Voluntary Funds Administered by the United Nations High Commissioner for Refugees: Accounts for the year 1997 (submitted by the High Commissioner)

A/AC.96/899

NOTES TO THE FINANCIAL STATEMENTS I. United Nations High Commissioner for Refugees (UNHCR) AND ITS ACTIVITIES

1. The Office of the United Nations High Commissioner for Refugees (UNHCR) was established by the General Assembly in its resolution 319 A (IV) of 3 December 1949 and its Statute was approved by the Assembly in resolution 428 (V) of 14 December 1950. According to the Statute, the United Nations High Commissioner for Refugees, acting under the authority of the General Assembly, shall assume the function of providing international protection, under the auspices of the United Nations, to refugees who fall within the scope of the present Statute and of seeking permanent solutions for the problem of refugees. The General Assembly has also called upon the High Commissioner to provide assistance to returnees, as well as to monitor their safety and well-being on return (General Assembly resolution 40/118). In addition, on the basis of specific requests from the Secretary-General or the competent principal organs of the United Nations, and with the consent of the State concerned, UNHCR provides humanitarian assistance and protection to internally displaced persons (General Assembly resolution 48/116). As regards UNHCR's assistance activities, the basic provisions of the Statute have been expanded by General Assembly resolution 832 (IX).

2. The overall objective of UNHCR is to provide international protection to refugees and to seek durable solutions to refugee problems. UNHCR is required to safeguard the fundamental principles of asylum and non-refoulement and to ensure that the basic rights of refugees are respected and that they are treated in a decent and humane manner. UNHCR has also developed, at the request of the General Assembly and the Governments concerned, substantial material assistance programmes to meet refugee needs. Subsequent resolutions of the General Assembly, the Economic and Social Council and the Executive Committee of the High Commissioner's Programme have called on the Office, in the context of its basic mandate, to assist other groups of persons regarded as falling within the competence of the High Commissioner. In complex humanitarian emergencies, UNHCR also contributes to the provision of humanitarian assistance.

3. The High Commissioner reports annually to the General Assembly through the Economic and Social Council. An Executive Committee of the High Commissioner's Programme was established pursuant to General Assembly resolution 1166 (XII) of 26 November 1957 to advise the High Commissioner in the exercise of his/her functions and to approve the use of extrabudgetary funds made available to the High Commissioner. The annual cycle of meetings of the Executive Committee consists of one annual plenary session and a number of inter-sessional meetings of its Standing Committee. The Executive Committee currently consists of 53 member countries. Reports on the sessions of the Executive Committee are submitted to the General Assembly as addenda to the Reports of the High Commissioner.

II. Summary of Significant Accounting Policies

(a) Financial Rules for Voluntary Funds

4. The UNHCR Voluntary Funds accounts are maintained in accordance with the Financial Rules for Voluntary Funds administered by the High Commissioner for Refugees (Document A/AC.96/503/Rev.6 dated 1 February 1996 approved by the forty-sixth session of the Executive Committee). These financial statements and schedules also conform with the common accounting standards for the United Nations system, as adopted by the General Assembly in its resolution 48/216C (Document A/48/530 of 29 October 1993).

(b) Fund Accounting

5. The UNHCR accounts are maintained on a "fund accounting" basis. Separate funds for general and special purposes are established in accordance with the Financial Rules for Voluntary Funds. General Programmes cover statutory activities and consist of the Annual Programme, the Voluntary Repatriation Fund and the Emergency Fund. The activities under General Programmes are funded through contributions to the General Fund. Special Programmes describe a series of activities funded from a range of distinct trust funds; these activities, while mandated, need not necessarily be strictly statutory. Each fund is maintained as a distinct financial and accounting entity with separate self-balancing double-entry groups of accounts. Separate financial statements are prepared for each fund or for a group of funds of the same nature.

(c) Use of Estimates

6. Preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Estimates are used in the context of expenditure recognition, in particular, but not exclusively, at the end of the financial period to determine the amounts to be retained in respect of unliquidated obligations.

(d) Funds

7. The funds reported in the accounts are:

a) Working Capital and Guarantee Fund: has an established ceiling of $ 50 million approved by the Executive Committee, and is maintained by income from interest on invested funds and savings from the prior years' Annual Programme, Emergency Fund and Voluntary Repatriation Fund. The Fund is utilized to replenish the Emergency Fund and meet essential payments for projects, pending receipt of contributions pledged.

b) Annual Programme: reflects the financial activities which are approved annually by the Executive Committee for the programmed activities for individual country/areas and for certain costs incurred by Headquarters; it also includes a Programme Reserve.

c) Emergency Fund: is maintained at not less than $ 8 million and is replenished from the Working Capital and Guarantee Fund and voluntary contributions. The High Commissioner may allocate from the Emergency Fund up to $ 25 million annually, provided that one single emergency does not exceed $ 8 million.

d) Voluntary Repatriation Fund: provides financial assistance, under General or Special Programmes, for voluntary repatriation operations for refugees. The fund was established with a base level of $ 20 million and may extend up to an amount equivalent to 10 per cent of the total budgetary estimates for voluntary repatriation for the preceding year.

e) Special Programmes (including Trust Funds): comprise various trust and special programme funds to account for moneys available for purposes falling outside the General Programmes, and within the scope of UNHCR activities.

f) Refugee Education Account: a special account maintained by voluntary contributions and used to finance refugee higher education.

g) Medical Insurance Plan: is maintained by premiums from field staff and related contributions from UNHCR; payments reflect claims processed during the year to cover field staff medical costs.

h) Fund for International Field Staff Housing and Basic Amenities: was established at the thirty-third Session of the Executive Committee (1982) as a special account to primarily assist internationally recruited staff members serving in most difficult duty stations, where housing is substandard, to obtain suitable housing and basic amenities.

i) Income-Generating Activities: this fund is maintained by revenue from external sales and expenditure reflects purchase of goods for resale.

(e) Translation of Currency

8. The accounts are presented in United States dollars. In the field offices, the accounts may be maintained in the national currency of the country concerned. The field office account transactions are translated into United States dollars using the United Nations operational rates of exchange, as established by the United Nations Controller, in effect at the date of the transaction. At the balance sheet date, all asset and liability balances are adjusted to reflect the United Nations operational rate of exchange in effect at 31 December.

(f) Voluntary Contributions and Pledges

9. Voluntary contributions from Member States and other donors are recorded as income upon receipt or on the basis of a written pledge from the donor. Unconditional pledges from Governments are fully recognized as income at the time of receipt of the pledge. In the interests of prudent financial management, up to half of the value of conditional pledges from Governments and firm pledges made by organizations of established repute are recognized as income at the time the pledge is received. Pledges unpaid are adjusted to their dollar equivalent calculated at the United Nations operational rate of exchange prevailing on 31 December of each year.

10. Contributions in kind are recorded at the fair market value of the goods and services to UNHCR at the time the pledge is made. The related obligation and expenditure are recorded at the time the pledge is made. At delivery, the obligation is liquidated and the receivable is correspondingly cancelled. Extra-budgetary in-kind contributions are not recorded in the accounts but are listed in Appendix I.

11. Cash received against pledges is recorded at the dollar equivalent calculated at the United Nations operational rate of exchange prevailing on the date of receipt.

12. Pledges due are normally written off after five years unless the donor has reconfirmed the commitment in writing not more than 18 months before the end of the accounting period.

(g) Interest Income

13. Interest income includes all interest and related investment income earned on invested funds and various bank accounts. Financial Rule 9.3 specifies the conditions for recording of investment income which is to be credited to the General Fund.

(h) Miscellaneous Income

14. Miscellaneous income includes income from sale of used or surplus property, refunds of expenditures charged to prior periods, settlement of insurance claims, and other sundry income. The Annual Programme includes net recoveries relating to the transfer of emergency stockpile items to operational projects, as miscellaneous income.

(i) Currency Exchange Adjustments

15. Currency exchange adjustments include losses and gains on transactions and translation losses and gains from revaluation of year end asset and liability balances, based on the United Nations operational rate of exchange. Exchange differences are charged to the General Fund.

(j) Expenditure

16. Project expenditure reflects the amounts obligated according to the terms and conditions specified in Financial Rule 8.

(k) Ex-gratia Payments

17. The granting of ex-gratia payments is governed by Financial Rule 10.5. A statement of ex-gratia payments, if any, is submitted to the Board of Auditors with the annual accounts.

(l) Write-offs

18. Write-off due to losses of cash, property, or the book value of accounts receivable, including the conversion of loans into grants, is governed by Financial Rule 10.6. A statement of all amounts written off is submitted to the Board of Auditors with the annual accounts.

(m) Accrual Basis

19. Financial transactions are recorded in the accounts on an accrual basis.

(n) Non-Expendable Property

20. Non-expendable property purchased with UNHCR's Voluntary Funds is charged as expenditure to the appropriate budget accounts in the year of acquisition; it is not included in the balance sheet but recorded in separate inventories. The inventories are recorded at the dollar equivalent calculated at the rate of exchange prevailing on the date of purchase.

III. Cash and Term Deposits

21. The cash and term deposits figure shown represents the net total of all cash balances (including funds held in non-convertible currencies) less any overdrafts. Refer to Schedule 9 for a breakdown between current and deposit accounts. Refer to Schedule 10 for details of the dollar equivalent of non-convertible currencies held at 31 December 1997.

IV. Voluntary Contributions Receivable

22. The receivable represents contributions outstanding from all donors, the details of which are reflected in Schedule 1 for current year and Schedule 2 for all prior years. The age of contributions outstanding is shown below:

The 1991 pledge outstanding has been reconfirmed by the donor.

V. Due from United Nations Agencies

23. This balance represents amounts due from:

VI. Other Receivables

24. Included in this balance are amounts due from other United Nations agencies. The balances in excess of $10,000 are noted below:

25. An amount of $1,598,267 in respect of loans made to or on behalf of refugees is still refundable to UNHCR at 31 December 1997 (Schedule 7). These loans were fully expensed in the years in which they were made and only memorandum accounts are maintained in UNHCR's books.

VII. Non-Expendable Property

26. In accordance with United Nations accounting policies, non-expendable property is not included in the fixed assets on the balance sheet but is charged as expenditure to the appropriate project in the year of acquisition.

27. The value of non-expendable property is maintained in an asset tracking system. Prior to 1995, only items used and operated by UNHCR were recorded in the tracking system. During 1995, the Minder Asset Tracking System was introduced worldwide for recording of all administrative and project assets, whether used by implementing agencies or by UNHCR.

28. Although implementation continued throughout 1997, not all field offices have been able to complete the recording of their assets. Out of approximately 134 locations, approximately 109 locations have implemented the Minder Tracking System as of 31 December 1997. The historical cost of assets recorded in the Minder Tracking System as at 31 December 1997 was $ 234,247,451 and the depreciated value was $ 82,380,160.

VIII. Accounts Payable

29. The accounts payable include the following amounts due to United Nations agencies:

IX. Liabilities for end-of-service and post retirement benefits

30. In accordance with United Nations common practice, UNHCR has not specifically recognized in any of its financial accounts liabilities for after-service health insurance costs or the liabilities for other types of end-of-service payments, which will be owed when staff members leave the Organization. Such expenses are budgeted for in the corresponding operations budget, and the actual costs incurred in each financial period, when staff members are separated form the organization, are reported as current year expenditures.

31. The financial dimension of the Organization's liability for after service health insurance is included in the overall United Nations estimate disclosed in the Notes to the United Nations' Financial Statements for the corresponding year.

32. Liabilities for the payment of unused accrued annual leave (maximum of 60 days) and the payment of repatriation grants and related expenditures of the relocation upon separation from the Organization based on the number of years of service, needs to be valuated and the disclosure will be incorporated in the Notes to the Financial Statements for subsequent financial periods.

(Note: Tables in A/AC.96/833 not included in this online version. See your nearest UN Depository Library.)