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PROGRAM-BUDGET FOR 2012 Financing Proposal

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Purpose

• Contribute a few ideas to the talks of the Member States on two topics specific to the 2012 Regular Fund Program-Budget:

• The 2012 Regular Fund Budget global level, and• The Quota Assessment level to finance the 2012 Regular Fund Budget.

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• The GA will fix the budget ceiling and the quotas in San Salvador

• A Special General Assembly will meet on/about October 31, 2011 to approve the 2012 Regular Fund Program-Budget.

• Delivery of the proposed 2012 Program-Budget to the Permanent Council on/about July 31, 2011, based on the San Salvador GA budget guidelines.

• Submission of a first draft of a results-based budget for the OAS

Steps

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• Chronic imbalances between fixed income and growing expenditures.

• No increases, in real terms, to the budget of the Organization since 2005.

• Annual quota adjustments needed to cover inflation.

• Moderate increases in three of last six years were insufficient to cover the gap between income and expenses

• Adjustments for inflation and a growing list of mandates have exhausted resources from quotas in arrears. Widening structural financial gap has not been closed since 1995.

• Budget 2011 reduced by $5 million from 2010 levels. Sixty separations from service and the elimination of 45 RF posts required in 2010 to meet 2011 budget constraints.

Present Situation of the Regular Fund

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• Personnel reductions led to shifting of posts to minimize impact on priority areas.

• Separations carried out over a span of six months in coordination with Secretaries and Directors. None resulted in complaints before TRIBAD

• Adjustments in 2010 allowed 2011 budget to fund approved number of posts; however, without further cuts in personnel spending, recent salary adjustments required under UN parity would cause personnel expenditures to exceed budget funding in 2011.

Current Situation (cont.)

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Personnel Budget 2011 $54,9 (Includes 1.4 mill ion in statutory increases)Projected Personnel Expenditures Jan - Dec 2011 $56,3 (Includes 2,8 millon in statutory increases)Variance: $1,4

Cost driver DiffAssumptions $ Assumptions $ $

Impact of 2010 increases on the 2011 budget: 1% Prof & GS increase 0,5 0.9% Prof & 7.3% GS 1,1 0,62011 statutory remuneration adjustments: 1.5% Prof & GS increase 0,5 2.8% Prof & 2.0% GS 0,9 0,4Mandatory step increases: 0,3 0,4 0,1Health insurance premiums: 1.5% increase 0,1 1.5% increase 0,1 0,0Reclassifications & Competitions 0,0 0,2 0,2Overtime 0,0 0,1 0,1

Total 1,4 2,8 1,4

Budget 2011 Revised Estimate 2011

Projected Increases to Personnel Expenditures Jan - Dec 2011In millions of USD

Current Situation (cont.)

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• An additional $1.4 million in personnel expenditures must be reduced to stay within the 64% threshold,

• New cuts of 20 posts will be taken out of the RF and staff will be transferred to Specific Funds or ICR.

• More than 250 posts have been cut out of the Regular Fund since 1995.

• Need to reduce mandates in order to reduce costs.

Current Situation (cont.)

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• In 2010, RF resources account for less than 50% of total

• Donors not operating under unified international cooperation mechanism poses challenges to planning of activities. Significant progress with Canada and Spain.

• Relying on funding from donors affects long-term priority-setting process.

• Must strengthen Regular Fund to meet GA mandates.

Specific Funds

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• Multiple studies point to the need to maintain and repair buildings and grounds of the Organization. Options have been presented. Decisions needed.

• Approval required for sale of Casa del Soldado. Proceeds would finance urgent repairs to Main Building and Constitution Avenue complex.

Real Property

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• Board of External Auditors strongly urged “hard decisions” to align quotas and expenditure budget.

• Expenditure Budget:– Budget level 2012: $87.9 million

• Financed by:– Net income from quota assessments of $83.1 million (including $0.4 million

in prompt payment discounts)– Administrative support to Specific and Voluntary Funds $2.6 million– Other income $2.2 million

Budget Proposal 2012 – Conclusions andRecommendations

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Projected Personnel Increases

Approved2011

Personnel 54.9 1.7 56.6Non-Personnel 30.4 0.9 31.3TOTAL 85.3 2.6 87.9

FEMCIDI 15% 0.6 - 0.3ICR 2.5 - 2.3Other 1.3 - 2.2Sub-total 4.4 - 4.8

Quota 80.9 2.6 83.5 Discount (0.5) 0.5 (0.4) Sub-total 80.4 - 83.1

Total 84.8 87.9

* Other income: Rent ($1.0 M), Interest ($0.5 M), and other refunds and deobligations ($0.7 M)

Regular Fund 2012

(In millions of USD)

Other Income

Quota Assessment

Budget CeilingQuota Assessments

3%Adjustments

Proposed2012

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• Increases of 3% to 2011 budget and quota levels.

• Consensus on principle of quota-setting linked to statutory and inflationary increases in expenditures.

• Challenges will remain:– Lack of a Regular Fund reserve, high reliance on specific funds, and deferred

maintenance of OAS real property

Budget Proposal 2012 – Conclusions andRecommendations (cont.)

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• Increases of 3% to 2011 budget and quota levels.• Budget:

• Quotas:

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Increases to Budget and Quota Levels

Approved budget 2011 + 3% = Budget 2012

Budget 2012 = $85,349,300 + $2,560,500 = $87,910,300

3% of Budget 2011 = $85,349,300 x 3% = $2,560,500

Overall Quota Level 2011 (including Cuba): 81,574,900$ Plus 3% increase: 2,447,500$ Overall Quota Level 2012 84,022,400$

Cuba's Quota 2012 (0.575%): (483,100)$ Quota due from member states in 2012: 83,539,300$

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