Financial report and audited financial statements relating...

35 C

35 C/28 31 July 2009 Original: English

Item 11.2 of the provisional agenda

FINANCIAL REPORT AND AUDITED FINANCIAL STATEMENTS RELATING TO THE ACCOUNTS OF UNESCO

FOR THE FINANCIAL PERIOD ENDED 31 DECEMBER 2007 AND REPORT BY THE EXTERNAL AUDITOR

OUTLINE

Source: Financial Regulation 12.10.

Background: In accordance with this Financial Regulation the report of the External Auditor, the audited financial statements and the report of the Director-General on the accounts of UNESCO for the financial period ended 31 December 2007 are hereby transmitted to the General Conference.

Purpose: Purpose: To submit to the General Conference for examination the audited final accounts for the biennium 2006-2007, the report of the External Auditor thereon and the report of the Director-General on the implementation of the recommendations of the External Auditor.

Decision required: paragraph 4.

35 C/28

FINANCIAL STATEMENTS AND EXTERNAL AUDIT REPORT

1. This document incorporates document 180 EX/33 Part I Rev. and Part II (Annex) containing the report of the Director-General on the accounts of UNESCO for the financial period ended 31 December 2007, the audit opinion of the External Auditor, the audited financial statements and the report of the External Auditor together with the written comments of the Director-General thereon.

2. Having examined these reports and financial statements, the Executive Board decided, in 180 EX/Decision 33, paragraph 9, to transmit them to the General Conference.

3. The General Conference is invited to receive and accept the report of the External Auditor and the audited financial statements.

4. The General Conference may wish to adopt a decision along the following lines:

The General Conference,

1. Having examined document 35 C/28,

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

3. 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 2007 and the results of its operations and its cash flows for the two-year financial period then ended, and 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;

4. Notes that although he does not qualify his opinion, the External Auditor draws attention to two points: first, the need to strengthen internal oversight within the Organization and second, the need to take action and prepare for the changes resulting from the adoption of International Public Sector Accounting Standards (IPSAS);

5. Notes the use of the unspent balance of unliquidated obligations to liquidate other outstanding legal obligations of the Organization as explained in Note 5(d) to the Financial Statements;

6. Notes the recommendations of the External Auditor and the Director-General’s comments thereon;

7. Receives and accepts the report of the External Auditor and the audited financial statements on the accounts of UNESCO for the financial period ended 31 December 2007.

Executive Board 180 EX/33 Part I Rev.

Item 33 of the provisional agenda

FINANCIAL REPORT AND AUDITED FINANCIAL STATEMENTS OF UNESCO FOR THE PERIOD ENDED 31 DECEMBER 2007,

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 2007, 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/133 (attached hereto) while the report by the External Auditor, together with the comments of the Director-General thereon, is presented in document 180 EX/33 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 2007 …”. The long-form report of the External Auditor and the Director-General’s comments thereon are to be found in document 180 EX/33 Part II.

PARIS, 4 August 2008 Original: English/French

Hundred and eightieth session

ANNEX35 C/28Annex

180 EX/33 Part I Rev. – 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 document 180 EX/33 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 2007 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 35th session and to submit this report to the Executive Board at its 182nd session for prior review;

7. Decides to transmit to the General Conference the report by the External Auditor and the audited financial statements of UNESCO for the period ended 31 December 2007.


BOC/133 PARIS, 16 June 2008 Original: English

UNITED NATIONS EDUCATIONAL, SCIENTIFIC AND CULTURAL ORGANIZATION

FINANCIAL REPORT AND AUDITED FINANCIAL STATEMENTS OF UNESCO FOR THE FINANCIAL PERIOD ENDED 31 DECEMBER 2007


CONTENTS

1. REPORT OF THE DIRECTOR-GENERAL ON THE ACCOUNTS OF UNESCO FOR THE FINANCIAL PERIOD ENDED 31 DECEMBER 2007

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 as at 31 December 2007 for the financial period ended 31 December 2007

Statement II Statement of Assets, Liabilities and Reserves and Fund Balances as at 31 December 2007

Statement III Statement of Cash Flow of Proprietary Funds (General, Working Capital and Other) for the financial period ended 31 December 2007

Statement IV Status of Appropriations of the General Fund – Regular and Participation Programmes for the financial period ended 31 December 2007

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 2007 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 2007 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 2007

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 2007

Full biennium combined financial situation

1. In 2006-2007, UNESCO has achieved another record of programme expenditure (i.e. excluding Staff Fiduciary Funds) of which over 50% relates to non-regular programme activities. It is interesting to recall that the $1 billion threshold was attained in the 2002-2003 biennium. A net increase of $26,514K on overall total expenditure was recorded when compared to the previous financial period. The table below shows the expenditure for the biennium 2006-2007, together with comparative figures of the previous financial period, which are broken down by business area.

2006-2007 2004-2005

$ '000s % $ '000s %

General Fund (GEF – Schedule 1.1) 620,233 44.97 620,391 45.86

Other Proprietary Funds (OPF – Schedule 1.2) 75,912 5.50 69,347 5.13

Total, Proprietary Funds (A) 696,145 50.47 689,738 50.99

Add: Programme Fiduciary Funds (PFF – Schedule 1.3) (B)

743,729 53.93 718,715 53.13

Less: Transfers from General Fund (C) (60,698) (4.40) (55,791) (4.12)

Total, Programme Funds – (A) + (B) - (C) 1,379,176 100.00 1,352,662 100.00

When compared with the 2004-2005 biennium, increases (decrease) in total expenditure were recorded in the following business areas:

General Fund ($0.2 million) - 0.02% Other Proprietary Funds $6.6 million + 9.5% Programme Fiduciary Funds $25.0 million + 3.5%

2. Although the budget of the General Fund (regular programme) remained unchanged at the level of zero nominal growth of $610 million for the two consecutive biennia 2004-2005 and 2006-2007, the rate of programme execution achieved in the period under review was a record high at 99.8%. This should be viewed as a major achievement and, as a consequence, only $97K of the total approved budget of the regular programme has been declared as unspent at the close of the biennium 2006-2007.

3. Expenditure on Other Proprietary Funds (OPFs) has increased by a significant 9.5% ($6.6 million) notably on the Revenue-Generating Accounts and support costs funds for extrabudgetary activities.

4. The overall net increase of 3.5% ($24.9 million) in expenditure on Programme Fiduciary Funds (extrabudgetary activities) was principally due to the institutes (with the inclusion of UIL for the first time this biennium), and other Special Accounts and Trust Funds, with the exception of Brazil where expenditure showed a decrease of $22 million.


Contributions and cash flow – general fund

5. Receipts of contributions in respect of the biennium 2006-2007 amounted to $563.2 million against an assessed total of $610 million, which represents 92% of the total receivable on Member States during the biennium.

6. Receipts of contributions in respect of previous biennia and payment plans prior to the 33rd session of the General Conference amounted to $49 million against a total due of $71.9 million for 2006-2007. Before the approval of four new payment plans at the 34th session of the General Conference, the total deferred to future years equalled $14.3 million but after the new payment plans, the total amount almost doubled to $27.6 million under 24 payment plans.

7. Unpaid contributions remain a cause for concern with $91 million due at the end of 2007 representing a 7% increase as compared to $85.1 million in 2005. The working capital fund of $28 million was not sufficient to finance arrears and instalments deferred for future years.

8. 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 2006-2007 is shown graphically as follows, in millions of US dollars:

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

-100.00

-50.00

0.00

50.00

100.00

150.00

1/06

3/06

5/06

7/06

9/06

11/0

6

1/07

3/07

5/07

7/07

9/07

11/0

7

Cash positionCombined with WCF

2006 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

Cash position -5.46 -19.68 11.44 79.70 73.59 61.49 36.86 26.41 4.29 -24.74 -31.08 -16.50

Combined with WCF 22.53 8.32 39.44 107.69 101.59 89.49 64.86 54.41 32.29 3.26 -3.08 11.50

2007

Cash position -11.63 -1.48 12.24 48.63 48.63 50.70 39.53 24.98 -8.98 -38.04 -50.93 -33.68

Combined with WCF 15.91 26.22 40.04 76.44 76.45 78.55 67.39 52.97 19.01 -10.05 -22.94 -5.68

9. The peak amounts from April to June are due to the receipt of large contributions in those months in 2006 and 2007, whereas payments are more evenly spread throughout the two years.

10. As at 31 December 2007, the General Fund at Headquarters showed a negative cash balance of $33.7 million, but with the Working Capital Fund of $28 million the net negative cash balance equalled $5.7 million.


11. Internal borrowing was required in November 2006 and between October and December 2007, but it did not entail any cost as it remained within the ceiling of non-interest-bearing special accounts.

Investments

12. At the end of December 2007, the investment portfolio of UNESCO totalled $1,168.6 million in comparison to $1,035.2 million at the end of 2006. The performance of the investments made in accordance with the Investment Policy of the Organization has been in line with the set benchmarks. The Organization has a very conservative investment policy and was not affected by the turmoil of the financial markets during the second half of 2007.

Strengthening internal controls

13. UNESCO has recently published an internal control policy framework which captures in a single document the revised framework for its financial policies, procedures and processes underpinned by the Organization’s ethical value system. The framework will provide a base for developing specific rules, policies and processes to comply with the forthcoming IPSAS requirements as well as give a common understanding of internal control issues to all staff.

14 Steps have also been taken to tighten the control environment within the Secretariat by changing the reporting structure of the Comptroller’s Office and reaffirming the functional relationship between the Administrative Officers and the Comptroller. A Financial Policy and Compliance Section was established within the Bureau of the Comptroller with a mandate to respond to internal control issues raised by our governing bodies and the External Auditor and to facilitate the policy and reporting framework under IPSAS.

International Public Sector Accounting Standards

15. The next biennium’s Financial Statements should be the last to be prepared under the United Nations System Accounting Standards. For reporting periods commencing 1 January 2010 the Organization will adopt International Public Sector Accounting Standards (IPSAS). One of the main reasons for this change is the growing awareness to base United Nations organizations’ financial reporting on a more uniform and commonly accepted standard.

16. We have the obligation and responsibility to manage financial resources entrusted to us in a transparent and accountable manner. IPSAS is one important tool for doing this, leading to the enhancement of UNESCO’s credibility.

Liabilities for employee benefits

17. The funding of long-term contractual obligations with employees, both current and past, remains an issue for the Organization. The liability, estimated at $658 million at the end of 2007, relates mainly to After-Service Health Insurance.

18. This amount is currently disclosed as a note to the Financial Statements. Under IPSAS the full liability will be included in the Statement of Financial Position and prudent management would favour the direct funding of this amount over a reasonable period of time.


First President Paris, 28 July 2008

To: Mr Koïchiro Matsuura Director-General of the United Nations Educational, Scientific and Cultural Organization

OPINION OF THE EXTERNAL AUDITOR

I have audited the financial statements of UNESCO for the period ended 31 December 2007, the notes thereto, the statements of income and expenditure and the distribution of the result. It is now for me to express an opinion, based on this audit, on these documents, which have been drawn up under the responsibility of the Director-General of UNESCO.

We conducted our audit in accordance with the common accounting standards of the Panel of External Auditors of the United Nations, the specialized agencies and the International Atomic Energy Agency and with the International Standards of Auditing. These standards require that I organize and perform my work in such a way as to obtain reasonable assurance that the financial statements are free of material misstatement. An audit consists in particular of examining, through testing, evidence supporting the amounts and other data disclosed in the financial statements. It also consists of assessing the accounting principles used and significant estimates made by the Director-General of UNESCO, and of evaluating the overall presentation of the financial statements. I believe that my audit provides a reasonable basis on which to found my opinion.

In my opinion, the financial statements present fairly, in all material respects, the financial position of UNESCO as at 31 December 2007 and of the results of operations and cash flows in the period then ended and were prepared in accordance with the accounting standards of the United Nations system, which were applied in a manner consistent with that of the preceding financial period.

Furthermore, in my opinion, those UNESCO transactions that came to my notice or that I examined by testing as part of the audit complied in all significant respects with the Financial Regulations and the legislative authority.

Although I do not qualify my opinion, I should, however, like to draw attention to two points. First, internal oversight within the Organization should be strengthened in order to ensure compliance with all internal regulations adopted by the Organization. Second, the adoption of the International Public Sector Accounting Standards (IPSAS) as from 1 January 2010 is an important step forward for UNESCO. It is indispensable to take action now to prepare for the changes (in working methods and computer hardware) that will be required in the central services and in the field offices.

Philippe SÉGUIN


APPROVAL OF THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD ENDED

31 DECEMBER 2007

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 610 271 610 271 610 104 8 009 618 280 616 302Voluntary contributions 8 258 8 258 8 652 654 416 662 674 600 277Revenue producing activities 22 837 22 837 17 391 3 121 16 167 42 125 33 178Funds received under inter-organization arrangements 54 933 54 933 58 032Allocations from other funds (Regular Programme) 5 149 5 149 5 329 28 333 17 949 (51 431)Income for services rendered 26 822 26 822 25 057 40 900 17 498 (26 822) 58 398 52 009Investment income 3 949 18 802 22 751 13 174 47 599 48 240 118 590 67 333Currency exchange adjustments (5 043) 2 173 (2 870) 2 164 45 713 4 950 47 793 17 326Other income 2 028 6 958 8 986 7 007 3 519 3 105 15 610 11 561

TOTAL INCOME 619 463 82 741 702 204 688 878 886 543 107 909 (78 253) 1 618 403 1 456 018

EXPENDITURE 620 233 75 912 696 145 689 738 743 729 59 889 (78 253) 1 421 510 1 388 281

TOTAL EXPENDITURE 620 233 75 912 696 145 689 738 743 729 59 889 (78 253) 1 421 510 1 388 281

EXCESS (SHORTFALL) OF INCOME OVER EXPENDITURE (770) 6 829 6 059 (860) 142 814 48 020 196 893 67 737

Increase in land and buildings (Note 11) 9 590 9 590 22 941 9 590 22 941Transfer (to)/from reserves (246) 246Distribution to members of USLS (41 596) (41 596) (28 001)Decrease in budgetary surpluses (8 182) (8 182) (5 012) (8 182) (5 012)Other adjustments to reserves and fund balances 134 3 790 3 924 2 749 6 185 3 197 13 306 5 322Reserves and fund balances, beginning of period 139 801 45 612 185 413 165 595 309 367 48 270 543 050 480 063

RESERVES AND FUND BALANCES, END OF PERIOD 140 327 56 477 196 804 185 413 458 366 57 891 713 061 543 050

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

(a) Represented by - : Budget Surplus - Statement IV 97 New Member State - Montenegro 3 Miscellaneous income 5 999 Currency exchange adjustments 11 031 Currency Exchange Reserve (16 074) Singapore Special Account OPF 246 Use of Savings 2004-2005 - MBF Subcontracting (2 072)

(770)

PROPRIETARY FUNDS PROGRAMME FIDUCIARY FUNDS

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

FOR THE FINANCIAL PERIOD ENDED 31 DECEMBER 2007(Expressed in '000s US dollars)

2007 2005

Total Proprietary Funds

Total Managed Funds

2007 2005

180 EX

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STATEMENT II

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

Funds Eliminations Funds Funds Eliminations

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

ASSETSCash and term deposits (Note 6) (1 902) 68 530 66 628 60 955 547 286 493 135 1 107 049 869 169Investments (Note 7) 2 305 127 487 129 792 130 151Accounts receivable

Assessed contributions receivable from Member States (Note 8) 90 979 90 979 85 100 90 979 85 100Inter-fund balances 852 246 (246) 852 6 1 (859)Other (Note 9) 8 422 6 373 14 795 8 396 16 565 62 024 93 384 63 194

Other assets (Note 10) 918 802 1 720 1 398 3 186 3 030 7 936 6 888Land and buildings (Note 11) 98 141 98 141 98 142 98 141 98 142Renovation work in progress (Note 12) 65 582 65 582 28 896 65 582 28 896

TOTAL ASSETS 262 992 75 951 (246) 338 697 282 887 569 348 685 677 (859) 1 592 863 1 281 540

LIABILITIESPayments or contributions received in advance 990 990 540 990 540Unliquidated obligations 24 972 4 307 29 279 35 892 85 852 115 131 130 574Accounts payable

Inter-fund balances 1 105 (246) 859 109 - (859)Other 13 505 13 328 26 833 25 843 22 324 8 275 57 432 46 508

Members' deposits 596 474 596 474 509 157Other liabilities 1 014 734 1 748 2 003 2 806 23 037 27 591 18 624Loan for HQ building renovation (Note 12) 80 451 80 451 31 441 80 451 31 441Loan for IBE building (Note 11) 1 733 1 733 1 646 1 733 1 646

TOTAL LIABILITIES 122 665 19 474 (246) 141 893 97 474 110 982 627 786 (859) 879 802 738 490

RESERVES AND FUND BALANCESWorking Capital Fund (Note 3) 28 097 28 097 28 010 28 097 28 010Capital funds relating to land and buildings (Note 11) 103 484 103 484 93 894 103 484 93 894Currency Exchange Reserve (Note 12) (16 942) (16 942) (868) (16 942) (868)Operating reserves (Note 5) 1 620 1 620 1 381 16 171 25 683 43 474 34 110Balances relating to projects funded by donors 416 218 416 218 282 897Budgetary surpluses (Note 4) 7 237 7 237 7 237 7 237 7 237Other surpluses (Note 5) 18 451 54 857 73 308 55 759 25 977 32 208 131 493 97 770

TOTAL RESERVES AND FUND BALANCES 140 327 56 477 196 804 185 413 458 366 57 891 713 061 543 050

TOTAL LIABILITIES, RESERVES AND FUND BALANCES 262 992 75 951 (246) 338 697 282 887 569 348 685 677 (859) 1 592 863 1 281 540

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

Total Proprietary FundsTotal Managed Funds

2007 20052007 2005

PROGRAMME FIDUCIARY FUNDSPROPRIETARY FUNDS

UNESCOSTATEMENT OF ASSETS, LIABILITIES AND RESERVES AND FUND BALANCES

AS AT 31 DECEMBER 2007 (Expressed in '000s US dollars)

180 EX

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Statement lll

2007 2005CASH FLOWS FROM OPERATING ACTIVITIES

Net excess (shortfall) of income over expenditure (Statement I) 6 059 (860)

(Increase) decrease in contributions receivable (5 879) 12 631Increase in other accounts receivable (6 399) (4 273)Increase in other assets (322) (82)(Increase) decrease in inter-fund balances receivable (852) 14 128Increase (decrease) in contributions or payments received in advance 450 (20 916)Increase (decrease) in unliquidated obligations (6 613) 5 578Increase (decrease) in accounts payable 990 3 516Decrease in other liabilities (255) (300)Increase (decrease) in inter-fund balances payable 750 (32 511)

Less: Interest income (22 751) (13 174) Plus: Interest expense 349 314 Currency exchange adjustments (13 204) (3 032)

NET CASH FROM OPERATING ACTIVITIES (47 677) (38 981)

CASH FLOWS FROM INVESTING ACTIVITIES: Increase in renovation work in progress (36 686) (28 896) (Increase) decrease in land and buildings 1 (25 251) Increase in borrowings 49 097 31 149

Plus: Interest income 22 751 13 174 Less: Interest expense (349) (314) Currency exchange adjustments 13 204 3 032

NET CASH USED FROM INVESTING 48 018 (7 106)

CASH FLOWS FROM FINANCING ACTIVITIES Savings on or cancellation of prior periods' obligations 3 735 2 478 Credits to member States (8 182) (5 011) Other adjustments to reserves and fund balances 9 779 23 211

NET CASH FLOWS FROM FINANCING ACTIVITIES 5 332 20 678

NET INCREASE (DECREASE) IN CASH AND TERM DEPOSITS 5 673 (25 409)

CASH AND TERM DEPOSITS, BEGINNING OF PERIOD 60 955 86 364

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

UNESCOPROPRIETARY FUNDS

(General, Working Capital and Other)STATEMENT OF CASH FLOW FOR THE PERIOD ENDED 31 DECEMBER 2007

180 EX/33 Part I Rev. - page 15

STATEMENT IV

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

A. Governing Bodies

1. General Conference 5 507 98 5 605 5 115 392 5 507 98

2. Executive Board 7 779 139 7 918 7 689 114 7 803 115 Total Part I.A 13 286 237 13 523 12 804 506 13 310 213

B. Direction 18 639 561 63 19 263 17 583 268 17 851 1 412

C.6 735 3 412 10 147 9 115 501 9 616 531

TOTAL, PART I 38 660 4 210 63 42 933 39 502 1 275 40 777 2 156

PART II PROGRAMMES AND PROGRAMME RELATED SERVICES

A. Programmes

107 802 101 2 762 110 665 104 230 5 353 109 583 1 082

55 994 743 1 506 58 243 55 005 2 140 57 145 1 098

30 838 307 888 32 033 29 797 1 045 30 842 1 191

50 575 1 478 964 53 017 50 803 2 039 52 842 175

32 950 431 788 34 169 31 187 1 767 32 954 1 215

9 020 9 020 9 020 - 9 020 -

40 814 415 41 229 45 170 72 45 242 (4 013) Total, Part II.A 327 993 3 475 6 908 338 376 325 212 12 416 337 628 748

B. Participation Programme 20 000 - - 20 000 19 611 349 19 960 40

C. Programme Related Services

1. Coordination of action to benefit Africa 4 309 118 - 4 427 4 535 80 4 615 (188)

2. Fellowships Programme 1 867 30 - 1 897 1 891 79 1 970 (73)

3. Public information 13 658 416 - 14 074 13 751 816 14 567 (493)

4. Strategic planning and programming monitoring 6 259 470 228 6 957 6 123 336 6 459 498

5. Budget preparation and monitoring 4 306 163 - 4 469 4 210 137 4 347 122

6. Anticipation and Foresight - 713 5 718 515 46 561 157 Total, Part II.C 30 399 1 910 233 32 542 31 025 1 494 32 519 23

TOTAL PART II 378 392 5 385 7 141 390 918 375 848 14 259 390 107 811

PART III SUPPORT FOR PROGRAMME EXECUTION AND ADMINISTRATION

A. Field management and coordination 20 988 923 929 22 840 22 478 1 311 23 789 (949)

B. External relations and cooperation 19 825 607 121 20 553 20 051 295 20 346 207

C. Human resources management 30 717 643 4 31 364 30 339 1 145 31 484 (120)

D. 106 152 3 498 - 109 650 107 284 4 374 111 658 (2 008)

TOTAL, PART III 177 682 5 671 1 054 184 407 180 152 7 125 187 277 (2 870)

TOTAL, PARTS I - III 594 734 15 266 8 258 618 258 595 502 22 659 618 161 97

Reserve for reclassifications 1 500 (1 500) - - - - - -

PART IV ANTICIPATED COST INCREASES 13 766 (13 766) - - - - - -

610 000 - 8 258 618 258 595 502 22 659 618 161 97

FOR THE FINANCIAL PERIOD ENDED 31 DECEMBER 2007

TOTAL

Participation in the Joint Machinery of the United Nations System

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

33 C/5 Approved as

Adjusted

Authorized Transfers

ULOs

Main Appropriation Line 33 C/5 Approved

UNESCO GENERAL FUNDSTATUS OF APPROPRIATIONS

REGULAR AND PARTICIPATION PROGRAMMES

Administration

Major Programme I - Education

Major Programme II - Natural Sciences

Major Programme III - Social and Human Sciences

Major Programme IV - Culture

(Expressed in 000s US dollars)

Major Programme V - Communication and Information

UNESCO Institute for Statistics

Field - Management of decentralized programmes

Additional Appropriations

Disbursements

Expenditure

Total

Unobligated balance



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. The United Kingdom and United States Special Funds are also included under this grouping.


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.

During the year 2006, steps were taken to transform the UNESCO Institute for Education (UIE), from a foundation under German law, into a fully fledged UNESCO institute. The former UIE was dissolved on 30 June 2006 following a decision of the UIE Governing Board in February 2006. The new Institute’s name was changed to the UNESCO Institute for Lifelong Learning (UIL), (Executive Board, 174th session). During this transition period, the Institute functioned as an international UNESCO project. On 21 February 2007 a host country agreement was signed, by UNESCO and the Government of the Federal Republic of Germany, transforming UIL into a category 1 UNESCO institute.

The full effect of the transformation to UIL for the period from 1 July 2006 to 31 December 2007 has been presented in this biennium’s Financial Statements.

(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 Services (URS) and the UNESCO Children’s Club and 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.

(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 overheads and are capitalized 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 that 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 33 C/Resolution 81, the authorized level of the fund, which was maintained at K$28,000 for 2006-2007, was subsequently adjusted to K$28,097 to include assessments made on new Member States.

(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, Self-Benefiting Trust Fund-Brazil 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:


2007 2005

$’000s

Un-apportioned surpluses relating to the budgets of previous financial periods:

Not yet available for apportionment

Surpluses apportioned but not surrendered

1,958

5,279

1,958

5,279

Total (Statement II) 7,237 7,237

In accordance with 34 C/Resolution 76 (III) “the existing experimental scheme to encourage prompt payment of contributions should be continued for a further six-year period”.

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:

2007 2005 Increase/ (Decrease)

$’000s

(a) Administrative reserves

(i) Public Information Liaison and Relations Fund 1,351 1,195 156

(ii) International Centre for Theoretical Physics (ICTP) 10,006 7,782 2,224

(iii) International Institute for Education Planning (IIEP) 4,898 3,314 1,584

(iv) UNESCO Institute of Statistics (UIS) 1,267 813 454

17,522 13,104 4,418

(b) Currency fluctuation reserves

– Public Information Liaison and Relations Fund (PILRF)

165 102 63

165 102 63

(c) Staff savings reserves

– UNESCO Savings and Loan Service (USLS) 25,683 20,820 4,863

25,683 20,820 4,863

(d) Other reserves

– Headquarters Utilization Fund (HQF) 104 84 20

104 84 20

Total (Statement II) 43,474 34,110 9,364


(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:

2007 2005 Increase/ (Decrease)

$’000s

Proprietary funds

Regular programme (Note 5(ii)(c)) 18,451 11,528 6,923

Other Proprietary Funds 54,857 44,231 10,626

73,308 55,759 17,549

Fiduciary funds

Special Accounts 25,977 14,561 11,416

Staff Fiduciary Funds 32,208 27,450 4,758

58,185 42,011 16,174

Total (Statement II) 131,493 97,770 33,723

(c) The surplus of the regular programme is reconciled to the balance available for distribution under the positive incentive scheme to encourage prompt payment of contributions as follows:


2007 2005

$’000s

Excess of regular programme income over expenditure (Schedule 1.1)

1,302 8,018

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

3,735 2,478

Unspent balance on MBF subcontracting 406

Unspent balance on Use of carry-forward funds 105

Currency Exchange Reserve 16,942 868

Distribution PILRF 47 59

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

(246)

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

(3,735)

Other surpluses (Schedule 2.1) 18,451 11,528 Adjust for:

(i) MBF subcontracting in accordance with 32 C/Resolution 64 (2,478)

(ii) Currency Exchange Reserve (868)

Balance available for distribution under the positive incentive scheme

18,451 8,182

(d) At the close of the 2004-2005 financial period, a provision of K$32,639 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 2006 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.

As previously reported to the General Conference (34 C/29) a part of the unspent balance of these unliquidated obligations has been used to liquidate other outstanding legal obligations of the Organization as follows:


2007 2005

$’000s

Unspent balance 4,237 5,259

(i) Courier sub-account deficit 1,871

(ii) Field offices expenditure 92 513

(iii) Headquarters expenditure 230 22

(iv) ILO Administrative Tribunal Judgement 180

(v) Liquidation of lawsuit – additional costs 52

(vi) Clearance of stock of photocopy paper 48

(vii) Accounts receivable written off 98

(viii) UIE additional allocation 177

Subtotal 502 2,781

Total 3,735 2,478

In accordance with 34 C/Resolution 85 the unspent balance from the 2004-2005 biennium, amounting to K$3,735, may be used to finance the additional costs of the renovation plan of UNESCO Headquarters.

6. CASH AND TERM DEPOSITS

The table below shows that of the total K$1,107,049 (2005 K$869,169), the amount available under proprietary funds is K$66,628 (2005 K$60,955) and the remaining balances are held by UNESCO in a fiduciary capacity.

2007 2005

$’000

Regular programme (GEF) (1,902) 4,742

Other Proprietary Funds (OPF) 68,530 56,213

Total Proprietary Funds 66,628 60,955

Programme Fiduciary Funds (PFF) 547,286 407,090

Staff Fiduciary Funds (SFF) 493,135 401,124

Total (Statement II) 1,107,049 869,169

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 2.


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:

2007 2005

$’000s $’000s

Carrying value

Market value

Carrying value

Market value

Short-term money market funds and shares

878 944 721 1,100

Bonds 128,914 128,915 129,430 129,478

Total (Statement II) 129,792 129,859 130,151 130,578

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 2007, the fair market value of futures contracts owned by USLS was K€4,307 (K$6,353) and as at 31 December 2005 K€6,607 (K$7,819). 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 organizations or corporations with a duration of 3 to 5 years, the quality of which is not to be less than AA (Standard & Poors or its equivalent) except for Euro zone sovereign bonds for which a rating of A is accepted.

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:

2006-2007 2004-2005

$’000s $’000s

Contributions due as at 1 January

2006

Contributions received

Unpaid contributions

as at 31 December

2007

Unpaid contributions

as at 31 December

2005

Arrears * 70,397 (56,995) 13,402 14,141

Contributions assessed for the biennium**

610,271 (560,427) 49,844 48,002

Subtotal 680,668 (617,422) 63,246 62,143

Deferred arrears under payment plans

27,636 22,957

Subtotal contributions Receivable

90,882 85,100

Working Capital Fund 97

TOTAL (Statement II) 90,979 85,100

* 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 1988-2001 2002-2003 2004-2005 2006-2007

11,444 914 150

49,844

Subtotal 1 62,352

Arrears under payment plans (annual instalments) 1992-2007 894

Deferred arrears under payment plans 2008-2015 27,636

Subtotal 2 28,530

Working Capital Fund 2006-2007 97

TOTAL 90,979



In application of 33 C/Resolution 79.II paragraph 1(c), the contributions for 2006-2007 that remained unpaid as at 31 December 2007 that were assessed in euros are considered as due and payable in United States dollars thereafter and are converted into United States dollars at the United Nations operational rate of exchange for the Euro prevailing in December 2007: USD 1 = EUR 0.678. A detailed listing of unpaid contributions as at 31 December 2007 is shown in Annex III. In addition, the complete statement of assessed contributions and payments received is available in separate documents submitted to the governing bodies of UNESCO.

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:

2007 2005

$’000s

Staff loans and advances 54,019 41,863

Interest receivable 13,681 5,897

Amounts receivable for goods and services 3,693 4,480

Value added tax recoverable 5,440 2,554

Advances to project partners 6,267 2,220

Miscellaneous 10,284 6,180


10. OTHER ASSETS

Other assets are summarized as follows:

2007 2005

$’000s

Field office payments 423 1,051

Stock on hand, at lower of cost or net realizable value 1,720 1,678

Fixed assets 4,484 3,246

Miscellaneous 1,309 913



11. LAND AND BUILDINGS

2007 2005

$’000s

Headquarters premises, Place de Fontenoy at cost 23,022 23,022

Add – Phase I Belmont Plan – renovation costs, Place de Fontenoy 23,549 23,549

Subtotal, Headquarters premises, Place de Fontenoy at cost 46,571 46,571

Headquarters Fifth Building, rue Miollis at cost 7,899 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 2,602

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) 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 total of K$1,300 has been amortized in 2006-2007.


(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 2006 2,156 1,646

Less:-

(i) Loan repayment 2006 and 2007

(267)

(220)

(ii) Exchange adjustment on revaluation 307

Balance at 31 December 2007 1,889 1,733

Amount payable in 2008

Amount payable in future periods

133

1,756

122

1,611

(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$9,590 bringing the total capital funds at 31 December 2007 to K$103,484 (2005 K$93,894) is due to the following:

(i) Renovation loan amortization for a total sum of K$8,377 corresponding to the repayments made in 2006 and 2007;

(ii) Headquarters Apartment amortization of K$1,300;


(iii) Repayment of the outstanding loan on IBE building equivalent to K$220 and a loss on the loan revaluation of K$307.

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 an interest-free 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 interest-free 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. Four instalments were received from CDC between April 2004 and March 2007 for a total sum of K€62,469.

The interest that would have been payable by the Organization during the biennium under a non-interest-free arrangement amounts to K€3,141.

€ $

’000s

Balance at 1 January 2006 26,567 30,573

Loan withdrawals from CDC in 2006-2007 35,902 41,313

Less:-

(i) Loan repayment in 2006-2007

(7,280)

(8,377)

Add:-

(ii) Exchange adjustment on revaluation

16,942

Balance at 31 December 2007 55,189 80,451

Amount payable in 2008

Amount payable in future periods

5,654

49,535

6,507

73,944

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$16,942 from revaluation has therefore been reported separately in the balance sheet of the General Fund (GEF) (Statement II) as at 31 December 2007.

(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 costs incurred under Phase II of the Plan as at 31 December 2007 amounting to K$ 65,582 (of which K$36,686 was incurred during 2006-2007) are currently disclosed separately in the GEF balance sheet as “Renovation Work-in-Progress”. It is anticipated that when the renovation project is completed, the total costs incurred will be brought to account at cost under Land and Buildings.

If the General Conference had approved that expenditure of Phase II of the Belmont Plan be recognized based on costs incurred rather than on the reimbursement schedule of the amount borrowed, then the above stated K$36,686 would have been treated as expenditure in the current biennium.

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 2007, UNESCO’s total liability for these costs is estimated to be approximately K$44,000 (2005 K$38,000) of which an amount of K$19,657 (2005 K$16,002) 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 an associate 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 2007 the net present value of UNESCO’s liability, which is not provided for in these Financial Statements, amounted to K$614,000 (2005 K$601,000).

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 2007 are as follows:

2007 2005

$’000s

Paris Headquarters

UNESCO institutes

at valuation/original cost

at valuation/original cost

6,811

10,316

6,797

10,736

Offices away from Headquarters at original cost 10,310 7,539


15. 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. Action on the case has been suspended pending determination by Brazil’s Supreme Court of Justice on UNESCO’s immunity from legal process. At this time it is not possible to determine the outcome of the above claim nor can the likelihood or the amount, if any, of loss associated with the outcome be determined.

(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.

SCHEDULE 1.1

MBF TOTALRegular Subcontracting

Programme (33 C/RES 86) 2007 2005

INCOME

Assessed contributionsMember States 610 000 610 000 610 000New Member States 249 249 82Associate Member States 22 22 22

610 271 610 271 610 104Voluntary contributions 8 258 8 258 8 652Interest income 3 949 3 949 2 835Currency exchange adjustments (5 043) (5 043) 2 285Other income 2 028 2 028 2 528

TOTAL INCOME 619 463 619 463 626 404

EXPENDITURE 618 161 2 072 620 233 620 391

TOTAL EXPENDITURE 618 161 2 072 620 233 620 391

EXCESS (SHORTFALL) OF INCOME OVER EXPENDITURE 1 302 (2 072) (770) 6 013

Increase in land and buildings 9 590 9 590 22 941Transfers (to)/from other funds (246) (246)Decrease in budgetary surpluses (8 182) (8 182) (5 012)Other adjustments to reserves and fund balances 134 134 47Reserves and fund balances, beginning of period 137 323 2 478 139 801 115 812

RESERVES AND FUND BALANCES, END OF PERIOD 139 921 406 140 327 139 801

AND CHANGES IN RESERVES AND FUND BALANCESFOR THE FINANCIAL PERIOD ENDED 31 DECEMBER 2007

(Expressed in '000s US dollars)

UNESCOGENERAL FUND

SCHEDULE OF INCOME AND EXPENDITURE

180 EX

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SCHEDULE 1.2

Revenue Generating activities

Support costs Staff related accounts Renovation planNew Management

Monitoring Instruments

US special account UK special account IPSAS special account

Elimination

(Schedule 1.2.1) (Schedule 1.2.2) (Schedule 1.2.3) 2007 2005

INCOME

Voluntary contributionsRevenue producing activities 22 837 22 837 17 391Allocations from other funds 130 5 659 (640) 5 149 5 329Income for services rendered 26 822 26 822 25 057Investment income 2 092 15 013 555 45 241 841 15 18 802 10 339Currency exchange adjustment 25 2 148 2 173 (121)Other 794 4 585 1 579 6 958 4 479

TOTAL INCOME 25 748 48 568 2 264 45 5 900 841 15 (640) 82 741 62 474

EXPENDITURE 22 582 39 098 1 951 355 6 355 6 198 13 (640) 75 912 69 347

TOTAL EXPENDITURE 22 582 39 098 1 951 355 6 355 6 198 13 (640) 75 912 69 347

EXCESS ( SHORTFALL ) OF INCOMEOVER EXPENDITURE 3 166 9 470 313 (310) (455) (5 357) 2 6 829 (6 873)

Savings on prior period obligations

Transfer to/from reserves 246 246

Other adjustments to reserves andfund balances (46) 173 3 735 (72) 3 790 2 702

Reserves and fund balances, beginning of period 11 753 16 134 6 117 443 1 364 9 731 70 45 612 49 783

RESERVES AND FUND BALANCES, END OF PERIOD 14 873 25 604 6 603 3 868 909 4 374 246 56 477 45 612

( Expressed in '000s US dollars )

TOTAL

UNESCOOTHER PROPRIETARY FUND

SCHEDULE OF INCOME AND EXPENDITURE AND CHANGES IN RESERVES AND FUND BALANCESFOR THE FINANCIAL PERIOD ENDED 31 DECEMBER 2007

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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

2007 2005

INCOME

Revenue producing activities Sales & Royalties 347 1 983 6 6 555 2 910 11 801 7 536 Rental & Charges from letting 10 964 72 11 036 9 855

Allocation from other funds 200

Investment income 1 262 830 2 092 939

Currency exchange adjustment 25 25 7

Other 325 15 454 794 646

TOTAL INCOME 1 934 1 998 12 279 6 627 2 910 25 748 19 183

EXPENDITURECost of Goods Sold 74 391 465 472Staff Costs 775 7 5 860 333 423 7 398 6 951Other Expenditure 1 176 1 149 5 672 4 472 2 250 14 719 9 819

TOTAL EXPENDITURE 2 025 1 547 11 532 4 805 2 673 22 582 17 242

EXCESS (SHORTFALL) OF INCOMEOVER EXPENDITURE (91) 451 747 1 822 237 3 166 1 941

Other adjustments to reserves andfund balances (46) (46) 3 039

Reserves and fund balances, beginning of period 2 837 1 370 6 032 922 592 11 753 6 773

RESERVES AND FUND BALANCES, END OF PERIOD 2 700 1 821 6 779 2 744 829 14 873 11 753


TOTAL

UNESCOREVENUE GENERATING ACTIVITIES


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SCHEDULE 1.2.3

Terminal Payment Fund Staff Compensation Fund Language Courses

2007 2005

INCOMEAllocations from other funds 130 130 129Investment income 555 555 252Currency exchange adjustment 1Other 1 357 222 1 579 1 679

TOTAL INCOME 1 912 130 222 2 264 2 061

EXPENDITUREStaff Costs 1 272 1 272 1 380Compensation/Benefits Paid 196Other Expenditure 337 220 122 679 297


EXCESS (SHORTFALL) OF INCOMEOVER EXPENDITURE 303 (90) 100 313 188

Other adjustments to reserves andfund balances 173 173

Reserves and fund balances, beginning of period 5 418 699 6 117 5 929

RESERVES AND FUND BALANCES, END OF PERIOD 5 721 609 273 6 603 6 117


TOTAL

UNESCOSTAFF RELATED ACCOUNTS


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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 )2007 2005

INCOME

Income for services rendered Programme Support Costs 26 631 191 26 822 25 057

Investment income 14 913 70 30 15 013 8 410

Currency exchange adjustment 2 148 2 148 (129)

Other 4 585 4 585 2 154

TOTAL INCOME 48 277 191 70 30 48 568 35 492

EXPENDITUREStaff Costs 24 454 24 454 25 548Other Expenditure 14 619 9 16 14 644 12 302


EXCESS (SHORTFALL) OF INCOMEOVER EXPENDITURE 9 204 191 61 14 9 470 (2 358)

Other adjustments to reserves and fund balances (332)

Reserves and fund balances, beginning of period 13 096 2 071 675 292 16 134 18 824

RESERVES AND FUND BALANCES, END OF PERIOD 22 300 2 262 736 306 25 604 16 134


TOTAL

UNESCOPROGRAMME SUPPORT COSTS FOR SPECIAL ACCOUNTS AND TRUST FUNDS


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SCHEDULE 1.3

INCOME

Assessed contributions 8 009 8 009 6 198 Voluntary contributions 138 272 261 229 254 915 654 416 591 625 Revenue producing activities 3 121 3 121 1 027 Funds received under inter-organization arrangements 54 933 54 933 58 032 Allocations from other funds 27 878 455 28 333 25 405 Income for services rendered 40 900 40 900 35 791 Investment income 2 913 23 357 21 329 47 599 23 465 Currency exchange adjustments 1 182 38 850 5 681 45 713 16 100 Other 3 519 3 519 1 606

TOTAL INCOME 217 785 323 436 345 322 886 543 759 249

EXPENDITUREExpenditure 208 292 257 182 278 255 743 729 718 715

TOTAL EXPENDITURE 208 292 257 182 278 255 743 729 718 715

EXCESS OF INCOME OVER EXPENDITURE 9 493 66 254 67 067 142 814 40 534

Other adjustments to reserves and fund balances 6 185 6 185 3 386 Reserves and fund balances, beginning of period 26 470 63 582 219 315 309 367 265 447

RESERVES AND FUND BALANCES, END OF PERIOD 42 148 129 836 286 382 458 366 309 367

Institutes (Schedule 1.3.1)

Self-Benefiting Trust Fund-Brazil

Other Special Accounts and Trust Funds (Sch. 1.3.2)

TOTAL

2007 2005

FOR THE FINANCIAL PERIOD ENDED 31 DECEMBER 2007(Expressed in '000s US dollars)

UNESCOPROGRAMME FIDUCIARY FUNDS

SCHEDULE OF INCOME AND EXPENDITUREAND CHANGES IN RESERVES AND FUND BALANCES

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SCHEDULE 2.1

MBF TOTALRegular Subcontracting

Programme (33 C/RES 86) 2007 2005

ASSETSCash and term deposits (1 902) (1 902) 4 742Assessed contributions receivable from Member States 90 979 90 979 85 100Accounts receivable

Inter-fund balances 852 852Other 8 016 406 8 422 4 528

Other assets 918 918 490Land and buildings 98 141 98 141 98 142Renovation work in progress 65 582 65 582 28 896

TOTAL ASSETS 262 586 406 262 992 221 898

LIABILITIESPayments or contributions received in advance 990 990 540Unliquidated obligations 24 972 24 972 32 639Accounts payable

Inter-fund balances 687Other 13 505 13 505 13 870

Other liabilities 1 014 1 014 1 274Loan for HQ building renovation 80 451 80 451 31 441Loan for IBE building 1 733 1 733 1 646

TOTAL LIABILITIES 122 665 122 665 82 097

RESERVES AND FUND BALANCESWorking Capital Fund 28 097 28 097 28 010Capital funds relating to land and buildings 103 484 103 484 93 894Currency Exchange Reserve (16 942) (16 942) (868)Budgetary surpluses 7 237 7 237 7 237Other surpluses 18 045 406 18 451 11 528

TOTAL RESERVES AND FUND BALANCES 139 921 406 140 327 139 801

TOTAL LIABILITIES, RESERVES AND FUND BALANCES 262 586 406 262 992 221 898

UNESCOGENERAL AND WORKING CAPITAL FUNDS

SCHEDULE OF ASSETS, LIABILITIES AND RESERVES AND FUND BALANCES AS AT 31 DECEMBER 2007


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SCHEDULE 1.4

INCOME

Revenue Producing Activities 3 646 11 979 542 16 167 14 760Employer Contribution to Benefit Plan 17 555 17 555 16 104Employee Contribution to Benefit Plan 17 498 17 498 16 218Allocation from Other Funds 394 394Investment Income 2 363 45 749 116 12 48 240 30 694Currency Exchange Adjustments 4 950 4 950 (938)Other 1 329 188 121 1 460 7 3 105 2 948

TOTAL INCOME 43 695 45 937 3 883 13 439 955 107 909 79 786

EXPENDITURE

Staff costs 1 798 941 7 590 662 10 991 9 550Compensation/Benefit Paid 39 389 39 389 33 038Other Expenditures 375 2 975 5 989 170 9 509 9 135

TOTAL EXPENDITURE 39 389 2 173 3 916 13 579 832 59 889 51 723

EXCESS/(SHORTFALL) OF INCOME OVER EXPENDITURE 4 306 43 764 (33) (140) 123 48 020 28 063

Distribution to members of USLS (41 596) (41 596) (28 001)Other adjustment to reserves & fund balances 2 695 386 23 93 3 197 (813)Reserves and fund balances, beginning of period 25 334 20 820 1 901 215 48 270 49 021

RESERVES AND FUND BALANCES, END OF PERIOD 29 640 25 683 2 254 98 216 57 891 48 270

* The UNESCO Childrens' Club and Day Nursery has been incorporated in SFF as from 01 January 2006.

TOTAL

Medical Benefit Fund

UNESCO Staff Savings and Loan Service

UNESCO Commissary

Fund

UNESCO Restaurant

Service2007 2005

UNESCO Children's Club &

Day Nursery*


UNESCOSTAFF FIDUCIARY FUNDS


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U N E S C O Schedule 1.3.2 - page 1/6

OTHER SPECIAL ACCOUNTS AND TRUST FUNDSBALANCES AS AT 1 JANUARY 2006, RECEIPTS AND DISBURSEMENTS FOR THE FINANCIAL PERIOD ENDED 31 DECEMBER 2007

AND BALANCES AS AT 31 DECEMBER 2007

(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 December2006 UN Agencies 2007 2007

PART I - UN SOURCES

UN AIDS - AIDS Prevention, Awareness and Education Projects 2 279 718 10 582 399 8 914 082 532 350 3 415 685 1 882 197 1 533 488 UNDP/Spain MDG Fund 120 000 3 647 255 116 098 65 292 50 806 UN Development Programme -3 376 102 2 618 312 -379 397 2 466 708 191 408 -3 795 303 164 241 -3 959 544 UN Development Programme Projects 117 441 860 651 983 617 816 47 577 313 682 9 114 304 568 UN East Timor J. Cultural Centre 18 004 -1 729 -16 275 UN Economic and Social Commission for Asia and the Pacific 100 000 100 000 100 000 UN Environment Programme - Memoranda of Understanding 1 270 795 1 666 537 2 336 183 601 149 349 392 251 757 UN Fund for International Partnership 4 293 064 5 714 148 310 778 10 758 5 468 372 273 419 4 586 957 1 523 139 3 063 818 UN Fund for Population Activities -82 092 289 738 193 837 14 538 -729 -729 UN Joint Programmes 1 211 616 915 221 48 022 151 627 555 776 66 304 1 704 406 140 561 1 563 845 UN Multi-Donor : International Workshops/Conferences 25 763 19 000 68 073 101 425 3 545 7 866 7 321 545 UNESCO/UNOCHA Trust Fund for Tsunami Disaster Relief 661 141 -101 616 -2 501 506 385 50 639 UNHCR Fund -7 158 664 618 616 360 41 100 23 462 17 638 United Nations Central Emergency Response Fund 500 000 6 679 462 350 32 365 11 964 5 243 6 721 United Nations Development Group Iraq Trust Fund 20 577 680 26 304 490 753 213 18 563 386 982 236 28 089 761 7 068 870 21 020 891 United Nations Human Security Fund 50 774 1 310 009 4 997 742 554 45 399 577 827 102 615 475 212 United Nations International Strategy for Disaster Reduction 1 272 620 1 642 172 65 019 -250 000 2 327 644 186 212 215 955 6 596 209 359 United Nations Lebanon Recovery Fund 767 226 6 979 774 205 774 205 UNICEF Fund 172 387 368 147 2 257 -1 050 394 341 11 064 136 336 7 097 129 239 World Conference on Education for All 56 255 17 577 69 348 4 484 4 413 71

TOTAL PART I 27 330 290 1 230 616 54 388 396 1 196 426 10 758 -477 518 44 340 214 2 437 311 36 901 443 11 359 553 25 541 890

PART II - OTHER EXTRA-BUDGETARY SOURCES

A.TECHNICAL ASSISTANCE PROJECTSFINANCED BY LOANS / GRANTS FROM INSTITUTIONS

African Development Bank:Cameroon -9 301 1 283 806 23 673 1 103 755 77 263 117 160 80 108 37 052 Côte d'Ivoire -194 573 211 131 -781 -101 17 440 17 440 Democratic Republic of Congo 2 933 800 93 734 1 619 967 99 550 1 308 017 107 580 1 200 437 Gambia 88 461 114 850 2 795 189 113 15 129 1 864 1 863 1 Niger 8 976 -8 976 Rwanda -35 104 166 404 116 195 15 105 Sierra- Leone 106 763 65 466 3 008 100 215 13 028 61 994 3 230 58 764 Support to the ECOWAS Peace and Development Programme 13 502 325 734 232 007 20 881 86 348 57 463 28 885 Co-operative Programme -132 748 251 397 52 313 66 336 2 229 64 107

Arab Fund For Economic Development:Feasibility Study - Educational Industries / Decision Support Systems in Arab countries 121 535 -121 535

Asian Development Bank:HIV/AIDS Vulnerability and Risk Reduction among Ethnic Minorities Groups through Communication Strategies in GMS 9 956 569 900 472 623 61 441 45 792 45 418 374 Lao PDR 211 370 104 323 222 028 93 665 Uzbekistan -64 595 167 404 102 809

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Vietnam 439 -439

Inter-American Development Bank:Brazil 1 676 752 1 109 337 45 663 2 631 216 133 368 67 168 287 66 881 Latin America - Comparative Evaluation of Education 78 247 45 422 32 825 25 500 7 325 Latin America - Summit of the Presidents for Education Evaluation 27 415 -27 415 Peru 27 439 66 715 94 154

Islamic Development Bank:Chad 8 187 4 737 3 450 3 450 Niger 4 596 3 887 709 709 Co-operative Programme 23 731 -23 731 -23 731

Japan Bank for International Cooperation:Vietnam 97 500 78 639 8 084 10 777 10 777

OPEC Fund:Bangladesh 15 615 -15 615 Côte d'Ivoire 32 661 32 661 32 661 Mali 19 523 13 599 1 360 4 564 4 564 Mauritania 645 346 36 367 583 314 46 665 51 734 7 195 44 539 Populations and Perspectives for Development in the Arab World -15 318 15 318 Senegal -18 416 -18 416 -18 416 Strengthening Education Sector Response to prevent HIV/AIDS 775 173 39 688 1 053 273 1 683 607 184 527 114 878 69 649 Tajikistan 782 -2 722 58 Co-operative Programme -4 668 9 709 5 041 5 041

World Bank:African Education Planners Study Tour 9 872 -9 872 Bangladesh 409 696 29 768 439 464 439 464 Brazil 779 157 1 836 176 112 498 160 171 2 464 327 123 216 300 459 300 459 Conservation Master Plan, Rehabilitation Activities for Cultural Heritage in the Bethlehem Area -12 036 -11 463 -573 Consultation of the Mena Education Stake Holders -4 311 4 311 Consulting Services within the Framework of UN Special Initiative - Africa 10 091 -10 091 Co-operation under EFA Framework - Consultancy Services - Africa 2 400 -2 400 Ghana 60 60 60 Global Initiative for Quality Assurance Capacity 1 280 000 1 280 000 1 280 000 Haiti 30 527 300 000 10 479 287 142 53 864 28 031 25 833 Iran -84 689 -84 689 -84 689 Latin American Laboratory for Assessment of the Quality of Education 792 261 939 54 710 2 878 205 143 19 778 185 365 Morocco -11 590 61 2 -11 653 -11 653 Programme of Analytical and Capacity Building conducted by the Pôle de Dakar 15 822 642 000 173 662 8 683 475 477 87 001 388 476 Uzbekistan -3 390 27 312 12 320 1 602 10 000 9 998 2 Vietnam 6 265 -6 265 Workshop on Strengthening the Role of Education Ministries in the Government's response to HIV/AIDS in Central Asia 4 660 -4 660

SUB-TOTAL PART II A 4 433 022 8 452 929 437 745 160 171 4 315 853 12 251 222 824 113 4 724 385 590 559 4 133 826

B.SELF BENEFITING PROJECTS

Aga Khan Foundation 197 226 10 730 309 115 325 191 42 275 149 605 149 605 Albania 1 367 014 22 727 1 389 741 1 389 741 Bahrain 623 419 228 051 39 265 197 325 25 652 667 758 16 168 651 590 Cameroon 86 694 80 272 6 422

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Chile 164 063 305 578 258 743 22 281 188 617 9 425 179 192 Costa Rica 5 695 5 695 5 695 Ecuador 341 527 10 000 200 968 10 558 140 001 9 465 130 536 Guatemala 132 657 894 23 523 -132 103 017 13 222 565 178 24 400 540 778 Iraq 3 650 000 62 516 91 562 7 834 3 613 120 2 923 020 690 100 Jordan 704 -704 Korea, Republic of 71 292 977 63 955 8 314 Latin American Laboratory for Assessment of Quality in Education 205 860 285 911 66 295 415 712 142 354 31 034 111 320 Lebanon 39 336 7 900 1 027 30 409 11 074 19 335 Libyan Arab Jamahiriya 11 072 383 7 049 380 649 166 3 070 771 300 787 15 399 371 1 097 866 14 301 505 Mexico 145 186 414 349 324 422 41 702 193 411 7 436 185 975 Namibia 779 115 989 2 990 389 113 389 32 565 80 824 Nigeria 2 109 987 1 780 501 79 277 21 336 2 701 984 135 099 1 154 018 269 913 884 105 Saudi Arabia 254 964 18 609 -1 230 -123 274 926 50 274 876 United Arab Emirates 519 780 14 910 192 822 25 067 316 801 260 569 56 232 Uruguay 6 267 432 188 -5 369 727 18 486 50 237 585 49 652

SUB-TOTAL PART II B 15 167 528 16 974 621 921 700 21 336 374 569 8 406 131 658 992 24 394 631 4 693 570 19 701 061

C.DONATED PROJECTS

Albanian Trust Fund 126 583 33 060 159 643 159 643 Arab Gulf Programme for United Nations Development 421 685 33 231 370 525 250 656 32 437 542 348 30 654 511 694 Associate Experts' Scheme

Austria 39 470 80 000 490 127 800 15 336 -23 176 -23 176 Belgium 157 767 523 288 10 158 458 811 55 057 177 345 386 176 959 Denmark 114 028 -3 197 82 909 9 949 17 973 622 17 351 Finland 225 049 512 300 11 387 460 036 55 204 233 496 17 977 215 519 France 105 043 530 900 7 888 338 568 40 628 264 635 2 264 633 Germany 150 244 523 216 3 342 531 330 63 759 81 713 81 713 Greece 131 579 4 462 38 370 4 604 93 067 2 800 90 267 Italy -137 007 1 466 480 6 838 964 583 115 750 255 978 7 103 248 875 Japan 165 997 1 733 215 35 627 1 383 827 166 059 384 953 10 952 374 001 Korea, Republic of 63 756 306 681 488 322 340 38 681 9 904 13 004 -3 100 Netherlands 31 724 -7 916 21 257 2 551 Norway -32 238 129 007 56 814 6 818 33 137 1 901 31 236 Portugal 37 460 289 14 220 1 707 21 822 21 822 Spain -7 602 750 000 2 280 39 559 4 747 700 372 700 372 Sweden -226 728 843 218 236 509 120 61 094 46 512 8 955 37 557 Switzerland 472 442 5 997 249 739 29 969 198 731 8 023 190 708 United Kingdom -23 761 23 761 490 59 -549 -549

Association of Private Committees Trust Fund 58 936 986 344 579 829 28 991 436 460 340 884 95 576 Australian Trust Fund 12 245 400 606 20 019 235 035 30 555 167 280 108 371 58 909 Belgian (Flanders) Trust Fund 4 535 912 6 213 163 331 441 -43 000 5 003 055 518 678 5 515 783 440 479 5 075 304 Canadian Trust Fund 45 587 595 041 17 804 461 406 59 983 137 043 85 438 51 605 Czech Republic Trust Fund 76 336 3 103 79 439 79 439 Danish Trust Fund 507 761 409 570 22 863 515 444 48 308 376 442 1 268 375 174 European Commission Trust Fund 2 663 823 287 633 9 514 945 8 645 235 386 749 3 434 417 382 360 3 052 057 Felissimo Trust Fund 281 933 19 036 50 422 87 223 11 339 252 829 5 650 247 179 Finnish Trust Fund 298 935 178 192 16 417 -44 632 336 967 16 848 95 097 27 211 67 886 French Trust Fund 1 115 419 3 109 308 103 150 -37 748 2 662 623 253 437 1 374 069 322 512 1 051 557 German Trust Fund 2 400 134 2 525 513 123 594 1 400 2 917 551 299 222 1 833 868 350 241 1 483 627 Greek Trust Fund 471 065 17 421 212 690 27 650 248 146 22 600 225 546 Iranian Trust Fund 84 348 6 130 90 478 90 478 Irish Trust Fund 591 833 33 630 296 777 38 581 290 105 290 105 Islamic Call Society Trust Fund 1 555 731 71 149 5 133 038 794 196 101 387 5 864 335 25 506 5 838 829 Italian Trust Fund 23 033 282 28 358 565 1 523 152 -500 000 13 398 893 1 580 149 37 435 957 3 252 788 34 183 169 Japanese Trust Fund 40 705 245 20 730 097 2 509 550 28 345 478 3 678 193 31 921 221 3 872 449 28 048 772 Korea, Republic of, Trust Fund 664 219 2 687 608 76 352 1 378 905 174 307 1 874 967 117 793 1 757 174

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Luxembourg Trust Fund 825 314 -17 051 35 245 455 358 57 430 330 720 8 689 322 031 Malta Trust Fund 60 000 1 180 61 180 61 180 Menorca Trust Fund 1 839 14 -28 1 738 87 Mexico Trust Fund 87 387 377 299 233 610 30 369 200 707 8 370 192 337 Multi-Donor Trust Fund 279 768 12 414 20 743 2 697 268 742 189 258 79 484 Netherlands Trust Fund 1 874 582 737 519 73 124 1 486 640 173 664 1 024 921 143 493 881 428 New Zealand Trust Fund 570 391 1 063 384 35 349 1 270 845 112 009 286 270 216 651 69 619 Norwegian Agency for Development Trust Fund 1 057 998 -236 911 -68 076 646 268 84 015 22 728 22 728 Norwegian Trust Fund 5 464 762 6 253 442 106 910 4 955 592 622 222 6 247 300 488 391 5 758 909 OECD Trust Fund 99 -99 Portuguese Trust Fund 374 469 342 044 43 475 45 876 15 584 698 528 2 390 696 138 Private Sector Trust Funds - other 4 137 076 249 703 50 864 7 560 596 5 426 696 556 757 6 014 786 468 951 5 545 835 Private Sector UNESCO Chairs 325 447 16 724 76 434 166 340 21 279 230 986 40 783 190 203 Qatar Foundation Trust Fund 4 375 888 181 885 2 439 743 243 974 1 874 056 334 313 1 539 743 Romania Trust Fund 147 493 147 493 147 493 Saudi Arabian Trust Fund 11 060 725 8 581 008 476 574 14 672 507 752 337 4 693 463 308 4 693 155 Spanish Trust Fund 2 994 386 12 600 971 407 854 4 257 274 533 817 11 212 120 672 394 10 539 726 Swedish Trust Fund 1 112 267 5 579 924 164 111 3 040 114 358 345 3 457 843 630 088 2 827 755 Swiss Trust Fund 2 005 600 303 045 75 130 1 948 586 248 759 186 430 58 821 127 609 United Arab Emirates Trust fund 50 342 357 45 345 3 627 1 727 1 727 United Kingdom Trust Fund 1 415 592 1 660 684 107 786 2 072 062 269 368 842 632 223 190 619 442 United States of America Trust Fund 477 035 1 873 208 51 729 -234 1 986 522 244 858 170 358 247 027 -76 669

SUB- TOTAL PART II C 117 792 493 113 505 645 7 306 508 109 701 23 068 062 116 893 595 12 289 984 132 598 830 13 191 046 119 407 784

D.FUNDS FOR CULTURAL CAMPAIGNS, VOLUNTARYCONTRIBUTIONS AND INTERNATIONAL APPEALS

PRIZES AND AWARDS :

Arirang Prize (Korea Rep. Of) 60 000 30 000 1 025 60 000 31 025 31 025 Emir Jaber Al-Ahmad Al-Jaber Al-Sabah Prize 563 467 58 064 71 721 549 810 549 810 Felix Houphouet-Boigny Peace Prize 7 617 137 455 000 574 627 1 316 640 1 365 883 8 597 521 14 136 8 583 385 International Prize for Water Conservation : "Great Artificial River" 374 206 26 000 41 282 31 779 3 927 405 782 151 405 631 Japan Shipbuilding Industry Foundation Endowment for UNESCO Peace Prize 1 123 937 115 523 133 730 154 1 105 576 1 105 576 Javad Husain "Young Scientist" Prize 190 809 21 122 211 931 211 931 King Hamad Bin Isa Al-Khalifa Prize 435 000 35 744 185 620 24 131 260 993 30 415 230 578 Literacy Prizes

Conficius Prize for Literacy 300 000 13 172 206 959 26 905 79 308 15 410 63 898 International Reading Association Literacy Award 48 264 2 689 50 000 86 556 7 776 6 621 6 621 King Sejong Literacy Prize 43 089 96 000 2 010 129 121 6 598 5 380 5 380 Malcolm Adiseshiah International Literacy Prize 28 -28 Noma Literacy Prize 14 102 8 382 5 720 4 502 1 218

Melina Mercouri Prize 6 756 34 135 26 549 14 342 14 342 Prince of Asturias Prize 3 3 3 Samarkand Taronasi Prize 3 000 3 000 3 000 Sharjah Prize for Arab Culture 245 076 169 328 30 976 155 446 289 934 12 244 277 690 Sheikh Zayed Bin Sultan Al Nahyan Prize 4 433 149 975 7 888 35 564 126 732 70 331 56 401 Special Account for : International Simon Bolivar Prize 272 191 30 129 302 320 302 320 Sultan Qaboos Prize for Environmental Preservation 288 781 24 000 32 606 35 196 310 191 1 050 309 141 UNESCO/Jikji Memory of the World Prize 236 35 000 4 600 30 636 30 636 UNESCO Kalinga Prize for the Popularization of Science 3 554 3 621 7 175 7 175 UNESCO Prize for Children and Young People Literature in the Service of Tolerance 4 488 -4 488 UNESCO Prize for the Promotion of the Arts 132 520 12 441 52 080 158 391 38 650 281 38 369 UNESCO-Madanjeet Singh Prize for the Promotion of Tolerance and Non-Violence 100 000 150 000 146 112 103 888 103 888

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FELLOWSHIP AND SCHOLARSHIP FUNDS :

Nessim Habif Fund 1 615 648 649 813 15 392 2 250 069 2 250 069 Scholarship Fund for Higher Educational Students in Occupied Arab Territories 140 -140 Scholarship Programme for Girls in Africa 6 868 6 868 6 868 Theresa McKay Memorial Fund Fellowships 204 220 22 604 226 824 226 824 Third World Academy of Sciences 16 976 974 10 140 760 97 487 2 005 951 25 230 767 658 8 636 467 21 377 593 3 098 830 18 278 763 UNESCO-ASCHBERG Foundation Trust Fund 3 439 982 361 661 17 259 228 828 3 590 074 9 105 3 580 969 UNESCO Fellowship Bank 28 181 70 000 5 320 92 861 92 861

OTHERS :

Action in Education for Afghan Refugees 27 426 2 533 24 893 14 475 10 418 African Research and Development - Science & Technology 36 737 -1 36 532 204 204 ANSTI Membership Fund 123 622 13 072 83 951 105 194 115 451 115 451 Asian Programme of Educational Innovation for Development 27 993 10 000 3 458 94 541 32 798 103 194 24 650 78 544 Asia-Pacific Programme of Education for All 37 846 10 000 29 102 18 744 18 742 2 Capacity Building for Education for All 5 986 424 11 975 057 829 227 62 813 8 155 953 10 697 568 2 099 378 8 598 190 CCT Links 54 765 6 003 1 201 59 567 5 000 54 567 Children in Need 1 313 250 102 604 174 300 3 166 301 2 766 915 1 989 540 220 542 1 768 998 Conservation and Restoration of Wat Phu Archaelogical Sites 1 505 -1 505 Copyrights Programme 2 167 899 3 066 Criança Esperanza - Hope on our Children 8 861 362 1 743 615 3 327 402 14 209 434 12 109 686 16 032 127 1 832 415 14 199 712 Education For All - Dakar Follow-up 3 543 749 8 990 996 429 270 -18 182 7 881 610 5 064 223 341 963 4 722 260 Emergency Relief Fund 82 309 6 478 -88 787 Fund for the Elimination of Doping in Sport 1 090 985 11 075 7 199 8 947 895 1 099 417 8 1 099 409 Global Alliance for Cultural Diversity 83 106 268 355 15 329 84 152 282 638 11 760 270 878 Great Apes Survival Project 3 996 964 4 960 4 960 Increased Aid to Developing Countries 270 556 9 080 28 383 163 476 210 832 260 663 67 554 193 109 Information Programme for All 726 137 62 694 47 760 14 284 472 147 378 728 48 385 330 343 Initiative for the Volga-Caspian basin 2 976 -776 2 200 Integral Study of the Silk Roads 1 659 1 659 1 659 Intergovernmental Informatics Programme 14 340 -14 285 55 Intergovernmental Oceanographic Commission ( I.O.C ) 4 735 006 4 516 362 352 582 476 364 680 883 5 185 602 5 575 595 468 712 5 106 883 International Campaigns - Cultural Heritage 216 836 14 408 12 271 81 937 161 578 8 751 152 827 International Computer Driving License 2 167 299 501 102 61 239 3 137 521 2 044 620 3 822 541 442 271 3 380 270 International Fund for Cultural Diversity 13 514 13 514 13 514 International Fund for the Development of Physical Education and Sport 11 220 60 000 7 968 324 278 314 596 88 870 41 991 46 879 International Fund for the Promotion of Culture 3 776 426 312 970 82 741 321 724 3 850 413 5 535 3 844 878 International Fund for the Promotion of the Return of Cultural Works of Art to their Country of Origin 28 913 77 205 2 842 108 960 108 960 International Programme for the Development of Communication 1 632 217 3 248 137 219 863 45 000 1 890 180 3 255 037 638 052 2 616 985 International Programme on Technical and Vocational Education (UNEVOC) 3 112 -3 142 -30 Man and Biosphere Programme (MAB) 214 199 2 669 439 20 000 65 580 -88 000 1 015 036 33 923 1 832 259 1 019 922 812 337 Mitigation Against Earthquake Losses in the Mediterranean Region 16 729 7 279 9 450 1 532 7 918 Ocampo Donations Special Account 130 064 146 689 5 371 194 153 422 840 53 437 5 675 47 762 Plan for the Promotion of Arab Culture 7 523 7 523 7 523 Portal on Higher Education Institutions 129 697 3 509 41 320 4 132 87 754 45 938 41 816 Preliminary Microzonation Map for Bam 2 636 2 635 1 1 Priority Africa 117 858 1 136 834 40 141 829 73 848 1 221 814 8 151 1 213 663 Programme for Education of Children in Difficult Situations 3 949 4 081 368 728 287 667 89 091 57 444 31 647 Promotion of Cultural Heritage Activities 19 587 11 162 8 425 8 425 Protection of Cultural Property in the Middle East in the Event of Armed Conflict 416 361 46 089 462 450 462 450 Protection of the World Cultural and Natural Heritage 241 211 153 168 18 026 165 528 246 877 30 117 216 760 Special Account - Egypt 10 394 388 1 145 422 70 299 11 469 511 11 469 511 Special Accounts for General Histories 363 375 29 065 66 058 326 382 22 505 303 877 Special Account - Contribution to Internal Oversight Service 271 551 22 699 89 455 204 795 1 475 203 320 Special Account for Science and Human Sciences Sector - Div. of Foresight & Philosophy 38 748 28 924 4 911 72 583 72 583

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Special Account for South South Cooperation in Education 80 882 80 882 80 882 Special Account for Voluntary Contributions 4 395 812 450 763 13 000 459 330 658 067 1 259 013 2 895 646 42 288 4 298 051 87 638 4 210 413 Special Account for the Reinforcement of the 33C/5 5 921 601 313 372 543 010 1 913 265 4 864 718 300 172 4 564 546 Special Account for the Strengthening of UNESCO's Infrastructure and its Programme 39 768 1 999 975 259 578 1 780 165 164 067 1 616 098 Special Fund for Youth 16 383 13 709 2 674 493 2 181 The Convention for the Safeguarding of the Intangible Cultural Heritage 1 876 057 76 289 1 952 346 1 952 346 Trust Fund for the Establishment of the Nubia Museum in Aswan and -- the National Museum of Egyptian Civilization in Cairo 1 185 672 8 065 93 763 646 129 641 371 77 473 563 898 Trust Funds for the Preservation of :

Moenjodaro 565 942 54 144 159 857 460 229 3 374 456 855 Parsi Zorastrian Culture and Heritage 14 065 32 843 27 055 19 853 19 853

Trust Funds for Safeguarding the :Monuments of Borobodur 259 482 23 538 86 694 196 326 61 087 135 239 Monuments of Venice 801 762 16 678 96 059 1 043 397 1 863 257 94 639 14 081 80 558

Tsunami Special Account 64 706 667 -42 751 22 622 UNESCO History Project 32 425 32 425 32 425 UNESCO Media Fund 65 084 377 53 404 12 057 5 634 6 423 World AIDS Foundation 56 627 398 -3 750 53 275 World Commission on Culture and Development 3 782 1 615 2 167 2 167 World Heritage Fund 4 658 281 6 737 863 533 154 1 239 910 7 509 873 5 659 335 1 297 978 4 361 357 World Solar Summit - High Level Expert Meeting 67 877 1 023 -1 025 67 875

Sub-Total Part II D 91 563 569 455 000 61 805 172 544 308 11 352 889 5 423 398 29 533 043 71 296 149 150 729 129 230 501 12 751 395 116 479 106

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 17 295 448 738 348 591 117 442 4 440 113 002 Brazil UNESCO Antenna 162 687 -22 513 1 832 23 303 142 068 23 241 23 241 Beirut Office -92 740 332 405 162 694 76 971 2 792 74 179 Venice Office 35 114 6 343 18 567 22 890 22 890 Regional Bureau for Science and Culture in Europe - Venice 1 306 011 3 375 448 105 411 3 217 359 1 569 511 389 846 1 179 665

SUB-TOTAL - PART II E 1 428 367 4 134 078 107 243 23 303 6 343 3 889 279 1 810 055 397 078 1 412 977

F. CONTRIBUTIONS FOR HQ RENOVATIONS

Japanese Garden - Renovation Plan 73 121 6 659 193 24 327 55 646 55 646

SUB-TOTAL - PART II F 73 121 6 659 193 24 327 55 646 55 646

TOTAL - PART II 230 458 100 455 000 204 872 445 544 308 20 132 744 5 737 909 57 298 063 212 760 703 13 923 818 292 814 048 31 623 648 261 190 400

TOTAL PROGRAMME EXPENDITURE PARTS I AND II 257 788 390 455 000 206 103 061 54 932 704 21 329 170 5 748 667 56 820 545 257 100 917 16 361 129 329 715 491 42 983 201 286 732 290

Closing Exchange Revaluation 69 382 -67 703 1 679 352 028 -350 349

GRAND TOTAL 257 857 772 455 000 206 103 061 54 932 704 21 329 170 5 680 964 56 820 545 257 100 917 16 361 129 329 717 170 43 335 229 286 381 941

Note: The fund balance of US $286,381,941 at 31 December 2007 includes amounts of US $28,307,782 held as Endowments

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SCHEDULE 1.3.1

IBE ICTP IESALC IHE IICBA IIEP IITE UIS UIL

INCOMEVoluntary contributions 2 515 60 604 1 065 22 880 35 33 045 58 13 453 4 617 138 272 115 824Revenue producing activities 299 1 128 2 1 678 14 3 121 1 027Allocations from other funds (regular programme) 4 591 1 021 2 200 2 000 6 346 1 100 9 020 1 600 27 878 25 051Income for services rendered 97 38 790 2 012 1 40 900 35 791Investment income 174 1 398 563 731 47 2 913 1 554Currency exchange adjustments 24 2 (22) (2) 895 276 9 1 182 (312)Other 15 51 1 2 389 775 82 206 3 519 1 606

TOTAL INCOME 7 715 64 204 3 268 64 037 2 033 45 314 1 172 23 563 6 479 217 785 180 541

EXPENDITUREExpenditure 6 572 64 919 3 348 64 055 1 968 41 296 1 164 19 770 5 200 208 292 182 820

TOTAL EXPENDITURE 6 572 64 919 3 348 64 055 1 968 41 296 1 164 19 770 5 200 208 292 182 820EXCESS (SHORTFALL) OF INCOME 1 143 (715) (80) (18) 65 4 018 8 3 793 1 279 9 493 (2 279)OVER EXPENDITURE

Savings on prior period obligations 40 138 234 60 1 054 190 1 716 2 476Transfers to/from reservesOther adjustments to reserves and fund balances 2 407 524 1 096 (11) 453 4 469 910Reserves and fund balances, beginning of period 42 12 929 55 2 328 230 6 628 36 4 222 26 470 25 363

RESERVES AND FUND BALANCES, END OF PERIOD 1 225 14 759 209 2 834 355 12 796 44 8 194 1 732 42 148 26 470

UNESCOSPECIAL ACCOUNTS FOR INSTITUTES

SCHEDULE OF INCOME AND EXPENDITURE AND CHANGES IN RESERVES AND FUND BALANCES FOR THE FINANCIAL PERIOD ENDED 31 DECEMBER 2007

(Expressed in '000s USD)

International Bureau of Education

International Centre for

Theoretical Physics

TotalInternational Institute for Higher Education in Latin America and the

Carribean 2007 2005

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

UNESCO Institute for

Lifelong Learning

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180 EX


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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

United Kingdom special account IPSAS

special accountUnattributed

OPF Balances (Schedule 2.2.1) (Schedule 2.2.2) (Schedule 2.2.3) 2007 2005

ASSETS

Cash and term deposits 71 68 459 68 530 56 213Accounts receivable Inter-fund balances 22 598 26 758 6 691 4 018 1 455 5 528 246 (67 048) 246 578 Other 2 149 4 224 6 373 3 868Other assets 802 802 908

TOTAL ASSETS 25 620 26 758 6 691 4 018 1 455 5 528 246 5 635 75 951 61 567

LIABILITIES

Unliquidated obligations 1 215 1 154 88 150 546 1 154 4 307 3 253Accounts payable Inter-fund balances 1 105 1 105 Other 9 532 3 796 13 328 11 973Other liabilities 734 734 729

TOTAL LIABILITIES 10 747 1 154 88 150 546 1 154 5 635 19 474 15 955

RESERVES AND FUND BALANCES

Operating reserves 1 620 1 620 1 381Other Surpluses 13 253 25 604 6 603 3 868 909 4 374 246 54 857 44 231

TOTAL RESERVES AND FUND BALANCES 14 873 25 604 6 603 3 868 909 4 374 246 56 477 45 612

TOTAL LIABILITIES, RESERVES AND FUND BALANCES 25 620 26 758 6 691 4 018 1 455 5 528 246 5 635 75 951 61 567


TOTAL

UNESCOOTHER PROPRIETARY FUND

SCHEDULE OF ASSETS, LIABILITIES, RESERVES AND FUND BALANCESAS AT 31 DECEMBER 2007

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SCHEDULE 2.3.1

IBE ICTP IESALC IHE IICBA IIEP IITE UIS UIL

ASSETSCash and term deposits 126 16 377 44 10 228 19 15 931 69 7 289 1 929 52 012 34 277Investments Accounts receivable

Inter-fund balances 1447 318 1 368 2 174 56 4 364 4 961Other 3 754 12 9 708 2 581 1 85 93 11 239 6 166

Other assets 5 2 698 3 13 2 719 2 101

TOTAL ASSETS 1 581 17 131 374 22 635 389 16 515 70 9 561 2 078 70 334 47 505

LIABILITIESUnliquidated obligations 247 2 237 165 2 376 32 2 239 1 309 8 605 7 106Accounts payable

Inter-fund balances 19 1 049 26 1 094 1 426Other 109 116 17 350 2 431 58 67 18 133 12 170

Other liabilities 75 279 354 333

TOTAL LIABILITIES 356 2 372 165 19 801 34 3 719 26 1 367 346 28 186 21 035

RESERVES AND FUND BALANCESOperating reserves 10 006 4 898 1 267 16 171 11 909Other surpluses 1 225 4 753 209 2 834 355 7 898 44 6 927 1 732 25 977 14 561

TOTAL RESERVES AND FUND BALANCES 1 225 14 759 209 2 834 355 12 796 44 8 194 1 732 42 148 26 470

TOTAL LIABILITIES, RESERVES AND FUND BALANCES 1 581 17 131 374 22 635 389 16 515 70 9 561 2 078 70 334 47 505

0 0 0 0 0 0 0 0 0 0

Total

2007 2005


Capacity Building in Africa

International Institute for Educational

Planning

UNESCO Institute for Information

Technologies in Education

UNESCO Institute of Statistics

UNESCO Institute for

Lifelong Learning

(Expressed in '000s USDs)

UNESCOSPECIAL ACCOUNTS FOR INSTITUTES


UNESCO-IHE Institute for Water

Education

International Bureau of Education

International Centre for Theoretical Physics


Higher Education in Latin America

and the Carribean

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SCHEDULE 2.3

TOTAL

ASSETS

Cash and term deposits 52 012 196 619 298 655 547 286 407 090 Investments (Market Value 2007 - $2,372; 2005 - $1,852) 2 305 2 305 1 425 Accounts receivable

Inter-fund balances 4 364 29 926 (34 284) 6 119 Other 11 239 5 326 16 565 9 586

Other assets 2 719 319 148 3 186 3 115

TOTAL ASSETS 70 334 196 938 336 360 (34 284) 569 348 421 335

LIABILITIES

Unliquidated obligations 8 605 33 912 43 335 85 852 94 682 Accounts payable

Inter-fund balances 1 094 33 190 (34 284) 0 Other 18 133 4 191 22 324 14 988

Other liabilities 354 2 452 2 806 2 298

TOTAL LIABILITIES 28 186 67 102 49 978 (34 284) 110 982 111 968


Balances relating to projects funded by donors 129 836 286 382 416 218 282 897 Operating reserves 16 171 16 171 11 909 Other surpluses 25 977 25 977 14 561

TOTAL RESERVES AND FUND BALANCES 42 148 129 836 286 382 458 366 309 367

TOTAL LIABILITIES, RESERVES AND FUND BALANCES 70 334 196 938 336 360 (34 284) 569 348 421 335

2005

Institutes (Schedule 2.3.1)

UNESCO Brasilia Office

Other Special Accounts and Trust

Funds 2007

Inter-fund Eliminations


UNESCOPROGRAMME FIDUCIARY FUNDS

SCHEDULE OF ASSETS, LIABILITIES, RESERVES AND FUND BALANCES AS AT 31 DECEMBER 2007

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SCHEDULE 2.2.3

Terminal Payment Fund

Staff Compensation Fund Language Courses

2007 2005

ASSETS

Accounts receivable Inter-fund balances 5 769 609 313 6 691 6 117

TOTAL ASSETS 5 769 609 6 691 6 117

LIABILITIES

Unliquidated obligations 48 40 88

TOTAL LIABILITIES 48 40 88


Other Surpluses 5 721 609 273 6 603 6 117

TOTAL RESERVES AND FUND BALANCES 5 721 609 273 6 603 6 117

TOTAL LIABILITIES, RESERVES AND FUND BALANCES 5 769 609 313 6 691 6 117


TOTAL

UNESCOSTAFF RELATED ACCOUNTS


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SCHEDULE 2.2.2

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)

2007 2005

ASSETS

Accounts receivable Inter-fund balances 23 454 2 262 736 306 26 758 16 880

TOTAL ASSETS 23 454 2 262 736 306 26 758 16 880

LIABILITIES

Unliquidated obligations 1 154 1 154 746

TOTAL LIABILITIES 1 154 1 154 746


Other Surpluses 22 300 2 262 736 306 25 604 16 134

TOTAL RESERVES AND FUND BALANCES 22 300 2 262 736 306 25 604 16 134

TOTAL LIABILITIES, RESERVES AND FUND BALANCES 23 454 2 262 736 306 26 758 16 880


TOTAL

UNESCOPROGRAMME SUPPORT COSTS FOR SPECIAL ACCOUNTS AND TRUST FUNDS


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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

2007 2005

ASSETS

Cash and term deposits 71 71 36Accounts receivable Inter-fund balances 11 984 1 356 5 330 3 099 829 22 598 20 894 Other 205 1 944 2 149 1 814Other assets 307 335 160 802 900

TOTAL ASSETS 12 291 1 967 7 434 3 099 829 25 620 23 644

LIABILITIES

Unliquidated obligations 59 146 655 355 1 215 795

Accounts payable

Unredeemed coupons 8 860 8 860 11 031 Other 672 672Other liabilities 65

TOTAL LIABILITIES 9 591 146 655 355 10 747 11 891


Operating reserves 1 516 104 1 620 1 381Other Surpluses 1 184 1 821 6 675 2 744 829 13 253 10 372

TOTAL RESERVES AND FUND BALANCES 2 700 1 821 6 779 2 744 829 14 873 11 753

TOTAL LIABILITIES, RESERVES AND FUND BALANCES 12 291 1 967 7 434 3 099 829 25 620 23 644


TOTAL

UNESCOREVENUE GENERATING ACTIVITIES


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SCHEDULE 2.4

ASSETSCash and term deposits 33 144 457 396 1 842 444 309 493 135 401 124 Investments 127 487 127 487 128 726 Accounts receivable

Inter-fund balances 1 1 Loans to staff members 50 493 50 493 40 183 Other 865 10 148 42 472 4 11 531 5 029

Stock on hand at lower of cost or net realizable value 765 153 918 777 Other assets 292 14 1 806 2 112 1 598

TOTAL ASSETS 34 302 645 524 2 663 2 875 313 685 677 577 437

LIABILITIESAccounts payable 4 662 395 344 2 777 97 8 275 5 677 Inter-fund balances 10 Distribution payable to members 23 037 23 037 14 272 Members' deposits 596 409 65 596 474 509 157 Other Liabilities 51

TOTAL LIABILITIES 4 662 619 841 409 2 777 97 627 786 529 167

RESERVES AND FUND BALANCESOperating reserves 25 683 25 683 20 820 Surplus 29 640 2 254 98 216 32 208 27 450

TOTAL RESERVES AND FUND BALANCES 29 640 25 683 2 254 98 216 57 891 48 270

TOTAL LIABILITIES, RESERVES AND FUND BALANCES 34 302 645 524 2 663 2 875 313 685 677 577 437

TOTAL

Medical Benefit Fund

UNESCO Staff Savings and Loan Service

UNESCO Commissary

Fund

UNESCO Restaurant

Service2007 2005

UNESCO Children's Club & Day Nursery


UNESCOSTAFF FIDUCIARY FUNDS

SCHEDULE OF ASSETS, LIABILITIES AND RESERVES AND FUND BALANCESAS AT 31 DECEMBER 2007

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180 EX/33 Part I Rev. Annex I

ANNEX I

UNESCO EX GRATIA PAYMENTS

Financial Regulation 10.3 states that ex gratia payments shall be notified to the General Conference. No ex gratia payments were recorded during the financial period ended 31 December 2007.

180 EX/33 Part I Rev. Annex II

ANNEX II

UNESCO SPECIAL ACCOUNTS AND TRUST FUNDS

The new special accounts and trust funds established during the financial period 2006-2007 were the following:

United Nations sources

UNDP/Spain MDG Fund UN Economic and Social Commission for Asia and the Pacific United Nations Central Emergency Response Fund UN Joint Programmes United Nations Lebanon Recovery Fund

Technical Assistance Projects

African Development Bank Democratic Republic of the Congo Support to the ECOWAS Peace and Development Programme

Asian Development Bank HIV/AIDS Vulnerability and Risk Reduction among Ethnic Minority Groups through Communication Strategies in GMS

Inter-American Development Bank Latin America – Comparative Evaluation of Education

Japan Bank for International Cooperation Viet Nam

OPEC Fund Burkina Faso

Strengthening Education Sector Response to prevent HIV/AIDS

World Bank Global Initiative for Quality Assurance Capacity Latin American Laboratory for Assessment of the Quality of Education

Programme of Analytical and Capacity-Building conducted by the Pôle de Dakar

Self-Benefiting Projects

Albania Cameroon Iraq Korea, Republic of United Arab Emirates

Donated Projects

Associate Experts’ Scheme – Greece Associate Experts’ Scheme – Switzerland Albanian Trust Fund Association of Private Committees Trust Fund Czech Republic Trust Fund Greek Trust Fund Malta Trust Fund Multi-Donor Trust Fund Romania Trust Fund

180 EX/33 Part I Rev. Annex II – page 2

Ali.S.O. Al-Kaabi Abu Dhabi Association Vocations Patrimoine CISCO Systems International Coca Cola Foundation Foundation for the Preservation of Cultural Properties, Korea Gordon and Betty Moore Foundation International Management Group Maersk Oil Qatar MBl Jaber Foundation Odebrecht Engineering OSISA Space Group, Korea Studio Galli Ingegneria Spa The William and Flora Hewlett Foundation The Christensen Fund The British and Foreign School Society The British Council, Nigeria Universita degli Studi di Bergamo The Getty Grant Program

Special Accounts for:

King Hamad Bin Isa Al-Khalifa Prize Confucius Prize for Literacy UNESCO Kalinga Prize for the Popularization of Science Fund for the Elimination of Doping in Sport International Fund for Cultural Diversity Portal on Higher Education Institutions South Cooperation in Education The Reinforcement of the 33 C/5 The Strengthening of UNESCO's Infrastructure and its Programme The Convention for the Safeguarding of the Intangible Cultural Heritage

UNESCO/Jikji Memory of the World Prize Criança Esperanza - Hope for our Children Great Apes Survival Project Preliminary Microzonation Map for Bam Tsunami UNESCO History Project

The following special accounts were closed during the biennium:

Malcolm Adiseshiah International Literacy Prize UNESCO Prize for Children's and Young People's Literature in the Service of Tolerance Scholarship Fund for Higher Educational Students in Occupied Arab Territories Conservation and Restoration of Wat Phu Archaeological Sites Copyrights Programme Emergency Relief Fund Initiative for the Volga-Caspian basin Intergovernmental Informatics Programme International Programme on Technical and Vocational Education (UNEVOC) Tsunami World AIDS Foundation World Solar Summit – High-Level Expert Meeting The UK Special Account

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* Balance due

USD USD USD USD USD USD USD USD USD USDAntigua and Barbuda 63,897 76,034 76,340 16,268 16,330 16,054 19,072 17,657 301,652Bolivia 52,968 52,968Brazil 2,524,485 2,524,485Burundi 270 270Cape Verde 7,062 7,062Central African Republic 6,357 7,062 13,419Chile 652,830 652,830Comoros 6,357 7,062 13,419Costa Rica 149,162 149,162Democratic Republic of the Congo 21,169 21,169Dominica 7,062 7,062Gambia 3,489 7,062 10,551Guinea 14,125 14,125Guinea-Bissau 7,062 7,062India 1,279,396 1,279,396Iran, Islamic Republic of 639,141 639,141Iraq 468,146 830,652 1,026,533 1,059,586 471,772 571,585 891,980 101,720 109,466 5,531,440Israel 10,575 10,575Italy 387,494 387,494Kenya 2,022 2,022Kiribati 1,307 1,307Lebanon 122,499 122,499Liberia 412 412Libyan Arab Jamahiriya 218,004 218,004Madagascar 382 382Marshall Islands 7,062 7,062Mauritania 3,469 3,469Mexico 1,403,880 1,403,880Micronesia 2,013 2,013Myanmar 52,968 52,968Pakistan 27,567 27,567Palau 5,815 5,815

UNPAID CONTRIBUTIONS AS AT 31 DECEMBER 2007PART I: ARREARS ON CONTRIBUTIONS FOR PRIOR FINANCIAL PERIODS (EXCLUDING ARREARS PAYABLE IN ANNUAL INSTALMENTS) AS OF 31 DECEMBER 2007

ANNEX III

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nnex III

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* Balance due

USD USD USD USD USD USD USD USD USD USD

UNPAID CONTRIBUTIONS AS AT 31 DECEMBER 2007PART I: ARREARS ON CONTRIBUTIONS FOR PRIOR FINANCIAL PERIODS (EXCLUDING ARREARS PAYABLE IN ANNUAL INSTALMENTS) AS OF 31 DECEMBER 2007

ANNEX III

Panama 58,625 58,625Papua New Guinea 17,657 17,657Qatar 79,424 79,424Senegal 8,781 8,781Sierra Leone 6,310 7,062 13,372Singapore 285,348 285,348Somalia 103,293 63,897 76,034 76,340 5,422 5,445 5,704 6,357 7,062 349,554Spain 10,299,725 10,299,725Sudan 63,562 63,562Suriname 3,521 3,521Tajikistan 1,506 1,506

The former Yugoslav Republic of Macedonia 599 599Timor-Leste 4,230 4,230Tunisia 200,638 200,638Turkmenistan 125 125United States of America 30,865,265 30,865,265Uzbekistan 71,865 71,865Vanuatu 3,055 3,055Venezuela 89,138 89,138Zimbabwe 28,544 28,544Yugoslavia, SFRY** 2,469,044 297,439 0 2,766,483Yugoslavia, Former FRY** 1,528,727 950,215 766,062 338,918 85,894 0 3,669,816

Total Member States 3,040,483 2,784,612 2,128,816 1,978,328 832,380 679,254 913,738 149,662 49,844,242 62,351,515

** Recovery of arrears from the Socialist Federal Republic of Yugoslavia (SFRY) amounting to USD 2,766,483 and the former Federal Republic of Yugoslavia (FRY) amounting to USD 3,669,816 is under review.

*Arrears on contributions due in euros for 2006-2007 are translated at the UN operational rate of exchange rate prevailing in December 2007 of USD 1 = EUR 0.678

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General TOTALConference Member State 2006 and 2007 total due 2008 2009 2010 2011 2012 Total deferred DUE PLUSsession prior years to 2015 DEFERRED

$ $ $ $ $ $ $ $ $ $32nd 1 AFGHANISTAN - - - 32nd 5 000 5 000 312 413 322 413 322 413 26th 2 ANTIGUA AND BARBUDA 152 920 152 920 26th - 152 920 34th 3 ARGENTINA - 34th 3 202 357 3 202 357 3 202 357 3 202 358 6 404 716 19 214 145 19 214 145 32nd 4 ARMENIA - - - 32nd 103 710 103 710 103 710 103 710 207 426 622 266 622 266 32nd 5 AZERBAIJAN - - - 32nd - - 108 514 108 514 108 514 32nd 6 CENTRAL AFRICAN REPUBLIC 180 244 180 244 32nd - 180 244 32nd 7 COMOROS 227 394 75 798 303 192 32nd 75 798 75 799 151 597 454 789 33rd 8 COSTA RICA - - - 33rd 30 499 30 499 30 499 30 504 122 001 122 001 34th 9 DJIBOUTI - 34th 45 214 45 214 90 428 90 428 32nd 10 GABON - - - 32nd - 2 498 2 498 2 498 31st 11 GAMBIA 31 525 37 910 69 435 31st - 69 435 32nd 12 GEORGIA - - - 32nd 39 459 40 000 2 753 065 2 832 524 2 832 524 33rd 13 GUINEA-BISSAU 109 897 51 529 161 426 33rd 51 529 51 529 51 529 51 533 206 120 367 546 32nd 14 KYRGYZSTAN - - - 32nd 4 514 5 000 784 082 793 596 793 596 33rd 15 LIBERIA - - - 33rd 35 587 35 587 35 587 35 588 142 349 142 349 33rd 16 NAURU - - - 33rd 2 643 1 093 - - 3 736 3 736 33rd 17 NIGER - - - 33rd 14 931 21 427 21 427 21 430 79 215 79 215 34th 18 PARAGUAY 34th 32 300 32 300 32 299 96 899 96 899 33rd 19 PERU - - - 33rd 180 546 229 936 229 936 229 937 870 355 870 355 33rd 20 REPUBLIC OF MOLDOVA - - - 33rd 145 736 145 736 145 736 145 736 582 949 1 165 893 1 165 893 34th 21 SAO TOME AND PRINCIPE 5 000 5 000 34th 35 316 40 316 40 316 40 316 80 632 236 896 241 896 32nd 22 SIERRA LEONE 7 719 14 108 21 827 32nd 14 108 14 108 28 216 50 043 32nd 23 TAJIKISTAN - - - 32nd 5 000 5 000 397 992 407 992 407 992 32nd 24 TURKMENISTAN - - - 32nd 138 193 138 193 138 193

TOTAL 709 699 184 345 894 044 4 162 440 4 087 109 8 249 462 3 861 112 7 275 723 27 635 846 28 529 890

PART II: ARREARS OF CONTRIBUTIONS PAYABLE UNDER PAYMENTS PLANS AS OF 31 DECEMBER 2007

UNPAID CONTRIBUTIONS AS AT 31 DECEMBER 2007

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180 EX/33 Part I Rev. 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 2006-2007 is as follows:

Regular Programme Extrabudgetary TOTAL

Contracts Submitted

$’000s Contracts Submitted

$’000s Contracts Submitted

$’000s

Total contracts approved

44 10 003 228 98 600 272 108 600

Total waivers approved

19 4 700 43 26 400 62 31 080

The waivers granted in regard to the regular programme were 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 for reasons of standardization and harmonization, mainly in respect of 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 issue on partnerships will in future be governed by Manual Item 513 on Implementation Partnerships.

Printed on recycled paper

Executive Board 180 EX/33 Part II

Item 33 of the provisional agenda

FINANCIAL REPORT AND AUDITED FINANCIAL STATEMENTS OF UNESCO FOR THE PERIOD ENDED 31 DECEMBER 2007

AND REPORT BY THE EXTERNAL AUDITOR

PART II

REPORT BY THE EXTERNAL AUDITOR

SUMMARY

This document contains the full report by the External Auditor on the accounts of UNESCO for the biennium, together with the written comments of the Director-General thereon.

PARIS, 18 August 2008 Original: English

Hundred and eightieth session

180 EX/33 Part II

OFFICE OF THE EXTERNAL

AUDITOR OF THE UNITED NATIONS EDUCATIONAL,

SCIENTIFIC AND CULTURAL ORGANIZATION

REPORT

On the financial statements for the 2006-2007 biennium

180 EX/33 Part II – page 3

TABLE OF CONTENTS

INTRODUCTION............................................................................................................................5 PREPARATION OF THE FINANCIAL STATEMENTS ..................................................................7 DETAILED COMMENTS AND OBSERVATIONS..........................................................................7

Voluntary and Compulsory Contributions 7 Compulsory assessed contributions ...................................................................................... 7 Voluntary contributions........................................................................................................... 8

Staff Costs 9 Lack of formal procedures...................................................................................................... 9 Dependent spouses ............................................................................................................... 9 Education grant .................................................................................................................... 10

Exchange Differences 11 UNESCO’s specific situation................................................................................................ 11 Impact of exchange differences on the Belmont loan .......................................................... 11

Inventory Compilation and Updating 12 Reliability of inventories and monitoring by the Contracts Unit ............................................ 12 Valuation of recorded assets................................................................................................ 12 Works of art.......................................................................................................................... 13

Unliquidated Obligations 13 Cash Flow 14

Management of bank accounts (opening, closure) .............................................................. 14 Bank reconciliation and cash fund position by account........................................................ 14 Headquarters petty cash fund .............................................................................................. 14

Provisions for Staff Benefits......................................................................................................15 PREPARING FOR THE TRANSITION TO INTERNATIONAL PUBLIC SECTOR ACCOUNTING STANDARDS (IPSAS) .................................................................................................................15

Timetable ..................................................................................................................................15 Foreseeable Changes to the Financial Statements..................................................................16 Impact of IPSAS on Unliquidated Obligations ..........................................................................17 Impact of IPSAS on the Recording of Voluntary Contributions.................................................18 Impact of IPSAS on the Inventories, Evaluation and Depreciation of Capital Assets...............19


INTRODUCTION

1. The External Auditor examined the financial statements and operations of UNESCO for the period ended 31 December 2007. The auditing of the accounts was conducted in accordance with Article 12 of UNESCO’s Financial Regulations and with the Additional Terms of Reference Governing the Audit, and also in compliance with the Common Auditing Standards of the Panel of External Auditors of the United Nations, the specialized agencies and the International Atomic Energy Agency. These standards require that the External Auditor plan and perform the audit in such a way as to obtain reasonable assurance that the financial statements are free of material misstatement.

2. The audit was undertaken so that the External Auditor could establish whether the expenditure shown in the financial statements for the period ended 31 December 2007 was fully in keeping with the objectives approved by the governing body, whether the income and expenditure were classified and recorded in accordance with the Financial Regulations and whether the financial statements presented fairly, in all material respects, the financial position of UNESCO as at 31 December 2007.

3. This report addresses issues that the External Auditor considers should be brought to the attention of the governing bodies. The External Auditor’s observations and conclusions were the subject of discussions with UNESCO’s central services, whose comments were duly taken into consideration at the time of drafting this report. The audit covered the overall examination of the financial systems and internal oversight and sample checking of the accounts and other supporting documents.

Changes in UNESCO’s financial position

4. UNESCO’s overall resources increased during the biennium. However, the situation was found to be substantially different in regard to regular programme and extrabudgetary resources. From the data in Table 1, which distinguishes the regular programme from extrabudgetary programmes, it can be seen that regular budget expenditure was slightly higher than income. Conversely, extrabudgetary funds showed a clear surplus, and the rate of expenditure did not follow the progression of resources. This imbalance generally led to an increase in the reserves.

5. The increase in the reserves was particularly significant for extrabudgetary funds (excluding Brazil), which increased by $67 million (+31%) between the two bienniums. On the other hand, the reserves of the General Fund, which reflect regular budget operations, were stable compared to the previous biennium (-$0.5 million).


Table 1. Changes in UNESCO’s combined financial position – main indicators

In thousands of $, all funds1 combined 2006-2007 biennium

2004-2005 biennium

Variation

Income 1 618 403 1 456 018 + 11.1%

including the regular budget 619 463 626 404 - 1.1%

including extrabudgetary funds excluding Brazil 345 322 280 635 + 23.1%

including self-benefiting funds Brazil 323 436 298 073 + 8.5%

including institutes 217 785 180 541 + 20.6%

others 112 397 70 365 + 59.7%

Expenditure 1 421 510 1 388 281 + 2.4%

including the regular budget 620 233 620 391 - 0.03%


including self-benefiting funds Brazil 257 182 279 400 - 8.0%


others 57 548 49 175 + 17%

Excess of income over expenditure 196 893 67 737 + 190.7%

Reserves and Working Capital Fund 713 061 543 050 + 31.3%

including the regular budget 140 327 139 801 + 0.4%


including self-benefiting funds Brazil 129 836 63 582 + 104.2%


others 114 368 93 882 + 21.8%

Table 2. Share of the regular programme in UNESCO’s accounts

In thousands of $, all funds2 combined 2006-2007 biennium

2004-2005 biennium

Variation

Income 43.4% 47.3% - 8.3%

Expenditure 49.0% 49.7% - 1.4%

Excess of income over expenditure - 0.3% 8.8% - 342.2%

Assets 21.2% 22.1% - 3.9%

Liabilities exclusive of reserves 16.0% 13.2% + 21.4%

Reserves and Working Capital Fund 27.6% 34.1% - 19.1%

1 Business areas. 2 Business areas.


PREPARATION OF THE FINANCIAL STATEMENTS

6. The External Auditor found that the UNESCO accounting and financial information system (Finance and Budget System – FABS) was unable – as it now stood – to produce the Organization’s financial statements in a simple and direct way. For example, the various tables in the financial statements are not automatically drawn from the overall balance sheet of accounts, as might be the case in a more integrated situation. Many intermediary working documents (of the Excel type) are necessary to take account of the numerous adjustments.3

7. A great many manual adjustments respond to particular cases and not a general rule of online input from the chart of accounts for the presentation of the financial statements. In the final analysis, sums requiring manual adjustments are significant. Their accounting impact is real since they result in transfers between balance sheet accounts, between revenue and current expense accounts, and between balance sheet accounts and profit and loss accounts.

8. The controls carried out did not reveal a significant number of errors. However, the extent and the number of manual adjustments constitute risk factors and make the work of validation by internal and external oversight more complicated.

Recommendation No. 1. The acquisition and deployment of new functions in the accounting and financial information technology (IT) system (FABS) should be considered, in order to provide for automated or at least secure production of the financial statements. In the immediate future, it is recommended that a document be drawn up detailing for each line of the financial statements the accounts in the chart of accounts which compose it.

Comments by the Director-General

Agreed. The recommendation concerning automatic online production of financial statements is noted and will be reviewed with the current preparatory work on the revised template for IPSAS. Improvements however will be undertaken immediately to minimize off-line manual adjustments and to provide more transparent audit trails in the classification of general ledger accounts on worksheets at year-end closures.

DETAILED COMMENTS AND OBSERVATIONS

Voluntary and Compulsory Contributions

Compulsory assessed contributions

9. The General Conference set $610 million as the level for assessed contributions from the 191 Member States for the 2006-2007 biennium. As at 31 December 2007, the amount of income in the assessed contributions account effectively amounted to $610.27 million.

10. The two largest contributors were the United States of America (22% for 2006 and 2007) and Japan (19.6% for 2006 and 16.7% for 2007). Germany (8.7% for 2006 and 8.6% for 2007), the United Kingdom (6.2% for 2006 and 6.7% for 2007), France (6.1% for 2006 and 6.3% for 2007) and Italy (5.1% for 2007) fell into the 5% to 10% bracket. Examination of the arrears shows that the process for the collection of contributions was correctly followed. Under the rules in force, no provision is made for delays in the collection of assessed contributions.

3 For example, the manual adjustments with regard to the General Fund and extrabudgetary funds represent

respectively $95 million and $71.5 million in debit and in credit. These adjustments relate mainly to contractions in income and expenditure, linked to “gains and losses on exchange” (approximately $80 million or 13% of the total of General Fund expenditure, or to the contractions in assets and liabilities (accrued revenue and staff charges to be paid amounting to $6 million for the General Fund or 2% of the total), or again to mistakes undetected before the closure of accounts (approximately $13 million).


11. The arrears in respect of the biennium in progress are not really discouraged by the voting rules at the General Conference which require that the assessed contributions due for the previous biennium be up to date, except in a case of force majeure. Accordingly, a State that is not up to date with its contributions for the 2006-2007 biennium may nevertheless be entitled to vote at the General Conference of October 2007. Although a scheme to encourage prompt payment of contributions was set up, that provision is not an incentive to pay arrears.

Voluntary contributions

12. The voluntary contributions received by UNESCO during the 2006-2007 biennium amounted to $572.2 million. For the second consecutive biennium, they were slightly in excess of the assessed contributions received. However, when considering this figure, the atypical contribution by Brazil should be discounted: amounting to $269.3 million, it represents 47% of the total of voluntary contributions. Exclusive of Brazil, voluntary contributions total $302.9 million, from 233 donors.

Table 3. Breakdown of voluntary contributions, exclusive of Brazil’s self-benefiting funds

Number of State

contributors

Amount in $ (million)

Total in $ (million)

% voluntary contributions

9 Exceeding $10 million 169.6 56.0%

35 between $1 million and $10 million

107.8 35.6%

13 between $0.5 million and $1 million

9.5 3.1%

21 between $0.25 million and $0.5 million

7.1 2.4%

13 between $0.15 million and $0.25 million

2.5 0.8%

142 Less than $150 000 6.4 2.1%

233 302.9 100.0%

13. An analysis of these $302.9 million shows wide disparities in the amounts received. Thus:

(a) 92% of the voluntary contributions, amounting to $277.5 million, come from 44 donors who contribute more than $1 million. The five largest contributors are Italy (nearly $40 million), Japan (nearly $24 million), Spain ($16 million), Norway ($14.5 million) and Sweden ($13.3 million);

(b) 8% of the voluntary contributions, amounting to $25.4 million, come from 189 donors who contribute less than $1 million. 75% of these donors, i.e. 142, make a voluntary contribution of less than $0.15 million.

14. Utilization of voluntary contributions (Table 1.3.2). Expenditure during the biennium ($273.5 million) absorbed only 45% of available extrabudgetary resources, with reserves accounting for $257.9 million and new income $345.3 million. The level of extrabudgetary project expenditure was therefore lower than that of income, resulting in an increase of $28.5 million in reserves, bringing them up to $286.4 million.

15. This low disbursement rate of the available resources is attributable to various factors, in particular the fact that, as the operations are multi-annual, the rate of expenditure in respect of the 1,500 extrabudgetary funds is not directly linked to the rate of income collection. However, the slow


rate of expenditure in relation to the sums received may also be interpreted as the Organization’s difficulty in absorbing the funds entrusted to it, their translation into concrete activities, depending in fine on the same teams as those dealing with the regular programme.

Staff Costs

16. Perimeter of staff costs. The coexistence of several information systems whose respective perimeters do not coincide makes it difficult to analyse staff costs in detail. In accounting terms, staff-related costs (which are not limited to expenditure on remuneration) represent the sum of the following parts:

Table 4. Accounting approach to staff costs

In millions of $ Total biennium2006-2007

Total biennium 2004-2005

Variation

Subtotal of staff costs/Main emoluments and other costs

473.6 454.9 + 4.09%

Other staff-related expenditure 216.6 206.3 + 5.02%

Total staff costs 690.2 661.2 + 4.38% Source: Extract from the General Ledger and the expenditure and income for 2004-2005 and 2006-2007

Lack of formal procedures

17. In spite of the efforts made recently,4 there is little in the way of formal procedures relating to payroll and the recording of staff costs. For example, there is no document setting out the security procedures for the human resources management software; similarly, detection by the Bureau of the Comptroller (BOC) of pay miscalculations depends on know-how shared by four staff members, but there is no formal guidance in this respect.5 This situation entails the risk of having to rely for the smooth implementation of the procedures on the personal skills of a few staff members, rather than on the optimal organization of work and on a precise definition of the roles of the various services.

Recommendation No. 2. It is recommended that payroll procedures and the recording of staff costs be documented.


The Director-General agrees to the completion of the existing payroll guidance material, in particular the process linked to the security of the system. The preparation of the document is under way and expected to be finalized by the end of the year.

Dependent spouses

18. The remuneration of staff members takes account of family dependants, and in particular the presence in the home of a dependent person: in this case, the net salary is increased by an amount equal on average to 6%-7% of the salary.

19. Two conditions govern whether or not this benefit is granted: the spouse can only be recognized as a dependant if (i) his/her occupational earnings are below a specific ceiling, and (ii) the staff member ensures “the main and continuing support of the family”. This second condition is intended to avoid classifying among dependent persons those who, without drawing revenue from a professional activity, nevertheless have a high income.

4 Drafting of an audit manual for use by the staff of the Bureau of the Comptroller (BOC). 5 File “Accounts 2029041 and 2029045 – payroll clearing account” transmitted by BOC on 26 March 2008.


20. Furthermore the rule, which refers to the amount of the spouse’s earnings “during the course of a given year”,6 places an obligation on the services concerned to check each year whether the conditions entitling the spouses of staff members to be deemed dependent are met.

21. Staff are required to submit the substantiating documents that are listed in a notice issued by the Bureau of Human Resources Management (HRM) in 2007, 7 including, for example, photocopies of payslips of tax return forms. Meanwhile, when STEPS, the new database system, was launched, Director HRM requested the staff in an email dated 11 July 2007 to submit the required supporting documents to the management unit, before the end of August 2007, so that the information contained in STEPS could be updated.

22. During the audit, the files of 43 staff members 8 who had declared their spouse as a dependant were reviewed. It was found that in most cases the only certifying statement held by the Bureau was the one in the marital status questionnaire filed by the staff member when joining UNESCO. In most cases, no follow-up action had been taken recently to determine whether the requirements for a spouse to be considered a dependant were still met,9 which meant that the instructions issued by Director HRM in July 2007 had not been enforced. In any event, the obligation to verify each year that the requirements are met, as provided for in Rule 103.9 of the Staff Regulations and Staff Rules, cannot be considered to have been fulfilled in this case. Furthermore, the statements were hardly in a proper form. In three cases, however, the spouse’s dependency status was clearly established by the file, either because the statement had been made recently or because the spouse’s professional income was below the ceiling.

23. In regard to the staff included in the sample, UNESCO’s central services conducted full checks in order to determine whether the spouse’s professional status had changed. The audit revealed in fine one case of undue payment. This sample did not, therefore, reveal many anomalies. It did, however, show up weaknesses in internal oversight.

Education grant

24. Pursuant to Rule 103.12 of the Staff Regulations and Staff Rules, an education grant is payable for each dependent child in full-time attendance at an educational institution. This provision stipulates, in particular, the conditions for the granting of the allowance, the nature of the reimbursable expenditure and ancillary expenditure admissible in certain circumstances.

25. The sample of beneficiaries of the education grant was based on 2007 data taken from the accounting and financial system. The sample consisted, on the one hand, of staff in receipt of the 18 largest grants, accounting for slightly more than $933,000 or roughly 25% of total disbursements under this head in 2007 and, on the other, of 11 staff members selected at random from among the 289 staff members in receipt of grants.

26. Five anomalies were found within the sample, including two cases of double payment. The anomalies found stemmed concurrently from an erroneous or excessively broad interpretation of the applicable regulations and rules and from a lack of internal oversight. Recovery of amounts unduly disbursed has been initiated for several files.

6 Allowance related to the first step on the lowest grade in the scale applied by the United Nations “on 1 January of

that year”. 7 HRM note issued in July 2007 on supporting documents for the payment of dependency benefits and MBF

coverage for protected persons for 2006. 8 The sample was constituted on the basis of the December 2007 payroll, by isolating from among staff members

the 436 persons whose spouse was the only declared dependant; among them, 43 persons were selected at random and the documents that had served as the basis for the spouse’s dependency status in 2007 were audited.

9 For 32 persons, no new certifying statement had been requested since the above-mentioned marital status questionnaire had been completed, which, in some extreme cases, dated back to 1988.


Recommendation No. 3. It is recommended that the existing texts be enforced more strictly in order to ascertain full entitlement to the amounts disbursed in respect of the dependent spouse allowance and the education grant.


The principle of a yearly audit to ascertain entitlement to family allowances was reinstated by HRM in 2007; this auditing exercise will be repeated yearly to ensure more rigorous application of the texts. The next exercise will take place in September/October 2008. In regard to the education grant, steps have been taken to clarify certain points and ensure that the provisions are strictly applied. Furthermore, the principles and procedures governing the education grant will be spelt out clearly in the Manual and the item is being finalized. Internal auditing measures will also be introduced and yearly sampling audits will be conducted by HRM.

Exchange Differences

UNESCO’s specific situation

27. UNESCO uses only one currency for reporting and for operations (the dollar) although it conducts a significant portion of its operations (income/expenditure/assets/liabilities) in euros.

28. That specific feature is taken into account in the split assessment system used by the Organization for contributions receivable from Member States in the two currencies (the euro and the dollar), reflecting the proportion observed in expenditure for several bienniums which seems to be relatively stable over time (44% dollar/56% euro). The mechanism therefore generally provides structural coverage of currency exchange risks. Such coverage cannot be perfect but can reduce currency purchases at the end of the biennium to a minimum. The split assessment of currency requirements, to the extent that it is maintained and respected by Member States, thus enables the Organization to have the euro resources required to meet its euro payments in hand at each settlement date.

Impact of exchange differences on the Belmont loan

29. The revaluation of the Belmont loan, as reported in the financial statements for the period ended 31 December 2007, shows a $16.9 million increase in the dollar-denominated debt owed to the Caisse des Dépôts et Consignations (CDC).

30. From an accounting standpoint, the exact nature of the reported exchange difference must be analysed. The increase in the dollar amount of the debt is neither a loss likely to be incurred nor a loss for which provision must be made since reimbursements in euros will be covered in future bienniums by contributions that will be received in that currency (euros) and in proportions generally consistent with the Organization’s profile of expenditure by currency under the split assessment system. It may be considered that the loan has structural currency exchange coverage akin to the coverage that would be afforded by the purchase of an ad hoc financial instrument (for example, forward purchasing of euros). The accounting translation difference recorded is thus unlikely to result in a loss, in other words a cash outflow, or a net reduction in assets.10 It does not bode for the Organization a currency exchange loss against which provision must be made and which would thus proportionally reduce the balance available for redistribution to the Member States.

10 This distinction corresponds to the difference between the “accounting translation difference” (exchange

difference) for which no provision has been made (shown in the balance sheet but having no impact on the cash flow), although they have been covered, and “exchange gains and losses” (if, for example, currency is ultimately to be sold or purchased by BOC/TRS at a net gain/cost).


Inventory Compilation and Updating

Reliability of inventories and monitoring by the Contracts Unit

31. The Organization is under an obligation to compile and keep updated accurate and full statements of the property that it owns and to disclose its full value.11 The UNESCO Manual accordingly provides12 that the Administration Sector will ensure “regular conduct of a physical inventory (at least annually), as well as random checks”.

32. Stocktaking has been conducted since 2003. Since that date, updating and monitoring of the inventories have not been performed directly by UNESCO units but have been outsourced to a firm (Horus 21), which has provided an irregular service.

33. Lack of physical checks.13 The Procurement Division does not to date have the best equipment for checking the labels affixed by the outside service provider. It cannot therefore conduct the necessary checks readily to ensure that the inventory is updated effectively.

34. The issue of inventories and physical checks is particularly important on the eve of the switchover to IPSAS standards, since the corresponding amounts will in future be shown as assets in the financial statements, and no longer in the notes only. Direct involvement of the Procurement Division and the assignment of dedicated staff to monitor, update and check inventories therefore seem to be absolutely necessary.

Recommendation No. 4. It is recommended that the UNESCO central services (Administration/ Procurement Division) be involved to a greater extent in inventory management and that they conduct updating and checking operations themselves throughout the biennium without waiting for 2010.


The Administration (Procurement Division) will be involved to a greater extent in inventory management, conducting updating and checking operations, including stocktaking at least yearly, and random checks as available resources permit.

Valuation of recorded assets

35. The values shown correspond to the transaction costs of recent equipment, primarily computer hardware and, in respect of movables (desks, chairs and so on), the values used in the first inventory (2003). In both cases, no depreciation of the assets has been recorded. Computer hardware, which becomes obsolete within a short time, can therefore be considered to be overestimated. The value of other very old equipment can only be close to zero. The valuation should therefore be revised in its entirety with a view to the forthcoming switchover to IPSAS standards.

Recommendation No. 5. Work on the valuation, which should result in figures close to a fair value, should be an opportunity to remove from the inventory items (office furniture, in particular) that are too old to be amenable to valuation.

11 Pursuant to UNSAS standards (50) and UNESCO rules on the recording and inventorying of UNESCO property,

in particular former Item 1040 of the Manual. 12 See Item 1000.2 of the Administrative Manual. 13 In the 2006-2007 biennium, the inventory was finalized at the end of 2006 only, once the firm had finished its

work. The outside provider identified, listed and catalogued items and established an inventory base as at 31 December 2003. The firm subsequently maintained the database and continued to compile the inventory under successive contracts performed from March 2004 to February 2005. A sample of premises was checked physically and recording was continued in November 2005; further recording, database maintenance and two physical checks were then effected from January to March 2006 and lastly from May to July 2006.


Comments by the Director General

The Administration (Procurement Division), in conjunction with the Bureau of the Comptroller (BOC), will ensure valuation of property – including office furniture – for inclusion in the inventory, in full compliance with UNESCO’s accounting policy and BOC’s instructions.

Works of art

36. UNESCO is home to 598 works of art of all kinds and from all over the world. Some are on loan, but most are UNESCO’s property and are in theory alienable. None is insured. Although they are not listed as assets, the works of art have nonetheless been inventoried, but are not included in the balance sheet.

37. The value of the works of art was estimated by a firm, Gras-Savoye, in 1995. That appraisal, now outdated, was, moreover, not very coherent (identical amounts or no amounts at all were posted for many works). Their total estimated value, as at 31 December 2007, was $17.4 million.

38. Updating will result, as from 2008, in a significant rise in the value of the inventory of works of art. The 43 major works that constitute the “heritage collection” were estimated by Sotheby’s in February 2008 at $87 million to $119 million. As the other works are currently being appraised by Sotheby’s, the value of entire inventory of works of art should be in the order of $300 million.

Recommendation No. 6. It is recommended that data showing the value of works of art in UNESCO’s heritage assets be included in the notes to the financial statements.


Under UNSAS, heritage assets are neither required to be disclosed on financial statements nor as notes to the accounts. Although IPSAS gives the option that these assets can be brought into account on first-time recognition, the High-Level Committee of Management, a subsidiary body of the Chief Executives Board (CEB) of the United Nations system, has endorsed the proposal made by the Accounting Standards Task Force which stated “Do not recognize heritage assets, but reconsider the policy when the IPSAS Board has done further work on requirements for reporting heritage assets”. In this context, the External Auditor’s recommendation will be taken into account once a harmonized policy decision is taken by the responsible organs. Given the complexity of the subject, it is likely that it will be some time before the IPSAS Board makes a pronouncement on the matter.

Unliquidated Obligations

39. Sampling audit. A sample composed of 40 operations, amounting to a total of $16 million or 14% of all unliquidated obligations shown in the financial statements for the biennium, irrespective of type of fund, was examined. The operations reviewed were selected from among transactions totalling the highest amounts in the various categories of fund (regular programme, other funds held by UNESCO, extrabudgetary funds). Operations of potentially doubtful validity – mainly because the provision of services did not commence during the biennium concerned – were examined in detail with the Bureau of the Comptroller.

40. Review of unliquidated obligations. Progress was achieved in the monitoring of unliquidated obligations in the 2006-2007 biennium and took the form of a sharp reduction in the volume of unliquidated obligations at the end of the biennium. Funds reservations made by the sectors and central services were reviewed systematically on the initiative of the Bureau of the Comptroller in respect of amounts recorded at the end of August 2007.

41. Residual audit of amounts relating to liquidated obligations recorded under Brazil extrabudgetary funds. Owing to changes made in 2007, the management of funds received from Brazil (self-benefiting funds) and, in particular, the discontinuation of the practice of advances


made by UNESCO to extrabudgetary funds, data communication between the accounting and IT systems at Headquarters and in the Brasilia Office has improved. There are still variations between the amounts recorded at Headquarters and in the Brasilia Office in respect of unliquidated obligations as at 31 December 2007 amounting to $1,235,344.14 However, the components of and reasons for this difference have been identified clearly (mainly time differentials), and the total is much lower than the $50 million approximately that the External Auditor had found at the end of the previous biennium (2004-2005).

Cash Flow

Management of bank accounts (opening, closure)

42. In the 2006-2007 biennium, the central services proceeded to compile a list of all accounts opened in the Organization’s name and bearing a title showing a link with UNESCO. Accordingly, 29 bank accounts relating to staff associations, particular events run by the associations or by associated bodies,15 which are managed daily by those bodies but administratively (opening, transfers, closure, signature authorizations) by the Comptroller, have now been recorded in the centralized database of bank accounts monitored by the Comptroller.

43. Such action was designed to put the management of the financial resources mobilized on behalf of the Organization on a sound footing. It now seems possible and desirable also to exercise oversight over bodies associated with the name of UNESCO and highly subsidized by the Organization by obtaining from them detailed and regular activity and financial reports.

Bank reconciliation and cash fund position by account

44. The Treasury Section reviews the cash fund position of all of the Organization’s accounts daily by account and by major category of fund in order, in particular, to invest surpluses or replenish any deficits, whenever the high or low cash fund limits set for an account has been crossed.

Bank reconciliation in respect of Headquarters was checked by sample and directly with the manager and require no comments.

45. In regard to bank reconciliation in respect of field offices, UNESCO has in its possession the documents required for such reconciliation (last bank statement, statement of operations unrecorded by the bank or in the accounts and final reconciliation status), and no comment is required on sample-checked operations.

Headquarters petty cash fund

46. Use at Headquarters of petty cash, amounting to more than $148,000 in expenditure in the last biennium, is governed primarily by the cash utilization policy drafted by the Bureau of the Comptroller (para. 42). Specific texts have not yet, however, been drafted to cover rules on: (a) procedures for appointing the person responsible (individual decision taken formally by the Comptroller) and the alternate, and definition of the responsibilities and incompatibilities attaching

14 The differences have resulted from the following events: (a) the operations of the Brasilia Office (imprests) in

November 2007 and December 2007 were recorded by BOC between 9 December and 31 December; during that period, however, the Brasilia Office continued to increase and reduce funds reservations, and new funds reservations were recorded (between December 2007 and January 2008) (before the closure of accounts) which are therefore not reflected in FABS; (b) furthermore, funds reservations in SICOF may not be reflected in FABS, for when funds in a budget line are insufficient, the operation is rejected by Headquarters; (c) lastly, some funds reservations were made by the Brasilia Office for operations that have not yet been validated by the Contracts Committee.

15 For example, the UNESCO Committee for the United Nations Inter-Agency Games, UNESCO Restaurant Services, and so on.


to such duties; (b) the maximum amount of expenditure payable16 and the type of expenditure borne;17 (c) the maximum petty cash fund amount; and (d) procedures for the replenishment of the fund.

47. Furthermore, the entire petty cash balance should be banked on 31 December or on the last working day of the year,18 which was not done in the last biennium. Although the amounts involved are not substantial, the petty cash operational rules could be placed on a formal footing and, if necessary, rendered more precise in line with the Organization’s specific needs.

Provisions for Staff Benefits

48. UNESCO, in common with several other organizations of the United Nations system, has contracted to provide for the after-service health insurance expenses of its staff.19 The future burden under that head must therefore be assessed by means of an actuarial method. This task was entrusted, for the purposes of the 2006-2007 financial statements, to Cabinet Mercer,20 which has estimated the amount at $614 million.

PREPARING FOR THE TRANSITION TO INTERNATIONAL PUBLIC SECTOR ACCOUNTING STANDARDS (IPSAS)

Timetable

49. In June 2006 the United Nations General Assembly approved the adoption of IPSAS as the new accounting standards for the United Nations system with effect from the financial period starting 1 January 2010 at the latest. Consequently, UNESCO has less than two accounting years to adapt its information systems and working practices to IPSAS. The Organization should accordingly have an IPSAS compliant closing statement for the 2008-2009 biennium, since these data will also provide the data for the opening balance sheet for the period beginning 2010 which will be produced in full conformity with IPSAS. In fact, as UNESCO is not an early adopter, transactions in the 2008-2009 biennium will be recorded on the basis of the United Nations System Accounting Standards (UNSAS).

50. UNESCO does not at present (start of the 2008-2009 biennium) have the information tools and systems needed to provide a two-track, secured presentation of accounting records, one under UNSAS and the other under IPSAS. UNESCO will have to make rapid progress in order to be in a position to apply IPSAS in full as of 1 January 2010. The central services will accordingly have to take early action and distribute to the services concerned the new procedures for recording information well before 1 January 2010, and in order to be effective as of 1 January the changes will have to be prepared for and anticipated, for instance as of the end of 2009.

51. The introduction of full accruals accounting, taking into account the value in use of assets acquired and their gradual depreciation (amortizement), presupposes not only different accounting entries but also different working practices.

52. Over and above the purely accounting aspects of the transition to and full adoption of IPSAS, there will have to be methodological changes within all services in terms of organization, working methods and the resources required. At this stage, the evaluation of the organizational impact and the adequacy of current resources, in particular regarding staffing levels, skills and information systems, has not yet been fully carried out (either at Headquarters or in the field offices). The

16 The maximum amount paid in 2007 was $8,081. 17 The average amount of expenditure is roughly $1,650. 18 Appendix 3G to the Manual, Item 6.1.3.3.l ”Petty Cash”, subparagraph ii. 19 After Service Health Insurance. 20 Actuarial valuation report, as at 31 December 2007, Health Care Plan, Mercer, April 2008.


possibility of redeploying staff and effecting new resource allocations must be examined in order to rise to the challenges.

53. It may be useful to recall the transitional provisions suggested and the warning issued by the Finance and Budget Network of the agencies and organizations of the United Nations system:21 “When estimating the time involved to effect changes required by an IPSAS, organizations should allow extra time to avoid the risk of under-estimating the time involved. Often the full extent of the implementation task only emerges once the task is in progress”.

54. At this stage, reflection on the principles is quite advanced, and the time has now come to make decisions on the specific accounting options concerning UNESCO, which alone is in a position to understand its own particular features, without now waiting for the other organizations.

55. Preparatory studies conducted by UNESCO in November 2006 enabled staff members responsible for preparing the change in standards to be designated in each accounting area.

56. The External Auditor wishes to draw attention to the fact that, unless the requisite human and financial resources are provided, merely designating the staff members to be responsible in no way guarantees that the work and the organizational changes needed for the full application of IPSAS on 1 January 2010 will be carried out successfully. In this regard, UNESCO is under an obligation to deliver.

Recommendation No. 7. It is recommended that UNESCO should evaluate the adequacy of its resources, in particular human and IT resources, for the application of IPSAS in order to complete preparations for the necessary changes prior to 1January 2010, that is, during the second half of 2009.


Agreed. The UNESCO Steering Committee for the IPSAS implementation has been kept informed of developments and priority areas highlighted where financial and human resources are needed as the work progresses. The additional upstream technical work required so far has been undertaken by the dedicated members of the Project Team. The Steering Committee will further evaluate the adequacy of human and financial resources available to ensure the timely implementation of the IPSAS project.

Foreseeable Changes to the Financial Statements

57. The application of IPSAS will entail substantial modifications to the current structure of UNESCO’s financial statements. The next financial statements should, in particular, not refer in as much detail as at present to the different categories of funds, but should logically show a single, consolidated position for the Organization. The other, more conspicuous changes should concern provisions for future liabilities and the recording of inventories as assets.

(a) On the liabilities side, provisions of significant magnitude (several million dollars) will have to be recorded, in particular to anticipate the Organization’s future liabilities in regard to retired staff members (medical expenses). This is probably the most high-profile change as these sums (estimated at $614 million as at 31 December 2007) will henceforth appear as a full liability for the Organization. At the moment the amount is only mentioned in a note to the Financial Statements.

(b) On the asset side, capital goods with a unit value of over $5,000 will have to be included in the balance sheet at their actual value.

21 Transitional Provisions policy paper, Finance and Budget Network.


58. To date, there has been no complete simulation of what UNESCO’s financial statements under IPSAS will look like. This kind of simulation, which would enable a precise assessment to be made of missing information, is an indispensable and urgent initial step.

Recommendation No. 8. It is recommended that an IPSAS-based presentation of the financial statements for 2006-2007 be produced as soon as possible in order to (i) to identify fundamental reforms and their impact; (ii) to raise awareness among producer services and user services; and (iii) prepare Member States for the changes to come in the presentation of the accounts.


Agreed. For the reasons enumerated above, this recommendation is currently work-in-progress and pro-forma financial statements based on IPSAS are being drafted using basic financial data from the audited financial statements (based on UNSAS) for the biennium ended 31 December 2007. In addition, a gap analysis has already been undertaken highlighting the differences between the two accounting standards and which complements the financial data contained in the pro-forma IPSAS-based presentation. The information output will be used precisely for the reasons advanced by the External Auditor under this recommendation.

Impact of IPSAS on Unliquidated Obligations

59. The unliquidated obligations 22 which are currently recorded correspond to a concept of “commitment accounting”, the commitment being considered to be the first stage in the consumption of budgetary appropriations. This stage generally takes place before the recording of the liability at the time the service is rendered.

60. Application of the principle of “full accruals accounting”, will radically change result assessment, which will no longer take account of budget commitments that have not yet given rise to the delivery of a service. IPSAS involves moving from an underlying logic of the commitment of funds, and cash consumption, to the recognition of liabilities at the very moment that they become certain and due.

61. The transition to IPSAS will lead to a very clear dissociation of budget information (monitoring of the execution of the adopted budget) from accounting and financial information.

Example: The case of the purchase of work from a consultant.

The signing of the contract will have no accounting impact. However, the date of delivery/provision of the service bought in will become the only reference, instead of the reservation of the budget funds. Receipt of the payment request will become the key event (unless a single date can be set for delivery and likewise for the purchase of property), with the liabilities charged to the financial period. This then presupposes that compliance with intermediary payment conditions has been verified in full.

It will no longer be a “matter of liquidating a funds reservation” but of recording each event once it has actually occurred.

62. At the moment, some of UNESCO’s expenditure is recorded in the FABS accounting system in a way that allows for compliance with this standard. However, this function of the IT system is not used systematically at Headquarters, and is not possible in the UNESCO field offices, which do not have access to the programme in question. In both cases the expenditure is recorded using a

22 Unliquidated obligations, or ULO.


simplified IT procedure23 which does not require the user to provide all information concerning the contract, notably its beneficiary, and the expected dates of the service.

Recommendation No. 9. UNESCO’s central services should ensure that staff members use the FABS accounting and financial system in a manner compatible with IPSAS, and the entire system should be rolled out in the field offices24 as soon as possible, and in any event before the last quarter of 2009.


Agreed. The rollout of FABS to the field offices including the UNESCO institutes has been ongoing since SAP was implemented. With IPSAS, it is essential that the Materials Management and Travel Management modules of FABS be included to facilitate expenditure recognition based on the delivery principle. In this context, it is planned that more field offices and institutes will be integrated into FABS before the end of the current biennium 2008-2009 with the objective of facilitating the implementation of IPSAS.

Impact of IPSAS on the Recording of Voluntary Contributions

63. Voluntary contributions are currently recognized on the date the funds are received in a UNESCO bank account from the donor. Under full accruals accounting UNESCO should recognize the revenue on the date of the signature of the agreement, if the agreement is unconditional. However, agreements on voluntary contributions contain clauses that vary considerably according to the project or the State concerned: it will henceforth be necessary to analyse the content of the agreement so as to ascertain whether the payments due are certain or, on the contrary, contingent on strict conditions and therefore too uncertain to be recognized as revenue. The commitments will also have to be further formalized: status of the signatory, type of document, contract or pledge, budgetary documents, and so on.

64. For voluntary contributions, the transition to full accruals accounting from cash accounting means that it is essential, in particular with a view to the pro forma presentation of the 2009 financial statements, to determine very rapidly the criteria to be applied in analysing each agreement.25

65. Implementation of IPSAS26 now means that a precise analysis will have to be made of the terms of the legal commitment underpinning the voluntary contribution in order to identify the date and amount that will be used for the financial statements. It also means that the multi-year nature of these agreements will have to be taken into account, along with any suspensive or sequential conditions, by the recognition, or not, in full or in part, in the balance sheet of revenue recorded in advance.

Recommendation No. 10. It is important to determine as soon as possible, and in any event by the end of 2008, the criteria to be taken into account for recording accounting events, it being understood that commitments can vary considerably according to the project or State in question: the degree of formalization of the commitment must be defined: status of the signatory, type of document, contract or pledge, budgetary document, and so on.

23 Use of what is known as the financial management (FM) module. 24 Rollout of the MM module of FABS. 25 See IPSAS … It will also be necessary to decide on how to treat multi-years in accounting terms and possible

suspensive or sequential conditions, through the recording, or not, in full or in part, in the balance sheet of amounts not attached to the financial period concerning them (revenue recorded in advance).

26 In this case the reference is IPSAS 23 “Revenue from Non-Exchange Transactions”.



Agreed. A complete inventory of all valid donor agreements for voluntary contributions is currently under review with the aim of determining whether conditions exist that warrant the immediate recognition or deferment of the voluntary contribution as revenue in accordance with the IPSAS provisions. The detailed analysis by project agreement including the subsequent implementation strategy is currently work in progress and foreseen for completion within the required time-frame.

Impact of IPSAS on the Inventories, Evaluation and Depreciation of Capital Assets

66. As from 2010, UNESCO will have to recognize as assets on its balance sheet all the goods and equipment it disposes of to perform its tasks.27 Depreciable property, plant and equipment should be recorded in the accounts as assets and not, as is currently the case, as expenditure. Available texts on the matter (the standard and interpretative texts28) are clear and give the services concerned a precise idea of the objectives to be reached. However, at present, the practical steps for applying the standard have not yet been established. It is now up to the Bureau of the Comptroller to choose among the options and to determine its accounting policy in this area.

67. Given these circumstances, the application of IPSAS regarding inventories as at 1 January 2010 demands a significant effort to programme the necessary adaptations, especially since the post of the staff member responsible for monitoring the inventory is currently vacant. It is a matter of urgency (i) to conduct a simulation integrating the inventory at its true value into the assets of UNESCO; and (ii) to determine as of now the future amortizement policy (duration, procedure) by category of property.

27 See IPSAS 17. 28 These are the texts established by the Finance and Budget Network of the United Nations systems agencies, in

this case the guide to IPSAS 17 “Property, plant and equipment background” and the preparatory document “Guidance on first-time recognition of property, plant and equipment”.

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