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Statutory and Inflationary Adjustments to the 2007 Program-Budget

This presentation discusses the projected statutory and inflationary adjustments to the Regular Fund Program-Budget for 2007. It explores the background, challenges, and objectives of addressing the budget shortfall, as well as potential financing options and expenditure control measures. The focus is on the importance of maintaining a strong and effective organization to achieve its mandates in hemispheric democracy, governance, human rights, multidimensional security, and integral development.

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Statutory and Inflationary Adjustments to the 2007 Program-Budget

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  1. Projected Statutory and Inflationary Adjustments to the Regular Fund Program-Budget for 2007 GENERAL SECRETARIAT OF THE ORGANIZATION OF AMERICAN STATESSecretariat for Administration and Finance - Department of Budgetary and Financial Services

  2. Preamble - Projected Statutory and Inflationary Adjustments p. 2 -

  3. Discussions and Decisions of the 2006 Special and General Assemblies • In his presentations, the Secretary General concluded that the principal cause of the OAS’ financial weakness was the systematic reduction of its budget due to the freeze in ordinary (RF) income, accompanied by an increase in mandates. • Special and Regular GA’s took corrective steps by: • Updating the scale of quota assessments, • Raising the 2007 budget ceiling, and • Approving a 3% quota increase in 2007. • In addition, in 2005 and 2006 the Permanent Council gave the Secretariat additional budget authority to permit it to respond to essential requirements. • The SG, in his June 5 speech, urged resolution of the recurrent cost-of-living adjustment issue as the last critical link in strengthening RF financing. - Projected Statutory and Inflationary Adjustments p. 3 -

  4. Strategic Considerations • Our role, as representatives of Member States and as managers in the Secretariat, is to ensure that the Organization is strong and effective, able to achieve its mandates. • While financial resources alone will not guarantee an organization’s success, it cannot lead and cannot prosper without a sound, trained and well-equipped human and operational base. • It is through its people, systems and facilities that the Organization delivers on its mission of strengthening hemispheric democracy and governance, human rights, multidimensional security and integral development. • It is with this broader focus in mind that we review the specific issues in this presentation. - Projected Statutory and Inflationary Adjustments p. 4 -

  5. Contents • Objective • Background • Personnel Costs • Operating Costs • Projected Totals • Financing Options and Expenditure Control Measures - Projected Statutory and Inflationary Adjustments p. 5 -

  6. Objective • To address the projected RF budget shortfall in 2007 arising from: • Statutory adjustments to personnel costs; and • Loss of purchasing power for operating costs due to inflation. • To provide options for addressing the shortfall. • To incorporate a workforce planning mechanism and revised personnel policies to control and contain future personnel costs. - Projected Statutory and Inflationary Adjustments p. 6 -

  7. Background - Projected Statutory and Inflationary Adjustments p. 7 -

  8. 2007 Program-Budget Background • January 2006: Special GA mandated a RF budget ceiling for 2007 not to exceed $81.5 million. • June 2006: GA Budget Resolution for 2007 RF: Personnel $51.2 M Operating Costs $30.3 M - Projected Statutory and Inflationary Adjustments p. 8 -

  9. Background (cont.) 2007 Program-Budget • Budget authorization does not contain sufficient funds to cover: • Statutory adjustments to personnel costs; and • Inflation-driven increases in cost of operations. • GA considered “that an increase in object 1, coupled with other mandatory increases … could … require a revision of the 2007 program-budget …” - Projected Statutory and Inflationary Adjustments p. 9 -

  10. Current OAS salary policy is based on Resolutions of GA and PC Background (cont.) • 1994 Resolutions AG/RES. 1275 and CP/RES. 631, both titled “Modification of the General Secretariat’s Staff Compensation System” • General Standards - Article 40 (“Salaries”) • “The salaries in force for the staff of the General Secretariat shall be the salaries in force at the United Nations Secretariat …” - Projected Statutory and Inflationary Adjustments p. 10 -

  11. To absorb required inflationary and statutory adjustments, the Organization was forced to downsize by: Background (cont.) • Suspending replacements for retiring / departing personnel; • Freezing recruitment; • Curtailing training and others staff investments; • Reducing services; and • Postponing required maintenance and timely replacement of equipment. Therefore, the Organization reduced its capacity to comply with mandates. - Projected Statutory and Inflationary Adjustments p. 11 -

  12. Have these actions worked? Background (cont.) • Regular Fund Budget reductions were realized. • However, they have adversely affected the activities of the Organization by: • Creating gaps in priority areas; • Weakening internal controls; and • Reducing response capability. - Projected Statutory and Inflationary Adjustments p. 12 -

  13. The 2007 budget presents additional challenges: Background (cont.) • Need to fill existing vacancies to adequately comply with mandates and reduce vulnerabilities. • Requirement to fill nine new positions without affecting budget ceiling. - Projected Statutory and Inflationary Adjustments p. 13 -

  14. Personnel Costs - Projected Statutory and Inflationary Adjustments p. 14 -

  15. Regular Fund – Monthly Payroll Personnel Costs • The monthly total RF payroll cost has not changed significantly since 1995. • The cost per RF staff member has risen at a rate of 3.9% annually since 1995. • From 1995 through 2005, the number of RF staff members decreased by 31.5%. - Projected Statutory and Inflationary Adjustments p. 15 -

  16. Regular Fund – Monthly Payroll Personnel Costs (cont.) Avg. Cost per Staff Member (US$) RF Staff Actual Cost (US$ million) December 1995 June 2001 December 2005 June 2006 $3.9 $3.5 $3.7 $4.1 709 555 486 502 $5,500 $6,300 $7,600 $8,200 - Projected Statutory and Inflationary Adjustments p. 16 -

  17. Key Factors in Payroll Cost Increases: Personnel Costs (cont.) • Revisions to Post Adjustment for Professional Staff. • Revisions to Basic Salary Scale for General Services Staff. • Both are calculated by the United Nations. • Retirement Fund Contributions. • Lower than those of the UN system. • Health Insurance Premiums. • Increased by over 80% over the last five years, despite reductions in benefits. - Projected Statutory and Inflationary Adjustments p. 17 -

  18. UN Post Adjustment and cost is higher in New York than in Washington DC Post Adjustment: OAS vs. UN NY, US DC, US Nicaragua - Projected Statutory and Inflationary Adjustments p. 18 -

  19. Personnel Costs (cont.) Monthly RF Payroll Components: (US$ million) * Other Components: Allowances, Life Insurance. - Projected Statutory and Inflationary Adjustments p. 19 -

  20. Personnel Costs (cont.) Projected Statutory and Inflationary Adjustments for 2007 (US$ million) - Projected Statutory and Inflationary Adjustments p. 20 -

  21. Personnel Costs (cont.) Projected Statutory and Inflationary Adjustments for 2007 (US $ Million) - Projected Statutory and Inflationary Adjustments p. 21 -

  22. Personnel Costs (cont.) Projected Statutory Adjustments for 2007 – Basis for Calculations • Basic Salary: • General Services at Headquarters 5% • General Services away from Headquarters 3% • Post Adjustment: • Professionals at Headquarters 4.5% of total remuneration • Professionals away from Headquarters 2.5% of total remuneration • Retirement Fund Contributions: • Represents approximately 13% of remuneration adjustments • Health Insurance Premiums: • 10% (Blue Cross Blue Shield, Kaiser) • Others: • 3% (Allowances, Life Insurance) - Projected Statutory and Inflationary Adjustments p. 22 -

  23. Operating Costs - Projected Statutory and Inflationary Adjustments p. 23 -

  24. Evolution Operating Costs • From 1995 through December 2005 the Operating Cost Budgets (Objs. 3-9) decreased by 28%. • Historical trend is reversed beginning in 2006. APPROPRIATION Objects 3-9 1995 – 2007 (US$ 1,000) - Projected Statutory and Inflationary Adjustments p. 24 -

  25. Projected Inflationary Adjustments for 2007 – Objects 2 - 9 Operating Costs (cont.) - Projected Statutory and Inflationary Adjustments p. 25 -

  26. Projected Totals - Projected Statutory and Inflationary Adjustments p. 26 -

  27. Projected Totals Projected Totals - Projected Statutory and Inflationary Adjustments p. 27 -

  28. Financing Options and Expenditure Control Measures - Projected Statutory and Inflationary Adjustments p. 28 -

  29. Financing Options and Expenditure Control Measures • Adjustments up to a cap of 3% approved automatically. • Increase budget authority only for 2007. • Adopt a proactive workforce planning strategy. - Projected Statutory and Inflationary Adjustments p. 29 -

  30. Financing Option # 1 – Adjustments up to a cap of 3% approved automatically Adopt a mechanism to adjust annual budget ceilings up to 3% to cover statutory and inflationary costs. Pros: • Predictable resources to insure proper implementation of mandates. • Simplifies decision-making process for the governing bodies. • Resolves a long-standing problem. Challenge: • Requires General Assembly approval to adjust budget ceilings and quota assessments automatically up to a capped percentage. - Projected Statutory and Inflationary Adjustments p. 30 -

  31. Financing Option # 1 – Adjustments up to a cap of 3% approved automatically (cont.) UN Regular Budget Assessments are adjusted annually (US$ millions) - Projected Statutory and Inflationary Adjustments p. 31 -

  32. Financing Option # 2 – Increase Budget Authority only for 2007 Authorize $2.9 million from RF Reserve Subfund to cover adjustments (3.6%) Pros: • Resources are available. • Resolves an immediate problem. Cons: • Short-term solution to a long-standing problem. • May adversely affect liquidity. • Postpones resolution of 2008 budget ceiling. - Projected Statutory and Inflationary Adjustments p. 32 -

  33. Financing Option # 2 – Increase Budget Authority for only 2007 Reserve Subfund 2006 Outlook - Projected Statutory and Inflationary Adjustments p. 33 -

  34. Expenditure Control Measure: Workforce Planning Adopt a workforce planning strategy to: • Manage and sustain human resources in a cost-effective, efficient and integrated manner; • Contain projected rate of growth in personnel costs; and • Relieve the RF of cost associated with activities appropriately financed by specific funds. - Projected Statutory and Inflationary Adjustments p. 34 -

  35. GENERAL SECRETARIAT OF THE ORGANIZATION OF AMERICAN STATESSecretariat for Administration and FinanceDepartment of Human Resources Workforce PlanningTHERIGHT PEOPLE IN THE RIGHT PLACE AT THE RIGHT TIME

  36. Contents Workforce Planning • Objectives • Past Practices • Current Situation • Challenges and Opportunities • Plan of Action - Workforce Planning p. 36 - - Projected Statutory and Inflationary Adjustments p. 36 -

  37. Workforce Planning Objectives • Manage and control growth of staffing costs • Match resources to needs • Respond effectively to changing needs • Increase organizational efficiency • Enhance job satisfaction and productivity - Workforce Planning p. 37 - - Projected Statutory and Inflationary Adjustments p. 37 -

  38. Past practices Lack of workforce planning resulted in: • Redundancies and shortages in functions & skills • Distortions in the staffing structure • RF workforce downsizing and freezing irrespective of need • Uncontrolled increase in CPR’s and other hiring mechanisms • Uneven enforcement of Human Resources policies and rules - Workforce Planning p. 38 - - Projected Statutory and Inflationary Adjustments p. 38 -

  39. Past practices (cont.) 1 1 Staff Member Count 1995 - 2005 As of 9/30/06.This does not include an estimated 48 CPR’s who perform staff functions and Temporary Support / Local Professionals - Workforce Planning p. 39 - - Projected Statutory and Inflationary Adjustments p. 39 -

  40. Current Situation 652 Staff Members as of 9/30/06 * * Total 652 * Record for local proffesionals and support personnel is incomplete at this time - Workforce Planning p. 40 - - Projected Statutory and Inflationary Adjustments p. 40 -

  41. OAS Types of Appointments - Workforce Planning p. 41 - - Projected Statutory and Inflationary Adjustments p. 41 -

  42. Current Situation (cont.) Staff by Funds 652 Staff Members - Workforce Planning p. 42 - - Projected Statutory and Inflationary Adjustments p. 42 -

  43. Current Situation (cont.) 301 Staff Members at Professional Level (59%) RF Staffing By type of appointment 508 staff members as of 9/30/06 207 Staff Members at General Services level (41%) Staff Staff by Level - Workforce Planning p. 43 - - Projected Statutory and Inflationary Adjustments p. 43 -

  44. Current Situation (cont.) 106 Staff Members at Professional Level (73%) SF Staffing By type of appointment 144 staff members as of 9/30/06 Staff 38 Staff Members at General Services level (27%) - Workforce Planning p. 44 - - Projected Statutory and Inflationary Adjustments p. 44 -

  45. Challenges and Opportunities Challenges • Institutional competencies not aligned to emerging vision and mission • In the next 5 years 25% of the RF workforce will retire • Minimal recruitment and staff development has left the Secretariat ill-prepared • to confront future requirements Opportunities • Manage all positions irrespective of funding source • Match available skills with functional needs • Allocate workforce based on predictable funding • Optimize use of projected RF vacancies • Emphasize coordinated staff development - Workforce Planning p. 45 - - Projected Statutory and Inflationary Adjustments p. 45 -

  46. Challenges and Opportunities (cont.) Projected retirements 2006-2011 - Workforce Planning p. 46 - - Projected Statutory and Inflationary Adjustments p. 46 -

  47. Plan of Action 1. Target allocation of RF and SF resources • Regular fund: core, permanent functions & skills • Top and mid level management • Public information & external relations • Legal counsel • Conferences & meetings • Administration: central areas and country offices • Project administration • Audit oversight • Specific funds: variable needs & special requirements • Technical programs • Special missions • Projects - Workforce Planning p. 47 - - Projected Statutory and Inflationary Adjustments p. 47 -

  48. Plan of Action (cont.) 2. Human Resources objectives by funding source • Regular Fund: • Maintain a stable RF-funded workforce within statutorily adjusted budget • Uniform classification system to avoid grade creep • Facilitate rotation of staff members to strengthen areas • Facilitate outplacement as appropriate • Specific Funds: • Focus existing resources on priority mandates • Seek and expand use of SF to finance emerging mandates • Apply uniform HR policies & practices to SF, including indirect costs recovery - Workforce Planning p. 48 - - Projected Statutory and Inflationary Adjustments p. 48 -

  49. Plan of Action (cont.) • 3. Optimize use of projected RF vacancies • Position conversion according to organizational needs (e.g., replacing higher grades position with a greater number of lower ones) without increasing costs • 4. Fill vacant posts • Redefine job descriptions • Implement generic job descriptions • Streamline administrative functions in technical areas • 5. Staff Development • Redirect training programsto focus on highest functional needs • Put in place an effective performance management system • Improve performance reward mechanisms • Promote confidence in and use of central administrative systems • Develop succession planning • Enhance individual job satisfaction - Workforce Planning p. 49 - - Projected Statutory and Inflationary Adjustments p. 49 -

  50. Thank you - Projected Statutory and Inflationary Adjustments p. 50 -

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