Intervention Summary
Title: Voluntary core funding for the United Nations Development Programme
(UNDP)
What support will the UK provide?
1. In 2011 DFID undertook a Multilateral Aid Review (MAR) that assessed the value for
money of 43 multilateral agencies (including UNDP) that receive voluntary core funding
from the UK. The MAR found that UNDP was a critical partner for DFID in meeting UK and
international development objectives. However, a range of reforms were urgently needed
to strengthen the quality of UNDP’s delivery on the ground. Overall the review found that
UNDP offered good value for money for UK funds. The Secretary of State agreed that
DFID’s annual voluntary core funding to UNDP should remain at £55 million per year for
20011/12 and 2012/13.
2. The provision of voluntary core funding supports the basic running costs of UNDP but also
supports specific programmes and projects at the country level that help countries reduce
poverty, improve their governance and recover from crisis or conflict. Providing voluntary
core funds enables the UK to deliver development objectives on the ground and also to
engage with UNDP on reform priorities.
3. This business case provisionally allocates up to £220 million of voluntary core funding over
the period 2011-2015 to UNDP. For the UK’s financial years (FYs) 2011/12 and 2012/13
voluntary core funding will be paid at £55 million a year. In 2013 a mid-point review will be
undertaken to assess progress against MAR reforms. Thereafter, DFID will decide if
voluntary core funding should be maintained at £55 million per year, increased, decreased
or earmarked for specific programmes through voluntary non-core funding. In the
meantime, indicative funding levels for FYs 2013/14 and 2014/15 remain at £55 million per
year.
4. In addition to DFID’s voluntary core funding support that is covered in this business case
the UK provides voluntary non-core funding for specific projects at the country level. In
2010 the UK provided a total of $183 million of voluntary non-core funding support. DFID
is also providing £17.5 million of voluntary non-core funding financial support over 2009-12
to UNDP’s Bureau for Crisis Prevention and Recovery (BCPR).
5. DFID country offices will prepare separate business cases for country level funding but will
take in to account the weaknesses that were identified in the MAR.
Why is UK support required?
6. Multilateral organisations are an essential part of the international system for humanitarian
and development aid. They have a global presence and the legitimacy to work even in
politically sensitive contexts.
7. UNDP is critical to DFID as it:





Delivers programmes in fragile and conflict-affected states;
Has a unique role delivering programmes to support democratic governance, crisis
prevention and recovery;
Has a vital role in gathering MDG statistics and convening action to make progress
towards the MDGs;
Has a unique legitimacy with partner governments and can provide support in difficult or
political contexts where other development entities cannot;
Has a unique role supporting the work of the wider UN system.
8. DFID will maintain voluntary core funding to UNDP as it is critical partner in meeting UK
and international development objectives. Additionally, the provision of voluntary core
funding support will allow DFID to engage UNDP on those reforms that need to occur in
order to improve its value for money.
What are the expected results?
9. DFID investment will help UNDP support partner countries to make greater progress
towards the MDGs. It will enable UNDP to work with countries to help them prevent and
recover from conflict or crises and facilitate free and fair elections. DFID funding will also
support UNDP’s work on improving the UN system’s collective effectiveness and efficiency
leading to stronger performance particularly in fragile states.
10. Through this voluntary core funding contribution DFID also expects to see UNDP make
progress against the key reform priorities identified through the MAR. In particular the
provision of this funding will support UNDP to:
 Significantly improve its country level performance and leadership, particularly in
fragile and crisis-affected states;
 Implement its organisational reform agenda to allow UNDP to better report on its
contribution to development;
 Sharpen its focus on its comparative advantage;
 Strengthen its leadership of the UN development system.
11. These changes should enable UNDP to make a greater contribution to development; in
particularly helping more countries improve their governance and helping more countries
recover from or prevent conflict and crisis.
12. UNDP’s results reporting framework is very weak. It is not yet possible to use UNDP’s own
targets to measure its development results. Addressing this weakness is one of DFID’s top
reform priorities. After the mid-point review has been undertaken in 2013 DFID will revisit
this business case’s log-frame and update it to include UNDP’s own indicators from its new
strategic plan that is due in 2013 if these are sufficiently robust. In the interim, the logframe will principally track progress against the MAR reform priorities.
13. DFID recognises that making progress on the MAR reforms will be difficult. This business
case sets out how DFID will seek to build stronger relations with UNDP and the Executive
Board’s membership to support positive change.
Business Case for: Voluntary core funding for the United Nations Development
Programme (UNDP)
Strategic Case
A. Context and need for DFID intervention
Summary
14. Providing support to the multilateral system allows DFID to tackle development priorities
beyond the reach of its bilateral programme. UNDP is a critical partner for DFID and the
international community. It has a unique role in the multilateral system to improve the
UN’s collective impact but also in supporting countries to recover from crisis and conflict
and improve their democratic governance. However, the MAR also found that UNDP
needs to improve its delivery, particularly in fragile states. The review also found that
UNDP spreads itself too thinly across its broad mandate. It also needs to implement a
range of organisational reforms to improve its cost effectiveness and results reporting.
DFID will need to work closely with UNDP to ensure reforms are taken forward leading to
improved delivery on the ground. In 2013 DFID will take-stock of progress and adjust its
voluntary core funding accordingly.
What does UNDP do?
15. Multilateral organisations are an essential part of the international system for
humanitarian and development aid. They have a global presence and the legitimacy to
work even in politically sensitive contexts where bilateral donors may not be welcome.
They provide specialist technical expertise, and deliver aid on a large scale. They offer a
wide-range of aid instruments to meet the needs of all countries. They have legitimacy to
lead and co-ordinate development and humanitarian assistance. They broker
international agreements and monitor adherence to them. They develop and share
knowledge about what works, and why.
16. UNDP has two critical roles. It works across the UN development system to make the
UN’s collective effort more effective. It also delivers a wide range of programmes to help
developing countries achieve their development objectives.
UNDP’s Cross-system role
17. UNDP has an important coordination and leadership role across the UN development
system. The UNDP Administrator chairs the UN Development Group (UNDG) which
brings the heads of the 32 UN funds, programmes and agencies involved in development
issues together to deliver more effective support to developing countries.
18. UNDP also manages the UN’s Resident Coordinator (RC) system. RCs lead UN country
teams and bring together the different UN funds and programmes to improve the UN’s
overall impact and coordination.
19. UNDP also undertakes the role of administrative agent for over 45 multi-donor trust funds
(MDTFs).
UNDP’s delivery role
20. UNDP invests $5 billion a year and carries out its programme activities in 177 countries
and territories through 5 regional and 129 country offices. Its work covers:
 Poverty Reduction and MDG achievement – Over 1 billion people continue to live in
extreme poverty. UNDP advocates for progress on the MDGs in totality but has a
particular focus on MDG1 – poverty eradication. Its work supports countries to
develop national plans to meet the MDGs and gather data to track their progress. It
also has a unique convening role to hold the international community to account for
meeting the MDGs. UNDP’s global mandate allows it to tackle extreme poverty
worldwide. Of its partners, 95% rated UNDP as a ‘critical partner’ in contributing to the
MDGs globally.

Democratic Governance – UNDP supports governments to provide access to fair
justice systems, elections, and helps to strengthen local governance. In 2010 128
countries received support from UNDP in democratic governance, 60 of those
specifically on electoral assistance. In 2011 UNDP will provide electoral assistance to
Zimbabwe and Nigeria, among others. Under its democratic governance remit, UNDP
supports human rights work in over 100 countries. DFID country offices have raised
concerns about the effectiveness of UNDP’s democratic governance and electoral
assistance work.

Crisis Prevention and Recovery. Fragile states account for 58 percent of the
poverty in the developing world, as well as 67 percent of the infant deaths and 69
percent of the deaths of children under five. UNDP provides vital support to countries
that are striving to recover from armed conflicts and natural disasters, developing
strategies to prevent further conflict. It also works with countries to mitigate the risks
of natural disasters. UNDP often has a longer term presence than other development
actors (first in, last out), and is well-placed to work on these issues because of its
legitimacy and links to the UN’s peace-keeping work. UNDP has the capacity to
respond quickly, providing leadership on crises, especially around peace-building in
the aftermath of crises. Improving UNDP’s effectiveness in these settings is a top
reform priority for the UK.

Environment and Energy – UNDP helps developing countries secure the
environmental conditions needed to reduce poverty and achieve the MDGs. Its work
seeks to tackle climate change, improve biodiversity, expand energy supplies and
improve water management. UNDP currently supports 124 countries in environment
and sustainable development projects. The joint UNDP/UNEP Poverty and
Environment Initiative is supporting 18 countries to articulate environmental priorities
within their national development strategies and planning. Working with the Global
Environment Facility, UNDP has helped 29 countries develop national approaches to
climate change adaptation. UNDP needs to further sharpen the focus of its climate
and sustainable development, evermore effectively with other multilateral partners,
e.g. UNEP and the World Bank, and strengthen its own environment and
climate safeguards.

HIV/AIDS – UNDP works with developing countries to understand and respond to the
impacts of HIV/AIDS. It implements projects for the Global Fund for AIDS,
Tuberculosis and Malaria. In 2010 it delivered projects in 56 countries and allocated
$350 million to prevent and treat HIV/AIDS.
How is UNDP managed?
21. UNDP is led by the Administrator (Helen Clark) and her senior management team. It has
8,421 staff worldwide of which 80% are based in regional or country offices.
22. UNDP is governed by 36 member states of the UN. Member states’ membership of the
Executive Board is rotational. The Executive Board meets three times a year to set policy
direction and provide oversight. The UK is a member of the Executive Board for 2011,
and will resume its membership in 2013 for a three-year period as it is part of an agreed
rotation scheme with other major donors. Even when the UK is not a Board member it
can still engage in discussions at the Board and has influence.
23. The UK is active and influential within UNDP’s Executive Board and has good relations
with other members of the Board. At times DFID’s views differ to UNDP’s senior
management team, for example DFID believes that UNDP needs a sharper focus and a
stronger results reporting system. However, overall DFID has a strong partnership with
UNDP.
24. DFID provided £55 million of voluntary core funding, representing approximately 9% of
UNDP’s total voluntary core funding, in 2010. In addition, DFID provided £17.5 million of
voluntary non-core funding financial support over 2009-12 to UNDP’s Bureau for Crisis
Prevention and Recovery (BCPR). Across DFID’s bilateral programme around £200
million per year is invested in UNDP. In 2010 the UK was the fourth largest funder of
UNDP in total.
25. The table below shows UNDP’s income for the period 2007 – 2010. Table 2 illustrates the
UK’s total funding in US dollar terms compared to other donors.
Table 1: UNDP’s total Income (billions of US$)
Year
2007
2008
Voluntary core
1.1
1.1
funding income
Voluntary noncore
funding
3.8
3.6
income
TOTAL
4.9
4.7
2009
2010
1.0
1.0
3.6
4.0
4.6
5.0
Table 2: Top 7 donors in 2010 (millions of US$)
No.
1
2
3
4
5
Country
Japan USA
Norway
UK
The
Netherlands
Voluntary
73
99
117
85
121
core
funding
Voluntary
353
322
155
183
91
non-core
funding
TOTAL
426
421
272
268
212
6
Sweden
88
48
88
109
176
157
26. While UNDP carries out a wide-range of activities UNDP is critical to DFID as it:

Delivers vital programmes in fragile and conflict-affected states;
7
Canada




Has a unique role delivering programmes to support democratic governance, crisis
prevention and recovery;
Has a vital role in gathering MDG statistics and convening action to make progress
towards the MDGs;
Has a unique legitimacy with partner governments and can provide support in difficult
or political contexts where other development entities cannot;
Has a unique role supporting the work of the wider UN development system.
Multilateral Aid Reviews findings
27. The Multilateral Aid Review (MAR) was commissioned by the DFID Secretary of State to
assess the value for money and impact provided by multilateral agencies that receive
funding from DFID. The MAR found that UNDP is critical in meeting both international
and key UK objectives, but also that UNDP’s performance needs to improve in a number
of areas. Overall UNDP was judged to offer good value for money for UK aid.
28. The MAR identified the following strengths:



UNDP has a critical role in meeting UK and international development objectives;
It has strong partnerships across the UN and multilateral system, and also with
member states;
It has good disclosure practices and is committed to implementing International Aid
Transparency Initiative (IATI) standards.
29. The MAR identified that UNDP would provide greater value for money if it made progress
in four areas. DFID will press for UNDP to address these as a matter of priority. These
are:
 Much better delivery at the country level. UNDP’s delivery in-country is far too
variable. DFID has particular concerns about the effectiveness of UNDP in fragile and
conflict-affected countries and its work on democratic governance including electoral
assistance. The MAR found that improving delivery will require UNDP to tackle a
range of issues including strengthening its in-country leadership, strengthening its
project and programme management and filling key vacancies with the right people
more quickly.
 Address a number of organisational weaknesses. UNDP needs to significantly
improve its results management and reporting, drive better value for money through
its procurement and improve its cost control and efficiency.
 Demonstrate stronger leadership across the UN system to improve the
effectiveness of Resident/Humanitarian Coordinators; push forward common reforms
such as the adoption of the International Aid Transparency Initiative, improve
efficiency and effectiveness through Delivering as One; and improve the performance
and effectiveness of MDTFs.
 Sharpen UNDP’s focus. UNDP spreads its resources across a broad range of
sectors, which affects its ability to deliver results at country level. UNDP would have
greater impact, and hence represent greater value for money to the UK, if it focused
more on support to fragile and conflict-affected states, crisis prevention and recovery
and democratic governance.
30. UNDP’s response to the issues highlighted in the MAR has been mixed. The UNDP
Administrator has launched a change management agenda that seeks to tackle many of
the issues highlighted above. The Administrator has also committed to re-invigorate
UNDP to make it more results driven. However, due to the breadth of the reforms that
are required, the scale and complexity of UNDP’s operations and the fact that decisionmaking within UNDP requires consensus amongst member states, substantive progress
on the issues of most interest to DFID is far from certain. DFID has particular concerns
about the likelihood that UNDP will sharpen its focus as the UNDP Administrator and
Senior Management Team have expressed a strong desire to maintain UNDP’s broad
mandate. UNDP’s response to calls to improve its results focus (which has been seen as
a real possibility through the review of its strategic plan in June 2011) has been
disappointing.
B. Impact and Outcome
Theory of change
31. Voluntary core funding is not tied to a specific project or programme. It provides support
to all of the work of the organisation and can be used flexibly to support any of the
objectives in UNDP’s strategic plan. The underpinning theory of change of voluntary
core funding is as follows;
 Strengthened UNDP value for money requires progress against the reforms identified
in the MAR.
 UN reform is slow and difficult. It will only be achieved through strong leadership and
direction from UNDP and the support of the Executive Board’s membership.
 DFID will encourage improvements on the key issues identified here, drawing on its
strong partnership with UNDP, its role as a major donor and Executive Board
member, and its technical focus around fragile states, results and improved value for
money.
 Targeted engagement by DFID officials and Ministers will help to sustain and support
the reform process, but DFID recognises that this must be based on a sound
understanding of the institution and the way in which it operates.
 As a result of progress against the reforms identified here UNDP’s overall efficiency
and impact – its value for money - is expected to improve. It will deliver better
development results in the areas that are of most important to the UK.
32. DFID has been supporting reform within UNDP for a number of years, but has secured
limited change to date. However, the above approach represents a step-change in
DFID’s engagement with UNDP. DFID will be explicit that the volume of its voluntary
core funding is linked to the organisation’s overall value for money and its progress
against key reforms. DFID is prepared to allocate additional voluntary core funds if
progress is made. Alternatively, DFID will consider cutting its voluntary core funding
support if UNDP’s performance does not improve.
Impact
33. DFID’s voluntary core funding investment will help UNDP to support partner countries to
make greater progress towards the MDGs. At the end of the funding period UNDP
should be able to demonstrate that it has enabled more free and fair elections to occur
and improved countries’ governance on the ground. It should also be able to
demonstrate how it has helped countries recover from or prevent conflict or crises.
Finally, UNDP should be improving the UN development system’s performance in fragile
states and improving the UN system’s collective effectiveness and efficiency. The impact
indicators are set out in the log-frame.
Outcome
34. To achieve this impact UNDP needs to make progress on its organisational reform
agenda and tackle the weaknesses that were identified in the MAR. By the mid-point
review in 2013 DFID expects to see substantive progress against the MAR reforms
areas. By 2015 UNDP should be performing satisfactorily or better in the four areas
(paragraph 27) that were identified as weak in the MAR: i) country delivery; ii)
organisational reforms; iii) cross-system leadership; and, iv) a sharper focus.
35. UNDP will need to:
Significantly improve its country level performance, particularly on democratic
governance and electoral assistance, crisis prevention and recovery.
 Improve its programme and project management including results reporting,
budgeting and financial management.
 Fill critical posts more quickly with high quality staff with the right expertise.
Implement its organisational reform agenda.
 Push ahead with key organisational reforms that improve UNDP’s global results
reporting, its cost control, human resource and performance management.
Strengthen its leadership across the UN development system.
 Provide stronger support to RCs/HCs resulting in better leadership on the ground.
 Implement the aid transparency standard, International Aid Transparency Initiative
(IATI), and encourage other UN agencies to do the same.
 Work more effectively with other agencies within the UN development system to
achieve better coordination and efficiency on the ground.
Sharpen its focus on its comparative advantage.
 Focus more of its resources and effort on its comparative advantage i.e. democratic
governance and electoral support, crisis prevention and recovery, and delivery across
its objectives in conflict-affected and fragile states.
Appraisal Case
A. Determining Critical Success Criteria (CSC)
36. Each CSC is weighted 1 to 5, where 1 is least important and 5 most important based on
the relative importance of each criteria to the success of the intervention. The logical
framework for this programme outlines our key progress monitoring indicators. These
critical success criteria set out the conditions and assumptions which need to be fulfilled
in order for the outcomes and impact documented in the log frame to be achieved.
37. The CSC are built around the specific areas where weaknesses were identified in the
MAR. These are areas where UNDP must show evidence of improvement if they are to
show better value for money at the mid-point review.
CSC for Description
Weighting
Results /
(1-5)
Reforms
1
UNDP’s Administrator, senior management team and the
5
Executive Board are supportive of key reforms.
2
UNDP improves its delivery at the country level,
particularly conflict-affected and fragile states and in the
areas of democratic governance and electoral assistance,
and crisis prevention and recovery.
3
UNDP’s next strategic plan (commencing 2014) sharpens
its focus on its comparative advantage. This is
underpinned by a strengthened results framework.
4
The Administrator, as Chair of the UNDG, drives reforms
across the UN system to:
 improve the leadership of Resident and Humanitarian
Coordinators;
 improve the UN’s transparency by implementing the
IATI standards;
 deliver improved efficiency and effectiveness through
better coordination in country.
B. Feasible options
5
4
4
38. The four criteria set out above are critical to the achievement of DFID’s reform priorities
for UNDP, as described in the strategic case. Meeting these CSCs will result in a more
effective UNDP that delivers better results for the poor.
39. The two options below consider different ways in which financing might be provided, as
well as different approaches to policy engagement and influencing that DFID might
utilise.
Financing
40. There are two financing options to consider.

Option 1 – voluntary core funding: This type of funding is allocated to an institution
(such as UNDP) but is not tied to a particular theme or project. It can be spent against

any activity that relates to an institution’s mandated area of work.
Option 2 – voluntary non-core funding: This type of funding is allocated against
specific projects in country (for example a governance project in Somalia) or by a
particular theme (for example crisis prevention and recovery). Once allocated it can
not be spent on other issues beyond the scope of the original project or theme.
41. A decision between option 1 and 2 should also consider the fact that DFID as a whole
already provides significant voluntary non-core funding to UNDP (as described in the
strategic case).
C. Appraisal of options
Option 1: voluntary core funding
42. The benefits of this option are:



It provides UNDP with flexible resources that can be used for under-funded or
emerging priorities and to support work in fragile and conflict-affected states where
there is often less bilateral funding.
As a major core funding donor DFID will continue to have leverage with UNDP and
other Executive Board members on key reforms that need to occur;
UNDP can use DFID’s voluntary core funding to support the Administrator’s
organisational change agenda;
43. The costs of option 1 are;


In the absence of a robust results framework it is difficult to see how DFID’s voluntary
core funds are delivering results.
There is a staff resource commitment associated with this voluntary core funding. At
the very least, DFID will need to maintain a significant policy engagement with UNDP
to ensure stewardship and oversight of these funds.
Option 2 - Voluntary non-core funding
44. An alternative would be to further increase DFID’s voluntary non-core funding e.g. for
work on elections or crisis prevention and recovery. The UK already provides voluntary
non-core funding to the Bureau for Crisis Prevention and Recovery (£17.5 million over a
3 year period from FY 09/10 to 11/12) and over £200 million through its country offices.
45. The benefits of option 2 are:


DFID can target its funding to specific programmes or themes which are important to
UK development objectives and allow us more robustly to measure results.
It would potentially allow DFID to reduce its central engagement with UNDP.
46. The costs of option 2 are:



DFID would lose influence at the Executive Board and have reduced leverage over
key organisational reforms that it wishes to see.
Reducing our core funding could affect UNDP’s flexibility and ability to target
resources where they are most needed, especially in fragile and conflict-affected
states.
In order to operate effectively UNDP requires a mix of voluntary non-core funding and
voluntary core funding resources. By only providing voluntary non-core funds we
might affect the scale at which UNDP can operate.
Consequences of decreasing or not funding
47. DFID provided 9% of UNDP’s voluntary core funding resources in 2010. Significantly
reducing or stopping DFID’s voluntary core funding would result in UNDP reducing the
number of programmes it was able to carry out on the ground. This would affect the
achievement of UK development objectives particularly where UNDP has a critical role. It
would also potentially lessen DFID’s influence with UNDP and the Executive Board,
particularly on MAR-related reforms. On the other hand, if DFID and other donors
sharply reduced voluntary core funding, this could create a strong momentum for change.
DFID should assess the progress on the reform agenda in two years’ time and then
adjust its voluntary core funding levels accordingly.
D. Comparison of options
48. The same weighting is used as for CSC above. The score ranges from 1-5, where 1 is
low contribution and 5 is high contribution, based on the relative contribution to the
success of the intervention.
Analysis of options against Critical Success Criteria
Option 1 – Voluntary core Option 2- Voluntary nonfunding
core funding
CSC
1 – UNDP/EB
support
2 – Organisational
reform
3 – Sharper focus
4 – UN system
Totals
Weight
(1-5)
5
Score
(1-5)
5
Weighted
Score
25
Score
1
Weighted
Score
5
5
2
10
4
20
4
4
5
5
20
20
75
1
1
4
4
33
Conclusion
49. DFID’s overall funding to UNDP has traditionally included both voluntary core funding and
voluntary non-core funding support. Voluntary non-core funding is a useful approach
when specific development results are desired or when there is a funding gap in a
specific priority area. This is, for example, why DFID is currently providing voluntary noncore funding for UNDP’s Bureau for Crisis Prevention and Recovery. However, voluntary
core funds only have limited coverage, do not have the flexibility to be used for
organisational-wide programming, and potentially undermine an organisation’s
effectiveness.
50. The MAR found that UNDP needs to improve its country level delivery and implement a
range of organisational reforms. Providing voluntary core funding is the best way to
support these changes and at the same time deliver development impact in initial areas
for the UK. Therefore, option 1 is preferred, supported by targeted engagement and
influencing. If the mid-point review in 2013 indicates that no significant progress is being
made against priority reforms, DFID will adjust its approach to voluntary core funding to
ensure maximum value for money for the UK taxpayer for the remaining two years of this
business case.
E. Measures to be used or developed to assess value for money
51. DFID will use the same criteria to assess the value for money of its voluntary core
funding contribution to UNDP in two years’ time that were used for the MAR. In FY
2013/14 a mid-point review will assess progress against key reform areas identified as
weak by the MAR. Consequently, DFID will decide if the best value for money can be
achieved by continuing voluntary core funding at £55 million per year, increasing this
amount, decreasing it and/or providing voluntary non-core funding for specific
programmes. In the meantime, indicative funding levels for FY 2013/14 and FY 2014/15
have been set at £55 million per year.
Commercial Case
A. Value for money through procurement
52. DFID undertook a review of UNDP’s procurement in 2011. The review found that the
scope of UNDP’s procurement was relatively broad. The main items of expenditure
include consultancy, bed nets, election materials, civil works and vehicles. In 2010
UNDP spent almost $3 billion on procurement with the largest proportion, around 77%,
being spent on services rather than goods.
53. In terms of accountability the Director for the Bureau for Management is the Chief
Procurement Officer. The CPO is responsibility of raising procurement issues with the
Associate Administrator.
54. UNDP has a procurement strategy which sets out how its procurement function is
managed. UNDP’s procurement manual sets out the processes that need to be applied
and the criteria used in assessing bids. Comprehensive guidance and tools which
support the strategy and manual are in place.
55. Procurement is decentralised to UNDP’s country offices. UNDP has around half a million
vendors on its system and, like other UN organisations, has processes in place to deal
with supplier malpractice. UNDP’s Project Support Office (PSO), based in New York and
Copenhagen, provides central guidance, training and oversight.
56. The findings of the MAR support the need to strengthen UNDP’s procurement work,
particularly at the country level. The level of skills and expertise in procurement needs to
be improved and UNDP’s own procedures and processes need to be more effectively
monitored. UNDP’s decentralised approach results in a high-volume of procurement
transactions being conducted by staff with varying levels of expertise. This can have a
serious impact on a project’s performance.
57. The Administrator’s organisational change agenda seeks to tackle some of these issues.
Some progress has already been made in implementing a ‘Fast Track’ approach, to
streamline the process for procurement related to UNDP’s crisis prevention and recovery
work. Training is also being scaled-up and professional standards introduced. But DFID
judges that more could be done to ensure UNDP has adequate capacity in its country
offices, where the majority of procurement is conducted.
58. Procurement is not routinely discussed at the Executive Board. Through the UK’s
Executive Board membership DFID will seek to ensure that procurement practices are
improved and that UNDP continues to improve the value for money of its procurement
portfolio.
Financial Case
A. How much it will cost
59. Overall this business case has an indicative funding level of £220 million over the four
year period 2011-2015. DFID expects to provide UNDP with £55 million of voluntary
core funding per year for FYs 2011/12 and 2012/13. An additional £110 million has been
provisionally set aside for the period covering FYs 2013/14 and 2014/15.
B. How it will be funded: capital/programme/admin
60. The funding will be paid from DFID’s programme budget.
C. How funds will be paid out
61. The £55 million per year allocation for FY 2011/12 and 2012/13 will be released in two
payments of £27.5 million. This reduces the risk of paying voluntary core funds in
advance of need. The timing of payments will be set out in a Memoranda of
Understanding that will be signed by DFID and UNDP in 2011. Indicative funding levels
and the timing of payments is set out in table 3.
Table 3: Payment schedule 2011-2015
YEAR
Payment timing
FY 2011 to 2012
August 2011 (£27.5m - 50%) and
October 2011 (£27.4m -50%).
FY 2012 to 2013
April 2012 (£27.5m -50%) and
September 2012 (£27.5m -50%).
FY 2013 to 2014
October 2013 (100% paid post the
mid-point review)
FY 2014 to 2015
April 2014 (£27.5m -50%) and
September 2014 (£27.5m -50%).
Total
£ million
£55 million in total.
£55 million in total.
£55 million in total (subject
to mid-point review).
£55 million in total (subject
to mid-point review).
£220 million
62. To ensure that UK funds are required DFID has reviewed UNDP’s unspent balance of
voluntary core funding resources. In 2010 UNDP’s voluntary core funding cash balance
was $283 million. This is in-line with the Executive Board’s approved policy. DFID will
continue to monitor this annually.
D. How expenditure will be monitored, reported, and accounted for
63. DFID’s expenditure is monitored through the UK’s engagement at Executive Board
meetings and bilaterally with UNDP, as required. Monitoring is carried out by officials in
the UK and also at the UK’s Mission to the UN in New York.
64. The main reports that DFID uses to monitor UNDP’s performance are:
 The UNDP Administrator’s annual report, which provides an overview of UNDP’s


results;
The Annual Review of the Financial Situation, which provides an overview of the
financial position of UNDP.
The biennial set of certified accounts that are completed by the UN’s Board of Auditors

(BoA). The BoA’s report provides an opinion on the financial integrity of the
organisation. The last set of accounts was ‘without qualification’, indicating that
UNDP’s management systems are responding to oversight findings.
The annual internal audit and evaluation reports, which provide an overview of
UNDP’s programmatic performance, the risks facing UNDP and the steps needed to
address any weaknesses. UNDP’s management provide a response that allows
Executive Board members to track progress over time.
Management Case
A. Oversight
Governance in UNDP
65. UNDP’s Executive Board consists of 36 UN member states that are elected for three-year
terms. Twelve donors and 24 programme countries sit on the Executive Board. Each
Board member has equal voice and voting rights. Programme countries fully participate in
decision-making. Non-board members can also participate in Executive Board sessions to
express their views but cannot vote. The UK is a member of the Executive Board until the
end of 2011. It will resume its membership in 2013 for three years. During 2012 the UK will
continue to engage in Board discussions.
66. The Executive Board provides strategic and policy direction. It takes decisions on papers
and documents presented by UNDP’s management. Member states strive for consensus in
decision making, (although a simple majority is all that is required) and in some cases
decisions are put to a vote.
67. All Executive Board meetings are held in public, unless the Executive Board determines
otherwise. This has never happened. Intergovernmental organisations and nongovernmental organisations can participate in Executive Board meetings but have to be
accredited to the UN and formally invited by the Executive Board.
Oversight in UNDP
68. UNDP’s oversight and accountability framework broadly conforms to National Audit Office
standards i.e. UNDP has an internal auditor, an independent external auditor and an
independent Audit Advisory Committee.
69. Internal audit is carried out by UNDP’s Office of Audit and Investigation (OAI) under the
oversight of its Director. UNDP’s external auditor is the UN Board of Auditors (BoA) that
provides a certified set of accounts every two years – in-line with all UN agencies. The
Audit Advisory Committee is made up of 5 independent members who provide advice to
management on the risks facing the organisation.
70. The OAI reports to the Executive Board annually on internal audit and oversight issues. Its
Director has direct access to the Executive Board. OAI provides an assessment on
UNDP’s performance and raises weaknesses in its control framework that UNDP’s
management needs to address. Oversight by OAI includes internal audits and fraud
detection and investigation. The OAI also monitors progress against recommendations
made by the external auditor. In 2008 the Executive Board agreed that member states can
have access to internal audit reports. In 2011 this was extended to donor intergovernmental
organisations and the Global Fund to Fight AIDS, Tuberculosis and Malaria.
71. The UN BoA is responsible for certifying UNDP’s financial statements. The UK (through the
NAO) is currently the BoA member responsible for assessing UNDP and will certify the next
set of UNDP’s accounts (2010/11). The BoA provides a comprehensive report to the
Executive Board that covers both compliance and value for money issues. The BoA issued
an unqualified opinion on the last set of accounts (2008/09) indicating that UNDP’s internal
controls are working effectively.
72. The Audit Advisory Committee is responsible for assisting UNDP’s management in carrying
out its oversight responsibilities. It also provides an annual report to the Executive Board on
the major strategic oversight issues facing the organisation.
73. Reports from all three parts of UNDP’s oversight framework are presented to the Executive
Board with management responses. These reports provide an update on the
implementation of audit recommendations and an overview of the risks facing the
organisation. All of these reports are available on the UNDP Executive Board’s website.
Executive Board members can comment on the reports and take decisions to improve and
strengthen UNDP’s oversight. The UK actively participates in the Executive Board meetings
and raises issues of concern.
B. Management
74. DFID staff exercise due diligence to oversee UNDP’s activities.
Executive Board
documents and reports are scrutinised to ensure that UK funds are spent efficiently and
effectively to maximise the impact of UNDP’s work.
75. DFID has adequate staff resources to provide proportionate management and oversight of
UK taxpayers’ funds. The team responsible for relations and oversight of UNDP is led by
an A2 Team Leader in DFID’s United Nations and Commonwealth Department (UNCD).
The team leader is also responsible for 2 other agencies, UN Women and UNICEF. All
programme management, including project reviews and payments are the responsibility of
a B1 Deputy Programme Manager (DPM). All programme management activities will be
carried out in accordance with DFID’s oversight requirements. Either the Team Leader or
the DPM is responsible for representing the UK at Executive Board meetings alongside
colleagues from the UK Mission to the UN (UKMIS).
76. The UK Mission to the UN (UKMIS) in New York is the focal point for engagement with
UNDP on all issues. UKMIS takes the lead on issues where discussions are sensitive and
a face-to-face meeting is required.
77. UNCD’s A1 governance adviser and A2 results adviser will provide policy advice on the
appropriateness and effectiveness of UNDP’s governance arrangements and results
systems.
78. DFID’s Internal Audit Department will provide advice on key financial papers that are
presented to the Executive Board. DFID’s Procurement Group will also provide advice and
guidance on procurement issues, as necessary. DFID’s Evaluation Department provides
inputs to key evaluation reports.
79. Technical inputs will be provided by a Governance Adviser in Policy Division as well as a
conflict adviser in the Conflict Institutions Task Team in CHASE.
80. DFID will seek out feedback on UNDP’s performance in a range of countries.
C. Conditionality
81. The amount of voluntary core funds DFID provides UNDP in FY 2013/14 and FY 2014/15
will be dependent on its progress against the MAR reforms.
E. Monitoring and Evaluation
82. As part of this business case DFID has developed a logical framework (log-frame) which
will be used to measure UNDP’s progress annually. The baseline in the log-frame for
measuring overall progress on reforms is the MAR. The log-frame shows the high-level
goals which have been set and contains indicators (what will be measured), milestones
(how the end result will be reached) and targets, (what should be achieved by the end
date). The information in the log-frame will be reviewed annually to check if progress is
being made. The log-frame will be updated to reflect changing circumstances.
83. Progress against the log-frame will be assessed through information provided by UNDP in
its reporting to the Executive Board, and other publicly available information. UNCD will
also seek feedback on UNDP’s performance in a range of countries.
84. The first annual review will assess UNDP’s progress against milestones in the log-frame. At
the mid-point in 2013 a more holistic review will be undertaken against the MAR value for
money reform priorities.
85. UNDP has a strong and relatively independent evaluation function.
UNDP’s evaluation
policy is approved by the Executive Board. The Director of the Evaluation office produces
an annual report and has access to the Executive Board. UNDP’s management provides a
separate response. The evaluation office also produces an annual workplan that is
approved by the Executive Board.
86. DFID will not conduct an in-depth evaluation of UNDP’s work. However, DFID will take
opportunities to share its expertise and support UNDP to further strengthen its evaluation
function. In the first two years of this business case DFID will focus on supporting UNDP to
overhaul its results frameworks and results based-management systems as these are an
important part of a strong evaluation function. DFID will also use evaluations presented to
the Executive Board to assess UNDP’s impact. DFID’s future engagement with UNDP will
be guided by the development of UNCD's overarching evaluation strategy and on advice
from DFID's Evaluation Department. This strategy will be prepared by October 2011.
Engagement / Influencing
87. In order to manage DFID’s voluntary core funds, make progress the MAR reform agenda
and improve the lives of poor people in countries that suffer weak governance or are fragile
or affected by conflict DFID will increase its engagement with UNDP over the next two
years. DFID will seek to build stronger relations with UNDP and other Executive Board
members. DFID will develop a comprehensive stakeholder analysis to map the levers and
barriers to change. DFID will also strengthen its engagement at country level to understand
how UNDP’s delivery on the ground is altering.
G. Risk Assessment
88. DFID’s voluntary core funding to UNDP is judged to be medium risk overall. The greatest
risks relate to maintaining a commitment to reform from UNDP’s management and
Executive Board. DFID will mitigate this risk by supporting UNDP’s senior leadership as
well as by using our position as a major contributor to support and enable change. The
risks highlighted below will be reviewed on an annual basis as part of the overall project
review.
89. The table below sets out the key risks associated with this funding, together with an
assessment of their likelihood/impact and DFID’s approach to mitigating them.
Risk
Risk assessment
likelihood Impact
Mitigation strategy
1
There is a major fraud or
DFID’s funds are misused.
Medium
High
2
UNDP’s staff and
management fail to
implement reforms.
Medium
Medium
 DFID will recover all funds that have
been misspent or misused.
 DFID will continue to monitor the
quality of UNDP’s oversight and
financial management through the
Executive Board and also ask for
access to a number of UNDP’s
internal audit reports each year.
 DFID will engage UNDP’s leadership
team to support its reform efforts.
 DFID should be prepared to cut
voluntary core funds considerably if
reforms are not implemented by the
2013 mid-point review.
3
Other Executive Board
members block reforms.
Medium
Medium
4
UNDP’s country delivery
does not improve.
Medium
High
 DFID will work with other key
member states to build support for
priority reforms
 DFID will strengthen its
engagement in UNDP’s Executive
Board.
 DFID will gather feedback on
UNDP’s performance in a range of
countries and provide this to
UNDP.
F. Results and Benefits Management
90. The logical framework sets out the goal, impact, outcomes and outputs for this business
case. The logical framework is based on the reform priorities from the MAR. It these
reforms are delivered this should lead to better, more efficient performance by UNDP at the
country level.
91. The logical framework will be used to assess UNDP’s progress against the following MAR
reforms:
 Much better delivery at the country level, particularly in the areas of democratic



governance and electoral assistance, and crisis prevention and recovery;
Implement a number of organisational reforms in the areas of global results
reporting and costs control e.g. driving down procurement costs;
Demonstrate stronger leadership across the UN system by improving the quality of
RCs and by advocating for the UN to adopt IATI standards;
Sharpen its focus on its comparative advantage, particularly in the areas of democratic
governance and electoral assistance, and crisis prevention and recovery.
92. A link to the log-frame is here.