U.N . Regular Budget Funding : Issues for Congress

Congressional research reportMay 15, 1995

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95-645 F

U.N . Regular Budget Funding :

Issues for Congress

Vita Bite

Analyst in International Relations

Foreign Affairs and National Defense Division

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May 15, 1995

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U.N . REGULAR BUDGET FUNDING : ISSUES FOR CONGRESS

SUMMARY

All U.N. member states are assessed a percentage share of the U .N. budget

to provide funds to carry out the organizations's operations . Throughout most

of its history the United Nations has been plagued by financial difficulties

caused largely by some member states' failure to pay their assessments on time

and in full . The financial situation has been particularly acute as the United

Nations has taken on more tasks in recent years .

In the 1990s, the United Nations is playing an especially active role in

providing peacekeeping operations, advancing human rights, and providing

humanitarian assistance . The United Nations has also taken some steps, as the

United States has been pressing it to do, to improve management and budgeting

practices which have been of particular concern to the U .S. Congress . Indeed, in

1994, Congress pressed for establishment of an independent office of U .N.

inspector general by enacting legislation withholding a portion of the U .S.

assessed contribution to the U .N. regular budget until the establishment of such

an office .

The United States has been and remains by far the single largest contributor

to the U.N. regular budget . It is assessed 25 percent of that budget, or $315

million for calendar year 1995 . At the same time, since 1986, the United States

has had the largest outstanding shortfall in its contributions to the United

Nations . Currently, more than $212 million is outstanding (arrears) . Efforts by

both the Bush and Clinton Administrations to pay some of the arrearages

resulted in partial payments in FY1991-1993, but Congress did not appropriate

funds for that purpose in FY1994 and FY1995 . Pressure to reduce Federal

Government expenditures and the budget deficit, as well as for additional U .N.

reforms are likely to continue to affect congressional decisions on U .N. system

funding in the coming years . The arrearage issue is likely to remain a difficult

and unresolved problem for some time to come .

Various proposals have been made to improve the U .N. financial situation,

ranging from urging states to pay in full and on time, to pay up arrearages, to

charging interest on those arrearages, to increasing the Working Capital Fund

that provides some cash reserves, to allowing the United Nations to borrow

commercially, to changing assessment rates on member states . With the

exception of the proposal to establish the office of inspector general, the U .S.

Government and Congress have not shown much interest in these proposals to

improve U .N . regular budget financing That office has now been established

and has begun its work . However, some observers are concerned that the

activity and pace of that office have been too little and too slow .

Continuing pressure to reduce the budget deficit and Federal expenditures

are likely to affect congressional actions on U .N. funding and increase pressure

for reduced U .N. budgets . Congress has also been particularly concerned about

the slow pace of reform and change at the United Nations . Withholding of

funding remains a congressional option favored by some Members to continue

pressure on the United Nations to speed up changes .

CONTENTS

INTRODUCTION

BACKGROUND

DETERMINATION OF THE SIZE OF THE U .N. REGULAR

BUDGET AND CONTROL OF ITS GROWTH

INFLUENCE OF MAJOR CONTRIBUTORS ON

BUDGET DECISIONS

CONGRESSIONAL ISSUES AND CONCERNS

WITHHOLDING/ARREARAGES

RATE OF ASSESSMENTS

ASSURING PAYMENTS IN FULL AND ON TIME

IMPACT OF CONTINUING SHORTFALLS/ARREARAGES

ACCOUNTABILITY FOR BUDGET EXPENDITURES

CAPACITY OF THE UNITED STATES TO TRACK, MONITOR,

AND EVALUATE U .N . FINANCIAL ACTIVITIES

APPENDIX I . BRIEF OVERVIEW OF PROPOSALS FOR

IMPROVING U .N. FINANCING

GENERALLY

U .S . GOVERNMENT RESPONSE TO PROPOSALS

TABLES AND FIGURES

Table 1 . U.N. Regular Budgets, 1984-1995

Figure 1 and Table 2 . U .N. Assessed Contributions Outstanding to U .N.

Regular Budget from All Member States

at End of Calendar Year

Figure 2 and Table 3 . U .S . Assessed Contributions Outstanding to U .N.

Regular Budget Compared to Total Outstanding

at End of Calendar Year

Table 4 . Assessments of Major Contributors to the U .N.

Regular Budget

Table 5 . Summary of Selected Recent Findings and Recommendations

for Improving U .N. Regular Budget Financing

U.N. REGULAR BUDGET FUNDING : ISSUES FOR CONGRESS

INTRODUCTION

As the United Nations nears its 50th birthday, the world's nations have

given the organization unprecedented tasks in dealing with many global and

regional problems . At the same time, however, many member states have not

shown an equal willingness to provide increased financial resources, or even to

pay their current assessments on time and in full . The United States has

accumulated outstanding contributions (arrearages) to the U .N. regular budget

(as of April 15, 1995) of $212 .126 million, and owes its full current assessment

(for calendar year 1995) of $315 .027 million . The United States has had the

largest accumulated arrearages to the U .N. regular budget since 1986 . Congress

for its part appears increasingly reluctant to pay the arrearages and increasingly

likely to make current U .N. funding contingent on reform actions at the United

Nations.

A major issue facing the United Nations, the United States, and Congress is

the extent to which the United Nations currently has the financial resources

and the capacity to manage those resources efficiently to meet the demands

which are increasingly placed on the organization . Because of late payments

and nonpayment of assessed contributions by member states, the United Nations

operates under a constant shortage of funds to meet its basic expenses . In the

view of some, the unremitting precariousness of the financial situation of the

organization, makes efficient financial management difficult, and paralyzes the

U.N. ability to carry out its rapidly expanding activities . Unless these problems

are resolved and more reliable financing and monitoring mechanisms are put in

place, the United Nations is unlikely to be able to play the strong role which

many governments claim that they want it to play .

On the other hand, some feel that the United Nations is a seriously flawed

organization to which only the most minimal powers and resources should be

given . Many of these critics question whether the United Nations has the

capability to undertake the fundamental reform and restructuring required to

transform it into a financially and administratively effective and efficient

organization .

The United States has been and remains the single largest financial

contributor to the U .N. regular budget. The United States is assessed 25

percent of the U .N. regular budget, or $315 .027 million for calendar year 1995 .

What does this mean? It means that the United States has a great deal of direct

and indirect influence over U .N. financial matters . At the same time, with a

budget system diffusely controlled by 185 member states, the U .S. capacity to

track, monitor, and evaluate U .N. financial activities is very limited and

haphazard at best .

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The intense scrutiny which the United Nations is likely to undergo during

its 50th anniversary year may offer an opportunity to devise new and innovative

approaches both at the United Nations and in the way that the United States

handles U .N . funding . There is no shortage of proposals and recommendations

for improvements or changes . (See the appendix for a brief discussion and

summary chart of some proposals .) The proposals on the whole, however, are

not particularly innovative or far-reaching . Moreover, they do not address the

need for additional revenues or provide new sources of revenues . Most proposals

look to tightening the existing system to help it work better . There has been

very little public debate about any of these proposals .

This report will look only at the United Nations regular budget, not at the

whole U .N . system--that is, it will not cover U .N . specialized agencies, especially

assessed peacekeeping budgets or voluntary programs . 1

BACKGROUND

The United States is required by Article 17 of the U .N . Charter (a treaty

ratified by the United States on August 8, 1945) to contribute to the expenses

of the organization "as apportioned by the General Assembly ." 2 Section 8 of the

U .N. Participation Act (P .L . 79-264, as amended) authorizes an annual

appropriation of the funds necessary for the U .S . payment . U .S . assessed

contributions are included within the State Department's budget . Congress

authorizes those funds as part of the biennial Foreign Relations Authorization

Act and appropriates the money annually in the Departments of Commerce,

Justice, State, the Judiciary, and Related Agencies appropriations legislation .

Assessed contributions finance the regular budget of the United Nations .

They are supposed to provide the organization with a predetermined source of

1 For more on U .N . peacekeeping, including funding issues, see : Browne, Maijorie A.

United Nations Peacekeeping: Issues for Congress . CRS Issue Brief, IB90103 . Updated

regularly . For more on funding other organizations in the U .N . system see : Bite, Vita .

U.N. System Funding: Congressional Issues . CRS Issue Brief, 186116 . Updated

regularly .

2 Article 17 reads :

1 . The General Assembly shall consider and approve the budget of the Organization .

2 . The expenses of the Organization shall be borne by the Members as apportioned

by the General Assembly .

3 . The General Assembly shall consider and approve any financial and budgetary

arrangements with specialized agencies referred to in Article 57 and shall

examine the administrative budgets of such specialized agencies with a view to

making recommendations to the agencies concerned .

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income from its member states to enable it to carry out programs authorized by

that membership .'

DETERMINATION OF THE SIZE OF THE

U.N . REGULAR BUDGET AND CONTROL OF ITS GROWTH

The U .N . regular budget is authorized by the General Assembly for a twoyear period or biennium--that is, the General Assembly estimates income and

fixes spending limits for two years . There is also a six-year medium term plan

which provides the policy framework for the regular budget . The budget is

proposed by the U.N. Secretary-General after the requests of individual U .N .

secretariat departments are scrutinized . The draft budget is then reviewed by

the Advisory Committee on Administrative and Budgetary Questions (ACABQ)

and the Committee for Program and Coordination (CPC) . U. S. representatives

participate on both committees . The draft budget is then reviewed by the

General Assembly's Fifth Committee (Administrative and Budgetary), and finally

by the General Assembly itself . Since 1988, the U .N. regular budget has been

approved unanimously, that is, without a dissenting vote by any U .N . member

state .

For more than a decade, the United States and other major contributors have

put pressure on the United Nations to limit budget growth . As a result, zeroreal-growth budgets have been the norm for the past decade . Inflation and

exchange rate fluctuations have accounted for most of the changes in recent

budgets . Thus, for example, the 1990-91 approved budget was a 12 percent

nominal increase over the 1988-89 budget, but reflected negative growth in real

terms (see table 1, below) .

The budget proposed for the 1996-97 biennium is reportedly $2 .51 billion--a

reduction in real terms from the 1994-95 biennium .

Table 1

. U.N. Regular Budgets, 1984-1995

Biennium

U.N. Regular Budget

1994-95

$2,580,200,000

1992-93

$2,411,404,000

1990-91

$2,167,974,500

1988-89

$1,772,313,700

1986-87

$1,711,801,200

1984-85

$1,608,954,000

a For recent contributions to the U .N. regular budget see United Nations Regular

Budget Contributions : Members Compared, 1989-1994, by Marjorie A. Browne

[Washington}, 1995. 7 p ., CRS Report 95-571 .

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The United States has insisted on zero-real-growth budgets to reduce

inefficiencies and duplication, and to force U .N. high priority activities to be

financed by reductions in low priority programs . To achieve this, the principle

of zero real growth is an absolute must . It forces the organization to establish

priorities . As new needs arise, they must be ranked among existing programs .

Those which are deemed to have high priority are given funds . Others are

allocated less resources .

Critics of this principle, however, feel that zero-real-growth budgets have

hurt the development of the U .N . organization, and, perhaps, the

implementation of needed reforms and introduction of technology which might

be cost-saving in the long run . In this view, zero-real-growth budgets have not

taken account of the expanded membership of the organization nor changed in

its activities from mainly servicing meetings and conferences to a much more

operational organization--overseeing increasing peacekeeping functions, and

human rights missions, for example . Proponents of this view argue that when

demand for U .N. action is growing, zero real growth suppresses the U .N.

capacity to take on new initiatives . In addition, there is an urgent need to

upgrade technology--to computerize and improve communications so the

organization can better and more rationally and efficiently expend its budget .

During 1993 General Assembly debate on the 1994-95 U .N . operating

budget, the Secretary-General proposed what he deemed a modest 1 percent real

growth in the budget . He justified such an increase in terms of the massive

expansion in U .N . workload, both qualitative and quantitative, and especially

given the six-fold increase in peacekeeping operations . Most major contributors,

with the United States in the lead, refused to even consider real growth in the

budget . Consequently, the proposed $2 .749 billion budget was scaled back to

$2 .58 billion (below the $2 .702 billion level originally established in the budget

outline) . Part of the reason for refusing to approve the Secretary-General's

request stemmed from the late submission of budget documents, as well as some

changes in the budget methodology used by the Secretary-General . In addition,

however, major donors felt that zero real growth in U .N . budgets must be

maintained . Member states are also insisting on more consultations with the

Secretary-General during the budget process and earlier issuance of budget

documents .

INFLUENCE OF MAJOR CONTRIBUTORS ON

BUDGET DECISIONS

Congressional concern about lack of control of U .N . budget procedures by

major financial contributors led in the 1980s to enactment of the Kassebaum

Amendment (section 143 of P.L . 99-93) . This measure called for withholding 20

percent of U.S . assessed dues until the United Nations instituted procedures

which give voting rights on budgetary matters proportionate to a member's

budget contributions .

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Partially in response to this congressional action, the U .N . General Assembly

in December 1985 established a Group of High-Level Intergovernmental Experts

to review the efficiency of the administrative and financial functioning of the

United Nations . In December 1986, the U .N . General Assembly generally

adopted the recommendations of this Group in Resolution 41/213 . This

resolution, strongly supported by the U.S . delegation, established a budget

mechanism containing a budget ceiling, a contingency fund to accommodate

additional expenditures ("add-ons"), and a consensus budget decision process

through a strengthened Committee for Program and Coordination (CPC) .

In the years immediately preceding adoption of this resolution, the U .N

budget had been approved by a majority of the membership, but not by a

majority of those members providing the bulk of funds for the U.N . budget . In

the late 1970s and early 1980s U .N . budgets were voted by a numerical majority

in the General Assembly which contributed, however, only a small portion of the

budget . During that period most major contributors either voted against or

abstained on the budget--that is, those countries which supplied the majority of

funds did not support the budget as adopted .

Since 1988 the U .N . budget has been approved by consensus . This means

that no country has voted against the budget as adopted . Therefore, it would

seem that member countries should be willing to pay for the budget that they

did not feel the need to vote against . The consensus budget procedures, while

theoretically giving each member state a potential veto, is, however, a very

fragile instrument . If any state were to vote against the budget proposal, it

would simply break the consensus and might lead the United States to invoke

the Kassebaum Amendment and place a hold on 20 percent of the U .S .

contribution .

The consensus was nearly upset in 1993 when the Secretary-General's

budget proposal for the 1994-95 biennium included a 1 percent real increase .

The possibility of a break in the continued implementation of consensus-based

budget procedures, raised the possibility of the United States invoking the

current version of the Kassebaum Amendment . Indeed, the Clinton

Administration withheld 20 percent of U .S . FY 1995 U .N . assessed contributions

pending results of preliminary action on the 1996-97 U .N . budget .

During 1993 debates on the U .N. budget significant differences also arose

among members as to where the funding emphasis should be . The SecretaryGeneral's proposed budget placed priority on peacekeeping, humanitarian

affairs, and human rights activities . This approach was supported by the main

donor countries such as the United States and ultimately prevailed . Many

4 A modified Kassebaum Amendment (Section 409, P .L . 103-236) currently gives the

President discretionary authority to withhold (after notice to and consultation with

Congress) 20 percent of the funds appropriated for U .S . assessed contributions to the

United Nations or its specialized agencies, if those organizations fail to continue

implementing consensus-based budget procedures which assure that sufficient attention

is given to the views of major financial contributors .

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developing countries, however, felt that more emphasis and resources should be

given to U .N . socio-economic development activities .

CONGRESSIONAL ISSUES AND CONCERNS

WITHHOLDING/ARREARAGES

The United Nations has a long history of financial problems--withholding

and delayed payments by members have characterized financial affairs at the

United Nations almost from birth . What is different in the current situation is

that the number of countries paying up fully and on time is declining . By the

end of September 1994, only 56 states had paid their regular budget dues in full

and 70 states had made no payment toward 1994 assessments .' By December

31, 1994 only 74 countries were fully paid up, while 109 had some dues

outstanding. (See figure 1 and table 2, p . 8) .

A very important factor in the current situation is that the United States is

the largest arrearage holder . Since the United States is also the largest

contributor, the impact is significant . (See figure 2 and table 3, p . 9 .) Most

other major donors (those paying 1 percent or more) do not have arrearages .

Japan, Germany, France, the United Kingdom, Italy, Canada, and Spain usually

have fully paid their assessments by the end of the calendar year (U .N . fiscal

year) . The Russian Federation, which has had a substantial arrearage to the

U .N . regular budget in recent years, made a large contribution in 1994 to bring

its outstanding dues to less the $500 .000 . Other countries of the former Soviet

Union have (as of December 31, 1994) large sums outstanding, most notably

Ukraine ($41 .405 million), Belarus ($8 .134 million), and Kazakhstan ($7 .132

million) . Other countries with substantial outstanding dues are : Brazil ($16 .174

million), Yugoslavia ($9 .611 million), and Iran ($7 .884 million) . South Africa

has $57 .399 million outstanding accumulated since 1974 when the General

Assembly refused to seat the delegation representing the apartheid government .

Since 1980, Congress has enacted legislation to withhold the U .S .

proportionate share of the assessed U .N . budget contribution for a list of U .N .

activities of which Congress and the executive branch do not approve

U .N . Press Release SG/SM5435, Oct . 12, 1994 .

These included prohibitions on paying the U .S . proportionate share (25%) for

programs benefitting the Palestine Liberation Organization (PLO) ; the South West

People's Organization (SWAPO) ; for the Second Decade to Combat Racism and Racial

Discrimination ; for the Committee on the Exercise of the Inalienable Rights of the

Palestinian People ; for the Special Unit on Palestinian Rights ; for the Special Committee

to Investigate Israeli Practices Affecting the Human Rights of the Population of the

Occupied Territories ; for construction of a conference center in Addis Ababa, Ethiopia;

for cost of living increases for U .N . employees in New York (known as the "Kasten

Amendment") ; and for "kickbacks" allegedly paid by some U .N . employees to their home

governments (known as the "Sundquist Amendment") . In addition to these statutory

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Currently these withholdings cumulatively total about $138 million .

Administration proposals to make arrearage payments have not included these

withholdings, and it is likely that some of these arrearages will continue to

accumulate, with no foreseeable plans to pay .

Selective withholding has been a problem for U .N . financing throughout its

history . The U .S . position in an earlier era was that all expenses of the

organization must be paid by all members . This concept is at the center of the

notion that providing funds for U .N . activities is the collective responsibility of

the membership and must be maintained no matter how individual states may

view specific programs supported by the budget . From this perspective,

unilateral withholdings are viewed as detrimental for the organization and the

premise of collective responsibility for the finances of the organization and

undermine the rule of law.

By 1983, however, U .S . Ambassador to the United Nations, Jeans

Kirkpatrick, enunciated a far more limited U .S . obligation to make U .N .

payments as assessed :

It is sometimes argued that as signatories to the treaty, we assume an

absolute legal obligation to pay the assessed share of the budget, it seems

to me, after consultation and reflection, that this obligation is real,

substantial, and serious, but also that it is not absolute . . . . I do not

suggest the United States should take lightly the obligation to pay its

assessed share of the budget . This is a serious, but not, in my opinion,

an absolute obligation . To be sure, article 17 of the U .N . Charter

requires member states to pay their share of the U .N . budget as assessed

by the General Assembly . We should not assume, however, that any

expense apportioned by the General Assembly is absolutely valid . ?

Today some in Congress and the U .S . Government continue to feel that the U .N .

Charter obligation to pay dues as assessed by the General Assembly is not

absolute .

The consensus based budget process gives the United States a mechanism to

oppose specific expenses if it feels that they are not justified . However, the

difficulty with the consensus-based mechanism is that if the whole membership

cannot be convinced, then U .S . opposition leading to a vote on the budget, might

not result in support for the U .S . position . That is, the United States is likely

withholdings the Administration has, as a matter of policy, also withheld assessments for

the U .S . proportionate share of funds for the Preparatory Commission for the Law of the

Sea Convention and made adjustments in the U .S . payment to the Tax Equalization

Fund relating to tax reimbursements for Americans employed by the United Nations .

7 See U .S . Congress. House . Committee on Foreign Affairs, Subcommittee on

Human Rights and International Organizations . The U.S . Role in the United Nations .

Hearings, 98th Congress, let session . Sept . 27 and Oct . 3, 1983 . Washington, U .S . Govt .

Print. Off., 1984 . p . 54 .

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to be outvoted . But more than that, breaking the consensus may trigger the

Kassebaum amendment and lead to U .S . withholding of 20 percent of its

assessed payment, and might result in even greater U .N. financial difficulties .

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Figure 1 . U .N . Assessed Contributions Outstanding to

U.N . Regular Budget from All Member States

at End of Calendar Year

Millions of $

1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994

Millions of U .S . $

Total Outstanding MTotal Assessment

Source: Status of Contributions . U .N . Secretariat .

U .N. document STIADM/Ser.B . As of Dec. 31 of each year.

Table 2 . U.N . Assessed Contributions Outstanding to

U .N . Regular Budget from All Member States

at End of Calendar Year

Calendar

Year

Total

Outstanding

(millions of $)

Total

Assessment

for That Year

(millions of $)

Outstanding

As % of

Current

Assessment

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

166 .2

242 .4

257 .8

353 .4

394 .9

461 .2

403 .0

439 .4

500 .6

478 .0

480 .0

677 .8

691 .9

735 .6

756 .3

758 .0

776 .6

826 .8

962 .7

1,037 .5

1,070 .0

1,061 .0

24 .5%

35 .0%

46 .7%

52 .1%

59 .4%

48 .7%

45 .6%

48 .3%

44 .7%

45 .2%

Source : Status of Contributions . U .N . Secretariat .

U .N . document ST/ADM/Ser . B . As of Dec . 31 of each year .

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Figure 2 . U .S . Assessed Contributions Outstanding to

U.N . Regular Budget Compared to Total Outstanding

at End of Calendar Year

Millions of $

600

500

400

300

200

100

V//

A/1

1984 1985 1986 1987 1988 989 1990 1991 1992 1993

2 1

994

Millions of U.S . $

Owed by U .S . % Total Outstanding

Source : Status of Contributions. U.N. Secretariat

U .N. document ST/ADM/Ser. B. As of Dec. 31 of each year.

Table 3 . U .S . Assessed Contributions Outstanding to

U.N. Regular Budget Compared to Total Outstanding

at End of Calendar Year

Calendar

Year

Owed by

U.S .

Total

Outstanding

U .S . % of

Total

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

11 .5

85 .5

147 .0

252 .8

307 .7

365 .1

296 .2

266 .4

239 .5

232 .7

247 .9

166 .2

242 .4

257 .8

353 .4

394 .9

461 .2

403 .0

439 .4

500 .6

478 .0

480 .0

6 .9%

35 .3%

57 .0%

71 .5%

77 .9%

79 .2%

73 .5%

60 .6%

48 .7%

51 .6%

Source : Status of Contributions . U .N. Secretariat .

U .N. document ST/ADM/Ser . B . As of Dec . 31 of each year.

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RATE OF ASSESSMENTS

The General Assembly adopts the scale of assessments for the regular budget

of the United Nations based on the recommendation of an 18-member (including

U .S .) expert Committee on Contributions . The Committee determines individual

country assessments on the basis of a country's capacity to pay . The capacity

to pay is determined using a complex formula that adjusts gross national income

upward or downward according to per capita income and other factors, but with

the proviso that no contributor pay less than .01 percent nor more than 25

percent of the total . 8

The United States is the only country that is assessed 25 percent of the

regular budget, while about half, or some 91 members pay .01 percent . For

some small poor states the floor can represent substantial sums, and a high

proportion of national income . The effect of the floor is that for a number of

small states the complex and carefully worked out principles embodied in the

assessment scheme are not applied at all--they simply pay the floor rate . In

practice this means that they pay more than they would otherwise . In some

cases it means that they pay the highest rate in relation to national income .

Because of the ceiling, the U .S . contribution of 25 percent is below the true

figure of its wealth as a percentage of world GNP . If there were no ceiling, the

U.S . assessment might be closer to 30 percent . The difference is made up by

other major donors paying more . Thus the United Kingdom is assessed a little

over 5 percent rather than a little under 5 percent, and France is assessed a

little over 6 percent rather than just under 6 percent .

For 1995, the U .S . assessment is $315 .027 million ; for those members paying

.01 percent it is $109,278, or a total of about $9 .9 million for all 91 countries .

Regardless of the size of assessment, each U .N . member has one vote on budget

decisions, although as described above, U .N . budgets since 1988 have been

adopted by consensus .

8 In the past, the United States paid a larger portion of the U .N . regular budget . In

1946, the U .S . contributed nearly 40% of the UN regular budget, and in 1970, the United

States contributed more than 31% . In 1971, a Presidential commission recommended

that the U.S . assessment be reduced to 25%, and in 1972, Congress urged the Executive

to negotiate such a reduction . The admission of West and East Germany to the United

Nations in 1973 made possible the reduction in the U .S . assessment without adverse

financial impact on the U.N. budget, or higher assessments for other countries . If there

were no maximum and minimum assessment levels, and charges were based exclusively

on a ratio of a country's gross national product, the United States would be assessed

about 28% and some poor countries would be assessed less than .01% . (See Annex IA in

United Nations . General Assembly . Report of the Committee on Contributions . New

York, United Nations, 1989 . pp. 20-27 (Supplement No . 11 ; A/44/11) .

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Table 4 . Assessments of Major Contributors

to the U .N . Regular Budget

Member

State

Assessments for

1995 (u.s . ss

1995

(% of

Budget)

1996

(% of

Budget)

1997

(% of

Budget)

minions)

U .S .

315 .03

25 .00

Japan

152 .44

13 .95

15 .44

15 .65

Germany

97 .69

8 .94

9 .04

9 .06

France

69 .06

6 .32

6 .41

6 .42

Russian Fed .

62 .07

5 .68

4 .45

4 .27

U .K.

57 .59

5 .27

5 .32

4 .79

5 .20

5 .25

Italy

Canada

33 .55

3 .07

3 .10

3 .11

Spain

24.48

2 .24

2 .36

2 .38

Brazil

17 .70

1 .62

Netherlands

17 .27

1 .58

1 .59

Ukraine

16 .17

1 .48

1 .41

1 .09

Australia

15 .95

1 .46

1 .48

Change the Scale of Assessments . Many have suggested that, in the long

term, the United Nations needs to consider changing the assessment scale .

Since the United States currently does not pay its full 25 percent, in a sense

others are paying a larger share of the budget . This, they say, may be the time

to institutionalize what actually takes place . Former U .N . Secretary-General

Perez de Cuellar reportedly suggested that it is dangerous and excessive to rely

on one Member for such a large share of the budget -- that it gives too much

control to that Member and opportunities to hold the organization hostage .

Some have suggested that a 15 percent maximum contribution is more

realistic ." The international economic situation, especially the status of the

9 New York Times, April 29, 1986, p . Al 1 .

United States Commission on Improving the Effectiveness of the United Nations .

Defining Purpose : the U.N. and the Health of Nations . Sept . 1993, p. 35, suggests a 1520% rate for the United States ; Erskine Childers and Brian Urquhart, Renewing the

United Nations System, Uppsala, Sweden, Dag Hammerskjold Foundation, 1994, p. 154,

suggest an assessment of 10-12% .

CRS-13

United States, has changed significantly since the 25 percent ceiling was

imposed. The economies of other countries have grown relative to the U .S.

economy and many in the United States stress the need for a more rational

distribution of financial burden-sharing . Perhaps the scale of assessments needs

to more accurately reflect changed global economic prosperity . Such a step

would remove the United States from feeling that it is carrying the United

Nations and better reflect changes in international economic prosperity in the

1990s . Japan or Germany might be expected to pick up a greater share of the

funding in such a scheme .

While there has been some discussion along the margins about changing U .S .

regular budget assessment rate, the U .S. Government has not pursued this to

any great extent . Most congressional and Administration attention has been on

lowering the peacekeeping assessment from its current rate of more than 30

percent to the 25 percent assessment rate of the regular budget. A few Members

of Congress, however, continually call for significant changes in regular budget

assessment rates . Nevertheless, executive branch officials, have shown little

enthusiasm for lowering the U .S. assessment . It would mean less influence and

prestige at the United Nations . It might be seen as a signal of decreasing U .S.

commitment to the United Nations and even be seen as an admission of a

diminished superpower status .

Notwithstanding the overall assessed level,, the Clinton Administration and

Congress have been pushing for lowering the assessment for U .S. peacekeeping

assessments to 25 percent . The Foreign Relations Authorization Act (P .L. 103236) prohibited payment of more than 25 percent for peacekeeping operations

beginning in FY1996 . The National Security Revitalization Act (H .R. 7), as

passed by House in February 1995, limits U .S. assessed contributions to U .N.

peacekeeping activities to 20 percent of the total, but allows the President to

increase this to 25 percent if he reports his intention to do so to Congress and

states his reasons for taking such action . These actions in peacekeeping funding

may possibly signal the opening of consideration within the U .S. Government

of changes in regular budget assessments as well .

Any discussion about changing assessments opens a larger issue of power

relationships within the United Nations, especially in the Security Council . In

the view of many, the current makeup of the Security Council does not reflect

contemporary global power relationships, especially in an economic context .

Overall contribution to the U .N. budget by the permanent members of the

Security Council has significantly declined since the early years of the United

Nations. In 1951 the five permanent members of the Security Council

contributed more than 70 percent of the U.N. budget, while today they

contribute less than 43 percent .

Oil producing countries--Saudi Arabia, Venezuela, Nigeria, etc .-- (given

relatively low oil prices) have seen a drop in their assessments in recent years .

Newly industrializing countries such as the Republic of Korea have had modest

assessment raises in recent years . Organization for Economic Cooperation and

CRS-14

Development (OECD) countries for the most part have seen either stable or

rising assessment rates .

Japan and Germany, currently assessed 13 .95 percent and 8 .94 percent,

respectively, or nearly 23 percent between them, appear to be strong candidates

for picking up a larger share of U .N . budget . By 1997, they will be assessed

15 .65 percent and 9 .06 percent, respectively, and together will pay almost as

much as the United States . A permanent seat on the Security Council, however,

may well be the price for their greater financial contribution . Discussions about

expanding the Security Council are continuing, but the question remains

.ri

difficult

Another suggestion has been to review the minimum 0 .01 percent paid by

about half of U .N . members . Some feel that the floor is too low and that too

many states are assessed at that rate . In this view, the $109,278 is a token

amount for some members, such as Bolivia, Cameroon, and Sri Lanka, who may

spend many times that amount maintaining missions in New York . 12 Raising

the assessment floor, however, would impose a severe financial hardship on

some of the smallest and poorest countries and, moreover, would not do a great

deal for the U .N . budget . Even if the assessment for some of these states were

doubled (leaving only the countries designated as least developed at the .01

percent level), it might only add about $4 million to the U .N . budget .

Some have also suggested that the assessments of some of the large- to

middle-sized developing countries in the next higher assessment tier might be

reviewed and raised slightly . Among the countries in such a group are : Republic

of Korea (0 .80 percent assessment), Brazil (1 .62 percent assessment), Indonesia

(0 .14 percent assessment), Turkey (0 .34 percent assessment), Malaysia (0 .14

percent), and Singapore ( .14 percent assessment) . In addition to adding small

sums to the U .N . budget, such a step might also limit pressures from some of

these states to increase U .N . programs and expand the U .N . budget . Many of

these countries argue, however, that they are already burdened with substantial

u Currently, the Security Council consists of five permanent members with veto

power and 10 others without veto, elected on a regional basis, for two-year terms . While

many agree that the Security Council should be enlarged given the growth in U .N .

membership and the role and importance of the Council, there is disagreement as to how

this might be done . Among the questions which need to be answered are : How many

seats should be added? Should there be permanent membership without veto or

permanent membership rotated among regional groups? How should the new seats be

allocated given that most developing countries feel that they are currently seriously

under-represented on the Council? Countries which are often named as likely candidates

for membership are Japan and Germany as well as such regionally important countries

as Brazil, Nigeria, and India .

Lister, Frederick K . Fairness and Accountability in U.N. Financial Decisionmaking . New York, UNA-USA, 1986 . p . 32 . (At head of title : U .N. Management and

Decision-making Project, UNA-USA .) .

CRS-15

external debt and low per capita income levels, and could not possibly pay a

larger U .N. assessment .

Adding Taiwan as a U .N . member state might bring in a little more funding .

However, such a proposal raises the difficult issue of adamant opposition by

China, a permanent member of the Security Council .

Finally, the system for calculating rates of assessment may need to be

reviewed and adjusted . The current methodology (under on-going review by the

U.N . Committee on Contributions) is extremely complex with many technical

problems, such as insuring real comparability of national income statistics .

Some critics also feel that the current assessment system is excessively skewed

in favor of reducing and redistributing the assessments of developing countries .

On November 30, 1994, the U .N. General Assembly established an ad hoc

governmental working group to study the principle of "capacity to pay" as a

fundamental criterion in determining scale of assessments for contributions .

The working group is to submit a report by May 15, 1995 .

An area that has received considerable discussion and some change in recent

years has been the length of the base period on which the assessment is

calculated . Until 1994 the base period was ten years . Such a long base period

has been viewed as particularly unfair to countries undergoing rapid economic

changes, such as the countries of Eastern Europe and the former Soviet Union .

The economies of those countries collapsed with the fall of Communism . The

U.N. assessment base period was reduced to 7 .5 years recently, and a 3-year or

other short base periods have been proposed .

ASSURING PAYMENTS IN FULL AND ON TIME

While the U .N. assessment system is complex, and the scale may be

regressive, even if one could devise a totally fair system, another basic problem

would remain--that of securing timely and full payments by governments. Two

factors, in particular--different U .S. and U.N. fiscal year schedules and the scope

of U.S . legislation appropriating U .N. contributions--further complicate the

situation for the United States .

The United States and the United Nations maintain different fiscal or

financial year schedules . The U .N. financial year is identical with the calendar

year; that is, it starts on January 1 and ends on December 31 . The U.S. fiscal

year begins on October 1 and ends on September 30 . U.S . payments to the U .N.

1994 calendar year budget are made from funds authorized and appropriated for

FY1995. Thus, U .S . contributions to the 1994 U.N. budget were at the very

earliest available on October 1, 1994, and partial payment was only made in

November . In practice, U .S . funds are sometimes not fully available until the

next calendar year, because of late passage of appropriations legislation .

U .S. delayed and late payments have had an especially significant impact on

U.N. cash flow problems . The impact has been especially severe on U .N.

CRS-16

operations in the second half of the U.N. financial year--the September to

December period when the General Assembly meets .

The United Nations may not borrow from commercial or international

landing institutions to meet its obligations when assessed contributions are late .

In the past, the United Nations relied on its Working Capital Fund (WCF)

and voluntary contributions to a Special Account" to deal with cash flow

problems . In addition, the United Nations has borrowed from peacekeeping

funds to cover short-term cash shortages . The Working Capital Fund, however,

has been exhausted for years . Moreover, countries have stopped contributing

to the U.N. Special Account, feeling that they were simply subsidizing the U .S .

shortfall . U .N. peacekeeping funds are also experiencing especially severe cash

shortages .

Another complicating factor is to the U .S . domestic process for approving

U .N . regular budget payments . The U .S . payment is part of a larger

international organization funding account which is part of a comprehensive

piece of legislation that includes important international and domestic programs

that sometimes compete for the same scarce resources .

(U .N.

assessed

contributions are included in a measure which appropriates funds for the

Departments of Commerce, Justice, and State, the Judiciary and related

agencies .) During 1994 Senate debate on this bill, Senator Hutchinson proposed

and the Senate agreed that not less than $350 million of the funds provided for

assessed contributions to international organizations and contributions for

international peacekeeping activities be made available to reimburse U .S . state

and local governments for the costs of incarcerating illegal alien felons .

Although this provision was not included in the legislation as finally enacted,

it demonstrates the vulnerability of support for U .N. funding when other

pressing domestic needs remain . As further evidence, in subsequent legislation,

Department of Defense appropriations for FY1995 (P .L . 103-335) included a

provision rescinding $4 .561 million which had earlier been appropriated for

contributions to international organizations . This congressional action allowed

an increase in the appropriation for the Asia Foundation from $10 million to

$15 million .

Some options--at the U.N . level and at the U .S . domestic level--have been

suggested to promote timely payments :

Incentives or disincentives to pay on time . The United Nations applies

neither penalties nor incentives for members to make payments on time . A

The Working Capital Fund was raised in 1981 from $40 million to $100 million

(General Assembly Resolution 36/242 passed by a vote of 117 to 19, with 4 abstentions .

The United States voted against it .)

The U .N . Special Account was originally established in 1965 for voluntary

contributions by member states to help overcome existing financial difficulties . The U .N .

Special Account was reformed in 1972 to clear up past financial difficulties and resolve

the short-term deficit of the organization .

CRS-17

number of organizations in the U .N. system, however, have used incentive

and/or disincentive schemes to improve timely and full payment of assessed dues .

Two small organizations, the International Telecommunications Union (ITU)

and the Universal Postal Union (UPU) charge interest for contributions not

received by January 1st .

Other organizations have also developed incentive mechanisms . The

International Civil Aviation Organization (ICAO) distributes interest income to

member states on a weighted scale based on the date of payment and amount

of payment . A number of other organizations have also recently considered

incentive mechanisms including the International Labor Organization (ILO) and

the World Health Organization (WHO) .`

At the United Nations, however, the Secretary-General has not succeeded in

gaining support for an incentive/disincentive mechanism . Many feel that this

type of "carrot and stick" approach would not have a significant impact on

changing current U.N . funding patterns . The United States does not favor

charging interest for late payments ; yet, many other countries do .

Make changes in the U.S. budget-appropriations process by which

the United Nations is funded . U.N. funding is a small item in a complicated

U.S . budget and appropriations process . Indeed, even among those who closely

follow foreign affairs, very few understand how the United Nations is funded by

the U.S . Government or even what U.S. legislation provides funds for the

United Nations regular budget .

One suggestion has been that the United States make its U .N . payments

earlier--either making payments to the United Nations budget from the previous

fiscal year, or as it did earlier, making quarterly payments . In that way the

United Nations would receive funds throughout its fiscal year rather than at the

end of the U .N. fiscal year, or even in subsequent fiscal years . 16

Another approach would be to put international organization funding, as an

international legal obligation, in a separate budget category--perhaps as a

"mandatory" appropriation--similar to interest on the national debt or Social

Security payments, and thus not subject to budgetary tinkering . Still another

approach would be to have separate international organization funding

legislation . That way payments to these organizations would not compete with

domestic and other international programs in the same bill . This, however,

would focus more direct attention on international organizations, something

that could have an uncertain impact on U .N. funding levels .

Ultimately continuing arrears could lead a country to lose its vote in the

General Assembly . Article 19 of the U .N. Charter states that a U .N. member

U.N. Document A/ C . 5/43/29, p . 7-8.

For example, in U .S . FY1990 the United States completed its pa

U.N. 1989 budget in August 1990 .

e s to

CRS-18

"which is in arrears in the payment of its financial contributions to the

Organization shall have no vote in the General Assembly if the amount of its

arrears equals or exceeds the amount of the contributions due from it for the

preceding two full years ."

IMPACT OF CONTINUING SIIORTFALLSIARREARAGES

As a result of appropriation shortfalls, withholdings to encourage reforms,

and other statutory and other withholdings described above, the United States

developed shortfalls that, as of April 15, 1995, total $212 .126 million.

Initially, many felt that U .S. withholdings of funds in the 1980s had some

positive impact in providing the necessary catalyst for the United Nations to

undertake serious reform initiatives . Such reforms, it was felt would result in

a stronger and more efficient organization . Prodded by this pressure, the United

Nations did undertake some reform measures .

For the long-term, however, the impact of on-going U .S. shortfalls may be

less positive . Many feel that inadequate funds, uncertainty of resource

availability, and depleted reserves are damaging the capacity and potential of the

United Nations. Efficiency in financial management, future planning, and

restructuring are difficult to carry out when the organization does not know

when or how much will be provided by the major contributor . Thus, many feel

that long-term and continuing withholding may indeed be jeopardizing reform

momentum and worthwhile U .N. activities .

Continuing U .S. withholding, erratic payments, and arrearages may have an

adverse impact not only on the organization, but also on U .S. influence and

prestige within the United Nations . Indeed, there is growing frustration within

the United Nations and among member nations with U .S . funding action . U.S.

reliability and credibility, as well as its commitment and adherence to Charter

principles are both brought into question . Some observers, who concede that

further reforms are needed at the United Nations, nevertheless, question

whether such goals can be achieved by unilateral U .S. actions which violate

American treaty commitments and isolate the United States. Some fear that U.S.

efforts in the 1980s have given reform a bad name--the United States pressed

for changes and when implemented, did not pay up . Success of reform efforts

was predicated on the assumption by others that the United States would

resume full payment of assessments and begin eliminating past arrearages .

There are some in Congress again considering reducing U .N . funding. Many

observers fear that real and lasting reforms are unlikely to take full effect in an

organization paralyzed by financial instability .

U.S . representatives freely acknowledge that U .S. failure to pay all assessed

contributions damages U . N . ability to carry out its responsibilities, and have

CRS-19

expressed commitment to meet current assessments and arrears .' At the same

time U .S officials have also stated that no major U .N . activities were stopped or

staff laid off, because of lack of funds . There are no major congressional or

Administration efforts to come up with funds or initiatives to change the way

the U .S . Government approaches funding for the U .N. regular budget .

ACCOUNTABILITY FOR BUDGET EXPENDITURES

Congress and the U .S . Government view greater U .N . accountability and

oversight as an absolute core requirement for setting U .N . financing back on

solid ground . Under pressure from U .S . officials and Members of Congress an

office of inspector general was established at the United Nations . However,

concerns about the independence and activity of the office continue .

The U .S . General Accounting Office (GAO), in an October 19, 1992 report,

found that "current U .N . internal and external audit and evaluation structures

do not ensure program accountability or provide member states with adequate

oversight of the United Nations finances and operations . 18

The GAO

recommended the establishment of an independent, central audit and evaluation

authority headed by an official appointed by the U .N . Secretary-General and

confirmed by the General Assembly . Some months later, Richard Thornburgh,

ending his term as U .N . Under Secretary-General for Administration and

Management, submitted a report to U .N . Secretary-General Boutros-Ghali

recommending establishment of a U .N. inspector general office . 19

The Foreign Relations Authorization Act, Fiscal Years 1994 and 1995, as

passed by the House in June 1993, (and later enacted in P .L . 103-236) required

withholding of 10 percent for FY1994 and 20 percent for FY1995 of assessed

contributions for the U .N . regular budget until the President certified to

Congress that the United Nations had established an independent office of

inspector general . 20 In November 1993, U .S . U .N . Representative Madeleine

See, for example, the statement by Madeleine Albright before the General

Assembly's Fifth Committee on November 16, 1994 (USIUN Press Release #208-(93)) .

18 U .S . General Accounting Office. U.N. Audit and Evaluation . GAO/NSIAD-93-72R .

Oct . 19, 1992, Washington. p . 5 .

19 Thornburgh, Dick. Report to the Secretary-General of the United Nations . March

1, 1993 . 32 p .

The President was to certify that an Inspector General has been appointed by the

U .N . Secretary-General with the approval of the General Assembly and the appointment

was based mainly on the appointee's integrity and demonstrated ability in accounting,

auditing, financial analysis, law, management analysis, public administration, or

investigations ; that the Inspector General was authorized to make investigations and

reports relating to the administration of the programs and operations of the United

Nations; have access to all records, documents, and materials relating to programs and

CRS-20

Albright proposed to the U .N . General Assembly the establishment of an

independent office of inspector general . The U .N . General Assembly on July 29,

1994 adopted a resolution (AIRES/48/218B) establishing an Office of Internal

Oversight Services (OIOS) . On August 12, 1994 the General Assembly approved

the appointment of Karl Theodor Pashke as the Under-Secretary-General for

OIOS for one fixed term of five years, effective October 1, 1994 ."

The

Secretary-General also established a special reporting facility 22 to provide

direct, confidential access by staff members and others who wish to report

possible misuse of funds, waste, or abuse of U.N . facilities or privileges, or who

wish to make proposals for improvements in program delivery .

The State Department, on September 23, 1994 certified that an independent

office of inspector general (named the Office of Internal Oversight Services

(OIOS)) had been established, its head appointed with the approval of the

General Assembly, and established procedures for its functioning .

Some Members of Congress have, however, not been convinced that the

Office has sufficient independence and resources to be fully effective ." There

is considerable controversy in Congress about the performance to date of this

office and its head, Karl Theodore Paschke . Critics feel that the Paschke's pace

is too slow and that the United Nations is not providing sufficient resources for

the office . Others, however, argue that continuing U .S . arrearages make it

difficult to expand the staff and activity of this office .

Other recent U .N . actions, appear to demonstrate continuing efforts to create

a more accountable organization . On October 24, 1994, the Under-Secretary-

operations, and direct and prompt access to any official of the United Nations; procedures

were in place to protect the identity, and prevent reprisals against any staff making a

complaint, or providing information to, or cooperating in any investigation or inspection

by the Inspector General ; procedures were in place to ensure compliance with the

recommendations of the Inspector General ; and procedures were in place to ensure that

all annual and other relevant reports submitted by the Inspector General are available

to the General Assembly without modification .

United Nations document STISGB/273, Sept . 7, 1994. The OIOS is to have

operational independence under the authority of the Secretary-General and have the

authority to initiate, carry out, and report on all actions necessary to carry out its

responsibilities in monitoring, internal audit, inspection, evaluation, and investigations .

The Office is to submit a detailed annual report of its activities and recommendations as

well as significant problems in carrying out its functions to the Secretary-General for

transmittal as received to the General Assembly . The Under-Secretary is also to

comment on the scope od his activities and the adequacy of resources for the purpose

intended .

U .N . document ST/AT/397, Sept . 7, 1994 .

Senator Pressler who was a major proponent for creation of this office has also

been very critical of its functioning thus far . See, for example his statement in the

Congressional Record, September 29, 1994, v . 140, pp . S13703-4 .

CRS-21

General for Administration and Management, Joseph Connor, told the Fifth

Committee that a transparent and effective system of accountability and

responsibility would be established in 1995 . The system is to include the

establishment of clear responsibility for program delivery and a mechanism for

ensuring that program managers are accountable for effectively managing their

human and financial resources . Performance evaluation for all officials and

effective training of staff in financial and management responsibilities is to be

included . It is also to include measures to make U .N. legislative mandates

clearer . Efforts would be made to improve the procurement system by creating

competitive and transparent bidding system . 4

CAPACITY OF THE UNITED STATES TO TRACK, MONITOR, AND

EVALUATE U.N. FINANCIAL ACTIVITIES

If Congress continues to make full U .N. funding contingent on specific

performance by the United Nations on particular financial and other reforms,

the U.S . Government must have the ability to evaluate progress, or lack of

progress, in these areas . In the late 1980s, Congress found it difficult to assess

whether the requirements of the Kassebaum measure had been substantially

met and therefore whether full U.S. funding could be restored as the United

Nations began reforming its budget and administrative procedures .

This issue area also touches on Administration and congressional

consultation .

Congress has been increasingly concerned that it be fully

informed in a timely fashion about developments at the United Nations, so that

Members can make rational funding decisions . The Clinton Administration, like

most other administrations, has not necessarily come back to discuss and explain

U.N. developments to Congress . The Administration is largely responding to

congressional actions in this area rather than initiating consultation .

For FY1996, the Administration did not request any funding for arrearages .

Clearly, the FY1997 target date for paying up U .S. arrearages is not likely to be

met . Moreover, the Administration is not making clear to Congress the full

arrearage picture . While the annual congressional presentation documents

provide information on the arrearages which the United States intends to pay

($63 .229 million), it does not include figures for the statutory and policy

withholdings which are steadily growing and currently make up the largest part

of the U .S. arrearage (about $126 million) .

In peacekeeping, Congress has instituted requirements for regular reporting

to Congress as U .N. peacekeeping actions unfold . (Section 407 of P .L. 103-236

required more detailed annual reports, monthly consultations and reports, as

well as interim reports and notices to Congress on U .N. peacekeeping activities,

and quarterly notices on U .S. assistance for such U .N . activities .) Questions

remain, however, whether the State Department has the resources and the

trained personnel to respond to these added reporting and notification

24 U.N. Press Release GA/AB/2954, Oct . 24, 1994 .

CRS-22

requirements in peacekeeping as well as for U .N . financial and reform

developments . A corresponding question is whether Congress has the resources

to analyze and make full and informed use of the information provided .

It is not evident that the U .S.Government has evaluated whether past U .S.

withholdings achieved goals intended . Such an assessment would examine

several questions : For example, did the Kassebaum Amendment produce

sustained U .N. reform? Some reforms did take place, but has U .N. funding been

placed on firmer footing since those reforms? Has U .S . reform pressure without

an improved payment record simply given reform a bad name within the

organization and among other member states? Have the other withholdings for

PLO programs, Law of Sea Commission, or for the tax equalization fund had

any impact on those programs at all?

CRS-23

APPENDIX I . BRIEF OVERVIEW OF

PROPOSALS FOR IMPROVING U .N. FINANCING

GENERALLY

Most proposals are based on the general premise that changes and reforms

at the United Nations are necessary and will take place . (See table 5, p . 26, for

a summary of some recent proposals .) Most of the specific proposals calling for

reform of the way assessed budgets are financed are not new, they, have been

around for years . Most of them are not radical and do not call for any

significant changes in the way that financing is done . Some of the current

proposals were made by then U.N. Secretary-General Perez de Cuellar, and were

repeated in large part by current U.N. Secretary-General Boutros-Ghali in his

Agenda for Peace proposal .

A Ford Foundation-sponsored report, co-chaired by Paul Volcker and

Shijuro Ogata, focussed specifically on the U .N. regular budget, and made

recommendations that have been endorsed by many other groups . Richard

Thornburgh, on leaving his post after one year as U .N. Under Secretary-General

for Administration and Management, submitted a report calling for U .N.

management reform including establishment of an office of inspector general .

Former U.N. officials Erskine Childers and Brian Urquhart issued a study

calling for renewing the U .N. system through a major overhaul including

improvements in financing. The U.S . Commission on the Effectiveness of the

United Nations, with members appointed by the President and Congress in its

final report included some discussion of U .N . financing.

Almost all of these proposals, while indicating the need for various

improvements and reforms, also see as the most basic need for governments to

pay in full and on time--that is, to meet the financial obligations which all states

undertake to fulfill at the time they become members .

None of the proposals relating to assessed budgets would bring in much new

revenue. The existing proposals do not really give details as to the amount of

money that might be raised by charging interest on unpaid assessments for

example. The amount would of course depend on the interest rate and the

amount on which it is levied . Charging interest on unpaid assessments may be

more of an inducement to pay on time than really meant to produce extra

revenues .

In addition, the Secretary-General and others have proposed a number of

rather creative proposals--taxes on arms sales and international air travel . Such

proposals would all require some kind of bureaucracy and enforcement

mechanism, and are probably unworkable at this point . The Secretary-General

also suggested tax exempt contributions from businesses, foundations, and

private individuals . This might mean a significant loss of control of the United

Nations by member states . It might mean there would be other nongovernmental masters for the United Nations . Thus, governments have not

been particularly enthusiastic about non-governmental sources of U .N . revenue

CRS-24

raising . Such options would give the United Nations system some financial

independence from contributing governments and might also impinge on

governmental tax bases, if, for example, donations by businesses or individuals

to the United Nations were to be domestically tax deductible .

U .S . GOVERNMENT RESPONSE TO PROPOSALS

The U.S. Government has not shown much enthusiasm for many of these

proposals, except for praising and emphasizing the need to reform the U .N.'s

financial management system by establishing an Inspector General's Office .

The Bush Administration attitude overall was rather negative to most

proposals, including those for increasing the Working Capital Fund and

imposing interest charges on arrears . The Clinton Administration has talked

about regularizing U .S. payments . Nevertheless, while Ambassador Albright has

stated that the United States is creating havoc by not paying on time, the

Administration has not come up with any proposals to do so . Indeed, while the

Administration requested some monies to pay for partial U .N. arrearages,

Congress has not appropriated any money for this purpose for FY1994 or

FY1995 .

Except for the proposal to establish an office of inspector general, Congress

has not expressed wide support for other ideas . In order for most proposals to

be put into effect, congressional acquiescence would be needed . Any proposals

involving higher contributions or earlier payments would not likely be embraced

in the foreseeable future. For example, quarterly payments would return to the

way the United States used to finance the U.N. system . But it would require

Congress to change the way in which the U .S . Government pays its U .N. dues.

Congress would likely be very reluctant to switch back to a quarterly system of

payments . Such a system would mean that three-quarters of U .N. assessed

payments would have to be made in an earlier fiscal year . That is, threequarters of calendar year 1995 payments, paid before October 1, would have to

come from FY1995 funds . This would increase the FY1995 international

organization account requirement in that single transition year . Currently,

FY1995 appropriations provide funding for calendar year 1994 U .N. assessments

only .

Increasing the Working Capital Fund would also require a one-time increase

in U .N. appropriations (or could be done in multi-year way), something Congress

appears not likely to support .

Many in Congress feel there is need for more reforms in the U .N. system

before they would be willing to consider changing U .S. funding for the United

Nations system. Indeed, the attitude of Congress toward funding the United

Nations assessed accounts has undergone a significant change since the 1970s .

Before that time, usually Congress appropriated whatever sum the

Administration requested for international organization dues . During the 1980s

Congress found that it could withhold some funds or reduce amounts

CRS-25

appropriated because of U.S . domestic funding difficulties and to express

displeasure with the United Nations . While some Members did express concern

about U .S . treaty commitments, the sense that financial obligations must be met

as assessed, is no longer entrenched in Congress . Indeed selective withholding

continues--for some Palestinian programs, Addis Ababa conference center, and

Administration policy withholdings . Some feel it is necessary to maintain

financial leverage in order to push for further U .N . reforms . Others, however,

have argued that such leverage has limited value in inducing lasting reforms .

CRS-26

Table 5 . Summary of Selected Recent Findings and Recommendations

for Improving U.N . Regular Budget Financing

Subject

Agenda for Peace

Thornburgh2

Voleker/Ogata3

Basic

Problem

Exceptionally high

level of unpaid

contributions and

inadequate reserves

Late and uneven payment of

assessments

Assuring timely

availability of funds

Simplify budget process .

Too much micromanagement by General

Assembly. Set priorities

and give U.N. managers

greater flexibility and hold

to greater accountability

Maintain consensus

procedures for approving

budget .

Prompt and full payment of

assessments

All countries must pay

on time and in full .

Arrearages must be paid

General

Observations

(Prompt and full

payment of

assessments)

Charge

Interest

Charge interest on late

payments

Increase Working

Capital Fund to $250

million or 1/4 of annual

assessment

Charge interest on late

payments

Raise level of Working

Capital Fund to $200

million

Member States may

wish to consider

modifications

Base assessments on 3year base period, rather

than 10-year

Assessments

Borrowing

Allow U .N . to borrow

commercially ;

authorize borrowing

from the World Bank

and International

Monetary Fund

Inspector

General

Rephase appropriations

process so that dues can

be paid on time

Non-governmental

sources of funds : levy

o international air

travel; tax exemptions

for U .N. contributions

by foundation,

businesses and

ndividuals

Revise scale of

assessments--U .S . rate

for regular budget

should be in 15-20%

range

meat

0-12%

Generally endorses

proposals and

establishment of

Inspector General

Improve staffing and

procedures for

accountability and

oei

Congress should

streamline procedures

for dealing with U .N.

financing. Keep

American public

informed about U .S.

contributions

Member states must

improve domestic

ancial system for

N . financing.

Correctly inform

Risers of annual

estme in

fling) .

U .N . should not have

authority to borrow .

Create offce of Inspector

General

National

Funding

Nongovernmental

Sources of

Funds

Short-term borrowing

authority

Childers/

Urquhart5

ndorses adoption of

olcker/Ogata

oposals.

must be

made in

ble and

Four quarterly

installments, instead of

lump sum at beginning

of year

Basic

Premise

Working

Capital

Fund

US. Commission¢

ongovernmental

so rtes levies on arms

ency

o meats,

rnational trade and

at, U.N . lottery to

raise revenues and

crease citizen

participation .

I United Nations . General Assembly . Security Council . An Agenda for Peace . New York, United Nations . 24 p.

document A/47/277 ;

.N . document AI50/60 ; S/1995/1 . Jan. 3, 1995.

S/24111

June

17,

1992

Supplemented

2 Thornburgh, Dick. Report to the Secretary-General of the United Nations . Mar. 1, 1993 . 32 p . (unpublished)

3 Volcker, Paul, and Shijuro Opals, et al . Financing an Effective United Nations. N .Y ., Ford Foundation, 1993 . 34 p .

4 United States Commission on Improving the Effectiveness of the United Nations . Defining Purpose : The U.N . and the Health of Nations .

Sept . 1993 . 116 p.

5 Childers, Erskine, and Brian Urquhart . Renewing the United Nations System. Uppsala, Sweden, Dag Hammerskjold Foundation, 1994 . 213 p .

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.