The United Nations is a complex system of organizations, agencies, funds, programs, and other bodies. The financing for all these entities and their activities is so multifaceted and complex that knowing the basics of the budgetary process can go a very long way in understanding the U.N. budget, including allocations for development.
Funding for the United Nations comes from two sources: (1) assessed contributions and (2) voluntary contributions. Assessed contributions are obligatory payments made by member states to finance the U.N. regular budget and peacekeeping operations. Assessed contributions to the regular budget from member states are largely based on per capita income, with a floor of 0.001 percent to ensure that even the poorest countries contribute something.
Structured to avoid relying too heavily on any member for its funds, the United Nations does not allow any country’s dues to exceed 22 percent of the regular budget. In the history of the international body, the United States is the only member to have hit that ceiling.
Similarly, the United Nations funds its peacekeeping operations based on a country’s ability to pay, but with greater discounts for poorer nations. The permanent members of the Security Council – the United States, United Kingdom, France, Russia and China – make up the difference.
In contrast, voluntary contributions are left to the discretion of each member state. These contributions, which account for more than half of total funding, finance most of the United Nations’ humanitarian relief and development activities. Major programs heavily dependent on voluntary contributions include the World Food Program, UNICEF and the U.N. Development Program.
A dependence on voluntary funding has its pros and cons. On the one hand, competition for scarce financial resources has made U.N. programs more responsive, dynamic, and efficient since U.N. members can make the decision to finance certain activities that might have the greatest development impact or compliment their own aid priorities. Among all the major programs and funds of the U.N. General Assembly, UNDP receives the highest voluntary funding, which peaked at $9.8 billion in 2010-2011.
On the other hand, reliance on voluntary funding can risk objective program planning and sacrifice program continuity. For example, in 2009, WFP said it needed $6.7 billion to reach the world’s hungry, but total contributions amounted to only $4 billion. Due to the funding shortfall, WFP claimed that 21.3 million targeted beneficiaries were left to fend for themselves.
As a public enterprise, the U.N. system collectively spends more than $36 billion annually. If accounting for the U.N. regular budget, peacekeeping operations budget and major program budgets of the General Assembly, the overall U.N. budget grew significantly over the past decade. For instance, available funds for U.N. activities grew from $34.09 billion in 2004-2005 to $58.84 billion by 2012-2013. Analysts agree that this growth is due largely to the expansion of U.N. mandates, brought about by a growing demand for U.N. assistance.
Looking at this through a simplified and user-friendly lens, the U.N. budget (not including U.N. specialized agencies) can be broken down as follows:
Regular budget: The regular budget funds the activities and staff of the United Nations’ “core” institutions, those established by the charter: the Security Council, General Assembly, Economic and Social Council, International Court of Justice, Trusteeship Council and Secretariat. It also provides funding support (ranging from full assistance to token amounts) for various U.N. bodies, including the U.N. Human Rights Council, U.N. Relief and Works Agency for Palestine Refugees in the Near East, or UNRWA, and U.N. Environment Program.
Other U.N. activities budget: The budget for other U.N. activities discussed here refers to funding support given for the developmental and humanitarian activities of the General Assembly. These include the UNDP, UNICEF, WFP, UNEP, U.N. High Commissioner for Refugees, International Trade Centre, U.N. Conference on Trade and Development, U.N. Office on Drugs and Crime, U.N. Human Settlements Programme, U.N. Population Fund, and UNRWA. While these programs and funds receive allocations from the U.N. regular budget for their administrative expenses, they are largely funded independently by member states through assessed or voluntary contributions, or a combination of both.
Peacekeeping budget: The U.N. peacekeeping budget funds most of the peacekeeping missions established by the Security Council. Because it fluctuates significantly as missions are established, expanded, contracted or terminated, the peacekeeping budget is appropriated annually. For example, the 2012 peacekeeping budget of $7 billion per year is the result of a $1 billion budget cut as the East Timor mission closes down and those in Haiti, Liberia and possibly Darfur are downsized.
The U.N. regular budget grew from $3.61 billion in 2004-2005 to $5.40 billion by 2010-2011, representing a 50 percent increase over a period that included a post 9/11 economic contraction and a global recession that forced countries to do more with less. The trend of constant increases appears to have been momentarily arrested, however, with the adoption of the $5.15 billion regular budget for 2012-2013, which is 4.9 percent lower than the final expenditures of the 2010-2011 biennium. More importantly, this program budget represents the first time in 14 years – and only the second time in the last 50 years – that U.N. member states approved a budget below the previous biennium’s final appropriation.
Closer inspection reveals that this budget “cut” may be misleading. Instead of reductions in U.N. mandates, employment, or other activities, the bulk of the budget cut hinges on the noninclusion of recosting in the initial budget appropriation and its deferment until the mid-biennium budget debate next autumn. Indeed, most of the expected recosting “bill” for this biennium has been deferred until later so as to give U.N. Secretary-General Ban Ki-moon the opportunity to find further cost savings, which he has pledged to do to offset any recosting increase that may be required later.
Recosting is included in the U.N. budget to account for potential inflation, exchange rate variances, and other variables that could lead to increased expenses. Regrettably, by building a budget cushion, the U.S. Mission to the U.N. has said that recosting “has had the effect of eroding budget discipline.” Through recosting, the United Nations can continue or even expand planned activities regardless of these budgetary factors and simply pass additional expenses as part of the regular budget. As such, after passage every other year, the General Assembly continues to debate and fine-tune the regular budget, responding to various external and internal factors.
Further complicating the U.N.’s budgetary process is the issue of extrabudgetary resources which supplement the regular budget. As voluntary funding by member states for activities under the U.N. regular budget, extrabudgetary resources are projected to be roughly double the size of regular budget expenditures. For 2012-2013, the U.N.’s Advisory Committee on Administrative and Budgetary Questions projects an additional $12.44 billion in extrabudgetary resources, bringing the regular, plus extra, budget to $17.59 billion. While extrabudgetary resources help achieve U.N. priorities, the process is perceived by many to suffer from a lack of transparency and accountability.
Indeed, in addition to some of the expected bureaucratic and organizational complexities, most view the U.N. budget-making process as overly opaque. Analysts frequently complain that the U.N. budget documents provide an overload of data with little or no explanation to make it useful information. For example, the U.S. Mission to the U.N. has highlighted the fact that the precise number of policy papers to be issued by a department is published, but there is no information on the cost of employee benefits even though personnel costs account for over a third of the current biennium’s budget.
Adding to the U.N. budgetary problems is the one-country-one-vote structure of the General Assembly. The voting structure incites complaints of a free-rider problem whereby countries that contribute relatively minimal resources to the United Nations, but still have voting power, maintain control over financial decisions. In fact, countries which account for more than 85 percent of the U.N. budget regularly vote against the budget, but are unable to prevent its increases because countries that pay less than 10 percent have the votes. The Group of 77, whose membership includes over two-thirds of the states in the General Assembly, consistently favors budget increases. Proponents of the one-country-one-vote setup argue that it is the only way to ensure that all nations – large or small, developed or emerging – have a voice in the U.N. budget process.
Christine Dugay contributed to this report.