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Please E-mail your comments regarding the contents or accessibility features of this document to Webmaster@gao.gov. March 28, 2003: The Honorable Henry J. Hyde: Chairman: Committee on International Relations: House of Representatives: Subject: Status of Reforms and Budgets of the United Nations Educational, Scientific, and Cultural Organization: Dear Mr. Chairman: In 1945, the United States helped establish the United Nations Educational, Scientific, and Cultural Organization (UNESCO) as a means to promote international peace. During the 1970s, UNESCO was criticized for becoming too politicized. In 1984, the United States left the organization, contending that it was poorly managed and had failed to restrain budget growth. At that time, the United States urged UNESCO to reform its management practices and adopt zero real growth budgets. In 2002, the United States announced that UNESCO had made progress in adopting reforms and that the United States would rejoin UNESCO to help advance the organization’s mission. The United States plans to rejoin UNESCO on October 1, 2003. To facilitate your committee’s oversight of U.S. reentry into UNESCO, you asked us to review the organization’s reform efforts and budget trends, as well as issues associated with the U.S. reentry. On February 26, 2003, we briefed your staff on our findings. Enclosure I documents the information we provided to your staff. UNESCO and the Department of State provided comments on a draft of our briefing, which we incorporated as appropriate. ‘: Background: UNESCO employs more than 2,200 staff[Footnote 1] at its headquarters in Paris, 48 field offices, 2 liaison offices, and 10 affiliated institutes and centers. The 188 nations that are members of UNESCO comprise the General Conference, which is UNESCO’s governing body. The General Conference generally meets every 2 years to approve UNESCO’s program and budget. A 58-member executive board is responsible for the execution of conference decisions. The Director General implements policy and manages the organization’s day-to-day operations. UNESCO has five major programming areas: Education, Natural Sciences, Social and Human Sciences, Culture, and Communication and Information. These programs include efforts to provide basic education through the Education for All Initiative, preserve 730 cultural and natural heritage sites worldwide, and promote policy decisions for sustainable use of freshwater resources. Summary: While UNESCO has launched several efforts to reform its management practices, these reforms are in their early phases and will succeed only with the sustained efforts of UNESCO’s Director General and member states. In the late 1990s, UNESCO’s auditors and top officials identified numerous management problems, including violations of personnel and hiring rules, and widespread weaknesses in financial rules and procedures. Other problems included an insufficient focus on program results, an over-extended network of field offices, and fragmented internal oversight functions. In response, UNESCO began efforts to enforce and strengthen its personnel rules, create new automated financial and program management systems, close unnecessary field offices, and establish an integrated internal oversight and evaluation office. While the Director General has made reform a high priority, these efforts are not yet complete. According to UNESCO, the organization plans to implement a new personnel appraisal system, train staff on new financial systems, develop measures for evaluating program results, provide field staff with access to the new systems, and close additional field offices. Over the past 6 years, UNESCO’s biennial regular budget has remained at its current level of $544 million.[Footnote 2] When adjusted for inflation, UNESCO’s 2000-2001 regular budget is almost equivalent to its 1984-1985 budget. However, UNESCO’s total resources grew significantly during this period due to an eight-fold increase in UNESCO’s extra-budgetary funds[Footnote 3]. Extra-budgetary funds constituted about one half of the resources UNESCO had available for its 2000-2001 programs. While the infusion of extra-budgetary funds has allowed UNESCO to fund more projects, representatives of some member states that we interviewed stated that extra-budgetary resources may not support the priorities set by the General Conference. The United States faces several unresolved issues before it rejoins UNESCO in October 2003. First, the United States must decide which UNESCO budget proposal it will support for the 2004-2005 biennium. The Director General is considering two proposals that will breach the zero nominal growth budget of $544 million and: increase UNESCO’s budget to as high as $610 million. The executive branch’s fiscal year 2004 budget request for UNESCO assumes that the UNESCO budget will remain at $544 million. At this level, the U.S. contribution of $60 million will essentially decrease the assessments of other member states by an equivalent amount. Second, since the United States has announced that it will stand for election to UNESCO’s executive board, it will need to campaign for support from other member states. Membership on the Executive Board would allow the United States to contribute to the reform efforts. Third, the United States will have to determine if it wants to target its assessment for the last quarter of 2003 to support U.S. priorities. UNESCO officials stated that they would support the establishment of a special account for the initial U.S. payment of $15 million, subject to the approval of the Executive Board and the General Conference. Without a special account, the $15 million could be refunded to other member states. Fourth, until an ambassador to UNESCO is appointed, the United States must decide how best to convey U.S. interests and priorities. The current observer to UNESCO does not have the authority of an ambassador to help shape and convey U.S. priorities. Scope and Methodology: To review UNESCO’s reform efforts, we assessed reports prepared by UNESCO and United Nations audit groups. We also traveled to UNESCO headquarters in Paris, France, in January 2003, where we met with UNESCO’s Director General and the directors of UNESCO’s internal audit, strategic planning, and human resource offices. We also met with the assistant director generals for UNESCO’s five major programming areas of Education, Natural Sciences, Social and Human Sciences, Culture, and Communication and Information. To examine UNESCO budget trends, we met with the directors of budget and comptroller offices. We also reviewed budget data from these officials. We converted UNESCO budget data into constant dollars by using a weighted average gross domestic product deflator. We constructed the deflator using U.S. and French inflation rates (representing the currencies in which dues were assessed). To identify issues associated with U.S. reentry, we reviewed UNESCO documents pertaining to the return of former member states and met with U.S. and UNESCO officials. We also met with representatives from nine member states. During the course of our review, we met with U.S. State Department and National Security Council officials in Washington, D.C. We performed our work from December 2002 through March 2003 in accordance with generally accepted government auditing standards. We obtained comments on a draft of this letter and its enclosure from the Acting Director, International Organization Systems Administration, and the Director of UNESCO Affairs; Bureau of International Organization Affairs, Department of State; and UNESCO’s Director of Strategic Planning, Director of the Bureau of the Budget, the Comptroller, and the Director of Internal Oversight. In general, they concurred with our findings and provided technical comments that we incorporated where appropriate. In addition, Department of State officials stated that the United States has begun to actively campaign for Executive Board membership. ---------------: We are sending copies of this report to the Honorable Colin Powell, Secretary of State, and to interested congressional committees. Copies will be made available to others upon request. In addition, this report will be available at no charge on our Web site at http://www.gao.gov. If you or your staff have any further questions regarding this assessment, please contact me at (202) 512-8979. Phyllis Anderson, Beth Anne Hoffman León, Hynek Kalkus, Pierre Toureille, and Lynn Cothern also made key contributions to this report. Sincerely yours, Joseph Christoff: Director, International Affairs and Trade: Signed by Joseph Christoff: Enclosure: [See PDF for image] [End of slide show] (320173): FOOTNOTES  This number does not include those staff working under limited duration contracts, special service agreements or contracts, and other additional staff.  The past two biennial budgets, 2000-2001 and 2002-2003, have been approved at zero nominal growth.  Extra-budgetary funds are voluntary contributions that other United Nations agencies, international organizations, educational institutions, and member states provide to UNESCO. One member state-- Brazil--has provided much of UNESCO’s extra-budgetary resources in recent years for programs conducted in that country.