Projected Statutory and Inflationary Adjustments to the Regular Fund Program-Budget for 2007 GENERAL SECRETARIAT OF THE ORGANIZATION OF AMERICAN STATES.

Projected Statutory and Inflationary Adjustments to the Regular Fund

Program-Budget for 2007

GENERAL SECRETARIAT OF THE ORGANIZATION OF AMERICAN STATESSecretariat for Administration and Finance - Department of Budgetary and Financial Services

- Projected Statutory and Inflationary Adjustments p. 2 -

Preamble


In his presentations, the Secretary General concluded that the principal cause of the OAS’ financial weakness was the systematic reduction of its budget due to the freeze in ordinary (RF) income, accompanied by an increase in mandates.

Special and Regular GA’s took corrective steps by:a. Updating the scale of quota assessments,b. Raising the 2007 budget ceiling, and c. Approving a 3% quota increase in 2007.

In addition, in 2005 and 2006 the Permanent Council gave the Secretariat additional budget authority to permit it to respond to essential requirements.

The SG, in his June 5 speech, urged resolution of the recurrent cost-of-living adjustment issue as the last critical link in strengthening RF financing.

Discussions and Decisions of the 2006 Special and General Assemblies


• Our role, as representatives of Member States and as managers in the Secretariat, is to ensure that the Organization is strong and effective, able to achieve its mandates.

• While financial resources alone will not guarantee an organization’s success, it cannot lead and cannot prosper without a sound, trained and well-equipped human and operational base.

• It is through its people, systems and facilities that the Organization delivers on its mission of strengthening hemispheric democracy and governance, human rights, multidimensional security and integral development.

• It is with this broader focus in mind that we review the specific issues in this presentation.

Strategic Considerations


Contents

• Objective

• Background

• Personnel Costs

• Operating Costs

• Projected Totals

• Financing Options and Expenditure Control Measures


Objective

• To address the projected RF budget shortfall in 2007 arising from:

– Statutory adjustments to personnel costs; and– Loss of purchasing power for operating costs due

to inflation.

• To provide options for addressing the shortfall.

• To incorporate a workforce planning mechanism and revised personnel policies to control and contain future personnel costs.


Background


Background

• January 2006: Special GA mandated a RF budget ceiling for 2007 not to exceed $81.5 million.

• June 2006: GA Budget Resolution for 2007 RF:

2007 Program-Budget

Operating Costs$30.3 M

Personnel $51.2 M


• Budget authorization does not contain sufficient funds to cover:

– Statutory adjustments to personnel costs; and– Inflation-driven increases in cost of operations.

• GA considered “that an increase in object 1, coupled with other mandatory increases … could … require a revision of the 2007 program-budget …”

2007 Program-Budget

Background (cont.)


Current OAS salary policy is based on Resolutions of GA and PC

• 1994 Resolutions AG/RES. 1275 and CP/RES. 631, both titled “Modification of the General Secretariat’s Staff Compensation System”

• General Standards - Article 40 (“Salaries”)– “The salaries in force for the staff of the General

Secretariat shall be the salaries in force at the United Nations Secretariat …”

Background (cont.)


To absorb required inflationary and statutory adjustments, the Organization was forced to downsize by:

• Suspending replacements for retiring / departing personnel;

• Freezing recruitment;

• Curtailing training and others staff investments;

• Reducing services; and

• Postponing required maintenance and timely replacement of equipment.

Background (cont.)

Therefore, the Organization reduced its capacity to comply with mandates.


Have these actions worked?

• Regular Fund Budget reductions were realized.

• However, they have adversely affected the activities of the Organization by:

– Creating gaps in priority areas;– Weakening internal controls; and– Reducing response capability.

Background (cont.)


• Need to fill existing vacancies to adequately comply with mandates and reduce vulnerabilities.

• Requirement to fill nine new positions without affecting budget ceiling.

Background (cont.)

The 2007 budget presents additional challenges:


Personnel Costs


Personnel Costs

Regular Fund – Monthly Payroll

• The monthly total RF payroll cost has not changed significantly since 1995.

• The cost per RF staff member has risen at a rate of 3.9% annually since 1995.

• From 1995 through 2005, the number of RF staff members decreased by 31.5%.


Personnel Costs (cont.)

Regular Fund – Monthly Payroll

December 1995

June 2001

December 2005

June 2006

Actual Cost(US$ million)

RFStaff

Avg. Cost per Staff Member

(US$)

$3.9

$3.5

$3.7

$4.1

709

555

486

502

$5,500

$6,300

$7,600

$8,200


Key Factors in Payroll Cost Increases:

• Revisions to Post Adjustment for Professional Staff.

• Revisions to Basic Salary Scale for General Services

Staff.– Both are calculated by the United Nations.

• Retirement Fund Contributions.– Lower than those of the UN system.

• Health Insurance Premiums.– Increased by over 80% over the last five years, despite

reductions in benefits.



UN Post Adjustment and cost is higher in New York than in Washington DC

Post Adjustment: OAS vs. UN

Annual Basic Salary, P4 Step 8, without dependents

$67,909 $67,909 $67,909

Post Adjustment $45,635 $31,034 $22,750

Total net remuneration $113,544 $98,943 $90,659

Retirement Contribution $23,026 $20,546 $20,546

Total Cost $136,570 $119,489 $111,205

NY, US DC, US Nicaragua


Monthly RF Payroll Components:(US$ million)

Basic Salary

(Prof./GS)

Post Adjustment

RetirementFund

Health Insurance

Other Components*

TOTAL

December 1995 2.4 0.6 0.5 0.3 0.08 3.9

June 2001 2.4 0.4 0.5 0.2 0.06 3.5

December 2005 2.3 0.6 0.6 0.2 0.07 3.7

June 2006 2.4 0.7 0.6 0.3 0.09 4.1

* Other Components: Allowances, Life Insurance.



Payroll Components2007 Approved

BudgetNon-budgetedadjustments

Projected Total 2007

1 - Basic Salary 29.8 0.38 30.2

2 – Post Adjustments 9.5 0.99 10.5

3 – Retirement Fund 7.7 0.27 8.0

4 – Health Insurance 3.4 0.35 3.7

5 – Others 0.8 0.02 0.8

Totals 51.2 2.01 53.2

Projected Statutory and Inflationary Adjustments for 2007(US$ million)



Projected Statutory and Inflationary Adjustments for 2007(US $ Million)


Others$ 17.4

1%

Health Insurance

$ 349.017%

Retirement Fund

$ 266.913%

Basic Salary (GS)

$ 383.919%

Post Adj(Prof.)$ 993.2

50%

Total Adjustment for 2007: $2,010.4


Projected Statutory Adjustments for 2007 – Basis for Calculations

• Basic Salary:– General Services at Headquarters 5%

– General Services away from Headquarters 3%

• Post Adjustment:– Professionals at Headquarters 4.5% of total remuneration

– Professionals away from Headquarters 2.5% of total remuneration

• Retirement Fund Contributions:– Represents approximately 13% of remuneration adjustments

• Health Insurance Premiums:– 10% (Blue Cross Blue Shield, Kaiser)

• Others:– 3% (Allowances, Life Insurance)



Operating Costs


Operating Costs

Evolution

• From 1995 through December 2005 the Operating Cost Budgets (Objs. 3-9) decreased by 28%.

• Historical trend is reversed beginning in 2006.

APPROPRIATIONObjects 3-91995 – 2007(US$ 1,000)

36.2

41.6

37.6

30.9 29.1

28.928.9

27.1 26.4

28.4

32.532.3

36.6

25

30

35

40

45

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007


Projected Inflationary Adjustments for 2007 – Objects 2 - 9

Object of Expense2007 Approved



2- Non-recurrent Personnel 1.2 0.1 1.3

3 – Fellowships 7.0 - 7.0

4 - Travel 1.5 0.2 1.7

5, 6, and 9 – Documents, Equipment and Other Costs 7.9 0.2 8.1

7 – Building Maintenance 5.9 0.2 6.1

8 – Performance Contracts 6.8 0.2 7.0

Totals 30.3 0.9 31.2

Operating Costs (cont.)


Projected Totals


Projected Totals

Object of Expense2007 Approved



1 – Personnel 51.2 2.0 53.2

2- Non-recurrent Personnel 1.2 0.1 1.3

3 – Fellowships 7.0 - 7.0

4 – Travel 1.5 0.2 1.7

5, 6, and 9 – Documents, Equipment and Other Costs

7.9 0.2 8.1

7 – Building Maintenance 5.9 0.2 6.1

8 – Performance Contracts 6.8 0.2 7.0

Totals 81.5 2.9 84.4

Projected Totals


Financing Options and Expenditure Control Measures


Financing Options and Expenditure Control Measures

• Adjustments up to a cap of 3% approved automatically.

• Increase budget authority only for 2007.

• Adopt a proactive workforce planning strategy.


Financing Option # 1 – Adjustments up to a cap of 3% approved automaticallyAdopt a mechanism to adjust annual budget ceilings up to 3% to cover statutory and inflationary costs.

Pros:

• Predictable resources to insure proper implementation of

mandates.

• Simplifies decision-making process for the governing bodies.

• Resolves a long-standing problem.

Challenge:

• Requires General Assembly approval to adjust budget ceilings and

quota assessments automatically up to a capped percentage.


UN Regular Budget Assessments are adjusted annually (US$ millions)

Financing Option # 1 – Adjustments up to a cap of 3% approved automatically (cont.)

Regular Budget Assessments1990 - 2005

1,828

1,483

1,409

1,149

1,0741,090

1,217

1,086

1,1121,1121,181

1,087

1,0311,008999838

0

400

800

1,200

1,600

2,000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005


Financing Option # 2 – Increase Budget Authority only for 2007

Authorize $2.9 million from RF Reserve Subfund to cover

adjustments (3.6%)

Pros: • Resources are available.• Resolves an immediate problem.

Cons: • Short-term solution to a long-standing problem.• May adversely affect liquidity.• Postpones resolution of 2008 budget ceiling.


Reserve Subfund 2006 Outlook

Financing Option # 2 – Increase Budget Authority for only 2007

2005 2006

Income:Quota Collections $76.0 $83.1 (1)

Adm. Support - FEMCIDI and Specific Funds 1.2 0.9Americas Subscriptions 0.3 0.3Interest Income 0.4 0.4Rentals 0.5 0.5Miscellaneous 1.4 1.3 (2)

Total Increases 79.8 86.5

Obligations:Regular Fund Obligations 77.2 81.9 (3)

Change during period 2.6 4.6Balance at beginning of period 7.6 8.6

Fund balance at end of period $10.2 $13.2

Less: transfer to repay Fellowships Capital Fund loan 1.6

Adjusted fund balance at end of period $8.6 $13.2

(2) INCLUDES REIMBURSEMENT FROM FELLOWSHIPS ADMINISTRATION SERVICES (LASPAU) FOR $1.1 AND

(3) INCLUDES ESTIMATED EXECUTION, SUPPLEMENTARY APPROPRIATIONS AND AMERICAS MAGAZINE.

For the period from January 1 to December 31, 2005 and 2006 (projected)

(US$ 1,000)

(1) ESTIMATED COLLECTIONS

$0.2 CORRESPONDING TO OTHER INCOME (PRIOR YEAR REFUNDS, TAXES AND TRAVEL).


Expenditure Control Measure: Workforce Planning

Adopt a workforce planning strategy to:

• Manage and sustain human resources in a cost-effective, efficient and integrated manner;

• Contain projected rate of growth in personnel costs; and

• Relieve the RF of cost associated with activities appropriately financed by specific funds.

Workforce Planning

THE RIGHT PEOPLE IN THE RIGHT PLACE

AT THE RIGHT TIME

GENERAL SECRETARIAT OF THE ORGANIZATION OF AMERICAN STATES

Secretariat for Administration and Finance

Department of Human Resources


Contents

Workforce Planning

• Objectives

• Past Practices

• Current Situation

• Challenges and Opportunities

• Plan of Action

- Workforce Planning p. 36 -


Workforce Planning Objectives

• Manage and control growth of staffing costs

• Match resources to needs

• Respond effectively to changing needs

• Increase organizational efficiency

• Enhance job satisfaction and productivity



Past practices

Lack of workforce planning resulted in:

• Redundancies and shortages in functions & skills

• Distortions in the staffing structure

• RF workforce downsizing and freezing irrespective of need

• Uncontrolled increase in CPR’s and other hiring mechanisms

• Uneven enforcement of Human Resources policies and rules



Staff Member Count 1995 - 2005

As of 9/30/06.This does not include an estimated 48 CPR’s who perform staff functions and Temporary Support / Local Professionals

123 144

508

709657

478536544550541

560578576

486

119

183

1308771

10948

568441

632741750

626612 637

674

597 609669 719 652

0

100

200

300

400

500

600

700

800

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Regular Fund Specific Fund Total

Past practices (cont.)


1

1


Current Situation

Continuing Contract

6%

Long Term Contract

33%

Short Term Contract

24%

Trust / Career1%

SOC4%

Career23%

Others* (Associate,

TSP)1%

Local Professional

0.5%

Trust / Non-Career

8%

652 Staff Membersas of 9/30/06

Type of Appointment RF Staff SF Staff

Career 146 0

Continuing Contract 40 0

Long Term Contract 158 50

Short Term Contract 105 60

Local Professional 0 2

Trust/ Non-Career 56 0

Trust/ Career 3 0

SOC 0 28

Others* (Associate, TSP) 0 4

Total 508 144

Total 652


*

*

* Record for local proffesionals and support personnel is incomplete at this time


OAS Types of Appointments


Type Career Apppointments

Contunuing Appointments

Long Term Short Term Trust positions appointments

Special Observer Contract (SOC)

Temporary Support

Personnel

Local Professional

Contract

Associate Staff Member

Purpose The nature of the contract is not linked to the

functions and responsibilities of

the individuals, but to a personal status

they enjoy to fill vacancies and to

continue in service when reductions are made to the

staff of the General Secretariat

The nature of the contract is not linked to the

functions and responsibilities of the individuals,

but to the personal status

they enjoy

To carry out continuing GS

needs

To carry out special project or

activity

Appointed because of the trust or

confidence the Secretary General places in them, as

individuals, to perform the duties

and functions entrusted to them.

Event based project or mission away from

headquarters

To provide support (general

services) away form

headquarters

To provide services

(professional) away from

headquarters

Individuals appointed primarily

to perform functions of a professional,

technical, administrative, or

scientific nature, in accordance with agreements or

contracts concluded with

other institutions participating in programs of

common interest

Fund Regular Fund Regular Fund All Funds All Funds Regular Fund Specific Funds Specific Funds Specific Funds All FundsLength Indeterminate Indeterminate 1 up to 5 years up to 3 years for

Regular Fund . No limit for

Specific funds.

SG's term 11 mos. 29 days As needed Up to 5 years As needed

Competition No longer available as an option

Only those individuals with

five years of service in posts financed by the Regular Fund

who have successfully won

a recruitment competition may

apply for consideration for

a Continuing Contract

Yes, unless position financed

by Specific Fund & area requests

waiving of competition

No No No No No No. Hired in accordance

w/agreement or contract signed

w/institution.

Special Notes Only staff members who were appointed

to the Career Service prior to

June 30, 1994 and are still staff

members have career

appointments

Are characterized by their

indeterminate nature (no end

date to the contracts). The nature of the

contract is not linked to the functions and

responsibilities of the individuals.

To waive competition

requires written justification on why it is not convenient

to hold competition;

requires approval by DHRS

RF- Requires written

justification to show that purpose is

special project & in best interest of

GS/OAS & requires DHRS

approval

Although their appointments are for an indefinite

period, there is no implied tenure

unless they held career status prior to being appointed to a position of trust

If services after 11 mos. 29 days, must

have break in service.

Remuneration & benefits in

accordance w/ national labor laws of duty

staion. Salary no higher than UNDP G-6 in

country.

Remuneration in accordance with UNDP scale or national labor laws of duty

station.

Remuneration by GS/OAS, if any, in

accordance w/terms set out in

agreement.

Staff Rules 104.1 1042 Article 19 of the General

Standards

104.3, 104.5 104.3, 104.5 104.1, 104.4 104.3 104.1, 104.19 104.1, 104.18 104.1, 104.17


Regular and Specific Funds as of 9/30/06

77%

23%

RF

SF

Staff by Funds

652 Staff Members

Current Situation (cont.)



146

40

158

105

0

56

3 00

20

40

60

80

100

120

140

160

180

D-14%

P-16%

P-216%

P-324%

P-423%

P-527%

RF Staffing

Staff by LevelG-315%

G-419%

G-527%

G-636%

G-22%

G-11%

301 Staff Members at Professional Level (59%)

207 Staff Members at General Services level (41%)

By type of appointment508 staff members

as of 9/30/06



Sta

ff


SF Staffing

0 0

50

60

2 0 0

28

4

0

10

20

30

40

50

60

70

D-11%

P-130%

P-239%

P-316%

P-410%

P-54%

106 Staff Members at Professional Level (73%)

38 Staff Members at General Services level (27%)

By type of appointment144 staff members

as of 9/30/06



Sta

ff

G-38%

G-424%

G-552%

G-616%


Challenges

• Manage all positions irrespective of funding source

• Match available skills with functional needs

• Allocate workforce based on predictable funding

• Optimize use of projected RF vacancies

• Emphasize coordinated staff development

• Institutional competencies not aligned to emerging vision and mission

• In the next 5 years 25% of the RF workforce will retire

• Minimal recruitment and staff development has left the Secretariat ill-prepared

to confront future requirementsOpportunities

Challenges and Opportunities



Projected retirements 2006-2011

Year G-1 G-2 G-3 G-4 G-5 G-6 G-7 Total P-1 P-2 P-3 P-4 P-5 D-1 Total TOTAL

2006 1 1 1 2 2 7 1 1 6 8 15

2007 1 1 4 6 1 6 4 1 12 18

2008 2 2 1 5 1 8 9 14

2009 1 1 2 3 7 1 2 5 5 13 20

2010 1 1 2 4 1 9 1 1 2 2 1 7 16

2011 1 1 3 1 6 1 3 2 6 12

Total 2 1 4 6 10 13 4 40 3 2 4 17 27 2 55 95

Challenges and Opportunities (cont.)



Plan of Action

Regular fund: core, permanent functions & skills• Top and mid level management• Public information & external relations• Legal counsel• Conferences & meetings• Administration: central areas and country offices • Project administration • Audit oversight

Specific funds: variable needs & special requirements• Technical programs• Special missions• Projects

1. Target allocation of RF and SF resources



Regular Fund:

• Maintain a stable RF-funded workforce within statutorily adjusted budget

• Uniform classification system to avoid grade creep

• Facilitate rotation of staff members to strengthen areas

• Facilitate outplacement as appropriate

Specific Funds:

• Focus existing resources on priority mandates

• Seek and expand use of SF to finance emerging mandates

• Apply uniform HR policies & practices to SF, including indirect costs recovery

2. Human Resources objectives by funding source

Plan of Action (cont.)



3. Optimize use of projected RF vacancies

• Position conversion according to organizational needs (e.g., replacing higher grades position with a greater number of lower ones) without increasing costs

4. Fill vacant posts

• Redefine job descriptions• Implement generic job descriptions• Streamline administrative functions in technical areas

5. Staff Development

• Redirect training programs to focus on highest functional needs• Put in place an effective performance management system• Improve performance reward mechanisms• Promote confidence in and use of central administrative systems• Develop succession planning• Enhance individual job satisfaction

Plan of Action (cont.)



Thank you

Projected Statutory and Inflationary Adjustments to the Regular Fund Program-Budget for 2007 GENERAL SECRETARIAT OF THE ORGANIZATION OF AMERICAN STATES.

Documents

rf budget ceiling

budget authorization

ga budget resolution

projected rf budget

regular fund programbudget

statutory adjustments

secretary general

general assembliesin