FINANCE PRESENTATIONS TO
UNRWA Advisory Commission
21/22 JUNE 2011
2
May 2011 FINANCE (UPDATE)
• No major changes from starting position.
• 1-Jan-11
- Income Statement Deficit
- Cash deficit
-$63.0m
-$51.0m
• 31-May-11
- Income Statement Deficit
- Cash deficit
-$63.0m
-$55.0m
• Adverse increase in CAF (depreciation of NIS) -$3.0m offset by F/C in PSC
Income +$3.0m.
• Donor Income F/C $458.4m (exclude favourable FX $8.5m) = $449.9m.
Budget of $453.0m
• Favourable FX on Income +$8.5m – Offset by FX on Derivatives -$8.6m
• Timing of future cash receipts critical to effect post July salary payments.
• Difficult to meet November payroll, currently inadequate cash for December
Payroll.
3
UNRWA Financial Situation
4 Key Areas:
1)
Inadequate Working Capital
2)
Relative Inadequate Annual Income
3)
Adverse Internal and External Factors &
4)
Financial Effect of Migration to IPSAS
4
Inadequate Working Capital – General Fund
• Usual Working Capital (WC) for most entities is in excess of 3 month’s
expenditure
• UNRWA spends @ $50m per month,
• UNRWA’s WC has declined over last 10 years from @ $80m to be
$42m at 1 Jan. 2011
• UNRWA’s $42m – comprises only $8m cash
5
Relative Inadequacy of donor Income
• Due to relative inadequacy of income – UNRWA typically starts each
year with a deficit
• Rate of growth in expenses has outstripped growth in income
•
•
•
•
2010 starting deficit - $53m
2011 starting deficit - $63m
2012 (draft) starting deficit - $73m
2013 (draft) starting deficit - $88m
• Structural deficit @ -$100m
6
Internal & External Factors
• Structurally costs increase at least $20m p.a. (Wages + $12m,
Severance +$4m, Others +$4m)
• Excl. e-Health, Education Reform, ERP, etc
• Impact on wages through Middle East changes
• OECD countries economic challenges
• 2012/13 shaping up as a very challenging period
7
Severance Provision & IPSAS (Int. Public Sector Accounting Standards)
• UNRWA is legally required to pay severance to local staff – liability
• At 1 Jan. 2011 severance liability -$330m, expect 2012 to -$370m
• Due to IPSAS, severance liability first time on Balance Sheet
• Expect in 2013 UNRWA’s net equity will be negative – Audit
implications.
8
9
UNRWA Financial Reforms
•
UNRWA is serious about reforms and Finance with many Depts
have been active in seeking to effect appreciable reform.
•
Financial Reforms covering:
i)
ii)
iii)
iv)
v)
vi)
vii)
viii)
Reporting
Financial Reporting
Project Reporting
Inventory Management
Treasury Management
IPSAS, (Int. Public Sector Accounting Standards)
ABC (Activity Based Costing) &
Streamlining of Costs
10
Reporting
•
From April 2010 UNRWA has effected a hard close
of Monthly Accounts. Initially on working day (WD)
7, after 5 months WD5, April 2011 on WD 4
•
As per UNBOA – UNRWA one of very few UN
entities effects monthly hard close of GL. GF fully
accrued.
•
Full Monthly Report from Dec 2010 – forwarded to
donors.
11
Reporting
•
New Fixed Assets and Accounts Receivable sub ledgers – go live
July/August 2011
•
Re programme ERP to effect a clear delineation of all cash
transactions per Fund Group (GF, Projects, EA & PF)
•
Enhanced, standard system generated project reports, by donor,
Field. For YTD, LTD and E EOY – go live August 2011
•
Freezing and aging of all hard commitments – new active
•
Standard system generated report for all UN costs – replace manual
processes – active July 2011
12
Financial Reporting
•
Standard system generated donor reports – replaces tedious
manual process – active July/August 2011
•
New standard system generated head count by occupation – per
Field/Dept – active July/August 2011
•
New standard system generated expenditure reports for UNRWA’s
largest project – Nahr El Bared – active July/August 2011
13
Project Reporting
•
UNRWA commenced 1 Jan 2011 with 832 “active” projects.
•
Just over 300 projects closed
•
Work on closing over 250 projects by August 2011
•
Post August & pre December 2011, effect full accrual accounting for
the top 80% of projects by value (@ $100m)
•
Project reporting, in all material respects fully accrued pre end of
2011
14
Inventory Management
•
Pre 2011, annual stock take for the 5 Field warehouses
•
Commencing 2011, each quarter (March, June etc), quarterly stock
take each warehouse
•
Commencing June 2011 manual count of medical stores, One Field.
15
Treasury Management
•
Effected inaugural FX hedges for 2011 donor income – stability of
income & E EOY forecast
•
Detailed 2 monthly & rolling 12 month cash flow forecast
•
Having short listed preferred Bank, commence internet banking in
August 2011 & roll out to all Fields within 6 months, bias – move
away from cash & cheque transactions – quicker, safer, less time
consuming
16
IPSAS
•
UNRWA to be an early adopter of IPSAS – as from 1 January 2012
•
IPSAS not reliant on purchasing new ERP
•
Projects – accrual accounting – August – December 2011
•
20 UNRWA Policies IPSAS compliant – effected
•
45 UNRWA Financial Technical Instructions IPSAS compliant –
August 2011
•
New Sub-ledgers (Assets and Accounts Receivable) and Reports
17
Activity Based Costing (ABC) – General Fund
•
Select preferred vendor end of June, 2011
•
Project commence in July and estimated to conclude December 2011
•
Project deliverables:
1.
2.
3.
4.
Identification, definition and costing of all salient activities per Dept & Field
Identification and weighting of the cost drivers per activity
Full absorption costing of all key activities for all Fields – front line activities
Clearer understanding of the cost differentials in provision of services per
Field
What can be done to stream line costs of comparable activities per Field
ABC model, aligned with ERP system, each month generate system
generated reports, costing key activities per Field Dept, actuals tie to each
month’s actual costs
Each key Field activity appraised with reference to performance metrics
5.
6.
7.
18
Streamlining of Costs
•
UNRWA Management have agreed to a series of initiatives that are
planned to generate over $20m of savings per year
•
I.e. – agreement of 2% head count reduction per year
•
Finance – effect plan to centralize the current 6 Accounts Payable
teams – to 1 central location, pre end of 2011 – savings $400K p.a.
19
20
21
Past Biennia Expenditure and draft 2012/13 Budget
•
Past Biennia Expenditure and draft
2012/13 Budget covering:
1. General Fund
2. Projects
3. Emergency Appeals in Gaza and WB
22
Definitions
GF
Projects
EA - Gaza&WB
Definition:
Definition:
Definition:
Support “core” activities
that require recurrent
resources.
For specific and time
bound activities, with a
view to improve services
without increasing
recurrent costs.
Responding to emergency
conditions; i.e. that are
created by external
factors and that are
expected to be provided
as long as these external
conditions prevail.
Typical Intervention:
Provision of health,
education, and relief and
social services, as well as
support services that
enable UNRWA to
operate.
Typical Intervention:
Building of facilities, and
reform related items that
are supposed to be
integrated in the medium
term.
Typical Intervention:
Source of Funding:
Source of Funding:
JCP, emergency
education, additional relief
related to the external
factors
93% voluntary
contributions, 6% UNNY
– Int. Staff, 1% Others
Earmarked contributions.
Source of Funding:
Earmarked and unearmarked contributions
23
General Fund – Expenditure and Draft Budget
2006-07
2008-09
2010-11
2012-13
Expenditure
($m)
Expenditure
($m)
Expenditure/
Forecast
($m)
Draft Budget
($m)
602.8
117.8
720.6
751.7
153.8
905.5
869.0
196.5
1,065.5
924.1
219.6
1,143.7
472.5
148.9
44.1
6.1
49.0
720.6
590.2
172.2
43.5
10.5
89.1
905.5
651.0
199.6
50.0
18.7
146.2
1,065.5
674.2
212.8
57.8
21.0
177.9
1,143.7
27,789
28,535
General Fund:
Labour Costs
Non Labour Costs
Programmes:
Education
Health
Relief & Social Services
Infrastructure and Camp Development
Support Departments
Head Count
26,566
Notes:
1. Labour costs excludes international staff posts funded by UN
2. 2010/2011 includes 2010 Expenditure and 2011 EOY forecast
24
General Fund:
2006/2007
2008/2009
General Fund
Expenditure
& Draft2010/2011
Budget
US$M
Labour1400
Costs
Non Labour Costs
Programmes:
1200
Education
Health
Relief &1000
Social Services
Infrastructure and Camp Development
Support Departments
602.8
117.8
751.7
153.8
472.5
148.9
44.1
6.1
49.0
869.0
196.5
590.2
172.2
43.5
10.5
89.1
2012-2013
924.1
Support Departments
219.6
651.0
674.2
Infrastructure and Camp
199.6 Development
212.8
50.0
57.8
18.7 Relief & Social Services
21.0
146.2
177.9
800
Health
600
Education
400
Non Labour Costs
200
Labour Costs
0
07
0
2
6/
0
20
09
0
2
8/
0
20
11
0
2
0/
1
20
21
20
13
0
2
25
Emergency Appeal – Gaza and West Bank
Expenditure and Draft Budget in US$M
Emergency Appeal
Prior Years EA incl. 2006-07
2006-2007
2008-2009
289.0
EA 2008-09
2010-2011
67.8
12.8
346.5
157.2
EA 2010-11
247.3
EA 2012-13 (Draft Budget)
Total
2012-2013
528.3
289.0
414.3
Note: The US$528.3m for 2012-13 represents Gaza and WB requirements as per the draft FIPs
417.4
528.3
26
Past Biennia Expenditure & Draft Budget US$M
GF-Projects-EA
2500
US$M
2000
General Fund
1500
Projects
1000
Emergency Appeals
500
Grand Total
0
2006-07
Fund Type
2008-09
2010-11
2012-13
2006-07
2008-09
2010-11
2012-13
General Fund
720.6
905.5
1,065.5
1,143.7
Projects
116.8
173.9
213.0
295.5
Emergency Appeals
289.0
414.3
417.4
528.3
1,126.4
1,493.7
1,695.9
1,967.5
Grand Total
27
Detailed Breakdown of Support Department Costs
($000 – Actual + Draft Budget)
Notes Expenditure Expenditure Expenditure Expenditure Expenditure
2006
2007
2008
2009
2010
Com-Gen Office
1
1,029
1,273
1,300
1,507
1,948
Human Resources
Office of Director of Human Resources
127
110
152
199
111
Personnel Services
2,3
2,003
1,942
4,229
2,017
11,238
Compensation & Management Services
175
200
274
250
314
Staff Training and Development
220
407
514
459
540
Human Resources Total
2,524
2,660
5,170
2,924
12,203
Admin Services
Admin Support
4
11,071
14,019
13,550
13,902
16,335
Procurement
5
13,329
(11,596)
16,850
19,247
19,625
Information Sysems
6,7
1,874
2,172
3,175
3,142
4,207
ERP
219
270
202
197
384
Admin Services Total
26,493
4,865
33,777
36,488
40,552
Financal Services
8,9
2,609
4,291
1,375
2,508
4,335
Legal
330
400
409
586
580
IOS
10
506
378
308
400
664
ERD
11
729
876
1,119
1,168
1,250
Holding Codes
12,13
1,186
(1,186)
Grand Total
35,407
13,556
43,457
45,581
61,532
Department/Year
Total Biennium
48,963
89,038
EOY F/C Draft Budget Draft Budget
2011
2012
2013
771
767
767
8,305
8,606
8,831
787
951
951
55,280
57,281
58,781
9,869
10,226
10,494
669
693
711
1,086
1,079
1,079
2,582
2,021
2,021
5,384
6,176
6,464
84,733
146,265
87,800
90,100
177,900
29
Explanation Note to Support Department Costs
Note 1
Adhoc increase in 2010 $300k due to construction and maintenance of HQ Jerusalem
office
Note 2
Increase in 2008 is due to Accrual of Area staff annual leave encashment of +$2.4m.
Note 3
Increase in 2010 due to +$4m leave encashment and +$3m towards the costs of strike in
West Bank
Note 4
Increase of +$2m in 2007 is due to Construction & Remodeling of new building in HQA,
and new building for Field Office Jordan.
Note 5
Inventory credit of +$25m in 2007 is due to consumption from the previous years inventory.
Note 6&7
Increase in costs +$1m due to expansion of SWAN network for users and disaster
recovery plan costs
Note 8
Increase of +$2m in 2007 due to accounting for depreciation / capitalization
Note 9
Increase in 2011 is due to expected CAF expenditure increase + $3m, expected +$2m
unbudgeted annual leave and +$2m other accruals.
Note 10
Increase of +$400K in 2010 is due to increased staff and consultancy services.
Note 11
Increase in 2011 EOY Forecast in ERD is due to transfer of PIO and Cairo office costs
from Com Gen to ERD.
Note 12&13 Represents the Head Quarters Reserves EOY(F/c) as on May 2011+$5.4m, $12.6m for
2012-13 and will be reallocated to other Programmes.
MTS costing – Assumptions and Main Results
• MTS costing is based on the individual sections per field in the MTS
• The majority of recurrent costs are staff cost and cost for relief
services
• One time cost mostly refer to additional installations mainly schools
• Reform costs are only partially included
• GFO has not yet calculated the recurrent costs for the additional
schools nor the UNESCO teacher norm
• SFO needs to confirm the recurrent or one time nature of the needs
• Headquarters‘ initiatives are not included
30
MTS costing – What would it cost to implement the full
MTS in 2011 in USD millions
1400
Additional cost
USD m
Emergency Funding
1200
Project Funding
1000
General Fund
800
600
400
200
0
Annual - Recurrent MTS cost
One time MTS cost
31
32
MTS costing – Breakdown of the additional cost
700
Goal 1 - Long and healthy life
USD m
Goal 2 - Acquired knowledge and skills
600
Goal 3 - A decent standard of living
Goal 4 - Human rights enjoyed to the fullest extend possible
Other
500
400
300
200
100
0
Annual Recurrent
Costs
One Time
Costs
Gaza
Annual Recurrent
Costs
One Time
Costs
Jordan
Annual Recurrent
Costs
One Time
Costs
Lebanon
Annual Recurrent
Costs
One Time
Costs
Syria
Annual Recurrent
Costs
One Time
Costs
West Bank