Funding and Financial Analysis

 

ELEMENTS OF OCHA’S BUDGET

 

OCHA’s budget has two elements: the programme budget, which covers all programme activities necessary to achieve OCHA’s mandate, and the administrative budget, which covers OCHA’s administrative and financial management activities.

 

The programme budget is funded from the United Nations regular budget and from extrabudgetary income (donor contributions). The regular budget covers 70 staff posts at headquarters, plus non-staff costs. This is paid for by the assessed contributions of Member States to the United Nations Secretariat. There is no PSC applied to the regular budget.

 

The extrabudgetary (XB) programme budget covers 95 per cent of OCHA’s requirements. This budget includes a mandatory PSC levy of 13 per cent on most activities and is set by the General Assembly. The XB programme budget is exclusively funded through voluntary contributions.

 

The administrative budget is paid for out of the above-mentioned PSCs. OCHA does not raise funds for this budget since PSCs are automatically transferred into a separate account. OCHA’s global budget includes programme and administrative elements in line with UN financial accounting procedures.

 

The objectives in OCHA’s Strategic Framework form the basis of budgetary decisions.

OCHA relies almost exclusively on voluntary contributions from governments. A small amount—about 5 per cent— comes from the United Nations regular budget. Predictable funding is therefore essential to enable OCHA to prioritize and remain confident that underfunding will not inhibit its capacity to fulfil its mandate.

Over the past two years, OCHA has put greater emphasis on aligning its anticipated expenditure to projected donor income. It has also ensured that crisis-driven budget growth at the field level is coupled with budget reprioritization exercises. This has resulted in net budget reductions in some areas and zero or modest growth in others. These measures have ensured that OCHA’s budget is sustainable and cash liquidity is restored to a healthy position.

In 2011, donors increased their funding to OCHA by $26.6 million to $213.3 million. They also made more funding available in flexible, predictable and early contributions. As a result, OCHA generated slightly more donor income than it spent on activities. It was able to replenish its reserves to cover field-level expenditure ahead of receiving the actual cash. This, combined with careful budget planning, meant that OCHA began 2012 in a healthy financial position. It advanced funds in December 2011 to cover staff and operating costs for the first four months of 2012.

Budget and income in 2011

In its Annual Plan and Budget 2011, OCHA published a global budget of $250 million, which was revised upwards during the year. This was mainly in response to crises in Côte d’Ivoire, Libya, Sudan, Yemen and the Horn of Africa. The final global budget for 2011 was $278.2 million.

Of this total, OCHA sought $230 million in voluntary contributions. The remainder was covered by the regular budget ($13.5 million) and the Programme Support Account ($34.7 million). Click below for a detailed budget breakdown. 

In 2011, donor funding increased to $213.3 million ($26.6 million more than 2010). This was a continued sign of confidence in OCHA’s strategic direction and prudent financial management. Click here for a breakdown of 2009-2011 Donor Income.

In addition to the $13.5 million from the regular budget, $6.9 million was received in miscellaneous programme income. Total programme income was therefore $233.7 million. Total programme expenditure amounted to $215.3 million. The difference was invested in OCHA’s reserves.

On the administrative side, OCHA’s direct expenditure on programme activities generated $22.9 million in programme support cost (PSC) levies. This was transferred to the Programme Support Account. It was supplemented by $5.3 million in other income and adjustments,[1] bringing total administrative income to $28.2 million. A total of $30.2 million was spent on administrative activities, including central human resources, finance, procurement, resource mobilization and field-level administrative support.

How and where OCHA spent its budget in 2011

Total expenditure charged against the budget was $245.5 million (compared with $224.3 million in 2010). Seventy-one per cent of OCHA’s expenditure was on activities supporting field-based humanitarian coordination and advocacy, with 58 per cent spent directly in the field. Ten per cent of the spending was on OCHA’s other core functions: policy development, humanitarian planning and financing, and communications and information management. Five per cent covered OCHA’s executive management and 14 per cent went to administrative activities mainly funded from programme support charges. Expenditure by thematic area and region is outlined in the charts below.

As a coordinating agency, OCHA’s mandated operations are delivered through its staff. In 2011, 71 per cent of OCHA’s total expenditure was on staff costs and 29 per cent on non-staff costs.

The average expenditure rate during 2011 was 88 per cent (in 2010 it was 85.5 per cent). Click below for a detailed breakdown of expenditure.

Cash management and closing balance 2011

The table below reflects the financial status at 31 December 2011. It shows the resources available to fund the OCHA budget during 2011.

The closing balance across OCHA’s budgeted programme activities was $155.5 million, representing a net increase of $18.7 million. Of this total, 40 per cent consisted of unearmarked funds received late in 2011 and advanced to cover headquarters and field activities from January to April in 2012. Twenty-six per cent consisted of earmarked funds carried forward for spending in the early part of 2012, and 12 per cent was set aside for mandatory operating reserves. The balance, or 22 per cent, remained in OCHA’s cash reserves, which are used to support emergency scale-up and other priority operations in between disbursements of donor funding. These reserves were drawn on during the first quarter of 2012 to respond to evolving crises.

OCHA aims to have enough cash in its reserves at any one time to cover six months of staff costs and three months of operating costs.

The closing balance across OCHA’s administrative activities decreased by $2 million to $50 million. OCHA spent $7.3 million more on these activities than it generated in PSC income. This was in line with the organization’s strategy to reduce the closing balance in the Programme Support Account to match expected annual administrative expenditure.

OCHA Financial Status as at 31 December 2011
OCHA-Mandated Programme and Administrative Activities Programme Activities Administrative Activities Regular Budget Total
Opening Balance - 1 Jan 20111 136,756,216 52,001,736 - 188,757,952
2011 Donor Contributions2 213,264,180  - 13,517,600  226,781,780 
Available funds3 350,020,396  52,001,736  13,517,600  415,539,732 
Transfer of PSC4 (22,913,924) 22,913,924 - -
 Direct Expenditure5 (178,516,112) (30,184,720) (13,909,992) (222,610,824)
Total Expenditure Charged against Budget6 (201,430,036) (30,184,720) (13,909,992)  (245,524,748)
Net available funds before other income, adjustments,
transfers, refunds and ISDR costs7
148,590,360 44,730,940 193,321,299 
Other income, adjustments, transfers, refunds and ISDR costs8 6,899,518   5,296,136  - 12,195,655 
Closing Balance9 155,489,878  50,027,076  - 205,516,954 
Increase/(Decrease) in opening balance10 18,733,662    (1,974,660) - 16,759,002 
Mandatory Reserves11 19,233,751  5,715,814   -  24,949,565 
 Available Balance for Spending12 136,256,127  44,311,262  - 180,567,389 

Notes:
1)  The opening balance reflects the situation as at 1 January 2011.      
2)  For programme activities, includes paid contributions and unpaid pledges of $.6 million.        
3)  = 1 + 2      
4)  PSC levied on programme expenditure and transferred to the Administrative Account to cover cost of administrative activities.
5)  (1) Includes disbursements and unliquidated obligations as at 31 December 2011.  (2) Excludes $4.3 million for International Strategy for Disaster Reduction (ISDR) activities.
6)  = 4 + 5.  For programme activities, expenditure charged against budget is the direct programme expenditure plus programme support transfers. For administrative and regular budget activities, it is the direct expenditure only.      
7)  = 3 + 4 + 5. Regular budget balances are not carried forward to the next biennium.      
8)  Transfers of PSC from other trust funds and transfers from dormant account, Specially Designated Contributions and ISDR; interest and miscellaneous income; foreign-exchange adjustments; transfers, refunds and savings on prior period unliquidated obligations.      
9)  7 + 8.  Includes mandatory reserves of $19.2 million for programme activities and $5.7 million for administrative activities, which were not available for spending in 2011. Regular budget balances are not carried forward to the next biennium.      
10)  Closing balance (9) less opening balance (1).      
11)  Reserves mandated under the UN Financial Regulations and Rules for extrabudgetary activities (programmme and administrative activities).
12)  Closing balance (9) less mandatory reserves (11). Regular budget balances are not carried forward to the next biennium. 

Funding trends in 2011

As in previous years, the overwhelming majority of voluntary contributions came from Member States. They provided $193.4 million, or 91 per cent of all contributions. The European Commission contributed a further $17.4 million or 8 per cent. Multi-Donor Funds channelled $2.4 million. Private individuals provided the remaining $1,218. The table overleaf lists all donors to OCHA in 2011.

In 2011, OCHA’s miscellaneous income primarily comprised investment income ($3.5 million) and other net adjustments ($2.3 million). It also included $1.1 million in foreign-exchange gains/losses.

Flexibility

 
 

How and why OCHA seeks earmarked funds

Despite the recent upward trend in unearmarked funding, such fully flexible contributions only cover on average between 45 to 55 per cent of total income in a given year. This is why continued earmarked support is also vital to enable OCHA to cover its planned expenditure. Knowing that some donors cannot provide unearmarked funds, and that other donors have highly specific targets for their earmarking, OCHA seeks to mobilize earmarked funds for those parts of the organization that are most likely to attract such support, as well as for sudden-onset emergency response. The remainder of the budget is covered from unearmarked funding.

In 2011, 94 per cent of donor earmarking was for the field. The most popular recipients of earmarked funding were OCHA offices in high-visibility crises and new emergencies. When targeting donors for earmarked funds, OCHA considers each donor’s funding mechanisms and the potential alignment of interest between a specific donor and a specific country office, regional office or headquarters activity. OCHA values donors’ efforts to consult prior to making earmarking decisions, to ensure that there is an even spread of funds. OCHA does not fundraise for earmarked grants where these are not required.

To ensure full coverage of its planned expenditure, OCHA will continue to ask relevant donors to provide earmarked support for its priority activities and response to sudden-onset emergencies. This will complement the sustained and predictable unearmarked support also provided to OCHA.

 
 

OCHA Donor Support Group

The ODSG is an informal group of donors that gives OCHA financial, political and technical support. The group currently comprises Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, Luxembourg, New Zealand, Netherlands, Norway, Republic of Korea, Russian Federation, Spain, Sweden, Switzerland, United Arab Emirates, UK, USA and the European Commission (Poland joined in 2012). Members commit to annual funding of at least $0.5 million and to supporting OCHA in fulfilling its General Assembly mandate.

The ODSG is a sounding board and a source of advice for OCHA on policy, management, budgetary and financial issues. The group is also used for feedback, donor consultation and exchanging views on OCHA’s strategic priorities, new project initiatives, evaluations and reviews. The group discusses measures that may be taken individually or collectively by members to help OCHA fulfil its mission and achieve its goals.

The ODSG meets regularly at the expert level in Geneva and New York, and annually at the high level. The High-Level Meeting attracts delegates from capitals at the Director level and above. An annual ODSG field mission reviews OCHA’s work at the country level. Donor members are invited at the senior level from capitals or permanent missions.

 
 

Unearmarked funds give OCHA flexibility in allocating its resources. A key element of the organization’s resource mobilization strategy is to secure increases in unearmarked funding from donors and, where possible, secure those commitments on a multi-year basis.

In 2011, several donors either increased their unearmarked contributions or provided fully unearmarked contributions. As a result, and for the first time, unearmarked funding (54 per cent) exceeded earmarked funding (46 per cent). OCHA achieved an overall net increase of $32.2 million in fully unearmarked funding compared with 2010.
In addition, Canada and the Swedish International Development Cooperation Agency provided flexible earmarked funding. This gave OCHA freedom to allocate funds earmarked loosely for the field in line with cash requirements.

Earmarked funds decreased by $5.6 million in comparison with 2010. Ninety-four per cent of OCHA’s earmarked income was for country offices and regional offices, and 6 per cent was for headquarters. Click here for a detailed breakdown earmarking.

Predictability

OCHA has improved the predictability of its income, securing multi-year funding agreements with Australia, Canada, Finland, Luxembourg, Norway, Sweden, Switzerland and the UK. Three of these countries provide for a gradually increasing sum of unearmarked funding per year, one provides a fixed sum of loosely earmarked funds for the field, and four provide a fixed sum per year. Committed income for 2012 from these eight multi-year agreements totals $71 million (at May 2012 exchange rates). This covers one third of OCHA’s 2012 funding target.

These agreements provide an important basis for accountability to donors. They also place OCHA’s income on a more predictable footing, which in turn assists in better cash flow and human resource planning.

Diversity

OCHA had 43 governmental donors in 2011 (one more than in 2010 and seven more than in 2009). In 2011, 21 non-Development Assistance Committee (DAC) donors gave $5.7 million to OCHA. Four of these were new donors. OCHA has nine regular non-DAC donors (contributors for three out of the past four years). OCHA attracts new donors primarily when there are high-profile sudden-onset emergencies, such as Cyclone Nargis in 2008, and the Haiti earthquake and Pakistan floods in 2010.

Timeliness

Timely disbursement is critical to OCHA. This is due to the heavy reliance on voluntary contributions, and the fact that OCHA may incur expenditure only against cash received and not against pledges. In 2011, 60 per cent of income was committed (paid or pledged) in the first half of the year compared with 52 per cent in 2010. OCHA will work with donors to increase the proportion of contributions transferred during the first half of the year to 75 per cent.

Sharing the cost of coordination

OCHA’s ability to fulfil its coordination mandate depends on the financial support of a small group of donors. To show their support for principled and well-coordinated humanitarian action, members of OCHA’s Donor Support Group (ODSG - see box) gave OCHA the equivalent of 2 per cent of their total humanitarian spending. However, this statistic hides a wide disparity in the range of funding set aside for OCHA’s coordination work from this group. Some supporters of coordination significantly exceeded these averages, while many paid significantly less. If all Member States contributed just 2 per cent of their recorded humanitarian spending to OCHA, the organization would have been fully funded.

ANNEX – Specially Designated Contributions and Other Trust Funds

Specially Designated Contributions

Specially Designated Contributions (SDCs) are earmarked by donors for humanitarian projects implemented by third parties (UN partners and NGOs). OCHA channels income for such activities in the form of grants. SDC activities are not included in the OCHA Annual Plan and Budget. Income towards SDCs is not counted in the OCHA total donor income nor in its donor-ranking tables.

SDCs comprise UNDAC Mission accounts, natural disaster activities (emergency cash grants), relief stock items, ERFs and the ProCap and GenCap projects.

PSCs levied from expenditure for SDC projects are spent on administrative overheads. In most cases these charges are levied at 3 per cent on SDCs.

UNDAC Mission Accounts: Member States deposit funding with OCHA, which is then used to deploy their nationals on UNDAC missions. Thirty-four Member States currently hold UNDAC Mission Accounts with OCHA.

Natural Disaster Activities: These extrabudgetary funds are held in pre-positioned accounts that have been used primarily to provide emergency cash grants to UN agencies and NGOs in natural disasters, supplementing the emergency cash grants funded from the regular budget. The regular pre-positioned funds are being wound down in view of diminishing donor interest. The remaining balance is expected to be spent in 2012. This will leave only the Italian Bilateral Emergency Fund, which is used to channel Italian contributions for allocation subject to Italian approval.

Relief Stock Items: These funds are used to purchase and manage OCHA relief stocks held in the UN Humanitarian Response Depot.

The ProCap and GenCap Projects: This is flow-through funding for Protection Standby Capacity (ProCap) and Gender Standby Capacity (GenCap) projects covering the Norwegian Refugee Council’s management and deployment of senior protection officers and senior gender advisers. Both projects are governed by their respective inter-agency steering committees, and daily management is undertaken by the ProCap and GenCap Support Unit. The unit is hosted by HCSS. Its costs appear in the OCHA budget (O292) as they are not flow-through costs. In 2011, total spending on the two projects’ management of the rosters and deployments was approximately $6.8 million (ProCap $2.6 million and GenCap $4.2 million).

In 2011, ProCap deployed 14 senior protection officers to 13 countries hosted by five UN agencies. While reporting to specific agencies, the experts have an inter-agency role, and all requests for their support are acknowledged by the RC/HC in-country. In several cases over the last year, such as Côte d’Ivoire, Pakistan, Libya, Yemen and Colombia, their role revolved around stepping up the effectiveness of Protection Cluster coordination to maximize the protection of displaced people and other vulnerable groups. In other cases, namely Namibia, Malawi, Mongolia and South-East Asia, ProCap members were assigned to integrate protection agendas into country and regional disaster preparedness planning. In 2011, ProCap was an agent of change in WFP, with ProCap officers helping WFP in DRC and South-East Asia to mainstream protection into organizational policy and programming.

In 2011, 16 countries, regions and global clusters requested the support of GenCap advisers to ensure that the different needs of women, girls, boys and men are effectively met through gender-sensitive humanitarian programming. Notably, in 2011 GenCap stepped up its support to disaster response preparedness, with deployments to the Pacific and Southern African regions. GenCap advisers provided extensive support to the development and implementation of the IASC Gender Marker, which has been made mandatory for all CAPs and has been used in five pooled funds.

An external evaluation of the GenCap and ProCap projects delivered at the close of 2011 concluded that both projects continue to be highly relevant and should con¬tinue for the medium-term future.

Country-Based Pooled Funds

Emergency Response Funds: ERFs are country-level pooled funds man¬aged under OCHA auspices. The HC is the overall custodian of ERFs where grants are allocated to NGOs, UN agencies, the International Or¬ganization for Migration and the Red Cross/Red Crescent Movement for response to rapidly evolving needs. The funds are unearmarked, and decisions for fund allocations are made at the country level in a timely, flexible and coordinated manner. In 2011, OCHA managed ERFs in 15 countries: Afghanistan, Colombia, DRC, Ethiopia, Haiti, Indonesia, Iraq, Kenya, Myanmar, Nepal, oPt, Pakistan, Uganda, Yemen and Zimbabwe. By the end of 2011, Nepal, Iraq and Uganda were considered as closed funds. Click here for a detailed breakdown of ERFs.

The funding for ERFs decreased dramatically in 2011 (by 50 per cent) in relation to the fact that the Haiti earthquake and the Pakistan floods accounted for 75 per cent of the funding in 2010.

The $73 million contributed in 2011 was critical in meeting new developments, including the Horn of Africa crisis. Ethiopia and Kenya, in comparison with 2010, received triple the amount of funding in 2011 due to the situation. The total ERF expenditure in 2011 was $99 million. Of the total, the largest amount went to water and sanitation and nutrition sectors. NGOs received 73 per cent of the total allocations.

OCHA in 2011 intensified its efforts in ensuring full compliance with pooled fund management, standardization and harmonization policy in order to improve coherence among the funds, and to better mitigate and manage any potential risks. OCHA is reviewing, revising and finalizing global guidelines for ERFs and CHFs, which will help OCHA country offices to better support the HCs in managing the funds.

Common Humanitarian Fund for Somalia: The Somalia CHF is a multi-donor humanitarian fund under the authority of the HC. The fund’s key objective is to improve the timeliness and coherence of the humanitarian response through an inclusive process allocating funds to priority needs. Unlike CHFs in other countries (CAR, DRC, Sudan and South Sudan), OCHA is responsible for the financial management of funds allocated to NGOs.

The Somalia CHF received $99.6 million from donors in 2011. Contributions increased threefold compared with 2010, when $31.2 million was received for the fund. The large increase is mainly due to the severe drought that occurred in the Horn of Africa during the year. In 2011, international and national NGOs received 74 per cent of funds.

Other Trust Funds

The Afghanistan Emergency Trust Fund was established in June 1988 by the Secretary-General to support various humanitarian activities in Afghanistan. This included providing grants to NGOs and financing some economic development initiatives through the Office of the Deputy Special Representative of the Secretary-General to the United Nations Assistance Mission in Afghanistan. In 2011, there was no expenditure from this trust fund. Therefore, OCHA had expected to settle most of the remaining fi¬nancial charges pending the receipt of related expenditure reports from the executing agencies in order to close the fund. As at 31 December 2011, the outstanding clos¬ing balance was $101,466. OCHA is in contact with the implementing agencies, but has not yet received the final expenditure reports to facilitate the closure of this fund.

The Tsunami Trust Fund was established following the 2004 Indian Ocean tsunami. The fund financed activities undertaken in the course of coordinating humanitarian activities. This included providing relief to victims and longer-term infrastructure development. During the trust fund’s closing stages, remaining funds supported UNDP’s development activities. OCHA anticipated closing this fund in 2011. However, it was unable to achieve this goal because there were outstanding and/or overdue expenditure reports from UN agencies that were not received as expected. The closing balance of this trust fund as at 31 December 2011 was $3,805,469.38. OCHA will ask the respective donors to allow the reprogramming of the re¬maining funds to other humanitarian activities.

Click here for a detailed breakdown of in-kind contributions and Associate Experts.

[1] This is the sum of interest and miscellaneous income, prior period adjustments, transfers of PSC from other trust funds, Specially Designated Contributions and excludes $4.3 million in UN International Strategy for Disaster Reduction administrative expenditure.