executive board 185 ex/25 hundred and eighty-fifth...

185 EX/25 Part I

Executive Board

Item 25 of the provisional agenda

FINANCIAL REPORT AND AUDITED FINANCIAL STATEMENTS OF UNESCO FOR THE PERIOD ENDED 31 DECEMBER 2009,

AND REPORT BY THE EXTERNAL AUDITOR

PART I

SUMMARY

In accordance with Financial Regulation 12.10, the report by the External Auditor and the audited financial statements, together with the report by the Director-General on the accounts of UNESCO for the financial period ended 31 December 2009, are submitted to the Executive Board.

The financial report and the audited financial statements, together with the formal opinion of the External Auditor, are contained in document BOC/125 (attached hereto) while the report by the External Auditor, together with the comments of the Director-General thereon, is presented in document 185 EX/25 Part II.

Action expected of the Executive Board: proposed decision in paragraph 3.

1. In accordance with Financial Regulation 12.10, the Executive Board is required to examine the External Auditor’s report together with the final audited accounts and to forward them to the General Conference with such comments as it deems appropriate.

2. The Executive Board may also wish to note in particular the opinion of the External Auditor on the financial statements which states: “My opinion is that the financial statements present fairly, in all material respects, the financial position of UNESCO as at 31 December 2009 …”. The long-form report of the External Auditor and the Director-General’s comments thereon are to be found in document 185 EX/25 Part II.

PARIS, 30 August 2010 Original: English/French

Hundred and eighty-fifth session

185 EX/25 Part I – page 2

Action expected of the Executive Board

3. The Board may wish to adopt a decision along the following lines:

The Executive Board,

1. Recalling Article 12.10 of the Financial Regulations,

2. Having examined documents 185 EX/25 Parts I and II,

3. Expresses its appreciation to the External Auditor for the high standard of his work;

4. Notes the opinion of the External Auditor that the financial statements presented fairly, in all material respects, the financial position of UNESCO as at 31 December 2009 and the results of its operations and its cash flow for the two-year financial period then ended; that they were prepared in accordance with the stated accounting policies, which were applied on a basis consistent with that of the preceding financial period;

5. Takes note of the unobligated balances in Statement IV by appropriation line and approves the expenditure as reported;

6. Invites the Director-General to report on the implementation of the recommendations of the External Auditor to the General Conference at its 36th session and to submit this report to it at its 187th session for prior review;

7. Decides to transmit to the General Conference at its 36th session the report by the External Auditor and the audited financial statements of UNESCO for the period ended 31 December 2009.


BOC/125 PARIS, 22 July 2010 Original: English

UNITED NATIONS EDUCATIONAL, SCIENTIFIC AND CULTURAL ORGANIZATION

FINANCIAL REPORT AND AUDITED FINANCIAL STATEMENTS OF UNESCO FOR THE FINANCIAL PERIOD ENDED 31 DECEMBER 2009


CONTENTS

1. REPORT OF THE DIRECTOR-GENERAL ON THE ACCOUNTS OF UNESCO FOR THE FINANCIAL PERIOD ENDED 31 DECEMBER 2009

2. OPINION OF THE EXTERNAL AUDITOR

3. APPROVAL OF THE FINANCIAL STATEMENTS

4. STATEMENTS

Statement I Statement of Income and Expenditure and Changes in Reserves and Fund Balances for the financial period ended 31 December 2009

Statement II Statement of Assets, Liabilities and Reserves and Fund Balances as at 31 December 2009

Statement III Statement of Cash Flow of Proprietary Funds (General, Working Capital and Other) for the financial period ended 31 December 2009

Statement IV Status of Appropriations of the General Fund – Regular and Participation Programmes for the financial period ended 31 December 2009

5. NOTES TO THE FINANCIAL STATEMENTS

6. SCHEDULES

Schedules of Income and Expenditure and Changes in Reserves and Fund Balances for the financial period ended 31 December 2009 for the following funds:

Schedule 1.1 General Fund (GEF)

Schedule 1.2 Other Proprietary Funds (OPF)

Schedule 1.2.1 Other Proprietary Funds (OPF) – Revenue-Generating Activities

Schedule 1.2.2 Other Proprietary Funds (OPF) – Support Costs

Schedule 1.2.3 Other Proprietary Funds (OPF) – Staff Related Accounts

Schedule 1.3 Programme Fiduciary Funds (PFF)

Schedule 1.3.1 Special Accounts for Institutes

Schedule 1.3.2 Other Special Accounts and Trust Funds

Schedule 1.4 Staff Fiduciary Funds (SFF)

Schedules of Assets, Liabilities and Reserves and Fund Balances as at 31 December 2009 for the following funds:

Schedule 2.1 General and Working Capital Funds

Schedule 2.2 Other Proprietary Funds

Schedule 2.2.1 Other Proprietary Funds – Revenue-Generating Activities


Schedule 2.2.2 Other Proprietary Funds (OPF) – Support Costs

Schedule 2.2.3 Other Proprietary Funds (OPF) – Staff-Related Accounts

Schedule 2.3 Programme Fiduciary Funds

Schedule 2.3.1 Special Accounts for Institutes

Schedule 2.4 Staff Fiduciary Funds

7. UNAUDITED ANNEXES

Annex I Ex gratia payments

Annex II Report of special accounts and trust funds established and closed during the financial period ended 31 December 2009

Annex III Aged analysis of assessed contributions receivable

Annex IV Waivers granted for contracts submitted to the Contracts Committee


REPORT OF THE DIRECTOR-GENERAL ON THE ACCOUNTS OF UNESCO

FOR THE FINANCIAL PERIOD ENDED 31 DECEMBER 2009

Introduction

1. In accordance with Article 11.1 of the Financial Regulations, I have the honour to submit the financial statements and report of the Organization for the biennium ending 31 December 2009.

2. The financial statements have been prepared in accordance with the United Nations System Accounting Standards (UNSAS). This is the last time that the accounts have been prepared under UNSAS since, as from 1 January 2010, the Organization will be applying International Public Sector Accounting Standards (IPSAS) as the basis for the preparation of its financial statements.

3. The Report of the External Auditor, together with his opinion on the financial statements, is also submitted in accordance with Article 12 of the financial regulations.

Programme Expenditure

4. UNESCO’s programme activities are financed mainly from two sources- the regular budget (GEF) and extra budgetary funding (PFF). The Regular Budget of the Organization including additional appropriations has increased by $22million (or 4%) from $620million in the 2006/2007 biennium to $642million this biennium. Extra budgetary spending, for the same period, shows a decrease of $93 million (or 12%) from $744 million to $651 million.

5. An implementation rate of almost 100% has been achieved on the execution of the regular budget activities for the biennium. Of the total amount of $642 million available in the 34 C/5 adjusted (including additional appropriations), only $8K remain as unspent at the end of the period. Unliquidated obligations represent just 4% of the total expenditure meaning that 96% of budget activities have been delivered by 31 December 2009.

6. The decrease of $93 million in extra budgetary expenditure is mainly due to the decrease in the operations of the UNESCO Brasilia office. In addition, the functional currency of the office has been changed from USD to Real to better reflect the economic substance of transactions managed by the Brasilia office. This change of functional currency has also resulted in accounting adjustments affecting the amount of expenditure recorded during the period.

7. Expenditure on Other Proprietary funds (OPF) has increased by 17% to $89 million for the biennium. The constant increase on these funds from one biennium to another demonstrates their growing significance to the delivery of the Organization’s programme activities.

8. The table below shows the expenditure for the biennium 2008-2009, together with the comparative figures of the previous financial period.

2008- 2009 2006-2007 $ '000s % $ '000s % General Fund (GEF - Schedule 1.1) 641,892 48.60 620,233 44.97Other Proprietary Funds (OPF - Schedule 1.2) 88,938 6.73 75,912 5.50 Total, Proprietary Funds (A) 730,830 55.34 696,145 50.47 Add : Programme Fiduciary Funds (PFF - Schedule 1.3) (B) 651,112 49.30

743,729 53.93

Total (A) + (B) 1,381,942 104.64 1,439,874 104.40 Less Inter-fund Transfers (C) (61,268) (4.64)

(60,698) (4.40)

Total (A) + (B) + (C) 1,320,674 100.00 1,379,176 100.00


9. For the first time in three biennia, programme expenditure from fiduciary funds (PFF) has fallen below the 50% threshold to 49.3% of overall expenditure. With the Regular Budget (GEF) accounting for 48.6% of expenditure and 6.73% from Other Proprietary Funds, the combined proprietary funds financed 55.34% of the Organization’s programme activities for the biennium before inter-fund eliminations.

CONTRIBUTIONS AND CASH FLOW – GENERAL FUND

10. Receipts of contributions in respect of the biennium 2008-2009 amounted to $610.5 million against an assessed total of $631 million, which represents 97% of the total receivable on Member States during the biennium.

11. Receipts of contributions in respect of previous biennia and payment plans prior to the 35th session of the General Conference amounted to $58.7 million against a total due of $71.5 million for 2008-2009. Before the approval of six new payment plans at the 35th session of the General Conference, the total deferred to future years equalled $12.8 million but after the new payment plans, the total amounts to $18.3 million under 17 payment plans.

12. Unpaid contributions remain a cause for concern with $ 49.6 million due at the end of 2009. The working capital fund of $29 million was not sufficient to finance arrears and instalments deferred to future years.

13. The cash position of Headquarters’ accounts based on the total resources of the General Fund with and without the Working Capital Fund as at the end of each month for the Biennium is shown graphically as follows, in millions of US dollars:

General Fund Cash Position with and without Working Capital Fund at Headquarters

-50,00

0,00

50,00

100,00

150,00

1/08

2/08

3/08

4/08

5/08

6/08

7/08

8/08

9/08

10/0

8

11/0

8

12/0

8

1/09

2/09

3/09

4/09

5/09

6/09

7/09

8/09

9/09

10/0

9

11/0

9

12/0

9

Cash position Cash position with Working Capital Fund (WCF)

2008 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

Cash position -20,2 24,4 35,6 74,2 83,5 85,1 79,5 47,2 22,6 9,3 16,7 8,8

Cash position with WCF 8,1 53,0 64,2 102,9 112,4 114,0 108,0 76,2 51,6 38,3 45,7 37,8

2009

Cash position 4,00 42,10 25,07 23,36 63,47 42,23 67,01 52,45 28,84 -2,83 -17,85 14,74

Cash position with WCF 33,00 71,10 54,06 52,35 92,47 71,23 96,01 81,45 57,84 26,17 11,15 43,74

14. The peak amounts in April through August are due to the receipt of large contributions in those months, whereas payments are more evenly spread throughout the Biennium.


15. As at 31 December 2009, the General Fund at Headquarters excluding field offices showed positive cash balance of $8.8 million but with the Working Capital Fund of $28 million the total cash balance equalled $37.8 million.

Investments

16. As at the end of 2009, the investment portfolio of UNESCO totalled $1,319.8 million in comparison to $1,214.4 million at the end of 2008. The performance of the investments made in accordance with a very conservative Investment Policy of the Organization has been in line with the established benchmarks and was not affected by the turmoil of the financial markets during the Biennium.

International Public Sector Accounting Standards (IPSAS)

17. The Organization, like many United Nations agencies, has adopted IPSAS as the basis of the preparation of the financial statements and accounts as from 1 January 2010. This represents a significant change but the Organization is well on track to delivering a set of IPSAS-compliant financial statements as at 31 December 2010. Throughout the biennium various documents and reports have been submitted to the Executive Board on the progress and activities relating to IPSAS implementation and this will continue in order to keep Member States fully informed of this important project.

Liabilities for employee benefits

18. The funding of long term contractual obligations with employees, both current and past, remains an issue for the Organization. The main liability, relating to After Service Health Insurance, amounts to $649 million as at 31 December 2009 based on an actuarial valuation. This shows an increase of $35 million from the last valuation as at 31 December 2007.

19. As highlighted previously, it is the belief of the Secretariat that this liability should be funded gradually over a reasonable period of time.

Renovation of Headquarters Building

20. The renovation of the Fontenoy building, financed from a loan from the French Government, which commenced in early 2004, was completed in September 2009. The accumulated cost of these works at 31 December 2009 amounted to $ 89 million.

185 EX/25Part I - page 11


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STATEMENT I

General Fund Other Programme Staff Inter-fund (Regular Programme) Proprietary Fiduciary Fiduciary Eliminations

Funds Funds Funds

"GEF" "OPF" "PFF" "SFF"

(Schedule) (1.1) (1.2) (1.3) (1.4)INCOMEAssessed contributions 631,023 631,023 610,271 9,203 640,226 618,280Voluntary contributions 10,900 141 11,041 8,258 503,584 514,625 662,674Revenue producing activities 29,407 29,407 22,837 3,168 17,411 49,986 42,125Funds received under inter-organization arrangements 79,059 79,059 54,933Allocations from other funds (Regular Programme) 7,817 7,817 5,149 28,133 20,083 (56,033)Income for services rendered 25,318 25,318 26,822 54,795 19,631 (25,318) 74,426 58,398Investment income 4,554 16,338 20,892 22,751 36,043 45,866 102,801 118,590Currency exchange adjustments 8,892 (1,138) 7,754 (2,870) (39,078) (118) (31,442) 47,793Other income 3,061 6,309 9,370 8,986 1,851 1,551 12,772 15,610

TOTAL INCOME 658,430 84,192 742,622 702,204 676,758 104,424 (81,351) 1,442,453 1,618,403

EXPENDITURE 641,892 88,938 730,830 696,145 651,112 65,560 (81,351) 1,366,151 1,421,510

TOTAL EXPENDITURE 641,892 88,938 730,830 696,145 651,112 65,560 (81,351) 1,366,151 1,421,510

EXCESS (SHORTFALL) OF INCOME OVER EXPENDITURE 16,538 (4,746) 11,792 6,059 25,646 38,864 76,302 196,893

Increase in land and buildings (Note 11) 14,858 14,858 9,590 14,858 9,590Distribution to Member States (18,451) (18,451) (8,182) (18,451) (8,182)Distribution to members of USLS (38,847) (38,847) (41,596)Other adjustments to reserves and fund balances 3,092 (62) 3,030 3,924 40,956 (214) 43,772 13,306Reserves and fund balances, beginning of period 140,327 56,477 196,804 185,413 458,366 57,891 713,061 543,050

RESERVES AND FUND BALANCES, END OF PERIOD 156,364 51,669 208,033 196,804 524,968 57,694 790,695 713,061

The accompanying notes and schedules are an integral part of the financial statements.

Total Proprietary Funds

Total Managed Funds

2009 2007

PROPRIETARY FUNDS PROGRAMME FIDUCIARY FUNDS

UNESCOSTATEMENT OF INCOME AND EXPENDITURE AND CHANGES IN RESERVES AND FUND BALANCES

FOR THE FINANCIAL PERIOD ENDED 31 DECEMBER 2009(Expressed in '000s US dollars)

2009 2007

185 EX

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art I - page 13

STATEMENT II

UNESCOSTATEMENT OF ASSETS, LIABILITIES AND RESERVES AND FUND BALANCES

AS AT 31 DECEMBER 2009(Expressed in '000s US dollars)

PROPRIETARY FUNDS PROGRAMME FIDUCIARY FUNDS

Total Managed FundsGeneral Fund Other Total Proprietary Funds

Programme Staff(Regular Programme) Proprietary Inter-fund Fiduciary Fiduciary Inter-fund

Funds Eliminations Funds Funds Eliminations

2009 2007 2009 2007"GEF" "OPF" "PFF" "SFF"(Schedule) (2.1) (2.2) (2.3) (2.4)

ASSETSCash and term deposits (Note 6) 47,204 39,572 86,776 66,628 639,931 536,231 1,262,938 1,107,049Investments (Note 7) 1,883 115,019 116,902 129,792Accounts receivable

Assessed contributions receivable from Member States (Note 8) 49,647 49,647 90,979 49,647 90,979Inter-fund balances 14,523 (2,826) 11,697 852 (11,697)Other (Note 9) 8,004 9,340 17,344 14,795 18,307 52,578 88,229 93,384

Other assets (Note 10) 452 837 1,289 1,720 3,530 3,106 7,925 7,936Land and buildings (Note 11) 187,207 187,207 98,141 187,207 98,141Renovation work in progress (Note 12) 65,582 - 65,582

TOTAL ASSETS 292,514 64,272 (2,826) 353,960 338,697 663,651 706,934 (11,697) 1,712,848 1,592,863

LIABILITIESPayments or contributions received in advance 3,451 3,451 990 3,451 990Unliquidated obligations 24,694 2,202 26,896 29,279 82,664 109,560 115,131Accounts payable

Inter-fund balances 2,826 (2,826) 859 11,697 (11,697)Other 12,638 9,880 22,518 26,833 42,781 8,266 73,565 57,432

Members' deposits 627,106 627,106 596,474Other liabilities 3,012 521 3,533 1,748 1,541 13,868 18,942 27,591Loan for HQ building renovation (Note 12) 87,954 87,954 80,451 87,954 80,451Loan for IBE building (Note 11) 1,575 1,575 1,733 1,575 1,733

TOTAL LIABILITIES 136,150 12,603 (2,826) 145,927 141,893 138,683 649,240 (11,697) 922,153 879,802

RESERVES AND FUND BALANCESWorking Capital Fund (Note 3) 29,000 29,000 28,097 29,000 28,097Capital funds relating to land and buildings (Note 11) 118,342 118,342 103,484 118,342 103,484Currency Exchange Reserve (Note 12) (17,813) (17,813) (16,942) (17,813) (16,942)Operating reserves (Note 5) 1,640 1,640 1,620 18,238 27,704 47,582 43,474Balances relating to projects funded by donors 433,963 433,963 416,218Budgetary surpluses (Note 4) 7,219 7,219 7,237 7,219 7,237Other surpluses (Note 5) 19,616 50,029 69,645 73,308 72,767 29,990 172,402 131,493

TOTAL RESERVES AND FUND BALANCES 156,364 51,669 208,033 196,804 524,968 57,694 790,695 713,061

TOTAL LIABILITIES, RESERVES AND FUND BALANCES 292,514 64,272 (2,826) 353,960 338,697 663,651 706,934 (11,697) 1,712,848 1,592,863

The accompanying notes and schedules are an integral part of the financial statements.

185 EX

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Statement lll

2009 2007CASH FLOWS FROM OPERATING ACTIVITIES

Net excess of income over expenditure (Statement I) 11,792 6,059

(Increase) / decrease in contributions receivable 41,332 (5,879)Increase in other accounts receivable (2,549) (6,399)(Increase) / decrease in other assets 431 (322)Increase in inter-fund balances receivable (10,845) (852)Increase in contributions or payments received in advance 2,461 450Decrease in unliquidated obligations (2,383) (6,613)Increase (decrease) in accounts payable (4,315) 990(Increase) / decrease in other liabilities 1,785 (255)Increase (decrease) in inter-fund balances payable (859) 750

Less: Interest income (20,892) (22,751) Plus: Interest expense 398 349 Currency exchange adjustments (7,754) (13,204)

NET CASH FROM OPERATING ACTIVITIES 8,602 (47,677)

CASH FLOWS FROM INVESTING ACTIVITIES: Increase in renovation work in progress (23,484) (36,686) (Increase) decrease in land and buildings 1 Increase in borrowings 7,345 49,097

Plus: Interest income 20,892 22,751 Less: Interest expense (398) (349) Currency exchange adjustments 7,754 13,204

NET CASH USED FROM INVESTING 12,109 48,018

CASH FLOWS FROM FINANCING ACTIVITIES Savings on or cancellation of prior periods' obligations 2,203 3,735 Credits to member States (18,451) (8,182) Other adjustments to reserves and fund balances 15,685 9,779

NET CASH FLOWS FROM FINANCING ACTIVITIES (563) 5,332

NET INCREASE IN CASH AND TERM DEPOSITS 20,148 5,673

CASH AND TERM DEPOSITS, BEGINNING OF PERIOD 66,628 60,955

CASH AND TERM DEPOSITS, END OF PERIOD 86,776 66,628

Expressed in '000s US dollars)

UNESCOPROPRIETARY FUNDS

(General, Working Capital and Other)STATEMENT OF CASH FLOW FOR THE PERIOD ENDED 31 DECEMBER 2009


185 EX/25 Part I - page 16STATEMENT IV

$ $ $ $ $ $ $ $PART I GENERAL POLICY AND DIRECTION

A. Governing bodies

1. General Conference 5,513 105 - 5,618 5,464 126 5,590 28

2. Executive Board 7,883 1,517 - 9,400 9,912 34 9,946 (546) Total Part I.A 13,396 1,622 - 15,018 15,376 160 15,536 (518)

B. Direction 20,677 (64) 81 20,694 19,119 571 19,690 1,004

C.

10,235 657 - 10,892 10,358 650 11,008 (116) TOTAL, PART I 44,308 2,215 81 46,604 44,853 1,381 46,234 370

PART II PROGRAMMES AND PROGRAMME RELATED SERVICES

A. Programmes

108,468 1,280 4,626 114,374 105,031 4,950 109,981 4,393

56,774 435 998 58,207 56,029 2,467 58,496 (289)

29,197 139 664 30,000 28,386 1,259 29,645 355

51,383 350 1,671 53,404 53,520 2,958 56,478 (3,074) 31,920 103 769 32,792 29,701 2,116 31,817 975

9,020 - - 9,020 9,020 - 9,020 -

45,474 7,405 - 52,879 54,448 377 54,825 (1,946)

Total, Part II.A 332,236 9,712 8,728 350,676 336,135 14,127 350,262 414

B. Participation Programme 18,800 - - 18,800 18,763 65 18,828 (28)

C. Programme Related Services

1. Coordination and monitoring of action to benefit Africa 4,655 (16) - 4,639 4,718 119 4,837 (198)

2. Fellowships Programme 1,776 18 - 1,794 1,896 22 1,918 (124)

3. Public information 13,814 (35) - 13,779 12,961 882 13,843 (64)

4. Strategic planning and programming monitoring 5,927 2,147 498 8,572 8,574 196 8,770 (198)

5. Budget preparation and monitoring 4,871 (36) 155 4,990 4,894 52 4,946 44

6. Anticipation and foresight 1,355 (1,355) - - - - - - Total, Part II.C 32,398 723 653 33,774 33,043 1,271 34,314 (540)

TOTAL PART II 383,434 10,435 9,381 403,250 387,941 15,463 403,404 (154)

PART III SUPPORT FOR PROGRAMME EXECUTION AND ADMINISTRATION

A. Field management and coordination 24,179 568 1,039 25,786 23,268 1,615 24,883 903

B. External relations and cooperation 19,565 (95) 340 19,810 18,676 297 18,973 837

C. Human resources management 33,506 910 - 34,416 32,137 1,457 33,594 822

D. Accounting, treasury management and financial control 11,043 (8) - 11,035 10,251 541 10,792 243

E. 99,733 944 59 100,736 99,981 2,061 102,042 (1,306)

TOTAL, PART III 188,026 2,319 1,438 191,783 184,313 5,971 190,284 1,499

TOTAL, PARTS I - III 615,768 14,969 10,900 641,637 617,107 22,815 639,922 1,715

Reserve for reclassifications/merit based promotions 2,000 (1,737) - 263 - - - 263

PART IV ANTICIPATED COST INCREASES 13,732 (13,732) - - - - - -

(500) 500 - - - - - -

631,000 - 10,900 641,900 617,107 22,815 639,922 1,978

1.- - - - 1,600 - 1,600 (1,600)

2.

- - - - 370 - 370 (370)

631,000 - 10,900 641,900 619,077 22,815 641,892 8

Totals may not sum exactly due to rounding

Absorption to be made under Part I and/or Part III

Expenditure

(Expressed in 000s US dollars)

Major Programme V - Communication and information

UNESCO Institute for Statistics

Field - Management of decentralized programmes

Additional Appropriations

ULOs Total

Unobligated balance

Administration

Major Programme I - Education

Major Programme II - Natural sciences

Major Programme III - Social and human sciences

Major Programme IV - Culture

UNESCO GENERAL FUNDSTATUS OF APPROPRIATIONS

REGULAR AND PARTICIPATION PROGRAMMESFOR THE FINANCIAL PERIOD ENDED 31 DECEMBER 2009

SUBTOTAL

Participation in the joint machinery of the United Nations system

(Including: Directorate; Office of the Director-General; Internal Oversight; International Standards and Legal Affairs; Ethics Programme)

34 C/5 Approved as Adjusted

Authorized Transfers

Disbursements Main Appropriation Line 34 C/5

Approved

TOTAL APPROPRIATION

Transfer to the IPSAS Special Account as per 182 EX/Decision 45.

Transfer of savings to the Special Account for Strengthening the Security of UNESCO Premises Worldwide as per 35 C/Resolution 97.

Transfers approved in principle from identified savings:


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UNESCO

NOTES TO THE FINANCIAL STATEMENTS

1. OBJECTIVES (purpose, mandate and governance of the Organization)

(a) The United Nations Educational, Scientific and Cultural Organization (UNESCO) was created in London on 16 November 1945 by governments of the States Parties to contribute to peace and security by promoting collaboration among the nations through education, science and culture in order to further universal respect for justice, for the rule of law and for human rights and fundamental freedoms which are affirmed for the peoples of the world, without distinction of race, sex, language or religion, by the Charter of the United Nations Organization. As one of the specialized agencies referred to in Article 57 of the Charter of the United Nations Organization, the provisions of Articles 104 and 105 of that Charter concerning the legal status of that Organization, its privileges and immunities, apply in the same way to UNESCO.

(b) UNESCO is governed by a General Conference, consisting of the representatives of its Member States, which determines the policies and main lines of work of the Organization. The Executive Board, which consists of 58 Member States elected by the General Conference, takes, in accordance with the decisions of the General Conference, all necessary measures to ensure the effective and rational execution of the programme by the Director-General.

2. SIGNIFICANT ACCOUNTING POLICIES

Introduction

The financial statements have been prepared in accordance with the provisions of UNESCO’s Financial Regulations and with stated accounting policies as described below. These accounting policies conform to the United Nations System Accounting Standards (UNSAS) which provide a framework for accounting and financial reporting in the United Nations system.

The financial period of UNESCO is a biennium and consists of two consecutive calendar years, beginning with an even-numbered year. The financial statements are presented in thousands (’000s/K) of United States dollars ($).

(a) Financial Statement presentation

In conformity with the framework for financial reporting in the United Nations system, the financial statements are prepared on a combined basis, which includes the accounts of all the funds managed by UNESCO with a sub-grouping for UNESCO Proprietary Funds (GEF and OPF), on which the Statement of Cash Flow is presented at the end of each financial period, followed by Programme Fiduciary Funds (PFF) and Staff Fiduciary Funds (SFF). Elimination columns show adjustments for inter-fund transfers and balances.

Managed Funds are disclosed in the following business areas:

(1) General Fund (GEF) includes both the General and Working Capital Funds set up in accordance with Financial Regulations 6.1 and 6.2.

(2) Other Proprietary Funds (OPF) include revenue-generating activities, programme support costs for special accounts and trust funds, the Staff Compensation Fund, the Terminal Payments Fund, and Headquarters-related special accounts.


These funds are used to carry out the programmes, or to group other authorized expenditure, of UNESCO. The residual right of ownership of all of these funds is ultimately vested in Member States. The funds have been established in accordance with Financial Regulation 6.6 and normally have individual special financial regulations.

(3) Programme Fiduciary Funds (PFF) include institutes, special accounts and trust funds set up in accordance with Financial Regulation 6.6. They are used to carry out extrabudgetary programme activities in accordance with the respective agreements signed between UNESCO and the related parties or other legal authority.

(4) Staff Fiduciary Funds (SFF) are funds that have been established for the benefit of UNESCO’s staff members, namely the Medical Benefits Fund, the UNESCO Staff Savings and Loans Services (USLS), UNESCO Commissary Fund (UCF), the UNESCO Restaurant Service (URS) and the UNESCO Children’s Club & Day Nursery. The residual right of ownership of these funds is totally or partially vested in staff or retired staff members.

The resources of each fund in the Programme Fiduciary Funds and the Staff Fiduciary Funds can only be used for the purposes for which the respective fund has been established.

(b) Income recognition

Income from assessed contributions represents a legal obligation of Member States, which is recognized as income in the year or biennium in which it becomes due and payable. No provision is made for delays in the collection of assessed contributions.

Voluntary contributions are recognized when funds are received.

Other sources of income are recorded on an accrual basis of accounting. A provision for doubtful receivables is recorded at the end of the financial period to recognize the risk of non receipt of certain amounts.

(c) Expenditure recognition

Expenditure is recorded on a modified accruals basis and includes amounts for goods supplied and services rendered in the financial period as well as amounts for legal obligations of the financial period.

UNESCO employees are entitled to annual leave, termination and repatriation grant entitlements. The Organization also contributes an amount equal to the employees share of medical costs. The cost of these benefits is normally recognized as an expense in the financial period in which they are paid. However, a Terminal Payment Fund (TPF) reserve for repatriation grant and other post-termination entitlements is maintained by appropriate transfers from certain non-General Fund accounts for the benefit of staff financed by these accounts.

Acquisitions of non-expendable equipment, including furniture, computers and other office equipment and motor vehicles as well as maintenance and repairs to buildings are charged to operations in the financial period in which the expenditure is contracted.

A figure for non-expendable equipment (referred to as Inventories) is given in Note 14 of these Financial Statements.


(d) Translation of currencies

Transactions carried out during the period in currencies other than United States dollars, are translated to United States dollars using the United Nations operational rate of exchange at the date of the transaction except for budgetary income and expenditure in euros of the Regular and Participation Programmes of the General Fund.

For budgetary purposes, General Fund expenditures (Regular and Participation Programmes) in euros are translated to United States dollars using UNESCO constant budget rate. The difference between the translation at constant and operational rates of exchange is recorded in the currency exchange adjustments account.

Likewise, the differences between the constant budget rate and operational rates of exchange at which the assessed contributions of the General Fund are brought to account are also credited or debited in the currency exchange adjustments account.

Monetary balances carried at fair value are converted using the United Nations rate of exchange at 1 January of the following year.

Non-monetary balances carried at historical cost are converted using the United Nations rate of exchange at the date of the transaction.

For operations carried out by entities where the functional currency is different from the United States Dollar, transactions are recorded in the functional currency of the entity. The financial statements of each entity are then translated into US dollars at the end of the reporting period for presentation with the combined Financial Statements of UNESCO. Income and Expenditure items are translated using an average rate for the period and Balance sheet items at the UN operational rate at the end of the reporting period. Any exchange adjustment resulting from such a translation is accounted for through reserves.

In addition to three Category 1 Institutes for which the Euro is the established functional currency, transactions carried out by UNESCO Brasilia Office have, for the first time this biennium, been reported using the Real as the functional currency.

(e) Land and buildings

Land and buildings are carried at historical purchase cost except for donated properties where land is shown at nominal valuation and structures at insurance valuation as of the balance sheet date. Major construction and renovation in progress are recorded at cost, which includes material, direct labour and related overhead and are capitalised under land and buildings when a project, or distinct phase of a project, is completed. In the case of large projects, the duration of which extends over several accounting periods, cost may be initially recorded as work-in-progress before being transferred to land and buildings on completion. No provision is made for depreciation since the cost is charged to expenditure as approved by the General Conference.

(f) Pension fund participation

UNESCO is a member organization participating in the United Nations Joint Staff Pension Fund (UNJSPF) which was established by the United Nations General Assembly to provide retirement, death, disability and related benefits. The Pension Fund is a defined benefit plan.

The financial obligation of the Organization to the UNJSPF consists of its mandated contribution at the rate established by the United Nations General Assembly together


with any share of any actuarial deficiency payments under Article 26 of the Regulations of the Fund. Such deficiency payments are only payable if and when the United Nations General Assembly has invoked the provision of Article 26, following determination that there is a requirement for deficiency payments based on an assessment of the actuarial sufficiency of the Fund as of the valuation date. At the time of this report the United Nations General Assembly has not invoked this provision.

(g) Investments

Investments are recorded at cost adjusted for amortization of premiums or discounts to maturity or market value, if significant.

3. FUNDS

(a) General Fund

A General Fund has been established for the purpose of accounting for the expenditure of the Regular Programme appropriation voted by the General Conference of UNESCO for a given financial period. It is financed from assessed contributions from Member States.

Appropriations, which are voted by the General Conference, are available for obligation during the financial period to which they relate and for a further twelve months to the extent they are required to discharge obligations incurred during that financial period.

In addition to the appropriations voted by the General Conference, the Director-General is authorized by Financial Regulation 7.3 to accept “voluntary contributions, gifts, bequests and subventions”. Such receipts are shown as “voluntary contributions” in Statement I and as “Additional Appropriations” in Statement IV.

(b) Working Capital Fund

A Working Capital Fund has been established in an amount and for purposes to be determined from time to time by the General Conference. It is financed by advances from Member States made in accordance with the scale of assessments as determined by the General Conference. By 34 C/Resolution 78, the authorized level of the fund was increased to K$29,000 for 2008/2009 biennium.

(c) Trust funds, reserves and special accounts

Trust funds, reserves and special accounts are established by the Director-General and are reported to the Executive Board. They are administered in accordance with the Financial Regulations of UNESCO unless otherwise provided.

Trust Funds and Special Accounts are financed principally by voluntary donations. They are organized into three groups, namely, Institutes, UNESCO Brasília office and Other. Details of Other, their sources of income and the projects they support are detailed in Schedule 1.3.2.

4. INCREASE/DECREASE IN BUDGETARY SURPLUSES

Budgetary surpluses for a financial period, after deducting therefrom any contributions of Member States relating to that financial period which remain unpaid, shall, in accordance with Financial Regulations 4.3 and 4.4, unless otherwise determined by the General Conference, be apportioned among Member States in proportion to their assessed contributions for that financial period and


surrendered to each Member State once its contribution for that financial period has been paid in full.

The balance of budgetary surplus from previous periods which has not been paid to Member States is summarized as follows:

2009 2007

$’000s

Un-apportioned surpluses relating to the budgets of previous financial periods: Not yet available for apportionment Surpluses apportioned but not surrendered

1,958 5,261

1,958 5,279

Total (Statement II) 7,219 7,237

5. OPERATING RESERVES AND OTHER SURPLUSES

(i) Operating reserves

Operating reserves have been created within the legislative authority of certain funds as is deemed to be required for the purpose of sound administration or legal obligation and are summarized as follows:

2009 2007 Increase/

(Decrease)

$’000s

(a) Administrative reserves

(i) Public Information Liaison and Relations Fund 1,351 1,351 -

(ii) International Centre for Theoretical Physics (ICTP) 9,984 10,006 (22)

(iii) International Institute for Education Planning (IIEP) 6,669 4,898 1,771

(iv) UNESCO Institute of Statistics (UIS) 1,585 1,267 318 19,589 17,522 2,067 (b) Currency fluctuation reserves

– Public Information Liaison and Relations Fund (PILRF) 165 165 -

165 165 - (c) Staff savings reserves – UNESCO Savings and Loan Services (USLS) 27,704 25,683 2,021 27,704 25,683 2,021 (d) Other reserves – Headquarters Utilization Fund (HQF) 124 104 20 124 104 20

Total (Statement II) 47,582 43,474 4,108


(a) Administrative reserves have been established in accordance with the rules pertaining to each fund to cover mainly staff related costs (separation, after service entitlements, etc.) and other outflows that may arise in the future.

(b) The currency fluctuation reserve is established to cover the foreign currency risk element arising from the operation of the coupons programme.

(c) The staff savings reserves for USLS include statutory reserves and special reserves for unrealized portfolio profits and interest rate stability.

(d) The Headquarters utilization reserve is intended to cover accidental damages to Works of Art.

(ii) Other surpluses

(a) Other surpluses consist of the net amount of all miscellaneous income earned for the biennium after taking into account currency exchange adjustments and the balance of the currency clearing account. Included also are other General Fund surpluses; surpluses on other proprietary funds and surpluses on fiduciary funds. Apart from surpluses of the regular programme and certain other funds, to which special rules apply, surpluses can be carried forward from one financial period to the next.

(b) An overall summary of all “other surpluses” is given in the following table:

2009 2007 Increase/

(Decrease)

$’000s Proprietary funds

Regular programme (Note 5(ii)(c)) 19,616 18,451 1,165 Other Proprietary Funds 50,029 54,857 (4,828) 69,645 73,308 (3,663) Fiduciary funds Institutes UNESCO Brasilia Office

31,540 41,227

25,977 5,563 41,227

Staff Fiduciary Funds 29,990 32,208 (2,218) 102,757 58,185 44,572 Total (Statement II)

172,402

131,493

40,909


(c) The surplus of the regular programme is reconciled to Statement II of the Financial Statements as follows:

2009 2007

$’000s Excess of Regular Programme Income over Expenditure (Schedule 1.1)

16,538

1,302

Unspent balance of appropriations from previous financial period (Note 5(ii)(d))

2,203 3,735

Unspent balance on MBF subcontracting

406

Other Adjustments to Reserves

4

Currency Exchange Reserve

871 16,942

Distribution PILRF

47

Transfer to Special account – IPSAS in accordance with 34C/Resolution 77

(246)

Transfer to Special account – Renovation Plan in accordance with 34 C/Resolution 85

(3,735)

Other surpluses (Schedule 2.1)

19,616

18,451

(d) At the close of 2006-2007 financial period, a provision of K$24,972 was set up to cover the unliquidated obligations of the Regular and Participation Programmes at that date. Those unliquidated obligations remained available for 12 months up to 31 December 2008 to the extent that they were required to discharge obligations against goods received and services rendered in the financial period and to liquidate any other outstanding legal obligations of that financial period.

The Director-General decided that the unspent balance of these unliquidated obligations be used to cover the following outstanding items amounting to K$150:

2009 2007

$’000s

Unspent balance 2,353 4,237

(i) Field offices expenditure 98 92

(ii) Headquarters expenditure 52 230

(iii) ILO Administrative Tribunal Judgement 180

Subtotal 150 502

Total 2,203 3,735


6. CASH AND TERM DEPOSITS

The table below shows that of the total K$1,262,938 (2007 K$1,107,049), the amount available under proprietary funds is K$86,776 (2007 K$66,628) and the remaining balances are held by UNESCO in a fiduciary capacity.

2009 2007

$’000

Regular programme (GEF) 47,204 (1,902)

Other Proprietary Funds (OPF) 39,572 68,530

Total Proprietary Funds 86,776 66,628 Programme Fiduciary Funds (PFF) 639,931 547,286

Staff Fiduciary Funds (SFF) 536,231 493,135

Total (Statement II) 1,262,938 1,107, 049

The term deposits are held with international banks which are assigned deposit ceilings in accordance with the investment policy of UNESCO. The deposit ceilings are determined using the following criteria: minimum equity $2,5 billion and minimum Fitch ratings: sovereign AA-, individual B/C, support 1. The Investment Committee regularly follows up that the rate of return is in line with the benchmarks set up in the investment policy.

7. INVESTMENTS

Investments, all of which are held in a fiduciary capacity, are summarized as follows:

2009 2007 $’000s $’000s Carrying

value Market value

Carrying value

Market value

Short-term money market funds & shares

4,410

4,429

878

944

Bonds 112,492 112,493 128,914 128,915

Total (Statement II) 116,902 116,922 129,792 129,859

Within Staff Fiduciary Funds (SFF), the UNESCO Staff Savings and Loan Service (USLS) portfolio managers are authorized within defined limits to buy and sell futures contracts which complement the bond investment strategy by covering firm investment positions and generating additional income. All such contracts are traded on organized markets and valued at official settlement prices. As at 31 December 2009, the fair market value of futures contracts owned by USLS was K$20 and as at 31 December 2007 K€4,307 (K$6,353). The futures are off-balance sheet amounts and consequently, the underlying values are not included in the Financial Statements.

Bonds include obligations issued or guaranteed by governments, supranational organisations or corporations with duration of 2 years, the quality of which is not to be less than AA (Fitch or its equivalent). The Investment Committee regularly follows up that the investment performance is in line with the benchmarks set up in the investment policy.


8. ASSESSED CONTRIBUTIONS RECEIVABLE FROM MEMBER STATES

The balance of assessed contributions receivable is summarized as follows:

2008-2009 2006-2007 $’000s $’000s

Contributions due as at 1 January 2008

Contributions received

Unpaid contributions

as at 31 December

2009

Unpaid contributions

as at 31 December

2007

Arrears * 71,495 (64,085) 7,410 13,402

Contributions assessed for the biennium** 631,023 (607,061) 23,962 49,844

Subtotal 702,518 (671,146) 31,372 63,246

Deferred arrears under payment plans 18,275 27,636

Subtotal contributions Receivable 49,647 90,882

Working Capital Fund 97

TOTAL (Statement II) 49,647 90,979

* includes arrears payable in annual instalments up to the current year.

** includes new Member States and Associated Members. Summary of aged Contributions Receivable:

Due for $’000s

Arrears

1988-2003 2004-2005 2006-2007 2008-2009

6,797 32 69

23,962

Sub-total 1 30,860 Arrears under payment plans (annual instalments)

1992-2009 512

Deferred arrears under payment plans 2010-2015 18,275

Sub-total 2 18,787

TOTAL 49,647


In application of 34 C/Resolution 75.II paragraph 1 (c), the contributions for 2008-2009 that remained unpaid as at 31 December 2009 that were assessed in euros are considered as due and payable in United States dollars. These balances are converted into United States dollars at the United Nations prevailing rate in December 2009. A detailed listing of unpaid contributions as at 31 December 2009 is shown in Annex III.

9. ACCOUNTS RECEIVABLE – OTHER

The balances of Accounts Receivable – Other, which are shown net of any provisions established to cover the risk of non-payment of any sum which appears doubtful, are summarized as follows:

2009 2007

$’000s Staff loans and advances 50,866 54,019 Interest receivable 3,791 13,681 Amounts receivable for goods and services 6,241 3,693 Value added tax recoverable 5,359 5,440 Advances to project partners 10,517 6,267 Miscellaneous 11,455 10,284 Total (Statement II) 88,229 93,384

10. OTHER ASSETS

Other assets are summarized as follows:

2009 2007

$’000s

Field office payments 484 423

Stock on hand, at lower of cost or net realizable value

1,595

1,720

Fixed assets Miscellaneous

4,670 1,176

4,484 1,309



11. LAND AND BUILDINGS

2009 2007

$’000s

Headquarters premises, Place de Fontenoy at cost Add – Phase I Belmont Plan – renovation costs, Place de Fontenoy - Phase II Renovation Works Completed, Place de Fontenoy

23,022

23,549

89,066

23,022

23,549

Subtotal, Headquarters premises, Place de Fontenoy at cost Headquarters Fifth Building, rue Miollis at cost

135,637

7,899

46,571

7,899

Headquarters Sixth Building, rue François Bonvin at cost 30,426 30,426

Headquarters Seventh Building, rue François Bonvin at cost 3,525 3,525

Industrial building, rue François Bonvin at cost 704 704

Headquarters Apartment, place Vauban at cost 2,601 2,601 Building of the International Bureau of Education (IBE), Geneva at cost 4,615 4,615

Ocampo Villa, Buenos Aires 1,800 1,800


(a) Headquarters buildings

The land at Place de Fontenoy is rented from the French Government at a nominal rent of €2 per annum and the land lease covers a period of 99 years starting with the year 1953. The land at rue Miollis and François Bonvin is rented from the French Government at a nominal rent of €15 per annum and the land lease covers a period of 84 years starting from 1 January 1969.

(i) Building renovation costs of Phase I – Belmont Plan

The Phase I of the Belmont Plan on the renovation of the Fontenoy Building complex was completed in 2004 and the associated costs amounting to K$23,549 were brought to account and capitalized under Land and Buildings as at 31 December 2005.

(ii) Building renovation costs of Phase II– Belmont Plan

The Phase II of the Belmont Plan on the renovation of the Fontenoy Building complex was officially completed in September 2009 and the associated costs amounting to K$89,066 initially recorded as renovation work in progress were brought to account and capitalized under Land and Buildings as at 31 December 2009.

(iii) Headquarters Apartment – Place Vauban

By 32 C/Resolution 76, the General Conference “approved the purchase of the apartment currently occupied by the Director-General under the conditions stated in the available offer for the use of UNESCO Directors-General and authorized the Executive Board to review and approve on its behalf the implementation of this purchase, including its funding from UNESCO’s own cash balances”. The


Resolution states that “the purchase will be amortized over two biennia starting in 2006-2007 and invites the Director-General to include in future budgets the necessary funds to cover such amortization”. The purchase was concluded in May 2004 and the cost incurred in the entire acquisition of K$2,601 is disclosed in the above table. The remaining balance of K$1,301 has been amortized in the current biennium 2008-2009.

(b) IBE building (and related loan)

(i) Building

An agreement was signed on 31 July 1984 between UNESCO and FIPOI (Property Foundation for International Organizations) of Switzerland for the purchase of three floors of a building situated at 17 rue des Morillons, Geneva to house the International Bureau of Education. Further to an agreement signed between FIPOI and the Canton of Geneva on 16 October 1996, UNESCO’s share of the costs of this building have been finalized at KCHF (thousands of Swiss francs) 6,692 (K$4,615) and the IBE building has consequently been brought to account for this amount.

This amount was financed partly by a donation of KCHF 2,255 by the “Conseil d’Etat” of the Republic and Canton of Geneva and partly by loans from FIPOI for the balance of KCHF 4,437.

Following a renegotiation of the repayment schedule in December 1997 it was agreed to fix the amount of the loan outstanding as of 1 January 1998 at KCHF 3,223 (K$2,270) repayable in equal annual instalments of KCHF 133 from 1998 until 2021, with a final payment of KCHF 19 in 2022.

(ii) IBE loan outstanding

Swiss francs $

’000s

Balance at 1 January 2008 1,889 1,733

Less -: (i) Loan repayment 2008 and 2009

(267)

(241)

(ii) Exchange adjustment on revaluation 83

Balance at 31 December 2009 1,622 1,575

Amount payable in 2010 Amount payable in future periods

133 1,489

129 1,446

(c) Ocampo Villa, Buenos Aires

Land is valued at a nominal amount of $1 and structures are included at their insurance valuation.

(d) Capital funds related to land and building

The increase in the capital funds relating to land and buildings amounting to K$14,858 bringing the total capital funds at 31 December 2009 to K$ 118,342 (2007 K$103,484) is due to the following:


(i) Renovation loan amortisation for a total sum of K$13,398 corresponding to the repayments made in 2008 and 2009;

(ii) Headquarters Apartment amortisation of K$1,302;

(iii) Repayment of the outstanding loan on IBE building equivalent to K$241 and a loss on the loan revaluation of K$83.

12. RENOVATION LOAN AND WORK-IN-PROGRESS

(a) Loan for renovation – Phase II of the Belmont Plan

By 32 C/Resolution 74, the General Conference had “authorized the Director-General to contract a loan of K€79,875 with a lender chosen by him in cooperation with the Government of France and to take into account the necessity of making provision in future budgets for the funds required for reimbursement of the sums borrowed.” An agreement was signed on 23 March 2004 between UNESCO, the Caisse des Dépôts et Consignations (CDC) and the Government of France for the loan which would be drawn in five yearly instalments from 2004 to 2008 and repaid over eight biennia starting in 2006. The loan repayments are fully guaranteed by the Government of France and the interest due on the loan is also paid by the Government of France.

The interest that would have been payable by the Organization during the biennium, which was actually paid by the Government of France, amounts to K$6,408.

€ $ ’000s

Balance at 1 January 2008 55,189 80,451

Loan withdrawals from CDC in 2008-2009 17,406 20,030 Less -: (i) Loan repayment in 2008-2009 (11,643) (13,398) Add - : (ii) Exchange adjustment on revaluation 871

Balance at 31 December 2009 60,952 87,954

Amount payable in 2010 Amount payable in future periods

5,989

54,963

8,642

79,312

Due to the significant impact and the extraordinary nature of the renovation loan, the exchange difference arising from the revaluation of the loan balance at the close of the reporting period is disclosed under a Currency Exchange Reserve account dedicated to the renovation loan. The exchange difference of K$17,813 from revaluation has therefore been reported separately in the balance sheet of the General Fund (GEF) (Statement II) as at 31 December 2009.

(b) Work-in-progress

Renovation costs are recorded as work in progress due to the significant amounts involved, the duration of the remaining phases of the Belmont Plan and the approved method of charging expenditure.


The renovation work undertaken under Phase II of the Belmont Plan includes major reconstruction and improvements to the existing Headquarters premises at the Place de Fontenoy. In conformity with the United Nations System Accounting Standards (UNSAS) the expenditure incurred on such undertakings would need to be “accumulated and disclosed in a separate account” and then “on completion should be brought to account at final cost”. In this respect the accumulated cost incurred under Phase II of the Plan as at 31 December 2009 amounting to K$89,066 (of which K$23,484 was incurred during 2008-2009) has been transferred to Buildings upon the official completion of the works in September 2009.

13. LIABILITIES FOR EMPLOYEE BENEFITS

(a) Annual leave, termination and repatriation grants

As stated in note 2(c) on expenditure recognition, UNESCO does not normally recognize in its financial statements liabilities for accrued annual leave, termination and repatriation grant entitlements. Where not provided, charges are recorded in the financial period in which they are paid.

At 31 December 2009, the total liability for these costs in respect of UNESCO staff is estimated to be approximately K$50,075 (2007 K$44,000) for which an amount of K$22,850 (2007 K$19,657) has been accumulated as reserves in the Financial Statements.

(b) After-service medical care

Staff retiring from UNESCO, who have reached their fifty-fifth birthday and who have completed at least 10 years of participation in the Medical Benefits Fund as at the date of their separation, may opt to remain (indefinitely) in that Fund as a voluntary participant with UNESCO continuing to participate in the funding of their contributions.

The Organization’s policy is to undertake a detailed actuarial valuation at the end of each biennium in order to calculate the potential amount of after service medical care costs. As at 31 December 2009 the net present value of UNESCO’s liability, which is not provided for in these Financial Statements, amounted to K$649,018 (2007 K$614,000).

14. INVENTORIES (non-expendable equipment)

Estimates of Inventories, excluding “Works of Art”, at Paris Headquarters, UNESCO institutes and offices away from Headquarters as at 31 December 2009 are as follows:

2009 2007

$’000s

Paris Headquarters

UNESCO institutes

at valuation/original cost

at valuation/original cost

10,814

9,174

6,811

10,316

Offices away from Headquarters at original cost 12,508 10,310


The Organization has a significant number of “Works of Art” including paintings, statues and various other objects, which have been mainly donated by governments, artists and other partners. An internal fund has been set-up to cover accidental damages to these works, which have a considerable intrinsic value.

15. UNESCO BRASILIA OFFICE

(a) Change in functional currency

During the biennium UNESCO Brasilia Office adopted the Real as its functional currency in order to better reflect the economic substance of transactions and facilitate the recording of its activities which are based almost entirely in Brazil and conducted in the currency of that country. For practical reasons, the timing of the change of functional currency coincided with the introduction of the UNESCO Finance and Budget System (FABS) to the Brasilia Office which went live on 1 January 2009.

For the year 2008 the shortfall of income over expenditure reported in the Interim Financial Statements, under Programme Fiduciary Funds, Self – benefiting Trust Fund Brazil, included an amount of K$ (37,329) as Currency exchange adjustments. Following the change of functional currency from USD to Real in January 2009 these biennium Financial Statements show on Schedule 1.3, under the equivalent fund, a currency exchange adjustment for the period of K$ (40,386) including the amount reported in 2008 and an adjustment to reserves of K$ 41,227 as required following the change in functional currency.

(b) Presentation of information

The roll-out of the FABS system to the Brasilia Office has also had an impact on the way information is analysed between Brasilia activities and Other Special Accounts and Trust Funds as set out in Schedule 1.3. As from 1 January 2009 all the activities handled by the Brasilia office are now shown under one column, as opposed to only the Self-Benefiting Trust Funds which was the basis of presentation in previous Financial Statements. If there had been no change in the way information is analysed and presented, the non Self-Benefiting activity relating to Brasilia, previously included under Other Special Accounts and Trust Funds, would have increased that category of income by K$ 18,821, increased its expenditure by K$ 23,235 and reduced the excess of Other Special Accounts and Trust Funds by K$ 4,414 in these Financial Statements.

16. CONTINGENT LIABILITIES

(a) A civil action suit alleging acts of administrative impropriety was filed in January 2005 against high-ranking former officials of the National Social Security Institute of Brazil in which UNESCO and its former representative in the country were also cited as co-defendants, with respect to technical assistance agreements concluded between the aforementioned Institute and the UNESCO Brazil Office. The Federal Prosecutors are claiming damages of approximately US$28 million. At the outset, UNESCO invoked its immunity from jurisdiction and that of its former Representative. In 2008, the Federal Court issued a decision declaring that civil action could continue against UNESCO and the former representative. Following an appeal in 2009 by UNESCO, the reporting judge issued a preliminary decision staying the proceedings in favour of UNESCO, pending his final decision on the admissibility of the appeal. The Federal Prosecutors have contested both UNESCO’s appeal and the reporting judge’s preliminary decision concerning the stay of proceedings. At this stage it is not possible to give an estimate as to the outcome of the case nor the amount of loss associated with the outcome.


(b) A number of legal cases are pending before labour courts in which former employees have lodged claims for compensation alleging violation of employment contracts. It is not possible at this time to determine whether any of these cases will result in a material outflow of resources. Staff members have also lodged complaints which are pending before UNESCO Appeal Board or the International Labour Organization Administrative Tribunal.


REGULAR PROGRAMME

2009 2007

INCOME

Assessed contributionsMember States 631,000 610,000New Member States 249Associate Member States 23 22

631,023 610,271Voluntary contributions 10,900 8,258Investment income 4,554 3,949Currency exchange adjustments 8,892 (5,043)Other income 3,061 2,028

TOTAL INCOME 658,430 619,463

EXPENDITURE 641,892 620,233

TOTAL EXPENDITURE 641,892 620,233

EXCESS (SHORTFALL) OF INCOME OVER EXPENDITURE 16,538 (770)

Increase in land and buildings 14,858 9,590Increase in Working Capital 903Distribution to Member States (18,451) (8,182)Transfers (to)/from other funds (246)Decrease in budgetary surpluses (18)Other adjustments to reserves and fund balances 2,207 134Reserves and fund balances, beginning of period 140,327 139,801

RESERVES AND FUND BALANCES, END OF PERIOD 156,364 140,327

FOR THE FINANCIAL PERIOD ENDED 31 DECEMBER 2009(Expressed in '000s US dollars)

UNESCOGENERAL FUND

SCHEDULE OF INCOME AND EXPENDITURE AND CHANGES IN RESERVES AND FUND BALANCES

185 EX

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Schedule 1.1

SCHEDULE 1.2

Revenue Generating Activities

Support Costs Staff Related Accounts Renovation PlanNew Management

Monitoring Instruments

US Special Account

IPSAS Special Account Cost Recovery Policy

External Evaluation of UNESCO

Voluntary Contributions-

SecurityElimination

(Schedule 1.2.1) (Schedule 1.2.2) (Schedule 1.2.3) 2009 2007

INCOME

Voluntary contributions 50 43 48 141Revenue generating activities 29,407 29,407 22,837Allocations from other funds 130 1,070 4,622 1,600 25 370 7,817 5,149Income for services rendered 25,318 25,318 26,822Investment income 537 15,359 160 135 55 85 7 16,338 18,802Currency exchange adjustment (1,138) (1,138) 2,173Other income 391 3,934 1,984 6,309 6,958

TOTAL INCOME 30,335 43,473 2,274 1,205 4,677 85 1,607 75 43 418 84,192 82,741

EXPENDITURE 27,083 47,176 1,357 5,756 4,438 2,916 15 197 88,938 75,912

TOTAL EXPENDITURE 27,083 47,176 1,357 5,756 4,438 2,916 15 197 88,938 75,912

EXCESS ( SHORTFALL ) OF INCOMEOVER EXPENDITURE 3,252 (3,703) 917 (4,551) 239 (2,831) 1,592 75 (154) 418 (4,746) 6,829

Transfer to/from reserves 246

Other adjustments to reserves andfund balances (569) (2,211) 2,718 (62) 3,790

Reserves and fund balances, beginning of period 14,873 25,604 6,603 3,868 909 4,374 246 56,477 45,612

RESERVES AND FUND BALANCES, END OF PERIOD 17,556 19,690 7,520 2,035 1,148 1,543 1,838 75 (154) 418 51,669 56,477

UNESCOOTHER PROPRIETARY FUNDS

SCHEDULE OF INCOME AND EXPENDITURE AND CHANGES IN RESERVES AND FUND BALANCESFOR THE FINANCIAL PERIOD ENDED 31 DECEMBER 2009

( Expressed in '000s US dollars )

TOTAL

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SCHEDULE 1.2.1

Public Information Liaison and

Relations Fund

Publications and Auditory and

Visual Material Fund

Utilization of Headquarters

Fund

Special Account for Documents/ Publications

Services

Special Account for

Interpretation Services

2009 2007

INCOME

Revenue producing activities Sales & Royalties 432 2,230 12 9,182 3,574 15,430 11,801 Rental & Charges from letting 13,912 65 13,977 11,036

Allocation from other funds

Investment income 314 223 537 2,092

Currency exchange adjustment 25

Other income 84 307 391 794

TOTAL INCOME 830 2,230 14,454 9,247 3,574 30,335 25,748

EXPENDITURECost of Goods Sold 416 201 617 465Staff Costs 1,013 205 6,918 329 450 8,915 7,398Other Expenditure 444 1,193 6,085 6,761 3,068 17,551 14,719

TOTAL EXPENDITURE 1,873 1,599 13,003 7,090 3,518 27,083 22,582

EXCESS (SHORTFALL) OF INCOMEOVER EXPENDITURE (1,043) 631 1,451 2,157 56 3,252 3,166

Other adjustments to reserves andfund balances (569) (569) (46)

Reserves and fund balances, beginning of period 2,700 1,821 6,779 2,744 829 14,873 11,753

RESERVES AND FUND BALANCES, END OF PERIOD 1,088 2,452 8,230 4,901 885 17,556 14,873

(Expressed in '000s US dollars)

TOTAL

UNESCOREVENUE GENERATING ACTIVITIES


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SCHEDULE 1.2.2

Funds-in Trust Overhead Cost

Account (FITOCA)

Special Account for Administrative and

Operational Services ( UNDP-AOS )

Technical Support Services at the

Programme Level ( UNDP-SPPD )

Technical Support at the Project Level

(UNDP-STS )2009 2007

INCOME

Income for services rendered Programme Support Costs 25,295 23 25,318 26,822

Investment income 15,332 19 8 15,359 15,013

Currency exchange adjustments (1,138) (1,138) 2,148

Other income 3,934 3,934 4,585

TOTAL INCOME 43,423 23 19 8 43,473 48,568

EXPENDITUREStaff Costs 28,040 28,040 24,454Other Expenditure 18,754 15 367 19,136 14,644

TOTAL EXPENDITURE 46,794 15 367 47,176 39,098

EXCESS (SHORTFALL) OF INCOMEOVER EXPENDITURE (3,371) 23 4 (359) (3,703) 9,470

Other adjustments to reserves and fund balances 731 (2,285) (740) 83 (2,211)

Reserves and fund balances, beginning of period 22,300 2,262 736 306 25,604 16,134

RESERVES AND FUND BALANCES, END OF PERIOD 19,660 30 19,690 25,604


TOTAL

UNESCOPROGRAMME SUPPORT COSTS FOR SPECIAL ACCOUNTS AND TRUST FUNDS


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SCHEDULE 1.2.3

Terminal Payment Fund Staff Compensation Fund Language Courses

2009 2007

INCOMEAllocations from other funds 130 130 130Investment income 160 160 555Other income 1,186 339 459 1,984 1,579

TOTAL INCOME 1,346 469 459 2,274 2,264

EXPENDITUREStaff Costs 806 806 1,272Compensation/Benefits Paid 105 105Other Expenditure 315 131 446 679

TOTAL EXPENDITURE 1,121 105 131 1,357 1,951

EXCESS OF INCOME OVER EXPENDITURE 225 364 328 917 313

Other adjustments to reserves andfund balances 173

Reserves and fund balances, beginning of period 5,721 609 273 6,603 6,117

RESERVES AND FUND BALANCES, END OF PERIOD 5,946 973 601 7,520 6,603


TOTAL

UNESCOSTAFF RELATED ACCOUNTS


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SCHEDULE 1.3

INCOME

Assessed contributions 9,203 9,203 8,009 Voluntary contributions 153,261 103,410 246,913 503,584 654,416 Revenue producing activities 3,168 3,168 3,121 Funds received under inter-organization arrangements 79,059 79,059 54,933 Allocations from other funds (Regular Programme) 28,133 28,133 28,333 Income for services rendered 54,795 54,795 40,900 Investment income 2,340 23,337 10,366 36,043 47,599 Currency exchange adjustments 1,626 (40,386) (318) (39,078) 45,713 Other income 1,851 1,851 3,519

TOTAL INCOME 245,174 86,361 345,223 676,758 886,543

EXPENDITUREExpenditure 236,703 138,312 276,097 651,112 743,729

TOTAL EXPENDITURE 236,703 138,312 276,097 651,112 743,729

EXCESS/ (SHORTFALL) OF INCOME OVER EXPENDITURE 8,471 (51,951) 69,126 25,646 142,814

Other adjustments to reserves and fund balances (841) 41,227 570 40,956 6,185 Reserves and fund balances, beginning of period 42,148 147,321 268,897 458,366 309,367

RESERVES AND FUND BALANCES, END OF PERIOD 49,778 136,597 338,593 524,968 458,366

Institutes (Schedule 1.3.1)

UNESCO Brasilia Office

Other Special Accounts and Trust Funds (Sch. 1.3.2)

TOTAL

2009 2007



UNESCOPROGRAMME FIDUCIARY FUNDS


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IBE ICTP IESALC IHE IICBA IIEP IITE UIS UIL

INCOMEVoluntary contributions 3,559 65,025 1,250 29,833 34 28,703 16 17,542 7,299 153,261 138,272Revenue producing activities 3 1,397 1,759 3 6 3,168 3,121Allocations from other funds (Regular Programme) 4,591 1,263 2,200 2,000 5,100 1,100 9,020 2,859 28,133 27,878Income for services rendered 237 96 52,195 2,182 5 80 54,795 40,900Investment income 133 1,333 311 563 2,340 2,913Currency exchange adjustments 14 (49) (70) (3) 1,756 (2) (20) 1,626 1,182Other income 19 172 1 769 335 100 455 1,851 3,519

TOTAL INCOME 8,556 69,237 3,451 82,727 2,031 40,146 1,117 27,216 10,693 245,174 217,785

EXPENDITUREExpenditure 7,931 69,256 3,082 82,819 2,242 38,402 687 22,919 9,365 236,703 208,292

TOTAL EXPENDITURE 7,931 69,256 3,082 82,819 2,242 38,402 687 22,919 9,365 236,703 208,292EXCESS (SHORTFALL) OF INCOME 625 (19) 369 (92) (211) 1,744 430 4,297 1,328 8,471 9,493OVER EXPENDITURE

Savings on prior period obligations 54 313 72 35 1,238 2 192 1,906 1,716Other adjustments to reserves and fund balances (859) (20) (1,741) (123) (4) (2,747) 4,469Reserves and fund balances, beginning of period 1,225 14,759 209 2,834 355 12,796 44 8,194 1,732 42,148 26,470

RESERVES AND FUND BALANCES, END OF PERIOD 1,904 14,194 650 2,722 179 14,037 476 12,560 3,056 49,778 42,148

SCHEDULE OF INCOME AND EXPENDITURE AND CHANGES IN RESERVES AND FUND BALANCES FOR THE FINANCIAL PERIOD ENDED 31 DECEMBER 2009

(Expressed in '000s USD)

International Bureau of Education

International Centre for

Theoretical Physics

TotalUNESCO

Institute for Lifelong Learning

SCHEDULE 1.3.1UNESCO

SPECIAL ACCOUNTS FOR INSTITUTES

International Institute for Higher Education in Latin America and the

Carribean 2009 2007

UNESCO-IHE Institute for

Water Education

International Institute for

Capacity Building in Africa

International Institute for Educational

Planning

UNESCO Institute for Information

Technologies in Education

UNESCO Institute of Statistics

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U N E S C O

OTHER SPECIAL ACCOUNTS AND TRUST FUNDSBALANCES AS AT 1 JANUARY 2008, RECEIPTS AND DISBURSEMENTS FOR THE FINANCIAL PERIOD ENDED 31 DECEMBER 2009

AND BALANCES AS AT 31 DECEMBER 2009

(Expressed in US dollars)

RECEIPTS DISBURSEMENTS

Fund Balances UNESCO Government Amounts Investment Exchange Other Project Programme Fund Balances Unliquidated Fundexcluding ULOs Regular Contributions Financed From Income Difference Receipts Disbursements Support excluding ULOs Obligations Balances

1 January Programme UN and Costs 31 December (ULOs) 31 December2008 UN Agencies 2009 2009

PART I - UN SOURCES

UN AIDS - AIDS Prevention, Awareness and Education Projects 3,415,685 20,602,360 98,450 10,889,072 654,186 12,573,237 2,543,982 10,029,255UN Democracy Fund 310,007 1,527 122,089 6,654 182,791 106,687 76,104UN Development Fund for Women 54,589 28,654 1,471 24,464 1,346 23,118UN Development Programme (3,795,303) 2,581,942 794,090 921,558 52,032 (1,392,861) 20,133 (1,412,994)UN Development Programme Projects 313,682 1,466,097 16,834 31,777 529,828 50,242 1,248,320 86,316 1,162,004UN Economic and Social Commission for Asia and the Pacific 100,000 745,914 12,606 286,247 11,450 560,823 60,881 499,942UN Environment Programme - Memoranda of Understanding 601,149 1,247,982 1,083 1,353,924 49,011 447,279 33,744 413,535UN Fund for International Partnership 4,586,957 2,237,182 113,685 22,630 3,430,641 171,532 3,358,281 553,033 2,805,248UN Fund for Population Activities (729) 729UN Fund for Population Activities Projects and UN Multi-Donor for International Conferences 7,866 320,336 1,495 (23,791) 227,886 16,152 61,868 50,084 11,784UN Joint Programmes 1,704,406 756,834 1,968,633 105,386 1,794,448 3,802,194 305,102 2,222,411 323,897 1,898,514UN Mine Action Service Fund 360,000 7,160 303,996 30,400 32,764 18,768 13,996UNDP/Spain MDG Fund 116,098 22,474,154 279,616 5,743,704 402,059 16,724,105 3,653,008 13,071,097UNHCR Fund 41,100 29,532 (37,532) 30,184 1,932 984 984UNICEF Fund 136,336 1,555,578 24,721 (54,078) 777,292 92,089 793,176 380,672 412,504UNICEF Joint Programme - Pakistan HRP Fund 206,920 416 158,600 11,102 37,634 22,898 14,736United Nations Central Emergency Response Fund 11,964 630,235 3,117 520,841 36,459 88,016 18,547 69,469United Nations Development Group Iraq Trust Fund 28,089,761 3,820,450 (931,708) 17,106,980 927,115 12,944,408 6,070,134 6,874,274United Nations Human Security Fund 577,827 1,606,671 2,020 980,545 77,549 1,128,424 398,627 729,797United Nations International Strategy for Disaster Reduction 215,955 752,550 8,863 548,020 43,842 385,506 122,791 262,715United Nations Lebanon Recovery Fund 774,205 820,000 49,213 422,109 29,548 1,191,761 19,741 1,172,020International Trade Centre Fund 49,038 22,927 1,605 24,506 24,506One UN Fund Albania 149,750 204 30,954 2,167 116,833 39,639 77,194One UN Fund Mozambique 2,053,179 34,278 633,886 44,372 1,409,199 391,701 1,017,498One UN Fund Pakistan 2,223,906 890 2,418 169 2,222,209 2,222,209One UN Fund Rwanda 596,116 5,284 536,555 37,559 27,286 5,735 21,551One UN Fund Tanzania 5,373,358 11,916 488,074 34,165 4,863,035 35,507 4,827,528One UN Fund Uruguay 1,084,184 7,390 810,173 56,712 224,689 50,486 174,203One UN Fund Viet Nam 1,507,766 3,231 141,008 9,870 1,360,119 234,174 1,125,945Preventing and Responding to Domestic Violence through a Multi-sectoral Approach Joint Programme in China 106,989 106,989 106,989Peacebuilding Fund 1,970,049 26,350 541,168 37,882 1,417,349 139,413 1,277,936World Conference on Education for All 4,484 (484) 4,000

TOTAL PART I 36,901,443 756,834 78,906,196 (115,973) 2,527,060 51,395,527 3,194,428 64,385,605 15,406,450 48,979,155

PART II - OTHER EXTRA-BUDGETARY SOURCES

A.TECHNICAL ASSISTANCE PROJECTSFINANCED BY LOANS / GRANTS FROM INSTITUTIONS

African Development Bank:Cameroon 117,160 375,184 1,139 183,067 12,815 297,601 31,186 266,415Côte d'Ivoire 17,440 15,434 2,006Democratic Republic of Congo 1,308,017 1,798,082 40,644 1,792,138 85,652 1,268,953 134,154 1,134,799Gambia 1,864 (1,864)Sierra- Leone 61,994 958 34,174 4,442 24,336 17,074 7,262Support to the ECOWAS Peace and Development Programme 86,348 8,294 325,734 337,031 30,333 53,012 2,327 50,685Co-operative Programme 66,336 43,150 8,992 100,494 100,494

Schedule 1.3.2 - page 1/6

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Sub-schedule 1.3.2

U N E S C O







Asian Development Bank:Fighting HIV/AIDS in Asia and the Pacific/Developing Capacity among Ethnic Minority Communities to Combat HIV/AIDS 622 150,000 108,298 14,079 28,245 27,333 912HIV/AIDS Vulnerability and Risk Reduction among Ethnic Minorities Groups through Communication Strategies in GMS 45,792 38,990 75,028 9,754Lao PDR 64,319 217 57,112 7,424

Inter-American Development Bank:Brazil 21,176 60,667 52,737 3,164 25,942 25,942Latin America - Comparative Evaluation of Education 32,825 70,617 103,442

Islamic Development Bank:Cameroon 168,222 913 131,780 17,131 20,224 5,015 15,209Chad 3,450 3,450 3,450Niger 709 709 709Co-operative Programme (23,731) (23,731) (23,731)

Japan Bank for International Cooperation:Vietnam 10,777 (10,843) (66)

OPEC Fund:Côte d'Ivoire 32,661 32,661 32,661Mali 4,564 (4,564)Mauritania 51,734 574 (47,869) 4,110 329Senegal (18,416) 18,416Strengthening Education Sector Response to prevent HIV/AIDS 184,527 1,200 (66,894) 118,833Strengthening Education Sector Response to HIV/AIDS in Southern Africa 915 1,499,975 1,500,890 1,500,890Co-operative Programme 5,041 (5,041)

World Bank:Bangladesh 439,464 15,376 454,840 454,840Brazil 19,380 3,155 (350) (17) 22,902 22,902Ghana 60 (60)Global Initiative for Quality Assurance Capacity 1,280,000 31,503 1,261,425 1,292,647 81,920 1,198,361 504,734 693,627Haiti 53,864 268 (14,515) 39,617Iran (84,689) 84,689Latin American Laboratory for Assessment of the Quality of Education 205,143 4,374 221,061 367,037 19,306 44,235 44,235Morocco (11,653) 11,653Prog. of Analytical and Capacity Building conducted by the Pôle de Dakar 475,477 20,627 1,619,805 1,267,936 63,397 784,576 37,773 746,803Uzbekistan 10,000 (69) 8,789 1,142

SUB-TOTAL PART II A 2,738,155 232,541 79,527 60,667 4,826,993 3,627,016 217,563 4,093,304 574,855 3,518,449

B.SELF BENEFITING PROJECTS

Aga Khan Foundation 149,605 1,395 (47,759) 91,364 11,877Albania 1,389,741 42,178 363,118 29,049 1,039,752 870,974 168,778Angola 99,976 294 100,270 100,270Azerbaijan 73,428 4,981 648 67,799 67,799Bahrain 667,758 16,982 419,764 54,570 210,406 210,406Cameroon 198,952 229 142,152 18,480 38,549 22,054 16,495Chile 188,617 335,354 367,936 34,335 121,700 51,410 70,290Costa Rica 5,695 (5,695)Ecuador 140,001 800,000 4,186 (5,698) 406,543 23,650 508,296 108,345 399,951Guatemala 565,178 (549,809) 4,113 17,241 2,241Iraq 3,613,120 825,000 135,597 1,045,346 128,549 3,399,822 3,144,404 255,418Latin American Laboratory for Assessment of Quality in Education 142,354 190,831 61,255 286,140 108,300 61,218 47,082

Schedule 1.3.2 - Page 2/6

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Schedule 1.3.2 - page 2

U N E S C O







Lebanon 30,409 25,367 3,298 1,744 1,744Libyan Arab Jamahiriya 15,399,371 399,893 461,372 1,936,856 204,041 14,119,739 119,714 14,000,025Mexico 193,411 679,644 (10,580) 722,620 93,941 45,914 5,093 40,821Namibia 113,389 (779) 46,793 6,083 59,734 675 59,059Nigeria 1,154,018 331,863 17,296 921,902 69,046 512,229 10,334 501,895Peru 174,051 789 90,639 11,783 72,418 46,849 25,569Saudi Arabia 274,926 9,150 (282,400) 1,524 152United Arab Emirates 316,801 17,206 (14,910) 276,284 35,917 6,896 2,769 4,127Uruguay 50,237 299,948 261,138 13,057 75,990 75,990

SUB-TOTAL PART II B 17,532,562 1,902,605 473,697 (293,759) 4,283,123 437,318 14,894,664 185,434 14,709,230

C.DONATED PROJECTS

Albania Trust Fund 159,643 5,587 165,230 165,230Arab Gulf Programme for United Nations Development 542,348 15,897 14,611 125,606 14,832 432,418 3,098 429,320Associate Experts' Scheme

Austria (23,176) 19,204 267 32 (4,271) (4,271)Belgium 177,345 268,185 2,118 384,900 46,188 16,560 4,437 12,123Denmark 17,973 555 66 17,352 17,352Finland 233,496 549,400 6,732 443,015 53,162 293,451 1,413 292,038France 264,635 118,200 6,623 276,864 33,224 79,370 79,370Germany 81,713 804,640 (2,825) 443,569 53,228 386,731 4,099 382,632Greece 93,067 375,700 6,675 264,144 31,697 179,601 179,601Italy 255,978 881,069 9,001 1,087,093 130,451 (71,496) 11,694 (83,190)Japan 384,953 1,332,500 20,894 1,309,098 157,092 272,157 10,186 261,971Korea, Republic of 9,904 410,593 1,025 314,757 37,771 68,994 68,994Norway 33,137 (33,137)Portugal 21,822 21,822 21,822Spain 700,372 1,036,272 14,899 1,006,584 120,790 624,169 5,869 618,300Sweden 46,512 383,173 403,203 48,384 (21,902) (21,902)Switzerland 198,731 21,886 2,346 185,559 22,267 15,137 15,137United Kingdom (549) (549) (549)

Association of Private Committees Trust Fund 436,460 (592) (36,841) 1,268,920 1,454,606 72,730 140,611 114,635 25,976Australia Trust Fund 167,280 2,820,107 35,066 (7,753) 480,361 58,994 2,475,345 384,671 2,090,674Belgium (Flanders) Trust Fund 5,515,783 5,146,422 227,587 4,999,554 522,700 5,367,538 548,454 4,819,084Bulgaria Trust Fund 669,101 5,265 31,280 4,066 639,020 43,324 595,696Canada Trust Fund 137,043 371,756 6,315 (3,653) 412,481 53,622 45,358 8,547 36,811Czech Republic Trust Fund 79,439 90,181 3,375 33,262 4,321 135,412 5,669 129,743Denmark Trust Fund 376,442 1,976,105 23,889 856,072 49,052 1,471,312 6,835 1,464,477European Commission Trust Fund 3,434,417 196,853 11,156,488 6,496,623 426,738 7,864,397 1,464,636 6,399,761Felissimo Trust Fund 252,829 9,123 15,738 5,000 650 272,040 272,040Finland Trust Fund 95,097 882,518 8,554 363,349 18,168 604,652 604,652France Trust Fund 1,374,069 5,037,957 3,690 5,700 3,012,707 290,368 3,118,341 266,497 2,851,844Germany Trust Fund 1,833,868 2,773,255 27,082 (1,433) 2,977,635 357,817 1,297,320 407,234 890,086Greece Trust Fund 248,146 10,327 (5,695) 122,682 15,949 114,147 796 113,351Hungary Trust Fund 48,689 984 49,673 49,673Iran Trust Fund 90,478 3,166 93,644 93,644Ireland Trust Fund 290,105 40,348 (34,301) 247,102 32,123 16,927 16,927Islamic Call Society Trust Fund 5,864,335 190,106 (271,176) 617,814 79,663 5,085,788 25,620 5,060,168Italy Trust Fund 37,435,957 9,016,905 786,356 (50,000) 23,163,182 2,594,868 21,431,168 2,364,445 19,066,723Japan Trust Fund 31,921,221 36,570,012 1,441,213 26,089,493 3,380,286 40,462,667 3,698,302 36,764,365Libyan Arab Jamahiriya Trust Fund 1,000,000 9,670 195,470 25,411 788,789 86 788,703Luxembourg Trust Fund 330,720 10,715 83,258 10,824 247,353 2,102 245,251Malta Trust Fund 61,180 2,141 63,321 63,321Mexico Trust Fund 200,707 254,301 282,561 36,733 135,714 56,002 79,712Monaco Trust Fund 327,366 999 183,270 23,825 121,270 6,501 114,769Multi-Donor Trust Fund 268,742 345,664 15,528 202,645 26,344 400,945 400,945Netherlands Trust Fund 1,024,921 1,394,288 1,225,380 158,920 1,034,909 105,079 929,830New Zealand Trust Fund 286,270 542,775 7,772 596,125 77,496 163,196 24,130 139,066Norwegian Agency for Development Trust Fund 22,728 (23,025) 297


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U N E S C O







Norway Trust Fund 6,247,300 7,219,123 29,725 (10,205) 6,770,515 735,903 5,979,525 665,839 5,313,686Poland Trust Fund 25,000 237 20,240 2,631 2,366 1,000 1,366Portugal Trust Fund 698,528 467,792 23,593 266,263 34,614 889,036 20,340 868,696Private Sector Trust Funds - other 5,466,671 233,272 12,709,535 8,995,472 1,087,534 8,326,472 1,123,974 7,202,498Private Sector UNESCO Chairs 230,986 5,171 (7,406) 127,852 16,021 84,878 27,316 57,562Qatar Foundation Trust Fund 1,874,056 62,759 8,456,668 1,098,406 121,958 9,173,119 207,839 8,965,280Republic of Korea Trust Fund 1,874,967 2,576,210 70,712 1,954,768 253,223 2,313,898 128,637 2,185,261Romania Trust Fund 147,493 3,048 111,272 14,465 24,804 24,804Russian Federation Trust Fund 1,882,315 20,480 410,146 53,319 1,439,330 29,391 1,409,939Saudi Arabia Trust Fund 4,693,463 2,530,000 222,222 282,400 577,683 21,504 7,128,898 92,898 7,036,000Singapore Trust Fund 40,000 139 10,619 1,380 28,140 23,759 4,381Spain Trust Fund 11,212,120 21,928,101 426,168 (826,444) 8,450,435 1,070,163 23,219,347 1,110,362 22,108,985Sweden Trust Fund 3,457,843 3,907,437 104,099 3,621,222 434,298 3,413,859 562,883 2,850,976Switzerland Trust Fund 186,430 1,394,949 17,429 (19,413) 614,292 79,416 885,687 128,961 756,726The People’s Republic of China Trust Fund 250,000 2,358 203,953 26,514 21,891 738 21,153Turkey Trust Fund 400,000 8,541 55,426 7,205 345,910 203 345,707United Arab Emirates Trust fund 1,727 (1,767) 40United Kingdom Trust Fund 842,632 569,190 19,770 (180) 918,455 119,399 393,558 32,469 361,089United States of America Trust Fund 170,358 6,446,962 40,741 (59,098) 3,317,587 431,522 2,849,854 325,996 2,523,858

SUB- TOTAL PART II C 37,104,574 49,635,312 1,290,504 20,525,857 37,524,606 4,511,069 66,520,572 4,482,605 62,037,967

D.FUNDS FOR CULTURAL CAMPAIGNS, VOLUNTARYCONTRIBUTIONS AND INTERNATIONAL APPEALS

PRIZES AND AWARDS :

Arirang Prize (Korea Rep. Of) 31,025 31,025 31,025Emir Jaber Al-Ahmad Al-Jaber Al-Sabah Prize 549,810 30,000 29,620 80,346 8,815 520,269 1,130 519,139Felix Houphouet-Boigny Peace Prize 8,597,521 606,731 (129,768) 1,108,944 7,965,540 66,729 7,898,811International Prize for Water Conservation : "Great Artificial River" 405,782 21,349 32,626 4,241 390,264 390,264Japan Shipbuilding Industry Foundation Endowment for UNESCO Peace Prize 1,105,576 55,643 105,576 13,725 1,041,918 1,041,918Javad Husain "Young Scientist" Prize 211,931 11,207 223,138 223,138King Hamad Bin Isa Al-Khalifa Prize 260,993 323,600 16,776 204,477 26,582 370,310 27,856 342,454Literacy Prizes

Conficius Prize for Literacy 79,308 299,978 5,129 294,658 38,306 51,451 1,511 49,940International Reading Association Literacy Award 6,621 792 50,000 49,826 6,477 1,110 1,110King Sejong Literacy Prize 5,380 155,000 1,339 126,685 16,469 18,565 7 18,558Noma Literacy Prize 5,720 (5,720)

Melina Mercouri Prize 14,342 47,509 61,851 61,851Prince of Asturias Prize 3 (3)Samarkand Taronasi Prize 3,000 (3,000)Sharjah Prize for Arab Culture 289,934 267,557 19,225 100,160 12,185 464,371 464,371Sheikh Zayed Bin Sultan Al Nahyan Prize 126,732 4,745 110,722 20,755 20,755Special Account for : International Simon Bolivar Prize 302,320 15,986 318,306 318,306Sultan Qaboos Prize for Environmental Preservation 310,191 217,568 25,800 33,041 4,212 516,306 516,306UNESCO Avicenna Prize for Ethics in Science 65,000 179 39,330 5,113 20,736 18,809 1,927UNESCO Bilbao Prize for the Promotion of Culture of Human Rights 163,297 3,521 102,015 13,262 51,541 22,513 29,028UNESCO-Guillermo Cano World Press Freedom Prize 20,000 20,000 20,000UNESCO - Hamdan bin Rashid Al-Maktoum Prize 1,259 149,956 11,592 1,507 138,116 5,187 132,929UNESCO-IPDC Prize for Rural Communication 38,000 38,000 38,000UNESCO-Jikji Memory of the World Prize 30,636 39,510 60,862 4,012 5,272 302 4,970UNESCO-Juan Bosch Prize for the Promotion of Social Science Research in Latin America and the Caribbean 62,500 62,500 62,500UNESCO Kalinga Prize for the Popularization of Science 7,175 16,046 16,083 2,091 5,047 5,047UNESCO Prize for the Promotion of the Arts 38,650 7,230 135,669 181,549 181,549UNESCO-Madanjeet Singh Prize for the Promotion of Tolerance and Non-Violence 103,888 2,448 150,000 122,538 15,930 117,868 7,336 110,532


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U N E S C O







UNESCO-Obiang Nguema Mbasogo International Prize for Research in the Life Sciences 3,000,000 25,647 81,515 10,597 2,933,535 20,568 2,912,967

FELLOWSHIP AND SCHOLARSHIP FUNDS :

Nessim Habif Fund 2,250,069 (297,564) 17,602 1,934,903 1,934,903Scholarship Programme for Girls in Africa 6,868 4,993 11,861 11,861Theresa McKay Memorial Fund Fellowships 226,824 10,865 85,730 5,278 146,681 1,918 144,763Third World Academy of Sciences 21,377,593 10,473,934 1,145,498 23,681 959,503 10,522,265 23,457,944 4,673,880 18,784,064UNESCO-ASCHBERG Foundation Trust Fund 3,590,074 226 189,414 23,775 1,765 3,754,174 39,377 3,714,797UNESCO Fellowship Bank 92,861 32,034 3,219 57,608 57,608

OTHERS :

Action in Education for Afghan Refugees 24,893 (6,299) 14,475 4,119 4,119African Research and Development - Science & Technology 204 (204)ANSTI Membership Fund 115,451 6,822 115,108 97,380 4,669 135,332 135,332Asian Programme of Educational Innovation for Development 103,194 24,989 5,843 127,565 56,460 3,270 201,861 201,861Asia-Pacific Programme of Education for All 18,744 9,989 5,358 100 23,275 5,500 17,775Capacity Building for Education for All 10,697,568 15,531,087 471,061 10,184 8,761,608 374,715 17,573,577 1,171,658 16,401,919CCT Links 59,567 10,542 2,170 34,517 2,355 35,407 35,407Children in Need 1,989,540 70,929 76,893 314,605 1,536,681 56,468 858,818 43,484 815,334Education For All - Dakar Follow-up 5,064,223 6,784,104 238,490 (524) 8,154,307 409,529 3,522,457 547,302 2,975,155Fund for the Elimination of Doping in Sport 1,099,417 1,297,526 71,306 7,542 146,769 14,677 2,314,345 7,700 2,306,645Global Alliance for Cultural Diversity 282,638 113,082 14,570 118,433 1,641 290,216 290,216Great Apes Survival Project 4,960 1,020 5,980 5,980Higher Education Activities in CEPES 12,343 10,151 1,015 1,177 1,177Increased Aid to Developing Countries 260,663 7,231 9,953 (385) 199,165 6,225 72,072 1,760 70,312Information Programme for All 378,728 40,000 14,497 254,843 22,521 155,861 51,715 104,146Integral Study of the Silk Roads 1,659 (1,659)Intergovernmental Oceanographic Commission ( I.O.C ) 5,575,595 2,952,975 12,000 251,674 205,290 3,956,161 268,087 4,773,286 296,186 4,477,100International Campaigns - Cultural Heritage 161,578 16,234 5,375 (3,724) 87,330 7,502 84,631 84,631International Computer Driving License 3,822,541 36,842 4,404,016 2,965,031 116,105 5,182,263 72,055 5,110,208International Fund for Cultural Diversity 13,514 2,322,285 36,073 265 2,372,137 2,372,137International Fund for the Development of Physical Education and Sport 88,870 1,923 88,850 131,794 552 47,297 913 46,384International Fund for the Promotion of Culture 3,850,413 199,963 109,527 83 3,940,766 3,940,766International Fund for the Promotion of the Return of Cultural Works of Art to their Country of Origin 108,960 199,090 6,782 176,118 8,326 130,388 295 130,093International Programme for the Development of Communication 3,255,037 2,729,192 176,114 903,276 3,232,608 212,320 3,618,691 781,240 2,837,451Man and Biosphere Programme (MAB) 1,832,259 3,497,806 104,742 23,044 2,097,974 167,505 3,192,372 321,103 2,871,269Mitigation Against Earthquake Losses in the Mediterranean Region 9,450 6,123 502 2,825 2,825Ocampo Donations Special Account 53,437 71,780 4,529 405,586 391,073 14,394 129,865 19,233 110,632Plan for the Promotion of Arab Culture 7,523 6,705 208 610 553 57Portal on Higher Education Institutions 87,754 19,763 1,123 80,362 8,036 20,242 12,100 8,142Preliminary Microzonation Map for Bam 1 (1)Priority Africa 1,221,814 47,420 62,903 50,000 647,101 66,184 668,852 203,409 465,443Programme for Education of Children in Difficult Situations 89,091 66,099 122,907 3,543 28,740 319 28,421Promotion of Cultural Heritage Activities 8,425 (340) 7,725 360Protection of Cultural Property in the Middle East in the Event of Armed Conflict 462,450 168,792 24,030 116,631 11,663 526,978 10,133 516,845Protection of the World Cultural and Natural Heritage 246,877 176,370 10,001 (6,796) 153,945 5,473 267,034 4,709 262,325Special Account - Egypt 11,469,511 603,827 278,076 27,807 11,767,455 20,835 11,746,620Special Accounts for General Histories 326,382 9,609 (5,259) 186,265 9,587 134,880 28,263 106,617Special Account - Contribution to Internal Oversight Service 204,795 10,761 1,479 214,077 214,077Special Account for Latin American Laboratory for Assessment of Quality in Education 544,344 484 544,828 544,828Special Account for Science and Human Sciences Sector - Div. of Foresight & Philosophy 72,583 41,102 4,536 118,221 118,221Special Account for South South Cooperation in Education 80,882 144,965 8,474 26,787 1,339 206,195 13,235 192,960Special Account for Voluntary Contributions 1,886,949 1,035,312 103,916 88,576 (6,536) 1,686,817 2,303,849 128,645 2,362,540 179,522 2,183,018Special Account for the Reinforcement of the 33C/5 4,864,718 197,637 3,020,977 2,041,378 288,893 1,752,485Special Account for the Strengthening of UNESCO's Infrastructure and its Programme 1,780,165 125,164 54,872 1,876,176 84,025 8,007 76,018Special Account for the Support to Countries in Post-conflict and Post-disaster Situations 9,998 769,387 204,951 20,495 553,939 52,687 501,252Special Account Teachers for Education for All 2,192,129 1,322 44,956 3,147 2,145,348 16,457 2,128,891


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U N E S C O







Special Fund for Youth 2,674 (2,674)The Convention for the Safeguarding of the Intangible Cultural Heritage 1,952,346 3,153,932 166,527 273,762 4,999,043 221,395 4,777,648Trust Fund for the Establishment of the Nubia Museum in Aswan and -- the National Museum of Egyptian Civilization in Cairo 641,371 17,891 28,270 223,463 6,659 457,410 15,602 441,808Trust Funds for the Preservation of :

Moenjodaro 460,229 20,824 210,236 12,085 258,732 25,041 233,691Parsi Zorastrian Culture and Heritage 19,853 12,012 23,336 934 7,595 7,187 408

Trust Funds for Safeguarding the :Monuments of Borobodur 196,326 8,522 111,991 6,250 86,607 30,089 56,518Monuments of Venice 94,639 7,975 109,311 135,569 76,356 76,356

UNESCO History Project 32,425 26,825 2,682 2,918 2,918UNESCO Media Fund 12,057 (568) 11,489Women's Empowerment and Gender Equality 590 101,961 56,327 5,633 40,591 5,500 35,091World Commission on Culture and Development 2,167 (61) 1,915 191World Heritage Fund 5,659,335 7,882,638 317,699 828,303 8,181,129 46,877 6,459,969 1,442,755 5,017,214

Sub-Total Part II D 110,787,272 66,371,342 152,758 5,232,204 (104,648) 11,732,534 64,241,222 2,254,145 127,676,095 10,793,958 116,882,137

E. GOVERNMENT CONTRIBUTIONS TO FIELD OFFICES

Special Account for the Contribution of the Government -- of Qatar for the Operation of the UNESCO Regional- Representative's Office in the Arab States of the Gulf 117,442 449,277 380,448 186,271 14,349 171,922Beirut Office 76,971 295,452 113,069 259,354 81,822 177,532Bucharest Office 1,490,000 1,490,000 1,490,000UNEVOC Office 459,779 33,583 356,797 136,565 35,610 100,955Venice Office 22,890 (21,155) 1,735Regional Bureau for Science and Culture in Europe - Venice 1,569,511 3,725,274 50,517 3,716,633 1,628,669 308,717 1,319,952

SUB-TOTAL - PART II E 1,786,814 6,419,782 84,100 (21,155) 4,568,682 3,700,859 440,498 3,260,361

F. CONTRIBUTIONS FOR HQ RENOVATIONS

Japanese Garden - Renovation Plan 55,646 2,170 (36,617) 21,199

SUB-TOTAL - PART II F 55,646 2,170 (36,617) 21,199

TOTAL - PART II 273,472,392 204,165,622 152,758 10,482,341 (80,822) 49,236,113 200,158,395 16,929,594 320,340,415 30,494,857 289,845,558

TOTAL PROGRAMME EXPENDITURE PARTS I AND II 310,373,835 204,922,456 79,058,954 10,366,368 (80,822) 51,763,173 251,553,922 20,124,022 384,726,020 45,901,307 338,824,713

Closing Exchange Revaluation 1,679 (237,276) (235,597) (3,749) (231,848)

GRAND TOTAL 310,375,514 204,922,456 79,058,954 10,366,368 (318,098) 51,763,173 251,553,922 20,124,022 384,490,423 45,897,558 338,592,865

Note: The fund balance of US $338,592,865 at 31 December 2009 includes amounts of US $28,724,750 held as Endowments


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SCHEDULE 1.4

INCOME

Revenue Generating Activities 3,696 13,120 595 17,411 16,167Employer Contribution to Benefit Plan 19,689 19,689 17,555Employee Contribution to Benefit Plan 19,631 19,631 17,498Allocation from Other Funds 394 394 394Investment Income 2,122 43,646 75 23 45,866 48,240Currency Exchange Adjustments (118) (118) 4,950Other income 848 200 58 445 1,551 3,105

TOTAL INCOME 42,172 43,846 3,829 13,565 1,012 104,424 107,909

EXPENDITURE

Staff costs 2,273 921 6,015 722 9,931 10,991Compensation/Benefit Paid 44,619 44,619 39,389Other Expenditures 516 2,902 7,374 218 11,010 9,509

TOTAL EXPENDITURE 44,619 2,789 3,823 13,389 940 65,560 59,889

EXCESS/(SHORTFALL) OF INCOME OVER EXPENDITURE (2,447) 41,057 6 176 72 38,864 48,020

Distribution to members of USLS (38,847) (38,847) (41,596)Other adjustment to reserves & fund balances (189) (23) (2) (214) 3,197Reserves and fund balances, beginning of period 29,640 25,683 2,254 98 216 57,891 48,270

RESERVES AND FUND BALANCES, END OF PERIOD 27,193 27,704 2,237 274 286 57,694 57,891


TOTAL

Medical Benefit Fund

UNESCO Staff Savings and Loan Service

UNESCO Commissary

Fund

UNESCO Restaurant

Service2009 2007

UNESCO Children's Club & Day Nursery


UNESCOSTAFF FIDUCIARY FUNDS


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SCHEDULE 2.1

REGULAR PROGRAMME

2009 2007

ASSETSCash and term deposits 47,204 (1,902)Assessed contributions receivable from Member States 49,647 90,979Accounts receivable

Inter-fund balances 852Other 8,004 8,422

Other assets 452 918Land and buildings 187,207 98,141Renovation work in progress 65,582

TOTAL ASSETS 292,514 262,992

LIABILITIESPayments or contributions received in advance 3,451 990Unliquidated obligations 24,694 24,972Accounts payable

Inter-fund balances 2,826Other 12,638 13,505

Other liabilities 3,012 1,014Loan for HQ building renovation 87,954 80,451Loan for IBE building 1,575 1,733

TOTAL LIABILITIES 136,150 122,665

RESERVES AND FUND BALANCESWorking Capital Fund 29,000 28,097Capital funds relating to land and buildings 118,342 103,484Currency Exchange Reserve (17,813) (16,942)Budgetary surpluses 7,219 7,237Other surpluses 19,616 18,451

TOTAL RESERVES AND FUND BALANCES 156,364 140,327

TOTAL LIABILITIES, RESERVES AND FUND BALANCES 292,514 262,992

UNESCOGENERAL AND WORKING CAPITAL FUNDS

SCHEDULE OF ASSETS, LIABILITIES AND RESERVES AND FUND BALANCES AS AT 31 DECEMBER 2009


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SCHEDULE 2.2

Revenue Generating Activities

Support Costs Staff Related Accounts Renovation Plan New Management

Monitoring Instruments

United States special account IPSAS

special accountCost Recovery

PolicyExternal Evaluation

of UNESCO

Voluntary Contributions-

SecurityUnattributed

OPF Balances (Schedule 2.2.1) (Schedule 2.2.2) (Schedule 2.2.3) 2009 2007

ASSETS

Cash and term deposits 340 39,232 39,572 68,530Accounts receivable Inter-fund balances 22,872 20,454 7,595 2,139 1,161 1,790 1,838 75 43 418 (43,862) 14,523 246 Other 2,405 6,935 9,340 6,373Other assets 496 341 837 802

TOTAL ASSETS 26,113 20,454 7,595 2,139 1,161 1,790 1,838 75 43 418 2,646 64,272 75,951

LIABILITIES

Unliquidated obligations 802 764 75 104 13 247 197 2,202 4,307Accounts payable Inter-fund balances 1,105 Other 7,655 2,225 9,880 13,328Other liabilities 100 421 521 734

TOTAL LIABILITIES 8,557 764 75 104 13 247 197 2,646 12,603 19,474

RESERVES AND FUND BALANCES

Operating reserves 1,640 1,640 1,620Other Surpluses 15,916 19,690 7,520 2,035 1,148 1,543 1,838 75 (154) 418 50,029 54,857

TOTAL RESERVES AND FUND BALANCES 17,556 19,690 7,520 2,035 1,148 1,543 1,838 75 (154) 418 51,669 56,477

TOTAL LIABILITIES, RESERVES AND FUND BALANCES 26,113 20,454 7,595 2,139 1,161 1,790 1,838 75 43 418 2,646 64,272 75,951


TOTAL

UNESCOOTHER PROPRIETARY FUNDS

SCHEDULE OF ASSETS, LIABILITIES, RESERVES AND FUND BALANCESAS AT 31 DECEMBER 2009

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SCHEDULE 2.2.1

Public Information Liaison

and Relations Fund

Publications and Auditory and

Visual Material Fund

Utilization of Headquarters Fund

Special Account for Documents/

Publications Services

Special Account for

Interpretation Services

2009 2007

ASSETS

Cash and term deposits 340 340 71Accounts receivable Inter-fund balances 8,607 1,676 6,409 5,295 885 22,872 22,598 Other 156 185 2,064 2,405 2,149Other assets 99 326 71 496 802

TOTAL ASSETS 8,862 2,527 8,544 5,295 885 26,113 25,620

LIABILITIES

Unliquidated obligations 19 75 315 393 802 1,215

Accounts payable

Unredeemed coupons 7,608 7,608 8,860 Other 47 47 672Other liabilities 100 100

TOTAL LIABILITIES 7,774 75 315 393 8,557 10,747


Operating reserves 1,516 124 1,640 1,620Other Surpluses (428) 2,452 8,105 4,902 885 15,916 13,253

TOTAL RESERVES AND FUND BALANCES 1,088 2,452 8,229 4,902 885 17,556 14,873

TOTAL LIABILITIES, RESERVES AND FUND BALANCES 8,862 2,527 8,544 5,295 885 26,113 25,620


TOTAL

UNESCOREVENUE GENERATING ACTIVITIES


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SCHEDULE 2.2.2

Funds-in Trust Overhead Cost Account

(FITOCA)

Technical Support at the Project Level

(UNDP-STS)

2009 2007

ASSETS

Accounts receivable Inter-fund balances 20,414 40 20,454 26,758

-

TOTAL ASSETS 20,414 40 20,454 26,758

LIABILITIES

Unliquidated obligations 754 10 764 1,154

TOTAL LIABILITIES 754 10 764 1,154


Other Surpluses 19,660 30 19,690 25,604

TOTAL RESERVES AND FUND BALANCES 19,660 30 19,690 25,604

TOTAL LIABILITIES, RESERVES AND FUND BALANCES 20,414 40 20,454 26,758


TOTAL

UNESCOPROGRAMME SUPPORT COSTS FOR SPECIAL ACCOUNTS AND TRUST FUNDS


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SCHEDULE 2.2.3

Terminal Payment Fund

Staff Compensation Fund Language Courses

2009 2007

ASSETS

Accounts receivable Inter-fund balances 5,966 973 656 7,595 6,691

TOTAL ASSETS 5,966 973 656 7,595 6,691

LIABILITIES

Unliquidated obligations 20 55 75 88

TOTAL LIABILITIES 20 55 75 88


Other Surpluses 5,946 973 601 7,520 6,603

TOTAL RESERVES AND FUND BALANCES 5,946 973 601 7,520 6,603

TOTAL LIABILITIES, RESERVES AND FUND BALANCES 5,966 973 656 7,595 6,691


TOTAL

UNESCOSTAFF RELATED ACCOUNTS


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SCHEDULE 2.3

TOTAL

ASSETS

Cash and term deposits 64,602 179,869 395,460 639,931 547,286Investments 1,883 1,883 2,305Accounts receivable

Inter-fund balances 7,527 (7,527) 6Other 15,798 235 2,274 18,307 16,565

Other assets 3,228 217 85 3,530 3,186

TOTAL ASSETS 91,155 180,321 399,702 (7,527) 663,651 569,348

LIABILITIES

Unliquidated obligations 6,291 30,475 45,898 82,664 85,852Accounts payable

Inter-fund balances 263 9,443 9,518 (7,527) 11,697Other 34,408 3,806 4,567 42,781 22,324

Other liabilities 415 1,126 1,541 2,806

TOTAL LIABILITIES 41,377 43,724 61,109 (7,527) 138,683 110,982


Balances relating to projects funded by donors 95,370 338,593 433,963 416,218Operating reserves 18,238 18,238 16,171Other surpluses 31,540 41,227 72,767 25,977

TOTAL RESERVES AND FUND BALANCES 49,778 136,597 338,593 524,968 458,366

TOTAL LIABILITIES, RESERVES AND FUND BALANCES 91,155 180,321 399,702 (7,527) 663,651 569,348

Other Special Accounts and Trust Funds 2009

Inter-fund Eliminations


UNESCOPROGRAMME FIDUCIARY FUNDS

SCHEDULE OF ASSETS, LIABILITIES, RESERVES AND FUND BALANCES AS AT 31 DECEMBER 2009

2007

Institutes (Schedule 2.3.1)

UNESCO Brasilia Office

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IBE ICTP IESALC IHE IICBA IIEP IITE UIS UIL

ASSETSCash and term deposits 254 15,710 2 21,009 -4 14,941 15 12,124 551 64,602 52,012Investments Accounts receivable

Inter-fund balances 2120 735 1 203 52 480 1,537 2,462 (63) 7,527 4,364Other 10 706 14 14,349 32 377 91 219 15,798 11,239

Other assets 3,218 10 3,228 2,719

TOTAL ASSETS 2,384 16,416 751 38,577 241 15,370 495 13,752 3,232 (63) 91,155 70,334

LIABILITIESUnliquidated obligations 404 2,038 95 1,924 62 785 19 964 6,291 8,605Accounts payable

Inter-fund balances 43 220 63 (63) 263 1,094Other 74 122 6 33,651 283 154 118 34,408 18,133

Other liabilities 2 19 280 45 11 58 415 354

TOTAL LIABILITIES 480 2,222 101 35,855 62 1,333 19 1,192 176 (63) 41,377 28,186

RESERVES AND FUND BALANCESOperating reserves 9,984 6,669 1,585 18,238 16,171Other surpluses 1,904 4,210 650 2,722 179 7,368 476 10,975 3,056 31,540 25,977

TOTAL RESERVES AND FUND BALANCES 1,904 14,194 650 2,722 179 14,037 476 12,560 3,056 49,778 42,148

TOTAL LIABILITIES, RESERVES AND FUND BALANCES 2,384 16,416 751 38,577 241 15,370 495 13,752 3,232 (63) 91,155 70,334

0 0 0 0 0 0 0 0 0 0

(Expressed in '000s USDs)

International Bureau of Education

International Centre for Theoretical Physics


Higher Education in Latin America

and the Carribean

Total

2009

International Institute for Educational

Planning

UNESCO Institute for Lifelong

Learning

UNESCO Institute for Information Technologies in

Education


Capacity Building in Africa

UNESCO Institute of Statistics

2007

Inter-fund Eliminations

UNESCO-IHE Institute for Water

Education

SCHEDULE 2.3.1

SPECIAL ACCOUNTS FOR INSTITUTESSCHEDULE OF ASSETS, LIABILITIES, RESERVES AND FUND BALANCES

UNESCO

AS AT 31 DECEMBER 2009

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Schedule 2.3.1

SCHEDULE 2.4

ASSETSCash and term deposits 32,012 501,957 1,720 218 324 536,231 493,135 Investments 115,019 115,019 127,487 Accounts receivable

Inter-fund balances 1 Loans to staff members 48,172 48,172 50,493 Other 312 3,741 42 303 8 4,406 11,531

Stock on hand 926 173 1,099 918 Other assets 288 8 1,711 2,007 2,112

TOTAL ASSETS 32,612 668,889 2,696 2,405 332 706,934 685,677

LIABILITIESAccounts payable 5,419 293 396 2,112 46 8,266 8,275 Inter-fund balancesDistribution payable to members 13,849 13,849 23,037 Members' deposits 627,043 63 627,106 596,474 Other Liabilities 19 19

TOTAL LIABILITIES 5,419 641,185 459 2,131 46 649,240 627,786

RESERVES AND FUND BALANCESOperating reserves 27,704 27,704 25,683 Surplus 27,193 2,237 274 286 29,990 32,208

TOTAL RESERVES AND FUND BALANCES 27,193 27,704 2,237 274 286 57,694 57,891

TOTAL LIABILITIES, RESERVES AND FUND BALANCES 32,612 668,889 2,696 2,405 332 706,934 685,677

AS AT 31 DECEMBER 2009

TOTAL

Medical Benefit Fund

UNESCO Staff Savings and Loan Service

UNESCO Commissary

UNESCO Restaurant

Service2009 2007

UNESCO Children's Club &

Day Nursery


UNESCOSTAFF FIDUCIARY FUNDS

SCHEDULE OF ASSETS, LIABILITIES AND RESERVES AND FUND BALANCES

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185 EX/25 Part I Annex I

ANNEX I

UNESCO EX GRATIA PAYMENTS

In accordance with the provisions of Financial Regulation 10.3, the following ex gratia payments, made during the financial period ended 31 December 2009, are hereby reported:

$’000

(i) Compensation paid to a departing staff member due to illness

(ii) Amount granted to a late staff member’s family due to work-related illness

(iii) Transportation and funeral fees paid for a staff member’s deceased spouse

(iv) Repatriation of a staff member’s deceased dependant

59

25 8 8

Total ex gratia payments for the 2008-2009 biennium

100

185 EX/25 Part I Annex II

ANNEX II

UNESCO SPECIAL ACCOUNTS AND TRUST FUNDS The new special accounts and trust funds established during the financial period 2008-2009 were the following:

United Nations Sources

UN Democracy Fund UN Development Fund for Women UN Mine Action Service Fund UNICEF Joint Programme - Pakistan HRP Fund One UN Fund Albania One UN Fund Mozambique One UN Fund Pakistan One UN Fund Rwanda One UN Fund Tanzania One UN Fund Uruguay One UN Fund Viet Nam Preventing and Responding to Domestic Violence through a Multi-sectoral Approach Joint Programme in China Peacebuilding Fund International Trade Centre Fund

Technical Assistance Projects

Asian Development Bank Fighting HIV/AIDS in Asia and the Pacific/Developing Capacity among Ethnic Minority Communities to Combat HIV/AIDS Lao PDR

Islamic Development Bank Cameroon OPEC Fund Strengthening Education Sector Response to HIV/AIDS in Southern Africa

Self-Benefiting Projects

Angola Azerbaijan Cameroon Peru

Donated Projects

Bulgaria Trust Fund Hungary Trust Fund Monaco Trust Fund Poland Trust Fund Russian Federation Trust Fund Singapore Trust Fund The People’s Republic of China Trust Fund Turkey Trust Fund China Cultural Heritage Foundation

Danone Waters Deutschland GMBH Foundation Virginio Bruni-Tedeschi I.A.T.W.S. IFESCCO Manufacture Jaeger-Lecoultre Mercedes Benz China Ltd Plan International Inc. The Zayed Bin Sultan Al Nahyan The Stratreal Foundation The A.G. Leventis Foundation Special Accounts for: UNESCO Avicenna Prize for Ethics in Science UNESCO Bilbao Prize for the Promotion of Culture of Human Rights UNESCO-Guillermo Cano World Press Freedom Prize UNESCO - Hamdan bin Rashid Al-Maktoum Prize UNESCO-IPDC Prize for Rural Communication UNESCO-Juan Bosch Prize for the Promotion of Social Science Research in Latin America and the Caribbean UNESCO-Obiang Nguema Mbasogo International Prize for Research in the Life Sciences Higher Education Activities in CEPES Special Account for Latin American Laboratory for Assessment of Quality in Education Special Account for the Support to Countries in Post-conflict and Post-disaster Situations Special Account Teachers for Education for All Women's Empowerment and Gender Equality Bucharest Office UNEVOC Office The following special accounts were closed during the biennium: Noma Literacy Prize Prince of Asturias Prize Samarkand Taronasi Prize African Research and Development - Science & Technology Integral Study of the Silk Roads Preliminary Microzonation Map for Bam Preliminary Microzonation Map for Bam Promotion of Cultural Heritage Activities Special Fund for Youth UNESCO Media Fund World Commission on Culture and Development

185 EX/25 Part IAnnex II - page 2

Balance due Balance due Balance due Balance due Balance due Balance due Balance due Balance due Balance due Balance due TOTALMember States 1988-1991 1992-1993 1994-1995 1996-1997 1998-1999 2000-2001 2002-2003 2004-2005 2006-2007 2008-2009* Balance due

USD USD USD USD USD USD USD USD USD USD USDAlgeria 298,592 298,592Antigua and Barbuda - - - - 7,867 16,054 19,072 17,657 14,839 75,489Benin 3,578 3,578Bolivia, Plurinational State of - - 44,524 44,524Brazil - - 2,203,028 2,203,028 Burundi - 1,938 1,938 Cape Verde - - 7,415 7,415 Central African Republic 6,357 7,062 7,422 20,841Chile - - 1,071,191 1,071,191 Colombia 221,831 221,831 Costa Rica - 196,809 196,809 Côte d'Ivoire 33,392 33,392 Democratic People's Republic of Korea 218 218 Dominica - 7,062 7,422 14,484El Salvador 77,301 77,301Ghana 1,508 1,508Guatemala 553 553Guinea - 14,125 7,422 21,547Guinea-Bissau 7,062 7,422 14,484Hungary 353,206 353,206Iceland 51,409 51,409India - 928 928Iran, Islamic Republic of - 474,328 474,328Jamaica 21,120 21,120Lebanon - 132,879 132,879Liberia - 7,422 7,422Libyan Arab Jamahiriya - - 458,023 458,023Marshall Islands - 7,062 7,422 14,484Mauritania - - 7,422 7,422Mexico - 879,046 879,046Micronesia 2,013 7,422 9,435Myanmar - - 32,297 32,297Nepal 10,903 10,903Nicaragua 7,206 7,206Pakistan - 309,323 309,323Palau - - 5,527 5,527Panama - 122,187 122,187Papua New Guinea - - 2,756 2,756

UNPAID CONTRIBUTIONS AS OF 31 DECEMBER 2009

PART I: ARREARS ON CONTRIBUTIONS FOR PRIOR FINANCIAL PERIODS (EXCLUDING ARREARS PAYABLE IN ANNUAL INSTALMENTS) AS OF 31 DECEMBER 2009

ANNEX III

185 EX

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Annex III

Balance due Balance due Balance due Balance due Balance due Balance due Balance due Balance due Balance due Balance due TOTALMember States 1988-1991 1992-1993 1994-1995 1996-1997 1998-1999 2000-2001 2002-2003 2004-2005 2006-2007 2008-2009* Balance due

USD USD USD USD USD USD USD USD USD USD USD


PART I: ARREARS ON CONTRIBUTIONS FOR PRIOR FINANCIAL PERIODS (EXCLUDING ARREARS PAYABLE IN ANNUAL INSTALMENTS) AS OF 31 DECEMBER 2009

Peru 12,926 12,926Philippines 12,276 12,276Saint Lucia 3,290 3,290Sao Tome and Principe 7,422 7,422Senegal - - 15,052 15,052Solomon Islands 939 939Somalia 103,293 63,897 76,034 76,340 5,422 5,445 5,704 6,357 7,062 7,422 356,976Sudan - - 41,872 41,872 Timor-Leste - - 4,473 4,473 Tunisia - - 23,346 23,346 Tuvalu 347 347 United States of America - 16,324,939 16,324,939 Vanuatu - 7,422 7,422 Venezuela, Bolivarian Republic of - - 400,583 400,583 Zimbabwe - - 2,361 2,361 Yugoslavia, SFRY** 2,469,044 297,439 - - 2,766,483Yugoslavia, Former FRY*** 1,528,727 950,215 766,062 338,918 85,894 - - 3,669,816Total Member States 2,572,337 1,890,063 1,026,249 842,402 344,340 99,206 21,758 31,786 69,105 23,961,901 30,859,147

Associate Member StatesFaroe Islands 494 494Total Associate Member States 494 494

TOTAL 2,572,337 1,890,063 1,026,249 842,402 344,340 99,206 21,758 31,786 69,105 23,962,395 30,859,641

* Arrears on contributions due in euros for 2008-2009 are translated at the UN operational rate of exchange rate prevailing in December 2009 of USD 1 = EUR 0.664

** By Resolution 63/249 the United Nations decided that the arrears of the Socialist Federal Republic of Yugoslavia (SFRY) should be apportioned among the successor States. The General Assembly of the United Nations requested the successor States to inform the Secretary-General of their respective shares.

1

*** By the same above Resolution the United Nations decided that the unpaid contributions of the former Federal Republic of Yugoslavia (FRY) should be written off. UNESCO will submit to the Executive Board at its 187th session as well as to the General Conference at its 36th session, proposals to cover the write-off of USD 3,669,816 when the Organization closes its 2010 accounts under IPSAS.

185 EX

/25 Part I

Annex III - page 2

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Text Box

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General TOTAL

Conference Member States 2008 and 2009 Total due 2010 2011 2012 2013 2014 Total deferred DUE PLUSsession prior years to 2015 DEFERRED

$ $ $ $ $ $ $ $ $

34th 1 ARGENTINA - - 34th - 208,674 3,202,358 3,202,358 6,613,390 6,613,390

32nd 2 ARMENIA - - - 32nd 103,259 103,710 103,710 103,715 414,394 414,394

32nd 3 CENTRAL AFRICAN REPUBLIC 167,218 167,218 32nd - 167,218

35th 4 COMOROS - - - 35th 77,336 77,426 77,426 77,426 154,854 464,468 464,468

33rd 5 COSTA RICA - - - 33rd 30,499 30,504 61,003 61,003

35th 6 GEORGIA - - - 35th 110,122 110,122 110,122 110,122 2,312,577 2,753,065 2,753,065

33rd 7 GUINEA-BISSAU 212,955 51,529 264,484 33rd 51,529 51,533 103,062 367,546

35th 8 IRAQ 828,671 828,671 828,671 828,671 1,657,341 4,972,025 4,972,025

35th 9 KYRGYZSTAN - - - 35th 19,688 19,688 19,688 19,688 708,386 787,138 787,138

33rd 10 LIBERIA - - - 33rd 35,587 35,588 71,175 71,175

33rd 11 NIGER - - - 33rd 18,338 21,430 39,768 39,768

34th 12 PARAGUAY - - - 34th 32,299 32,299 32,299

33rd 13 PERU - - - 33rd 229,936 229,937 459,873 459,873

33rd 14 REPUBLIC OF MOLDOVA - - - 33rd 145,736 145,736 145,736 145,736 291,477 874,421 874,421

34th 15 SAO TOME AND PRINCIPE 40,316 40,316 80,632 34th 40,316 40,316 40,316 40,316 161,264 241,896

35th 16 SIERRA LEONE - 35th 15,000 10,947 10,947 10,947 21,894 69,735 69,735

35th 17 TAJIKISTAN - - - 35th 5,000 5,000 5,000 5,000 377,992 397,992 397,992

TOTAL 420,489 91,845 512,334 1,743,316 1,919,282 4,543,974 4,543,979 5,524,521 18,275,072 18,787,406

PART II: ARREARS OF CONTRIBUTIONS PAYABLE UNDER PAYMENTS PLANS AS OF 31 DECEMBER 2009


185 EX/25 - Part IA

nnex III - Page 3

185 EX/25 Part I Annex IV

ANNEX IV

WAIVERS GRANTED FOR CONTRACTS SUBMITTED TO THE CONTRACTS COMMITTEE

In accordance with 176 EX/Decision 39.7 (c), information on waivers granted after review by the Contracts Committee during 2008-2009 is as follows:

Regular Programme Extrabudgetary TOTAL Contracts

Submitted $’000s Contracts Submitted $’000s Contracts

Submitted $’000s

Total Contracts approved

36

18,200

136

37,323

172

55,523

Total waivers approved

11

1,720

20

4,623

31

6,343

The waivers granted in regard to the Regular Programme are mainly for Single Source Situations (e.g. when certain equipment has been bought competitively, but after sales services have to be obtained by the manufacturer to ensure the validity of guarantees) or reasons of standardization and harmonization, mainly in respect to UNESCO IT infrastructure to facilitate maintenance and support.

For the Extrabudgetary Funds, the main reason for granting a waiver was due to partnerships or multi year projects where it would not have been cost effective to change the partner / contractor after a satisfactory performance during the first part of the project. The number of waivers granted for extra budgetary projects has significantly gone down due to the introduction of Implementation Partner Agreements (IPA). These IPAs involve the assessment of the partners’ capacity to implement projects on behalf of the Organization.

Printed on recycled paper

185 EX/25 Part II Rev.

Executive Board

Item 25 of the provisional agenda

FINANCIAL REPORT AND AUDITED FINANCIAL STATEMENTS OF UNESCO FOR THE PERIOD ENDED 31 DECEMBER 2009

AND REPORT BY THE EXTERNAL AUDITOR

PART II

EXTERNAL AUDITOR’s REPORT

PARIS, 5 October 2010 Original: French/English

Hundred and eighty-fifth session

Summary

This document contains the External Auditor’s full report on the accounts of UNESCO for the 2008-2009 biennium and written comments by the Director-General thereon.

185 EX/25 Part II Rev.

Office of the External Auditor

of the United Nations Educational, Scientific and Cultural Organization

REPORT ON UNESCO’s FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2009

TABLE OF CONTENTS

. 1. INTRODUCTION ....................................................................................................................... 3 2. CHANGES IN UNESCO’s RESULTS....................................................................................... 3

2.1. Statement of Assets, Liabilities and Reserves and Fund Balances........................... 3 2.2. Statement of Income and Expenditure ...................................................................... 4

3. OBSERVATIONS ON THE PREPARATION OF UNESCO ACCOUNTS ................................ 5 3.1. Adjustments ............................................................................................................... 5 3.2. Suspense accounts ................................................................................................... 5 3.3. Contractions in income and expenditure ................................................................... 6

4. OBSERVATIONS ON THE PROPRIETARY FUNDS............................................................... 6 4.1. Asset: Accounts Receivable (General Fund)............................................................. 6 4.2. Asset: Land, buildings and works of art (General Fund) ........................................... 6 4.3. Income-generating activities (Other UNESCO Proprietary Funds – OPF) ................ 7

5. OBSERVATIONS ON THE FIDUCIARY FUNDS ENTRUSTED TO UNESCO........................ 8 5.1. Programme Fiduciary Funds (PFF): Equipment procurement................................... 8 5.2. Institutes (Tables 1.3.1 and 2.3.1) ............................................................................. 8 5.3. UNESCO Office in Brasilia ........................................................................................ 8 5.4. Other special accounts and trust funds (Tables 1.3.2) .............................................. 9 5.5. Staff Fiduciary Funds (SFF, Tables 1.4 and 2.4)..................................................... 10

6. GENERAL OBSERVATIONS ................................................................................................. 12 6.1. Cash flow, deposits and investments (all funds)...................................................... 12 6.2. Processing of exchange rate differentials................................................................ 13 6.3. Contracting procedures and contracts..................................................................... 13 6.4. Staff costs ................................................................................................................ 15

185 EX/25 Part II Rev. – page 3

Ladies and gentlemen,

We have the honour of reporting on the audit of the financial statements and related tables for the period ended 31 December 2009 pursuant to Article 12, paragraph 9, of the Financial Regulations of UNESCO.

1. INTRODUCTION

1. In May and June 2010 the External Auditor examined the financial statements of UNESCO for the period ended at 31 December 2009. The audit was carried out in accordance with Article 12 of UNESCO’s Financial Regulations, the Additional Terms of Reference Governing the Audit and the Common Auditing Standards of the Panel of External Auditors of the United Nations, the specialized agencies and the International Atomic Energy Agency.

2. The External Auditor conducted the audit in order to be reasonably assured that the expenditure shown in the financial statements were consistent with the objectives approved by the General Conference, that income and expenditure were classified and recorded in accordance with the Financial Regulations and that the financial statements reflected fairly, in all material respects, the financial position of UNESCO as at 31 December 2009. Account entries and documentary evidence from random samples were examined.

3. On the basis of the audit, the External Auditor has drafted an audit opinion letter, the key document resulting from his work. This report complements the letter by setting out the various observations that he wishes to draw to the attention of the Organization’s governing bodies. They have been discussed with UNESCO’s central services. The External Auditor is pleased to stress that the Secretariat cooperated fully with the audit team.

2. CHANGES IN UNESCO’s RESULTS

2.1. Statement of Assets, Liabilities and Reserves and Fund Balances

4. Cash flow and investments amounted to US $1,379 million at 31 December 2009, 11.6% higher than at 31 December 2007. Those financial assets were posted mainly under programme fiduciary funds (PFF), 1 namely the UNESCO Office in Brasilia ($180 million), other special accounts ($397 million) and the UNESCO Staff Savings and Loan Service (USLS) ($616 million), one of the Staff Fiduciary Funds (SFF).2

5. The fall in the amount of receivables under the general fund (GEF),3 or regular programme is due to an improvement in the recovery of contributions in comparison with the previous financial period: the fall is 45.4% in contributions receivable from Member States. The general fund cash position improved from a negative balance of $1.9 million at 31 December 2007 to a positive balance of $47.2 million at 31 December 2009.

6. The land and buildings amount increased by 90.8% on incorporation of Phase II of the renovation of the buildings at the Fontenoy site which had been in progress at 31 December 2007. Exchange differentials relating to the $88 million loan contracted for Headquarters4 renovation have been recorded in a reserve account ($18 million).

1 Programme fiduciary funds. 2 Staff fiduciary funds. 3 General fund. 4 On which interest is paid by France (see note 12).


2.2. Statement of Income and Expenditure

7. The 10.9% ($176 million) fall in income is due to:

– a 6.3% rise in receipts under the general fund, owing mainly to the increased budget approved by Member States (+$21 million) and favourable conversion differentials of $8.9 million in contrast to the $5 million currency-exchange loss incurred in the previous financial period;

– a slight rise in Other UNESCO Proprietary Funds (OPF),5 under which the yield of income-generating activities had risen by 29%, while investment earnings had fallen by 18.1% and exchange differentials had a negative impact of $3.3 million;

– a 23.7% fall in PFF funds (-$209.8 million) as a result of lower voluntary contributions (-$151 million), mainly to the UNESCO Office in Brasilia, owing to the realignment of those funds with other self-benefiting funds for UNESCO activities as requested by the Executive Board and to the negative impact of $84.8 million in exchange rate differentials6 on account of the rise of the Brazilian real against the United States dollar;

– a 3.2% fall in SFF receipts, most of which come from the Medical Benefits Fund (MBF).7

8. Expenditure has fallen more than income, by $55.4 million or 3.9%.

Expenditure by business area

In thousands of US $ 2009 2007 Variation

GEF 641,892 620,233 21,659

OPF 88,938 75,912 13,026

PFF 651,112 743,729 (92,617)

SFF 65,560 59,889 5,671

Eliminations interfunds (81,351) (78,253) (3,098)

Total 1,366,151 1,421,510 (55,359)

9. Under the general fund (GEF), expenditure – with staff costs at 52% – has risen by 3.5%. The $16.5 million surplus is due mainly to investments and exchange rate differentials.

10. The OPF expenditure has risen by 17.2%, while receipts were only $1.5 million higher, resulting in a deficit of $4.7 million at 31 December 2009.8 The position has worsened mainly on account of the Funds-in-Trust Overhead Costs Account (FITOCA).9

11. PFF receipts have fallen twice as much as expenditure and, as a result, the surplus is 82.1% lower than at the end of the previous financial period.10 The position has worsened mainly on account of the deficit of the UNESCO Office in Brasilia ($52 million). The net result in respect of the Institutes is an $8.5 million surplus, while the other special funds and funds-in-trust have a surplus of $69.1 million. 5 Other UNESCO Proprietary Funds. 6 Loss of $39 million as at 31 December 2009 compared to $46 million in exchange earnings as at

31 December 2007. 7 Medical Benefits Fund. 8 The result was a gain of $6.8 million at 31 December 2007. 9 Funds-in-Trust Overhead Costs Account. 10 $142.8 million at 31 December 2007, $25.6 million at 31 December 2009.


12. With regard to the Staff Fiduciary Funds, receipts fell while expenditure rose by 9.5% and by 13.3%, in particular, in respect of the Medical Benefits Fund which has recorded a deficit. The USLS recorded a surplus, as in 2006-2007.11

3. OBSERVATIONS ON THE PREPARATION OF UNESCO ACCOUNTS

3.1. Adjustments

13. The scope and number of manual adjustments required when drawing up the financial statements were mentioned in the Report on the financial statements for the 2006-2007 biennium. The Director-General has undertaken to reduce them as far as possible. A small number of adjustments were made when drawing up the 2008-2009 financial statements.

14. The layout of the PFF financial statements (Table 1.3) differed from that used in the previous biennium. This was pointed out to the Bureau of the Comptroller and it provided an explanation on this point in the notes to the financial statements (note 5 (b)).

15. The accounts of the UNESCO Office in Brasilia (UBO)12 were kept in dollars throughout 2008, but in Brazilian reals in 2009. Exchange rate adjustments in 2008 were recorded in the profit and loss account (-$40.39 million in Table 1.3) and those for 2009 were included in the reserves (+$41.23 million). Such bookkeeping differences in recording exchange rate adjustments during the same biennium do not facilitate interpretation of the financial statements. This was pointed out to the Bureau of the Comptroller and it has provided an explanation in note 5 (a).

16. The turnover of the UNESCO restaurant (SFF) was $13.6 million in the 2008-2009 biennium. Of this amount, $1.92 million in services were billed to other UNESCO business areas.13 Those internal reverse charges were not eliminated during consolidation operations.

Recommendation No. 1. In the switch to IPSAS, eliminate internal reverse charges.

3.2. Suspense accounts

17. “Other liabilities” under the other special accounts and funds-in-trust (PFF Table 2.3) amounted to $1,126,000, of which $846,000 were in a suspense account that lists air-travel ticket purchases from travel agencies. The problem relates to the business area to be charged: when tickets are purchased, payments are charged to Other UNESCO Proprietary Funds (OPF). Expenditure is, however, entered correctly (unliquidated obligations) in the appropriate business area when funds are reserved.14 The suspense account is balanced only on completion of travel when the staff member submits a reimbursement claim. At 31 December 2009, the OPF business area had $4.82 million in assets, while the GEF and PFF had $2.47 million and $0.83 million in debts respectively. This breakdown is not a true picture of the actual financial situation.

Recommendation No. 2. Analyse suspense accounts more frequently so that they can be balanced at the end of the year.

11 $44 million at 31 December 2007, $41 million at 31 December 2009. 12 UNESCO Office in Brasilia. 13 $1.16 million to GEF, $0.22 million to OPF and $0.54 million to PFF. 14 A travel request entered by a staff member in the integrated SAP management tool automatically

results in the reservation of funds (and therefore expenditure).


3.3. Contractions in income and expenditure

18. Proceeds from vehicle sales amounting to $385,000 mitigated expenditure on vehicle purchases.15 However, UNSAS paragraph 24 provides that significant items should not be offset against other items. The Bureau of the Comptroller has promoted the practice of using the disposal of assets to replenish funds under similar budget heads during the same financial period.

19. The contraction in income and expenditure has been noted in respect of operations that were not, moreover, linked to essential UNESCO activities. Until the end of 2008, there had been a contraction in OPF miscellaneous income entries between the sale of duty-free petrol coupons to senior UNESCO staff and purchases from a petrol company or clearance of such coupons.16 Similarly, the Headquarters Utilization Fund (OPF, Table 1.2.1) reflects sales to UNESCO staff members at the beginning of the year of surplus bottles of alcohol purchased duty-free under the Headquarters Agreement.17

Recommendation No. 3. In the switch to IPSAS, ensure that income and expenditure are not offset

4. OBSERVATIONS ON THE PROPRIETARY FUNDS

4.1. Asset: Accounts Receivable (General Fund)

20. Note 8 gives details of arrears in the payment of mandatory assessed contributions ($49.65 million), in particular, $6.8 million outstanding from previous biennia (1988 to 2003). For the most part, those contributions are owed by Yugoslavia ($6.44 million) in respect of the contributions receivable from the Socialist Federal Republic of Yugoslavia for the period prior to 27 April 1992 ($2.77 million) and from the Federal Republic of Yugoslavia for the subsequent period ($3.67 million).18

21. A debt of $2.11 million under “Accounts Receivable – Other” relates to the tax rebates expected from the United States of America to compensate the sums reimbursed by UNESCO to nationals of the United States of America on its staff, in accordance with Rule 103.18 of the Staff Rules,19 pursuant to the precedent-based “last income” rule.20 The Secretariat has indicated that discussions with the Member State are under way.

4.2. Asset: Land, buildings and works of art (General Fund)

22. There is nothing to be said about land and buildings. UNESCO plans to make depreciation entries on the buildings as from 2010, not for the value shown in Table 2, which is the cost of capital renovations, but for the total amount of the buildings, which has been audited by an independent consultancy.

23. Owing to its cultural endeavours, UNESCO possesses an outstanding art collection. In a 2008 inventory, a major auction house estimated the value to be $124.59 million. IPSAS rules (Rule 17) do not require works of art to be included in the Organization’s assets and UNESCO has chosen not to do so.

15 $2.5 million on vehicle purchases during the 2008-2009 biennium. 16 $1,096,000 (account 703.1011) – $1,098,000 (c/ 602.2015) – $4,000 (c/ 610.1111) = ($7,000). 17 $290,000 in income – ($201,000 for purchases and $90,000 for stock withdrawals) = ($1,000). 18 35 C/Resolution 89 (III.1) and Resolution 249 of the United Nations General Assembly (63rd session). 19 These civil servants are not exempt from income tax in their home country. 20 Judgment No. 2255, dated 15 May 2003, of the International Labour Organization Administrative

Tribunal.


24. In his report on the 2006-2007 financial statements, the External Auditor had recommended that the value of works of art in UNESCO’s heritage collection be included in the notes to the financial statements. The 2008-2009 notes state that a fund has been opened to cover accidental damage to those works, which have a considerable intrinsic value (para. 14). UNESCO is not, as a matter of fact, insured against such damage. As at 31 December 2009, the internal fund opened during the 2008-2009 biennium amounted to $124,000, or 0.1% of the estimated value of the works of art.

25. Works of art donated to the Organization or its official representatives in order to enrich its collection must be handled in a transparent manner. The Director-General issued a note in 2004 specifying methods to be used in order to manage works of art.21 In particular, it strengthened procedures governing the acceptance and valuation of such works and provided for the establishment of an advisory committee and for the introduction of a system for registering works of art donated or offered as gifts. The audit has revealed, however, that those instructions are applied haphazardly.

Recommendation No 4. In view of the value of the UNESCO collection of works of art, consider the desirability of increasing the endowment of the internal fund established to cover accidental damage.

Table 1

Recommendation No 5. Strengthen the monitoring of the effective implementation of the measures adopted in 2004 to ensure that works of art given to UNESCO or its representatives are indeed registered by the Sector for Administration.

4.3. Income-generating activities (Other UNESCO Proprietary Funds – OPF)

26. According to the notes to the financial statements, income other than agreed statutory contributions and voluntary contributions is entered in the accounts on an accrual basis:22 the bookkeeping entry is effected on delivery of a good or proof of service rendered.

27. A cut-off test was carried out on entries made under the Headquarters Utilization Fund between November 2009 and February 2010. It was noted that receipts from the rental of conference rooms23 were recorded when invoices were issued and not when the service was rendered: such receipts were recorded in SAP in late January 2010, but the conferences or ceremonies in question had been held in late October or early December 2009.

28. The same observation holds for the rental of audiovisual equipment and for the provision of services. There was a time lag of several months between the events (April and July 2009) and the issue of invoices in January 2010. Moreover, two invoices had still not been paid in early May 2010.24

21 Document 161 EX/36 and 161 EX/Decision 7.9; DG/Note/04/17. 22 Note 2, (b). 23 Account 703-2015. 24 Account 703-2016: entry 7400000288 of 14 January 2010 ($17,283); account 703-2017: entry

7400000301 of 19 January 2010 ($12,325).


Recommendation No. 6. At the end of the financial period, ensure that invoices have been duly drawn up and that, whenever invoices have not yet been drawn up, provision is made for invoices yet to be issued.

5. OBSERVATIONS ON THE FIDUCIARY FUNDS ENTRUSTED TO UNESCO

5.1. Programme Fiduciary Funds (PFF): Equipment procurement

29. Equipment and materials must be procured for project implementation funded from extrabudgetary resources. In the 2008-2009 biennium, the total value of procurement exceeded $9 million. When projects are completed or when the funding agreement comes to an end, the project manager is required to draw up a list of equipment for submission to the beneficiary government. Formal approval by funding source must be sought through the Sector for External Relations and Information. However, UNESCO may keep some of the equipment indefinitely.

30. It was found that UNESCO had not established during the financial period under review a system for monitoring such assets, which were not recorded in a physical inventory at the end of the biennium. The list of equipment transferred to the beneficiary government and drawn up at the end of the project was not consistent with the financial accounts.

Recommendation No. 7. Strengthen the monitoring of equipment procured under extrabudgetary projects.

5.2. Institutes (Tables 1.3.1 and 2.3.1)

31. The accounts of the UNESCO-IHE Institute for Water Education – UNESCO-IHE (Delft) had been certified by an external auditor. The most recent audit opinion letter, which is unqualified, covers the combined accounts of UNESCO-IHE and IHE-Delft for 2008. IHE is not included in FABS.25

32. The External Auditor of UNESCO has, pursuant to specific terms of reference, audited the accounts for the period ended 31 December 2009 for three institutes, namely the UNESCO International Institute for Educational Planning (IIEP) (Paris and Buenos Aires), the UNESCO Institute for Lifelong Learning (UIL) (Hamburg) and the International Centre for Theoretical Physics (ICTP) (Trieste). In his opinion, UIL’s financial statements gave, in all material aspects, a true picture of the Institute’s financial situation. At the time of writing, examination of the External Auditor’s findings in respect of IIEP and ICTP were still under way.

33. IIEP is included in UNESCO’s FABS. FABS roll-out to UIL, scheduled for 1 January 2010, has been postponed. No new date had been set when the audit was carried out. The same holds true for ICTP.

5.3. UNESCO Office in Brasilia

34. Observations have been made above (section 3) on suspense accounts and the accounting entries of exchange rate adjustments.

25 Finance and Budget System, integrated management tool (SAP) used by UNESCO.


35. Unliquidated obligations amounted to $30.47 million at 31 December 2009. 26 Detailed information was obtained for each fund line. No pre-2008 unliquidated obligations were identified.

5.4. Other special accounts and trust funds (Table 1.3.2)

5.4.1. Unused or underused funds

36. Many projects did not achieve a satisfactory rate of progress in the 2008-2009 biennium. Some examples are given below. Unused funds are, naturally, held in financial investments. However, although UNESCO withdraws a third of the financial proceeds, the share of financial proceeds allocated to the projects in question cannot offset cost increases caused by late project implementation. It is therefore likely that such projects will not be completed.

37. With regard to donated projects, the implementation rates of urgent monument and museum restoration projects scheduled for completion in 2006 and financed under trust funds transferred by a Member State in 2004 were only 62% and 42% at the end of 2009.27 Of the funds released in 2006 and 2007 by other governments, the execution rate was only 45% for an AIDS-prevention project, 49% for local community capacity-building projects, 37% for vocational training activities and 0% for a project relating to intangible heritage. 28 The execution rates of a trust fund established by the private sector in 2007 were 29% and 42% respectively, for projects designed to support educational reform and digitize the cultural heritage.29

38. No disbursements were made from 11 of the 29 funds for prizes and awards during the biennium. Similarly, no disbursements had been made from four of the funds in the 2006-2007 biennium.

39. Eleven of the 58 miscellaneous funds for cultural campaigns, voluntary contributions and international appeals were audited. Here too, available resources were often found to be underused.

40. The execution rate was only 6.8% for the voluntary Fund for the Elimination of Doping in Sport. 30 No expenditure was committed under Main Lines of Action 2 and 3, although the implementation of the International Convention against Doping in Sport was one of the expected outcomes of Main Line of Action 2.31 Yet the Organization has stressed that the Convention “is the most successful convention in the history of UNESCO in terms of speed of development and entry into force”. 32 In the Secretariat’s view, this situation is due to “the small number of projects submitted by States Parties to date”. The Conference of Parties has decided to make it easier for action to be taken under the Fund.33

41. The execution rate of the resources of the Special Account for Voluntary Contributions for the Safeguarding of the Cultural Heritage in Egypt was only 2.7%,34 compared with 0.6% in 2006-2007. Set against the approved budget, which accounted for half of the available funds, the execution rate was only 5.3%. It took more than one and a half years to close the old account and transfer the balance of $11.96 million to the sub-accounts of the new special account in August 2008. Scrutiny of the correspondence between the Egyptian authorities and the Culture Sector did not shed much light on the reason for this delay. 26 $33.91 million at 31 December 2007 (including commitments relating to extrabudgetary funds

transferred to Other Special Accounts and Trust Funds). 27 Projects 534 AFG 4000 and 4001. 28 Projects 514 RAF 4000, 514 RLA 5000 and 559 GLO 1018, 552 AZE 1000 and 553 ALG 4000. 29 Projects 570 RER 4003 and 574 ALG 1000. 30 $0.17 million out of $2.48 million. 179 EX/Decision 29 and 179 EX/29. 31 34 C/5, paragraph 03020. 32 www.unesco.org on the “Background to the Convention”. 33 Second session of the Conference of Parties, 26-28 October 2009, ICDS/2CP/Doc.4. 34 $0.33 million of $12.09 million.


42. The Fund for the Safeguarding of the Intangible Cultural Heritage, established under Article 25 of the Convention adopted on 17 October 2003, which entered into force in April 2006, was used at a rate of only 9.4% of available funds and 27.1% of “budgeted” funds.35 The Secretariat reported that expenditure could only be committed after the initial operational directives adopted by the General Assembly of States Parties, were adopted in June 2008, but “Member States are not yet fully aware of the new opportunities and, in most cases, their capacities for proper project formulation are yet to be built up”.

43. The Special Account in Reinforcement of document 33 C/5 is a special case. The General Conference had accepted, in October 2005, “the programme package submitted by the Director-General designed to reinforce the principal priorities of document 33 C/5 in the amount of $25 million, to be funded on an exceptional basis from voluntary contributions”.36 The amount of the resources raised, $6.98 million, was quite low. However, a quarter of that amount had not been used at the end of 2009 ($1.75 million): the proportion of unused funds amounted to 67.7% under the teacher training component.37 The UNESCO International Institute for Capacity-Building in Africa (IICBA) reported delays in the formulation of projects with the category 2 institute in charge of implementation.

Recommendation No. 8. Pay closer attention to ensure that extrabudgetary resources are used within the requisite time frames so that the designated purpose of the special accounts can be fulfilled.

5.4.2. Financial equilibrium

44. The Special Account for the Félix Houphouët-Boigny Peace Prize, which has a special status in comparison with the Organization’s other prizes,38 poses a problem of financial equilibrium. Although the post of Executive Secretary of the Prize is now funded from the regular budget of UNESCO, the account had to be replenished during the financial period:39 pursuant to provisions adopted in 2008 to cover the eventuality that “the interest earned [might] be insufficient to cover all expenses pertaining to the Prize”,40 a sum of $800,000 was transferred from capital to account income in December 2008. With regard to the “overall strategy for UNESCO prizes”,41 the structure of expenditure from the special account42 is characterized by the high proportion of staff and operating costs, which accounted for 50.6% of expenditure in 2008-2009, while expenditure relating to the award of prizes (ceremony and jury) accounted for 21.9% and the prize itself for 27.5%.

5.5. Staff Fiduciary Funds (SFF, Tables 1.4 and 2.4)

5.5.1. UNESCO Commissary

45. There is an apparent gap between the UNESCO Commissary’s operational regulations and its actual operations. The Commissary “was established, inter alia, to undertake the distribution to authorized persons of articles purchased free of duty and/or taxes under the privileges extended to the Director-General and UNESCO by the French authorities”.43 A more realistic description can be 35 $0.5 million of $5.27 million or of $1.83 million. 36 33 C/Resolution 96 II and document 33 C/5, pages x and xii. 37 $5 million allocated – Project 490 GLO 1200 (China and France) $0.62 million of $0.91 million. 38 182 EX/25, paragraph 8.2. 39 During the previous biennium, the account was replenished with transfers from the regular budget. 40 New Article II (e) of the General Regulations of the Prize (180 EX/Decision 17). 41 171 EX/Decision 24 and 171 EX/Decision 19, paragraph 15, subparagraph (j). 42 $10.4 million since the inauguration of the Prize, $1.16 million during the 2008-2009 biennium. 43 Administrative Manual, Chapter 12, Item 12.6, paragraph 1.1, which refers to Article 12 of the

Headquarters Agreement of 2 July 2004.


found in the terms of reference for the recruitment of a new certified public accountant: “The purpose of the Commissary is to make available to UNESCO staff and associated persons the supplies and services procured by it.”

46. The Commissary is under the responsibility of the Assistant Director-General for Administration, who appoints the Chairman of the Commissary’s Management Committee. The Chief of the Sector’s Executive Office discharges oversight functions in that regard. However, the Management Committee exists in name only as the committee administering financial and personnel matters. Similarly, the General Assembly of members has not convened since 2004.

47. The Manual’s provisions on members’ deposits, too, have fallen into desuetude. The Commissary’s balance sheet shows $63,000 in debt under liabilities in respect of members’ deposits, but the Secretariat does not have a list of the creditors in question. It would therefore be difficult to apply the Manual provision requiring that “the repayment of these deposits shall constitute a first obligation on the Fund in the event of liquidation of the Commissary”.44

48. The management of the Commissary, which has a sizeable turnover ($1.36 million in 2009), seems somewhat amateurish, although no irregularities were found during the audit. Stock is monitored manually by means of stock journals to record boxes or pallets of items. Stocktaking is performed once a year. The stock level seems high: 8.13 months of turnover, excluding tobacco, and 13.2 months for perfumery. The Commissary’s liquid assets have not been invested to date, although the average amount of available funds to the Commissary in 2009 was $1.1 million.

49. Management has, however, been tightened up since the beginning of 2010. The new chartered accountant’s intention to examine the feasibility of computerized stock management and of more frequent stocktaking, at least for some products, has been duly noted. The Secretariat has indicated, moreover, that the investment of some $0.6 million to $0.7 million for a three-month period is under consideration.

50. The management costs of the Commissary are only balanced out by the variety of sources of income. Current operating costs exceed current operating income.45 The regular budget of the Organization bears the Commissary’s indirect costs incurred for the provision of offices, a shop floor of approximately 400 square metres, a subsidiary unit and working time of the Administration Sector’s Executive Office and Procurement Division (ADM/PRO).

Recommendation No. 9. Reconsider the Commissary’s operational arrangements in order to reduce the cost borne by the Organization’s regular budget.

5.5.2. The Medical Benefits Fund

51. UNESCO’s Medical Benefits Fund operates a self-insured scheme in the form of a staff fiduciary fund (MBF).

52. The 2008-2009 biennium ended with a shortfall in receipts against an expenditure of $2.45 million. Surplus receipts had been recorded in previous biennia, but there was already a technical deficit in 2006-2007 operations.46 Reserves at the end of the biennium ($27.2 million) amounted to 14.5 months of reimbursement-related expenditure, thus below the 15-month threshold set by the Director-General in 2005 pursuant to a recommendation by the External

44 Manual, Chapter 12, Annex 12.6 B, paragraph 13. 45 $2.68 million in expenditure and $2.63 million in receipts in 2008-2009. 46 MBF contributions – medical expenses = deficit of $3.3 million in 2006-2007 and $4.4 million in 2008-

2009.


Auditor (Canada).47 In September 2009, UNESCO commissioned a study by an independent consultancy firm on the long-term sustainability of the Medical Benefits Fund; only the actuarial part of the study has been accepted by the Organization.

53. An independent service provider has been processing claims for the reimbursement of medical and dental fees since 2006.48 The Internal Oversight Service (IOS) concluded in February 2010 that the model was working well. 49 A $4.3 million allocation for the settlement of reimbursement claims has been recorded under accounts payable and corresponds to 2.3 months of expenditure.

54. UNESCO’s unfunded liability for potential after-service medical care costs amounted to $190 million at the end of 1999, $252 million at the end of 2001, $323 million at the end of 2003, $601 million at the end of 2005 and $614 million at the end of 2007.50 It reached $649 million at the end of 2009 (note 13 to the financial statements). The switch to IPSAS will require online processing of this accounting information.

6. GENERAL OBSERVATIONS

6.1. Cash flow, deposits and investments (all funds)

55. Table II shows that the UNESCO Staff Savings and Loan Service (SEPU/USLS)51 accounts for 44.7% of the Organization’s financial assets in the form of term deposits. Pursuant to specific terms of reference, the External Auditor of UNESCO audited USLS accounts as at 31 December 2009. In his opinion, the financial statements of USLS provide, in all material aspects, a true picture of its financial position. The following remarks relate to the other funds managed by UNESCO.

56. Cash flow operations were managed in conjunction with financial institutions that met the criteria set under UNESCO’s investment policy. Tools had been introduced to monitor all deposits in real time. The cash-flow plan was monitored daily. No cash-flow management irregularity has been detected.

57. Detailed tests have shown that cash is managed in accordance with the provisions of the Administrative Manual. Practically all offices away from Headquarters have complied with those criteria. Some field offices do not yet have all SAP modules. Reconciliation of cash inventories as at 31 December 2009 and the overall balance reveal discrepancies due mainly to the time lag between on-the-spot reconciliation and actual accounting entry of the amount in SAP. The Bureau of the Comptroller has requested the offices in question to ensure that the inventory and balance are reconciled monthly.

58. The 147 bank accounts are divided between Headquarters (28 accounts) and units away from Headquarters (119 accounts). There are no comments to be made on bank reconciliation of “Headquarters” accounts. Bank reconciliation of accounts away from Headquarters is relatively satisfactory.

59. A test on calculation factors used for accrued interest not yet due on fixed-term deposits ($938,000) has shown that the position is satisfactory. A check on interests from term deposits and bank accounts away from Headquarters has shown that interests were properly recorded in the accounts.

47 Report in 171 EX/32, paragraph 121: 15 to 21 months (optimum: 18 months). 48 See 34 C/38, paragraph 9. Contract of 2 January 2006, additional clause dated 29 August 2008. 49 Document IOS/AUD/2010/04. 50 The figure of $640 million given in document 184 EX/5 (para. 75) is incorrect. 51 UNESCO Staff Savings and Loan Service.


60. Bonds ($1,137,000) and shares ($746,000) managed by a bank relate only to PFF (Table 2.3). Reconciliation with capital statements, bank statements and the general balance has shown the position to be satisfactory.

6.2. Processing of exchange rate differentials

61. The introduction in 1988 of the split-level system for the assessment of contributions,52 under which contributions are paid partly in dollars and partly in euros, depending on the proportion of the Organization’s expenditure in a given currency, has somewhat shielded the regular budget from the effects of fluctuations in the euro/dollar exchange rate.

62. That said, the constant rate has not been revalued since 1996. This facilitates budget comparison from one biennium to another, but an exceedingly wide gap between the constant exchange rate and the actual exchange rate creates an artificial exchange rate differential between the amount of the contribution (converted at the constant rate) and the amount encashed (at the official United Nations exchange rate for the month in which the transfer takes place). Thus, a $1 million contribution payable in euros will be billed to the Member State as $869,000 at the constant rate. If payment was made in January 2010, the amount encashed will be recorded as $1,253,000 after converting $869,000 at the United Nations exchange rate for that month, generating a currency exchange gain. Conversely, a supplier invoice in euros is entered in the accounts at the constant rate, while payment is recorded at the United Nations exchange rate for the month in question. Thus, an €869 invoice is recorded as $1,000, whereas payment of the invoice, if made in January 2010, will be recorded as $1,253, generating a currency exchange loss. This system is outlined in the Appropriation Resolution for 2008-2009.53 The balance of positive and negative exchange rate differentials is recorded under miscellaneous income.

63. This system, under which States bear the risk of fluctuations in euro/dollar parity, does not reflect the actual parity between the two currencies. It is to be noted that the constant rate concept has been dropped from the accounting options selected by UNESCO for the switch to IPSAS.

6.3. Contracting procedures and contracts

64. Some irregularities were identified in the conclusion of contracts, in particular failure to consult the Contracts Committee in respect of amounts of more than $100,000.

65. In the first case, a unit split the contract with a consultancy firm into three contracts of less than $100,000 each that were signed between April and November 2009. Several Administrative Manual provisions, such as the requirement to invite tenders, submit the contract to the Contracts Committee and certify that contracted services have been rendered, were breached.54 The Bureau of the Comptroller became aware of the situation only at the end of the validation of the second contractual instalment when the $100,000 threshold was exceeded. On signature of the third purchase order, UNESCO incurred a liability of $239,356. The unit in question sought to justify recourse to an independent company on the grounds of urgency and understaffing during a holiday period.

66. In the second case, a regional bureau contracted with a supplier of audiovisual equipment worth €227,145 and argued that it had published a tender and a technical study. The Bureau of the Comptroller considered, however, that it was unclear whether the selected bid afforded the best value for money. Moreover, the matter should have been laid before the Contracts Committee.

52 Split-level assessment (27 C/63). 53 Document 34 C/5, p. xiv (para. 3.j). 54 Administrative Manual, Chapter 7 (particularly Items 7.2 and 7.4) and Chapter 10 (particularly Item

10.2).


67. The audit of a sample of 30 consultant contracts showed that 10 such contracts had been signed after the commencement of the provision of services. Yet the ground rule of internal control is that no business relations must be commenced unless prior agreement has been reached on the services to be rendered and the price thereof.

68. Similarly, a fee contract entered into in September 2009 for studies relating to the Medical Benefits Fund did not specify which documents were required as proof of services rendered in order to effect payment; this was a departure from the model annexed to the Administrative Manual.55 It is noteworthy that one part of the work was not accepted by the Organization in 2010.

69. In the aforementioned cases, the Administrative Officer had not performed internal control duties properly. Moreover, ex post control to ensure compliance with the rules, a responsibility vested in the Bureau of the Comptroller, has not been performed satisfactorily since the beginning of the 2008 financial period owing to a lack of resources. The Director-General had stated, however, in April 2008 that the Financial Policy and Compliance Section would “advance the appropriate policy and procedures development enhancing internal financial control, awareness and training throughout the Organization”.56

Recommendation No. 10. Improve administrative officers’ and senior managers’ awareness of contracting procedures and strengthen measures, including disciplinary measures, to penalize failure to comply with such procedures.

70. “Unless otherwise provided”, the special accounts shall be administered in accordance with UNESCO’s Financial Regulations.57 A similar provision is set out in the “standard model text for financial regulations of special accounts”. 58 However, it was not until January 2008 that the Contracts Committee was informed of a draft contract with one of the two companies accredited by the Foundation trialling the International Computer Driving Licence (ICDL).59 The Director of the Regional Bureau in Cairo, the Foundation’s trustee since 2000, then disclosed that the Bureau had been contracting with the supplier for six years and intended to continue to contract with it for approximately $665,000 per year.60

71. The income ($4.4 million) recovery procedure implemented by the Regional Bureau in Cairo in respect of that major skills certification programme was seriously flawed in that cheques were received by the programme manager and not by the administrative officer, who was not informed of invoices and to whom cheques were submitted only once per month. The Internal Oversight Service (IOS) audited the Regional Bureau in 2010 and made recommendations.

Recommendation No 11. Take the necessary steps to strengthen internal control over the ICDL programme.

55 Model 205A annexed to Chapter 7, Item 7.2, of the Administrative Manual. 56 179 EX/31 Part II, page 20. 57 Article 6, paragraph 6.7 of the Financial Regulations. 58 161 EX/Decisions 7.10, regulation annexed thereto, Article 9. 59 International Computer Driving Licence: 518 centres in eight Arab States. 60 Letter dated 28 January 2008, submitted to the committee at its 7 February 2008 meeting, fee contract

dated 12 March 2008.


6.4. Staff costs

6.4.1. Integration of payroll data into the accounts

72. STEPS61-generated payroll data are transferred periodically to the SAP financial module. They pass through clearing accounts that must show a zero balance once payment has been made. In order to ascertain that the clearing process is correct, STEPS must be reconciled with the FI financial management module on a monthly basis.

73. However, no cumulative payroll journal for 2008 and 2009 could be obtained so that we could ascertain whether payroll software data had been correctly transcribed in the accounts. The files obtained consisted of a voluminous file for each month in which amounts were denominated in the currency of payment rather than in United States dollars. It is therefore very difficult to aggregate such information in order to reconcile it with accounting data.

74. Moreover, as staff costs account for 55% of UNESCO’s expenditure,62 basic controls over reconciliation between STEPS and the SAP financial module must be effected and formalized cumulatively and monthly, as with reconciliation between the financial management (FM) module and the finance module (FI). It should be possible to extract data on other staff categories (special service agreements (SSAs), contracts for services and temporary contracts) for analytical purposes.

Recommendation No. 12. Formalize reconciliation between payroll and accounting data.

6.4.2. Rejection of expenditure charged to extrabudgetary funds

75. Expenditure cannot be charged to an extrabudgetary fund that does not contain sufficient funds. This principle has been integrated into the accounting system so that, during the first payment transfer stage, recognition of such expenditure is blocked by the system. After an analysis in respect of each staff member, the Payroll Unit requests the Bureau of the Budget to regularize the situation, usually by raising the amount of resources in the fund in question.

76. This stage is not always completed on time, and staff salaries payable from a fund that has not been replenished are charged to a suspense account. The assets are overestimated by the amount and the liabilities are underestimated by an equivalent amount.

77. Apart from accounting considerations, the analysis of salary transactions blocked by the system is a time-consuming task for payroll clerks. The staff-salary accounting system should provide for waivers from the principle of not charging expenditure to insufficiently resourced funds. Programme specialists, too, must schedule expenditure more efficiently.

Recommendation No. 13. Extrabudgetary funds must be sufficiently resourced to pay project staff.

6.4.3. The SAP parameters of personnel accounts

78. The parameters of STEPS general ledger accounts have been designed to ensure that, following transfers to the SAP financial module, all debit transactions are charged to an asset

61 System to enhance personnel services. 62 $365 million out of $658 million in 2009.


account and all credit transactions to a liability account. The posting of a transaction in an asset or liability account should not be determined by whether it is a debit or credit transaction but by the content of the operation; thus advances paid to the staff are shown as receivables in the asset account and amounts to be transferred to staff as debits in the liability account. As a result of this anomaly, three accounts have abnormally high balances, thus necessitating painstaking work to clear the accounts.

Recommendation No. 14. Correct the parameters of STEPS personnel accounts so that balance sheet account liabilities are consistent with the nature of transactions.

6.4.4. Monitoring the staff complement

79. The salaries of staff under the special service agreement (SSA) or contract for services are managed locally, as is the recruitment process. Data on these staff members’ mission expenditure has been entered into STEPS from the beginning of 2010. By contrast, salary data have not been integrated. Moreover, the Bureau of Field Coordination63 monitors such staff only in part. Thus, the only file obtained for the audit of mission accounts concerned the situation for May 2009. Besides, it was pointed out that the file might be incomplete because Headquarters could not guarantee that all bureaux duly transmitted information to their Regional Bureau. Such shortcomings limit the control effected by certifying officers.

80. SESAM software is used to manage supernumeraries,64 who have not yet been integrated into STEPS, but a feasibility study on their inclusion is under way.

81. Consultants are managed by each of the units by which they are employed. Such staff are to be integrated into STEPS shortly.

Recommendation No. 15. Continue to integrate into STEPS data for monitoring temporary staff numbers.

6.4.5. Provisions for staff separation

82. In accordance with UNSAS, UNESCO makes provision for amounts payable to staff who will be separated before the end of the biennium (accumulated leave, any termination indemnities and salary adjustments).

83. A comparison of information from the Bureau of Human Resources Management (HRM) with accounting data has shown that no provision had been made for approximately $250,000 of the amounts paid in 2010 to staff separated as at 31 December 2010 – the reason being that field offices often submitted leave reports late.

84. IPSAS will require provision to be made for the leave accumulated by all UNESCO staff members. It is therefore important to ensure that the information transmitted to Headquarters for closure operations is exhaustive, for example, by means of a human resources module to liaise with Headquarters.

63 Bureau of Field Coordination – BFC. 64 Supernumeraries Employment System and Administrative Monitoring.


Recommendation No. 16. Introduce procedures for correct submission of information from field offices to Headquarters so that full data on all transactions can be entered into the accounts.

Director-General’s comments:

The Director-General thanks the External Auditor for his long-form report on the audit of UNESCO’s Financial Statements as at 31 December 2009 and notes with satisfaction the unqualified audit opinion. She will endeavour to implement the recommendations made at the earliest as far as practicable.

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