UN Controller Chandramouli Ramanathan tells us how he balances the UN’s books, explains our mission to funders, and keeps everyone paid on time, wherever they are.
How much money do you manage?
We have roughly $14 billion in annual revenues. I say “roughly”, and this links to one of our challenges. We have several accounts, and therefore seven or eight financial statements. For example, there are different accounts for UNEP, ITC and Habitat.
Now, finally, I am getting consolidated quarterly financial statements for the UN Secretariat, but it took a while.
If we look at breakdowns, roughly $6.5 billion is in peacekeeping, $3.5 billion is in the regular budget and 3 to 4 billion is voluntary contributions. At the same time, we need to make a distinction between money and cash. We are generally well bankrolled in terms of cash. There is around $6 to 8 billion in the bank, but the issue is liquidity, as there are numerous constraints from member states.
For example, voluntary contributions come in early and can cover multiple years at a time. A large part of peacekeeping and regular budget comes in within the first two quarters of the fiscal period. For the regular budget, there is a drought in the middle and nearly 25% comes in the last three months. This is what creates liquidity challenges.
How many staff and consultants do you pay?
About forty thousand staff. But this points to an interesting problem for the UN. We make a distinction between staff and non-staff. If we look at them as people, we would have an easy number. But we treat each in a different way, which creates inefficiencies.
For consultants, it depends on whether they are engaged by us or through third parties such as UNOPS. As the numbers don’t show up directly, we have to go through the Pass and ID system to figure it out.
How do you get money to local staff and retirees in places such as Russia, Afghanistan and Somalia?
In general, our banking infrastructure is pretty good, and for peacekeeping we work with banks to create branches inside mission premises. That is one way to get the cash there.
I like to get funds out to peacekeeping early because of logistic challenges. However, for certain locations we need to fly in cash, and this also creates its own challenges. In the pandemic, for example, pilots had to quarantine.
In Afghanistan for the first three months after the fall of the government, we used hawalas. They would operate in marketplaces in the presence of witnesses. We also make and receive payments on behalf of UN system players, because if there are sanctions, for example in Venezuela and Iran, we can work with the US treasury. In the case of Russia, we use a bank that has a Swift account that is also used by the EU for gas payments.
What are the implications of the shift to more voluntary contributions? How does it affect numbers? Is it easier or harder to manage?
I would say that for the Secretariat in general, voluntary funding is a complementary source. But for OCHA, UNEP, UNODC, it is significant. The risk with voluntary funding is that humanitarian funding crowds out development funding, so when you have a crisis, you see a shift to humanitarian. In this sense, it is not necessarily more predictable.
Then, within the Secretariat, there are so many entities with different business models. In general, the management of such funds is not difficult, although it can depend on donor requirements as they may each have their own reporting rules.
One of my roles is to represent the UN system in negotiations with large donors. This can be an exacting process, but with more sanction regimes coming in, we are under pressure to comply with different donors’ national legislation, and this isn’t always possible. Even so, this funding is very critical for many of our programs.
Donors are willing to fund projects, but not core funding, so we must use assessed funding to fund the core. We made efforts with the Resident Coordinator system to add predictability through core funding. But I am pleasantly surprised that the one percent on voluntary contributions are not as difficult as we thought it might be.
For a while now, EU funding to the UN has been blocked except for urgent cases while they conduct a pillar assessment. Are you worried about such a big donor not funding us?
I think this will be solved. The European Commission has its own challenges in terms of its own governments and auditors. We have worked closely with the EC in terms of detailing requirements with the European Court of Auditors, and the Director (budget) of the EC was exceptionally helpful to resolve the situation. The process wasn’t easy, but we feel we are now real partners. They need us as much as we need them. This process won’t be easy, but neither will it harm either organization.
The pillar assessment is almost done, and they are asking us to put in place supervisory measures. However, some of the requirements on data cannot be put in overnight as they need General Assembly approval, but I am sure it will get unblocked soon.
Three years ago we had a liquidity crunch. The Secretary-General even turned the escalators off. Do we now have enough reserves now to prevent this happening again?
As we stand today, there are two things. The arrears are at a record low, which is very welcome. It means that at the end of the year the arrears don’t eat into our liquidity reserve. Plus, now the General Assembly has increased liquidity reserves by $100 million, something they funded through savings.
So we start each year with more cash than before, plus there is a significant change in payment patterns. Japan, UK, Germany and France have all made commitments to pay earlier in the year, which improves cash flow. Additionally, the US also discontinued its withholding 15 percent until whistleblower certification in the following year.
We felt we needed at least a $200 million liquidity increase to be truly comfortable, but I don’t see a problem for the next couple of years. Also, a large contributor had a shift in payment patterns last year, but because we had the reserves we were not alarmed. At the same time, the bulk of payments is to staff, and they have to be paid on time.
If you had the power to improve the UN budgeting process, what would you do?
Everyone thinks that having a budget every year makes the problem twice as bad, but this is not true. Now, we can adjust the budget every year and budget reductions are much less. We budget closer to the point of delivery and Umoja gives us better visibility.
However, we are also seeing a shift towards better explaining what happens if Member States don’t fund us. In the last liquidity crisis we began to illustrate the impact this would create on the ground.
For example, we used vulnerability indices on the graduation of Least Developed Countries, which guides a lot of what happens to funding for them. We showed what happened when programs were suspended. We also showed the impact on scientific research funding that goes from ODC to benefit chemical laboratories.
These are things that people normally wouldn’t associate with the UN, but which are linked. At the start, people were struggling to explain the impact of budget cuts on their work, but now they are much better at providing the narrative.
In the end, our biggest selling point is what we can do that others can’t.