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Part I Financial Information and Analysis

 
 
Introduction
 
 
How OCHA is Funded
 
 
Donor Funding in 2005
 
 
Expenditure
 
  Carry-Over  
  Management of Cash Resources  
  Building Partnerships  
  Accountability and Risk Management  
  Key Financial Tables  

 

Donor Funding in 2005

Donors generously supported OCHA’s activities as outlined in OCHA in 2005, funding 96 percent of the original extra-budgetary requirements of US$ 99.4 million and 77 percent of the revised requirements of US$ 122.6 million. In addition, 49 percent of overall contributions were provided unearmarked or loosely earmarked, allowing OCHA greater flexibility in the allocation of resources to meet priority needs and ensure a more balanced overall funding of its activities.

Despite the major challenge for donors to respond to a number of large emergencies, donors contributed US$ 94.9 million against OCHA’s requirements in 2005 (revised upwards by 23 percent during the year to reflect the scale of unexpected humanitarian crises and needs), which was a US$ 14.3 million increase on contributions in 2004.

Yet, in percentage terms, donor funding to OCHA dropped from 81 percent of revised requirements in 2004 to 78 percent in 2005. While overall donor funding received by OCHA increased from US$ 102 million in 2004 to US$ 129.2 million in 2005 (excluding the Tsunami Trust Fund), both amounts included funds channelled through OCHA for grants for natural disasters, country-specific humanitarian response funds, operation of the Brindisi warehouse, and funds repositioned by governments for UNDAC deployment of their nationals.

Donors increasingly followed the principles of Good Humanitarian Donorship to provide a large proportion, 49 percent, of contributions fully unearmarked or loosely earmarked subject to consultations with OCHA on priorities. The disparity in coverage between field offices and between headquarters-based projects reduced considerably as a result.

Donor funding for the activities in OCHA in 2005 can be summarised as follows:
• Contributions for core requirements increased to US$ 14.1 million, an increase of US$ 2.9 million on 2004;
• Projects at headquarters level received US$ 18.0 million, US$ 2.1 million more than in 2004;
• IRIN was 112 percent funded, with US$ 6.1 million in contributions, an increase of US$ 0.9 million on 2004;
• The revised requirement for OCHA’s field presence was for US$ 74.3 million, of which US$ 56.7 million was received, leaving a 24 percent gap. By comparison, the revised requirements for the field in 2004 were US$ 56.7 million, with US$ 48.3 million funded and a gap of 15 percent. More funds were received unearmarked or loosely earmarked for field coordination, which were partly channelled
by OCHA through the Field Coordination Reserve Fund and exhausted at year end. A more detailed analysis of the funding level for different requirements is provided below.

Core Activities

Voluntary contributions for extra-budgetary headquarters core activities funded from the Trust Fund for Strengthening (DDA) amounted to US$ 14.1 million against revised requirements of US$ 22.4 million. Although this represented only 62 percent of the total requirements, the remaining 38 percent was covered from the carry-over from 2004 and an infusion of US$ 5.9 million from the Special Account for Programme Support income of US$ 16.2 million. In that way, OCHA’s core requirements for 2005 were fully covered.

Headquarters Projects

US$ 18.0 million (90 percent) of the US$ 20.5 million requirement was received for projects at New York and Geneva headquarters. This represented an increase of US$ 2.1 million and 12 percent over
the funding received in 2004. Furthermore, because funds for headquarters were increasingly received
as unearmarked, it was possible to implement nearly all planned activities. The second year of the ECHO thematic funding for information management provided a considerable injection.

Integrated Regional Information Networks (IRIN)

In 2005, IRIN received contributions of US$ 6.1 million, an increase of 17 percent on 2004, against revised requirements for 2005 of US$ 5.4 million. Donors have increasingly supported its activities and IRIN continues to improve its financial position, but it has not yet accumulated sufficient reserves to fully meet statutory management responsibilities and extend its staff contracts by a full year, like the rest of OCHA core staff. IRIN continues to need more predictable and timely funding to allow
for the timely implementation of its “core” activities without interruption.

 

Field Coordination Activities

In 2005, donor contributions for OCHA’s field requirements amounted to US$ 56.7 million. Against requirements of US$ 74.2 million, revised upwards from the original projection of US$ 55.2 million, total donor contributions represented 76 percent. This meant that, compared to 2004 contributions of US$ 48.3 million against annual requirements of US$ 57.1 million (85 percent funding), the 2005 contributions widened the requirements-funding gap by nine percent.

The increase of US$ 17.5 million over 2004 in revised requirements for field coordination was largely due to the changing situation in Sudan, which required US$ 21.5 million compared to US$ 8.4 million in 2004, as well as increased needs in DRC, Colombia, Côte d’Ivoire, Guinea, Nepal and Niger; the subregions covered by the Regional Office in Dakar; and in oPt, Somalia and Uganda. Fortunately, these increases could be offset, to a considerable extent, by the scaling down or closing of offices in Angola, Liberia, Sierra Leone, Indonesia (apart from the structure set in place in response to the tsunami), DPRK and Tajikistan.

As the increase in requirements occurred mostly in the second and third quarters of the year, OCHA did not receive adequate funding for some of the larger budgets, especially that for Sudan. On a more positive note, donors increasingly provided their funding for the field fully unearmarked or only loosely earmarked, which helped to achieve more balanced funding between offices. Even so, a number of new posts could not be filled until sufficient funds were available.

Budgetary Cash Reserve Fund (BCRF)

In common with the trend over several years, OCHA faced a shortfall at year-end of some US$ 30 million needed to issue 12-month contracts for all eligible field staff. Sweden, as the chair of the OCHA Donor Support Group, initiated the establishment of a Budgetary Cash Reserve Fund (BCRF) to provide a reserve of US$ 30 million at the end of each calendar year and allow for the issuance of one-year contracts and cover the financial requirements for the first quarter of the following year on a reimbursable basis. The fund was established in November, US$ 3 million had already been contributed by year-end and OCHA will continue its efforts to mobilise resources to reach US$ 30 million by November 2006. However, the fund will only serve its intended purpose if the gap between
requirements and receipts does not further widen and the fund can be replenished in full.

In order to help OCHA avoid funding gaps and imbalances between offices and to allow for more flexible and efficient use of resources, a greater share of funding would have to be received as unearmarked. But if earmarking is a necessary precondition, it would be most effective to earmark to the Field Coordination Reserve Fund (FCRF), through which resources can be allocated to least funded field offices, thus allowing a more equitable distribution of resources.

Earmarked, Loosely Earmarked or Unearmarked Contributions

The trend towards more flexible funding continued in 2005 as more donors provided a larger share of their funding either completely unearmarked, or loosely earmarked for priority activities in consultation with OCHA. Earmarking was reduced from 76 percent in 2003 and 72 percent in 2004, to 51 percent of all contributions related to requirements reflected in OCHA in 2005.

While this pattern was particularly applicable to headquarters in 2004, it also applied to a greater extent for field offices in 2005. OCHA wishes to encourage other donors to follow this pattern to the extent possible.

Contributions received for field coordination but not earmarked for a specific country are held in the Field Coordination Reserve Fund (FCRF). In 2005, the total amount channelled through this mechanism was US$ 3 million, although this does not reflect the full amount received as unearmarked for field coordination, since about US$ 9 million was allocated directly to deserving field offices without being passed through the FCRF. Since funds from the FCRF are almost fully allocated before the end of the year, these funds are reflected as contributions received for the respective field offices. OCHA would like to see the FCRF annual income raised to at least US$ 10 million to manage field activities with more flexibility and allow for resources to be allocated in accordance with priority or emergency requirements.

Timeliness of Contributions

Apart from the flexibility of donor funding, the timely receipt of funds is critical to allowing full and balanced implementation of OCHA’s planned activities. As OCHA does not have access to a large reserve account, it cannot incur expenditures until pledges are followed through with cash contributions.

A review of receipt dates confirms expectations that the tsunami response urged donors to advance the release of funds. However, nearly half of the funds for field coordination were received in the last two months of the year, which meant that a number of activities were delayed or even cancelled. To allow for timely renewal of staff appointments (which comprise some 80 percent of OCHA’s annual requirements) and continuation of activities without interruption at year-end, UN rules require that at least four-fifths of the funds required for a given year be available by November of the previous year. If OCHA could rely on donors transferring their funds in the first quarter of their financial cycle, this would mean that activities could be funded more evenly throughout the calendar year.

After the major improvement seen in 2004 on the timely receipt of contributions for the Trust Fund for Strengthening OCHA (DD), when over half of the funds received arrived in the first half of the year, 2005 was considerably slower, with only 2.36 percent received in the first quarter and 35.62 percent in the second. Fortunately, the year had opened with a healthy balance, which allowed for continuation of ongoing activities without interruption, but new initiatives had to be postponed until adequate funding was received.

The delay in receipt of funds for the Trust Fund for Disaster Relief (DM), which primarily covers field coordination, caused a rather critical cash flow situation, as nearly half of the contributions were received in the last two months of the year. Only 41 percent of funds had been received by mid-year, continuing a downward trend from 53.6 percent in 2004 and 67.3 percent in 2003.

 

 

The picture was not much better for the IRIN sub account (QTA), with less than 2 percent of contributions received by the end of the first quarter and 45.5 percent in the first half. This was a worrying decrease from 2004, when there was 60.3 percent coverage by the end of June, and put IRIN in a difficult cash flow situation. Fortunately IRIN’s requirements were fully covered at year-end.

OCHA understands the financial and legal constraints that affect donor governments in the timing of their cash contributions. The BCRF will be of great assistance in countering such constraints when it is funded to the US$ 30 million target level, helping to keep ongoing activities funded and allow one-year contracts to be issued for all eligible field staff.

Table: Status of EArmarking by Donors in 2005


 


 

 

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