[Senate Hearing 105-386]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 105-386


 
          UNITED NATIONS AT A CROSSROADS: EFFORTS TOWARD REFORM

=======================================================================

                                HEARING

                               BEFORE THE

                SUBCOMMITTEE ON INTERNATIONAL OPERATIONS

                                 OF THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                       ONE HUNDRED FIFTH CONGRESS

                             FIRST SESSION

                               __________

                            NOVEMBER 6, 1997

                               __________

       Printed for the use of the Committee on Foreign Relations





                     COMMITTEE ON FOREIGN RELATIONS

                 JESSE HELMS, North Carolina, Chairman

RICHARD G. LUGAR, Indiana            JOSEPH R. BIDEN, Jr., Delaware
PAUL COVERDELL, Georgia              PAUL S. SARBANES, Maryland
CHUCK HAGEL, Nebraska                CHRISTOPHER J. DODD, Connecticut
GORDON H. SMITH, Oregon              JOHN F. KERRY, Massachusetts
CRAIG THOMAS, Wyoming                CHARLES S. ROBB, Virginia
ROD GRAMS, Minnesota                 RUSSELL D. FEINGOLD, Wisconsin
JOHN ASHCROFT, Missouri              DIANNE FEINSTEIN, California
BILL FRIST, Tennessee                PAUL D. WELLSTONE, Minnesota
SAM BROWNBACK, Kansas

                     James W. Nance, Staff Director

                 Edwin K. Hall, Minority Staff Director

                                 ______

                SUBCOMMITTEE ON INTERNATIONAL OPERATIONS

                     ROD GRAMS, Minnesota, Chairman

JESSE HELMS, North Carolina          DIANNE FEINSTEIN, California
SAM BROWNBACK, Kansas                CHRISTOPHER J. DODD, Connecticut
GORDON H. SMITH, Oregon              JOHN F. KERRY, Massachusetts

                                  (ii)




                            C O N T E N T S

                              ----------                              
                                                                   Page

Connor, Joseph E., U.N. Under Secretary-General for Management...    23
Ruggie, John G., U.N. Assistant Secretary-General and Special 
  Advisor to the Secretary-General...............................    19
Sklar, Hon. Richard, U.S. Representative for U.N. Management and 
  Reform.........................................................     3

                                Appendix

Prepared statement of John G. Ruggie.............................    45
Prepared statement of Joseph E. Connor...........................    47
    Charts included as part of Mr. Connor's statement............    52

                                 (iii)




       THE UNITED NATIONS AT A CROSSROADS: EFFORTS TOWARD REFORM

                              ----------                              


                       THURSDAY, NOVEMBER 6, 1997

                               U.S. Senate,
          Subcommittee on International Operations,
                            Committee on Foreign Relations,
                                                     Washington DC.
    The subcommittee met, pursuant to notice, at 3:25 p.m. In 
room SD-419, Dirksen Senate Office Building, Hon. Rod Grams, 
chairman of the subcommittee, presiding.
    Present: Senators Grams and Sarbanes.
    Senator Grams. Welcome, thank you very much. I want to 
first thank the witnesses here today to testify before the 
committee. I want to thank you for your time and effort to come 
down from New York to provide us with some very important 
information.
    Ambassador Sklar, the U.S. Representative for the U.N. 
Management and Reform; U.N. Under Secretary-General for 
Administration and Management, Mr. Joseph Connor; and also U.N. 
Assistant Secretary-General and Special Advisor to the 
Secretary-General, Dr. John Ruggie, again I want to thank you 
all for taking time.
    I would also like to personally thank the U.N. Secretary-
General, Kofi Annan, for offering to send his staff here to 
testify. It was a gracious gesture from a very gracious man and 
we want to thank him for that.
    We are all working toward a very common goal of reforming 
the United Nations so that it will be a relevant institution 
into the next century. And as the Secretary-General has aptly 
noted, reform is a process, not an event. And if I may take the 
liberty to add, at the United Nations, the process is often 
exceedingly slow, and the victories sometimes rather meager.
    The powerful opponents of reform, the entrenched U.N. 
bureaucracy and member states who clearly benefit from the 
current system, are both powerful, but I also believe 
shortsighted. Any organization burdened with a bloated 
bureaucracy and no mechanisms to control spending will collapse 
under the weight of its own inefficiency.
    If the opponents of reform are not careful, they could end 
up killing their cash cow. Reform is necessary not because 
Congress wants it, but to ensure the very survival of the 
United Nations as a viable world organization.
    At this juncture in the reform process, I think it is 
important to take note of what has already been accomplished, 
and what more needs to be done. The Secretary-General has 
introduced his Track One reform proposals, which he can 
implement without the approval of the General Assembly, and 
then his Track Two reform proposals, which need General 
Assembly approval.
    The budget for the 1998 and 1999 biennium, which should 
reflect the efficiencies realized from the Secretary-General's 
reforms, has also been put forward. A bipartisan effort by the 
Senate and the administration has resulted in a package of 
reform measures that are linked to the payment of arrears.
    The United States has an important role to play in setting 
specific reform goals for the U.N. that will have a positive 
impact, both immediately and over the long-term. But it is not 
our job to try to micromanage every detail of how the U.N. is 
to reach those goals or to implement the reforms. That should 
be determined through negotiations among the member states and 
by Secretary-General Annan and his staff.
    Indeed, I think it is important to note that the Senate has 
consulted with the United Nations every step of the way during 
this process. We sent Foreign Relations Committee staff to the 
United Nations while our bill was in the process of being 
created to discuss possible reform benchmarks.
    We even adopted a number of reforms that were in the 
Secretary-General's reform proposals, such as the abolition of 
1,000 posts and the achievement of a no-growth budget. And 
quite frankly, I'm surprised that there is a question as to 
whether even these limited goals can be achieved.
    There is no doubt that the United States must settle the 
issues of its arrears. That is exactly what the Senate's U.N. 
reform plan is designed to do. But there is no way that any of 
the arrears will be paid if the reforms are not achieved.
    The U.S. can help make the United Nations a more effective 
and more efficient and financially sounder organization, but 
only if the U.N. and other member states in return are willing 
to finally become accountable to the American taxpayer.
    I know that Ambassador Richardson, Ambassador Sklar, and 
the entire team at the U.S. mission has a tough job to do 
trying to convince other nations that our reform package is, 
indeed, in their long-term best interest. I know that often, 
the objections to the package have little to do with the 
substance of the reforms and more to do with the fact that it 
is the United States that is suggesting them.
    I also realize that the failure of Congress to quickly move 
our reform legislation forward has made the U.S. mission's 
tasks even more difficult. They have been fighting basically 
with one hand tied behind their back.
    But every time another member state calls the United States 
a deadbeat and a bully and accuses the U.S. of not doing its 
fair share for the international community, I hope that they 
come out swinging, given the billions of dollars of 
unreimbursed costs and voluntary contributions that the U.S. 
continues to give to the U.N. in addition to our annual 
assessed contributions.
    So in a very broad sense, I called this hearing to try and 
help to establish a dialog between the U.N. Secretariat, the 
U.S. mission at the United Nations, as well as the Congress. 
And all too often, misunderstandings arise from a lack of 
communication.
    And hopefully, we will all be a bit wiser at the end of 
this hearing. I know I will, not only about the details of U.N. 
reform efforts, but about our priorities and the constraints 
under which we operate during this entire reform process.
    So when I asked Ambassador Sklar to take the hot seat, 
which he will do in a moment, and to comment on the 
administration's successes in achieving our reform benchmarks, 
I hope that the gentleman from the U.N. will also take note 
that he has some formidable constraints in being able to grant 
the U.N. what it wants and what we all want, and that is the 
repayment of U.S. arrears.
    So with that, gentlemen, I want to again thank you for 
being here, and Mr. Sklar, we take time now to take and listen 
to your opening statement.

 STATEMENT OF THE HONORABLE RICHARD SKLAR, U.S. REPRESENTATIVE 
                 FOR U.N. MANAGEMENT AND REFORM

    Ambassador Sklar. Mr. Chairman, I remark first the last 
time I was in here, I walked out with your approval and a title 
added to my name and I wonder if--my children asked when I came 
back, Do I get something new added each time?
    Senator Grams. Or taken away? No.
    Ambassador Sklar. Or taken away. [Laughter.]
    Ambassador Sklar. Mr. Chairman, thank you for this 
invitation to continue our dialog on the work we are at to the 
U.S. mission to the United Nations in the management and reform 
arena.
    A few months ago when I testified before this committee 
during my confirmation hearing, I described my understanding of 
my mission for this year as having two components--one, 
renormalization of the relationship of the United States and 
the United Nations by resolving financial differences with the 
United Nations on U.S. arrears and future assessment rates; and 
second, continuing to apply U.S. pressure on the United Nations 
to reform its management and financial control practices.
    I had no idea of the depth and breadth of both of those 
challenges. Today, I will attempt to brief the committee on our 
progress to date and the problems facing us on both counts.
    With respect to internal reform of the U.N.'s management 
and financial systems, it is fair to say that an effort that 
started in 1994 under pressure from the U.S. Government to 
renew and modernize the management of the U.N. continues, and 
under the leadership of Secretary-General Annan, is 
accelerating.
    Nevertheless, the pace is slower than we would like, and 
constant pressure must be maintained on the membership to 
accept and embrace the critical steps in this process. The 
Secretariat has been forthcoming and forward looking and 
working with us in this process.
    Our current efforts are centered on gaining the members' 
acceptance of the package of reform measures, introduced in 
July 1997 by the Secretary-General, known as Track Two. These 
are follow-on reforms to those implemented by the Secretary-
General in March.
    Examples of the actions and recommendations of the 
Secretary-General are establishment of a results-based 
budgeting as the norm; consolidation of the management of 
development efforts; rationalizing top management structures 
and practices; and streamlining the management of the 
humanitarian efforts.
    The U.S. by and large supports the entire package, albeit 
with certain reservations, which we have made known to the 
members and the Secretary-General. Most of the reforms are 
sound, solid managerial improvements and should be accepted 
without argument.
    However, there is great fear in the membership that this 
package is quote made in the USA unquote, and is part of 
attempt to downsize the United Nations and to diminish the 
power and influence and membership of the General Assembly. 
That is not true. We emphasize what we are talking about is 
doing more, doing better, not doing less.
    This fear has resulted in a too lengthy discussion period 
on the first group of the reform elements, the Secretary-
General's actions, that should be recognized as solely within 
the province of the Secretary-General--no approvals are 
necessary on this part of the package.
    We have been very actively working for swift 
acknowledgement of the value of these steps, many of which the 
Secretary-General is already implementing. I hope to be able to 
report success in this area of gaining recognition by the 
membership within a matter of days.
    The remainder of the Secretary-General's package, which 
includes his recommendations requiring membership approval, are 
under full debate and I believe most will be accepted within 
the month.
    Thus, the Secretary-General's 1997 reform program will be 
included in the budget for the coming 2 years. This package, 
while not revolutionary, lays a sound base for the next and 
bolder steps we must take. In my opening remarks on the budget 
debate last week at the United Nations, I started to lay out 
some of the directions we will be suggesting once this base or 
foundation is laid down.
    Going beyond results-based budgeting and sunset provisions, 
we will urge an ongoing value and efficacy review process that 
will weed out mandates and programs that no longer have value. 
We are urging that all functions performed by U.N. units that 
are a duplicate or a replicate of efforts carried on elsewhere 
in the multilateral system be dropped, unless the U.N. product 
is the best of the lot.
    World Bank economic studies ought to be used, rather, to 
build a U.N.-developed data base unless the quality of the U.N. 
work is superior. And then we ought to convince the 
multilateral community to use the U.N. data and drop their 
duplicative efforts.
    The United States contributes to the payments of all of 
these; whether done by the World Bank, the IMF, the OECD, or 
the U.N., we should pay only once.
    All U.N. units should be subject by internal management to 
a cost-benefit analysis, and those dropping below a standard 
ought to be eliminated or shaped up. Assuming the approval of 
the Secretary-General's base package, and the renormalization 
of the U.S.-U.N. relationship, we will be in a position to 
press for these more aggressive reforms in the coming years. 
Again, as you said and as the Secretary-General said, this is a 
process, not an event.
    You will note I included the caveat that we must rebuild 
the U.S.-U.N. relationship. That process requires again, as you 
pointed out, first, the passage of legislation in the Congress 
laying out our U.S. expectations and commitments.
    The lack of the completion of the legislative process and 
the agreement between the administration and Congress on the 
content of that legislation puts us in the position, in the 
words of some of the other members, of shadowboxing or dream 
dancing as we attempt to persuade the other members to accept 
our proposals.
    They ask us how we can expect them to negotiate when the 
Congress has not passed the bill and laid down, specifically 
and legally, the defining U.S. position.
    I know how hard you, Mr. Chairman, and members of this 
committee have worked to bring this legislation to fruition. I 
thank you for that effort, and I join you in hoping that within 
a matter of days, we will see a law coming out of this months 
or years of hard work. Passage of the legislation is a critical 
first step, but then the real battle will begin.
    It is important to understand the position of the other 
members as we pursue the effort to persuade them to accept the 
U.S. position. To proceed with only our own viewpoint would be 
like playing poker or bridge without acknowledging what is in 
your opponent's head.
    The other members universally deeply resent the U.S. 
position and attitude. They see us as a debtor to the U.N. 
laying out conditions for repayment of moneys that they view as 
owed under treaty obligations. They see us as unilaterally 
demanding a change in the rate of assessments as a condition 
for payment for past and future payments. They see us as 
putting down managerial conditions for an independent 
organization in a micro-managing mode as a further condition of 
payment of past and future assessments.
    They see the richest nation in the world demanding a 
discount from an assessment rate that they believe should be 
predicated on, quote--the words I hear night and day--capacity 
to pay, I.e., gross national income. These thoughts--these are 
the thoughts in the heads of those with whom I negotiate every 
day.
    I remain optimistic that when an agreed upon bill is signed 
into law, we can achieve significant progress in meeting our 
common goals. The most critical benchmark or element of the 
legislation going through your process is the reduction of the 
ceiling established for rates of assessment from the current 25 
percent first to 22 percent, and later, in 2 years or longer, 
to 20 percent.
    If we are to pay less, others must pay more, even with a 
capped in U.N. budget. In my 63-year life and 45-year history, 
I have rarely found others who said, ``Let me pay more money so 
you can pay less,'' for anything. I am still looking for that 
dinner, that date.
    There are others who should pay more. Countries with fast-
growing and significant economies receive excessive discounts 
through the selection of the statistical base for measurement 
of GNP that looks back too many years. Countries continue to 
benefit from discounts for their per capita income in a greater 
number than all reason.
    The United States' discount, which would come from a 
ceiling and many times is dwarfed by the discounts currently 
enjoyed by fast-growing and other large economies.
    Working vigorously with the other members to try to 
persuade them to join us in the revision of this scale of 
assessments, we are severely handicapped additionally by the 
limited time to adopt this scale. We only have 7 weeks, and 
that 7 weeks, whenever the legislation comes forward, is fixed. 
It cannot be stretched.
    Both the Congressional legislation and the U.N. practice 
demand an answer before we go home for Christmas this year.
    Amongst the other components of the pending U.S. 
legislation that challenges us in the U.N. most severely is the 
proposed budget cap of $2.533 billion for the coming biennium. 
This to--to meet this budget cap, there are programs that ought 
to and can and will have to be eliminated as new mandates 
arise.
    However, the Congress' experience in base closings may give 
you some idea of the difficulty in gaining agreement from 185 
sovereign countries in giving up their favorite programs. We 
cannot put together a base-closing commission and take that 
route up in New York, would that we could.
    We have laid out our concerns on the budget, financial 
control, and oversight in remarks that Ambassador Richardson 
and I made at the start of the debate on the scale of 
assessments and the budget. I have included a copy of those 
remarks with my written statement.
    Parenthetically, I think Ambassador Richardson have been 
perhaps a little blunter and more forthright in the way we have 
spoken out in public in the U.N. than the U.N. has been used 
to. But quite frankly, I think it is the only way to deal 
openly and honestly with the members. We have a tough 
situation, and polite and cutesy diplomatic language is not the 
way to deal with real problems that must be solved and met.
    We will continue our aggressive and forthright approach to 
the other members on these two critical issues in the weeks 
ahead. On Monday, the Ambassador and I will be hosting 12 
sessions at his apartment in New York where 180 of the 185 
members will come and meet with us, in addition to those we are 
talking to bilaterally. We are going to do that during your 
recess and ours next week. And we will keep you informed of our 
progress, as we have.
    I hope I have not painted too bleak a picture. In the words 
of Secretary-General Annan, the U.N. must reform or lose its 
relevancy. We could not agree more. Failure to reach agreement 
with the other members on reform and changes in the financial 
arrangement will, as Ambassador Richardson said several weeks 
ago, result in damage to the U.N. as well as to the interests 
of the U.S., which is well served by the United Nations in its 
multilateral role.
    We will work to prevent the scenario from coming into 
being. We look forward to working with you and for your help 
and attention. I welcome your questions.
    Senator Grams. Thank you very much, Ambassador. We have 
been joined by Senator Sarbanes. Would you like to make a 
comment or opening statement, Senator?
    Senator Sarbanes. Why don't you go ahead with your 
questions, Mr. Chairman, and then I will pick up afterwards?
    Senator Grams. And then you will have questions for me. 
[Laughter]
    Senator Grams. Well, thanks for being here. I appreciate 
it.
    Ambassador Sklar, I would like to ask you a few questions 
about the Secretary-General's Track Two reform proposal, and 
then to move on to basically the progress that you have made in 
achieving some U.S. reform goals.
    So first, are there any proposals in the Secretary-
General's Track Two plan that the administration disagrees with 
besides those outlined in your opening statement?
    Ambassador Sklar. Yes. There are a number that we have 
reservations about; others we question entirely whether they 
are the right answer or the problem is the right problem.
    For example, the Secretary-General has proposed a revolving 
fund, a voluntary revolving fund, to deal with the cash-flow 
problems of the U.N. we think the cash-flow problems are and 
have got to be solved. We do not think this is the way to solve 
it, and the sentiment amongst most of the members I think 
agrees with this. This is not the answer.
    We had some questions and reservations about the 
establishment of a Department of Disarmament in New York. The 
Secretary-General has alleviated those concerns. We were 
concerned that this department not become a watchdog or an 
interventionist in the treaty obligations we have directly with 
other nations. That has been dealt with quite satisfactorily.
    We are interested in seeing how the development fund--no, 
development management program that the Secretary-General is 
putting forward goes forward, the idea of a single country 
agent in each country representing all the agencies. We are in 
favor of it, but we have yet to see how it is going to work.
    Most of our questions were not, Do not do this. It does not 
make sense. It was How are you going to do this? How will you 
implement it? Have you thought about this?
    I would say the revolving fund is the largest single--the 
biggest single pure no, and I think it will go away because it 
had little or no support. What we do applaud the Secretary-
General for doing is saying I have got a cash-flow problem. 
Guys, help me solve it.
    Senator Grams. And, you know, just the opposite of that is 
the United States pushing for further reforms to the management 
structure of the U.N. in order to streamline the bureaucracy--
under the, you know, the Track Two proposal.
    Ambassador Sklar. I think as I mentioned in my remarks, 
what we consider as the Secretary-General has laid down a 
foundation or a base, in harking back to my life before I 
entered this world. 2 years ago, I was in the construction 
business and we have laid down--we have done the excavation and 
got the foundation if we get the Secretary-General's work 
through.
    What we have got to do, then, is put up the superstructure 
and the rest of the functioning components of the building. 
Without the foundation and base, that will not happen. And the 
Secretary- General was, I believe, correct to not reach out for 
the moon, but to lay down that solid foundation.
    You gentlemen have been using the word fast track around 
here, but it really comes from my world. Fast tracking means 
that while you are laying your foundation and base down, you 
are doing the design for what comes above. We are doing just 
that in our world.
    But I think if the Secretary-General had reached out for 
some of the aggressive reforms, zero-based budgeting, efficacy 
reviews, elimination of programs, closing of offices in this 
first round, he would have met such resistance from the members 
that we never would have gotten going--we would have been 
talking forever, so I think the strategy was the right one.
    And if we get our relationship normalized, we get into a 
position where we are not viewed as someone owing money to the 
organization yet demanding change, I think we will be able to 
build on that foundation in the next couple of years.
    Senator Grams. You always hear the term that it is a good 
first step, but sometimes we never take the second and third 
steps. This is a good first step, but will it be followed up by 
a second and third?
    Ambassador Sklar. All I can tell you is that while I am 
there and while I have the energy, we, representing the United 
States--we will push to make sure it happens. I cannot promise 
you the end results. I can promise you the pressure will be 
there, the ideas will be there.
    And frankly, we are finding a great many members very 
sympathetic to the approach we are taking. The Nordic 
countries, for example, have laid out an excellent proposal, 
going well beyond the foundation in the development area--one 
that we could subscribe to.
    So the pressure will be there--the administration is 
committed to it, the Secretary is, Bill Richardson is, and I 
am. Results we will have to measure as we move ahead.
    Senator Grams. Where are the negotiations right now in the 
attempt to lower the assessment to 22 percent?
    Ambassador Sklar. Well, as I mentioned to you, the words 
that come back at me are shadowboxing or dream dancing till the 
Senate and the House and the President give us a bill, but we 
have not waited.
    I do not want to just sit here and discuss the strategy. 
You and I have discussed the individual countries' strategies 
we are doing, and I will be happy to do that.
    But we are attempting to bring all of the membership in 
around the eight components of the scale of assessments, and 
point out to them that when they talk about capacity to pay, so 
do we.
    But capacity to pay is not an economic--you cannot find it 
in economic books or any math tables. Capacity to pay, as 
defined by the United Nations, is made up of eight separate 
components, each of which are political and have someone's 
interest. We are interested in the ceiling, which results in a 
discount for us. But we are also very interested in the look 
back that occurs for many nations.
    The way the United Nations' current plan works, they look 
back 8 years into history to determine the size of your 
economy. They really do not look back eight, they look back 10, 
because the first 2 years, there is no statistical data. They 
are proposing under the G-77, the developing nations', and 
China's proposal to cut that to 6 years.
    But even so, that means we will be looking at other 
countries' economies in the years 1992-93. If you take a 
country whose economy grown at 7 percent more than the world 
economy in that period of time, that means--and I will not go 
through all the math with you--that they are getting a discount 
of about 40 percent over their true capacity to pay today. We 
are pointing that out to the other members, and we are doing 
that with each of the seven other components, other than the 
ceiling.
    This is not something we can force. It is something we have 
got to point out and bring a coalition together around. So we 
are working bilaterally with the key countries, and there is 
about 14 of them, whose assessments will rise dramatically with 
our plan.
    And with the other countries whose assessments will not 
rise and letting them understand the importance of reaching 
agreement with us so that they who benefit from very low 
assessments and contributed very little money to this system 
but who benefit greatly will not see an organization that they 
care about and want, as we do, survive and grow.
    So it is a constant process--it goes on night and day, it 
goes on, as you know, with me over tables of pasta and bowls of 
good Chinese soup. And I think we are making progress, and I 
will be able to report back even more strongly once we see a 
bill that I can hold up as a sure marker from our side.
    Senator Grams. Mr. Ambassador, you mentioned the U.N. 
reform legislation. We have put off this hearing as long as we 
could to hopefully have the bill in hand and give you something 
to work with. But to our disappointment as well as yours, you 
know, we pushed this right down to the end of this session. But 
hopefully, you will have it within days if we can.
    Ambassador Sklar. Thank you.
    Senator Grams. There are press reports, Ambassador Sklar, 
that indicate that there is a proposal from some of the 
developing nations that has gotten some support, regarding the 
floor of assessments, to lower the floor, from what is now, the 
one-tenth of 1 percent to one-hundredth of 1 percent. 
Basically, the amount many countries pay would go from about 
$106,000 down to under $11,000.
    Ambassador Sklar. Yes.
    Senator Grams. Does the U.S. support this proposal?
    Ambassador Sklar. It was in--actually, it was in the U.S. 
package in the spring. From a negotiating standpoint, I might 
have offered it now rather than in the spring. But 
nevertheless, it really is not important in the big scheme of 
things.
    It does drop the payment for the very smallest 50 or 60 
countries, down, as you say, to $10-$12,000 a year--less than 
the apartment rents for their perm reps in New York. But in the 
scheme of things, it does not much matter because the total 
amount is only 5 or $6 million out of a $2.5 billion budget.
    And if 50 or 60 countries for this small concession, in 
real terms, would join us in support of our ceiling that is 
significant, I would not find it to be something that--that 
what I was negotiating, I would have trouble giving up.
    I hate to get into too much of the negotiating detail now 
or I will be playing my hand in public.
    Senator Grams. But it is part of the principle of the thing 
that seems to be--more than the money.
    Ambassador Sklar. The smallest countries, some of them 
barely larger than, as I said, four hotels and an airstrip, 
have sovereignty, have very little money, and this is a big 
achievement for them, and the United Nations is very important 
to them.
    Every one of the eight issues, every one of the eight 
areas, has principle. Everyone has their principle and their 
piece. And as you know, being in this body, compromise is the 
name of the game. If everyone held to their rigid principles on 
every count, we would not have enacted legislation for the last 
180 years.
    This is one set of principles that matter to someone, and 
the question I will have as we reach final negotiation on the 
eight principles is what can we give up in exchange for what we 
want?
    This is not one of the big chips.
    Senator Grams. Yes. But it seems like one of the biggest 
problems that we have in instituting these cost-saving 
procedures is those who pay very little but get a larger share 
as far as the benefits from the U.N.
    So, decreasing their stake in support of the U.N.--I do not 
see how that really will help our argument with them.
    Ambassador Sklar. I--Senator, I cannot argue with you--but 
again, I have got to try and work with the 185 members to find 
a balance around the eight areas, and I think--I do not know. 
Maybe you can tell me because I am not that familiar, but when 
the last piece of pure legislation came out where there was not 
a concession, where there was not a bridge or a road in 
exchange for something else, and you bit your tongue because it 
was for the greater good.
    I would like to have the freedom to deal with the eight as 
long as we achieve the noble--the major goals you set out for 
us.
    Senator Grams. Moving on to the budget issue, do you 
believe the Secretary-General's budget, as presented, continues 
a basic no-growth policy?
    Ambassador Sklar. Senator, as I mentioned to your staff in 
a lengthy discussion last week, I cannot answer that question 
now. I will not be able to until the Secretariat produces their 
end of 1996-97 figures. The budget cap of 283, which they 
believe will come down to $2.533 billion when the currency 
fluctuation is worked out in December, may or may not be, and I 
am not even guessing which, higher or lower than the 1996-97 
number. We will know that when the 1996-97 number is in.
    I believe it was clearly the intent and objective and 
expectation of the Secretariat that it will be a no-growth 
budget, but perhaps the panel who follow me will be able to 
answer that better. My view is I will not make a guess on 
something that I will know for certain in 3 to 4 weeks. As soon 
as I know, you will know.
    I have every hope and expectation it will, but I am not 
about to make a promise I--on information that I do not have 
yet.
    Senator Grams. OK. On the number of post jobs, are you 
confident that the Secretary-General's budget actually 
eliminates the magic number of 1,000 posts? You know the last 
time we spoke, you mentioned that you had some questions 
concerning the issues of the post. Have you received any 
answers to those?
    Ambassador Sklar. We have some of the answers but not all. 
I have become more progressively confident every day that it is 
truly a 1,000 posts dropped, from the 10,012 to 9,012. I am not 
over the total hump yet; there is one more set of questions 
that we have not gotten resolved.
    I believe we are going to be there, some two-thirds of the 
way up that hill that you and I talked about a week or so ago.
    Senator Grams. Is the administration, on the other hand, 
supporting the creation of any new jobs, any new posts? And, 
basically, do you think that any of these posts should be 
allocated to the OIOS--the Inspector General's Office--instead?
    Ambassador Sklar. Let me take them in two parts, sir.
    Yes, the Secretary-General has proposed that--I think it is 
29 or 39 posts in the computer system, the ARMIS system, which 
is the best thing that has happened, because you can now count 
how many people were there--they be made permanent.
    These people have been working for the Department while the 
computer system was brought on line. We think it is unrealistic 
to continue to carry them as temporary employees, and in fact, 
buried off the post count. So we applaud Under Secretary-
General Connor's decision to include those in there.
    The thousand is a net drop; I think the number is 1,059 
down and 59 back up to get to the 1,000 net, so, yes, we 
support the addition of those particular posts.
    Second question--I have talked to the Inspector General. I 
have talked to the GAO. I have read the GAO report, and I am 
convinced that the Inspector General Paschke, who is one my 
heroes up there, has the resources that he needs for this next 
biennium. He has done a super job. The GAO report was 
laudatory.
    I mentioned to your staff last week when we talked that I 
asked the GAO head team leader, when we were doing our exit 
interview, how he viewed the Inspector General on a scale of 1 
to 10. And what he told me was that compared to any similar 
operation in the U.S. Government department, Paschke at the 
same point in history was farther ahead than they were, which 
made me feel good.
    Paschke's reports have come out. They have been tough, they 
have been hard-hitting, and he says he has the resources and 
that is all I can go on.
    We are comfortable with the budget for the next 2 years.
    Senator Grams. As you are aware, dealing with the OIOS, 
Senator Helms and I requested that the GAO produce a report on 
the status of internal oversight services at the U.N.
    According to the draft report, GAO was unable to test 
whether OIOS exercised its authority and implemented its 
procedures in an independent manner because the U.N. denied the 
GAO access to the OIOS' working papers or other records or 
files related to specific audits, investigations, or 
inspections.
    So, the question is, will the U.S. mission have access to 
these materials so that the administration will be able to 
certify that the OIOS is operationally independent?
    Ambassador Sklar. OK. Sir, in reading that report and in 
talking to the GAO staff, they--one said that the OIOS was 
independent, reported directly to the Secretary-General, had 
laid out policies and procedures and two of its four teams had 
two more to go, and had the resources that were needed.
    They, since this is not an agency of the U.S. Government, 
did not have the ability to go through the personnel records 
and read through in detail all of the reports.
    They did raise one objection to the way the OIOS worked, 
one primary objection--a lot of minor ones. The primary one was 
they were concerned with the number of reports that actually 
were sent up to the Secretary-General and then on to the 
General Assembly. They worked out an arrangement with Inspector 
General Paschke where he will list all of his reports.
    When he does a report that he considers simply a matter of 
managerial change at the program level, he keeps it down there 
and it doesn't float and become a matter for the public and the 
press. When he finds anything of significance, he sends it up 
to the Secretary-General, and then it is fully available to us.
    He has gone even further this year--he has reached another 
agreement. He said that on any report that he does not issue 
because it is of a minor matter, he will be happy to brief any 
member state that so requests, report by report, and he lists 
all of those reports in case we want to take a look at them.
    So we will find out if in fact this step that the GAO 
recommended is followed. I have no reason to doubt it. And we 
will be able to come back to you and say, Yes, this now gets us 
as far as we need to go.
    We have to remember that this is not a U.S. Government 
agency. No one goes as far as we go with the GAO look. And I 
came away, frankly, much happier than I thought I would be 
after the GAO gave us the report and debriefed us--not perfect, 
but a good step forward.
    I do mention one other thing--you and I have a common 
concern, and that is his work be extended to the funds and 
programs that eventually replicated at the other agencies.
    Senator Grams. Right.
    Ambassador Sklar. This will be on my agenda for next year.
    Senator Grams. All right. Thank you. The GAO draft report 
also noted, Mr. Sklar, that only 39--and I think you have 
addressed part of this, but I would just like to go through 
this again--that 39 of its 162 various reports to the 
Secretary-General and General Assembly or its committees.
    Now, as I remarked to you last month, and I think you have 
addressed part of this already, it has been of grave concern to 
me and members of the committee--this does not comply with the 
reform benchmark agreed to by the administration and Congress, 
which states that the United Nations has procedures in place to 
ensure that all reports submitted by the Office of Internal 
Oversight Services are made available to the member States of 
the U.N. without modification except to the extent necessary to 
protect the privacy rights of individuals.
    So, first, is it your understanding that the fact that only 
39 of the 162 reports were given to member states is consistent 
with this reform benchmark? And second, is the U.S. mission 
taking any steps to ensure that all reports are made available 
to member States? Now, does this--what you are addressing?
    Ambassador Sklar. Yes. I think that--I think we have a 
question of reports submitted as opposed to studies done. It is 
my understanding that reports submitted are those he submits to 
the Secretary-General, that he considers worthy--all of those 
are viewable. The other audits and studies that he does that 
are dealt with at the program manager level are the ones that 
are outside this group.
    I apologize for going for papers. As you know, I try and 
keep most of this stuff in my head. But I pulled up the GAO 
report, and they indicated here that of the inspections that he 
did, seven of the eight went to the Secretary-General--only one 
was considered less important.
    And of the audits he did, most of those went up. It was the 
investigations with this small number that he did not send up 
because he did not find anything of substance in them.
    So, I do not know that we have a total answer. I believe 
that it is correct that all the reports submitted to the 
Secretary-General--I know those are available to the GA and to 
us. It is the others that do not--that are not submitted to the 
SG that are available only upon request and for a debriefing.
    Senator Grams. OK. I am just wondering. But you said that 
all the reports or investigations that he would undertake, 
whether he would pass them up or not, would be recorded?
    Ambassador Sklar. Recorded, listed. Those that are 
submitted are totally available to all the members. Those that 
are not, based upon the GAO's suggestion--and this is my 
reading of the GAO report--we will be available to go and 
request a debriefing, which he will give us. And I am being 
very careful not to say that he is going to hand us the whole 
report. He said he is going to do a debriefing.
    We do not know whether those debriefings will be in-depth 
enough to give us confidence that he stopped it at the right 
place and sent it back down, just dealt with program manager on 
it or not, but that is my understanding--all submitted reports 
go to the SG, go to the GA, fully available to us.
    Those reports, audits, or investigations that he does not 
consider worthy of submission--debriefings, and then we can 
make judgments after that.
    Senator Grams. OK. I just asked that again because, you 
know, that is really not the understanding, I think, of this 
benchmark that I have or maybe some others. So if we need to 
clarify that language a bit, we will take a closer look at 
that.
    Ambassador Sklar. I would be happy to. Again, I am not a 
lawyer and I am dealing only with my 3 months of it and 
understanding, and I, as you, are anxious to see anything of 
substance available to us. But I also have to respect the 
privacy that comes with an organization that is not ours.
    And again, I--we are going to have to rely upon the 
character and competence of Mr. Paschke, which I have no reason 
to question. And the GAO is very direct about it, and I think 
the--we will try and see this year if the combination of 
submitted/fully available, reported but not submitted, 
debriefed, is satisfactory. And if not, I will be out ahead of 
you in requesting a right to take a look at them.
    Senator Grams. All right, thank you. Does the office of IOS 
have the authority to audit, inspect, or investigate each 
program right now and the projects or activities funded by the 
United Nations? Does it have that authority right now?
    Ambassador Sklar. I believe it does have all the legal 
authority. There have been some questions raised by some 
members of the United Nations as to whether the funds are in 
programs all within his jurisdiction.
    A legal opinion came out, I believe--and I think you might 
talk to our U.N. friends later--in the last several days that 
indicated--reaffirming that. Now, again, there is the 
Secretariat; there are the voluntary funds and programs, and I 
think we are OK there.
    Where this OIS does not go is into the specialized 
agencies--WHO, FAO, ILO--and we have talked about the fact that 
we want to see this or similar processes in place at those. 
That has not happened to the full extent that we would like it 
yet, and we will be working on that in the years ahead.
    Senator Grams. But has every executive board that is under 
the United Nations been notified, in writing if necessary, to 
the authorization that Mr. Paschke has and that the OIOS has to 
be able to conduct these type of audits or investigations?
    Ambassador Sklar. I do not know. I am sorry. I do not know. 
I will find out. I will let you know. And perhaps, you might 
get an answer from a successor panel.
    Senator Grams. OK.
    The tax equalization fund. I understand that there is a 
U.N. proposal to remove the tax equalization fund from the 
regular budget, and make the United States pay for its cost. Is 
there also a dispute between the U.N. and the U.S. on the level 
of U.S. contributions? And if you know, would you outline the 
disagreement?
    Ambassador Sklar. The first question, I have no idea. I do 
not know anything about removing it from the budget. It is just 
something--it has not entered my consciousness.
    On the second one, there is a dispute going on between the 
U.S. Treasury Department and the United Nations, but it is 
really a dispute between the U.S. Treasury Department and the 
U.S. citizens who are employees of the U.N. as to what tax 
withholding rates can exist.
    I think Mr. Connor will tell you, and my digging into 
this--because I think it is an absurd battle--has nearly been 
resolved and we are waiting for the Treasury Department to 
close the last gap on this. And when they do, I think we will 
have this problem behind us.
    As a citizen, I find it to be almost incomprehensible that 
the Treasury and these employees cannot agree. It is a--really 
get into it. It is a question of whether to tax at the first 
dollar earned or whether to tax at the highest earned. It is 
not a U.S.-U.N. dispute except they're the carrier of the 
money.
    And it is my understanding the Treasury and the U.N. are 
nearly in closure on this, and I am going to pressing with 
Secretary Rubin to bring it to closure. It is a silly battle to 
go on when we have much bigger battles to fight. And it is not 
really one between the U.S. and the U.N.
    Senator Grams. And just one brief question to close out 
this part. What is the administration's position on a potential 
U.N.-sponsored World Conference on Racism?
    Ambassador Sklar. The U.S. position on all conferences, and 
I am not going to single out racism or anything else, is that 
these world conferences should not be held. We believe that the 
General Assembly is the appropriate forum for all such 
discussions, and I cannot think of any better for them.
    It is a forum where in the general debate, the heads of 
State, heads of Government, the leading foreign ministers, come 
together each fall. It would be far more productive to use that 
time for conferences on major issues, and racism is clearly 
one, than to go off to other sites at greater cost and hold 
special conferences.
    We have expressed that position very vigorously as recently 
as 2 and 3 days ago. We believe the General Assembly is the 
place to go.
    That does not mean within a 185-member organization, we can 
prevail. But I believe the legislation says if we lose on this 
battle, that we would not pay for our share of the cost of that 
conference when the legislation comes out--if that is what it 
says, that is where it will be.
    But our position--the administration's, the President's, 
the Secretary-General's, Ambassador Richardson's, and mine--is 
that these conferences are as stand alones, away from 
headquarters, are not appropriate, that the General Assembly 
sessions could best be used this way. We would get much more 
value than sessions are now.
    Senator Grams. Thank you very much, Mr. Sklar. I appreciate 
all your answers. Senator Sarbanes?
    Senator Sarbanes. Thank you, Mr. Chairman.
    I am intrigued by your statement which suggests that there 
is going to be a negotiation subsequent to the enactment of the 
legislation.
    Now--of course, I did not support the legislation--but my 
understanding of the legislation is that there is no room in it 
for negotiations, that those conditions are final. If the 
conditions are not complied with, adhered to, then that is the 
end of it.
    Do you have a different understanding?
    Ambassador Sklar. I think we are both right, sir. The 
negotiations are to achieve one of two objectives--one, to gain 
the members' agreement to the scale of assessments we have laid 
out, and one of our conditions is this ceiling. There are seven 
other conditions.
    If we do not succeed in getting the other members to buy 
this scale of assessments, what happens is that we reach 
January 1st, arrears are not paid, the U.N. arrears will 
actually grow because we will pay at the 25 percent rate for 
peacekeeping and be billed at the 31 percent rate.
    At some point, we will reach a----
    Senator Sarbanes. Well, let me just interject at this point 
because I want to make sure some figures I have been looking at 
are correct.
    The U.N. assessment is on a calendar year basis--is that 
correct?
    Ambassador Sklar. That is correct.
    Senator Sarbanes. So the U.N. made its assessment for 1997 
back in January, correct?
    Ambassador Sklar. That is correct.
    Senator Sarbanes. Now, I gather the U.S., even 
traditionally, has provided its funding almost a year late 
since we budget on a fiscal year basis. So we provide the 
funding for the 1997 calendar year assessment, or any calendar 
year assessment, in the last quarter of the calendar year or 
the first quarter of our fiscal year. Is that correct?
    Ambassador Sklar. That is correct, and it is even worse 
than that because some of our payments lag over into the third 
and fourth quarters of our fiscal year, well into the 7th and 
8th quarter after the start of their year. It is one of the 
reasons that the U.N. has such a cash-flow problem.
    Senator Sarbanes. Right.
    Ambassador Sklar. But you are correct.
    Senator Sarbanes. Now, what was our assessment for regular 
dues for calendar year 1997? I have a figure of $312 million--
is that correct?
    Ambassador Sklar. About 25 percent--I would think that 
amount is probably fairly close. I do not know exactly.
    Senator Sarbanes. How much of that have we paid?
    Ambassador Sklar. We have paid to date about $18 million of 
our 1997 assessment. We did not make our first payment, as you 
suggested, until after October 1st, and I believe that was 
based on the continuing resolution.
    Senator Sarbanes. Well, now, I have 53 million. Is that not 
right?
    Ambassador Sklar. There may have been another 45 million--
$35 million payment since the last one I had. Joe might know. 
53?
    Voice: That is correct.
    Senator Sarbanes. Pardon?
    Voice: $53 million is correct.
    Senator Sarbanes. And did we also pay $18 million toward 
the $312 million?
    Ambassador Sklar. No. I think the 18 was within the 53. It 
was an 18 within the 53.
    Senator Sarbanes. Within the 53, OK.
    So we have paid $53 million out of $312 million.
    Ambassador Sklar. Right.
    Senator Sarbanes. Now, even if this bill passed, monies are 
going to be withheld. Is that correct?
    Ambassador Sklar. If conditions are not met, money will be 
significantly withheld and our arrears will grow. That is 
correct.
    Senator Sarbanes. How much would be paid right away, 
additionally, if we----
    Ambassador Sklar. If the scale of assessment----
    Senator Sarbanes. Leaving aside meeting the conditions. Let 
us set that to one side--that is provisional.
    We have paid $53 million. If the bill is passed, we would 
pay another $23 million immediately. Is that right?
    Ambassador Sklar. I cannot tell you, but I have no reason 
to doubt it. But I--I have no reason to doubt that.
    Senator Sarbanes. So that would be $76 million out of $312 
million. Thus, over 75 percent of our contribution would be 
withheld one way or another--is that correct?
    Ambassador Sklar. I do not think so. The rest would be paid 
over--a portion of it would be paid over time. The withholdings 
would relate. There is an $80 million withholding if we fail to 
achieve a budget level of 2.533.
    Senator Sarbanes. Right.
    Ambassador Sklar. There is another withholding if we fail 
to----
    Senator Sarbanes. That is a budget level for which year?
    Ambassador Sklar. For 1998-99, the coming U.N. fiscal 
year--next year, not this past year. That is a prospective 
withholding.
    In other words, if the U.N. does not enact a budget with a 
limit of 2.533 for the years 1998-99 they do a 2-year budget--
there is an $80 million withholding that will take place.
    Senator Sarbanes. Now when will that budget be enacted?
    Ambassador Sklar. Between now and December 31.
    Senator Sarbanes. By the U.N.?
    Ambassador Sklar. Correct.
    Senator Sarbanes. All right. That is $80 million. Now, what 
else?
    Ambassador Sklar. There is a $20 million withholding--I 
think it relates to the Inspector General requirement on 
submission of reports and other independents. There is a 
withholding related to the 1,000 posts.
    Senator Sarbanes. How much is that withholding--$50 
million?
    Ambassador Sklar. I do not know what the amount is on that.
    Senator Sarbanes. I think it is $50 million. I think the 
Inspector General is $50 million, too, if I am not wrong. That 
is $180 million. Now what is it you are going to negotiate 
about?
    Ambassador Sklar. What we are--well, let us talk about 
several parts. One, the scale of assessment----
    Senator Sarbanes. Of course, we are saying to them, ``Well, 
our current assessment is $312 million. And we are going to 
give you about $75 million of it. And the rest of it you may or 
may not get, but that depends on whether you meet the 
conditions.
    Now, there is no flexibility on meeting the conditions. 
They are in the law, are they not?
    Ambassador Sklar. That is correct, sir.
    Senator Sarbanes. Well, I mean, what are we negotiating 
about?
    Ambassador Sklar. Well, I think what we are negotiating is 
whether or not they want us to pay the 180 million or not. 
The--there will be, in effect, a train wreck in the United 
States' relationship with the United Nations, the U.N.'s cash-
flow situation, and eventually the fiscal health of the U.N. if 
we do not achieve the series of benchmarks that the Congress 
has laid out.
    The negotiation is simply can we--which of the two 
alternatives will we have? Will we have an alternative that 
allows the United States to pay, or will we have an alternative 
that prohibits the United States from paying with the intended 
results?
    Senator Sarbanes. Now, you used to be in the business 
world, did not you?
    Ambassador Sklar. Sure did.
    Senator Sarbanes. If someone was your debtor, would you let 
them lay out conditions for repayment of moneys they owed?
    Ambassador Sklar. I would prefer not to but it has happened 
before.
    Senator Sarbanes. Usually when they are going into 
bankruptcy, I think.
    Ambassador Sklar. Yes, sir.
    Senator Sarbanes. What would you think if your debtor 
unilaterally demanded a change in the rate of assessments as a 
condition for past, due, and future payments?
    Ambassador Sklar. Senator, before you came in, in my 
statement, I mentioned what it is in the head and then coming 
out of the mouths of everyone I talk to every day. They say you 
are----
    Senator Sarbanes. I do not envy your task. I think it is a 
virtually impossible task that you have been handed. You have 
my sympathy.
    Ambassador Sklar. Senator, I guess I--I do not believe in 
impossible, but it is certainly difficult. And I guess I look 
at the alternative. The alternative to attempting to bring some 
agreement on this is the destruction of an institution that I 
have believed in all of my life--I wrote my high school theme 
paper around the United Nations and the NATO as twin pillars of 
peace for the last half of the century 40 years ago or 45 years 
ago, something like that.
    I believe in the institution. I believe in the importance 
of the United States being involved with it. I believe that if 
we do not take this first, and I think a significant and useful 
step to re-establishing our relationship--and I support this as 
a first and solid and essential step--then it will be terrible, 
a disaster. It will be bad for the United Nations, bad for us.
    Senator Sarbanes. Even if you can get them all to accept 
this, under duress as it were, don't you think resentment about 
this will remain and will significantly and substantially 
affect the U.S. posture within the United Nations?
    Ambassador Sklar. I can only put myself in the position of 
someone on the other side, and I suspect that that resentment 
will be there. It is there today. It is expressed very 
forcefully and eloquently.
    Senator Sarbanes. Actually, it is expressed rather 
forcefully and eloquently by some of our traditionally closest 
friends at the U.N. Is it not?
    Ambassador Sklar. That is correct. I would say that there 
is no distinction between friend and enemy in their comments.
    Senator Sarbanes. Is it being used by some of our friends 
to enhance their own leadership position within the United 
Nations?
    Ambassador Sklar. I do not think that we have that--you 
know, I think the striving for leadership is always there. I 
think that there are those nations who do that, and that strive 
for leadership in every action they take; others do not, I do 
not think, any more or less.
    Senator, I understand what you are saying, and I know--as I 
say, I live with this every day. But it is, as my wife says, 
not the perfect husband, but consider the alternatives.
    Senator Sarbanes. Well, I guess the alternative for you is 
to be in Bosnia, so maybe this is better. I do not know. 
[Laughter.]
    Ambassador Sklar. Having had a--actually, an alternative, I 
guess, is to return to my wonderful home in San Francisco, my 
life there.
    But, no, I consider this an opportunity and a 
responsibility, sir, and I do not disagree with you about the 
nature of it. But I believe that the package that the 
administration and the Congress are delivering is one that I am 
obligated and committed to try and sell, get negotiated, and 
put us back on a track that I think we have gotten off of.
    I think it is important that we return to that track. I 
hope in years ahead, we will have the respect and the love and 
the admiration. At the moment, I just want to have the respect 
and then we will try and build the others back over time. I 
know what we are dealing with but it is what we have.
    Senator Sarbanes. Mr. Chairman, I do not want to really 
press Mr. Sklar. I mean, he has been given a hand, and he just 
has to play it. I understand that. And I do have a lot of 
respect for him. He left the private sector to take on a very 
difficult job in Bosnia, and discharged it, I think, with great 
commitment and great ability.
    And, as I have already indicated by my comment, he has been 
given, in some respects, a far more difficult job now and I 
appreciate his coming to testify today.
    Senator Grams. Thank you, thank you very much, Mr. Sklar. I 
know you have mentioned a couple of times, as Senator Sarbanes 
has, about rebuilding the relationship. And we do not want to 
make it look like it is just the U.N. that is trying to, you 
know, rebuild its relationship with the U.S., but vice versa as 
well.
    I mean, the U.N. might have some problems with us, but we 
definitely have had some problems with the U.N. and so 
hopefully this is not, you know--it should be viewed as and in 
that respect. So, I want to thank you very much for your time 
again.
    And, of course, we might offer some questions in writing 
for more details, and I know we are going to be in contact, in 
conversations, over the next few days and weeks and months. So 
we really appreciate you coming.
    We really appreciate your taking the time to come up and be 
with us today.
    Ambassador Sklar. Thank you, Mr. Chairman.
    Senator Grams. Mr. Ruggie.
    Mr. Ruggie. Hi, Senator.
    Senator Grams. And again, I want to thank you for taking 
your time. Mr. Ruggie, we can begin with your opening 
statement, if you would.

 STATEMENT OF JOHN G. RUGGIE, U.N. ASSISTANT SECRETARY-GENERAL 
          AND SPECIAL ADVISOR TO THE SECRETARY-GENERAL

    Mr. Ruggie. Thank you, Senator. It is a great pleasure to 
be here. I have prepared a written statement, which I have left 
with your staff. I do not propose to read it in its entirety.
    Senator Grams. It will be entered into the record as read.
    Mr. Ruggie. Thank you very much. I bring you the best 
wishes of the Secretary-General.
    Senator Grams. Thank you.

    Mr. Ruggie. It is a relatively unusual occurrence for U.N. 
officials to appear before a body such as this, and I think it 
demonstrates the Secretary-General's commitment not only to 
reform but also to establishing a mutually supportive 
relationship with the United States as we go forward.

    Senator, as you know, the Secretary-General presented a 
very comprehensive report on United Nations reform to member 
States on July 16th. It explains in some detail the reasons for 
reform, the principles that guide his reforms, as well as 
various actions that he is undertaking in his own 
administrative capacity and recommendations that he has put 
before member states.

    We have had debates in the General Assembly since September 
22 on the issue of reform--first, at the general debate stage 
when heads of Government, heads of State, and foreign ministers 
come to the assembly. They virtually universally endorsed the 
Secretary-General's reform efforts, commended his report, and 
urged the Assembly to move toward implementing the various 
measures.

    For the past 6 weeks, the Assembly has been meeting in a 
very unusual format, in informal sessions so as to allow for 
more pragmatic give and take and to avoid the posturing that 
sometimes occurs.

    And this has been a very fruitful process. We expect that 
within a matter of days, perhaps as early as tomorrow, a 
resolution will be tabled and approved early next week, 
commending the Secretary-General for the reform effort and 
encouraging him to move forward with the major administrative 
and managerial issues that are in his domain.

    We have already had a reading of the recommendations that 
he has put before member States--a first reading--and I suspect 
that the rest of that will be wrapped between now and the end 
of this month. So we have had good progress.

    Reports in the press suggest that the proceedings have been 
slow. Legislative bodies, as you know better than I do, sir, 
have their own biorhythms, and the United Nations is proceeding 
in accordance with its own.

    But each day, we've been further ahead at the end of the 
day than we were at the beginning. Keep in mind that we are 
dealing with 185 member States, each of whom has its own views 
and should have ample opportunity to express them on an issue 
that's as important as this.

    Senator, if I may, I will just say a few words just to 
remind everyone briefly of what the major initiatives are in 
the Secretary-General's report. My colleague, Joseph Connor, 
will focus on administrative and managerial issues that he has 
been overseeing.

    Broadly speaking, the reform efforts consist of four main 
types of issues. The first is the issues that Joe Connor will 
be speaking about in greater detail--rationalizing 
administrative processes and enhancing administrative 
efficiencies. These include a no-growth budget, the elimination 
of 1,000 posts, reducing administrative costs from 38 percent 
of the budget down to 25 percent, and so on.

    In the same category, the Secretary-General has 
consolidated three departments in the social and economic 
sector into one. He has merged several units that service 
conferences and the Assembly into one department. And he has 
proposed to member states that they rationalize or abolish 
several subsidiary bodies of the legislative organs.

    Now, let me stress here that there are severe constraints 
on what the Secretary-General can do on his own by way of 
abolishing bodies. Most of them are an outgrowth of legislative 
mandates, and it requires legislative authorization to get 
these mandates undone.

    The second type of measure and proposal that the Secretary-
General put forward attempts to create within the Secretariat 
appropriate structures that will allow it to act as one, to 
deploy its resources strategically, to exploit synergies, to 
exploit complemen- tarities in the many areas in which it is 
active.

    To summarize quickly, Secretary-General clustered all of 
the work of the organization into four main business lines, if 
you will--peace and security, humanitarian affairs, 
international economic and social affairs, and development 
operations. It is the first time that we have ever imposed such 
a structure on the work of the organization.

    Human rights was designated as a fifth area, cutting across 
each of the other four. For each of the four, an executive 
committee was established, comprising the heads of the major 
programs and entities within the cluster. They now manage the 
clusters. In the cross-cutting issue, human rights, the High 
Commissioner, Mary Robinson, the former President of Ireland, 
participates in all of the other four.

    On top of that structure, the Secretary-General has 
established a senior management group, an in-house cabinet if 
you will, to oversee the entire functioning of the Secretariat.

    It includes the conveners of each of the sectoral executive 
committees, plus the other senior officials whose participation 
is essential if we are going to assure a unity of purpose and 
coherence of efforts in the Secretariat. This senior management 
group meets on a weekly basis and non-New York members 
participate through teleconferencing.

    As you know, the Secretary-General has also proposed the 
creation of the post of Deputy Secretary-General. This would 
relieve him of some of the administrative and representational 
duties he now bears, and the deputy would also be put in charge 
specifically of looking after issues that cut across 
institutional boundaries or sectoral boundaries and which often 
fall between the cracks.

    This new management structure will be assisted by a 
strategic planning unit that the Secretary-General is 
establishing in his office to look at medium-term trends that 
affect the work of the organization and to present appropriate 
policy analyses and options to the Secretary-General and the 
senior management group.

    There is a third set of initiatives: the Secretary-General 
is urging member States to do similar things on the legislative 
side of the House, to streamline the Assembly's agenda, to 
introduce sunset provisions, to focus the debate of the General 
Assembly more explicitly on priority areas rather than on the 
150 items that are now on the Assembly's agenda.

    Additionally, the Secretary-General has urged member States 
to introduce a system of results-based budgeting in place of 
the extensive micro-management that now characterizes the 
budgetary process.

    Finally, the Secretary-General's reform proposals include 
longer-term initiatives concerning the future of the 
organization as a whole. For example, he has requested member 
States to establish a ministerial level commission to look at 
the relationship agreements between the United Nations and 
specialized agencies.

    As you know, Senator, each one of these agencies is 
autonomous, it is based on its own treaty agreement, it has its 
own budget, it has its own governing board. The level of 
cooperation among them and with the U.N. proper is essentially 
voluntary. The Secretary-General has requested that a 
ministerial commission examine these treaty instruments with an 
eye toward inducing greater collaboration and efficiencies 
among the entire system.

    He's also recommended that in the year 2000 a millennium 
General Assembly be convened to which this ministerial level 
commission would report, and which would adopt a forward-
looking document and strategy guiding the United Nations in the 
decades ahead.

    Mr. Chairman, these four sets of changes at headquarters 
level you will also see increasingly reflected at the level of 
field operations.

    The means for closer integration at the country level, in 
the area of development operations, for example, include 
formulating joint policy frameworks within which each of the 
entities of the United Nations will operate, and wherever 
possible, having the various entities work out of a single 
United Nations house, under a single United Nations flag, using 
common services, common premises.

    These kinds of changes also have been introduced into the 
specific sectoral programs. For example, in the area of human 
rights, the Secretary-General has consolidated the Office of 
the High Commissioner and a Center for Human Rights, and has 
placed High Commissioner Robinson in charge of the newly 
integrated operation.

    Likewise, U.N. programs in crime prevention, drug 
trafficking and money laundering have been integrated into a 
single operation in Vienna under the direction of Pino 
Arlacchi, a former member of the Italian Senate and an expert 
on organized crime.

    Senator, the Secretary-General has described these reform 
proposals as bold and comprehensive. They are the most bold and 
comprehensive ever in the 52-year history of the organization. 
The receptivity to these measures on the part of heads of 
State, heads of Government, foreign ministers, and now the 
Ambassadors in the Assembly itself, indicates that more and 
more countries have joined in the cause of reform realizing, as 
the Secretary-General likes to put it, that our choice is not 
to reform or not to reform. Reform is our survival. Thank you, 
sir.

    [The prepared statement of Mr. Ruggie appears in the 
Appendix.]

    Senator Grams. Thank you very much, Mr. Ruggie. Mr. Connor?

STATEMENT OF JOSEPH E. CONNOR, U.N. UNDER SECRETARY-GENERAL FOR 
                           MANAGEMENT

    Mr. Connor. Thank you very much, Senator.
    I am going to be somewhat different. I had prepared and ask 
that you enter into the record a rather extensive paper, 
because I wanted to respond as fully as I could to some of the 
items.
    And I will----
    Senator Grams. Your entire statement will be entered as 
read, Mr. Connor.
    Mr. Connor. Thank you very, very much. That is this 
document.
    Senator Grams. That is right.
    Mr. Connor. And I guess I am reflecting my private sector 
background. But I have also prepared a series of charts which I 
believe will help you focus on the substance of the longer 
paper, and which I hope to conclude by going through in about 
seven or 8 minutes.
    Let me just make sure that you and perhaps others in the 
room are looking at the several charts.
    Of course, I am here to explain the management reform 
program, and I am going to start by calling your attention to 
our objectives. There are 10 objectives that we have in the 
management field. I am not going to read them all now because I 
will mention each one of them separately. But there are 10. 
Some of the more interesting ones--you have already mentioned 
reducing our budget levels and reducing our staff levels.
    [The charts referred to by Mr. Connor appear in the 
Appendix, beginning on page 53.]
    Let me turn instead to chart one. Objective number one is 
to reduce our administrative costs. This is the first time we 
analyzed how much administration we actually have in the United 
Nations. We did an analytical survey. It came up to 38 percent 
of all of our spending--that is too much. The goal is to reduce 
it to 25 percent.
    Please turn to chart two, and that is objective two--
creating out of those savings a dividend for development. We 
have already launched on a road that will terminate the first 
of January, 2002, when we will have shifted from administration 
to development output--meaning, services to real people--$200 
million a year.
    We have already made a down payment. In the revised 
estimates placed before the General Assembly for enactment next 
month, we have taken the first step. We have restored all of 
the cuts in the budget made in earlier years in the development 
area, and we have identified a first deposit of $12.5 million 
into the development account. So we are one-fourth of the way 
there.
    Chart three, and this is objective three--simplify our 
processes, procedures, and rules. And clearly, an ally in 
achieving simpler processes and controlling the quality of data 
is our new computer system, IMIS. It is up, it is running. It 
is not perfect, but it is the results of 7 years of 
development. I must point out that the failure rate to put a 
computer system of this complexity and size in place in the 
private sector and government is 60 percent.
    Senator Grams. Six-zero?
    Mr. Connor. 60 percent. They write them off--they do not 
work. The software does not do the job.
    I am not saying ours is perfect--we have got some fixes to 
make. But it is growing in usage and usefulness, and the cost, 
at about $75 million, is pretty cheap.
    Objective four, and that is on chart four. John Ruggie 
mentioned it before--expand and strengthen common services. We 
have put a task force together of United Nations, UNDP, UNICEF, 
and the other funds and programs people. We are going to try to 
merge procurement. We will try to merge information technology, 
personnel services, financial services, legal services. We can 
operate out of a common service capacity. There will be savings 
in that.
    Next chart is five, and it sets out objective five--create 
an electronic United Nations. Two events took place in 
September. Every permanent mission in New York was connected to 
the Internet. Mission staff were offered training and can now 
access the United Nations Web Site and obtain documents 
electronically. The result? We do not need as much hard copy 
documentation as we did before.
    Another event in September--finance experts from Africa 
were linked in an on line electronic meeting. Result? Extension 
of the experience to other meetings leads to reduced travel 
costs.
    Already, because of the increased availability of 
electronic documents, reduced requests by permanent missions, 
and the new space-saving type faces and formats, the production 
of documentation is down, measured by both pounds of paper and 
the cost. We have made a start on remote interpretation. We use 
remote translation very frequently. Videoconferencing is an 
accepted way of life in the organization. Every cabinet meeting 
is by videoconferencing.
    Charts six and seven, objective six--reduce the budget 
levels. This is a complicated chart, so let me just bring you 
down from top to bottom.
    The budget appropriations through 1996-97 on a comparable 
accounting basis, and there has been some confusion about that, 
with what we now propose through 1998-99, the current 
biennium's budget was $2,563,000. The one we are proposing for 
the next biennium, starting next January 1, on a comparable 
basis, the numbers are exactly--the accounting basis is exactly 
the same--is $2,533,000. I am convinced that there is a real 
decrease of $30 million.
    How do we achieve it? Three factors. We cut people, we cut 
travel, we cut correspondence. That produced a resource 
reduction of $84 million. We have to deal with inflation that 
push our costs up. They are going to push it up $126 million. 
Remember--it is a 2-year budget.
    And we have benefited from exchange rates going in the 
right direction relative to the dollar down 72. The net of that 
is $30 million. It is a very simple presentation, but it is 
significant as to how we actually are living in this day and 
age.
    Let me ask you to turn to chart seven. You may want to see 
the budget change over 6 years; the downward slope is shown in 
the chart before you. There has been some mystery about what 
accounting change we made. It was a very simple one.
    We call it net budgeting, but what we were trying to do is 
to put into the U.N. budget only the portion of joint 
facilities, joint units, like the International Civil Service 
Commission that serves more than the United Nations. They serve 
the entire common system.
    So we changed our appropriation line, and put in only that 
percentage of these joint activities that serve the U.N. I do 
not mind explaining the numbers as long as they are my numbers, 
but I do not want to explain somebody else's costs.
    Please turn to charts eight and nine, objective seven--
reduce staff levels. Since 1985, regular budget posts have been 
reduced by 25 percent, including the decrease planned for 1998-
1999. This year, in the budget, we have suppressed a total of 
net 1,000 posts.
    Actually, you will see a staffing table for 1998-1999 that 
says 8,695 posts. It is a combination of the aggregate change--
1,000 posts on a net basis are being suppressed. That means we 
have cut 1,059. We have added 30 new ones, and we converted 
from temporary assistance, 29 posts. That gives us the 1,000 
down.
    We did something else. We transferred out of the regular 
budget category 317 posts. Those 317 are the ones connected to 
result--to net budgeting. It seemed logical that we take out of 
the reporting the total number of posts because the total 
activity is not in our reporting. But they are not part of the 
1,000 net. It is something else. 317 down from 9,012 gives us 
8,685.
    Chart 10, objective eight--adopt results-based budgeting. 
We have rigid input controls--how many P4s, how many P3s, how 
many D1s you can have. You cannot cross budget lines. There is 
no flexibility.
    What we do not have is a focus on what we are trying to get 
out of the budget spends. That does not mean how many meetings, 
how many reports, what is the quality, what is the receptivity, 
did it answer the problem? We have got to do what member states 
themselves are doing--identifying the actual costs of producing 
results, allocate resources accordingly, and measure what you 
have got.
    For example, it would be very interesting to see how much 
more we pay for an administrative committee than we do for the 
Security Council. I think that is the way the costs fall.
    Chart 11, objective nine--provide the organization with a 
sound financial base. The graph you are looking at is what our 
cash balances look like throughout several years. The peaks 
above the line represent the times when we have real cash. The 
valleys below the line of zero is when we are in a borrowing 
position.
    1997 is now forecast to end with negative cash in the 
regular budget account of $272 million. The year began with a 
deficit of $197 million. So 1997 adds one more year of a 
pattern of cash deficits in the regular budget account.
    We cover the shortfall in regular budget cash by borrowing 
cash from the peacekeeping accounts. That is an imprudent 
practice at best, and a destructive practice, potentially. 
Usable peacekeeping cash at the beginning of 1997 was $848 
million. It is only $670 million forecast for the year end.
    Lesson--our peacekeeping cash is dwindling and our debts to 
member States are increasing. We now owe the member States $900 
million for troop and equipment amounts. And that is up from 
just over $800 million a year ago.
    In a few years, this organization has slid down this 
slippery slope to a point where the organization has little if 
any financial flexibility, is highly illiquid, and rests on a 
precarious financial perch.
    The Secretary-General's reform proposals includes one aimed 
at providing a $1 billion credit revolving fund to tide the 
organization over during periods of cash-flow shortfalls. The 
Secretary-General has challenged member States if they do not 
like that, what else? We are dealing with a situation that is 
real and needs to be addressed.
    And the last point I would make is on objective 10--enhance 
the scope and coverage of OIOS. In operation now for 3 years, I 
wrote the regulations that set it up, OIOS is one reform that 
has already helped strengthen the organization in its effort to 
use resources in the most efficient and effective way.
    We have had glaring instances of fraud and mismanagement. 
OIOS, as well as management, has uncovered a number of them, 
and both OIOS and management have worked well together to 
discipline or prosecute perpetrators. I must add that OIOS, 
with its distinctive capability to carry out investigations--
that is a fundamental capability to the task of uncovering 
fraud. Frankly, it is doing the job that was intended.
    Well, I hope I have kept to my time schedule. I want to 
just end with the words that have already been said here--
``Reform is not an event; it is a process.'' But so, too, is a 
change in management, and a change in management culture. We 
are trying to change generations of being brought up a 
different way. We have to continually reinforce, update, and 
review that situation.
    Senator, it has been a pleasure to see you in New York a 
number of times; we have good conversations. I look forward to 
continuing to work with you in the years ahead.
    Senator Grams. Thank you very much, Mr. Connor.
    [The prepared statement of Mr. Connor appears in the 
Appendix]
    Senator Grams. I have a list of questions here. I would 
start out with Mr. Ruggie first. But, Mr. Connor, if there is 
anything you would like to add to those questions. And vice 
versa, when I have a list of questions also for Mr. Connor, Mr. 
Ruggie, if there is something that you think you could 
interject or add to the comments, feel free to do this.
    Mr. Ruggie. Can I give him the hard ones?
    Senator Grams. That is basically the way we have outlined 
them; yes.
    In other words, you can defer some to him as well.
    First, Mr. Ruggie, in the introduction to the Secretary-
General's reform proposal, he stated that the major source of 
institutional weakness in the United Nations is that certain 
organizational features have become--and this is quoting him--
``fragmented, duplicative in some areas, ineffective in others, 
superfluous.'' Which organizational features at the United 
Nations do you believe are superfluous? Were they eliminated 
under the Secretary-General's plan?
    Mr. Ruggie. Yes, to the extent that the Secretary-General 
is capable of doing it. Let me describe an episode that took 
place recently. The Secretary-General proposed, for the purpose 
of streamlining, to move a unit that deals with decolonization 
issues from the Department of Political Affairs to the 
Conference Servicing Department.
    A resolution was introduced in the appropriate committee of 
the General Assembly protesting that move, contending that it 
would downgrade the Organization's commitment to 
decolonization. The issue had to be reviewed and resolved in a 
mutually satisfactory way.
    Senator, as I stated at the outset, when it comes to 
abolition of entities and programs, they typically involve 
mandates by the legislature, and they require cooperation by 
the legislature to bring about abolition. The Secretary-General 
can merge. He can consolidate, and, in the process, generate 
savings. The new consolidated Department in Economic and Social 
Affairs--Joe will have the figure at his fingertips--is going 
to be substantially smaller than its three predecessors. That 
he can do. For outright abolition, he has to go to the 
legislature, unless the mandate can be serviced in some other 
manner.
    Senator Grams. It appears that the primary goal of the 
Secretary-General's reform plan was to--again, I think, as you 
have mentioned--define the core missions of the United Nations 
and to restructure the organization accordingly. But I am 
concerned that the U.N. appears to be committed to emphasizing 
new priorities, like drug interdiction, disarmament, terrorism; 
and while adding these which may be worthwhile, not curtailing 
efforts in other areas, again, looking at like the abolition of 
decolonization areas.
    But has the Secretary-General proposed to eliminate a 
single function of the U.N. in order to devote more resources 
to the core mission which he outlined?
    Mr. Ruggie. Senator, I do not mean to be pedantic; how do 
you define ``function''? What do you mean by ``function''? Do 
you mean an area of activity?
    Senator Grams. Or an organization or a department or 
whatever it might be.
    Mr. Ruggie. Certainly. Among the recommendations to the 
General Assembly are several for streamlining and eliminating 
various bodies, for example, a number of subsidiary bodies of 
the Economic and Social Council. So the answer is yes.
    Senator Grams. But consolidating without eliminating; there 
are differences.
    Mr. Ruggie. No; including elimination. Including outright 
elimination.
    Senator Grams. One of the few reforms contained in the 
recent Senate legislation that is reflective in the Secretary-
General's plan is some of the sunset provisions. But under the 
Secretary-General's proposal, specific time limits would only 
apply to new organizational structures and/or major commitments 
of funds. But the report does not mention applying any time 
limits to existing programs. Also, the definition of what 
constitutes major commitments of funds is not included.
    So new programs, which would have relatively low costs, 
could escape this modest provision for controlling growth of 
new programs and offices.
    Mr. Ruggie. Sir, the modalities of the sunset provision are 
something that is still to be worked out once the legislative 
approval of the concept is given. If, as we hope, the General 
Assembly will agree to the principle of sunset provisions, the 
Secretariat will then be expected to make specific proposals 
for the legislature's consideration of how the modalities would 
operate. But you are correct, sir, in suggesting that it is 
forward-going and not retroactive.
    Senator Grams. Given the Secretary-General's concerns about 
duplicative and superfluous organizational features, why did 
not he propose to apply the sunset provisions to current 
programs instead of just to the new organizational structures 
and/or major commitments of funds, which would have seemed to 
have been a more straightforward effort to reduce?
    Mr. Ruggie. Sir, because I suspect--I would not want to 
speak for him without doublechecking--but I suspect it was 
because of a judgment that it would be exceedingly difficult if 
not impossible to get a retroactively applicable sunset 
provision through; that getting a forward-going one was, in 
itself, a sufficient challenge.
    Mr. Connor. If I could add just a word, Senator. We have 
not forgotten the 166 agenda items on the General Assembly. 
That is the nut that has to be cracked. Many of them have been 
there for many, many years and are established. There is a 
supportive reaction among the member states to clearing up the 
agenda. And so I think it is more than just going forward with 
the new ones. There is an effort, and he has given it to me, to 
see how we can clear up the agenda in the past. That is going 
to take some careful discussion. The target has not been lost. 
We are just trying to get at so many targets right now that 
this is one that is clearly on our list, and we will get to it.
    Mr. Ruggie. Senator, can I add one point.
    Senator Grams. Sure.
    Mr. Ruggie. I think it applies to other questions that have 
been raised today as well: What is it that is driving some of 
the member states in their apparent resistance?
    I do not believe that it is, in most instances, an 
opposition to reform. I think there is, however, a deep-seated 
political suspicion on the part particularly of developing 
countries that the primary objective of reform is to deny the 
organization the capacity to operate effectively in areas that 
concern them--namely, economic issues, macroeconomic issues and 
development operations--to subordinate the United Nations to 
the Bretton Woods institutions, where they do not believe their 
interests are as well served.
    So when they view the proposals that we make in the 
Secretariat for streamlining and for consolidation, these 
proposals, you have to understand, are viewed through the 
lenses of: Are you going to weaken the organization's capacity 
to do the things that we deeply care about? And our job in the 
Secretary-General's is to persuade them no, that reform in fact 
will enhance the capacity of the organization to do the things 
that it is mandated to do. But, as you can imagine, this act of 
persuasion does take time.
    Senator Grams. And I can see maybe some of their concerns. 
But, again, as I have tried to point out many times, that our 
goals in streamlining are not to give us an advantage or 
someone else a disadvantage, but to look at it in a way of 
restructuring the entire U.N. so it can deliver these type of 
core missions in a much more effective and streamlined way.
    Mr. Ruggie. Absolutely.
    Senator Grams. Which would basically free up more dollars, 
with better results.
    Mr. Ruggie. Absolutely.
    Senator Grams. So that is the attitude that we have tried 
to take. But I can understand maybe some of the perception. So, 
Mr. Sklar has a tough time, along with Mr. Richardson.
    Mr. Ruggie. Yes.
    Senator Grams. What does the Secretary-General mean by the 
term ``new organizational structures''? Would this provision 
apply to all new programs that are being talked about?
    Mr. Ruggie. Do you mean the sunset provision?
    Senator Grams. When it comes to the sunsetting provision, 
yes.
    Mr. Ruggie. Yes.
    Senator Grams. Would the sunset provision apply to all new 
organizational structures, including those with relatively 
modest expenditures?
    Mr. Ruggie. Well, the term ``significant'' has not been 
defined. And that is going to be the subject of negotiations 
among member states. The U.S. will have a definition of 
``significant'' and the Group of 77 will have a different one. 
And somewhere a compromise will be reached.
    We cannot specify what that is going to be, because it 
requires legislative agreement.
    Senator Grams. And before we leave sunsetting, to go back, 
is basically the opposition to looking at any existing programs 
and attach any sunset language to them? Those are the bulk of 
the core of the problems. And if we cannot get at the heart of 
those, you know, prospectively it's not going to cure the 
problems that we see that are behind us or that have been there 
for a long time and have built up these huge bureaucracies. So 
sunsetting is important as long as it is attached some time 
with some definite end and date, but it has to go back to some 
of the existing programs.
    Mr. Ruggie. You are absolutely right, Senator. And as Joe 
Connor has mentioned, the sunset provision should be viewed in 
conjunction with the recommendations to deal with the rigid and 
long agenda of the General Assembly. Each year, the same 
recurring issues are on the agenda. And mandates grow out of 
those items each year.
    If we succeed in building into the formulation of the 
agenda a provision that will routinely update the agenda in 
accordance with new priorities and couple that with the sunset 
provision, then I think we will achieve the objective that you 
are pointing to.
    Senator Grams. To meet these new demands of the no-growth 
budget, you have to have the money from somewhere.
    Mr. Ruggie. That is right. Exactly.
    Senator Grams. And what you need to do is get rid of the 
lesser priorities.
    Mr. Ruggie. Exactly. But, at the moment, we do not have the 
mechanism to routinely update the Assembly's agenda. That is 
what we are trying to propose here.
    Senator Grams. To move on, and I know we are going to keep 
you a little bit over time. I appreciate your staying for a 
little bit.
    Mr. Ruggie. That is OK.
    Senator Grams. I will try to go through some of these 
questions quickly. Let us move on to specialized agencies. What 
provision in the Track II plan would help to streamline the 
specialized agencies, such as the WHO, the FAO, and to make 
them more effective?
    Mr. Ruggie. Sir, the major component in the Track II 
reforms that deals with this is the ministerial commission that 
I mentioned. The Secretary-General, as you well know, has zero 
authority over the specialized agencies.
    Senator Grams. That is correct.
    Mr. Ruggie. There is an interagency group; the heads of 
agencies meet twice a year in the context of something called 
the Administrative Committee on Coordination, the ACC. The 
Secretary-General chairs that. It provides a forum for them to 
discuss policy issues of mutual concern and to establish 
mechanisms for collaboration where there are mutual interests.
    The ministerial commission would be tasked to revisit the 
constitutional bases of the agencies and their association 
agreements with the United Nations proper, with an eye to 
harmonizing the system more effectively.
    Senator Grams. Lead by example.
    Mr. Ruggie. Yes.
    Senator Grams. The results based budgeting. Budget 
proposals currently submitted to the UNGA contain specific 
results or budgets, implementation of planned activities, is 
measured in the evaluation cycle, which occurs upon the 
completion of the budget biennium. So, one, under the result-
based budgeting, what authority would member states have to 
determine budget levels and revised staff or resource 
allocations proposed by the Secretary-General?
    Mr. Ruggie. I will let Joe handle that, since he is writing 
the paper on the results-based budgeting scheme.
    Mr. Connor. That is a good question. Member states are 
always going to have total control over the total budget. What 
we are trying to do in results-based budgeting is lessen the 
control on specific inputs. Senator, I will be perfectly frank. 
The currency in operation in the debate is people. I will give 
you a P-3 in this department if you will back up my P-4 in that 
department. That goes on all the time.
    We sit there, after having prepared a budget, and watch 
resources shifted around, to the point where sometimes we 
cannot do what we are supposed to do because we have the wrong 
resources. The emphasis should be on defining what the member 
states get out of the moneys they spend.
    I gave you an example before. We simply do not know how 
much the Security Council costs. We do not know how much the 
Fifth Committee costs. I bet the Fifth Committee costs more 
than the Security Council. We do not know. We have great 
statistics. We know exactly how much it costs to produce a page 
of documentation. We know exactly how much it costs to service 
a meeting. But we have never channeled what types of meeting 
into the 140 programmatic outputs, and we have not defined what 
is an acceptable performance.
    Mr. Paschke and I have spent hours on this process. He is 
the one who now operates the performance measurement system. It 
does not measure performance. It counts documents. It counts 
meetings.
    For example, results-based budgeting in the economic and 
social side. Very few U.N. papers that are on the Internet have 
a high hit rate. That is an expression of how good they are. We 
do not have that in our performance measurement system. We have 
in our performance measurement system that they produced a 
paper. We are trying to put into the system an evaluation of 
how good the paper was, not the fact that it was produced.
    When we come up with this array of measurements, we will 
change the focus of program managers into the valuable items 
that they produce, or do not produce, as opposed to just the 
number that they produce. That is performance measurement. It 
is going to take 3 or 4 years. It is not going to come easily. 
But we have sent teams to New Zealand, to Singapore, to 
Australia, because they have put it in, in their governments. 
It is working and it is good. They have also shrunk the size of 
their people as a result.
    I think this is one of the things that has always hampered 
the U.N.: the output. They are not quite conscious of exactly 
how department A's output may or may not duplicate department 
B's. This will sharpen that up.
    I think it is an exciting change. It will also be an 
encouraging one to our managers. Would cannot, for example, 
within a budget for a department, decide to use a consultant 
instead of hiring staff. In approaching this development 
account, the initial $12.5 million, we will be taking costs out 
of the administration and we will be reducing the personnel 
that used to do that.
    The program manager, who has the responsibility for the 
output of the development account, wants to hire particular 
capabilities on a short-term basis to produce certain results. 
That is giving him flexibility. Before he was stuck with a cost 
structure that was 70 percent personnel. He could not go for 
the better output. He had to deal with what he was given by way 
of input. That is a change.
    Senator Grams. The UNDP's March 1996 compliance report 
noted that only 62 percent of projects which are required to 
receive mandatory evaluations were actually evaluated. 
Furthermore, an April 1997 GAO report on the U.S. participation 
in the United Nations Development Program noted that UNDP has 
no system to track the implementation of recommendations 
contained in project evaluation reports, and also cannot 
readily determine how many of its projects are completed on 
time or within budget.
    Now, how can the U.N. shift to a results-based budgeting 
process when the U.N. cannot even judge whether its programs 
today are effective?
    Mr. Connor. But that of course just states the problem that 
we are faced with, and why I think it is going to take several 
years. I am not, as you obviously know, familiar that much with 
UNDP. I hate to say it--they are across 1st Avenue. But we are 
now beginning, through the common services, beginning to share 
that sort of information, moving toward common output 
measurement.
    As a matter of fact, one of the key people who will be 
dealing with results-based budgeting has been loaned to me from 
UNDP. We are trying to deal with the organization.
    By the way, that also does define--the Secretary-General is 
exercising, through this cabinet, the two functions that he has 
relative to UNICEF, UNFPA and UNDP, to name or nominate the 
head. And the second function is to interpret mandates that 
should guide that individual. He has invited them to the 
cabinet table, and they all showed up.
    So, for the first time, we actually have a functioning 
leadership group, meeting every Wednesday morning for a couple 
of hours, deciding policy and issues, where those that we do 
not quite control legally participate, and, through that 
participation, develop agreement commitment and, of course, 
then they become responsible in their eyes, reporting to the SG 
as to how well they did. That was the concept.
    I am familiar with it. I have worked in that concept for 40 
years. I think it will work here.
    Mr. Ruggie. Senator, more and more, we are organizing 
ourselves by what we do and not where the funding for specific 
programs comes from. That is a major, major development in the 
structuring and functioning of the United Nations.
    Mr. Connor. I might add that in dealing with the enormous 
gift of Ted Turner, we are approaching it that the organization 
will respond to identified opportunities in the humanitarian 
field, regardless of whether the implementer is inside or 
outside the Secretariat proper.
    The Department of Humanitarian Affairs is in the 
Secretariat. Mrs. Ogata's UNHCR is in the Secretariat. The 
World Food Program is not in the Secretariat. But we are 
focusing, as Mr. Ruggie says, on what we do. That is where the 
idea of the four sectors and the crosscutting of human rights 
came from. We should be organized by what we do, just like a 
corporation is, not by the accident of who comes up with the 
money.
    Senator Grams. I have one question, too, about the $1 
billion, the generous offer from Mr. Ted Turner. I was curious, 
when the U.S. gives a voluntary contribution, that is assessed 
at a 13 percent value of the services or of the cash 
contribution, like if there was personnel to the Rwanda war 
crimes, et cetera, but is the U.N. going to treat Ted Turner's 
$1 billion contribution the same way--and that is, taking 13 
percent for administrative costs? I just thought I would ask, 
as long as we were here.
    Mr. Connor. Of course, I am the point man on the Ted Turner 
contribution, too, which has enormously increased my popularity 
around the place.
    Senator Grams. A lot of calls?
    Mr. Connor. Thirteen percent is the overhead charge we 
impose when we cannot define a more precise one. If you think I 
am going to say to Mr. Turner, We just took $130 million away 
from your gift, I am not going to do that. We have designated 
three or four people, three or four people. Their salaries will 
be charged to the trust fund of his contribution. And we will 
add 13 percent onto their salaries, because they are in our 
building, using our light and heat.
    The reason to that is that we not invade the assessed 
activities. The money has been provided by your government and 
all the others to run the Secretariat building, to turn on the 
lights and keep up the heat. But we have got to make sure that 
we do not infringe on that assessed contribution resource and 
divert it to what we call an extrabudgetary. But is it going to 
be 13 percent in whole? No.
    But we also apply this many, many times. The 13 percent, 
Senator, came from a study years ago in UNDP, and it got 
legislated. But we always have the freedom to measure exactly 
what support is being given to the activity that is being 
supported. And certainly there has been flexibility. We have 
used rates as low as 2 and 3 percent on other contributions. 
They must be empirically defended and assessed. You know, it is 
not a guesstimate. There has to be a cost study behind it to 
sustain that it is 1 percent and not 13. And when we cannot 
figure out anything else, then we use the 13 percent.
    But I know it is a sore point. And we hear from governments 
all the time on that. And it got a lot of sympathy on that 
score. We want voluntary contributions. We do not want to make 
it harder to give them.
    Senator Grams. Moving on to the area of development. The 
Secretary-General's plans also call for the savings achieved 
through reform to be funneled into development projects, as Mr. 
Connor noted in one of his charts, instead of back to countries 
with advanced economies in the form of lower assessments. This 
appears to violate the longstanding U.S. Government policy that 
U.N. regular budget contributions must not be used to pay for 
technical assistance programs in developing countries.
    Mr. Connor. We have some technical assistance programs in 
the regular budget. They are not big. They are relatively 
small. And I cannot think of any one in particular.
    Your quote eludes me at this point. I appreciate your 
raising it, and we will look into it.
    Senator Grams. The Secretary-General's plan also calls for 
a dividend for development.
    Mr. Ruggie. That is correct.
    Mr. Connor. The dividend simply means that we are going to 
reduce our administration and we are going to use the resources 
for development.
    For example, one of the projects that is being talked about 
now is increasing electronic communications with the African 
countries. You can come up with all of the cost-saving devices 
on paper, by turning it into electronically transmitted 
information. And while we have done that with the missions, we 
have not done that with all the capitals. That is not a problem 
with the United States.
    As a matter of fact, the State Department is one of the 
biggest users of U.N. information that is electronically 
available. But when you get into the smaller countries, that 
could well be something we would do. It is going to be cost 
beneficial to use to do it.
    Senator Grams. But looking at this even further, are you 
concerned that by opening up a separate funding stream, through 
regular budget assessed contributions, that you would be 
complicating rather than streamlining the budget and oversight 
process itself?
    Mr. Connor. I think we are going to be improving the 
relevance of the budgeting. We are not going to approve the 
project under the development account. Monies are put in the 
budget without any specific use. Every dollar of that has got 
to be justified by project, with very rigid outputs. We are 
going to have some competition in the place, among offices, to 
get some of that activity dollars awarded to them.
    The condition of getting the money is that you use it well 
and you achieve results and that it be timeframe-limited, 
nothing for more than 4 years. At the end of 4 years, it is 
canceled. We will go on to something else. It is not going to 
be a self-perpetuating project. Those are some of the rules 
that we have worked up, and it is a change.
    Senator Grams. Moving on to another area, the revolving 
credit fund, some questions there. For the past decade, the 
U.N. Secretariat and some member states have explored ways and 
means to expand U.S. cash reserves to neutralize the effects of 
U.S. withholdings. The revolving credit fund is one of those 
efforts--the latest effort.
    The Secretary-General has proposed the creation of a $1 
billion revolving credit fund, which will be capitalized 
through voluntary contributions and any other means of 
financing that member states may wish to suggest. Have any 
other means of financing this been suggested to date, including 
any kind of a special assessment to create and to build this 
fund?
    Mr. Connor. In the past, there have been periodically, 
generically termed, ``special assessments.'' There were working 
capital funds that were provided that way. There were one or 
two other ones. They have all been drawn down and disappeared 
in our immediate cash crisis situation.
    We felt that we were torn between two alternatives. There 
is a concern among many, many member states that that will 
impede our ability to collect assessments. That is a valid 
concern.
    On the other hand, we could well run out of cash. That is 
worse. Neither alternative is particularly good. We are getting 
to the point--Senator, the numbers I gave you, we are going to 
end up with about $300 million to $400 million in cash at the 
end of December. That is about a month and a half, generously, 
to keep us going. We use most of that money in January, waiting 
for the early payers to come in. We are getting close to the 
edge.
    With the peacekeeping assessments going down, we simply do 
not have the capacity in the peacekeeping cash account to 
borrow for regular budget purposes. The numbers I gave you show 
a very stark change in the last year. If peacekeeping 
assessments go down, it will tighten next year. And we will get 
to a point where there simply is not enough flexibility in the 
borrowing. It will happen fast, and it could be disastrous.
    We are doing this, frankly, as a fail-safe mechanism. 
During the course of the last real tight one, frankly, before 
the United States began to, in effect, substantially 
appropriate the regular budget--a late payment, but 
substantially appropriate--there were informal conversations 
among member states about the subject: What do we do if we run 
out of cash? We formalized those discussions in this 
suggestion.
    We have put many, many ideas on the table, over the years, 
on improving our cash situation. Most of them have had more 
objections than those who applauded them. We know the only way 
that we can really establish stability is to have member states 
make their contributions on time, in full, because that is the 
only real source we have of income.
    Mr. Ruggie. Senator, if I just may add one point.
    Senator Grams. Mr. Ruggie.
    Mr. Ruggie. We had the first reading of the recommendation 
that contains this revolving credit fund in the General 
Assembly a week ago. I might just report that some of the 
strongest opposition to the idea has come from the West 
European countries, some of whom have argued that what ought to 
be adopted instead is the imposition of interest penalties on 
late payments and arrears. The problem is the arrears. It 
remains to be solved. In the meantime, we have to deal with the 
severe cash-flow problem that Joe has spoken about.
    And if the idea of a revolving credit fund is unacceptable, 
it has to be another idea, because I suspect that the proposal 
to impose interest penalties on late payments and arrears would 
not be one that we welcome in this capital.
    Senator Grams. Are you aware that existing U.S. legislation 
forbids the U.S. from paying any form of interest on its 
arrears?
    Mr. Ruggie. Yes.
    Senator Grams. Let me turn to peacekeeping. Does the 
Secretary-General's reform plan make any effort to eliminate 
programmatic and administrative functions between the 
Department of Peacekeeping Operations, the Department of 
Political Affairs, the Department of Information and the 
Department of Administration and Management? Any plan to look 
at where there is duplicative services and how to streamline 
those operations to make sure that we are not doing the same 
thing by a couple of different agencies or groups?
    Mr. Ruggie. Senator, I will discuss political affairs and 
peacekeeping; and then perhaps Mr. Connor will pick up on some 
of the other issues.
    There are several areas involved here. The answer is that 
at the overall policy level, the two departments, peacekeeping 
and political affairs, work together increasingly closely. The 
Secretary-General, in the reform package and through other 
means, has designated one or the other as the focal point in 
the organization for a particular set of issues. So, for 
example, for postconflict peace building, the Political Affairs 
Department has been designated as the lead agency, if you will. 
For land mine removal, it is peacekeeping. So division of labor 
gradually is being worked out.
    Also, to the extent to which political affairs also engages 
in procurement activities, that, too, is being rationalized 
between the two departments.
    Joe, perhaps you can say more about that.
    Mr. Connor. Mr. Ruggie has mentioned some very key elements 
of that rationalization. But, overall, what we are doing is to 
adopt a policy where my own department ceases to approve 
transactions. The history of the organization has been to have 
a central control group that reviews and sometimes repeats and 
recalculates everything that program managers at the operating 
level do, and then applies the magic signature that makes it 
all happen.
    We can eliminate that oversight duplication of the central 
administrative function by delegating the responsibility to one 
level, not three. And there are three levels frequently. One of 
the ways we are going to get the 38 percent down to 25 is 
basically to change my own department. It is an anachronism. It 
controls transactions as opposed to setting policy, giving 
advice and providing oversight. We can take out that whole 
level of centralized management, just like corporations do.
    So this is the epitome of how we are going to deal with 
program managers, not only in the departments that you 
mentioned, but all across the board.
    Senator Grams. I want to followup on that. Does the plan 
provide for any mechanisms to prevent further what has been 
labelled as corruption, mismanagement on the part of U.N. staff 
of what may be stolen or squandered millions of dollars from 
peacekeeping operations such as has been alleged in Somalia, 
Angola, Cyprus, Haiti, Rwanda, and elsewhere? Is there a 
mechanism that is also being talked about under these reforms 
to look into these areas as well?
    Mr. Ruggie. Well, there is no specific mechanism in the 
reforms, but there are mechanisms in place.
    Joe, perhaps you could comment.
    Mr. Connor. You cannot overlook the deterrent effect of 
having a capable operating OIOS. It is preventative. They are 
all around the world now. But it is also stimulated that the 
first line of control is management, not the auditors.
    The approach we are taking here is to tighten up our 
controls and tighten up our review of controls by OIOS. I would 
like to talk a little bit about the OIOS report.
    As I said, they are doing the job they were created for. 
But let me illustrate some specifics. The one that hit the 
newspapers the most was when the staff member in Geneva--the 
immunities were waived and he was prosecuted for fraud. Now 
that particular fraud was not uncovered by OIOS; it was 
uncovered by the management. And OIOS appropriately did the 
investigation, brought the case before the prosecutors and 
worked to the conclusion.
    I think we are instilling a system that has always guided 
corporations: You cannot totally prevent fraud, particularly 
when it is collusive fraud. And most of the cases are collusive 
fraud. The fraudulent medical reimbursements. And you know 
about those in the United States. The false dental claims, 
where dentists were in collusion, faking the imprints that were 
being made. It is hard to stamp out collusive fraud, but we 
have certainly raised the control environment awareness and we 
have tightened the procedures.
    And in that respect, we are working well with OIOS. It is 
always going to be a joint effort. There is a new feeling in 
the organization over exactly what is meaningful.
    Senator Grams. As you mentioned, even in our system, like 
Medicare, if there is no threat of getting caught, it gets 
larger and larger. But at least if there is cooperation and an 
attempt, it at least checks the vast majority of them. Which is 
very important to have that type of attitude from the top on 
down. So that is encouraging.
    Mr. Connor. Senator, I fired 18 people in Bangkok for that 
sort of fraud. That sent a message throughout the organization.
    Senator Grams. Just to followup on a few other questions 
here. And these, again, are for either of the gentlemen that 
want to address these. But a second key commitment made by the 
Secretary-General was the reduction of staffing levels by 1,000 
posts. Let me list some of these. On October 22nd of this year, 
a U.N. General Assembly press release says that the budget 
calls for the abolition of 904. The same press release also 
noted that the ACABQ claims the Secretary-General will actually 
abolish 895. What is the reason for the discrepancy there?
    Mr. Connor. They were dealing with the original submitted 
budget, the one that was put in, in May 1997. The revised 
estimates, which were submitted to ACABQ and have not yet gone 
to the Fifth Committee, brought the number from 905 up to 
1,059. We always said to the member states that this is being 
done in two waves. The first wave would reduce most of the 
1,000 posts, but not all of them. But the reform measures we 
were looking to, to create additional opportunities to reduce 
posts.
    Now, the spread there, of about 260 posts, a lot of them 
came out of the consolidation of the three economic 
departments. For example, we had 37 executive officers when we 
had three departments. We now have 19. That was the sort of 
thing we did. Most of the rest of them came out of the 
Department of Public Information, the Department of 
Humanitarian Affairs and a few sprinkled here, there and 
everywhere else.
    It is two different documents that they are talking about: 
the preliminary budget and what we call the revised estimates, 
which is the final budget. The numbers in my paper included the 
final budget, because that is what it is going to be on January 
1.
    Mr. Ruggie. Senator, just to make sure that this point is 
underscored. At the time that the original budget went in, we 
did not have the 1,000 cut yet. We were somewhat short. The 
Secretary-General made his commitment on the 1,000 back in 
March. When the original budget was submitted, we only reported 
those cuts that we had achieved. Then the revised estimates 
came some 3 months later. By then, we had the full 1,000 cut, 
and we reported the final figure.
    Senator Grams. So, basically, if we get through the 
differences and how they are calculated or when, under this 
budget, will there be fewer people employed at the U.N. next 
year than there were this year? Or is the 1,000-post target 
being reached solely by eliminating vacant posts?
    Mr. Connor. The vacancies that we achieved through the 
downsizing, approximated about 900, and gradually moved up to a 
full 1,000. We are now at 1,100.
    We are doing this seriatim. It is the easiest way to do it 
when we downsize the budget. And perhaps that is not so well 
recalled. While we have downsized the 1998-1999 budget, we took 
a bigger cut in 1996-1997. We reduced $154 million on top of 
another $100 million, so $254 million. You are absolutely 
right, most of the real cleaving of people occurred in 1996-
1997. And there has been an add-on, if you are really looking 
at how many people are there, in the 1998-1999 budget.
    The vacancies were created in the first biennium. The posts 
were eliminated in the second. That is the way that you make 
sure that people do not come back into the organization. It was 
much easier to do this with 184 member states.
    Most of the vacancies were created, as I think you are well 
aware, by voluntary buyouts and attrition and putting a 
recruitment freeze on. There is another element. That while we 
are suppressing the posts--and the number of suppressed posts 
is the famous 1,000--we are also creating, as we have to, a 
vacancy rate. And that vacancy rate has the effect of keeping, 
or recognizing, that throughout the biennium, on average, 
somewhere around 250 to 300 of the reduced number of posts, 
8,600, will be vacant. We do not broadcast that as a 
retrenchment, because it is not. But it is an economic fact 
that only about--if we accept the base is 8,600, as the 
measuring base, we probably pretty close to 8,350 that are 
actually filled.
    Senator Grams. Are any funds appropriated toward the 
vacancy posts?
    Mr. Connor. No. No. The way we do it--it rather amazed me, 
because you never know where the vacancies are going to occur 
throughout the departments--we just budget for 97 percent of 
the personnel costs. And the other 3 percent takes care of the 
vacancies. It is a simple device that actually works quite 
well. And it also means that we hit our personnel costs right 
on the head. Unless we have 300 vacancies, we go over it. So 
there is a bit of management behind all this.
    Senator Grams. Now, Ambassador Sklar told me that you have 
a new computer data base that is up and running, and that it 
can tell you exactly how many people are employed at the United 
Nations. So that would lead to the question of: How many people 
are currently employed at the United Nations?
    Mr. Connor. The computer functionalities in the personnel 
area do involve the strict accounting for who is on what post. 
So we know every day how many of the now legislated 10,012 are 
occupied and by whom. And we can run that off. That is where I 
came up with 1,100 vacancies. I see that report every single 
day--as to how many vacancies against established posts.
    What I do not see is the other part of it. And there is a 
small number that represent real people on temporary 
assistance. That has not yet been integrated into the system. 
You heard some talk about the team that built the IMIS system; 
29 people, on temporary assistance, for about 6 years. They do 
not occupy legislative posts. We have not put them in the 
system yet, but we will.
    The other area that is just coming on stream now is that we 
have about 5,000 extrabudgetary posts. They exist because 
member states decide to fund them to do something extra that 
they want to see done. A lot of member states do that. We are 
just putting those people now into the computer.
    So the best I can give you is 8,900 on the regular budget 
posts. I do not know the small number of temporaries. And I can 
only estimate for a while how many of the extrabudgetary posts 
are filled. We do not worry much about the extrabudgetary 
posts. Because if the donor is not satisfied with what they do, 
the staff member goes. Because we have no funding for it. It is 
not on the regular budget. And, in fact, while we have about 
4,000 to 5,000, the budget shows, for information purposes, 
that there is a potential for about 8,000 of those posts.
    It is getting under pretty good accounting control. But I 
did say, I think perhaps to you, that I thought it would not be 
a bad idea to have a personnel audit, to make sure that the 
numbers are as they are. And I mentioned that to Mr. Paschke. 
It is 70 percent of our costs, you know.
    Senator Grams. Correct.
    Mr. Connor. If you control personnel, you control the 
budget.
    Senator Grams. Just using some of those numbers, on 
December 31st of last year, there were 8,500. So while the 
posts may have gone down, people have gone up. It is now 8,900.
    Mr. Connor. I do not accept that number. I have never seen 
a vacancy rate on the regular budget posts. We are now at the 
highest point, at 1,100. The numbers that I have seen at about 
that time were about between 1,000 and probably 1,089. So the 
number that you are quoting to me, I just do not recognize it. 
I would be glad to follow it up.
    I do not see how that could be. Because we had, largely, a 
recruiting freeze in effect for several months during that 
particular period. But, thank you for your number, and I will 
see if I can follow it up and see what it is.
    Senator Grams. We will followup, as well, with you.
    Mr. Connor. OK.
    Senator Grams. Let me ask about a couple of other areas. 
Dealing with the administrative costs, another key reform, is 
the reduction of the administrative costs, as we have talked 
about and as, Mr. Connor, you outlined, which currently consume 
38 percent. You want to reduce those by a third, and redirect 
the savings into programs.
    Now, I understand that the U.N. press reports indicate some 
400 efficiencies will be achieved by December of this year. How 
much reduction in administrative costs do you feel that these 
efficiencies are going to yield?
    Mr. Connor. Our count is roughly $100 million in total, but 
that includes peacekeeping, because a lot of them were in the 
peacekeeping area, as well as the regular budget activity. 
Actually, the number of completed projects by the end of this 
year will be about 600; 400 was an earlier number, and we have 
accelerated that process. They are not all in the 
administrative field, and they do not all involve personnel.
    For example, it is an easy one, we now have out a contract 
to buy 7,000 vehicles for the missions. It is the first blanket 
purchase procedure that we have gone through. We used to buy 
them in quantities of 200 or 300. Well, we computed that we 
could save $2,500 a vehicle if we bought them on a larger 
scale, since 7,000 is more than we normally buy at a time. But 
if we buy our normal requirement of about 4,000 vehicles a 
year, of course that way we save $10 million. That $10 million 
sits in the $100 million that I just reported to you.
    But there are some other ones: Time chartering of vessels 
to repatriate troops. Instead of always chartering, we now do 
time chartering. We do not have to pay for the return voyage. 
That saved $21 million.
    There are a whole series. Not all of the 600 end up with 
money savings. Some of them are just better ways of doing 
things so that we get a better product out. But, in the 
aggregate, $100 million was the number. And I would guess that 
a good portion of those ended up in the regular budget, as well 
as in peacekeeping.
    There was no way that we could--well, first of all, we have 
reduced real costs, in the present biennium, $250 million, and 
$84 million in the biennium budget that is coming up. You can 
do that two ways. You can just do not do the job, with fewer 
people, where you can try to re-engineer the job so that fewer 
people do it better. We have tried the latter. It has actually 
been a fairly morale-building experience.
    The people who were never asked before, ``What is wrong 
with the way you are doing things now?'' were asked. They came 
up with good ideas, and we have put them into effect. That is 
how we saved the money.
    Senator Grams. One last question on peacekeeping before we 
move on from that. And that is in the area that the Secretary-
General has urged member states to establish a standing rapid 
deployment force. Now, if this is done, will the countries that 
are going to be there, or providing the troops and equipment, 
for what would be considered a U.N. dedicated force, are they 
going to be able to be reimbursed even if that force is not 
deployed? So if the Secretary-General asks to have this force 
prepared and ready, will there be a billing to the U.N. for 
those numbers, even if they are not deployed?
    Mr. Connor. Only if you vote for it. It has to be assessed. 
I know of no plans for such assessment. The Canadians, as you 
know, train a certain number of their soldiers for peacekeeping 
activities. I believe the Nordics do exactly the same. They are 
doing it all on their own. They make the offer available, that 
if they are needed for a mission that is voted by mandate by 
the Security Council and then funded by the General Assembly, 
they are there. And they will be paid the same rates as we pay 
soldiers from any other country, $988 a month.
    Mr. Ruggie. Senator, if I just may followup on that as 
well.
    Senator Grams. Sure.
    Mr. Ruggie. First, it is not a standing force. It is a 
standby force. And that is an important difference to 
underscore. And, second, these are soldiers who are in the 
armed forces of the member states involved in any case. They 
are being trained now for peacekeeping duties as part of their 
regular missions for their national armed forces. There is no 
incremental expenditure to be assessed or to be paid for until 
such a point at which they would be deployed for a mission that 
the Security Council has authorized.
    So the answer is no.
    Senator Grams. All right. Thank you.
    Code of Conduct. The Secretary-General recently released a 
new Code of Conduct, as you are aware. Does the Code of Conduct 
specifically contain any prohibition against nepotism?
    Mr. Connor. No, I do not believe it does. I cannot recall 
any prohibition in there against nepotism.
    Mr. Ruggie. It is mostly for disclosure of various kinds.
    Mr. Connor. Disclosure-type things.
    Mr. Ruggie. Yes.
    Mr. Connor. The way we recruit is an international 
competitive exam and candidates getting on a roster. That would 
work against singling out any particular recruit. Obviously, 
within the Secretariat we have informal rules. But there is 
nothing by way of a formal requirement that I am aware of.
    Senator Grams. Also, in the area of conflict of interest, 
there was an Under Secretary-General for Internal Oversight 
Services report recently that noted the lack of a very 
stringent U.N. applicable definition of what would be 
considered as a conflict of interest. Are there any rules 
currently in effect which mandate that U.N. staff recuse 
themselves from activities which would promote the interests of 
their former employers, for instance? And would this be 
addressed in that?
    Mr. Connor. I think that recusion is very meaningful, but 
it is done informally. I do not know of any rule that has been 
promulgated to that effect specifically. This is an issue, for 
example, in many of our more senior people, who come from 
private industry and have backgrounds and associations and all 
that.
    I must say, in my own case, my former firm does work for 
many parts of the organization, always on a competitive bid 
basis. But I followed the same rules, and suggested the 
application of the same rules, by Dr. Boutros Ghali. In other 
words, my continuing relationships with the firm were severed 
financially. I receive a pension. But I had to give up an 
increasing pension and settle for a fixed amount. At age 90, I 
may not like that too well, but that is the way it is. 
[Laughter.]
    We did follow whatever the U.S. procedure is on that, and 
many other partners in my former firm have gone through the 
same thing with the U.S. Government. It is an interesting 
second career.
    Senator Grams. And that is one of the problems with having 
to take on that second career.
    Mr. Connor. It is well worth it.
    Senator Grams. Moving on, just to wrap this up, dealing 
again with the OIOS, which we feel is very important, and I 
think can be a very important tool. But given the Secretary-
General's focus on accountability and reform, why was not the 
Office of the Inspector General provided with an increase in 
funding over last year's level?
    Mr. Connor. It is up 23 percent for the next year.
    Senator Grams. For the 1998 and 1999 biennium?
    Mr. Connor. Yes. And, in addition, he has been able to 
arrange quite a few additional extrabudgetary posts. Meaning 
that other parts of the organization are funding those. I think 
he will end up with something like 116 staff members, in 
looking at the budget this year, plus the extrabudgetary ones.
    I think, because of the recruiting freeze, he fell into 
that category, by his own election. We have no control. He is 
independent in personnel financial matters. He has operational 
responsibilities. So he has full delegated authority on 
recruiting and others.
    I think that if there was any shortfall in the past--and I 
am not so sure there was--I would agree with Ambassador Sklar 
that Mr. Paschke believes he is well staffed at this point.
    Senator Grams. I have some report language here that was 
reported that said--and I will just quote out of this--that the 
full financial impact of this strengthening of OIOS--and this 
deals with--becomes evident in our budget proposal for 1998 and 
1999, which shows an increase in our total submission of over 
$2.5 million. But, it says, in reality, it is very close to a 
maintenance budget.
    So is that----
    Mr. Connor. He had $15 million in 1996-1997. I forget how 
many hundreds of thousands in addition to that $15 million. He 
is over $18 million in the new budget.
    There is a budgeting anomaly in that during the year that a 
new post is created--and Mr. Paschke has a number of new 
posts--we only budget for 50 percent of the value of that, on 
the assumption that the total number of new posts will be 
filled during the course of the biennium. So we just take half 
the biennium and put in that money. That could be the origin of 
it. I think he really had more resources by way of people in 
the 1996-1997 than the raw numbers on dollars would make you 
believe. Because a lot of those new people were only in at 50 
percent.
    What happens--this goes on all the time--if he over expends 
his personnel line as a result of, for example, bringing the 
people on closer to the first year of the biennium than the mid 
point, he is going to overspend the budget. Nobody worries 
about that. Because, overall, in the entire U.N. system, it 
comes out at about 50 percent. So the overs and the unders 
about balance out.
    We have had long meetings and tried to be responsive to Mr. 
Paschke's budgetary requests. I think he has gotten everything 
he wants.
    Senator Grams. Well, we will have to ask him, and let him 
defend that.
    One last question that I will ask. And, by the way, I just 
want to mention that I would like to submit some other 
information to you. And as we go along in this process, if you 
will just respond to some of these questions, rather than going 
into detail on them now. But we would have some questions I 
would like to submit in writing.
    Senator Grams. But, just the last one, I would like to 
bring up. And it is kind of an example of dealing with the 
annual report of the OIOS. The U.N. Inspector General 
highlights numerous administrative inefficiencies in that 
report. And one particularly egregious example was in the U.N. 
Center for Human Rights. And the OIOS report states that, and I 
am quoting now: In terms of oversight and administration, the 
situation remains disquieting.
    It goes on to say: Over the past 2 years, OIOS has 
continually stressed the urgency of establishing a system for 
monitoring the implementation of the work, and assessing its 
results. It goes on to say: The existence of such a system is 
not apparent as yet, nor are the plans for its establishment.
    So the question I would have is, what actions has the 
Secretary-General taken with regard to this center as an 
example of some of the things that need to be reformed?
    Mr. Connor. Well, we now have a new High Commissioner, and 
the new Deputy has not yet been named. The two that were in 
there before have moved on to other things.
    There was a problem that has now been dealt with. They have 
got a new organization. They have got a new organizational 
structure. And I think that, from my conversations with him, 
Mr. Paschke is supportive of giving them a free hand to put the 
situation right.
    Mr. Ruggie. Senator, just to add a footnote on that. I 
think the issue that you point to is perhaps one of the most 
significant reasons why the Secretary-General, in the reform 
report, announced--or in the reform process--consolidated the 
High Commissioner's Office with that of that Center.
    The two units, quite frankly, were at loggerheads. The 
Center was not responsive to the High Commissioner. They 
responded to different constituencies. The situation was 
unacceptable. And the Secretary-General, as you know, 
consolidated the two, and put the entire operation under the 
control of Mary Robinson. So we believe that that problem will 
be solved by this appointment and by the consolidation.
    Mr. Connor. The new Deputy will be a deputy, not a rival.
    Senator Grams. Well, I want to thank you, gentlemen. I just 
underscore or highlight that good intentions sometimes do not 
get the job done. And I am not saying that this is what is 
going to happen here. I appreciate your candor and your being 
here today. I appreciate the efforts that the Secretary-General 
is making. I think what the U.S. Congress has tried to put on 
the table and support and encourage has been very important, 
and goes a long ways.
    And I do not underestimate, or do not underscore, as the 
Secretary-General himself has pointed out, the hard job that is 
ahead of him, even in getting his plans implemented, let alone 
tackling some of the things that Congress has outlined. But, 
again, how we believe that it is so important to maintain the 
integrity and really the viability of the United Nations, to be 
the good agency worldwide that we know it can be and should be.
    So, again, I really appreciate your time to be here. I want 
you to convey to the Secretary-General how much we appreciate 
his cooperation and allowing you to come down. As you mentioned 
earlier, this is quite unusual, and we really appreciate what 
you have done here today. And, again, we look forward to 
working closely with you in the months ahead and in the years 
ahead, too.
    As I told the Secretary-General way back in January, I hope 
once all this is put behind us we can really look at what the 
U.N. should be and could be doing. And we hope that is the goal 
that we get completed in the near future.
    Thank you very much, gentlemen.
    Mr. Ruggie. Thank you, Senator, for your interest and your 
commitment.
    Mr. Connor. Thank you.
    Senator Grams. Thank you very much.
    [Whereupon, at 5:50 p.m., the hearing was adjourned.]



                            A P P E N D I X

                              ----------                              


                  Prepared Statement of John G. Ruggie

Mr. Chairman, Members of the Subcommittee:
    I welcome the opportunity of appearing at these hearings today to 
brief you and the Members of the Committee on the Secretary-General's 
measures and proposals to reform the United Nations.
    As you know, on 16 July the Secretary-General presented to the 
General Assembly a comprehensive report, entitled Renewing The United 
Nations: A Programme for Reform. The report explains why United Nations 
reforms are necessary; it describes the principles guiding the 
Secretary-General's reform efforts; and it contains actions that he is 
undertaking on his own authority as Chief Administrator Officer of the 
Organization, together with recommendations to Member States in areas 
of activities that fall within their jurisdiction.
    During the General Debate at the current General Assembly, 
virtually every Head of State, Head of Government, or Foreign Minister 
who spoke commended and broadly endorsed the Secretary-General's reform 
initiatives. For the past six weeks the Assembly, meeting in informal 
sessions that encourage a pragmatic give-and take approach, has been 
reviewing in detail the specific reform measures and proposals.
    We expect that, within a matter of days, the General Assembly will 
adopt a resolution welcoming the Secretary-General's report and 
encouraging him to proceed with those measures that are within his own 
administrative capacity. Thereafter, the Assembly will move to finalize 
its disposition concerning the recommended reforms in areas that are 
within the domain of Member States. The legislative calendar calls for 
the process of political endorsement to be completed before the end of 
November, so that the Budgetary Committee can conduct its work and 
provide the appropriate budgetary authority before the current session 
of the Assembly adjourns in December.
    The discussions in the Assembly to date have been positive and 
constructive. As reported in the press, the deliberations have taken 
some time. But that is only to be expected in light of the fact that 
the Secretary-General's reforms are both comprehensive and bold, and 
that the United Nations is an Organization of 185 sovereign Member 
States each of which must and should have ample opportunity to express 
its views on these important matters.
    Mr. Chairman, permit me to summarize briefly the main features of 
the Secretary-General's measures and proposals. In essence, they 
consist of four types.
    1. The first concerns rationalizing administrative processes and 
enhancing administrative efficiencies. For example, the Secretary-
General's proposed budget for the next biennium again shows no growth, 
and it includes the reduction of 1,000 posts. Moreover, the Secretary-
General is committed to reducing non-programme administrative costs 
from 38 per cent of the total budget down to 25 per cent through the 
next two budget cycles. Far more extensive use of common services and 
common premises are foreseen. My colleague, Under-Secretary-General 
Joseph Connor, will discuss these matters further in his presentation.
    In addition, the Secretary-General has consolidated three 
departments in the social and economic sector into one; he has merged 
several units in the area of conference servicing into one department; 
and he has proposed to Member States that they rationalize or abolish 
several subsidiary bodies of major legislative organs.
    2. The second type of measure and proposal attempts to create the 
appropriate Secretariat structures that will permit the Organization to 
act as one within and across its diverse areas of activities.
    To begin with, the Secretary-General has focused the entire work 
programme of the Secretariat into four clusters: peace and security, 
humanitarian affairs, international economic and social affairs, and 
development operations. For each of these clusters, an executive 
committee has been established, the function of which is to sharpen the 
specific contributions that each participating entity makes to the 
overall mission and objectives of the cluster. Human Rights has been 
designated as a cross-cutting issue, as a result of which the High 
Commissioner for Human Rights participates in each of the four 
executive committees.
    In addition, the Secretary-General has established and chairs a 
Senior Management Group. It consists of the conveners of the sectoral 
executive committees, together with other senior officials whose 
participation is essential to establishing a unity of purpose and 
coherence of efforts throughout the Secretariat. The Senior Management 
Group meets on a weekly basis, and non-New York officials participate 
through teleconferencing.
    The Secretary-General has also proposed to Member States the 
creation of the post of Deputy Secretary-General. The Deputy would 
relieve the Secretary-General of some of the administrative and 
representational duties he now bears, and he/she would be tasked in 
particular to oversee areas of activity that cut across sectoral and/or 
institutional boundaries.
    Finally, the Secretary-General is setting up a Strategic Planning 
Unit within his Executive Office. Its purpose is to analyze medium-term 
trends that affect the work of the Organization, and to present 
appropriate policy analyses and options to the Secretary-General and 
the Senior Management Group.
    This set of measures and proposals is designed to reduce 
fragmentation and overlap in the work of the Organization, to take 
advantage of synergies and complementarities among its component units, 
and to deploy its scarce resources with maximum efficiency.
    3. Through a third set of initiatives, the Secretary-General is 
seeking to stimulate parallel processes on the legislative side of the 
House. Largely for reasons having to do with the cold war practice of 
``bloc politics,'' a large number of the inefficiencies and rigidities 
with which the Organization is afflicted are, in fact, mandated by 
Governments. The Secretary-General is urging Member States to move 
beyond that legacy of the past and to restructure the legislative 
agenda and processes to more fully reflect the new international 
reality.
    Among the proposals made by the Secretary-General in this regard 
are that General Assembly debates be focused in accordance with the 
Organization's own medium-term plan, and that Member States streamline 
and continually update the Assembly's agenda. As a result of such 
efforts, it is believed that General Assembly sessions could be 
shortened perhaps by as much as three weeks. In addition, the 
Secretary-General has proposed that sunset provisions for new mandates 
be instituted, and that Member States consider establishing a system of 
result-based budgeting in place of the extensive micro-management 
through input-based budgeting that is currently the practice.
    4. The Secretary-General's reform proposals also include several 
longer-term initiatives concerning the future of the United Nations as 
a whole.
    Governments are asked to convene a ministerial commission to look 
at the charters of various United Nations specialized agencies and 
their relationship agreements with the United Nations itself, with an 
eye towards facilitating closer collaboration. A Millennium General 
Assembly is proposed for the year 2000, at which Member States would 
discuss their vision for the United Nations in the decades ahead, and 
to which the ministerial commission would submit its report. A 
Millennium Peoples' Assembly is recommended alongside so as to include 
the views of participants from as wide a spectrum of civil society as 
possible.
    Mr. Chairman, thus far, I have focused on changes in the overall 
managerial structure and functioning of the United Nations that the 
Secretary-General has undertaken and proposed.
    It should be noted that the reform effort comprises corresponding 
changes in the field. The Secretary-General has established the means 
for closer integration among United Nations entities engaged in 
development operations at the country level, for example. The 
mechanisms for doing so include joint policy frameworks, and wherever 
possible having the various entities work out of a single United 
Nations house, under one United Nations flag, and using common 
services.
    Similar changes are under way within the major programme areas of 
the United Nations. In the case of human rights, for instance, the 
Secretary-General has merged the office of the High Commissioner for 
Human Rights and the Centre for Human Rights, with Mary Robinson, the 
former President of Ireland, having recently joined the United Nations 
as High Commissioner in charge of the new integrated operation.
    Likewise, United Nations programmes in crime prevention, drug 
trafficking and money laundering have been integrated into a single 
entity under the direction of Pino Arlacchi, a former Member of the 
Italian Senate and an expert on organized crime.
    Mr. Chairman, Members of the Subcommittee, these are some of the 
major actions and recommendations undertaken and proposed by the 
Secretary-General. We fully expect that these initiatives will 
revitalize the United Nations, making it a more effective and efficient 
instrument in the pursuit of peace and progress for all.
    Thank you.

                               __________

                 Prepared Statement of Joseph E. Connor

                              Introduction

    Mr. Chairman, Members of the Sub-committee:
    I am pleased to have been asked to come before you and respond to 
your questions as to management reform actions announced by Secretary-
General Kofi Annan on 16 July 1997 as part of his Renewing the United 
Nations: A Programme for Reform. I would like to submit a statement for 
the record summarizing some of the key management reforms and how we 
are progressing to implement them.
    Management actions being taken currently are part of a significant 
managerial reform initiative that has been underway in the United 
Nations since 1995. The aim is to enhance the effectiveness and 
efficiency of the Organization. The bedrock of this effort is the 
hundreds of projects being carried out by UN staff members across the 
entire Secretariat, encouraged and catalyzed by a Management Reform 
Group consisting of experts in public sector reform provided by Member 
States. This unique effort, which began in 1996 to support the 
Efficiency Board, was reinforced and refocused by Secretary-General 
Kofi Annan in the context of his major management reform initiatives. 
The aim today is not only efficiency but also effectiveness.
    The principal management reform objectives are the following:

     1. Reduce Administrative Costs
     2. Create a ``Dividend for Development''
     3. Simplify Processes, Procedures and Rules
     4. Expand and Strengthen Common Services
     5. Create an Electronic United Nations
     6. Reduce Budget Levels
     7. Reduce Staff Levels
     8. Adopt Results Based Budgeting
     9. Provide the Organization with a Sound Financial Base
    10. Enhance the Scope and Coverage of OIOS

              Objective No. 1: Reduce Administrative Costs

    On 17 March 1997, the Secretary-General established a goal to drive 
down administrative and other non-programme costs (meaning 
administration, overhead and information services costs) included in 
the budget by one third and to make these resources available for 
reallocation by Member States to development activities.
    Three primary factors led to the conclusion that an important 
reduction in the overhead of the United Nations was feasible. First, 
current non-programme costs constitute a significant proportion of the 
regular budget, about 38 per cent of the total; and a similar 
proportion of the staff. The 38 per cent includes executive direction, 
direct administration costs, programme support, facilities, 
communications and the cost of producing reports and servicing Member 
State meetings concerned with finance, personnel and administrative 
matters. The objective is to reduce that proportion to 25 per cent.
    Second, there are relevant precedents in many Member States and 
international organizations for reductions of overhead costs of this 
type. We're following a proven path already traveled by many Member 
States, including the United States.
    Third, in-house experience has shown that significant savings are 
possible. Managers and staff members in all departments and offices in 
the Secretariat have designed and initiated more than 600 projects that 
are enhancing services, reducing overlap, simplifying processes and 
making more optimal use of information technology. Over 400 of these 
projects have been completed or are nearing completion, many resulting 
in concrete savings and all contributing to a more efficient and 
effective Organization.
    These efficiencies are adding up to substantial economies--
estimated for 1997 at $100 million in total for the regular budget and 
extra-budgetary funds including peacekeeping. For instance, the United 
Nations Treasury has saved over $500,000 in the first eight months of a 
cash management project to buy foreign currency more competitively. 
United Nations mainframe operations have been consolidated, saving $1.2 
million per year. Automated financial processes have decreased the 
monthly number of cheques used in Geneva by 33% and saved over $1 
million. These efforts confirm that it is often the people who are 
involved in the daily work who best understand the problems and can 
find the most practical solutions to improve value and service.

         Objective No. 2: Create a ``Dividend for Development''

    In his July 1997 report, the Secretary-General also proposed that 
Member States create a Development Account, funded by the dividend 
arising from the reduction in the Organization's administrative and 
other overhead costs. The proposal is straight forward: reduce 
bureaucracy and turn the savings into results for some of the world's 
poorest peoples. By reducing administration and other overhead by one 
third from its current level of 38 per cent of the regular budget, it 
should be possible to produce and sustain a dividend that will grow to 
$200 million a biennium, no later than 1 January 2002. For the biennium 
which begins on 1 January 1998, $50 million in the form of reduced 
administrative and overhead costs has already been achieved. As a 
result, reductions made in 1996-1997 in development spending have been 
restored in 1998-1999 budget proposals, and an initial down payment of 
$12.7 million recommended in the development account--all within the 
framework of maintaining no increase in our overall budget.
    As we work forward towards 1 January 2002, the central 
administrative and support offices of the Organization as well as every 
department will be given specific savings targets to reduce their 
administrative and other overhead costs over the next two bienniums.

       Objective No. 3: Simplify Processes, Procedures and Rules

    As part of the Secretary-General's overall effort to reform the 
United Nations and to reduce the costs and burdens associated with 
administration, the Secretariat is simplifying administrative 
processes, with particular reference to the processes used for the 
management of human and financial resources.
    The need is clear. Rules and procedures first developed decades ago 
and added to over the years no longer fit the needs of the 
Organization. They are hard to understand, sometimes conflicting, time-
consuming to follow, and costly to carry out. Despite good intentions, 
they may even fail to achieve the intended purpose of supporting the 
accomplishment of mandated programmes while assuring transparency and 
accountability.
    A clear ally in achieving simpler processes and controlling the 
quality of data input is the United Nations' new computer system--IMIS. 
Deployment of the new system is now underway in seven duty stations. As 
the ``home'' for all of the Organization's administrative processes--
personnel, finance and procurement--IMIS is fast becoming the 
administrative backbone of our worldwide operations.
    When systems of comparable complexity have been tried in other 
organizations the failure rate is around 60 per cent. By comparison, 
the United Nations' effort is growing in usage and usefulness, and the 
cost at around $75 million is modest compared to that of similar 
systems.
    Several other United Nations entities and specialized agencies have 
adopted or are considering adopting IMIS, suggesting that the time is 
not far off when United Nations managers throughout the system will 
adhere to a common, unifying and efficient management tool.

         Objective No. 4: Expand and Strengthen Common Services

    The provision of support services has the potential to serve as the 
administrative and technical centerpiece of a cohesive, cost-effective 
United Nations system. In this connection, the Secretary-General has 
decided to set up in New York, Geneva and Vienna a Common Services 
Facility to enhance the provision of common services to the United 
Nations, funds and programmes.
    A Task Force comprised of executives from the UN, UNDP, UNICEF and 
other UN Funds and Programmes is assessing a number of support services 
to determine how they could be regrouped, strengthened and streamlined 
in order to provide cost-effective, quality and timely common services 
on a competitive basis.
    Working groups of the Task Force are reviewing the areas which 
would benefit from the provision of common services. At this stage 
those areas being reviewed for possible inclusion in a common service 
facility include procurement, information technology and 
telecommunications, the Integrated Management Information System, 
personnel services, including Medical Services, financial services, 
including banking, treasury and payroll, legal services, transportation 
and traffic operations, security and safety services, facilities 
management and printing facilities.

        Objective No. 5: Create an ``Electronic United Nations''

    In September 1997, two events took place that symbolize what the 
future may bring as the United Nations takes increasing advantage of 
information technology:
   every permanent mission in New York was connected to the 
        Internet, mission staff were offered training and can now 
        access the United Nations Web Site and obtain documents 
        electronically; Result: the need for hard copy documentation is 
        diminishing.
   and finance experts across Africa were linked in an on-line 
        electronic meeting. Result: Extension of the experience to 
        other meetings would lead to reduced travel costs.
    The United Nations is particularly well situated to take advantage 
of rapidly evolving information technology and access to electronic 
media in all countries. It's unique capacity in multilingual, 
multicultural development communication complements the information and 
data bases of UNDP, the World Bank and other entities. It is also 
uniquely situated to contribute to the evolution of the Internet, by 
increasing the amount of material in the official languages of the 
United Nations and by encouraging access and use of this new 
technology.
    Thus, the Secretary-General is undertaking a number of steps to 
build the foundation for a truly electronic United Nations, including 
strengthening the UN web site, modernizing how the Secretariat 
prepares, produces, disseminates and stores documents and expanding the 
use of Intranet to communicate within the Secretariat.
    Already, because of the increased availability of electronic 
documents, reduced requests by Permanent Missions, the new space-saving 
typefaces and formats and other steps, the production of documentation 
is down, measured by both pounds of paper and cost.
    A start has been made on remote interpretation. Video conferencing 
is also being used extensively, especially for the weekly meetings of 
the Senior Management Group and the Executive Committee, so all high-
level personnel are informed and knowledgeable of the immediate as well 
as long-term priorities of the Secretary-General. The Secretary-General 
has also promoted remote translation which is now used broadly by UN 
offices in New York, Santiago, Vienna and other sites to reduce travel 
costs and make better use of translation staff.

                 Objective No. 6: Reduce Budget Levels

    Budget appropriations for 1996-1997 were $2,603 million, an amount 
now adjusted for comparative purposes by $40 million to reflect an 
accounting change recommended for 1998-1999. The restated amount is 
$2,563 million. In May 1997, the Secretary-General submitted for the 
biennium 1998-1999 a resource requirement then estimated at $2,583 
million but anticipated to be $50 million less or $2,533 when recosted 
for foreign exchange rate fluctuations in December 1997. Thus, the best 
estimate for 1998-1999 is $30 million less than 1996-1997, on a 
comparable basis. That is the acid test of whether or not a budget is 
growing. The UN budget is not growing.
    The $30 million decrease results from a resource reduction of $84 
million offset in part by inflationary increases of $126 million and 
foreign exchange benefits of $72 million.
    Of course, we don't yet know how actual spending for 1996-1997 will 
turn out. The General Assembly has been informed several times that 
there are no signs the 1996-1997 budget is being overspent. As is the 
usual practice, the situation will be updated in December 1997 and the 
General Assembly will be informed so that they can have all the 
elements at hand at the time they legislate the 1998-1999 budget.
    By way of background, the original budget for 1994-1995 totalled 
$2,608 million. The current appropriation for the 1996-1997 budget is 
$2,563 million, after adjustment for comparative purposes to reflect an 
accounting change, $40 million, recommended for 1998-1999. As stated 
above, the Secretary-General believes the budget originally submitted 
for 1998-1999, at $2,583 million, will be about $2,533 when fully 
recosted in December 1997.
    On a technical point, there seems to be a great deal of confusion 
regarding the accounting change that was made in the 1998-1999 proposed 
programme budget called net budgeting. What does this mean? It means 
that only the United Nations share of expenditures are included in the 
Secretariat's budget, not the entire gross budget of jointly financed 
system-wide activities. The ``net budgeting'' mechanism has already 
been used for a number of years for other jointly financed 
secretariats. The Secretary-General is now proposing this same 
budgetary mechanism be extended to the International Civil Service 
Commission and its Secretariat, the Joint Inspection Unit and its 
secretariat and for the services provided by the United Nations at the 
Vienna International Centre.
    Why was the change made? Very simply, to provide uniformity to the 
budget methodology--to include in the United Nations budget only those 
costs which relate to United Nations activities--not activities that 
pertain to some other organization's activity.

         Objective No. 7: Reduce Staff Levels, Improve Quality

    The Organization's future depends on the quality and competence of 
its staff. The Secretary-General's human resources programme focuses on 
improved procedures for recruitment and placement that will provide 
better support to managers in the management of their staff resources. 
Staff development at all levels is an essential investment in the 
capacity of the Organization to improve, change and adapt. This is 
especially true as our staffing numbers are declining.
    Since 1985 regular budget posts have been reduced by 25 per cent.
    For the next biennium, Secretary-General proposes a staffing level 
reduced by 1,000 posts. The proposed staffing table for 1998-1999 
stands at 8,695 posts; in 1996-1997, the number of posts at year end 
1997 was 10,012, representing a net change of 1,317 posts in the 
aggregate.
    Of the aggregate change, 1,000 posts, on a net basis, are being 
suppressed. This is a net change number which includes the abolition of 
1,059 posts, less the conversion from temporary assistance of 29 posts 
and the proposed creation of 30 new posts.
    In addition, 317 posts are being transferred out of the regular 
budget, a change related to the adoption of net budgeting procedures. 
These 317 posts are not being suppressed; they are simply no longer 
considered regular budget posts for reporting purposes.
    With staff numbers being reduced, it is essential that the staff be 
better trained, more versatile, more mobile, better managed and better 
integrated as a global team.
    Further steps are also being undertaken as part of the Secretary-
General's reform agenda, including carrying out a fundamental review of 
the management of human resources of the Organization with a view to 
creating a global team for the United Nations of the future. This will 
include identifying and undertaking concrete steps in recruitment and 
placement, human resources planning, career service and compensation 
packages, career development and mobility, and performance management. 
The Secretary-General has also submitted a code of conduct to the 
General Assembly for its approval.

   Objective No. 8: Adopt Results-Based Budgeting, Shift From Micro-
                   Management to Macro-Accountability

    As part of his reform package, the Secretary-General has proposed a 
fundamental shift in how the United Nations manages its affairs to put 
a much greater emphasis on results. He has recommended that the General 
Assembly consider moving the Organization's programme budget from input 
to output accountability.
    What does this mean? It means shifting the focus of planning, 
budgeting, reporting and oversight away from the rigid control of 
inputs, putting in place instead a system which emphasis defining what 
results are to be achieved and. measuring outputs and outcome. It means 
identifying the actual cost of producing results and allocating 
resources accordingly. It means giving programme managers greater 
flexibility and at the same time, greater accountability for 
performance.
    To complement these efforts and strengthen the management of the 
Organization, the Secretary-General is taking steps to delegate greater 
authority and flexibility to managers and hold them fully accountable. 
This principle has driven successful reform in organization after 
organization, in developed and developing countries: managers and staff 
can produce more efficient and effective programmes when they are given 
the flexibility and responsibility to achieve specified results and are 
held accountable for achieving them.

 Objective No. 9: Provide the Organization With a Sound Financial Base

    The implementation of the proposed programme budget and of the 
reform plan will be seriously compromised unless the financial 
soundness of the Organization is restored. Continuing high levels of 
unpaid assessments--regular budget, international tribunals and 
peacekeeping--are undermining the financial stability and liquidity of 
the Organization. 1997 is now forecast to end with a deficit in regular 
budget cash of $272 million. The year began with a deficit of $197 
million.
    1997 adds one more year to a pattern of cash deficits in the 
regular budget account. Through 1994, there had been a pattern of a 
modest and short-lived negative cash balance each year around 30 
September. Collections in October erased the negative balance. Year-end 
cash had a positive balance in the years up through 1994. In 1995 the 
pattern changed.
    Beginning in 1995, the depth of negative cash increased. So too the 
number of months the regular budget was in deficit. Every year since 
1994 ends with major deficit positions, maximum amounts of deficit 
frequently occur in even larger amounts; deficit periods of four or so 
months are usual.
    The United Nations covers this shortfall by borrowing cash from the 
peacekeeping accounts--an imprudent practice at best, a destructive 
practice potentially. When peacekeeping cash is borrowed to cover 
regular budget cash shortfall, the United Nations is unable to pay its 
peacekeeping bills--principally amounts owed to Member States for 
troops and equipment.
    Usable peacekeeping cash at the beginning of 1997, was $848 
million. $670 million is forecast at year end.
    Our peacekeeping cash is dwindling. Our debts to Member States are 
increasing.
    It is estimated that at year-end 1997, the Organization will owe 
$907 million to troop and equipment contributing countries, up from 
$838 million at the end of 1996. The increase in unpaid troop and 
equipment obligations leads to a situation where one group of Member 
States awaiting payment for troops and equipment are financing the late 
payment of regular budget and peacekeeping assessments by another group 
of Member States.
    The Secretary-General is able to pay down the amount of debt to 
troop and equipment providing Member States only when Member States 
remit substantial assessment arrearage amounts. This was done late in 
1996 when the Russian Federation paid over $200 million in arrearage 
payments.
    At 31 December 1997, the combined regular budget cash account 
deficit, and balances in the peacekeeping cash account will aggregate 
$398 million, about half the amount in 1995--a steady and now sudden 
decline in two years.
    In a few years, the Organization has slid down the slippery edge to 
a point where the Organization has little if any financial flexibility, 
is highly illiquid and rests on a precarious financial perch. The 
Organization is highly dependent on the level of peacekeeping activity 
and the forbearance of troop and equipment providers.
    The Secretary-General's reform proposals include one aimed at 
providing a $1 billion credit revolving fund to tide the Organization 
over during periods of cash flow shortfalls in collecting assessments.
    In effect, he is suggesting borrowing from one group of Member 
States to finance non- or late payment by other Member States.
    The Secretary-General has challenged Member States to suggest other 
means of dealing with this situation. The problem is real. It needs to 
be addressed.

        Objective No. 10: Enhance the Scope and Coverage of OIOS

    One more management reform--perhaps the initial one approved by the 
General Assembly--the functions of an Inspector General. Our term is 
the Office of Internal Oversight. In a few words, it is the internal 
control put in place to see that all the other controls are in place 
and working.
    In operation now for three years, OIOS is one reform that has 
already helped strengthen the Organization in its effort to use 
resources in the most efficient and effective way and to uncover 
instances of fraud and mismanagement.
    The United Nations has had glaring instances of both. OIOS, as well 
as management, has uncovered a number of them. Both OIOS and management 
have worked well together to discipline or prosecute perpetrators.
    I must add that OIOS with its distinctive capability in carrying 
out investigations, as contrasted with auditing, is fundamental to the 
task of uncovering fraud. It is doing the job intended.

                               Conclusion

    As has been repeatedly stressed by Secretary-General Annan, reform 
is not an event, it is a process. Management is also a process which 
must be continually updated and reviewed. The need is clear. The path 
has now been set. With your help and that of other Member States the 
potential of a modern, streamlined and effective United Nations can 
emerge.

                                 ______
                                 

                Objective 1. Reduce Administrative Costs



                                Chart 1

           Objective 2. Create a ``Dividend for Development''



                                Chart 2

         Objective 3. Simplify Processes, Procedures and Rules



                                Chart 3

           Objective 4. Expand and Strengthen Common Services



                                Chart 4

          Objective 5. Create an ``Electronic United Nations''



                                Chart 5

                   Objective 6. Reduce Budget Levels



                                Chart 6

                   Objective 6. Reduce Budget Levels



                                Chart 7

                    Objective 7. Reduce Staff Levels



                                Chart 8

                    Objective 7. Reduce Staff Levels



                                Chart 9

Objective 8. Adopt Results-Based Budgeting: Shift From Micro-Management 
                        to Macro-Accountability



                                Chart 10

   Objective 9. Provide the Organization With a Sound Financial Base



                                Chart 11