $1.54 $1.52 $1.50 $1.48 $1.46 $1.44 $1.

40 5 Given the current trends in pay and price factors in the UK economy, the following adjustments have been made against the budget: as reported to C 114, a new methodology for the General Service

3 Changes in RPI and AEI/AWE (%) Exchange rate ($/ ) Page 3 Chart 1 Movement of the budgetary assumption indicators (Jan to Sept. 2015) $/ Exchange AWE RPI J 2012M M J S NJ 2013M M - J S NJ 2014M M J S NJ 2015M M J S $1.72 $1.70 $1.68 $1.66 $1.64 $1.62 $1.60 $1.58 $1.56 $1.54 $1.52 $1.50 $1.48 $1.46 $1.44 $1.42 $ Given the current trends in pay and price factors in the UK economy, the following adjustments have been made against the budget: as reported to C 114, a new methodology for the General Service salary survey was introduced this year and the outcome of the survey provided a 3.5% increase in the base salary scale as of May The increased salary scale has been implemented since October this year, which is 1% above the assumptions made in the budget of 2.5%. The associated pensionable remuneration scale has been adjusted accordingly and the total retroactive costs for 8 months from May to December this year will be absorbed within the appropriations approved, without recourse to the Special Contingency Account; whilst the salary scales for the General Service category are established in pounds sterling, those for the Professional and higher categories are expressed in US dollars (base salary, post adjustment and pensionable remuneration) because of their comparators (i.e. the US federal government employees). In this context, a change in the post adjustment (cost-of-living allowance) for London was promulgated with a net effect of a 2.6% pay increase for staff in the Professional and higher categories from 1 February However, no change is expected for the time being for pensionable remuneration, in view of the continued freeze in post adjustment for New York, in order to lower the current net remuneration margin, between positions of the UN in New York and comparable positions of the US Federal civil service, to the midpoint (115) of the margin range of 110 to 120 approved by the UN General Assembly; and as the movement in the actual rate of exchange has been above or near to the budget rate, an accumulated exchange rate loss of 45,856 was made over the first three quarters of the year on the ring-fenced amounts for US dollar expenditure. Should the exchange rate remain at the average rate for the remainder of 2015, a total exchange rate loss of 52,400 would take place for the year, which would then be charged to the Working Capital Fund in accordance with resolution A.1039(27).

4 Page 4 Status of, and prospects for, the regular budget 6 The Council will note from table 3 below, which sets out the budgetary status as at 30 September 2015 and its forecast position for 2015 by expenditure group, that overall expenditure for this year is well contained and thus is expected to lead to expenditure savings of 2.53 million by the end of the year. The prospective saving is, above all, attributable to underspends in staff costs resulting from vacant posts which have taken much longer in filling than expected. As at 30 September 2015, a total of 289 work month savings have been achieved, comprising 100 and 188 work month savings for Professional and General Service staff, respectively (equivalent to 11 and 21 positions in each category). The recruitment process has nevertheless been accelerated with the aim to prioritize filling key vacant positions to avoid adverse effects in the delivery of the approved work programmes. Table 3 Forecast of the regular budget outturn by expenditure group as at 30 Sep Outturn () Objects of expenditure 2015 Appropriations () 21,535 Staff costs* 24,518 16,589 5,806 22,395 2,123 1,558 Other personnel** 1,922 1, , Official missions ,608 General operating expenses 5,090 3,405 1,505 4, Funds replenishment ,715 Total 32,618 21,397 8,689 30,086 2,532 * These reflect staff turnover of 300,000 for the 2015 budget ** This includes overtime, temporary assistance, consultancy and meetings personnel (interpreters and external translators) 7 Some other expected savings are: 2015 Expenditure ( '000) Forecast year-end Actual Forecast Total (Jan-Sep) (Oct-Dec) (Jan-Dec) balance the costs of other personnel (temporary assistance, overtime, consultancy and meetings personnel), partly due to the use of Junior Professional Officers (JPOs) and secondments, which totalled 11, as at 1 October 2015, generously provided by seven Member States, and partly due to the efficient use of meetings personnel; mission travel, due to increasing use of forward mission planning and video/tele-conferencing; and general operating expenses, largely emanating from savings in the maintenance of the Headquarters building and communications which are attributable to the shift to the "PaperSmart" production of documents, including for online administrative processes using Microsoft 'SharePoint' which was rolled out this year. 8 The provision for Funds replenishments will be used through transfers to the Headquarters Capital Fund ( 117,100) and the Termination Benefit Fund ( 662,900) when the cash status of the General Fund improves during the closing months of the year, following maturity of funds currently under longer-term investment. 9 The summary outturn in table 3 above is recast in table 4 below in terms of each Strategic Result, while chart 2 provides a comparison of expenditure for each Strategic Result with its associated budget. In this respect, at the end of the third quarter, overall expenditure stands at 66% of the budget, with three Strategic Results (SRs 1, 3 and 10) showing a budget execution rate of more than 80%.

5 Page 5 Table 4 Status of regular budget appropriation by Strategic Result as at 30 September 2015 Approved 2014 Expenditure Balance budget Strategic Results outturn 2015 Jan-Sep % () (a) (b) (b/a) c=a-b) 2,979 SR 1 Enhanced status as a primary international maritime forum 2,584 2,343 91% 241 2,370 SR 2 Enhanced global compliance and uniform implementation 2,994 1,728 58% 1,266 4,124 SR 3 Strengthened capacity-building 3,718 3,007 81% 711 7,320 SR 4 Enhanced governance, management and administration 7,703 5,482 71% 2,221 5,589 SR 5 Enhanced safety of human life at sea 7,714 4,777 62% 2, SR 6 Enhanced security of the maritime transport network % 599 2,378 SR 7 Reduced adverse impact on the environment 3,021 1,659 55% 1, SR 8 Ensured efficiency of shipping % SR 9 Increased attention to SIDS and LDCs % SR 10 Goal-based standards applied % 59 1,619 SR 11 Raised profile of the safety, security and environmental records of shipping 1, % 1, SR 12 Enhanced quality of shipping % SR 13 Enhanced environmental awareness % 188 Staff turnover (300) (300) 28,715 TOTAL 32,619 21,397 66% 11,222 Chart 2 Comparison of the expenditure with the approved budget for each Strategic Result 8,000 7,000 Budget (2015) Budget execution 160% 140% 6, % 5,000 4,000 3,000 2,000 1,000 91% 58% 81% 71% 62% Expenditure (Jan-Sep) 55% 53% 37% 55% 83% Budget execution % 39% 44% 60% 100% 80% 60% 40% 20% 0 SR 1 SR 2 SR 3 SR 4 SR 5 SR 6 SR 7 SR 8 SR 9 SR 10 SR 11 SR 12 SR 13 0% Status of the Organization's other Funds 10 The following paragraphs set out the status of the other Funds of the Organization, namely, the Trading Fund, the Headquarters Capital Fund, the Termination Benefit Fund, the Training and Development Fund and the Technical Cooperation Fund. Trading Fund 11 As at 30 September 2015, the income generated under the Trading Fund amounted to 9.33 million, which comprised publication and catering sales of 8.64 million and 0.43 million, respectively, as well as other miscellaneous income (freight and interest) amounting to 0.26 million, as set out in table 5 below. On the basis of income trends and some new editions such as the GMDSS Manual 2015; Ships Routeing 2015, FSS Code and Solid Bulk Cargoes (IMSBC), all of which are due to be on the market before the end of the year, overall income from publication sales is projected to reach million by the end of the year, exceeding the income target of million set for 2015 by 9% ( 0.92 million). Catering income is also expected to meet the income budget target owing to the customary Assembly functions.

6 Page 6 Table 5 Status of the Trading Fund as at 30 September Prospective status for 2015 () Outturn Statement Appropriation Actual Forecast Total (Jan-Sep) (Oct-Dec) (Jan-Dec) 10,801 Publication sales 10,506 8,641 2,788 11, Catering Interest earnings/ miscellaneous income ,723 Income (a) 11,505 9,327 3,143 12,470 1,532 Publishing personnel 1,731 1, ,499 2,283 Publishing operating expenses 2,506 1,291 1,080 2, Reimbursement/support costs ,311 Publication costs subtotal 4,787 2,639 1,734 4, Catering personnel Catering operating expenses Reimbursement/support costs ,205 Catering costs subtotal 1, ,291 5,516 Expenditure (b) 5,944 3,453 2,211 5,664 6,207 Net income for the year (c=a-b) 5,561 5, , In respect of Trading Fund expenditure, as in previous years, the publishing and catering services have been closely monitored with a view to achieving, wherever possible, maximum economies both in the operation of the services as well as in negotiations with external suppliers. Total expenditure is projected at 5.66 million for 2015, which represents 45% of total forecast income, resulting in an anticipated surplus of 6.81 million, as may be seen in table 5 above. The in-year surplus achieved in 2014 was 6.21 million and it was distributed as reported in document C 114/4(e). Headquarters Capital Fund 13 The overall budget delivery for 2015 under the Headquarters Capital Fund is projected to amount to 1.91 million by the end of the year, as shown in table 6 below. The work for the overall replacement of the sound and simultaneous interpretation system is being undertaken as planned and will be completed this year for the Main Hall, while the new system for Committee Rooms 9 and 10 is scheduled to be installed in the next year. Hence, some of the budget may need to be carried forward to 2016 in accordance with the Organization's Financial Regulations. Other capital investments for the year are generally on course and these include, in particular, an upgrade of the ICT infrastructure and of the Organization's SAP system and the replacement of obsolete servers. The SAP system is being refreshed with the latest technology and related development projects are underway, following the contracting of a new service provider in July Table 6 Status of the Headquarters Capital Fund as at 30 September Prospective status for 2015 () Outturn Expenditure statement Appropriation Actual Forecast Total (Jan-Sep) (Oct-Dec) (Jan-Dec) 76 Major building repairs 2, ,225 5 Equipment/furniture/vehicles IT/IS and SAP system Expenditure total 2, ,233 1,906 Termination Benefit Fund 14 The status of the Termination Benefit Fund as at 30 September 2015, which is given in table 7 below, indicates a full utilization of the approved budget for this year. The projection

7 Page 7 includes repatriation grants payable, in accordance with the Organization's Staff Regulations and Rules, for the staff separated this year. The amount shown under the after-service health insurance (ASHI) heading represents premium payments in respect of retirees' medical coverage only. This heading is expected to incur some overruns because of the considerable increase in the number of retirees on the scheme following separation from service in recent years. Table 7 Status of the Termination Benefit Fund as at 30 September Prospective status for 2015 () Outturn Expenditure statement Appropriation Actual Forecast Total (Jan-Sep) (Oct-Dec) (Jan-Dec) 260 Termination and repatriation After-service health insurance (ASHI) Replacement of long-term sick leave Expenditure total Training and Development Fund 15 Various training programmes in respect of performance improvement, human resource development and ICT proficiency have been arranged for staff with specialist training providers. The approved budget is expected to be fully utilized by the end of the year (table 8), due to higher demand in the training, in particular, for the roll-out of the SharePoint programme; ISO 9001:2008 Quality Assurance for Member State Audit/Internal Oversight; and external studies. Induction programmes will be carried out for translators during the closing month of the year to avoid disruption in the services for scheduled IMO meetings. Table 8 Status of the Training and Development Fund as at 30 September Prospective status for 2015 () Outturn Expenditure statement Appropriation Actual Forecast Total (Jan-Sep) (Oct-Dec) (Jan-Dec) 70 Performance/HR management Language training Induction programme Expenditure total Technical Cooperation Fund 16 Based on the delivery rate and commitments incurred during the first nine months of this year, it is forecast that overall expenditure for activities under the Organization's Integrated Technical Cooperation Programme (ITCP) in 2015 that are financed by the TC Fund, is to reach some 3.53 million, which is comparable to the actual outturn made in the last year.

8 Page Outturn Table 9 Status of the Technical Cooperation Fund as at 30 September 2015 Status of extra-budgetary programmes 17 As previously mentioned to the Council, extra-budgetary activities and resources are increasingly important in promoting the strategic objectives of the Organization as well as the successful implementation of IMO's technical instruments by Member States. The financial outturn under the various donor/trust Funds of the Organization stands at $5.2 million as at 30 September 2015, as may be noted from table 10 below, and is forecast, by the end of the year, to be in the region of $8.03 million. The low outturn in Africa is due to the completion of the Djibouti Code of Conduct Programme in the early part of this year, while the agreed scale down of the REMPEC programme this year affected the overall delivery in the Arab/Mediterranean region. Summary Programmed Region 2015 Prospective status for 2015 () Appropriation Actual Forecast Total (Jan-Sep) (Oct-Dec) (Jan-Dec) 807 Africa 1, Arab States/Mediterranean Asia Pacific Islands CIS/Eastern Europe Latin America Caribbean ,477 Global programmes 1, ,392 3,510 Expenditure total 4,841 1,663 1,869 3, Outturn US$'000 Table 10 Status of extra-budgetary programmes as at 30 September 2015 Programmed Region 2015 Prospective status for 2015 (US$'000) Budget* Actual Forecast Total US$'000 (Jan-Sep) (Oct-Dec) (Jan-Dec) 1,458 Africa 1, ,047 Arab States/Mediterranean Asia CIS/Eastern Europe ,302 Global programmes 9,894 3,969 2,267 6,236 10,197 Expenditure total 12,597 5,203 2,830 8,033 * The expenditure budget for 2015 is based on the Programme Implementation Documents (PIDs) formulated/revised by 30 September In light of the above review and in the absence of any unforeseen expenditure, the Secretary-General can confirm that the outturn expenditure for 2015 will be contained within the approved appropriations of the regular budget and other budgetary Funds. The actual and audited outturn for this year will be reported to the Council at its 116th session in On the basis of the review of the status of the regular budget for 2015, significant budget transfers between Strategic Results, as at 30 September 2015, do not appear to be necessary. Nevertheless, in order to be prepared for any eventualities, the Secretary-General seeks the Council's authorization, in accordance with the Organization's Financial Regulations and Financial Rules, to make, whenever necessary, timely transfers between Strategic Results to the extent that balances are available to cover or reduce deficits in each Strategic Result appropriation balance.

9 Page 9 Action requested of the Council 20 The Council is invited to:.1 note the review on external pay and price factors and their budgetary impacts (paragraphs 3 to 5, table 2 and chart 1);.2 note the forecast outturn of regular budget expenditure for 2015, assessed to be kept within the approved appropriation for 2015 (paragraphs 6 to 9, tables 3 and 4 and chart 2);.3 note the income and expenditure outturn and forecast in the Trading Fund (paragraphs 11 and 12 and table 5);.4 note the expenditure status of the Headquarters Capital Fund (paragraph 13 and table 6); the Termination Benefit Fund (paragraph 14 and table 7); the Training and Development Fund (paragraph 15 and table 8); the Technical Cooperation Fund (paragraph 16 and table 9); and extra-budgetary programmes (paragraph 17 and table 10); and.5 authorize the Secretary-General to make, as and when necessary, timely transfers between Strategic Results in the regular budget to the extent that balances are available to cover or reduce deficits in Strategic Results appropriation balances in accordance with the Organization's Financial Regulations and Financial Rules (paragraph 19).

INTEGRATED TECHNICAL COOPERATION PROGRAMME. Annual Report for 2015 Annex 2: Overview of financial resource delivery. Note by the Secretariat SUMMARY

E TECHNICAL COOPERATION COMMITTEE 66th session Agenda item 3 TC 66/3/Add.1 5 August 2016 Original: ENGLISH INTEGRATED TECHNICAL COOPERATION PROGRAMME Annual Report for 2015 Annex 2: Overview of financial