___________________________________________________________________________

2016/SOM3/014 Agenda Item: 2.6.1

Report by Chair of the Budget and Management Committee

Purpose: Consideration

Submitted by: BMC Chair

Third Senior Officials’ MeetingLima, Peru

27-28 August 2016

Executive Summary This report presents the major outcomes of the second meeting of the Budget and Management Committee (BMC) held on 22 August 2016 in Lima, Peru. Actions Required of SOM Senior Officials to:

• Endorse the 2017 Secretariat Account budget and corresponding level of 2017 Members’

Contributions for Ministers’ approval (paragraph 12); and

• Note this report by the BMC Chair.

Report by the Chair of the Budget and Management Committee to the Third Senior Officials’ Meeting

Lima, Peru

27 - 28 August 2016

Mr Chairman,

The Budget and Management Committee (BMC) held its second meeting of this year on 22 August 2016 in the margins of SOM3 in Lima, Peru. This report provides a summary of the major outcomes of the meeting, and seeks Senior Officials’ endorsement of the decisions made by BMC. APEC Management Issues Secretariat Staffing Matters

2. BMC noted the Secretariat’s update on its key staffing issues, including the new Program Directors seconded from members economies, Career Development System implemented since December 2014 for Program Directors/Corporate Directors, and the operational challenges faced by the Secretariat as a result of the resignation of 3 Program Executives. 3. BMC also considered the Secretariat’s proposal to hire a Program Executive Team Leader at an estimated cost of S$90,000. In order to balance the need to help the Secretariat manage an increasing workload against a general push toward streamlining within APEC, BMC agreed that the Secretariat should hire a Program Executive Team Leader for two years, with a view to reviewing the outcome of the setup after two years.

Review of Outsourced Social Media Work 4. BMC noted the Secretariat’s assessment on its media program and outsourced management from March 2015 to August 2016. With the help of the outsourced consultant, the Secretariat have already exceeded its Key performance indicators (KPIs), originally set for March 2017, in August 2016. 5. Some members, especially the previous, current and future host economies, expressed their appreciation to the Secretariat for its work and indicated strong support for the proposal. Some other members suggested that in view of the upcoming Communications Study in 2017, a more prudent approach should be adopted, such as by further extending the outsourced consultant for a few years, integrating the Community Manager’s portfolio into those of existing CPAU staff or expanding CPAU’s internship programme, instead of committing to a permanent position. After deliberation, BMC agreed that the Secretariat should hire a Community Manager on a contract basis for two years, with a view to reviewing the outcome of the setup after two years. APEC Collaboration System (ACS) Upgrade 6. BMC appreciated the key features of the upgraded new ACS and noted that a pilot test has been embarked in early 2016. The New ACS was expected to be roll-out in full in end January 2017. BMC also noted that in order to implement some useful suggestions gathered from the pilot test, the Secretariat has included a budget of S$43,000 for enhancements to the new ACS in 2017. Others

7. BMC noted the presentation given by the US-APEC Technical Assistance to Advance Regional Integration (US-ATAARI) and thanked their continued efforts to provide support to APEC’s institutional development, including capacity building of member economies and incoming hosts and other initiatives relating to the Secretariat.

APEC Budget Issues 2015 Audited Financial Statements 8. BMC approved the 2015 audited financial statements of the Secretariat at Annex A presented by the independent external auditors, Deloitte & Touche LLP, who expressed an opinion that the financial statements were properly drawn up in accordance with the provisions of the Singapore Financial Reporting Standards so as to give a true and fair view of the financial position of the Secretariat as at 31 December 2015. 9. For 2015, the Secretariat’s actual expenditure was about S$5.12 million, or 86% of the approved budget for the year, resulting in a surplus of about S$0.84 million. BMC commended the financial prudency and efficiency exercised by the Secretariat. 2016 Forecast Expenditure 10. BMC noted that for 2016, the Secretariat’s forecast expenditure will likely be about S$6.6 million, or 96% of the approved budget. The surplus will be placed in the Secretariat Account reserve, which is expected to remain at about S$6.9 million by the end of this year.

2017 Proposed Budget and Members’ Contribution 11. The Secretariat’s proposed budget for 2017 is S$6.18 million. This is 10% less than the approved budget for 2016, mainly due to decrease in travel costs for APEC meetings in Vietnam next year. A member highlighted that after taking out the travel expenses from the Secretariat’s budget, there was a steadily increasing trend for the remaining budget from S$4.52 million in 2015 to S$5.75 million in 2019 (i.e. 27% increase). 12. BMC endorsed the 2017 Secretariat Account budget with expenditure totalling S$6,333,000 million, including the Secretariat’s proposed budget of S$6.18 million and a provision of S$153,000 set aside for the asset replacement fund, detailed at Annex B. BMC invites Senior Officials to endorse the above 2017 Secretariat Account budget and corresponding level of 2017 Members’ Contributions at Annex C for Ministers’ approval.

Progress Update by the SWG Chair 13. SWG Chair updated BMC on the discussion of SWG. SWG agreed to the updates to the Guidebook on APEC Projects for incorporating the APEC Capacity Building Policy, as well as some administrative suggestions on streamlining the project process. SWG members were invited to provide comments inter-sessionally on the suggestions on structural reform, as well as the approach used by International Atomic Energy Agency to get “voluntary mandatory” project funding contributions from members, with a view that a decision would be made in the BMC1 in 2017.

Project Management and Funding Issues Aspirational Target for Voluntary Contributions 14. Following the Modus Operandi for Coordinating Voluntary Contributions endorsed by Ministers in 2014, an aspirational target of US$4.1 million was approved by Senior Officials at SOM1. As at end July, six member economies have made or committed untied contributions, totalling around US$3.6 million as follows –

(USD)

ASF General Fund Australia $1,075,500China $500,000Russia $1,000,000Chinese Taipei $250,000

$2,825,500

TILF Korea $700,000New Zealand $75,000

$775,000

$3,600,500

Untied Voluntary Contributions for 2016

Total Untied Project Funding

15. Japan announced at the meeting that a voluntary contributions of US$184,218 will be made to TILF in around October to December 2016. Hence, the remaining balance that still needs to be raised to achieve the 2016 aspirational target for untied project funding is about US$320,000.

Project Management Unit Update 16. The Project Management Unit updated on project issues since BMC 1. It was noted that the approval rate for projects had risen to 42% for Project Session 1 2016. This was an improvement on the last two years, but still lower than the longer-term average (about 50%). It was noted that the latest evaluation of project monitoring and completion reports revealed that 90% of projects focussed on capacity building, which is an improvement of 10% on the last evaluation. 17. BMC was presented with the financial reports for all APEC-funded projects. It was noted that all projects are operating within their approved budgets. Cap on Project Cost and Advance Payment Facility 18. BMC noted the committee previous decision in respect of setting a cap on budget for ASF General Fund and TILF in 2014, and the continuous using of the established mechanism for advance payment facility in 2012. 19. A member stated that the high cost of travel expenses in the case of Latin America economies covers most of the Budget. In this regard, it requested to take into consideration the possibility to modify the cap in order to address this concern. Another member suggested that the BMC might explore the possibility to introduce a different cap for Latin America economies on travel expenses. After deliberation, BMC tasked the Secretariat to provide further information on the average travel expenses incurred by projects implemented by Latin America economies in the last three years. BMC also agreed that the advance payment facility should remain unchanged.

Next BMC Meeting 20. BMC will hold its first meeting of 2017 in the margins of SOM1 in the Nha Trang, Viet Nam in the end of February or early March 2017. Millicent CRUZ-PAREDES BMC Chair 2016 24 August 2016

BMC Chair's Report to SOM3Annex A

Secretariat Account BMC Chair's Report to SOM32016 Forecast Expenditure and 2017-19 Budget Annex B

2015 2016 Q1-Q2 Q1-Q4 2017 2018 2019Actual Approved Actual Actual Forecast Forecast Proposed Y-o-Y Budget Y-o-Y Budget Y-o-Y

Expenditure Budget Expenditure vs Budget Expenditure vs Budget Budget Change Projection Change Projection ChangeS$ S$ S$ % S$ % S$ % S$ % S$ %

(1) COMMUNICATIONS AND PUBLIC AFFAIRS1.1 Publications and Library 34,200 42,000 11,700 28% 22,000 52% 61,500 46% 63,000 2% 65,000 3%1.2 Support for Media and Outreach Programs 156,280 208,000 58,382 28% 250,000 120% 217,000 4% 149,000 -31% 151,000 1%1.3 Website Redevelopment and Operations 83,737 75,000 21,029 28% 75,000 100% 74,500 -1% 97,000 30% 99,000 2%

Total Communications and Public Affairs Expenditure 274,217 325,000 91,111 28% 347,000 107% 353,000 9% 309,000 -12% 315,000 2%

(2) ADMINISTRATION2.1 Building Maintenance and Facilities Costs 420,934 475,000 191,487 40% 410,000 86% 445,000 -6% 452,000 2% 459,000 2%2.2 Furniture and Equipment 54,052 54,000 22,059 41% 53,000 98% 55,000 2% 56,000 2% 57,000 2%2.3 Miscellaneous Admin Expenses 37,645 41,000 14,794 36% 40,000 98% - - - - - -2.4 Office Operations and Supplies 91,983 125,000 29,873 24% 123,000 98% 127,000 2% 128,000 1% 129,000 1%2.5 Personnel and Staff Welfare 113,669 100,000 26,652 27% 99,000 99% 150,000 50% 250,000 67% 155,000 -38%2.6 Independent Assessment of APEC Sub-fora 115,235 160,000 57,651 36% 145,000 91% 160,000 0% 160,000 0% 160,000 0%2.7 Remunerations

2.7.1 Executive Director (including allowances) 508,044 555,000 223,869 555,000 555,000 600,000 600,000 2.7.2 Administration 1,158,515 1,268,000 500,230 1,210,000 1,430,000 1,480,000 1,550,000 2.7.3 Communications and Public Affairs 590,096 668,000 271,343 632,000 790,000 845,000 905,000 2.7.4 Information Technology 354,487 373,000 150,048 371,000 392,000 410,000 425,000 2.7.5 Project Management 608,204 646,000 260,949 622,000 673,000 700,000 730,000

3,219,346 3,510,000 1,406,439 40% 3,390,000 97% 3,840,000 9% 4,035,000 5% 4,210,000 4%

Total Administration Expenditure 4,052,864 4,465,000 1,748,955 39% 4,260,000 95% 4,777,000 7% 5,081,000 6% 5,170,000 2%

(3) INFORMATION TECHNOLOGY3.1 Broadband Networks and Related Charges 58,791 60,500 * 29,355 49% 60,000 99% 62,500 3% 63,000 1% 63,500 1%3.2 IT Development Costs 21,460 25,000 * 24,600 98% 24,600 98% 118,000 372% 37,000 -69% 37,500 1%3.3 IT Operational Costs 111,746 174,500 * 100,220 57% 165,400 95% 154,500 -11% 160,000 4% 164,000 3%

Total Information Technology Expenditure 191,997 260,000 154,175 59% 250,000 96% 335,000 29% 260,000 -22% 265,000 2%

(4) TRAVEL4.1 Executive Director 83,489 240,000 58,206 24% 193,000 80% 120,000 -50% 160,000 33% 200,000 25%4.2 Professional and Support Staff 519,762 1,560,000 703,845 45% 1,550,000 99% 545,000 -65% 1,040,000 91% 1,500,000 44%

Total Travel Expenditure 603,251 1,800,000 762,051 42% 1,743,000 97% 665,000 -63% 1,200,000 80% 1,700,000 42%

(5) CONTINGENT EXPENDITURE - 50,000 - - 50,000 50,000 50,000

GRAND TOTAL : 5,122,330 6,900,000 2,756,292 40% 6,600,000 96% 6,180,000 -10% 6,900,000 12% 7,500,000 9%

* After budget reallocations of S$500 to item 3.1 and S$5,000 to item 3.2 from item 3.3 as approved by Executive Director of the Secretariat on 30 June 2016 within the limit endorsed by Senior Officials.

Budget Summary

Income S$ US$ S$ US$ S$ US$ S$ US$Members' Contribution 5,000,000 5,000,000 5,000,000 5,000,000

Secretariat Account Budget (SGD)Secretariat Budgeted Expenditure 6,900,000 6,180,000 6,900,000 7,500,000 Fund Set Aside for Asset Replacement Fund 120,000 153,000 215,000 -

7,020,000 4,680,000 6,333,000 4,222,000 7,115,000 4,743,000 7,500,000 5,000,000 General Project Account Funding (USD) 320,000 778,000 257,000 - * USD/SGD Exchange Rate = 1.5 5,000,000 5,000,000 5,000,000 5,000,000

Secretariat Account ReserveBalance as at End of Previous Year 7,174,000 6,879,000 6,999,000 7,099,000 Reserve Target Level [a] 2,000,000 2,000,000 2,000,000 2,000,000 Reserve Available for Other Uses 5,174,000 4,879,000 4,999,000 5,099,000 Less:Transfer to General Project Account (787,000) Note 1 N.A. N.A. N.A.Transfer to Asset Replacement Fund - - - (255,000)

Add:Surplus of Secretariat Budgeted Expenditure 300,000 Note 2 N.A. N.A. N.A.Other Income of the Year 192,000 Note 3 120,000 100,000 100,000 Funds Retained in Reserve [b] 4,879,000 4,999,000 5,099,000 4,944,000

Closing Balance of the Year (Estimated) [a]+[b] 6,879,000 6,999,000 7,099,000 6,944,000

Note 1 : Amount approved by BMC 1, 2016. The amounts for 2017-19 are to be confirmed and subject to BMC's approval at its first meeting of the year.

Note 2 : Estimated amount based on the Secretariat's 2016 forecast expenditure (i.e. approved budget minus forecast expenditure).

Note 3 : Estimated amount, including administrative/management fees received from member economies, sponsorship income and interest income from fixed deposits.

2016 2017 2018 2019

BMC Chair’s Report to SOM3 Annex C

2017 Members’ Contributions

Economy

Total Members' Contribution

Percent Share

Contributions Contributions

to Secretariat

Account to General

Project Account

(US$) (%) (S$) (US$)

[a] [b]

[a] - ([b]/1.5)

[c]

1 Japan 901,000 18 1,139,900 141,000

2 United States of America 901,000 18 1,139,900 141,000

3 Canada 453,000 9.07 574,400 70,000

4 China 387,000 7.74 490,200 60,200

5 Australia 335,000 6.7 424,300 52,100

6 Republic of Korea 298,000 5.95 376,800 46,800

7 Chinese Taipei 236,000 4.73 299,500 36,300

8 Russia 202,000 4.04 255,900 31,400

9 Mexico 201,000 4.02 254,500 31,200

10 Hong Kong, China 137,000 2.75 174,200 20,900

11 New Zealand 137,000 2.75 174,200 20,900

12 Singapore 137,000 2.75 174,200 20,900

13 Brunei 75,000 1.5 95,000 11,700

14 Chile 75,000 1.5 95,000 11,700

15 Indonesia 75,000 1.5 95,000 11,700

16 Malaysia 75,000 1.5 95,000 11,700

17 Papua New Guinea 75,000 1.5 95,000 11,700

18 Peru 75,000 1.5 95,000 11,700

19 Philippines 75,000 1.5 95,000 11,700

20 Thailand 75,000 1.5 95,000 11,700

21 Viet Nam 75,000 1.5 95,000 11,700

Total 5,000,000 100 6,333,000 778,000