Minutes of the UNOV/UNODC Executives Committee Meeting

of Wednesday, 31 May 2017

Participants

Chair: Mr. Fedotov

Members: Ms. Di Pippo, Messrs. Brandolino, Lale-Demoz, Lemahieu and Thatchaichawalit

Also attending: Mmes. Dedeyne, Kayser, Perret and Thomas, Messrs. Dadge, Gallo, Nesirky,
Peresada and Sophocleous

Secretaries: Ms. Hanke and Mr. Arbitrio

Key issues discussed

1. Mr. Thatchaichawalit and Mr. Sophocleous presented the report “UNODC financial situation: 2016
actual results and 2017 projections”. The results for 2017 were based on figures up to 9 May 2017. The
report summarized the financial situation as follows: regarding General Purpose funding (GP), which now
represented 1.2 per cent of the overall funding of UNODC, UNODC continued to be vulnerable. In
addition to the loss for 2014-2015, the 2016-2017 income projection was lower than expected so that a
shortfall was to be expected. In 2016 Special Purpose funding (SP) income reached $297.2 million, $30.9
million higher than the revised projections for the year owing to an increase in contributions towards the
end of the year. For 2017, SP income was projected to be $281.9 million. The 2016 SP delivery of $210
million reflected slightly lower levels than those of 2015 ($215 million) and an implementation rate of 87
per cent based on the revised budget. Similarly, the Programme Support Cost (PSC) account reflected a
lower income; however, thanks to prudent fund management, that fund was balanced when closed. With
regard to Full Cost Recovery (FCR), 2016 reflected reduced absorbed expenditures and a sustained
corporate FCR rate of 6.5 per cent. However, a number of offices faced sustainability concerns. The
report advised that the cost structures of those offices should be urgently reviewed to enable remedial
action. UNOV/UNODC had now reached the end of the Umoja stabilization phase with most system
issues resolved by the end of 2016. The focus had now shifted to process and reporting improvement and
Umoja Extension 2 (UE2). The report suggested that, overall, the financial sustainability of UNODC
depended on successful implementation of FCR and that all funding sources needed to be used for the
intended purposes. The report also indicated other financial risk areas, namely co-funding shortfalls and
After Service Health Insurance provisions.

2. In the discussion, Mr. Lale-Demoz welcomed the timely report with hard figures, given that the
four Divisions were currently working on the UNODC Biennial Budget 2018-2019. He was pleased to
read that the efforts of the Division for Operations to implement stringent budget management in the field
office network had led to savings of US$ 1.7 million in 2016. It was not clear what savings had been
achieved in other parts of UNODC in 2016. It was a tribute to the hard work of global, regional and
country programme managers that a 2016 delivery of US$ 210 million was achieved, despite very serious
challenges posed by Umoja and slow delivery support services. However, it was a cause for concern that
delivery in 2016 was lower than in 2015, and even lower than in 2014, despite growing donor resources.
As mentioned several times before, delivery would only recover and reach its full potential once three
measures were in place: (i) more agile field delivery support services at HQ, (ii) decentralization of
processes at field level, and (iii) Umoja improvements.

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3. Regarding FCR, the report was frank about the fact that 7 out of 17 country and regional offices
would not survive the full FCR logic, if the latter was implemented without flexibility. The resulting
downsizing, or closure, of UNODC field offices would become a political problem to be addressed. He
also noted that important statements and recommendations made repeatedly by several Member States at
bilateral meetings with the Executive Director, Directors of Divisions and, most importantly, at both CND
and CCPCJ were not adequately reflected in the financial report. Examples included the call to use part of
PSC for indirect field costs and substantive functions, and to implement FCR appropriately, without
undermining field operations. Finally, he noted that the report assumed a business model that was based
on full implementation of FCR, without flexibility. That seemed to preclude any discussion among
Directors and with the Executive Director in the context of developing the 2018-2019 biennial budget, a
process that was just now starting.

4. Mr. Lemahieu pointed out that the key consideration should be how delivery could be improved.
Swift and efficient delivery was the only way to compensate for a somewhat higher cost structure. He
noted that direct costing was a method that had to be accepted, but that not all donors were favourable to
the way it had been designed and marketed, as only recently Germany had again indicated the possibility
of lowering their GP contribution after three years, notwithstanding hard CPS lobbying. Also, core
functions of the organization, currently funded through GP, might have to find other sources of funding if
the GP continued to decline — a question which was now pressing. Finally, he wondered why ASHI was
being charged against GP when it originated in RB funding. Mr. Brandolino noted the delivery figures and
gave full recognition to project and programme managers for their efforts to implement the organization’s
technical assistance activities. He noted the need for vigilance in following the development of UE2.
Umoja Phase 1 had turned out to be a costly endeavour, with annual fees required and extra costs in terms
of staff time, including for training. Some analysis was required to determine why a rate of roughly 20 per
cent of all extrabudgetary resources (the approximate average taken out of each programme budget for
PSC and FCR in any given project) plus budgeting for support services staff in HQs and field offices
through the direct costing portion of budgets was insufficient to cover adequate support services at HQ
and the field. In the framework of ERM, Mr. Arbitrio noted that, once again, the UNODC financial report
indicated that field offices were to go through another review process focused on their structure to address
sustainability risks and questioned whether that was the best approach to promote. He noted that, from the
point of view of ERM, it could be deduced from the last financial reports that focusing on cutting costs to
field offices might not be an effective measure to prevent and/or mitigate sustainability risks. Finally, he
raised a concern regarding the FCR barometer tool, which had been agreed by all Directors as a key risk
management instrument but was not yet functional.

5. Mr. Fedotov thanked Mr. Thatchaichawalit for the report, which showed important vulnerabilities
that needed to be addressed; he planned to hold a meeting with all Directors as soon as possible to discuss
the business model. ExCom took note of the report.

6. Mr. Gallo submitted the report on the status of implementation of the recommendations adopted by
the Senior Management Retreat of 20 January 2017. ExCom took note of the report and advised that
implementation efforts were continuing.

7. Mr. Brandolino reported on the outcome of the 26th session of the CCPCJ, which was a “record
event” in term of numbers of participants, side events and social media outreach, including live streaming
of some sessions for the first time. One live-streamed session on cybercrime had over 100,000 viewers.
Substantively, the CCPCJ adopted resolutions that covered many of the key topics of the day,
e.g. cybcercrime, counter-terrorism, alternatives to imprisonment, promoting the Mandela Rules,
finalizing topics for the next Crime Congress and extending FINGOV. For the next CCPCJ, DTA would
consider how to keep up the momentum, e.g. by cutting the number of side events and consolidating them
around certain topics. Mr. Fedotov thanked colleagues for the successful outcome of the CCPCJ and
noted that important substantive results had been achieved, and that this was one of the sessions with
highest attendance.

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8. Mr. Lemahieu tabled the UNODC quarterly publication list for consideration and noted that the vast
majority of proposed publications were generated in projects. Ms. Kayser recalled that synergies would be
fostered by deploying a peer review as well as an evaluation of the Thematic Programme on Research and
Trends Analysis, which was underway at the time. Those two approaches were complementary and
resonated with IEU’s approach of building complementarity through audits. ExCom endorsed the
publication list.

Follow-up actions

9. Arrange Directors’ meeting to discuss business model. Action by: Office of the Director-
General/Executive Director. Deadline: June 2017.

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