17 May 2007

Original: English

United Nations Development Programme/United Nations Children’s Fund

United Nations Population FundExecutive Board

Executive BoardAnnual session 2007

Annual session 20074-8 June 2007

11-22 June 2007Item 11 of the provisional agenda

Item 19 of the provisional agenda

Results-based budgeting for the biennial support budgets of

the United Nations Children’s Fund, the United Nations Development Programme and the United Nations Population Fund

Contents

Paragraphs / Page
Part One
Description of the proposed results-based budgeting approach for the United Nations Children’s Fund, United Nation’s Development Programme and United Nations Population Fund / 1 – 42
I. / Moving to a results-based budget system / 1 – 27
A. / Background and introduction / 1 – 6
B. / Major considerations / 7 – 14
C. / Major elements of the new approach / 15 – 27
II. / What the new biennial support budget will include / 28 – 42
A. / General / 28 – 31
B. / Description of the proposal as shown in the mock-up / 32 – 38
C. / Other considerations / 39 – 42
Part Two
Budget mock-up / 14

Part One

Description of the proposed results-basedbudgeting approach for theUnited Nations Children’s Fund, United Nations Development Programme and United Nations Population Fund

I.Moving to a results-based budget system

A.Background and introduction

1.The United Nations Children’s Fund (UNICEF), United Nations Development Programme (UNDP) and United Nations Population Fund (UNFPA) have presented their biennial support budgets (BSBs) in a harmonized format since 1999. The agencies (and the United Nations system as a whole) are endeavouring to move to results-based budgeting (RBB), in which resources are requested and allocated based on the results to be achieved rather than by input category or by broad strategic objectives. All are managing their programme resources based on expected results for the programmes and strategies described in their four-year strategic plans. The support budgets of the agencies are driven by the strategic plans because management results are essential for achievement of programme results.

2.The introduction of RBB in the three agencies is part of a larger process spanning the entire United Nations system. The rationale for introducing RBB in the United Nations system is three-fold: (a) as part of the Secretary-General’s reform agenda of increasing transparency, efficiency and accountability of United Nations system organizations; (b) as a key instrument for advancing the process of change towards a results-based management culture; and (c) in response to increased public demand for accountability in the use of resources.

3.In line with the broader United Nations context, the High-Level Committee on Management (HLCM) in 2004 commissioned a concept paper for implementing RBB in the United Nations system. The three agencies led the formulation of the paper, which was approved by the HLCM in 2005 and which served as conceptual and methodological starting point for the present document.Based on the HLCM concept paper, for the biennial support budgets of UNDP, UNFPA and UNICEF, RBB is defined as a results-driven budgeting process wherein resource justification is made for a set of expected results with indicators including baselines and targets to be achieved, presented by key functions.

4.The introduction of RBB is also in line with the encouragement of the Advisory Committee on Administrative and Budgetary Questions and the respective Executive Boards as described below:

(a)The UNDP/UNFPA Executive Board, in its decision 2005/33 which made funds available for the 2006-2007 biennium, welcomed the decision of UNDP to present an aligned, results-based biennial support budget for 2008-2009, harmonized with UNFPA and UNICEF;

(b)For UNFPA, the Advisory Committee recommended implementation of RBB, taking into account lessons learned by other United Nations entitiesand benefiting from the knowledge of the United Nations Department of Management and Department of Peacekeeping Operations (DP/FPA/2005/14);

(c)The UNICEF Executive Board, in its decision 2006/2 on the 2006-2007 biennial support budget (E/ICEF/2006/AB/L.1), welcomed the continued improvement in results-based management and urged the Executive Director to give high priority to implementing RBB for the next biennium 2008-2009.

5.The BSB represents the operational or management plan for implementing and supporting the strategic plan. The agencies are planning to prepare and present their BSBs for the 2008-2009 biennium to their Executive Boards, based to the extent possible on RBB principles. The move to RBB will be progressive; it is unrealistic to expect that the new approaches will be implemented perfectly in 2008-2009. As lessons are learned from the first biennium, continued improvements will be made in results-based budgeting and management. Given that the UNICEF medium-term strategic plan extends until 2009, two years beyond the UNDP and UNFPA strategic plans, which end in 2007, the shift to RBB by UNICEF will be more gradual. In addition, changing conditions, such as the need to align in 2010 with the implementation of International Public Sector Accounting Standards and ongoing United Nations reform, make it clear that refinements to the RBB approach will continue over several bienniums.

6.The agencies have worked together over the past three years to reach consensus on concepts, approaches and terminology related to this new method for resource requests. The last year has been spent developing the elements of a harmonized RBB approach for the support budgets of the three agencies. The present report is the result of this collaborative effort and consists of: (a) a description and discussion of the conclusions reached by the agencies on the harmonized RBB approach; and (b) a mock-up of the format and structure of a results-based budget that the agencies propose to use in preparing their future BSB requests to their Executive Boards.

B.Major considerations

7.The shift to a RBB implies changes in the way the budget is structured and presented. Simply stated, resources will be requested and allocated based on what they are expected to produce (results). The key element of the presentation becomes the cost of achieving the result rather than the price of specific inputs allocated to an activity or an organization. RBB must be a tool for managers, i.e., it must be useful in developing the budget because it relates what is to be accomplished to the cost of doing so and therefore guides the monitoring of progress towards the results. Managers and budget experts must determine the inputs needed to produce stated results; the managers are then held responsible for producing the results with the resources they have requested and received. Managers and stakeholders must shift their prime focus from the number of staff at particular grades who will work on an activity to the cost of successfully completing that activity. Implicit in the concept is that managers receive a degree of flexibility in shifting inputs to produce the expected results if they are to be held accountable for those results. While there are limits to the flexibility that can be provided within any public sector entity, national or international, a level of trust must be established between the organization and its stakeholders so that reasonable flexibility can be provided. The keys to an effective results-based management and budgeting system are strong performance management and accountability frameworks, as well as information systems (enterprise resource planning (ERP)) that can capture the data needed for managing performance. Performance management systems should include clear incentives for managerial success in producing the results on which the budgets are based; accountability systems must make clear the ways in which managers are to be held responsible for achieving success.

8.The support budgets of the three agencies have been presented in a harmonized fashion for the past three bienniums, but the agencies’ budget processes and coverage differ somewhat. The existing appropriation categories within the BSB (programme support, divided between field and headquarters, and management and administration) are defined in terms of the roles of organizational units within each agency. The category of management and administration has been defined as “organizational units whose primary function is the maintenance of the identity, direction and well-being of an organization. This will typically include units that carry out the functions of executive direction, organizational policy and evaluation, external relations, information and administration.” Programme support has been defined as “organizational units whose primary function is the development, formulation, delivery and evaluation of an organization’s programmes. This will typically include units that provide backstopping of programmes either on a technical, thematic, geographic, logistical or administrative basis.” There have been gray areas between these two subcategories and also between programme and programme support. Each agency has adopted a consistent internal approach to applying the definitions, but the applications have differed somewhat among the three.

9.The agencies agree that the resources that comprise the BSB represent more than support. Rather, they provide the basis on which the core business of the organization is carried out in support of its mission and mandate at all levels within the framework of the strategic plan. The BSB is the set of resources that enables each agency to undertake the programme activities that lead to the achievement of its broad goals and objectives. The strategic plan of each agency will contain management and support areas. The figure below illustrates the linkage of the BSB to the strategic plan.

Figure

Linkage of the biennial support budget with the strategic plan

10.The agencies have agreed that the structure of the new BSB will be based on functions, i.e., the groups of activities carried out, funded with BSB resources, to operate and improve the agencies in order to assure the effective delivery of development results and implementation of their respective mandates. As indicated above, an objective of the RBB exercise is to forge a better linkage between the BSB and the strategic plans of the agencies. The agencies agree that such a linkage exists but it is not programme-specific. Core BSB functions and activities provide a basis on which country, regional and global programmes are planned and delivered. Ensuing chapters of the present report list and describe the common functions carried out by the agencies in supporting their operations and programmes. The agencies agree that these functions reflect what is covered by the BSB and believe, to the extent possible, that they should form the basis for the BSB structure. Because there are differences in operations among the agencies, subfunctions will be agency-specific and will be mainly for internal management purposes.

11.Two important conditions must be placed on the new BSB approach: (a) the transition to a new approach must not create a significant additional workload on agency staff who prepare and submit budget proposals; and (b) the information provided in the budget submission must be useful to the providers as well as to those who are putting the budget together. If both conditions are not present, the submissions are likely to be inaccurate and of little use. There also must be a means of monitoring the performance of the budget against the results indicators that are used. Such means should not impose a great workload on staff and all efforts should be made to assure that the monitoring is not seen as threatening to managers or staff. The agencies’ ERP systems will be used to collect and store the initial data and to accept and provide progress updates.

12.The transition to RBB will require a different thought process on the part of those who submit budget proposals. Rather than thinking in terms of funds needed to keep an organization operating (the approach used in traditional, incremental budgeting through which an organization will continue the same thing from budget period to budget period unless an increased “volume” of resources is requested), managers will focus on the results they want to accomplish within their functions and determine how much it will cost to do so, so that the budget total rather than the specific posts and other inputs will be the “fixed” piece. For the new approach to work in practice, there must be sufficient training and orientation developed to assure that the new approaches are clear to all and that there is continuous improvement of the practical implementation based on the lessons learned.

13.As the system is used, it should lead over time to results-based management of the BSB resources. Managers who have more flexibility to deploy the resources needed to carry out activities can be held more directly accountable for the performance and results of those activities. Authority must accompany accountability; if the flexibility implied by RBM is not given to the managers, they cannot reasonably be held more accountable for results. The agencies’ performance management systems must be modified to recognize managers who are successful in using their authority to achieve meaningful results.

14.As stated at the outset, the full transition to an effective, results-based BSB will require more than one biennium. As the new approach is applied by each of the agencies, changing conditions (such as United Nations reform) and the lessons of actual practice will require modifications in the form and operation of the RBB system. As the agencies and their stakeholders gain experience with the approach, the system will mature and its benefits as a tool for both management and resource allocation will increase.

C.Major elements of the new approach

Functions

15.The BSB will be organized by functions, which are major groupings of activities, carried out using resources appropriated by the Executive Boards. Each major functional area will be structured in terms of what the activities within it are intended to achieve rather than by organizational units. Most functions will be shown in the BSB as a whole; for a few, selected functions, subcategories within functions may also be shown. Internal management requirements of agencies dictate that more detailed information on results be maintained at subcategory levels to permit senior and operational managers to measure programme and staff performance.

16.The agencies agree that the 16 functions listed in the table below and described in Part Two are comprehensive and reflect the activities financed by the BSB. They believe that there must be uniformity among the agencies with regard to these functions if harmonization is to be maintained. There will be similarity between organizations and functions in some areas (agency audit will be undertaken by the audit organization in each agency) as well as additional, agency-specific functions (e.g., the UNDP coordination role). In others, however, it will be possible to get a more complete picture of a function or subcategory by going beyond the organizational or geographical setting (general administrative management for an agency may be carried out not only at headquarters but in field offices as well). The level at which results will be produced is not always the same as the location where the activities are undertaken. For example, results at the field level may result from activity at headquarters (programme guidance) or at regional offices (programme oversight).

Table
Functions covered by the biennial support budget
Functions common to all agencies
1 / Executive direction and leadership
2 / Representation and advancement of the core mandate
3 / Corporate policy and strategy development, planning and guidance
4 / Programme guidance, management and oversight
5 / Procurement and supply management
6 / Emergency management
7 / External relations and partnerships
8 / Internal and external communication: media and public relations
9 / Resource mobilization and fund-raising
10 / Financial management
11 / Information and communications technology management
12 / General administrative management
13 / Human resources management
14 / Internal audit
15 / Corporate evaluation
16 / Staff security
Functions carried out by UNDP but not by the other agencies
17 / Coordinating United Nations activities in countries and at headquarters
18 / Providing services to other United Nations entities on a fully reimbursable basis

17.After extensive review and discussion, the agencies believe that because the BSB is an integrated set of resources which, as a whole, enables each agency to plan and carry out programmes, the best approach for linking the BSB to the strategic plan is to consider all BSB functions as a whole, eliminating the prior, input-based distinction between programme support and management andadministration. They also believe that the coverage of the BSB should not be changed from that of the previous BSB but that each agency should examine its BSB to ensure that the definitions of “programme” and “BSB” be applied consistently. Finally, they believe that the selected functions provide the basis for a strong integration with the management results dimension in the strategic plans.

Indicators

18.A major purpose of adopting an RBB structure fir the BSB is to demonstrate how the resources appropriated by the Executive Boards are significant to the programmes carried out by the agencies. In reaching consensus that functions would be the primary grouping used for the new BSB, the agencies determined that it would not be feasible to try to relate BSB activities to specific programme areas, be they programme objectives, sectors, agency goals or the broader Millennium Development Goals. This determination was made because: (a) most resources in the BSB that support programmes are not programme-specific but instead support a variety of programmes, so that trying to trace BSB results to specific programmes would require proportional or other attribution of such activities; and (b) programme objectives and broader goals are likely to change over time whereas the BSB should have a basis that can be tracked from biennium to biennium. It is important, therefore, that the functions chosen and the indicators for each function or subcategory make clear the contribution the activities within them make to the achievement of the strategic plan.