Elements to consider in the adoption of a biennial budget

1. Elements to consider in the adoption of a biennial budget Department of Planning and Evaluation

2. AG/RES. 2911 (XLVII-O/17) To request that the Permanent Council, with the assistance of the CAAP, give consideration to amending the General Standards in order to align them with the requirements of a biennial program-budget, in keeping with the Four-year Strategic Plan of the Organization. To that end: i. the overall budget level for the second year will be considered a tentative planning figure; and ii. it is understood that member states’ financial commitments to the Regular Fund are made on an annual basis.

3. The OAS experience • Last biennial budget cycle 1996-1997 • Practical considerations favored an annual cycle • Cycle repeated annually • Rapidly changing conditions – estimates quickly become obsolete • Income instability • Need for flexibility • Need to re-organize agenda and strategic direction

4. Adoption of a biennial cycle • Implications: • Programming • Financial and operative • Management information systems

5. I. Programming Implications • Favorable: • Suited to long-term planning • Stabilizes spending over a longer period • Halves time spent on decision-making during formulation • Facilitates programming in broader categories (e.g. budgeting to spend on Human Rights vs. budgeting for the Court, Commission, CIM, et al) • Facilitates incremental changes • Provides greater predictability for program managers.

6. I. Programming Implications • Less Favorable: • Requires planning eighteen to twenty-one months ahead of the start of Y2 • May still require interim review at least annually. • Estimates for the Y2 may become obsolete. • May limit flexibility to adapt to current events or changing priorities. • New or emergency budget requests may need supplementary budget authority or authorization for use of reserves

7. II. Financial and operative implicationsOriginal normative framework – prior to the change General Standards to Govern the Operations of the General Secretariat of the Organization of American States (revision 10, January 1992) Article 65. Effective period, scope, and closing of accounts. The program-budget is biennial, and the fiscal period runs from January 1 through December 31 of the subsequent year. Article 72. Appropriations and obligations. Appropriations shall be available to meet the obligations incurred during the fiscal period for which they were approved and for the next period, counting from the closing date of the former, to the extent necessary to liquidate obligations incurred during the former.

8. II. Financial and operative implicationsBoard of External Auditors Report (JAE/Doc. 27/97) The OAS operates on a two-year (biennium) budgetary reporting period. As a result, the aggregate funds appropriated for the biennium are divided into two reporting periods: 1) the Secretary General approved budget representing that portion of appropriations allocated to the first year of the biennium; and 2) appropriations reserved for execution during the second year of the biennium. To the extent that the appropriations allocated to the first year are not obligated at the end of the first year, they are added to the second year’s reserved balances and the aggregate becomes available for obligation in that year. The preparation of financial statements is based on this biennium cycle, with interim statements being prepared at the end of the first year, the midpoint of the biennium. The statements at the end of a biennium period include the cumulative financial information for the two-year period. For comparative purposes, interim statements at the midpoint of the biennium are compared to the most recent previous midpoint; statements at the end of a biennium are compared to the most recent previous biennium. The General Standards provide that appropriations are available to meet the obligations incurred during the fiscal period for which they were approved. At the end of a fiscal period, unobligated appropriations expire and are not available for future use, unless otherwise approved by the General Assembly.

10. II. Financial and operative implicationsChanges to the normative framework – from biennial to annual General Standards to Govern the Operations of the General Secretariat of the Organization of American States (revision 11, May 1998) Article 77. Effective period and scope of the program-budget. (Currently 83) The program-budget is annual, and the fiscal period runs from January 1 through December 31. Article 94. Appropriations and Obligations. (Currently 100) Appropriations shall be available to meet the obligations incurred during the fiscal period for which they were approved. However, and only to the extent necessary to liquidate obligations pending at the close of the year for which they were approved, the appropriations mentioned may be extended, but not beyond December 31 of the following year, on which date they shall expire irrevocably.

11. II. Financial and operative implicationsBoard of External Auditors Report (JAE/Doc. 29/99) Change in Financial Reporting Period Effective January 1, 1998, the Organization changed its budgetary reporting period form a biennial to an annual cycle as authorized by an amendment to Article 77 of the General Standards. The General Standards further provide that appropriations shall be available to meet the obligations incurred during the year for which they were approved. Regular Fund appropriations may be extended, but only to the extent necessary to liquidate the obligations pending at the close of the year for which they were approved, but not beyond December 31 of the following year at which time they expire irrevocably.

12. III. Management information systems implications • The current system acquired in 1998 • Configured to work on the basis of annual budgets. • Software version operated by the OAS is out-of-date and no longer supported by the vendor. • Any changes to the configuration would be the sole responsibility of the General Secretariat • Vendor would assume no liability for any operational failures due to changes. • High-risk undertaking with high probability of failure at a significant cost to the Organization.

13. Forward planning in budget process Article 94. General Guidelines. The Secretary General shall submit, together with the proposed program-budget, a proposal on the overall budget level for the next year. The General Assembly shall define the general financial parameters for the budget formulation for the following fiscal period, considering the current mandates, the working proposals of the Secretary General, and other statements, which the Member States may make. The decision adopted by the General Assembly on this overall figure in considering the proposal by the Secretary General and the opinion of the Preparatory Committee thereon, shall be used as a guide in formulating the proposed program-budget for the next year.

14. Other considerations • Quota scale is updated and approved by the General Assembly every three years. • Discrepancy in schedule of quota assessment and budget cycle • Contributions of some member states for Y1 would differ significantly from those of Y2 • The process of setting quotas and formulating budgets are independent of each other • The outcome of former may influence the latter