Version 15 March 2012

Background Note on UNRWA Budgeting

The main purpose of this note is to provide background information on UNRWA budgeting to members of the Advisory Commission (AdCom). The issues covered in this note are based on issues raised by the members of the Sub-Committee of UNRWA’s Advisory Commission.

Overview of UNRWA’s budget processes

“Internal” (UNRWA) and “External” (UNHQ New York) budget processes

Every biennium, UNRWA prepares its programme budget along two main tracks. One is “internal” and results in Field Implementation Plans (“FIPs”) and a Headquarters Implementation Plan (“HIP”). FIPs represent field-level strategies to achieve the Agency’s broad human development goals within each of the five areas of operation. The HIP presents the programmatic guidance and support strategies to achieve coherent and effective implementation of the FIPs, and, under the broad direction of UNRWA’s executive leadership, to promote accountable and results-based management.

All implementation plans – FIPs and HIP – are prepared in line with the vision and priorities set out in UNRWA’s Medium Term Strategy (MTS) for 2010-2015[1], and also present the financial requirements for implementation of the biennial plans. These requirements are referred to as UNRWA’s General Fund, which the Agency relies on MemberStates and other donors to fund voluntarily on an annual basis.

The “external” budget track is managed by UN Headquarters in New York. It covers UN entities, including UNRWA, that receive funds from the “Programme Budget of the United Nations”[2]. UNRWA’s core international staff posts are funded through this budget; as of January 2012, they numbered 146.

In both the internal and external budget process, UNRWA presents a corporate programme vision and strategy, notwithstanding some differences in format imposed by UNHQ on all sections of the UN Programme Budget.

For ease of understanding, the internal and external budget preparation processes are enumerated separately below, with 2014-2015 biennium planning as an indicative model[3].

“Internal” (UNRWA) budget process

In November 2012 the Executive Office will initiate preparation of the 2014-2015 programme budget with preliminary and broad guidance to UNRWA’s management team. Between early December 2012 and February 2013 further detailed guidance will be shared in the form of consolidated planning documents.

These documents are prepared in close and active consultation with all senior managers in the Agency and their programme and budget focal points. The planning documents represent UNRWA’s comprehensive guidance framework for the preparation of the 2014-2015 FIPs and HIPs, based on: the Agency’s five Human Development Goals, the hierarchy of outcomes, strategic objectives, and interventions required to achieve these goals by theField Offices, Programme Departments and Headquarters Support Departments[4].

In December 2012 close and active Agency-wide consultations will be effected by planning and coordination working groups. These consultations continue until the draft implementation plans are prepared in the second quarter of 2013. In the course of these consultations, UNRWA’s Resource Allocation Committee (RAC)after consultation with Field and Programme Directors will provide the CG with recommended biennium budgets (envelopes) for each Field and HQ department for approval. These recommended budgets provide a quantification (headcount expense and capital dollars) of the level of resources that will likely be available for the upcoming biennium (i.e. notwithstanding that the Agency has in recent years commenced the financial year with a budgeted deficit). The recommended budgets are based on:

  • previous year’s approved budget;
  • income constraints; and
  • salient changes in Field Office / Headquarters Departments which potentially impact resource allocation[5].

The budgets approved by the Commissioner-General are then conveyed to the Field Offices and HQ Departments for the development of the Blue Book (Programme Budget for 2014-2015).

In the past two biennia, UNRWA has sought to shift the basis of its estimate of financial requirements from status to needs, including more effective assessment and targeting of vulnerable groups (for example by field implementation of the proxy means test formula). It has also sought to refine the process by which resources are allocated between fields and programmes to balance the respective needs in each field and programme against each other. For example, it is recognized that the Gaza Field Office (GFO) has relative needs that are greater than in other UNRWA Field Offices (e.g. an unemployment rate that exceeds 50%, the impact of the ongoing blockade, inadequate clean water, inadequate access to medicine, etc). Nevertheless, a shift of already constrained resources from budgets of other Fields which are facing increasing refugee populations would adversely impact constrained service delivery in those Fields. Therefore the re-allocation of budgets can only be achieved incrementally.Allocations use the last biennium budget as a base, modified by changes in the operational context, such as staff salaries, staff numbers and cost of supplies.

UNRWA expects that the 2014-2015 FIPs will continue to be framed on assessments of needs by Field Offices and the estimated budget requirements based on an established set of cost drivers (principally the growth in the population of refugees utilizing education and primary medical services) and projected unit costs (staff costs, goods and services).

Ahead of the June 2013 Advisory Commission (AdCom) meeting, the draft FIPs and HIP will be shared with AdCom members (including in the Sub-Committee), with a view to integrating feedback received and obtaining the Advisory Commission's endorsement of the plans at the June meeting. The final FIPs and HIP including the budget requirements using an RBM framework will be shared with the AdCom ahead of its November 2013 meeting.

In the process of finalization of FIPs and HIP, targets for all outputs and outcomes are developed, agreed and uploaded into the Results Based Monitoring system.

In the last quarter of 2013, the budget review will take place. It will re-assess funding projections[6] for the General Fund, and take into account changed cost projections reflecting the most recent political, security and other developments that may affect the budget. As this re-assessment is done while keeping within the total Agency Envelope approved by the CG and published in the Blue Book, under some circumstances this may require a reduction in previously budgeted expenditures. Budget hearings involving the Deputy Commissioner-General (DCG), Field Directors and key staff working on financial and programmatic issues and Headquarters Departments[7]will take place and comments and recommendations from the Advisory Commission and ACABQ will be taken into consideration.

The final budgetswill be approved by the CG prior to the commencement of the 2014 budget year and will be subsequently quantified and uploaded into the Financial Management System (FMS). Budget modifications might be necessary during the year (e.g. fund re-allocations to cover salary increases andfood distributions). These modifications or changes to the approved budget typically involve first, a formal recommendation from UNRWA’s Resource Allocation Committee (RAC) to the CG and once approved by the CG will result in an approved (higher or lower) “Manage To” allocation for the respective Field/Department. Thus the final approved budget, does not change throughout the year, approved changes are reflected in changes to the reported “Manage To” allocation.

The indicators, targets and baselines included in the biennium plans (FIPs and HIP) will be regularly monitored and reported against. Many of these indicators are by now harmonized between fields enabling UNRWA to compare implementation success between fields. The FIPs will be internally reviewed in the Fields on a quarterly basis supplemented by an agency-wide review of progress against plans on an annual basis. Donors who have agreed to use the harmonized monitoring approach to limit the burden on UNRWA for reporting will receive a harmonized donor report which will use commonly agreed indicators and will be produced once a year.

“External” (UNHQ New York) budget process: 2014-2015

2014-2015 Strategic Framework is developed

In January 2012, UNRWA submitted its Strategic Framework (SF) for the 2014-2015 biennium to the Programme Planning and Budget Division (PPBD) of the UN Secretariat (within the Office of the UN Comptroller) for review and approval. The SF is a narrative based on UNRWA’s Human Development Goals, and presented in a logical framework mandated by the UN General Assembly. SFs remain for the most part unchanged in their articulation of strategic objectives from one biennium to the next; changes at this level are only made if a new programme objective is introduced in line with an inter-governmental mandate.

PPBD reviews the SF, meets with UNRWA to discuss the document and issues the proposed SF in draft form in the first quarter of 2012 for review by the General Assembly’s Committee on Programme Coordination (CPC). In June / July 2012, UNRWA appears before the CPC to describe the SF’s overarching programme objectives. There is no discussion of resource requirements at this stage of the process. The CPC may amend the parts of the SF, specifically indicators of achievement.

2014-2015 biennium budget is developed

In late 2012, SFs for all entities covered by the UN Headquarters budget process are published in an integrated General Assembly document. This brings to a close the programmatic phase of 2014-2015 planning, and the resource phase begins in this same quarter with the General Assembly’s adoption of a budget “outline” which establishes the financial ceilings for the more than $5 billion budget for 2014-2015. PPBD applies this ceiling to all the entities in the budget, while taking into account relativities (needs, mandates, etc).

In November 2012, UNRWA submits to PPBD its “indicative” budget for 2014-2015. This budget relates exclusively to the international posts funded under the Programme Budget of the United Nations. By February 2013 PPBD will convey its “proposal” regarding UNRWA’s indicative budget – i.e. endorsement, or a downward / upward revision. PPBD’s proposal takes the form of a report on UNRWA’s narrative SF, and adds resourcing data making this the main programme budget document for the UN Headquarters budget process. It is referred to as a “fascicle”.

ACABQ review

The ACABQ will review this fascicle in mid-2013 and hold a budget hearing with UNRWA at the level of CG or Deputy Commissioner-General (DCG).

Upon endorsement by the ACABQ, the draft fascicle is then incorporated into the proposed UN budget submitted to the Fifth Committee. The Fifth Committee reviews the entire UN Programme Budget, including UNRWA's fascicle, between September-December 2013, and once consensus is achieved the proposed 2014-2015 budget is sent to the General Assembly for adoption.

Standalone UNRWA Programme Budget 2014-2015

On the margins of the UNHQ budget process described above, UNRWA submits to the ACABQ its full 2014-2015 Programme Budget, informally referred to as the “Blue Book”. The 2014-2015 Programme Budget as included in the Blue Book encompasses both the requirements as funded by UN New York through assessed contributions as well as requirements funded through voluntary contributions and confirm with the indicative Envelopes approved by the CG in the second quarter of 2003. In September 2013, the ACABQ holds a budget hearing with UNRWA at the level of CG or DCG regarding this programme budget and transmits its conclusions to the UNRWA Advisory Commission. From the perspective of UN Headquarters, this is an “extra-budgetary” document reflecting the programme of work covered by UNRWA’s voluntarily-funded budget. Unlike the “fascicle”, it does not have direct implications for the UN’s budget, nor is it adopted by the General Assembly. The ACABQ’s review remains important, however, as it validates the Agency’s overarching programme of work and voluntary-budget requirements, and conveys its views in writing to the UNRWA Advisory Commission.

ANNEX 1: Frequently Asked Questions (FAQ)

  1. Some of UNRWA’s core programmes (e.g. education and health) appear to be supported by non-core funding sources (funding from projects and emergency appeals). Are long-term core activities supported by short-term funding?

As stated in the Agency’s Medium Term Strategy (MTS), UNRWA aligns long-term funding with long-term programming commitments. To support this, the MTS definesthose services that are to be covered under the General Fund. The Agency notes however that certain questions may arise as a result of the Emergency Appeal funding certain services that might appear to be “core”. For example, the blockade on Gaza, the associated effects of high levels of poverty and a stressful environment pose a significant challenge to students in meeting minimum scholastic standards in Gaza. Therefore, among other emergency appeal supported interventions, UNRWA hires remedial teachers who provide additional extra-curricular support to students, many of whom are living in abject poverty as a consequence of the blockade. As these teachers are funded through the Job Creation Programme on a temporary basis, they receive lower salaries without any of the benefits received by UNRWA’s regular staff, and do not have the same functions or duties as UNRWA’s General Fund teachers. If the emergency situation in Gaza subsides, so will the need for these teachers and their contracts will not be renewed. It should however be noted that a rise in the number of teachers in Gaza is expected in coming years – this is not attributable to Emergency Appeal funding, but rather to the growth of the student population in Gaza.

With regard to health, additional staff were hired through emergency contracts (in the West Bank) and the Job Creation Programme (in Gaza) to support additional patient caseloads created by the emergency situation. This additional reliance is due to the critical socio-economic situation, continued erosion of the health infrastructure, declining environmental health standards, the difficulties of replenishing medical supplies, and the inability of refugees to pay the nominal prescription fees in the Gaza Strip since the blockade. In the West Bank, UNRWA clinics averaged 150 consultations per doctor per day (70 more than the PA clinics). Access restrictions (particularly with regard to East Jerusalem, which houses 12.4 percent of all oPt hospital beds and is the centre for specialised care), the inability of refugees to pay nominal fees, and increasing rates of chronic diseases since 2000 have led to this rise in services.

The Agency hopes that once the emergency situation in both the Gaza Strip and the West Bank comes to an end, the need for the above-mentioned interventions should dissipate.

  1. The idea of self–sustaining projects with no links to core funding does not seem realistic. Aren’t projects increasing the budget requirements of the General Fund?

The Agency is fully aware of the possible inherent long-term financial risks associated with certain projects. To this end, the Agency’s project prioritization process (which is explained in detail in Question 11) views sustainability and impact of General Fund recurring costs as a key factor when deciding upon which projects the Agency should embark on. This process, which is relatively new to the Agency, allows the Agency to improve controls on future costs. For example, the Agency will be reluctant to take on temporary project activity which will inexorably lead to structurally higher GF costs once the temporary project funds conclude. Future sustainability will be the most important criterion during project prioritization; if a project is not sustainable, the Agency will not seek funding. The second most important criteria for the prioritization of projects is their alignment with the strategic framework of the Agency (MTS, FIPs, HIP, sector strategies, reform strategies)

At the same time, it should be noted that certain projects are of such vital importance to the Agency that they must proceed, despite incurring additional recurrent costs to the General Fund. For example, in Gaza, the rising population of school-age children, compounded by already-crowded UNRWA schools, necessitate the building of new schools to take in more students. While a project covers the building of a school, the recurrent costs of teachers and maintenance costs associated with the school are recurrent costs that will be borne by the General Fund. This added cost however is the only alternative to depriving children of their right to education, and thus must be borne by the Agency in line with its mandate.

Construction projects are not the only ones that potentially impact on the General Fund, but which the Agency must continue with. For example, in 2012, the Agency made the decision to increase its General Fund to guarantee delivery of food assistance to refugees and to ensure development of its ERP system. While this invariably increased costs, they were deemed to be of such high priority that the Agency could not operationally afford to respond to insufficient project funding by reducing food assistance or postponing implementation of the ERP.

With a new project prioritization process in place, the Agency is now better equipped to ensure that they are the exception rather than the norm. Moreover, the Agency has streamlined project management procedures by reducing ad hoc project proposals as much as possible. The Agency also encourages donors to remain cognisant that ad hoc project proposal request can affect the Agency’s longer term project planning process.