Identifier
Created
Classification
Origin
06GENEVA582
2006-03-14 16:10:00
UNCLASSIFIED
US Mission Geneva
Cable title:  

36TH UNHCR STANDING COMMITTEE - PROGRAM BUDGETS

Tags:  PREF PREL UNHCR 
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RUEHBS/USEU BRUSSELS BE
UNCLAS SECTION 01 OF 04 GENEVA 000582 

SIPDIS

C O R R E C T E D C O P Y //CORRECTED REFS A, B, C//

SIPDIS

POSTS FOR REFCOORD, STATE FOR PRM

E.O. 12958: N/A
TAGS: PREF PREL UNHCR
SUBJECT: 36TH UNHCR STANDING COMMITTEE - PROGRAM BUDGETS
AND FUNDING

REF: A. GENEVA 555

B. GENEVA 556

C. GENEVA 557

GENEVA 00000582 001.2 OF 004


UNCLAS SECTION 01 OF 04 GENEVA 000582

SIPDIS

C O R R E C T E D C O P Y //CORRECTED REFS A, B, C//

SIPDIS

POSTS FOR REFCOORD, STATE FOR PRM

E.O. 12958: N/A
TAGS: PREF PREL UNHCR
SUBJECT: 36TH UNHCR STANDING COMMITTEE - PROGRAM BUDGETS
AND FUNDING

REF: A. GENEVA 555

B. GENEVA 556

C. GENEVA 557

GENEVA 00000582 001.2 OF 004



1. (U ) Summary. The Deputy High Commissioner, the
Controller and the head of External Relations provided a
briefing to member states on UNHCR strategies to meet the
current budget crisis. Member states were frank in their
remarks to UNHCR, sometimes highlighting the organization's
shortcoming on budget matters. Most expressed their concern
over the capping issue, and said they wanted to see UNHCR
prioritize rather than continue cuts across the board.
Members stressed the need for UNHCR to provide updates on its
financial situation and said that more strategic thinking on
the budget was needed. Member states also recognized that
flexibility on contributions will help support timely
assistance to refugees. On the IDP issue, member states
asked for more clarification on UNHCR's budget for the pilot
countries and cautioned against adding responsibilities under
the cluster approach that would further strain its financial
situation. End Summary.

Budget Discussion - Recap of 2005
- - - - - - - - - - - - - - - - -


2. (U) Deputy High Commissioner Wendy Chamberlin and
Controller Saburo Takizawa made a joint presentation of the
current state of UNHCR's budget, painting a frank picture of
UNHCR's financial crisis and emphasizing the fact that for
the first time ever, UNHCR began the calendar year with
depleted reserves for its Annual Program Budget (AB). As
previously reported, UNHCR realized mid year in 2005 that it
was going to have financial difficulties and relied on a
number of measures to reduce the pain. These included
shifting funds across programs based on its mid-year review
capping, and spending reductions across the board to reduce
funding requirements. UNHCR's financial situation was
nonetheless grim at the end of 2005, and the organization
imposed more cutbacks late in the final quarter and borrowed
USG 12.1 million from the working capital fund to support its
operations.


3. (U) UNHCR has paid back the loan in 2006, and is looking
at a number of financial reforms to support continuing
operations. Chamberlin repeated the High Commissioner's

mantra that UNHCR needs to change its way of doing business,
because its current structure is financially unsustainable.
She emphasized obvious contradictory results over the years,
such as staff costs overtaking operational costs as a direct
result of putting staff on indefinite contracts. On a more
positive note, the approximate ratios on program, program
support and management and administration budgets have more
or less in the past five years balanced out. However,
external factors such as the fluctuations in the exchange
rate, combined with fixed cost rigidities, have made it
impossible to obtain 100% support of the budget.

Making Difficult Budget Decisions in 2006 and Beyond
- - - - - - - - - - - - - - - - - - - - - - - - - -


4. (U) Unfortunately, UNHCR is still in a financial crisis
and is trying to maintain a precarious balance of waiting for
donor contributions while making sure that contributions
received early in the year are not prematurely liquidated.
In response to members' requests for regular budget updates,
the High Commissioner, during his recent meetings with
representatives from UNHCR's major donor countries, had
promised to provide monthly financial reports. Other factors
for the 2006 financial crisis include the large number of
programs in the Supplementary Program Budget (SB),the
absence of carryover funds from the previous year, and the
addition of the Burundi and Chad budgets (formerly SBs) into

GENEVA 00000582 002.2 OF 004


UNHCR's annual program budget (AB) making the 2006 AB USD
163.7 million larger than the 2005 budget.


5. (U) Chamberlin noted that obtaining "fresh funds" from
donors is a challenge and pressed member states to give UNHCR
as much as possible this year. She said that things are so
bad that capping the budget, customarily done at the end of
the year, has been imposed in the beginning of 2006 in order
to prevent painful cuts later. Some of the programs affected
by the early capping of 20% include the headquarters' budget,
staff travel, training and seminars. Despite this, UNHCR
still has a sizeable shortfall. The DHC stressed that
UNHCR's way of doing business must change to meet these
realities and mentioned the headquarters and field review
that will look for a more flexible workforce strategy. She
ended her presentation with a bleak statement that UNHCR may
also face a difficult year in 2007.


6. (U) Many members asked that UNHCR keep them informed of
the situation and the USDEL asked that a new paragraph
calling for UNHCR to keep donors informed of its financial
situation be inserted in the draft decision on the budget.
Others, such as Australia and the UK, said that if further
cuts were needed, it expected UNHCR to clearly prioritize its
activities rather than implementing across the board cuts and
asked UNHCR to keep EXCOM members informed of how it expects
to prioritize. Chamberlin agreed that the capping is not the
optimal choice for responding to the financial crisis, which
UNHCR is making a top priority for the financial review that
will focus on plans to strategize and prioritize. In the
instructions for the country operations planning exercise,
UNHCR has asked its mission representatives to use UNHCR's
strategic objectives to look at their needs assessments and
plan programs that will be in line with results based
management. Takizawa said that there was a broad consensus
that UNHCR should be transparent and that UNHCR is amenable
to present a briefing on the financial picture and budget at
any time.

Changing the Approach on Fundraising
- - - - - - - - - - - - - - - - - -


7. (U) The director of External Relations, Anne-Willem
Bijleveld, told members that 2005 had been a challenging year
in terms of fundraising but was marked by positive outcomes
such as the improvement in the timing of contributions. In
response to previous criticism from EXCOM members on
incentive based funding, Bijleveld said that it was crucial
that country representatives get involved in raising funds,
particularly from private donors. He added that field
missions will also help UNHCR get funds from the Central
Emergency Response Fund (CERF). He acknowledged that the
office of Donor Relations is not able to obtain full funding
of the budget on its own, so UNHCR must look at other means
as well and is looking at private sector fundraising in Asia,
Africa, the Americas, and Europe. UNHCR is hoping to get the
overall investment level to the same one to four ratio
applied to WFP and UNICEF on the private sector funding.
Sweden responded that local fundraising has its advantages
and that country representatives have to seize the
opportunities to get additional funding, particularly on CERF
and pooled funding. However, Sweden added that it expects
UNHCR to have a more diversified fundraising strategy,
focusing on private sector fund raising, and would like to
see UNHCR develop clear guidelines on diversified
fundraising. Norway also encouraged UNHCR to expand its very
limited donor base.


8. (U) Bijleveld updated members on UNHCR's plans to possibly
charge a seven percent overhead on programs funded under the
Operational Reserve II (ORII) budget. He said that UNHCR
will ask the evaluators of the ORII to look at this issue and

GENEVA 00000582 003.2 OF 004


draft a report for the next SC meeting. (Note: This
initiative was announced at a February meeting of UNHCR's top
donors, where the USG noted its dissatisfaction with the
suggestion of charging an overhead, saying that the ORII is
part of the AB and it was not logical to charge an overhead
on a program which should be serviced from within this
budget.) Bijleveld urged members to do as much as possible
to help UNHCR in reaching its funding goal. Canada, France
and Spain all announced forthcoming contributions to UNHCR.
Spain's contribution of 25 million Euro is a marked increase
in its usual core contribution. Japan announced that its
support for UNHCR is under deliberation but expected its
contribution to be around USD 55.5 million. Japan may make
additional contributions on a project-by-project basis
and said it is also considering a USD 2.1 million
contribution for resettlement and reintegration of Liberians
in Liberia. The USDEL said that the USG believed its 2006
funding to UNHCR will be the same amount as last year, but
will not be able to meet the same percentage.

Questions from the Floor
- - - - - - - - - - - -


9. (U) Most speakers expressed their concern over UNHCR's
current financial crisis, commented that the conference paper
did not accurately reflect the situation and asked for more
details on the actual impacts on UNHCR's programming.
Chamberlin responded that the 20% cap affected budget items
that did not directly impact tangible benefits for refugees.
However, programs such as preparations for repatriations,
income-generating and vocational training, reintegration and
return monitoring are affected, as are capacity building,
refugee status determination, training of government
partners, environmental programs and AGDM training. Press
and information, public affairs, Refugee Day events,
community services and education grants have also been cut.
Chamberlin added that if UNHCR embarks on further cuts, it
will be difficult to avoid actions that will directly affect
the refugees.


10. (U) Algeria, on behalf of the African Group, said that
earmarking by donors during this time would increase the
funding gap in certain programs, particularly in North
Africa. The delegate emphasized that UNHCR's programs are
too important to have this funding problem, which undermines
the credibility of the institution. He urged more
burden-sharing among countries in order to alleviate the
pressure on refugee hosting countries. Pakistan asked if the
funding shortage will effect emergency situations. Other
countries asked if exchange rate pressures or increases in
expenditures had an effect on the funding caps and requested
a comparison on how the fluctuating exchange rates affected
other UN agencies. Takizawa responded that the financial
crisis is not only based on the fluctuating exchange rate,
but that it is part of the entire picture that has caused
problems for UNHCR. He asked members to put things in
perspective. Canada cautioned that being the "agency of last
resort" in the IDP cluster approach also posed an additional
financial risk to UNHCR and urged the organization to move
slowly before adding other countries under their
responsibility. Sweden, the USDEL and others supported
Canada's comments.


11. (U) The Netherlands expressed concern that since EXCOM
approval of the 2006 AB, UNHCR has approved USD 294.5 million
worth of SB programs. Sweden would have preferred if UNHCR
had used the CERF to support these programs. Sweden
commented that IDP programs, such as Somalia, Nepal, and
Colombia, should not be reflected in the SB since they are
not new programs. Sweden and the USDEL asked for a clear
account of what UNHCR needed for the three pilot countries
under the cluster approach. Australia expanded on this and

GENEVA 00000582 004.2 OF 004


asked UNHCR to explain where the money for the cluster
approach, as is outlined in the "Cluster 2006 appeal" goes in
UNHCR's operational budget. Bijleveld deferred to the Bureau
heads to respond to the IDP budget questions but noted that
the USD 4.3 million for the three pilot countries are not for
operational support in the three countries but for UNHCR to
fulfill its role as cluster lead - staff salaries are
included in this figure. He added that the issue of "agency
of last resort" is an important issue and does not mean that
UNHCR will have to divert money from refugee programs, but
needs to make the extra effort to find the money. He
described the "agency of last resort" as a catalytic role.

Discussing the Situation with UNHCR
- - - - - - - - - - - - - - - - - -


12. (U) As was apparent from the discussion at the SC meeting
(and from previous meetings and discussions),UNHCR is still
trying to work out what it needs to do to respond to this
financial crisis. During a February meeting with Ambassador
Moley, High Commissioner Guterres said that UNHCR is in the
midst of a major reform to improve its response to protection
of refugees by decreasing its costs, reducing staff at HQ by
outsourcing some of its specialized units, and working more
with NGO partners. He also mentioned the need to strengthen
UNHCR's relationship with UNDP and the World Bank to get them
involved earlier in refugee reintegration efforts. He said
that UNHCR must do better in terms of looking at the exchange
rate issue and is working on increasing funding from Gulf
States and private corporations.


13. (U) In a follow-up conversation with Mission Officer,
the Controller said that, if the AB is 80% funded by donors,
UNHCR would be working with a shortfall figure of some $60
million for 2006. The High Commissioner has approved a plan
to try to address the shortfall by dividing it into three
parts. He hopes to address the first USD 20 million
shortfall through funding from the CERF and has asked the
Bureau heads to see which of their programs would benefit
from these possible grants. The second USD 20 million would
come from cuts at headquarters and the final USD 20 million
would be saved through targeted cuts in administrative and
project support costs. The High Commissioner has refused to
make additional cuts across the board, and has asked the
field to prioritize programs. There are disagreements at
headquarters whether or not this is a good move; some of the
staff believing that Guterres is taking enormous risks not
cutting across the board. US Mission Geneva will continue to
discuss the situation with UNHCR and push, like other donors,
for UNHCR to come up with clear guidelines to help the field
make their decisions.
Moley