PROGRESS REPORT BY THE DIRECTOR-GENERAL ON EXTRABUDGETARY RESOURCES AND ACTIVITIES SUMMARY

Original: French Executive Board Hundred and seventy-sixth session 176 EX/INF.9 PARIS, 11 April 2007 English & French only Item 43 of the provisional agenda PROGRESS REPORT BY THE DIRECTOR-GENERAL ON EXTRABUDGETARY RESOURCES AND ACTIVITIES SUMMARY This information document responds to the call in 166 EX/Decision 8.7 for information on UNESCO s extrabudgetary resources to be provided regularly to each Spring session of the Executive Board. The document also, as stipulated in paragraph 3 of document 176 EX/43, presents a further update on the steps taken on the implementation of the Director-General s Action Plan for improved management of UNESCO s extrabudgetary activities. A draft decision is proposed in paragraph 36 of the main report, document 176 EX/43.

176 EX/INF.9 I. MAIN TRENDS IN THE FUNDING AND ORIENTATION OF UNESCO S EXTRABUDGETARY ACTIVITIES IN 2006 1. As will be seen from the Annex reproducing table 7 of the Management Chart (176 EX/4 Part II) total allocations for approved extrabudgetary programmes and projects amounted to more than US $494 million during 2006. This represents yet another record in UNESCO s history, with extrabudgetary allocations thus corresponding to almost 62% of UNESCO s total resource base. The increase in allocations from the 2005 level of US $373 million stems largely from a very major increase in allocations under the self-benefiting funds-in-trust arrangements with Brazil. However, satisfactory increases were also recorded in the amount of donated funds-in-trust from bilateral Government sources, from the European Commission, and from a number of United Nations funds and programmes. Furthermore, it should be noted that an additional almost US $51 million was received from extrabudgetary funding sources directly by UNESCO s category 1 institutes, mainly stemming from bilateral Government donors and United Nations sources. 2. Fresh extrabudgetary contributions to UNESCO during 2006 totalled US $346 million, slightly below the 2005 level of US $351 million, mainly because of somewhat lower new contributions from some of the United Nations funds and programmes. Conversely, new donated funds from bilateral governments increased significantly during 2006. The two sets of statistics allocations/delivery versus fresh contributions cannot be compared directly, since the first group comprises extrabudgetary funds carried forward from previous years, whereas the second also reflects contributions received in UNESCO, but not yet allocated to approved programmes and projects. 3. Actual delivery of extrabudgetary activities under the 2006 allocations, US $361 million, represents a substantial increase over the 2005 level of US $282 million. However, the ratio between allocations and actual delivery fell to 73% in 2006 from the 75.8% recorded in 2005. There is therefore still room for improvement in UNESCO s planning and delivery capacity, so that available resources may be utilized to the maximum extent possible in the interest of Member States. 4. The overall substantive and regional distribution of the extrabudgetary activities, as presented in Tables 8 and 9 of the Management Chart, remained roughly similar to previous years, with a heavy substantive emphasis on education, and a heavy regional emphasis on Latin America and the Caribbean, due to the large self-benefiting arrangements with Brazil. Beyond these arrangements, it should be noted that interregional and global projects and programmes play the largest role in UNESCO s extrabudgetary portfolio. 5. As will be seen from the Annex, allocations under donated funds-in-trust from UNESCO s largest Government donors Italy and Japan showed a small decline during 2006 compared to 2005, but remained at a very high level, and very significantly above allocations pertaining to other Government donors. However, very satisfactory increases were noted for a number of other Government donors, notably Flanders, Norway, Spain and Sweden, as well as the emergence of a new donor, the Kingdom of Saudi Arabia, with a very large donation for the development of education in Palestine. It should also be kept in mind that the donor specific allocations are only listed in the Annex for funds-in-trust projects, and do not reflect contributions from the same Governments to multi-donor special accounts. Since a major part of the voluntary contributions for instance from Italy, Norway and Sweden are channelled to such special accounts notably in the form of institutional support to some of UNESCO s category 1 institutes the total contributions from these donors to UNESCO during 2006 are therefore considerably higher than listed in the Annex. 6. The self-benefiting funds-in-trust arrangements remained heavily dominated by the very large agreements with Brazil, but also as explained in Section III in document 176 EX/43 comprised a number of other arrangements, mainly focused on emerging economies.

176 EX/INF.9 page 2 7. The cooperation with the European Commission under voluntary contributions continues at a very satisfactory level, greatly facilitated by a United Nations system wide framework agreement on the administrative and financial aspects of the cooperation. Furthermore, UNESCO has enhanced its calls on key senior staff in the Commission, comprising both the substantive general directorates of direct interest to UNESCO s mandate, as well as EuropeAid and the general directorate for development cooperation. Although there is undoubtedly still a way to go to substantially enhance UNESCO s access to funding from the Commission, perspectives are promising. 8. While UNESCO s funding from traditional United Nations sources, notably UNDP and UNFPA, continues to decline, UNESCO remained also in 2006 one of the largest recipients of funding under the UNDG led multi donor trust fund for Iraq. Furthermore, UNESCO received considerable amounts of funding from other United Nations funds and programmes, notably the United Nations Fund for International Partnerships (UNFIP), UNAIDS and UNEP, as well as funds mainly for activities related to tsunami mitigation and prevention channelled by various donors through the International Secretariat for Disaster Reduction (ISDR). In general, the perspectives for enhancing UNESCO s access to United Nations funding sources must be deemed promising, with the emergence of several new funds, notably the Japanese financed United Nations Fund for Human Security, the Peace Building Fund, the Democracy Fund, the Central Emergency Response Fund, the United Nations Fund for South-South Cooperation, and a possible new United Nations fund on cooperation with civil society. Although the mandates of most of these funds do not relate directly to UNESCO s key competences, they are seen to hold major promise for UNESCO s emerging activities in conflict prevention, and post-conflict rehabilitation and peace building. It is also very positive for UNESCO that Spain, in its new international fund (to be administered by UNDP) for achievement of the Millennium Development Goals has decided to include a special window on culture and development. Finally, UNESCO is an active player in the UNDG inter-agency discussions on generic terms-of-reference for the mandates, operations, decision-making procedures and accountability for the several new country level multi-donor trust funds that are expected to be created in the coming years. 9. UNESCO s collaboration with the multilateral development banks continues to be rather limited in terms of actual funds transiting UNESCO. However, UNESCO entertains close and very constructive relations with the African Development Bank, focused on joint advocacy, analysis and programming, and also involving UNESCO staff providing targeted training to key staff of the Bank within themes of mutual interest to the two organizations. UNESCO is also deploying major efforts to step up its cooperation with the Inter-American Development Bank, and will field a mission in May, comprising all UNESCO s concerned field offices, to the Bank s headquarters with a view to discussing a concept note that may eventually lead to the definition of a joint work programme, and possibly also to the conclusion of a substantive cooperation agreement. Finally, recent months have seen a very positive development in the relations between the World Bank and UNESCO in the field of Education for All, notably in the context of enhancing UNESCO s role in the implementation of the Bank s Fast-Track Initiative. 10. Voluntary contributions from the private sector to UNESCO s activities continue to be very modest in cash terms and did in 2006 beyond the very large contribution from the Qatar Foundation in favour of higher education in Iraq amount to less than 1% of total allocations. While UNESCO s relations with the private sector in terms of mutual exchange of views and information, and joint advocacy, continue to evolve in a satisfactory manner, there is undoubtedly room for exploiting in a more proactive and targeted manner the very major funding potential from the private, including the corporate, sector.

176 EX/INF.9 page 3 II. FURTHER ELABORATION AND IMPLEMENTATION OF THE DIRECTOR-GENERAL S ACTION PLAN ON IMPROVED MANAGEMENT OF EXTRABUDGETARY ACTIVITIES 11. The Table on Delegation of Authority and Accountability (ToAA) on Extrabudgetary Activities, approved by the Director-General on 19 January 2007, was officially circulated with Administrative Circular 2285 dated 18 February 2007. The first meeting of UNESCO s revitalized working group on extrabudgetary activities has been scheduled for 10 April 2007 with the main purpose of taking stock of the various issues that are listed in the ToAA for further discussion and action, and agree on modalities and time schedule for the solving of the problems identified, and the eventual incorporation of the agreed solution in the further revisions of the ToAA. The working group will also, as mentioned in document 176 EX/43, act as a sounding board for the implementation of the ToAA, recording good and possible bad practices, with a view to making recommendations to the Director-General on adjustments to the Table as required. 12. Discussions are well advanced concerning the identification of external and internal experts that will undertake the necessary revision of UNESCO s Administrative Manual, and the Guide to UNESCO s extrabudgetary activities, so as to ensure full consistency with the main provisions of the approved ToAA on Extrabudgetary Activities. It is expected that the necessary revisions will be completed by the end of May 2007, and the resulting documents made available on the Intranet and in hard copy. Negotiations are also in progress with potential external consultants that will conceptualize the requisite training material on the implementation of the ToAA, and eventually translate it into IT-based self-learning tools for UNESCO staff. The training material will be prepared in modular form, and allow certification of UNESCO staff with regard to the various main components of the Action Plan and the ToAA, in order to enhance efficiency in the planning, financing and implementation of UNESCO s extrabudgetary activities. The first outlines of the training material will be presented to the global meeting of all UNESCO s senior managers at Headquarters and in the field at the end of May 2007. Upon finalization, the prototype training material will be tested and validated by its main users through a few pilot training courses, and subsequently made available on UNESCO s Intranet. The main components of the Action Plan and the ToAA will also be presented to the National Commissions during a series of capacity-building workshops planned throughout the year. 13. Beyond the Secretariat s own efforts to advance the implementation of the Action Plan on improved management of UNESCO s extrabudgetary activities, and the associated Table on Delegation of Authority and Accountability, a number of consultations have taken place with UNESCO s main partners in extrabudgetary cooperation, notably the major funding sources. 14. In this context, a consultation meeting took place on 22 March 2007 with the members of the Geneva group (consisting of the major contributors to UNESCO s regular programme and budget). The dialogue focused mainly on the timing and format for the eventual preparation of the additional programme of projected extrabudgetary activities foreseen in the Action Plan as the main basis for UNESCO s strategic plan for the mobilization of extrabudgetary resources. 15. In this context, the Secretariat notably recalled that the additional programme fully aligned with the strategic objectives and biennial sectoral priorities of draft documents 34 C/4 and C/5, and also reflecting national development plans of the beneficiary countries would be prepared in parallel with the further elaboration of these two documents, and be finalized when document 34 C/5 Approved has been translated into work plans for each of the Main Lines of Action. Based on this identification of unfunded needs of UNESCO s overall programme, collective consultations would take place with the donor community after the General Conference. The funding sources would be encouraged to extend their contributions under a programme approach, preferably towards the various Main Lines of Action in document 34 C/5, with as little earmarking as possible, and leaving the final prioritizing with regard to the individual activities to UNESCO. However, the funding sources would obviously also retain the possibility to indicate their general priorities in the context of the collective consultations, whereupon more detailed project proposals would be

176 EX/INF.9 page 4 elaborated by UNESCO for subsequent detailed consultations with the individual interested funding sources. 16. In order to ensure as much support as possible to this new approach to the programming and funding of UNESCO s extrabudgetary activities, a further series of consultations will take place in the coming months with all interested partners, both in Paris, and in interested capitals, providing more detailed explanations of the plans, and notably aimed at taking into account the views of the major actual and potential funding sources. In this context, the views of UNESCO s main partners would also be sought on the various basic documents relating to extrabudgetary cooperation with a view to arriving at a set of broadly accepted models so as to enhance streamlining of cooperation modalities. 17. Views were also exchanged with the members of the Geneva group on the plans, appreciated by the group, for the creation, as called for in 175 EX/Decision 36, of a permanent UNESCO forum for regular comprehensive consultations with the main funding sources. The composition of such a forum, as well as the timing and modalities for its meetings, would be reviewed as part of the forthcoming further consultations with UNESCO s main partners in extrabudgetary activities. 18. Consultations are also continuing with the other United Nations organizations in order for UNESCO to draw lessons from their policies and procedures regarding programming, funding and implementation of extrabudgetary activities. The most important event was a meeting on 2 and 3 April 2007 at UNESCO Headquarters, called at the initiative of UNESCO, to constitute an informal network of the key resource mobilizers of the major United Nations specialized agencies, FAO, ILO, UNESCO, UNIDO and WHO. 19. The discussions, judged very helpful by all, confirmed that all the main specialized agencies are facing the same challenges in terms of regular programmes and budgets with little or no growth, and rapidly growing extrabudgetary contributions that in most cases outweigh the regular resources. All the agencies are therefore in the process of taking steps that would enhance programming of projected extrabudgetary activities in full alignment with the regular programme and budget. They are also, in spite of an increasingly bilateralized cooperation environment, devising measures that would encourage the voluntary funding sources to provide their contributions under flexible modalities allowing the organizations to undertake the final prioritization. 20. In the above context, WHO has gone the furthest in the preparation of a fully integrated 2008-2009 draft programme and budget, comprising both core and projected extrabudgetary activities, and grouped within a limited number of strategic objectives. While the full programme would be funded both from assessed contributions, and traditional project based voluntary contributions, WHO is also consulting its main partners on the perspectives of achieving negotiated voluntary contributions to the core programme, extended under flexible multi-year partnership agreements. Regular reviews at WHO s senior management level throughout the biennium would allow a certain adjustment among the respective strategic objectives in light of the funding actually being made available from the various regular or voluntary sources. FAO continues to plan its extrabudgetary activities under a rolling project pipeline system, based mainly on contributions from its field offices as vetted by Headquarters, and undertakes proactive negotiations on this basis with its funding partners within specific targets. ILO has held its first collective donor consultations in September 2006 on the basis of consolidated field programmes on projected extrabudgetary activities in the context of its decent work agenda, and intends to make such consultations an annual event. ILO is also proposing to its forthcoming general conference the creation of a new regular budget supplementary account, which would receive voluntary contributions within a target of US $56 million, allowing soft substantive or regional earmarking if desired. Regular reporting, in the context of ILO s normal oversight mechanisms, would take place to the governing bodies and to the donors, with full recognition of the donors identity.

176 EX/INF.9 page 5 21. All the participating specialized agencies reconfirmed their commitment to the One United Nations reform effort, and notably their willingness to participate actively in these efforts in the eight pilot countries designated by UNDG. All did, however, indicate that they were proceeding with cautious optimism, emphasizing the need to respect the specific competences of the technical specialized agencies, and their role in providing sectoral and thematic advice, as well as capacitybuilding, at the country level. 22. Agreement was reached to maintain the informal network with the main aim of exchanging information on good and possible bad practices in the planning and implementation of extrabudgetary activities, and notably concerning relations with the various funding sources. Agreement was also reached to share the various basic documents governing extrabudgetary activities with a view to arriving at a greater degree of standardization among the agencies, and thereby reducing the transaction costs. Finally, the network confirmed the agreement among the Director-Generals of the specialized agencies to encourage their respective representatives at the country level to seek a closer cooperation, mainly through joint programming, and through joint demarches, both with regard to the host countries and the local donor community, and within the United Nations country teams. In light of further discussions and experience, the specialized agencies would also review the perspectives for updating, or concluding, strategic partnership agreements with each other. 23. The network meeting furthermore allowed a brief exchange of views on the respective policies and procedures for cost recovery and overhead costs for extrabudgetary contributions, and perspectives for achieving a larger degree of harmonization among the various United Nations institutions. In this context, the other specialized agencies expressed support to UNESCO s proposal to revive the United Nations inter-agency working group on cost recovery, chaired by UNESCO during 2002-2004. A first discussion to this effect would take place during the next meeting of the Finance and Budget Network under the United Nations High Level Committee on Management. 24. Beyond the above discussions with the other major specialized agencies, UNESCO has also pursued its discussions with the various United Nations funds and programmes on possible revisions of the existing cooperation agreements with a view to bringing them more into line with current circumstances, notably the One United Nations reform. In this context, UNESCO is exploring with UNDP the feasibility of a strategic partnership agreement. Furthermore, based on prior internal discussions within UNESCO, a draft of a new strategic partnership agreement was presented to the Executive Director of UNFPA during the Director-General s visit to New York in late February 2007. Exploratory talks were also held with key senior staff of UNHCR during a mission in mid-march, revealing a very major potential for a UNESCO/UNHCR partnership in the field of emergency and refugee education, including measures to ensure an orderly transition, both for the refugees and their home countries, and for the host countries, in the context of post-conflict durable solutions. More concrete discussions will be launched with UNHCR in coming weeks on a new strategic partnership agreement, possibly also envisaging the development of joint UNESCO/UNHCR model projects that could be presented in the context of future United Nations Consolidated Appeals and Flash Appeals for countries in situations of post-disaster or post-conflict. Finally, preliminary discussions have been carried out with the United Nations Office for Project Support, UNOPS, on a possible revision of the 2002 UNESCO/UNOPS cooperation agreement, so as to enhance focus on the expertise of UNOPS in procurement, and in management of complex contracts, including personnel recruitment, notably in situations of post-disaster or post-conflict. 25. The Executive Board will be regularly appraised of developments with regard to UNESCO s partnership agreements with other United Nations agencies.

176 EX/INF.9 page 6 TABLE 7 EXECUTION OF EXTRABUDGETARY PROGRAMMES BY FUNDING SOURCE 1 January 2006 to 31 December 2006 (in thousands of US dollars) SOURCE OF FUNDS UNITED NATIONS SOURCES 2006 2005 Allocations Expenditure Rate % Allocations Expenditure Rate % UNDP 3,535 2,128 60.2 5,154 2,433 47.2 UNFPA 200 162 81.0 156 108 69.2 Other United Nations sources UNDG 19,217 14,972 77.9 24,612 18,353 74.6 UNEP 2,133 1,733 81.2 1,927 1,454 75.5 UNFIP 6,938 4,232 61.0 7,698 5,174 67.2 UN-ISDR 2,329 2,273 97.6 1,515 1,390 91.7 WHO/UNAIDS 6,533 4,771 73.0 6,567 6,034 91.9 Others 2,668 1,551 58.1 1,437 894 62.2 Subtotal United Nations sources 43,553 31,822 73.1 49,066 35,840 73.0 OTHER PROGRAMMES World Bank 2,885 1,900 65.9 2,716 2,105 77.5 Regional Development Banks 8,247 5,796 70.3 5,083 2,944 57.9 Donated funds-in-trust Japan 28,494 18,088 63.5 30,857 18,756 60.8 Italy 21,396 10,792 50.4 23,345 12,024 51.5 Saudi Arabia 15,004 13,511 90.0 292 0 0.0 Norway 5,070 3,232 63.7 4,731 3,257 68.8 Spain 3,403 1,994 58.6 1,830 1,074 58.7 Flanders 3,328 2,417 72.6 4,397 2,613 59.4 Sweden 2,559 1,669 65.2 1,291 851 65.9 European Commission 7,963 6,386 80.2 6,909 5,443 78.8 Private Funds 4,686 3,269 69.8 8,002 5,720 71.5 Qatar Foundation 3,836 2,725 71.0 7,326 5,000 68.3 Others 19,398 12,804 66.0 18,625 12,241 65.7 Self-benefiting funds-in-trust Brazil 245,021 190,934 77.9 135,914 122,712 90.3 Lybian Arab Jamahirya 5,961 3,957 66.4 6,240 2,281 36.6 Nigeria 2,927 2,701 92.3 1,768 515 29.1 Bahrain 429 102 23.8 334 142 42.5 Others 1,896 1,317 69.5 2,687 2,201 81.9 Associate experts, special accounts and voluntary contributions 68,278 45,529 66.7 61,174 46,878 76.6 Subtotal other programmes 450,781 329,123 73.0 323,521 246,757 76.3 Total 494,334 360,945 73.0 372,587 282,597 75.8 Printed on recycled paper