OUTLINE. Source: Article of the Financial Regulations

Transcription

1 U General Conference 33rd session, Paris C 20 July 2005 Original: English Item 10.3 of the provisional agenda FINANCIAL REPORT AND INTERIM FINANCIAL STATEMENTS RELATING TO THE ACCOUNTS OF UNESCO AS AT 31 DECEMBER 2004 FOR THE FINANCIAL PERIOD ENDING 31 DECEMBER 2005 OUTLINE Source: Article of the Financial Regulations Background: In accordance with this article, the interim financial report of the Director-General and supporting unaudited financial statements of UNESCO as at 31 December 2004 for the financial period ending 31 December 2005 are hereby transmitted to the General Conference, pursuant to Article 11.2 of the Financial Regulations. Purpose: The General Conference is invited to take note of this report and the supporting financial statements of UNESCO as at 31 December 2004 for the financial period ending 31 December Decision required: paragraph This document incorporates document DCO/135 annexed hereto containing the report of the Director-General and supporting unaudited financial statements of UNESCO as at 31 December 2004 for the financial period ending 31 December The document is also being submitted to the Executive Board at its 172nd session for examination and the decision and observations, if any, of the Board will be reported to the General Conference as an addendum to this document.

2 page 2 3. The Director-General would draw the attention of Member States to his decision on the use of the unspent balance of unliquidated obligations for the biennium to liquidate other outstanding legal obligations of the Organization relating to periods prior to 1 January 2004 as explained in Note 5(ii)(c) to the Financial Statements. 4. The General Conference is invited to take note of this report and these financial statements. It may wish, therefore, to adopt a resolution along the following lines: The General Conference, 1. Having examined document, 2. Approves the Director-General s decision on the use of the unspent balance of unliquidated obligations to liquidate other outstanding legal obligations of the Organization as explained in Note 5(ii)(c) to the Financial Statements; 3. Notes the financial report of the Director-General together with the interim financial statements of UNESCO as at 31 December 2004 for the financial period ending 31 December 2005.

3 Annex ANNEX DCO/135 PARIS, 20 June 2005 Original: English UNITED NATIONS EDUCATIONAL, SCIENTIFIC AND CULTURAL ORGANIZATION FINANCIAL REPORT AND INTERIM FINANCIAL STATEMENTS OF UNESCO AS AT 31 DECEMBER 2004 FOR THE FINANCIAL PERIOD ENDING 31 DECEMBER 2005

4 Annex page 3 CONTENTS 1. REPORT OF THE DIRECTOR-GENERAL ON THE INTERIM ACCOUNTS OF UNESCO AS AT 31 DECEMBER 2004 FOR THE FINANCIAL PERIOD ENDING 31 DECEMBER STATEMENTS Statement I Statement II Statement IV Statement of Income and Expenditure and Changes in Reserves and Fund Balances as at 31 December 2004 for the financial period ending 31 December 2005 Statement of Assets, Liabilities and Reserves and Fund Balances as at 31 December 2004 Status of Appropriations of the General Fund Regular and Participation Programmes as at 31 December 2004 for the financial period ending 31 December NOTES TO THE FINANCIAL STATEMENTS 4. SCHEDULES Schedules of Income and Expenditure and Changes in Reserves and Fund Balances as at 31 December 2004 for the financial period ending 31 December 2005 for the following funds: Schedule 1.1 Schedule 1.2 Schedule Schedule Schedule Schedule 1.3 Schedule Schedule Schedule 1.4 General Fund (GEF) Other Proprietary Funds (OPF) Other Proprietary Funds (OPF) Revenue Generating Activities Other Proprietary Funds (OPF) Support Costs Other Proprietary Funds (OPF) Staff Related Accounts Programme Fiduciary Funds (PFF) Special Accounts for Institutes Other Special Accounts and Trust Funds Staff Fiduciary Funds (SFF) Schedules of Assets, Liabilities and Reserves and Fund Balances as at 31 December 2004 for the following funds: Schedule 2.1 Schedule 2.2 Schedule Schedule General and Working Capital Funds Other Proprietary Funds Other Proprietary Funds Revenue Generating Activities Other Proprietary Funds (OPF) Support Costs

5 Annex page 4 Schedule Schedule 2.3 Schedule Schedule 2.4 Other Proprietary Funds (OPF) Staff Related Accounts Programme Fiduciary Funds Special Accounts for Institutes Staff Fiduciary Funds

6 Introduction Annex page 5 FINANCIAL REPORT OF THE DIRECTOR-GENERAL ON THE INTERIM ACCOUNTS OF UNESCO AS AT 31 DECEMBER 2004 FOR THE FINANCIAL PERIOD ENDING 31 DECEMBER 2005 In accordance with the provisions of Financial Regulation 11.2, the Director-General presents herewith his financial report on the unaudited interim financial statements of UNESCO for the year ended 31 December Programme expenditure The table below provides an overview of programme expenditure at the end of the first year of the biennium with comparative figures for the equivalent period in the previous biennium. Expenditure relating to Staff Fiduciary Funds is excluded $ 000s % $ 000s % General Fund 284, , Other Proprietary Funds 32, , Total, Proprietary Funds (1) 317, , Programme Fiduciary Funds (2) 317, , Total, (1) + (2) 635, , Eliminations (3) (26,964) (4.4) (32,758) (6.2) TOTAL ( ) 608, , The main variations are: General Fund $30.1 million +12% Other Proprietary Funds $(2.9) million -8% Programme Fiduciary Funds $53.0 million +20%

7 Annex page 6 Renovation of Headquarters Fontenoy site (The Belmont Plan phase 2) Work on this major project started in the spring of 2004 and will continue until At the end of the year, the first instalment drawn down from the interest-free euro loan granted by the Caisse des Depots et Consignations of million, equivalent to constant $9.2 million, has been received and spent. The renovation costs are reflected in the balance sheet as additions to Land and Buildings since they enhance the overall value of the Headquarters property. The full cost of $91 million (K 79,875 constant rate), equivalent to the amount of the loan, will be provided for in future budgets based on the repayment schedule which starts in 2006 and finishes eight biennia later in 2021 (refer 32 C/Resolution 74). No costs therefore relating to the Headquarters Renovation have been included in these 2004 Interim Financial Statements. Unliquidated obligations Unliquidated obligations have been a cause for concern in the past resulting in a series of recommendations made by both the External Auditor and Internal Oversight. The Organization has taken account of the recommendations made and the rules have now been reviewed and procedures revisited which have resulted in increased awareness throughout the Organization of the need to monitor levels on an ongoing basis and accurately reflect only valid obligations at the end of each financial period. This is a continuous process involving both Sector Administration Officers and the Comptroller s Office. An amount of $5.2 million has been recorded at the end of 2004 as the unspent balance, representing 0.8% of the regular programme budget. Headquarters account for 55% of the unspent balance and field offices for the remaining 45%. In line with past practice, a request is made for the approval of the Executive Board to utilize $2.7 million to meet past legal obligations. Finance and Budget System (FABS) Following the deployment of the FM module (funds reservation) to all field units in , the FI module (accounting/expenditure registration) has been successfully rolled out to 13 field offices during the year and the project will continue until 2007 bringing more offices online and providing even greater use in future through access to additional modules within the system. In addition, an ambitious project enabling UNESCO institutes and centres to benefit from the use of FABS is also in progress. If the Organization is to reap the maximum benefits from FABS it must be made available to as many users as possible. Through controlled use and adequate training these users will be able to get the most out of the system and even improve it over time. Liabilities for employee benefits Like several agencies within the United Nations system the Organization has a contractual obligation with employees, both current and past, which is not provided for as a liability in the accounts. The liability, amounting to $355 million at end 2003, relates mainly to after service medical care but also includes accrued annual leave and terminal and repatriation grant entitlements. In line with past practice and as accepted under United Nations System Accounting Standards this item is treated as a note to the Financial Statements. However, International Accounting Standards

8 Annex page 7 require that these items be provided for as a liability in the balance sheet and prudent management would also favour the direct funding, over time, of this amount. As indicated on previous occasions this subject will be addressed by the United Nations Accounting Standards Development Project once it has completed its study. Currency fluctuation The exchange differences arising from recording Member States contributions and expenditure incurred during the financial period in euros at varying operational rates of exchange as compared with the constant rate (used to calculate the budget) have been recorded as gains or losses on exchange. Throughout 2004, the constant rate of exchange between the dollar and the euro was higher than the monthly operational rates. Consequently, gains were registered on contributions received and losses on payments made. As at 31 December 2004, UNESCO had received 44.5% of the contributions assessed for the biennium and paid 43.9% of the total appropriation. The net balance resulting from all gains and losses on exchange under the General Fund at the end of 2004 equalled $0.7 million. The balance as at the end of the biennium will be added to or deducted from Miscellaneous Income. Contributions and cash flow General Fund In 2004, receipts of contributions in respect of that year amounted to $271.3 million against an assessed total of $ million, which represents 88.95% of the total receivable during the year ( %). Total receipts of contributions (2004 and previous years) received in 2004 amounted to $298.5 million (2002 $269.8 million) and represented 97.81% ( %) of the total amount assessed on Member States in respect of the year. The cash position of the Organization based on the total resources of the General Fund with and without the Working Capital Fund as at the end of each month for 2004 is shown graphically as follows, in millions of United States dollars: JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Cash position Combined with WCF

9 Annex page 8 The peak amounts in April through June are due to the receipt of large contributions in those months, whereas payments are more evenly spread throughout the year. As at 31 December 2004, the cash balance of the General Fund at Headquarters amounted to $25.1 million of which $28.0 million is related to the Working Capital Fund. An amount of $6.6 million was held in field office imprest bank accounts. Investments Further to a recommendation made by the External Auditors, the UNESCO Investment Committee was established at the end of During its three meetings in 2004 the Committee reviewed and updated the Investment Policy of the Organization. This policy is now applied to all units of the Organization making investments.

10 STATEMENT I UNESCO STATEMENT OF INCOME AND EXPENDITURE AND CHANGES IN RESERVES AND FUND BALANCES AS AT 31 DECEMBER 2004 FOR THE FINANCIAL PERIOD ENDING 31 DECEMBER 2005 (Expressed in '000s US dollars) General Fund (Regular programme) PROPRIETARY FUNDS Other Proprietary Funds Total Proprietary Funds PROGRAMME FIDUCIARY FUNDS Programme Fiduciary Funds Staff Fiduciary Funds "GEF" "OPF" "PFF" "SFF" Inter-fund Eliminations Total Managed Funds (Schedule) (1.1) (1.2) (1.3) (1.4) INCOME Assessed contributions Voluntary contributions Revenue producing activities Funds received under inter-organization arrangements Allocations from other funds (regular programme) (23 782) Income for services rendered (11 084) Investment income Currency exchange adjustments (3 600) Other income TOTAL INCOME (34 866) EXPENDITURE (34 866) TOTAL EXPENDITURE (34 866) EXCESS (SHORTFALL) OF INCOME OVER EXPENDITURE (2 178) Increase in lands and buildings (988) (988) 101 (988) 101 Distribution to members of USLS (14 015) (14 015) (18 553) Other adjustments to reserves and fund balances (1 666) 932 (734) Reserves and fund balances, beginning of period RESERVES AND FUND BALANCES, END OF PERIOD The accompanying notes and schedules are an integral part of the financial statements. Annex page 9

11 UNESCO STATEMENT OF ASSETS, LIABILITIES AND RESERVES AND FUND BALANCES AS AT 31 DECEMBER 2004 (Expressed in '000s US dollars) General Fund (regular programme) Statement ll PROPRIETARY FUNDS Other Total Programme Staff Total Proprietary Inter-fund Proprietary Funds Fiduciary Fiduciary Inter-fund Managed Funds Funds Eliminations Funds Funds Eliminations "GEF" "OPF" "PFF" "SFF" (Schedule) (2.1) (2.2) (2.3) (2.4) ASSETS Cash and term deposits (Note 6) Investments (Note 7) Accounts receivable Assessed contributions receivable from Member States (Note 8) Inter-fund balances (27 443) (7 276) Other (Note 9) Other assets (Note 10) Land and buildings (Note 11) Annex page 10 TOTAL ASSETS (27 443) (7 276) LIABILITIES Payments or contributions received in advance Loan for Headquarters building renovation (Note 11) Loan for IBE building (Note 11) Unliquidated obligations Accounts payable Inter-fund balances (27 443) (2 022) (7 276) Other Members' deposits Other liabilities TOTAL LIABILITIES (27 443) (7 276) RESERVES AND FUND BALANCES Working Capital Fund Capital funds relating to land and buildings Currency Equalization Reserve (Note 11) (1 644) (1 644) (1 644) Operating reserves (Note 5) Balances relating to projects funded by donors Budgetary surpluses (Note 4) Interim balance of income and expenditure Other surpluses (Note 5) TOTAL RESERVES AND FUND BALANCES TOTAL LIABILITIES, RESERVES AND FUND BALANCES (27 443) (7 276)

12 Annex page 11 UNESCO GENERAL FUND STATUS OF APPROPRIATIONS REGULAR AND PARTICIPATION PROGRAMMES AS AT 31 DECEMBER 2004 FOR THE FINANCIAL PERIOD ENDING 31 DECEMBER 2004 (Expressed in '000s US dollars) STATEMENT IV Appropriation line 32 C/5 Approved Carryover funds Authorized Transfers Additional Appropriations 32 C/5 Approved as Adjusted Expenditure Disbursement ULOs/UDOs Total PART I GENERAL POLICY AND DIRECTION $ $ $ $ $ $ $ $ A. Governing bodies 1. General Conference 2. Executive Board Total, Part I.A B. Direction (40) (Including: Directorate; Office of the Director-General; Internal Oversight; International Standards and Legal Affairs) C. Participation in the Joint Machinery of the United Nations System PART II PROGRAMMES AND PROGRAMME RELATED SERVICES TOTAL, PART I A. Programmes Major Programme I - Education Major Programme II - Natural sciences Major Programme III - Social and human sciences Major Programme IV - Culture Major Programme V - Communication and information UNESCO Institute for Statistics Field - Management of decentralized programmes (925) Total, Part II.A (73) B. Participation Programme C. Programme Related Services 1. Coordination of action to benefit Africa 2. Fellowships Programme 3. Public information 4. Strategic planning and programming monitoring 5. Budget preparation and monitoring Total, Part II.C PART III SUPPORT FOR PROGRAMME EXECUTION AND ADMINISTRATION TOTAL, PART II A. Field management and coordination B. External relations and cooperation C. Human resources management D. Administration, maintenance and renovation of Headquarters premises (108) TOTAL, PART III TOTAL, PARTS I- III Reserve for reclassifications PART IV ANTICIPATED COST INCREASES TOTAL (3 340)

13 Annex page 12 UNESCO NOTES TO THE FINANCIAL STATEMENTS 1. OBJECTIVES (Purpose, mandate and governance of the Organization) (a) The United Nations Educational, Scientific and Cultural Organization (UNESCO) was created in London on 16 November 1945 by Governments of the States Parties to contribute to peace and security by promoting collaboration among the nations through education, science and culture in order to further universal respect for justice, for the rule of law and for human rights and fundamental freedoms which are affirmed for the peoples of the world, without distinction of race, sex, language or religion, by the Charter of the United Nations Organization. As one of the Specialized Agencies referred to in Article 57 of the Charter of the United Nations Organization, the provisions of Articles 104 and 105 of that Charter concerning the legal status of that Organization, its privileges and immunities, apply in the same way to UNESCO. (b) UNESCO is governed by a General Conference, consisting of the representatives of its Member States, which determines the policies and main lines of work of the Organization. The Executive Board, which consists of 58 Member States elected by the General Conference, takes, in accordance with the decisions of the General Conference, all necessary measures to ensure the effective and rational execution of the programme by the Director-General. 2. SIGNIFICANT ACCOUNTING POLICIES Introduction The financial statements have been prepared in accordance with the provisions of UNESCO s Financial Regulations and with stated accounting policies as described below. These accounting policies conform to the United Nations System Accounting Standards which provide a framework for accounting and financial reporting in the United Nations System. The financial period of UNESCO is a biennium and consists of two consecutive calendar years, beginning with an even-numbered year. The financial statements are presented in thousands ( 000s/K) of United States dollars ($). (a) Financial Statement presentation In conformity with the framework for financial reporting in the United Nations System, the financial statements are prepared on a combined basis, which includes the accounts of all the funds managed by UNESCO with a sub-grouping for UNESCO Proprietary Funds (GEF and OPF), on which the Statement of Cash Flow is presented at the end of each financial period, followed by Programme Fiduciary Funds (PFF) and Staff Fiduciary Funds (SFF). Elimination columns show adjustments for inter-fund transfers and balances. Managed Funds are disclosed in the following business areas: (1) General Fund (GEF) includes both the General and Working Capital Funds set up in accordance with Financial Regulations 6.1 and 6.2.

14 Annex page 13 (2) Other Proprietary Funds (OPF) include Revenue-Generating Activities, Programme Support Costs for Special Accounts and Trust Funds, the Staff Compensation Fund, the Terminal Payments Fund, the Staff Housing Loan and the Headquarters Special Accounts for new management and monitoring instruments (FABS) and building renovations. The United Kingdom and United States Special Funds are also included under this grouping. These funds are used to carry out the programmes, or to group other authorized expenditure, of UNESCO. The residual right of ownership of all of these funds is ultimately vested in Member States. The Funds have been established in accordance with Financial Regulation 6.6 and normally have individual special financial regulations. (3) Programme Fiduciary Funds (PFF) include Institutes, Special Accounts and Trust Funds set up in accordance with Financial Regulation 6.6. They are used to carry out extra-budgetary programme activities in accordance with the respective agreements signed between UNESCO and the related parties or other legal authority. As of 1 January 2004 a new institute, UNESCO-IHE Institute for Water Education, has been included with PFF. (4) Staff Fiduciary Funds (SFF) are funds that have been established for the benefit of UNESCO s staff members, namely the Medical Benefits Fund, the UNESCO Staff Savings and Loans Services (USLS), UNESCO Commissary Fund (UCF) and the UNESCO Restaurant Service (URS) with the residual right of ownership totally or partially vested in staff or retired staff members. The resources of each fund in the Programme Fiduciary Funds and the Staff Fiduciary Funds can only be used for the purposes for which the respective fund has been established. (b) Income recognition Income from assessed contributions represents a legal obligation of Member States, which is recognized as income in the biennium in which it becomes due and payable. Member States are invoiced their contribution for the biennium in two equal annual instalments at the beginning of each year. No provision is made for delays in the collection of assessed contributions. Voluntary contributions are recognized when funds are received. Other sources of income are recorded on an accrual basis of accounting. (c) Expenditure recognition Expenditure includes amounts for goods supplied and services rendered in the financial period as well as amounts for legal obligations of the financial period. Expenditure is recorded on an accrual basis of accounting except for certain employee benefits. UNESCO employees are entitled to annual leave, termination and repatriation grant entitlements. The Organization also contributes an amount equal to the employees share of medical costs. The cost of these benefits is normally recognized as an expense in the financial period in which they are paid. However, a Terminal Payment Fund (TPF) reserve for repatriation grant and other post-termination entitlements is maintained by appropriate

15 Annex page 14 transfers from certain non-general Fund accounts for the benefit of staff financed by these accounts. Acquisitions of non-expendable equipment, including furniture, computers and other office equipment and motor vehicles as well as maintenance and repairs to buildings are charged to operations in the financial period in which the expenditure is contracted. A figure for non-expendable equipment (referred to as Inventories) is given in Note 13 of these Financial Statements. (d) Translation of currencies Transactions carried out during the period in currencies other than United States dollars, are translated to United States dollars using the United Nations operational rate of exchange at the date of the transaction. For budgetary purposes, General Fund expenditures (regular and Participation Programmes) in euros are translated to United States dollars using UNESCO constant budget rate. The difference between the translation at constant and operational rates of exchange is recorded as an exchange difference. Likewise, the differences between the constant budget rate and operational rates of exchange at which the assessed contributions of the General Fund are brought to account are also credited or debited to exchange difference. Any balance under the exchange difference account at the end of the biennium is added to or deducted from Miscellaneous Income. Monetary balances carried at fair value are converted using the United Nations rate of exchange at 1 January of the following year (2005). Non-monetary balances carried at historical cost are converted using the appropriate United Nations rate of exchange at the date of the transaction. (e) Land and buildings Land and buildings are carried at historical purchase cost except for donated properties where land is shown at nominal valuation and structures at insurance valuation as of the balance sheet date. Major construction and renovations in progress are recorded at cost, which includes material, direct labour and related overhead. No provision is made for depreciation since the cost is charged to expenditure as approved by the General Conference. (f) Pension fund participation UNESCO is a member organization participating in the United Nations Joint Staff Pension Fund (UNJSPF) which was established by the United Nations General Assembly to provide retirement, death, disability and related benefits. The Pension Fund is a defined benefit plan. The financial obligation of the Organization to the UNJSPF consists of its mandated contribution at the rate established by the United Nations General Assembly together with any share of any actuarial deficiency payments under Article 26 of the Regulations of the Fund. Such deficiency payments are only payable if and when the United Nations General Assembly has invoked the provision of Article 26, following determination that there is a requirement

16 Annex page 15 for deficiency payments based on an assessment of the actuarial sufficiency of the Fund as of the valuation date. At the time of this report the United Nations General Assembly has not invoked this provision. (g) Investments Investments are recorded at cost adjusted for amortization of premiums or discounts to maturity or market value, if significant. 3. FUNDS (a) General Fund A General Fund has been established for the purpose of accounting for the expenditure of the Regular Programme appropriation voted by the General Conference of UNESCO for a given financial period. It is financed from assessed contributions from Member States. Appropriations, which are voted by the General Conference, are available for obligation during the financial period to which they relate and for a further twelve months to the extent they are required to discharge obligations incurred during that financial period. In addition to the appropriations voted by the General Conference, the Director-General is authorized by Financial Regulation 7.3 to accept voluntary contributions, gifts, bequests and subventions. Such receipts are shown as Voluntary contributions in Statement I and as Additional Appropriations in Statement IV. Furthermore, as authorized by the General Conference, the carry forward of unspent balance from the previous biennium is identified separately in Schedule 1.1 and Statement IV. (b) Working Capital Fund A Working Capital Fund has been established in an amount and for purposes to be determined from time to time by the General Conference. It is financed by advances from Member States made in accordance with the scale of assessments as determined by the General Conference. By 32 C/Resolution 68, the authorized level of the fund was established to K$28,000 as of 1 January 2004 ( K$25,000). (c) Trust Funds, Reserve and Special Accounts Trust Funds, Reserve and Special Accounts are established by the Director-General and are reported to the Executive Board. They are administered in accordance with the Financial Regulations of UNESCO unless otherwise provided. Trust Funds and Special Accounts are financed principally by voluntary donations. They are organized in three groups, namely, Institutes, Self-Benefiting Trust Fund-Brazil and Other. Details of Other, their sources of income and the projects they support are detailed in Schedule INCREASE/DECREASE IN BUDGETARY SURPLUSES Budgetary surpluses for a financial period, after deducting therefrom any contributions of Member States relating to that financial period which remain unpaid, shall, in accordance with Financial

17 Annex page 16 Regulations 4.3 and 4.4, unless otherwise determined by the General Conference, be apportioned among Member States in proportion to their assessed contributions for that financial period and surrendered to each Member State once its contribution for that financial period has been paid in full. The balance of budgetary surplus is summarized as follows: Unapportioned surpluses relating to the budgets of previous financial periods: $ 000s Not yet available for apportionment 1,958 1,958 Available for apportionment 18 - Subtotal Surpluses apportioned but not surrendered 1,976 5,279 1,958 5,279 Total (Statement ll) 7,255 7,237 However, in accordance with 31 C/Resolution 53 III the existing experimental scheme to encourage prompt payment of contributions should be continued for a further six-year period. Consequently, the amount of K$18 available for apportionment shall be included in the balance available for distribution under that scheme. 5. OPERATING RESERVES AND OTHER SURPLUSES (i) Operating reserves Operating reserves have been created within the legislative authority of certain funds as is deemed to be required for the purpose of sound administration or legal obligation and are summarized as follows: $ 000s Staff savings reserves (USLS) 23,322 19,467 Currency fluctuation reserves (PILRF) Administrative reserves 17,819 9,514 Total 41,272 29,860 (ii) (a) Other surpluses Other surpluses consist of the budget surplus of the regular programme for the current biennium to which is added (or deducted if negative) the net amount of all miscellaneous income earned for the biennium after taking into account currency exchange adjustments. Included also are other General Fund surpluses, surpluses on other proprietary funds and surpluses on fiduciary funds. Apart from surpluses of the regular programme and certain other funds, to which special rules apply, surpluses can be carried forward from one financial period to the next.

18 Annex page 17 (b) Other surpluses are summarized as follows: Regular programme $ 000s Available for the positive incentive scheme 5, Unspent balance of provision for unliquidated obligations 2, Adjustment budget surplus available for apportionment (18) - Total regular programme 7,472 1,517 Other General Fund (Schedule 2.1) 2,110 8,287 Total General and Working Capital Fund (Schedule 2.1) 9,582 9,804 Other funds (Schedules 2.2, 2.3, and 2.4) 89,339 76,526 Total (Statement II) 98,921 86,330 (c) At the close of the 2002/2003 financial period, a provision of K$25,115 was set up to cover the unliquidated obligations of the Regular and Participation Programmes at that date. Those unliquidated obligations remained available for 12 months up to 31 December 2004 to the extent that they were required to discharge obligations against goods and services rendered in the financial period and to liquidate any other outstanding legal obligations of that financial period. It is proposed that the unspent balance of these unliquidated obligations be used to cover the following outstanding items: $ 000s Unspent balance 5,259 1,247 (i) Courier sub-account deficit on foreclosure 1,871 (ii) Field offices over expenditure (iii) Headquarters regularization of commitments arising from cancellation of unliquidated obligations in the biennium 22 (iv) Liquidation of lawsuit additional costs 52 (v) Stock of photocopy paper uncleared since (vi) Unrecoverable accounts receivable 98 (vii) UIE deficit 31 December (viii) Salary adjustments on overtime social charges 257 Subtotal 2, Total 2,

19 Annex page CASH AND TERM DEPOSITS The table below shows that of the total amount of K$839,046 (2002 K$678,870), K$64,131 (2002 K$79,640) is available under Proprietary Funds and the remaining balances are held by UNESCO in a fiduciary capacity $ 000 Regular Programme (GEF) 31,673 34,135 Other Proprietary Funds (OPF) 32,458 45,505 Total Proprietary Funds 64,131 79,640 Programme Fiduciary Funds (PFF) Staff Fiduciary Funds (SFF) 348, , , ,362 Total (Statement ll) 839, ,870 The term deposits are held with international banks which are assigned deposit ceilings in line with their ratings and in accordance with the investment policy. 7. INVESTMENTS Investments, all of which are held in a fiduciary capacity, are summarized as follows: $ 000s $ 000s Carrying value Market value Carrying value Market value Short-term money market funds and shares 6,741 7,088 5,511 5,623 Bonds 133, , , ,526 Total (Statement II) 140, , , ,149 Within Staff Fiduciary Funds (SFF), the UNESCO Staff Savings and Loan Service (USLS) portfolio managers are authorized within defined limits to buy and sell futures contracts which complement the bond investment strategy by covering firm investment positions and generating additional income. All such contracts are traded on organized markets and valued at official settlement prices. As at 31 December 2004, the fair market value of futures contracts owned by USLS was K 2,897 (K$3,931) (2002, Nil). The futures are off-balance sheet amounts and consequently, the underlying values are not included in the Financial Statements.

20 8. ASSESSED CONTRIBUTIONS RECEIVABLE FROM MEMBER STATES Annex page 19 A detailed listing of assessed contributions for the General Fund is not provided since this is included in separate documents submitted to the governing bodies of UNESCO. The balance of assessed contributions receivable, including those denominated in euros translated at the approved budget rate (0.869), is summarized as follows: Contributions due for prior financial periods and receivable as at 1 January 2004 Current financial period Prior financial periods Arrears payable Total in annual instalments 2004/5 2002/3 $ 000s 52,131 40,066 92,197 73,826 Contributions assessed , , , , , ,000 52,131 40, , ,213 Less -: Paid and other credits ,302 19,915 7, , ,829 Total General Fund 33, ,000 32,216 32, , ,384 Working Capital Fund Total 33, ,000 32,216 32, , , ACCOUNTS RECEIVABLE OTHER The balances of Accounts Receivable Other, which are shown net of any provisions established to cover the risk of non-payment of any sum which appears doubtful, are summarized as follows: $ 000s Staff loans 46,157 36,827 Interest receivable 6,156 6,158 Amounts receivable for goods and services 6,388 2,168 Value-added tax recoverable 1,745 2,865 Miscellaneous 8,040 5,571 Total (Statement II) 68,486 53,589

21 Annex page OTHER ASSETS $ 000s Field office payments held in suspense pending analysis 1,521 6,170 Stock on hand, at lower of cost or net realizable value 1,932 1,444 Project Imprest Accounts Deferred expenditure Value-Added Tax receivable Miscellaneous ,834 2,918 1, ,633 Total (Statement II) 7,957 15, LAND AND BUILDINGS $ 000s Headquarters premises, place de Fontenoy at cost 23,022 23,022 Plus Additions 8,711 Subtotal, Headquarters premises, place de Fontenoy 31,733 23,022 Headquarters Fifth Building, rue Miollis at cost 7,899 7,899 Headquarters Sixth Building, rue François Bonvin at cost 30,426 30,426 Headquarters Seventh Building, rue François Bonvin at cost 3,525 3,525 Industrialized Building, rue François Bonvin at cost Headquarters Apartment, place Vauban at cost 2,601 Building of the International Bureau of Education, Geneva at cost 4,615 4,615 Ocampo Villa, Buenos Aires Land, at nominal valuation of $1 and structures, at insurance valuation 1,800 2,700 Total 83,303 72,891

22 Annex page 21 (a) Headquarters buildings (additions and related loan) The land at place de Fontenoy is rented from the French Government at a nominal rent of 1.52 per annum and the land lease covers a period of 99 years starting with the year The land at rue Miollis and François Bonvin is rented from the French Government at a nominal rent of per annum and the land lease covers a period of 84 years starting from 1 January (i) Additions (The Belmont Plan) By 32 C/Resolution 74, the General Conference had authorized the Director-General to contract an interest-free loan of K 79,875 with a lender chosen by him in cooperation with the Government of France and to take into account the necessity of making provision in future budgets for the funds required for reimbursement of the sums borrowed. An agreement was signed on 23 March 2004 between UNESCO, the Caisse des Depots et Consignations (CDC) and the Government of France for the interest-free loan which would be drawn in five yearly instalments from 2004 to 2008 and repaid over eight biennia starting in The first instalment was received from CDC in April 2004 and renovation work based on the Belmont Plan immediately started. Total renovation expenditure incurred in 2004 financed from the loan funds amounted to K$8,711 which was capitalized at year-end and shown as additions to the brought forward balance of K$23,022 under the Headquarters Premises, Place de Fontenoy. (ii) Headquarters building renovation outstanding loan $ $ 000s First loan instalment April ,978 9,181 Exchange adjustment on revaluation 1,644 Balance at 31 December ,978 10,825 Due to the significant impact and the extraordinary nature of the renovation loan, the exchange difference arising from the revaluation of the loan balance at the close of the reporting period is disclosed under a Currency Equalization Reserve (CER) dedicated to the Renovation Loan. The exchange loss of K$1,644 from revaluation has therefore been reported in the Balance Sheet of the General Fund (GEF) as at 31 December (iii) Headquarters apartment By 32 C/Resolution 76, the General Conference approved the purchase of the apartment currently occupied by the Director-General under the conditions stated in the available offer for the use of UNESCO Directors-General and authorized the Executive Board to review and approve on its behalf the implementation of this purchase, including its funding from UNESCO s own cash balances. The Resolution states that the purchase will be amortized over 2 biennia starting in 2006 and 2007 and invites the Director-General to include in future budgets the necessary funds to cover such amortization. The purchase was concluded in May 2004 and the cost incurred in the entire acquisition of K$2,601 is disclosed in the above table.

23 Annex page 22 (b) IBE building (and related loan) (i) Building An agreement was signed on 31 July 1984 between UNESCO and FIPOI (Property Foundation for International Organizations) of Switzerland for the purchase of three floors of a building situated at 17 rue des Morillons, Geneva to house the International Bureau of Education. Further to an agreement signed between FIPOI and the Canton of Geneva on 16 October 1996, UNESCO s share of the costs of this building has been finalized at KCHF (thousands of Swiss Francs) 6,692 (K$4,615) and the IBE building has consequently been brought to account for this amount. This amount was financed partly by a donation of KCHF 2,255 by the Conseil d Etat of the Republic and Canton of Geneva and partly by loans from FIPOI for the balance of KCHF 4,437. Following a renegotiation of the repayment schedule in December 1997 it was agreed to fix the amount of the loan outstanding as of 1 January 1998 at KCHF 3,223 ($2,270) repayable in equal annual instalments of KCHF 133 from 1998 until 2021, with a final payment of KCHF 19 in Swiss francs $ 000s Balance at 1 January ,423 1,938 Loan repayment 2004 (134) (118) Exchange adjustment on revaluation 206 Balance at 31 December ,289 2,026 (c) Capital funds relating to land and building The net decrease of K$988 recorded in the capital funds relating to land and buildings as at 31 December 2004 is attributed directly to the following two factors: (i) IBE Loan Despite the annual repayment of KCHF 134 (K$118), the revaluation of the outstanding loan balance of KCHF 2,289 when applying the closing rate at year-end has resulted in an exchange loss of K$206. The net reduction in the capital reserve on the IBE loan is therefore K$88. (ii) Ocampo Villa, Buenos Aires Following damages sustained by a fire on the Ocampo Villa complex in 2003, the insurance value for all the existing structures was decreased by K$900 resulting in a revised value of K$1,800 as at 31 December Consequently, after taking into consideration the above two cases, the balance of the capital funds relating to land and buildings brought forward from the last biennium of K$70,953 has been reduced by K$988 to K$69,965 at 31 December 2004 (2002 K$71,052).

24 Annex page LIABILITIES FOR EMPLOYEE BENEFITS (a) Annual leave, termination and repatriation grants As stated in Note 2(c) on expenditure recognition, UNESCO does not normally recognize in its financial statements liabilities for accrued annual leave, termination and repatriation grant entitlements. Charges are recorded in the financial period in which they are paid. At 31 December 2004, UNESCO s total liability for these costs is estimated to be approximately K$38,000 (2002 K$35,000) of which an amount of K$5,448 (2002 K$5,146) has been accumulated as reserves in the Financial Statements. (b) After-service medical care Staff retiring from UNESCO, who have reached their fifty-fifth birthday and who have completed at least 10 years of participation in the Medical Benefits Fund as at the date of their separation, may opt to remain (indefinitely) in that Fund as an associate participant with UNESCO continuing to participate in the funding of their contributions. The Organization s policy is to undertake a detailed actuarial valuation at the end of each biennium in order to calculate the potential amount of after service medical care costs. As at 31 December 2003 the net present value of UNESCO s liability, which is not provided for in these Financial Statements, amounted to K$323,000 (2001 K$252,000). 13. INVENTORIES (Non-expendable equipment) Estimates of Inventories, excluding Works of Art, at Paris Headquarters, UNESCO Institutes and Offices away from Headquarters as at 31 December 2004 are as follows: $ 000s Paris Headquarters UNESCO institutes at valuation/original cost at valuation/original cost 5,073 11,841 Offices away from Headquarters at original cost 7, CURRENCY EXCHANGE ADJUSTMENTS The differences arising from recording expenditure and assessed contributions of the regular programme in euros at varying operational rates of exchange as compared with the constant rate were previously captured and separately identified in the currency clearing account. Since the biennium these differences are included as part of the overall exchange difference, calculated through application of the policy as defined in Note 2(d), and reported on the line currency exchange adjustments in Statement I. 15. COMPARATIVE FIGURES Comparative figures of the corresponding period of the previous biennium (2002) are given in the statements and schedules. These have been adjusted to mirror changes introduced in 2003.

25 SCHEDULE 1.1 UNESCO GENERAL FUND SCHEDULE OF INCOME AND EXPENDITURE AND CHANGES IN RESERVES AND FUND BALANCES AS AT 31 DECEMBER 2004 FOR THE FINANCIAL PERIOD ENDING 31 DECEMBER 2005 (Expressed in '000s US dollars) Annex page 24 Regular Programme Use of carryover funds 169 EX/FA/EG TOTAL INCOME Assessed contributions Member States Associate Member States Voluntary contributions Income for services rendered 29 Interest income Currency exchange adjustments Other TOTAL INCOME EXPENDITURE Expenditure TOTAL EXPENDITURE EXCESS OF INCOME OVER EXPENDITURE (1 389) Increase (decrease) in land and buildings (988) (988) 101 Other adjustments to reserves and fund balances (3 776) (1 666) 157 Reserves and fund balances, beginning of period RESERVES AND FUND BALANCES, END OF PERIOD

26 UNESCO OTHER PROPRIETARY FUNDS SCHEDULE OF INCOME AND EXPENDITURE AND CHANGES IN RESERVES AND FUND BALANCES AS AT 31 DECEMBER 2004 FOR THE FINANCIAL PERIOD ENDING 31 DECEMBER 2005 ( Expressed in '000s US dollars ) SCHEDULE 1.2 Revenue-generating activities (Schedule 1.2.1) Support costs (Schedule1.2.2) Staff-related accounts (Schedule 1.2.3) Renovation plan New management monitoring instruments United States special account United Kingdom special account TOTAL INCOME Voluntary contributions Revenue producing activities Allocations from other funds Income for services rendered Investment income Currency exchange adjustment 136 (2) 134 Other income TOTAL INCOME EXPENDITURE Expenditure TOTAL EXPENDITURE EXCESS (SHORTFALL) OF INCOME OVER EXPENDITURE (1 700) 347 (1 589) (1 564) (446) (2 178) (1 493) Saving on prior year obligations Other adjustments to reserves and fund balances Reserves and fund balances, beginning of period RESERVES AND FUND BALANCES, END OF PERIOD Annex page 25

27 INCOME UNESCO REVENUE GENERATING ACTIVITIES SCHEDULE OF INCOME AND EXPENDITURE AND CHANGES IN RESERVES AND FUND BALANCES AS AT 31 DECEMBER 2004 FOR THE FINANCIAL PERIOD ENDING 31 DECEMBER 2005 (Expressed in '000s US dollars) Public Information Liaison and Relations Fund Publications and Auditory and Visual Material Fund Utilization of Headquarters Fund Special Account for Documents/ Publications Services Special Account for Interpretation Services Special Account for Micrography TOTAL SCHEDULE Annex page 26 Allocation from other fund Revenue producing activities Sales and royalties Rental and charges from letting Investment income Currency exchange adjustment and other TOTAL INCOME EXPENDITURE Cost of goods sold Staff costs Other expenditure (15) TOTAL EXPENDITURE EXCESS (SHORTFALL) OF INCOME OVER EXPENDITURE (346) (91) Saving on prior year obligations 494 Other adjustments to reserves and fund balances (42) Reserves and fund balances, beginning of period (775) RESERVES AND FUND BALANCES, END OF PERIOD

28 UNESCO PROGRAMME SUPPORT COSTS FOR SPECIAL ACCOUNTS AND TRUST FUNDS SCHEDULE OF INCOME AND EXPENDITURE AND CHANGES IN RESERVES AND FUND BALANCES AS AT 31 DECEMBER 2004 FOR THE FINANCIAL PERIOD ENDING 31 DECEMBER 2005 (Expressed in '000s US dollars) SCHEDULE Funds-in-Trust Overhead Cost Account (FITOCA) Special Account for Administrative and Operational Services (UNDP-AOS) Technical support services at programme level (UNDP-SPPD) Technical support at project level (UNDP- STS) 2004 TOTAL 2002 INCOME Income for services rendered Programme support costs Investment income Other income TOTAL INCOME EXPENDITURE Staff costs Other expenditure TOTAL EXPENDITURE EXCESS (SHORTFALL) OF INCOME OVER EXPENDITURE (1 914) 331 (61) (56) (1 700) (1 305) Reserves and fund balances, beginning of period RESERVES AND FUND BALANCES, END OF PERIOD Annex page 27