E. Cash management
and closing balance in 2009
Table 3 reflects the financial status at 31 December 2009 and shows the resources available to fund the OCHA budget during 2009.
OCHA programme activities continued to be underfunded in 2009, with donor income of $157 million (including $2 million from Italy officially recorded as a transfer), other income of $4.3 million and programme expenditure (direct expenditure plus programme support transfers) of $175 million. The result was a net depletion of OCHA’s cash reserves by $13 million. In 2008, programme activities were also underfunded by $13 million, resulting in the cumulative decrease of $26 million in the programme activities closing balance over the 2008-2009 biennium.
OCHA’s administrative activities were fully funded in 2009 by income from the programme support transfers levied against expenditure. While the closing balance for administrative activities grew by $5 million in 2009, following the implementation of a strategy to over use the programme support account, it is expected that the balance will reduce at the end of 2010 and succeeding years. This will bring the closing balance to a level that is commensurate with expected annual administrative costs.
OCHA faced repeated cash challenges during 2009. The causes included late disbursements against pledges; heavy earmarking for a narrow group of “high visibility” offices in the field; depleted cash reserves following two years of underfunding; and the overall mismatch between donor income and OCHA expenditure. OCHA thus stretched reliance on its unearmarked income and cash reserve funds to the very limit.
For the first time, due to a lack of cash, OCHA took a reimbursable loan against unpaid pledges from the Central Emergency Response Fund (CERF) in November. The quarterly cash allocation process was disrupted several times, with cash requirements for only one or two months covered instead of the planned three months. In some cases, allocations were also delayed by a few weeks.
Despite these challenges, through prudent management of the cash reserve funds, OCHA got through the year with all projects and offices having the required amount of cash. However, the organization was left with a significantly depleted closing balance. Consequently, in December 2009 there was cash to cover salaries for only two months and costs for 2010 (excluding well-funded projects carrying forward programmed funds). This is not in line with the OCHA target of having enough cash in the bank to cover 12 months of staff costs and three months of operating costs.
OCHA’s overall closing balance was $164 million of which $118 million was for programme activities, a reduction of $13 million from the 2008 closing balance. As Chart 3 reveals, over two thirds of this total could not be spent in the first quarter. This illustrates the cash challenges OCHA faces, in particular the low level of unearmarked funding and cash reserves available in December 2009 to cover Headquarters’ requirements and underfunded offices in the first quarter of 2010.
- The opening balance reflects the situation as at 1 January 2009.
- For programme activities, includes paid contributions and unpaid pledges of $7M. Does not include $2M of Italian contribution transferred from its bilateral fund for programme activities. This is reflected as a transfer - see note 8. For regular budget, corresponds to the appropriations for 2009.
- = 1 + 2
- Programme support cost (PSC) levied on programme expenditure and transferred to the Administrative Account to cover cost of administrative activities.
- Includes disbursements and unliquidated obligations as at 31 December 2009.
- = 4 + 5. For programme activities, expenditure charged against budget is the programme direct expenditure plus programme support transfers. For administrative and regular budget activities, it is the direct expenditure only.
- = 3 + 4 + 5. Regular budget balances are not carried forward to the next biennium.
- Includes $2M of Italian contribution to OCHA via transfer from its bilateral fund; transfers of PSC from other trust funds, Specially Designated Contributions and ISDR; interest and miscellaneous income; foreign exchange adjustments; transfers, refunds and savings on prior period unliquidated obligations; prior period adjustments to income and expenditure; and administrative costs of ISDR
- = 7 + 8. Includes mandatory reserves of $22M for programme activities and $8M for adminstrative activities, which were not available for spending in 2009. Regular budget balances are not carried forward to the next biennium.
- Closing balance (9) less Opening balance (1).
- Reserves mandated under the UN Financial Regulations and Rules for extrabudgetary activities (programmme and administrative activities)
- Closing balance (9) less mandatory reserves (11). Regular budget balances are not carried forward to the next biennium.