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A - Implementation of the Fund programme and management of the Environment Fund

425. Introducing the items 8 (a) and (c), the Assistant Executive Director, Bureau of the Environment Fund and Administration, noted that, following the request of the Governing Council at its seventh session, document UNEP/GC.8/7 and Add.1 combined three reports previously presented separately. Two main points relating to the implementation of the Fund programme were the allocation for Fund programme activities of only $36-15 million out of the approved appropriation of $42.8 million, and the progress made in 1979 in narrowing the gaps between allocations, commitments and expenditures. In addition, in line with the Executive Director's cautious approach, the Fund Programme Reserve had not been used during 1979; UNEP had also undertaken the management of three trust funds, for the Kuwait Action Plan, the Mediterranean and the Convention on International Trade in Endangered Species of Wild Fauna and Flora. In that connexion, it should be noted that UNEP could only commit funds as and when contributions were paid, so that projects supported by the trust funds could, where there were delays in payment of contributions, only be approved for a few months at any one time. The administrative costs of the management of the trust funds would be charged to the fund concerned.

426. Regarding the management of the Fund, progress had been made in solving some difficulties, such as slippage and use of non-convertible currencies. However, the problem of the level and composition of the Environment Fund's Resources and the liquidity of the Environment Fund remained. In addition, the shortfall from the medium-term plan target ($24.6 million), the low expected convertible currency balance at the end of 1981 ($5.6 million) and late payment of contributions were causes of increasing concern.

427. Several delegations welcomed the increase in the number of countries contributing to the Environment Fund. However, two delegations expressed their great concern at the shortfall in contributions for the medium-term plan, pointing out that the target was, after all, a rather modest one.

428. One delegation pointed out that countries whose financial year began in April found it was difficult to make contributions in the first quarter of the year: thEy would, however, endeavour to make their own payments in the first quarter of their financial year. Another delegation said its Government was in a similar position, but would in future make its payments in one lump sum, thereby enabling Ul,4EP to have more funds earlier in the year.

429. Wlhile there was general appreciation of the cautious management of -the Environment Fund in 1979, many delegations expressed concern at the difficulties encountered in implementing Fund programme activities as a result of the low level and late payment of contributions. While a few delegations recommended strengthening the appeal to Governments to pay more promptly (UNEP/GC.8/7, para. 20 (a) (iv)), others noted that late payment was a fact of life and the Fund should plan accordingly. One delegation, supported by several others, suggested that T21EP should tie the rate of implementation of Fund programme activities not to the rate of payment of contributions but rather to substantive considerations: the former approach could only lead to a very cautious programme, as seen in 1979.

430. Several delegations questioned, in view of the recognized problems regarding the level and rate of payment of contributions, the proposal for an additional appropriation of $6.65 million in 1980/1981: some doubted that, even if the Committee approved the higher appropriation level, the Executive Director would be able to allocate the entire appropriation, and the result would be an even larger carry-over of the appropriation at the end of each year. Other delegations questioned whether the necessary payments for the appropriation would, in fact, be received, while a few suggested that the Committee wait until the next biennium before changing the approved appropriation, to see it a higher ceiling was appropriate.

431. Another delegation, however, supported by several others, stated that there was a reasonable basis for the secretariat's proposal, and endorsed the Executive Director's proposed additional appropriation. After noting the reservations of several delegations as to the desirability of a higher appropriation and the reservation of one delegation that the Executive Director should not enter into obligations over any reasonable expected level of income, and after receiving assurances from the secretariat that sufficient cash would be available for the effective management of the Fund in 1981, the Committee agreed to accept the addition of t6.65 million to the appropriation for 1980/1981 approved by the Governing Council at its seventh session.

432. Many delegations voiced concern at the manifest imbalance between convertible and non-convertible currencies (UNEP/GC.8/7/Add.1, Table 1), noting that the non-convertible currencies, while constituting only 15 per cent of total contributions, formed well over 50 per cent of the Environment Fund's balance in 1979 and an estimated 66 per cent of the 1981 balance. One delegation noted that if all contributions were received in convertible currency, the Fund would face no problems of liquidity. Several delegations consequently advocated an appeal to those Governments which paid in non-convertible currencies to pay more of their contributions in convertible currency.

433. Many delegations felt that some of the attempts to spend the large accumulation of non-convertible currencies in the Environment Fund could lead to distortion of the programming of UNEP's activities. One delegation, backed by several others, drew attention to Governing Council decision 7/14 C, paragraph 3, and the view expressed in the Committee in that connexion to the effect that the Executive Director should make only reasonable efforts to spend non-convertible currencies; in fact, the secretariat appeared to be bending over backwards to reduce the accumulation. Several delegations stressed that the same criteria and standards should be used for approval of all projects, regardless of the type of currency used: projects should not be approved solely in order to facilitate the expenditure of non-convertible currencies. They therefore requested the secretariat to indicate the criteria by which non-convertible currency projects were selected, and to provide a list of topics covered by those projects, their geographical distribution, and information on how the funds were used - e.g., for purchase of equipment, recruitment of experts and staff etc. The Committee also requested the secretariat to prepare annually a table analysing allocations, commitments and expenditures by convertible and non-convertible currencies. One delegation requested information on the percentage of convertible currencies used in non-convertible currency projects, both directly and for support costs.

434. Two delegations observed that the non-convertible currency problem was systemwide, and one asked whether any pooling mechanism had been explored, noting that some organizations miiyht be in a better position than others to utilize such currencies.

435. One delegation stressed the difficulties experienced by less developed countries whose currencies were not convertible, in paying their contributions in convertible currency, e.g. their own low convertible currency stock, the decrease in the value of the dollar, the decrease in the terms of trade, and the increasing instability of convertible currencies. Another delegation noted, however, that many such countries faced similar problems but, recognizing the secretariat's requirements, nevertheless continued to pay in convertible currency.

436. One delegation, supported by numerous others, called for a stricter application of financial rule 203.4 of the Fund, on the ready usability of contributions, and therefore proposed that the draft decision before the Committee be amended to stipulate that the Executive Director should refuse any additional non-convertible currency contributions to the Environment Fund over a $3 million ceiling if they would not be easily spendable.

437. It was also proposed that the text of decision 7/14 C, paragraph 3, be repeated in the draft decision before the Committee, while several delegations, though concurring with its spirit, felt that it should be strengthened, since it had in fact had no effect on the Governments at which it was directed: rather, the secretariat had improved its efforts to utilize non-convertible currencies. One delegation felt that the decision had had its desired effect, and repetition was therefore unnecessary. However, it would not oppose the consensus adoption of a paragraph repeating it.

438. A few delegations strongly opposed the suggestion of a $3 million ceiling, since in their view the secretariat had experienced no problems in spending non-convertible currencies: considerable progress had been made in establishing a non-convertible currency programme, and the projects carried out under it, including those conducted through the Council for lvlutual Economic Assistance (CMEA), primarily benefitted developing countries. Since the accumulation was expected in any event to decrease at the rate of $3 million a year for 1980-1981, a ceiling seemed unnecessary. One delegation asked the secretariat to clarify whether it felt there was any difficulty in reducing the non-convertible currency accumulation, as no such difficulty had been referred to in the Executive Directorts introductory statement. Another delegation, supported by several others. pointed out that there was no problem in spending many types of non-convertible currency, which therefore did not accumulate. Two delegations felt that setting a ceiling on the non-convertible currency balance of the Environment Fund would create an undesirable precedent.

439. Several delegations suggested that a refusal to accept any voluntary contribution was perhaps inappropriate; it was better to have non-convertible currency than no currency at all. Responsibility for the implementation of decision 7/14 C rested with the Executive Director, who should therefore be requested to consult as necessary with countries paying in non-convertible currencies and at the same time to intensify his efforts to improve the utilization of such currencies. In view of the need to avoid distortion of the programme, he should also evaluate the impact of non-convertible currencies on the programme at all levels, and report in depth on the results to the Council at its ninth session.

440. Referring to document UNEP/GC.8/7, paragraph 22, many delegations requested the secretariat to elaborate on the criteria used for reducing Fund programme activities in 1979, and in particular to state whether the apportionment and priorities established by the Governing Council at its seventh session had been respected in implementing the reduction of the programme. In accepting the additional appropriation of $6.65 million, the Committee was therefore of the opinion that its apportionment, to be made in Sessional Committee 1, should be linked to the priorities established in Council decision 7/3 of 3 May 1979, since it was important that those priorities be observed.

441. One delegation pointed out that the Executive Director's proposal for a forward commitment authority of $16 million for the biennium 1980-1981 represented an increase of $5 million over the level approved by the Council at its seventh session, and requested clarification of the need for it.

442. Another delegation pointed out that if a $5 million cash carry-over were to be established, as suggested by the Executive Director, countries might feel justified in paying later in the year, as UNEP would appear to have sufficient resources, while countries paying early would be penalized by a loss of interest on their funds. Reference to a specific carry-over figure should therefore be deleted from the suggested draft decision before the Committee: it was sufficient to state that adequate liquidity should be maintained. The Committee agreed to that suggestion.

443. The Assistant Executive Director replied that, while the secretariat had no difficulty with such a reformulation, it would continue to be guided by the estimated need for a cash carry-over of $5 million for the first quarter. The proposed increase in the forward commitment authority was needed in order to ensure the steady progression of the programme. On the question of criteria for the reduction of the programme, three main approaches had been taken: fewer new projects were accepted, extensions of existing projects were severely limited, and cuts were made on a proportional basis in order not to distort the approved programme.

444. In explaining the secretariat's position on the balance of convertible and non-convertible currencies, he again drew attention to the progress made in reducing the non-convertible currency accumulation since 1978. It was estimated that roughly $6 million in non-convertible currency would be spent in 1980 and 1981.

While the accumulation was primarily in roubles, rather than in all types of non-convertible currencies, the Government of the Soviet Union had been most co-operative in aiding the establishment of a non-convertible currency programme, and had set certain conditions under which portions of its non-convertible currency contribution could be converted to convertible currency. The secretariat therefore felt that the composition of Fund resources, while not optimal, was shifting in a positive direction. TIherever possible, UNEP co-operated with other organizations of the United Nations system to find the most efficient methods of using non-convertible currencies.

445. There was no differentiation in criteria or standards applied to non-convertible as opposed to convertible currency projects. United Nations accounting procedures made it difficult to give an exact figure for the proportion of convertible currency used directly in non-convertible currency projects. The over-all estimate for the non-convertible currency programme was between 5 and 10 per cent, and there had been a noticeable decrease in the convertible currency percentage required in the more recent non-convertible currency projects.

446. In considering the part of agenda 8 (c) on evaluation, the Committee had before it document UNEP/GC.8/7, section III. In his introduction, the Assistant Executive Director noted the recent developments in the field of evaluation and in the use made of Report to Governments. In particular, he drew the Committee's attention to paragraph d noted that, following the request of the Governing Council, more intersessional reporting had been included in Report to Governments.

447. Many delegations expressed satisfaction at the work on evaluation, and especially at report to Governments ' . The secretariat's suggestion that the ne@Tly introduced index of UNEP/FU-ND/PROJECTS documents should be published annualy was particularly welcomed.

448. A few delegations suggested that improvements could be made in the presentation of financial information, to which they attached great importance, in Report to Governments. In particular, one delegation noted that an interpretative note on what were essentially accounting tables would be useful, and suggested that Report to Governments was the appropriate channel for informing Governments of major financial decisions such as the reduction of Fund programme activities in 1979 by '@'6.65 million.

449. Several delegations emphasized that evaluation was an important part of programme implementation, particularly as a tool for weeding out obsolete or ineffective activities and as a basis for decisions on the most effective allocation of resources. Clarification was requested on how evaluation results were fed back into the programme, on the geographical distribution of consultants used and whether a list of evaluation consultants was available, on whether the M@TEP evaluation methodology could be made available to Governments, especially for use in evaluating the environmental dimensions of national development projects, and on how evaluation fitted into the project approval system. One delegation said it would be desirable to indicate the need for greater involvement in evaluation work of consultants from the socialist countries. One delegation felt that UNEP efforts to co-ordinate evaluation of work on UNEP-supported and IMTEP-related projects in the United Nations system, and actions involving joint evaluation of programmes') should be continued. Another expressed appreciation of the Executive Director's report, and welcomed the suggestion that similar reports continue to be presented annually.

450. The Chief of the Division of Fund Policies and Evaluations Unit explained the principal points covered in project evaluation exercises, which constituted the main form of evaluation in UNEP. In line with U14EP's programmatic approach, evaluation not only examined project results, but sought to ascertain that their achievement had brought progress at Level Two, examined whether the Environment Fund's catalytic and coordinating role had been fulfilled, and included the classical approach of performance evaluation. In response to the suggestion made in the Committee at the Governing Council's seventh session, it also covered clusters of projects in order to improve the assessment of the programme's impact in a given sector.

451. Evaluation was used primarily during project implementation and when reviewing project results. The Evaluation Unit played an advisory role, rather than having a direct responsibility, at the time of project preparation, appraisal and approval. Since under the terms of UNEP's mandate, most projects were global or regional projects rather than national, the evaluation methodology developed was not readily applicable to national projects. However, UNEP was developing guidelines for evaluating the environmental impact of development projects. Evaluation results were reported to the Deputy Executive Director, who, to ensure the necessary feedback, then disseminated them as appropriate and assigned to the officers concerned responsibility for any action decided upon as a result of the evaluation findings. The global and coordinating nature of UNEP projects required evaluation consultants who were thoroughly familiar with those aspects and had a wide range of experience. For evaluation of regional projects, regional expertise was used wherever possible. Evaluation consultants formed only a small part of the over-all outside expertise used by UNEP. The Assistant Executive Director confirmed that an over-all list of UNEP consultants was available.

452. In continuing its consideration on the management of the Environment Fund, the Committee had before it document UNEP/GC.8/7/Add.2, "Revised General Procedures Governing the Operations of the Fund of the United Nations Environment Programmetv Introducing the document, the Assistant Executive Director noted that the propose@ procedures, which amended those approved by the Governing Council at its second session, were intended for experimental application in 1982 and full application in 1984. Three expected advantages of the revised system were that it would strengthen UNEP's central coordinating role in the United Nations system, help stabilize UNEP's co-operation with other United Nations organizations, and simplif'y financial accounting through quarterly disbursements which would be treated as expenditures.

453. Several delegations welcomed the opportunity to examine the proposals so well in advance of their implementation, and agreed that some change was needed in the implementation of the programme. They also noted, however, that the document had been received too late for any discussion of' its substance. Any further discussions should therefore be postponed until the Council's ninth session, in order to allow sufficient time for careful study of the proposed amendments.

454. One delegation asked if the "programme cluster" was to replace the two-digit budget line, and expressed concern that this would restrict the Governing Council, which currently approved funding levels for the four-digit budget line. Another delegation said it had no reservations in accepting the -proposals, which could well serve the needs of the secretariat. While generally agreeing that the proposals were acceptable and deserved serious consideration, another delegation noted that the Systerq-wide medium-term Environment Prograirme might involve an increase in the responsibilities of the Prcgramme bureau and a decrease in thcse of the Fund Eurcau, with a ccrrcs-pondinfly implied chanfe in the responsibilities of the respective sessional committees. It was agreed that the issue should. be further explored in plenary and at future Governing Council sessions.