Improving the Funding System of Operational Activities for Development: System-wide Coherence 2008 to Present

By Katie Jagel
23 April 2012

Funding reform has been, and continues to be, a necessary reform to enhance UN efficiency. This article covers the progress of Funding as a cluster within system-wide coherence in 2008, to the present efforts of improving the funding system of operational activities for development taken on by the Fifth Committee, ECOSOC, UNESDA, and the CEB.

Introduction
       Increased spending scrutiny was necessary to achieve coherence across the larger UN system. This was one of the necessary goals set up at the 2006 High Level Panel on System-wide Coherence. UN funding for operational activities for development has maintained the fundamental characteristics of 'universality, voluntary and grant nature, and neutrality in their multi-lateralism'. There is and have been problems with funding: promised and then rescinded donations, little accountability and few consequences. More specifically the imbalance of core versus non-core funding (general UN contributions versus earmarked country donations) has led to an erosion of the original funding framework. This has led to widespread inefficiency and discrepancies in enacting UN agendas. Undependable and unpredictable funding necessarily hampers program initiatives. In a report for the Organization for Economic Cooperation and Development - Development Assistance Committee (OECD-DAC) in 2007 it finds, "most donors are not on track to meet their stated commitments to scale up aid and will need to make unprecedented increases to meet the targets they set for 2010." This section marks the transformation of Funding as a cluster issue of System-wide coherence to a main responsibility under ECOSOC.

62nd Session: Imbalance and Consensus
       Informal meetings picked up where they had left off in spring of 2008 led by SWC co-Chairs Ambassadors Augustine Mahiga of Tanzania and John Paul Kavanaugh of Ireland. The co-Chairs held the consultations in the shadow of the Triennial Comprehensive Policy Review (TCPR), which looked to set a specific and strategic policy direction for funding. Two main recommendations from the meeting included: first, creating a general fund for operational activities of the UN Development System, and second, to find ways to lessen transaction costs and increase efficiency. Various Member States in attendance made statements. The EU mentioned that a pre-requisite to improving funding coherence was to strike a mediated balance between core and non-core funding. The
G77 and China issued a statement in full support of aligning multi-year funding cycles. They reiterated the need for accountability and an aversion of “false deadlines”. Most States were in agreement that poor management and inflexibility of funds have undermined UN policies and encumbered the larger UN system.
       By May, Member States has agreed upon several decisions. Member States advocated the idea of coordinating budget cycles for various funds, programs, and agencies. There was a general agreement that core funding needed to increase to counteract the recent decline of contributions, and that in this way funding could be more predictable; as multi-year funding is essential for the UN's effectiveness. There were several decisions made in regards to the Delivering as One initiative. The money saved by countries leading 'Delivering as One' efficiency initiatives should be rewarded for their innovation with the money being turned back to development related initiatives to be used in those same countries. States agreed it was important that increased donor activity in the Delivering as One pilot countries not leave non-pilot countries deprived of funding. Lastly, States pressed that the increase in donations for the DaO countries not be a short-term occurrence.
       By September 2008 a general consensus emerged among Member States that sufficient and predictable funding at the country level should and must be accompanied by sufficient and predictable funding at the normative UN level. Because of the progress taken under the guidance of the TCPR agreement, States did not wish to create any new mechanisms, preferring instead to keep the process efficient and uncomplicated by using the TCPR as the headlining institution. UN leadership urged Member States to increase their voluntary contributions substantially under the General Assembly's 2007 and 2008 TCPR resolutions. The GA then issued resolution 62/277 which requested concept notes on Gender Architecture, Governance and Funding from the Secretary-General, Ban Ki Moon.

63rd Session: Strengthening of Architecture; Quality over Quantity
       On 5 May 2009 the Secretary-General's concept note on Funding was issued; entitled “Strengthening the system-wide funding architecture of operational activities of the UN for development”. The concept paper summarizes existing challenges, but the bulk of the report focuses on recommendations towards enhancing the existing funding architecture. Deputy Secretary-General Asha-Rose Migiro, who has been involved in many other SWC issues as well, presented the paper. The recommendations fell into three categories: resource flows, organizational performance, and aid effectiveness. First, in 'Resource Flows' it was recommended that there be a renewal of commitment to funding volumes; that governments in donor countries revise budgetary laws and practices so that multi-year core funding commitments can be met; there was a specific nod to the successes of the 'One Fund' aspect of the DaO initiative; and then there were also recommendations specifically concerning percentages of resource distribution for donors. Second, 'Organizational Performance' asserted the necessity of multi-year strategic planning frameworks, and then for the UN Development Group (UNDG) and the CEB to establish a common standard with which to assess and hold organizations accountable to maximize effectiveness. Last, under 'Aid Effectiveness' it is reiterated that the UNDG/CEB at the country level should lead the management of aid; that UN agencies and donors should standardize both procedures and terminology of funding to increase coherence and to comply with the International Public Service Accounting Standards (IPSAS); and that the UN should publish bi-annual aid effectiveness reports to help development cooperation.
       Member State responses varied in terms of feedback. Most were supportive of the reforms, but many were concerned by the multiple referrals in the note to the "Delivering as One" project, for which the outcomes had not yet been finalized, and so all measured successes had to be taken as relative. Further, States argued that the DaO is often said with the mantra 'one size doesn't fit all', and therefore the project and its funding system, cannot be applied universally. States also mentioned an imbalance in the note, with more focus put on donor countries, without mention of responsibilities of recipient countries. Egypt, Japan, Norway, Switzerland and the US all called for increased contributions accompanied by an increase in the quality of use of the contributions, within a more accountable and clear UN funding system. States such as the CANZ nations, the EU, Norway and the US all expressed the wish for funding and governance to be discussed together.

       States and non-governmental funding-related agencies met to discuss the paper throughout May and June. The Funding note had come out on 5 May 2009 and by late June the 63rd session SWC co-Chairs, Ambassadors Kaire Mbuende of Namibia and Juan Antonio Yáñez-Barnuevo of Spain, presented an Executive Summary on the discussions of Funding, Gender and Governance. They directly quoted Ban Ki Moon's concept note, summarizing of the weaknesses of the current funding architecture: “volatility of resource flows, long-term decline in the share of core resources of overall contributions, fragmentation of non-core funding, and uneven burden-sharing among donors.” The co-Chairs listed potential solutions including: the ability of the GA to recommend to donor countries to allocate a minimum of 50% of all system-wide contributions to development, as core resources; that around 50% of system-wide non-core contributions could be made to thematic funds (specific issues and efforts e.g. HIV/AIDS); they also requested the Secretary-General to provide comprehensive statistical reports on core and non-core contributions to maintain accountability and effectiveness; and lastly, requested to the UNDG “to formulate a common standard to assess organizational and operational effectiveness” on the ground level.
       Following the concept note, the co-Chairs executive summary, and the June 17th plenary meeting, States made their statements. The statements mainly revolved around the following two conclusions: a fragmented system existed concerning development work; and information lacking at both a country level and headquarters level leads to competition for funds among similar agencies. Representatives called attention to 'the Four P's': Performance, Predictability, Planning and Programs. The JCC reiterated that it would be best for Governance and Funding to be pursued together. Other than an increase in funding and an accountable commitment to funding, CANZ emphasized that it is necessary to reconsider how current resources are being spent. The quality over quantity donations idea was reiterated by Japan, Switzerland and the UK with the JCC maintaining that an increase in funding was also necessary.

       In September of 2009, Resolution 63/311 passed. Throughout November and December, meetings took place led by the new co-Chairs of the SWC committee of the 64th GA, Ambassadors Tiina Intelmann of Estonia and Ghazi Jomaa of Tunisia. Under 'Funding System of Operational Activities for Development’, the resolution requested the Secretary-General to: create a "central repository of information on operational activities for development” (also recommended in regards to governance reforms) to help coherence between member states and UN agencies. Member States asked the Secretary-General to provide "actionable proposals" to help with the imbalance between core and non-core resources. The resolution asked those Member States who were in the position to do so, "to substantially increase their voluntary contributions to the core/regular budgets of the United Nations development system.”

64th Session: Central Repository of Information, Substantive Discussion
       On 22 December 2009 the Secretary-General issued a Follow-up note on Operational Activities for Development, which covered the four outstanding SWC issues (not Gender), and addressed the concerns from Resolution 311 follow-up. Secretary-General Ban Ki Moon presented his note to the 64th session of the GA on 4 February 2010. In 'Funding for Development Operations', he covered two categories; 'Financial Reporting', and the 'Central Repository on Operational Activities for Development'. The Assembly had requested that the Secretary-General, together with the CEB provide modalities on how to improve the UN's financial reporting system, with specific reference to the imbalance of core and non-core donations in the field of development. So, under 'Financial Reporting' he reported that the UNDG was “forming a working group charged with simplifying and harmonizing financial reporting by creating common guidelines to be used by the UN entities in classifying expenditures” and further, that the UNDG had created a system-wide database for improved coherence. He addressed concerns regarding the imbalance between predictability of core and non-core funding saying the 2012 Statistical Compendium would address them specifically. The Secretary-General recommended the following in response to specific approach towards improved financial reporting- keeping a statistical track record of all contributions and expenditures for UN development operations, strengthening policy analysis through the statistical compendium, enhancing data access to funding information and by extension publishing aggregate funding figures.
       This leads into the second area, the 'Central Repository on Operational Activities for Development'. The GA had requested “a central repository of information on operational activities for development”, which was to become part of a financial statistics database and reporting system. The Secretary-General supported this measure and advocated that it would enable better coordination and lead to a more comprehensive, reliable, and manageable financial situation for the entirety of the UN, which would amplify the “knowledge capital”, produced within the UN. The Secretary-General also created a time-line for the launching of two phases of the repository. The first was expected in early 2010, wherein analysis and charts detailing financial measures from reports of the Secretary-General (from 2002-2009) would be published online. The second phase was expected to launch around the time of the first one and had a completion schedule of two years- this would be the centralized collection and analysis of financial data for the larger UN entity.

       A Joint Session on Governance and Funding took place on the 12 February 2010, where the co-Chairs presented their SWC work plan to Member States. At these meetings, not just the actionable proposals were up for debate, but the consultation process itself. Although the most drama existed within working groups debating Governance issues (see 'Governance' section), there was some tense debate about funding as well.
       Deputy Secretary-General Asha-Rose Migiro spoke about several key issues relevant to funding architecture. She said pertinent to the core/ non-core funding imbalance, that it would be important to establish a dialogue with donors to find out exactly why many of them favor non-core over core contributions. She then made mention to the four areas outlined in the Secretary-General's report: better cooperation between UN governing bodies; improving UN Secretariat support capacities through reviews and feedback channels; equal participation and voice in governance decision-making; and finally, the impact of those intergovernmental decisions and improvement in the decision-making process. In Member State responses the EU noted, “numerous funding modalities are aligned with the principles of predictability [and] accountability," pressing the need for quality funding. The EU impressed the need for improved understanding of different 'forms' of funding, making particular mention to the varied modalities within the “non-core” label. The JCC noted that it was not in a position to endorse recommendations seeking to limit or define a specific role for the GA in operational activities.

       Informal consultations took place on 30 March and 7 April 2010, in conjunction with an informal concept note provided by UN Department of Social and Economic Affairs (UNDESA) containing the preliminary funding analysis conducted for the 2010 Statistical Compendium, and an informal note from the UN Secretariat titled “Funding of operational activities for development of the United Nations system”. The co-Chairs of SWC created a working group led by delegations from Australia and Brazil to run the meetings in the hopes that they would lead to a resolution. The consultations were based around both the UNESDA report and the December report from the Secretary-General. Both reports brought the non-core/ core discrepancy to a fore. In more detail: the non-core, restricting funds are widely preferred and steadily increasing, while the decrease in core funding had led to the erosion in funding predictability, and threatened regional and country-level programs covered more often by core funding.
       These discussions carved out four areas within the core/ non-core debate. These were; first, 'rapid growth of non-core donations' wherein it was discussed that it was caused in large part by 'non-traditional' donors including private sector groups and foundations, and that these should be better organized and integrated into the financial architecture of the UN. Second, issues surrounding 'critical mass' (the level of core funding necessary to accomplish the UN's development agenda, where non-core contributions are of supplementary value). It was discussed that an increase in non-core funding should not be at the expense of core funding, and further, that non-core resources cannot be utilized to maximum efficiency when they supplemented an unhealthy 'core'. Third, in regards to 'predictability of funding', Member States decided that funding modalities needed to be aligned and brushed up upon. Last was the structure and utility of 'Multi-Donor Trust Funds (MDTF's)'. Member States noted that MDTF's were already operating in many countries, and increasing in number. Member States cited these institutions as important and perhaps unexplored tools for coordinating donors; a stage for policy dialogue; and a mode of resource mobilization, as they reduce transaction costs. Some Member States agree with the MDTF's at theoretical capacity, but showered concern in terms of the risks associated with underfunded MDTF's that are not self-sustaining, and stipulated that minimum thresholds should be set.

       The informal consultations by the working group resulted in a draft resolution created by late April. This working group met with the other SWC clusters to form a compilation document, Resolution 64/289 issued on 21 July 2010. All issues discussed in the informal meetings reflected in the document. The necessity and centrality of funding was widely acknowledged since without it all other clusters would come to a standstill. In some ways, States view funding as the most important cluster, if only because it is the lifeblood of the others. The resolution also addressed the future of the funding issue requesting “...the funds and programmes […] report on their efforts and conclusions on critical mass in their annual or biennial reports to the Economic and Social Council, beginning in 2011”. It is here that the baton was passed, with funding changing hands from a cluster of SWC to a main responsibility of the ECOSOC. The document also requested that MDTF's provide reports to ECOSOC as well.

65th Session: Expert Dialogue and Critique
       UNDESA and the CEB jointly organized an Expert Meeting from 20-21 January 2011 in Geneva, Switzerland on “Strengthening system-wide reporting on funding for UN system” which discussed ways to modernize and simplify system-wide reporting, with particular focus on operational activities for development “through harmonization or simplification of data collection processes and improved analysis of funding-related information”. The Secretariat of OECD-DAC played a leading role in the discussions. The meeting reviewed the different funding reports and measures each of the three organizations had pursued. The three system-wide reporting “projects” had been conducted separately by: UNDESA, on UN operational activities for development; OECD/DAC, on multilateral aid; and CEB, on the budgetary and financial situation of the organizations within the UN system, including a common IT platform. There were obvious compliments but also a need to explore and exploit obvious overlaps and commonalities “relating to data/information requirements, collection processes and management and accessibility”. Addressing these overlaps would lead to enhanced coherence and cooperation among all three reports and future projects by the agencies. One specific measure the meeting addressed was the introduction of International Public Sector Accounting Standards (IPSAS) which would have a system-wide impact on common analysis of trends in expenditures. Although there was an obvious assertion for creating a standard of common terminology and classifications, the document cautioned the impracticality of pursuing full harmonization down to the level of individual entities.

       On 15 July 2011 ECOSOC in Geneva hosted a dialogue with the heads of several UN executive heads of programs and agencies to discuss “Looking to the Future of Operational Activities for Development of Funds and Programmes: strengths, weaknesses, opportunities and threats,” followed by a panel discussion on “Strengthening the Leadership of the United Nations Resident Coordinator: role of accountability frameworks, resources and results reporting.” The meeting took place under the vice president of ECOSOC Gonzalo Gutierrez Reinel, and featured coordinated statements from many UN agencies¹. The discussion centered around the importance of improving efficiency, the ability to respond to changing needs, and the continuing effort to strengthen the Resident Coordinator System of the 'Delivering as One' initiative inside the UN. In an effort to increase coherence and clarity, ECOSOC now posts 'Statistics on funding of UN operational activities' right on its website. This was also in part to answer the Secretary-Generals request in resolution 63/311 for a 'central repository of information'.
       The Secretary-General responded on 21 July 2011 with a concept note labeled “International financial system and development” It summarizes recent trends in international and private capital flows of developing countries. It also gives an overview of the current efforts to reform the international monetary and financial system and architecture by different institutions [IMF, OECD, etc]. It makes key mention to the areas of financial regulation and supervision, multilateral surveillance, macroeconomic policy coordination, sovereign debt, a global financial safety net, the international reserve system, and reforms of the Bretton Woods institutions (BWI's).

66th Session: International Financial System Reform
       On the 13 February 2012, ECOSOC partnered with the Permanent German Mission of New York to put on 'Dialogue on UN operational activities for development: emerging issues and challenges – Seminar 1: Emerging Issues in UN Development Operations'. This was in part to prepare for the General Assembly’s 2012 Quadrennial Comprehensive Policy Review (QCPR), which is to take place in the summer of 2012. Mr. Sha Zukang, Under-Secretary-General for Economic and Social Affairs, and Secretary-General of the 2012 UN Conference on Sustainable Development presented the participants with three questions concerning the follow-up of the QCPR. The first was in reference to the increased need for UN support at the country level: how can this demand be met while further enhancing UN impact?; second, how can the UN address increased emphasis on implementation of sustainable development?; and lastly how can current UN development activities be strengthened within the overall global development configurations, with specific mention to IFI's (Interntaional Financial Institutions e.g. the World Bank and the IMF)? He said the answers lie within the upcoming QCPR report and subsequent discussions and that he would leave it up to Member States, UN agencies, and ECOSOC to act efficiently and effectively. He called for 'vertical integration' and elaborated by saying “our normative work, including both our policy analysis and intergovernmental deliberations, could better guide UN operational activities at the country level” he gives a nod to the Delivering as One efforts in this regard. The QCPR will review the UN System’s operational activities for development (it also will be a forum for the final reports of the Delivering as One initiative). The goal of the QCPR is to create a more relevant, efficient, effective United Nations to better meet the needs of developing countries.
       On 14 February 2012 Resolution 66/187 passed pertaining to the “International financial system and development”. It makes note that it is in part because of the economic crisis that some contributions to the UN may have wavered. It maintains, “the international financial system should support sustained, inclusive and equitable economic growth, sustainable development, and hunger and poverty eradication efforts in developing countries, while allowing for the coherent mobilization of all sources of financing for development.” It mainly asks Member States to act decisively, inclusively and efficiently in regards to international economy and contributions to the UN so that it may be an effective tool in time of economic crisis.
       The QCPR report will come out mid-June of 2012.