WORLD HEALTH ORGANIZATION OPEN-ENDED INTERGOVERNMENTAL WORKING GROUP ON THE WHO FRAMEWORK CONVENTION ON TOBACCO CONTROL Provisional agenda item 7 A/FCTC/IGWG/1/5 20 May 2004
Draft financial rules for the Conference of the Parties Note by the Secretariat INTRODUCTION 1. The Fifty-sixth World Health Assembly (May 2003), in resolution WHA56.1, adopted the WHO Framework Convention on Tobacco Control and decided to establish an open-ended intergovernmental working group to consider and prepare proposals on a number of issues for consideration by the Conference of the Parties. In accordance with Article 23, paragraph 4 of the Convention, such issues were to include financial rules for the Conference of the Parties and its subsidiary bodies, and financial provisions governing the functioning of the secretariat. 2. In accordance with Article 24, paragraph 2 of the Convention, WHO provides the secretariat functions under the Convention on an interim basis. To assist the Open-ended Intergovernmental Working Group in its task, WHO has accordingly prepared draft rules, annexed hereto, based on the Financial Regulations and Financial Rules of WHO and on the precedents and practices of several international conventions and organizations. This note provides an overview and explanation of standard provisions of financial rules, and gives examples of precedents where appropriate. The precedents are listed numerically in the Appendix.
OUTLINE OF ELEMENTS OF FINANCIAL RULES 3. Financial regulations and financial rules (hereafter referred to as financial rules) constitute legal instruments that govern the financial administration of an international convention or organization, and are generally adopted by its supreme body. In some organizations they confer upon the executive head the competence to establish such specific administrative procedures as may be required to implement the rules. They provide the legal basis for the preparation of the budget, the establishment and administration of funds, revenues and expenditures, including contributions from members of an organization or parties to a convention, and accounting and auditing. The responsibility for these tasks normally rests with the head of the secretariat (in the case of a convention) or the executive head (in the case of an organization). 4. Financial rules relating to conventions negotiated and adopted under the auspices of an international organization customarily contains specific provisions for matters requiring treatment other than that provided by the organization’s regulations. For example, financial contributions under
A/FCTC/IGWG/1/5
the convention will be made by States that are Parties to the Convention, but not necessarily Member States of the organization. Contributions would therefore be governed by the financial rules of the convention. Furthermore, the head of the convention secretariat usually has the authority, under the financial rules of the convention, to administer the convention’s funds, whereas the funds of the organization are administered by the executive head of the organization pursuant to its financial rules. For matters where no specific ruling is required for the convention, reference is made to the financial rules of the parent organization. This is the approach taken with the draft rules contained in the Annex. 5. The draft rules follow the structure of the Financial Regulations and Financial Rules of WHO as the parent organization of the Framework Convention with modifications to accommodate the Convention’s simpler infrastructure and financial situation and to take into account the proposed approach of referring to the Financial Regulations and Financial Rules of WHO in matters not explicitly covered by the financial rules of the Convention. 6. In preparation of the draft rules, the financial rules of two conventions adopted under the auspices of FAO served as precedents, namely, the Financial Regulations of the Agreement for the Establishment of the Indian Ocean Tuna Commission (1993), and the draft financial rules of the International Treaty on Plant Genetic Resources for Food and Agriculture (2001).1 FAO, like WHO, is a specialized agency of the United Nations, and can therefore be considered a useful model. It retains a close institutional link with the conventions operating within its framework. 7. The draft rules set out in the Annex feature the following elements, which exist in most precedents. 8. Applicability. This rule defines the scope of the rules, i.e. it specifies to which body or bodies they shall apply. While some precedents merely provide that the financial rules shall govern the financial administration of the convention or organization, some environmental conventions specify that they apply to the Conference of the Parties, its subsidiary bodies, and secretariat. The relevant provision in most convention precedents also provides that the more detailed rules of the parent organization shall apply in matters not covered by the rules of the convention. 9. The financial period. Budget estimates are usually prepared biennially for organizations and conventions within the United Nations system. Some rules – including the Financial Regulations and Financial Rules of WHO – provide that the first calendar year shall be an even-numbered year. The rules of FAO conventions specify that the financial period of the convention shall coincide with that of FAO, as the convention budget falls within the financial administration of FAO. 10. The Budget. The budget projects expenditures for the activities to be undertaken within the framework of the convention. In some conventions there are different budgets for the different sources of income (see paragraph 14 below). One budget, which is sometimes referred to as the Regular Budget, relates to the assessed contributions of the Parties. This is used for expenditures of the Conference of the Parties and its subsidiary bodies, and for the functioning of the secretariat. A second budget, sometimes referred to as the Other Sources Budget, relates to other sources of income, such as earmarked funds provided by parties on a voluntary basis.
1
This Treaty will enter into force on 29 June 2004, hence the financial rules have not yet been adopted.
2
A/FCTC/IGWG/1/5
11. Upon entry into force of a convention, the Conference of the Parties, as the supreme body, will adopt the budget for the first financial period, on the basis of estimates prepared by the secretariat. A budget will subsequently be adopted for each successive financial period. 12. In most precedents, the financial rules provide that the budget estimates must be circulated by the secretariat to all Parties at a specified time in advance of the session of the Conference of the Parties at which it is to be adopted. Adoption by consensus is often required, although some precedents provide for adoption by a qualified majority. 13. Appropriations. By adopting the budget, the Conference of the Parties authorizes the head of the secretariat to incur expenditures and make payments for the purposes specified in the budget and up to the amounts approved. The head of the convention secretariat is authorized to transfer funds within the same budget appropriation, at his or her discretion, and to make transfers between budget appropriations. In such cases a limit is usually set for such transfers, either by the Conference of the Parties, or by the financial rules themselves. The standard limit, which also applies in WHO, is 10%. 14. Provision of Funds. These rules govern the sources of revenue of the convention. The financial rules of most recent international conventions make a distinction between the assessed contributions of the Parties, which are used for the expenditures of the Conference of the Parties, its subsidiary bodies, and secretariat, and voluntary contributions from different sources, which are used for other purposes. It may be necessary to establish different funds to receive the different types of contributions (see paragraph 18 below) and different budgets for the different kinds of revenue (see paragraph 10 above). In FAO conventions, which are institutionally linked to the parent organization, provision is also made for financial contributions by FAO. 15. Assessed contributions relating to conventions adopted within the framework of the United Nations are usually based on the scale of assessments of the United Nations regular budget whereas conventions operating within the framework of the specialized agencies, such as FAO, use different scales of assessments, usually those of the parent organization. Adjustments to the scale of assessments are common to ensure that no party contributes more than a certain percentage of the total and to provide for contributions of less than 0.001% of the total. In this respect, financial rules frequently provide that each Party shall pay 0.001% of the total as a minimum, even if its contribution, in accordance with the scale of assessment of the Organization under whose auspices the convention was adopted,1 would be less, to avoid the substantial costs of collecting and processing small contributions. Some conventions provide that least developed countries shall, in any event, pay no more than 0.001% of the total. 16. The rules on Provision of Funds also govern the methods of payment of assessed contributions, such as the time of payment, instalments, and currency of payment. 17. For convenience, the United States dollar is usually defined as the official currency of the budget of a convention. Accordingly, the assessed contributions from Parties are levied in United States dollars. In some cases, contributions may be paid in other convertible currencies, as determined by the financial rules or in accordance with a decision of the executive head of the organization or head of the convention secretariat.
1
See, for example, the draft financial rules relating to the Rotterdam Convention.
3
A/FCTC/IGWG/1/5
18. Funds. It is standard practice to establish a fund or a set of funds to which contributions are made and on which expenditures are based. Normally, there is a specific fund to receive assessed contributions in order to finance the activities of the Conference of the Parties, its subsidiary bodies and secretariat, and one or more separate funds to receive other contributions (see paragraph 14 above). Some conventions provide for earmarked voluntary contributions from parties to be paid into a designated fund. This allows a donor country to provide financial support for a specific project or activity of its choice. Some conventions also provide for different budgets for the different types of funds (see paragraph 10 above). 19. Accounts and Audit. In respect of auditing, it is customary for the financial rules of conventions to refer to the applicable rules of the parent organization, which may be the United Nations or one of its specialized agencies. 20. Amendments. Most of the precedents analysed provide that the Conference of the Parties may amend its financial rules by consensus. In the case of the Framework Convention, this is consistent with the requirement of Article 23, paragraph 4, that the financial rules be adopted by consensus.
4
A/FCTC/IGWG/1/5
ANNEX DRAFT FINANCIAL RULES1
(Numbered precedents appear in brackets) Rule 1 – Applicability 1.1 These Rules shall govern the financial administration of the Conference of the Parties to the WHO Framework Convention on Tobacco Control, any subsidiary bodies it may establish, and the Convention secretariat. (Precedents 1, 4, 6, 7, 8) 1.2 In respect of matters not specifically provided for by these Rules, the Financial Regulations and Financial Rules of [WHO][the Organization carrying out the secretariat functions] shall apply. (Precedents 2 and 3) Rule 2 – The Financial Period 2.1 The financial period shall be two consecutive calendar years [beginning with an even-numbered year][coinciding with the financial period of WHO]. (Precedents 1, 2, 4, 7) Rule 3 – The Budget 3.1 The budget shall comprise: (a) The regular budget relating to the contributions of the Parties under Rule 5.1(a), and to other monies accruing to the regular budget under Rule 5.1(c) and (d); (b) The Other Sources Budget relating to funds made available during the financial period under Rule 5.1(b), (e) and (f), and to other monies accruing to the Other Sources Budget under Rule 5.1(c) and (d). (Precedent 2) 3.2 The regular budget shall be used for appropriations for expenditures under the Convention including expenses of the secretariat 3.3 The Other Sources Budget shall be used for the purposes specified by the secretariat and/or in the contributions made under Rule 5.1(b), (e) or (f). (Precedent 2) 3.4 The budget estimates for the financial period shall be prepared by the head of the Convention secretariat. (Precedents 1, 4, 6, 8) 3.5 The budget estimates shall cover income and expenditures for the financial period to which they relate, and shall be presented in United States dollars. (Precedents 1 and 6) 1
As stated in paragraph 3 of this Note, the term “financial rules” is understood to refer to financial regulations or
rules.
5
A/FCTC/IGWG/1/5
Annex
3.6 The budget estimates shall include the programme of work for the financial period, and such information and data, annexes and explanatory statements as may be requested by the Conference of the Parties. (Precedents 1, 2, 8) 3.7 The budget estimates shall be circulated to all Parties to the Convention not less than [8 weeks]1 [60 days]2 before the opening day of the session of the Conference of the Parties at which the budget is to be adopted. 3.8 The Conference of the Parties shall, prior to the start of the financial period to which the budget relates, consider the budget estimates and adopt the budget by consensus. The budget shall be adopted at least four months prior to the start of the financial period. (Precedents 6 and 8) Rule 4 – Appropriations 4.1 Adoption of the budget by the Conference of the Parties shall constitute an authorization to the head of the Convention secretariat to incur expenditures and make payments for the purposes for which the regular budget appropriations were approved and up to the amounts so approved, provided always that, unless specifically authorized by the Conference of the Parties, commitments are covered by related income. (Precedents 1, 6, 8) 4.2 The head of the Convention secretariat may make transfers within each of the main appropriation lines of the approved budget. The head of the secretariat may also make transfers between such appropriation lines up to a limit of 10% of the amount appropriated for the budget line from which the transfer is made. Rule 5 – Provision of Funds 5.1 The resources of the Convention shall comprise: (a) assessed contributions to the regular budget made each year by the Parties on the basis of a scale, adopted by consensus by the Conference of the Parties, and based on the scale of assessments determined by the Health Assembly.3 However, no Party shall contribute less than 0.001% of the total regular budget; no one contribution shall exceed the maximum assessment rate adopted by the Health Assembly;3 (Precedents 2, 4, 6) (b) voluntary contributions by the Parties in addition to those under (a) above; (Precedents 2, 4, 6) (c) the unexpended balance of appropriations from previous financial periods; (Precedents 2, 4, 6) (d) miscellaneous income attributed to the fund concerned; (Precedents 2, 4, 6)
1 2 3
Precedent 9. Precedent 3.
This applies only if WHO is designated as permanent secretariat of the Convention. If another organization is chosen, Parties may wish to apply the scale of assessments used by that organization.
6
Annex
A/FCTC/IGWG/1/5
(e) monies contributed by [WHO][the Organization carrying out the functions of the secretariat] in respect of the expenses to be borne by it;1 (Precedent 2) and (f) contributions in kind and service by [WHO][the Organization carrying out the functions of the secretariat]. 5.2 Assessed contributions for each calendar year made pursuant to Rule 5.1(a) shall be due and payable on or before 1 January of that year. (Precedent 2) 5.3 Pending receipt of annual contributions, the head of the Convention secretariat is authorized to finance regular budget expenditure from the unexpended balance of the regular budget. (Precedent 2) 5.4 In determining the annual assessed contributions of each Party, the assessed contribution for such Party for the financial period pursuant to paragraph 5.1(a) above shall be divided into two equal instalments, one of which is payable in the first calendar year and the other in the second calendar year of the financial period. (Precedent 2) 5.5 Prior to the beginning of each calendar year the head of the Convention secretariat shall inform the Parties of their annual assessed contributions to the regular budget. (Precedent 2) 5.6 Contributions shall be assessed in United States dollars, and shall be paid in either United States dollars, euros or Swiss francs, or such other currency or currencies as the [head of the Convention secretariat][executive head of the Organization carrying out the functions of the secretariat] shall determine. (Precedent 1) Rule 6 – Funds 6.1 Contributions shall be placed in a Fund or Funds administered by the Convention secretariat in accordance with these Rules, and the Financial Regulations and Financial Rules of [WHO][the organization carrying out the functions of the secretariat]. (Precedents 2, 3) 6.2 With respect to the Funds referred to in paragraph 6.1, the Convention secretariat shall maintain: (a) a regular budget fund to which shall be credited receipts of all assessed contributions made by Parties under Rule 5.1(a), and other monies accruing in respect of the regular budget under Rule 5.1(c) and (d), from which shall be met all expenditures chargeable against the annual regular budget; (Precedents 2 and 3) (b) other funds to which shall be credited voluntary contributions made by Parties under Rule 5.1(b), contributions made under Rule 5.1(e) and (f), and other monies accruing in respect of the other sources budget under Rule 5.1(c) and (d). (Precedents 2 and 3) 6.3 In the event that the Conference of the Parties decides to terminate a Fund established pursuant to these Rules, it shall so advise the head of the Convention secretariat at least six months before the date of termination so decided. The Conference of the Parties shall decide, in consultation with the
This applies only if the organization designated as permanent secretariat will, under its own financial regulations and rules, contribute to the budget of the Convention.
1
7
A/FCTC/IGWG/1/5
Annex
head of the Convention secretariat, on the distribution of any unexpended balances after all expenses have been met and fully liquidated. (Precedents 6, 7, 8) Rule 7 – Accounts and audit 7.1 The accounts and financial management of all Funds governed by these Rules shall be subject to the internal and external audit process of [WHO][the organization carrying out the functions of the secretariat] (Precedents 2, 4, 6, 7) Rule 8 – Amendments 8.1 Any amendments to these Rules shall be adopted by the Conference of the Parties by consensus (Precedents 2, 4, 6, 7, 8)
8
A/FCTC/IGWG/1/5
APPENDIX PRECEDENTS CONSIDERED
1. 2.
Financial Regulations and Financial Rules of the World Health Organization Draft financial rules of the International Treaty on Plant Genetic Resources for Food and Agriculture (2001) Agreement for the Establishment of the Indian Ocean Tuna Commission (1993) United Nations Framework Convention on Climate Change (1992) United Nations Convention on Biological Diversity (1992) United Nations Convention to Combat Desertification (1994) Draft financial rules of the Rotterdam Convention on the Prior Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides in International Trade (1998) Draft financial rules of the Stockholm Convention on Persistent Organic Pollutants (2001) Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and on their Destruction (1993) The Financial Regulations and Rules of the Rome Statute of the International Criminal Court (1998)
3. 4. 5. 6. 7.
8. 9.
10.
=
=
=
9