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and Assumptions Underlying Secretariat Professional Salaries' which 
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United States Government Accountability Office: 
GAO: 

Report to Congressional Requesters: 

May 2013: 

UN Compensation: 

United Nations Should Clarify the Process and Assumptions Underlying 
Secretariat Professional Salaries: 

GAO-13-526: 

GAO Highlights: 

Highlights of GAO-13-526, a report to congressional requesters

Why GAO Did This Study: 

Several UN member states have expressed concern that UN employee 
salaries are increasing, and that they have limited understanding of 
how the UN determines salaries. ICSC determines salaries for 
Secretariat professional staff according to the Noblemaire Principle, 
which states that compensation should be high enough to attract civil 
servants internationally. In practice, the UN bases salaries for 
employees on salaries for U.S. civil service employees. The General 
Assembly has stipulated that salaries should be between 110 and 120 
percent of U.S. salaries. The UN and the U.S. government also offer 
employees benefits and allowances. 

GAO was asked to review UN compensation. The report examines (1) how 
the UN sets salaries for Secretariat professional staff; (2) how the 
UN compares its employees’ salaries with U.S. civil service salaries, 
including the assumptions underlying its process: and (3) how benefits 
and allowances provided to UN employees compare with those provided to 
U.S. civil service employees. GAO analyzed UN and U.S. government 
documents and interviewed U.S. and UN officials and other stakeholders. 

What GAO Found: 

The International Civil Service Commission (ICSC) determines changes 
to each component of United Nations (UN) Secretariat professional 
employees’ salaries and calculates the difference between UN and U.S. 
civil service salaries annually. ICSC recommends adjustments to the 
first component, base salaries, each year to align with changes to 
U.S. civil service base salaries. For example, ICSC calculated that 
U.S. civil service base salaries, including the impact of tax changes, 
increased 1.37 percent on January 1, 2010 and recommended that the UN 
base salary scale increase 1.37 percent on January 1, 2011. To set 
post adjustments, an additional salary component intended to equalize 
purchasing power, ICSC calculates the cost of living in each duty 
station. ICSC monitors changes in inflation, exchange rates, and other 
factors, and updates post adjustments periodically to reflect those 
changes. ICSC conducts surveys of UN employees and collects data on 
prices at least once every 5 years to ensure that post adjustments 
reflect the cost of several categories of expenditures relative to New 
York City, such as goods and services, housing, and medical insurance. 
Additionally, ICSC calculates the margin, or percentage difference, 
between UN and U.S. civil service salaries each year. If this process 
shows that the margin has fallen below 110 or exceeded 120, ICSC can 
recommend changes to bring UN salaries within that range. 

GAO found that the reported margin between UN and U.S. civil service 
salaries has increased over the past 10 years, and ICSC’s process for 
calculating this difference and its underlying assumptions lack 
clarity. ICSC data show that the margin was 116.9 in 2012, up from 
109.3 in 2002. GAO found that ICSC has developed a six-step process 
for comparing salaries using various assumptions about the populations 
included in their calculation. While GAO found that ICSC makes 
reasonable assumptions when calculating the margin, GAO analysis 
showed that making different assumptions changes the results, from as 
low as 105.2 up to 126.7 for 2012. However, ICSC’s presentation of 
this margin calculation to member states lacks clarity in that it does 
not adequately describe the process and its underlying assumptions. 
While ICSC has documented specific steps of the margin calculation, we 
found that ICSC has generally not documented the process as a whole. 

The UN Secretariat provides benefits that are similar to U.S. civil 
service benefits, as well as allowances that are similar to those 
provided to U.S. civil service employees serving overseas. The UN 
offers its staff various benefits, including retirement and health and 
life insurance benefits, that are similar to those offered to U.S. 
civil service employees. The UN offers more generous leave benefits to 
its employees than the U.S. civil service. The UN also provides 
allowances such as grants for education and rental subsidies to its 
employees. Eligibility for these allowances depends on each employee’s 
unique circumstances, which makes it difficult to compare UN 
allowances to U.S. civil service allowances. However, U.S. civil 
service employees serving overseas are eligible for some similar 
allowances. 

What GAO Recommends: 

GAO recommends that the U.S. Mission to the UN work with other member 
states to request that ICSC clarify the assumptions of the margin 
process and make this information available to member states. The 
Department of State concurred with this recommendation. ICSC did not 
agree with our conclusion and noted that its methodology is 
transparent. 

View [hyperlink, http://www.gao.gov/products/GAO-13-526]. For more 
information, contact Thomas Melito at (202) 512-9601 or 
melitot@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

ICSC Determines Changes to Each Component of UN Salaries, Then 
Calculates the Difference between UN and U.S. Salaries: 

ICSC's Reported Difference between UN and U.S. Civil Service Salaries 
Has Increased; ICSC's Process and Related Assumptions for Calculating 
This Difference Lack Clarity: 

UN Benefits Are Generally Similar to Those Offered to U.S. Civil 
Service Employees, and UN Allowances Are Similar to Allowances for 
U.S. Civil Service Employees Serving Overseas: 

Conclusions: 

Recommendation for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: UN Staff Assessment and the Tax Equalization Fund: 

Appendix III: ICSC's Margin Calculation Process Steps, Assumptions, 
and Alternatives: 
Steps in ICSC's Net Salary Margin Calculation Process: 
Assumptions in ICSC's Margin Calculation Process: 
Alternative Assumptions: 

Appendix IV: UN and U.S. Civil Service Retirement Benefits: 

Appendix V: UN Allowances and Allowances for U.S. Civil Service Staff 
Serving Overseas and Foreign Service Officers: 

Appendix VI: Comments from the Department of State: 
GAO Comments: 

Appendix VII: Comments from the United Nations: 
GAO Comments: 

Appendix VIII: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: International Civil Service Commission's Reported Margin 
between UN and U.S. Salaries, 2002 to 2012: 

Table 2: Assumptions the International Civil Service Commission Makes 
in Calculating the Margin between UN and U.S. Civil Service Salaries: 

Table 3: 2012 Margin Results under Selected Alternative Scenarios: 

Table 4: Comparison of Leave Benefits for UN Secretariat and U.S. 
Civil Service Employees: 

Table 5: Assumptions the International Civil Service Commission Makes 
in the Margin Calculation Process: 

Figures: 

Figure 1: UN Secretariat Employees by Broad Occupational Groups, 
Including Professional Employees, 2012: 

Figure 2: UN Professional Salaries Include a Base Salary and Post 
Adjustment: 

Figure 3: International Civil Service Commission's Net Salary Margin 
Calculation Process: 

Figure 4: UN Deducts the Staff Assessment from Gross Salaries: 

Figure 5: Steps in the International Civil Service Commission's Net 
Salary Margin Calculation: 

Abbreviations: 

CEB: United Nations Chief Executives Board for Coordination: 

CSRS: Civil Service Retirement System: 

FERS: Federal Employees Retirement System: 

GS: General Schedule: 

ICSC: International Civil Service Commission: 

OPM: United States Office of Personnel Management: 

UN: United Nations: 

TEF: Tax Equalization Fund: 

TSP: Thrift Savings Plan: 

[End of section] 

United States Government Accountability Office: 
GAO: 
441 G St. N.W. 
Washington, DC 20548: 

May 29, 2013: 

Congressional Requesters: 

Several member states of the United Nations (UN), including the United 
States, have expressed concern that UN employee salaries are 
increasing, and several member states are concerned that they have 
limited understanding of how the UN determines salaries. The UN system 
includes the General Assembly, the Security Council, the Secretariat, 
and separately administered funds, programs, and specialized agencies. 
To reduce competition for employees among these entities, among other 
reasons, the UN established a common system of salaries, allowances, 
and benefits. The common system includes the UN Secretariat, its 
affiliated programs, 13 specialized agencies, and one related entity. 

The UN is guided by the Noblemaire Principle in setting salaries for 
professional staff at the Secretariat, as well as other UN common 
system organizations. This principle states that compensation should 
be set high enough to attract civil servants from all member states, 
including those member states with the highest paid government 
employees.[Footnote 1] In practice, since its inception in 1945, the 
UN has based salaries for its professional employees on salaries for 
the U.S. national civil service. [Footnote 2] The United States 
enacted a salary freeze for U.S. civil service employees in 2010; base 
salaries and locality pay remained at 2010 levels until December 31, 
2012. However, in 2011, Secretariat professional employees in New York 
received an increase in their cost-of-living adjustment which 
increased their salaries. In December 2012, the General Assembly 
decided to temporarily freeze the cost of living portion of UN 
salaries for employees posted in New York for 6 months, effective from 
August 1, 2012, to January 31, 2013.[Footnote 3] 

We were asked to review how compensation for UN employees is 
determined and to compare salaries and benefits for UN Secretariat 
employees and U.S. civil service employees. In this report, we examine 
(1) how the UN sets salaries for Secretariat professional staff; (2) 
how the UN compares its employees' salaries with U.S. civil service 
salaries, including the assumptions underlying its process; and (3) 
how benefits and allowances provided to UN employees compare with 
benefits and allowances provided to U.S. civil servants.[Footnote 4] 

To determine how the UN sets salaries for Secretariat professional 
staff, we reviewed relevant documents from the UN's International 
Civil Service Commission (ICSC) and interviewed ICSC officials and 
officials from the UN Secretariat's budget office. To determine how 
the UN compares its employees' salaries with U.S. civil service 
salaries, we analyzed ICSC's annual reports and other documents 
showing the calculation of the difference between UN employee and U.S. 
civil service salaries, and replicated some parts of their process 
using UN and U.S. data. We reviewed relevant documentation and 
interviewed ICSC officials to assess the reliability of the data and 
determined that they were sufficiently reliable for the purposes of 
reviewing ICSC's margin calculation process. We interviewed ICSC, UN, 
and member-state officials about ICSC's calculation. To compare 
benefits and allowances provided to UN employees with benefits and 
allowances provided to U.S. civil servants, we analyzed documents from 
ICSC and other UN divisions, as well as documents from the U.S. Office 
of Personnel Management (OPM) and the Department of State (State). We 
also interviewed UN, OPM, and State officials about employee benefits 
and allowances. This report focuses on the compensation of UN 
Secretariat employees at the professional level, although professional 
employees of other common system organizations generally receive the 
same or similar salaries and benefits. Appendix I includes more 
details on our scope and methodology. 

We conducted this performance audit from August 2012 to May 2013 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

Background: 

About 30 Percent of UN Secretariat Employees Are Professional 
Employees: 

As of June 30, 2012, the Secretariat employed 42,887 people, including 
12,289 professional-level employees.[Footnote 5] The UN Secretariat 
administers the programs and policies established by the other 
principal organs of the UN, including the General Assembly and the 
Security Council. The duties of the Secretariat include administering 
peacekeeping operations, mediating international disputes, surveying 
economic and social trends and problems, and preparing studies on 
human rights and sustainable development. The Secretariat is 
headquartered in New York City and has employees at other locations 
throughout the world. The Secretariat is primarily funded through 
assessed contributions from member states to the UN regular budget. 
More than half of its professional employees work in departments or 
offices, such as the Department of Economics and Social Affairs and 
the Department for General Assembly and Conference Management, while 
the remainder work in field operations, including peacekeeping 
missions and some special political missions, regional commissions, 
and tribunals (see figure 1). 

Figure 1: UN Secretariat Employees by Broad Occupational Groups, 
Including Professional Employees, 2012: 

[Refer to PDF for image: pie-chart and subchart] 

UN Secretariat Employees: 
General Services: 26,220 (61%); 
Field Service: 4,378 (10%); 
Professional Employees: 12,289 (29%): including: 
- Departments and offices: 7,754 (63%); 
- Field operations: 2,961 (24%); 
- Regional commissions: 995 (8%); 
- Tribunals: 579 (5%). 

Source: GAO analysis based on UN Secretariat data. 

[End of figure] 

The Noblemaire Principle Guides the UN in Setting Salaries: 

The UN sets salaries for professional staff according to the 
Noblemaire Principle, which states that compensation should be set 
high enough to attract nationals from all member states, including 
those member states with the highest-paid national civil service 
employees. Since its inception, the UN has based salaries for 
professional employees on salaries for the U.S. civil service. The 
General Assembly passed a resolution in 1985 declaring that average UN 
net salaries should fall within 110 to 120 percent of average U.S. 
civil service net salaries, with an average mid-point of 115 over a 5-
year period.[Footnote 6] According to UN officials and documentation, 
there are three main reasons for setting the margin range higher than 
U.S. civil service salaries: (1) the relative lack of job stability 
and security for UN professional staff members compared with U.S. 
civil servants, (2) the limited promotion potential for UN 
professional staff members compared with U.S. civil servants, and (3) 
the fact that a large subset of UN professional staff members are 
expatriates and therefore incur additional expenses in living away 
from their home country. The General Assembly has reaffirmed the 
approved margin range several times since 1985 and as recently as 
2011, although representatives from some member states have suggested 
a lower range may be more appropriate. 

ICSC Determines Changes to UN Salaries and Benefits, Subject to 
General Assembly Approval: 

The UN General Assembly established ICSC in 1974 as an independent 
expert body with a mandate to regulate and coordinate the conditions 
of service of staff in the UN common system. As a part of its mandate, 
ICSC determines compensation for employees within the UN common 
system. Each year, ICSC makes recommendations to the General Assembly 
to change base salaries to align them with any change in U.S. civil 
service salaries. The General Assembly must approve ICSC's 
recommendations for the proposed changes to take effect. In addition, 
ICSC determines the cost-of-living component of UN salaries, called 
the post adjustment, without prior approval from the General Assembly. 
ICSC also has the authority to make decisions and take action 
independently on some routine compensation matters, such as 
establishing rates for some allowances and benefits. For example, ICSC 
may set the amount of hardship allowance for a duty station without 
General Assembly approval.[Footnote 7] 

ICSC is required to submit an annual report to the General Assembly 
that includes information on the implementation of its decisions and 
recommendations. In practice, the General Assembly refers ICSC's 
report and any recommendations to the Fifth Committee, the UN's 
administrative and budgetary committee. The Fifth Committee considers 
ICSC's recommendations, including any financial implications of its 
proposals on the UN budget, and reports its draft resolutions and 
recommendations to the General Assembly. The General Assembly makes 
the final decision and issues resolutions on ICSC's recommendations. 
Member states provide input and vote on ICSC's recommendations through 
the Fifth Committee and the General Assembly. 

ICSC Determines Changes to Each Component of UN Salaries, Then 
Calculates the Difference between UN and U.S. Salaries: 

ICSC makes recommendations to change UN base salaries to align with 
changes to U.S. civil service salaries, determines the cost of living 
at each duty station to set post adjustments, and calculates the 
difference between UN and U.S. civil service salaries. To set the 
primary compensation component --base salaries--ICSC analyzes changes 
in U.S. civil service salaries annually and makes a recommendation to 
the General Assembly to align the UN base salary scale with U.S. civil 
service salaries. To set the second compensation component--post 
adjustment--ICSC monitors changes in the cost of living at each duty 
station monthly and modifies each post adjustment periodically to 
account for these changes. This process typically results in changes 
to UN net salaries, which include base salary and post adjustment, one 
or more times during the year. Once a year, ICSC calculates the 
margin, or percentage difference, between average UN net salaries and 
average U.S. civil service salaries, to determine if average UN net 
salaries fall within the approved range of 110 to 120 percent of 
average U.S. civil service salaries. If the result of this calculation 
shows that UN net salaries fall outside the approved range, ICSC may 
recommend or make changes to bring average UN net salaries within the 
approved range. 

ICSC Recommends Changes to UN Base Salaries to Align with U.S. Civil 
Service Base Salaries and Determines a Cost-of-Living Adjustment for 
Each Post: 

ICSC Recommends Changes to UN Base Salaries to Align with U.S. Civil 
Service Base Salaries: 

ICSC makes a recommendation to change the UN base salary scale each 
year based on its calculation of changes to salaries for U.S. civil 
service employees. According to ICSC documents, ICSC follows this 
process to ensure that UN employees receive at least the base salary 
of comparable U.S. civil service employees, regardless of duty 
station. The UN base salary scale also ensures that UN employees 
around the world at the same grade and step receive at least the same 
minimum compensation (see figure 2). ICSC also uses the base salary to 
calculate post adjustments. The UN salary scale for professional 
employees includes five professional grades, two director grades, the 
assistant secretary-general level and the under-secretary-general 
level. The U.S. General Schedule, the pay system covering the majority 
of white-collar U.S. civil service employees, includes 15 grades; for 
comparison purposes, ICSC only considers grades 9 and higher to be 
professional grades. In addition, the U.S. civil service includes 
positions above grade 15, called the Senior Executive Service. Each of 
the UN professional and director grades is divided into 6 to 15 steps 
and each of the U.S. General Schedule grades is divided into 10 steps. 
UN and U.S. civil service employees who demonstrate an acceptable 
level of performance may receive step increases after a set length of 
time. 

Figure 2: UN Professional Salaries Include a Base Salary and Post 
Adjustment: 

[Refer to PDF for image: illustration] 

Base salary, plus Post adjustment[C], equals Net salary. 

UN Employee Salary Grade: P-1; 
Base salary range [A, B]: $39,439-%50,728. 

UN Employee Salary Grade: P-2; 
Base salary range [A, B]: $49,821-$64,180. 

UN Employee Salary Grade: P-3; 
Base salary range [A, B]: $60,091-$80,521. 

UN Employee Salary Grade: P-4; 
Base salary range [A, B]: $72,467-$94,540. 

UN Employee Salary Grade: P-5; 
Base salary range [A, B]: $86,904-$106,510. 

UN Employee Salary Grade: D-1; 
Base salary range [A, B]: $103,204-$118,565. 

UN Employee Salary Grade: D-2; 
Base salary range [A, B]: $112,096-$123,033. 

UN Employee Salary Grade: ASG; 
Base salary range [A, B]: $133,950. 

UN Employee Salary Grade: USG; 
Base salary range [A, B]: $146,044. 

P = Professional; 
D = Director; 
ASG = Assistant Secretary General; 
USG = Under Secretary General. 

Source: GAO analysis based on ICSC documents. 

Notes: 

[A] Base salary ranges in effect as of January 1, 2012. 

[B] Base salary ranges shown are for staff members with one or more 
dependents. Staff members without dependents receive lower base 
salaries. 

[C] Post adjustment amounts vary by duty station. 

[End of figure] 

To determine its recommended adjustment to the UN base salary scale, 
ICSC calculates the base salary of a U.S. civil service employee at a 
set point of the U.S. General Schedule and compares it with the base 
salary for professional employees at an equivalent point of the UN 
base salary scale. For the purposes of this comparison, ICSC uses the 
weighted average of the base salaries of U.S. civil servants at grade 
13, step 6, and grade 14, step 6, of the U.S. General Schedule as a 
comparator salary considered to be equivalent to the base salary of a 
UN employee at the P-4, step 6, grade. ICSC then calculates the 
percentage increase needed to align the base salary of a UN employee 
at the P-4, step 6, grade with the comparator salary derived from the 
U.S. General Schedule. 

To assess the extent to which U.S. base salaries have changed each 
year, ICSC calculates (1) any changes in the comparator salary due to 
changes published in the U.S. General Schedule, and (2) any changes in 
tax rates that affect the take-home salary of U.S. civil servants 
earning the comparator salary who are married and file taxes jointly 
with their spouse and who have no income other than their U.S. civil 
service salary. After calculating the change in the comparator salary 
derived from the U.S. General Schedule, ICSC compares the resulting 
salary to the base salary of a UN employee at the P-4, step 6, grade 
who has one or more dependents.[Footnote 8] The UN pays employees with 
dependents at a higher rate than those without dependents. According 
to an ICSC report, this is similar to the practice of many member 
states that provide a tax advantage for having dependents. Many UN 
employees are not eligible for these tax advantages, as they might be 
if they were employed in their national civil service, because most UN 
employees are not required to pay income taxes on their UN earnings in 
their home country. However, since some member states may require UN 
employees to pay taxes on their UN earnings, the UN deducts an amount, 
called the staff assessment, to determine the base salaries that 
employees receive. The staff assessment funds are credited to an 
account, called the Tax Equalization Fund, and are used to reimburse 
employees who are required to pay income taxes in their home country 
(see appendix II).[Footnote 9] 

After calculating the percentage increase needed to align the P-4, 
step 6, base salary with the U.S. comparator salary, ICSC makes a 
recommendation to the General Assembly to increase the UN base salary 
scale at all grades by the same percentage for the following year. As 
a result, changes to the UN base salary scale reflect the ICSC-
calculated changes in U.S. base salaries for the prior year. In 
addition, ICSC recommends that the General Assembly decrease post 
adjustment levels for all duty stations at the same time and by the 
same amount as the increase in the base salary scale. As a result, UN 
net salaries generally do not change when the updated base salary 
scale goes into effect in any given year, although increases in UN net 
salaries may occur one or more times during the year through increases 
in post adjustments. The General Assembly must approve ICSC's 
recommendations for changes to the base salary scale to take effect. 
For example, in its 2010 annual report, ICSC recommended a 1.37 
percent increase in the UN base salary scale at every grade for 2011 
to align UN base salaries with changes in U.S. civil service base 
salaries, and ICSC also recommended an equivalent decrease in the post 
adjustment for each duty station. ICSC calculated that the base salary 
of U.S. civil service employees earning the comparator salary 
increased 1.37 percent on January 1, 2010, because of an increase in 
base salaries published in the General Schedule and changes in tax 
rates. The General Assembly approved the revised salary scale, and it 
became effective on January 1, 2011. 

ICSC Calculates the Post Adjustment at Each Duty Station to Account 
for Cost of Living Changes: 

ICSC calculates cost of living, including price differences, 
inflation, exchange rates, and the average expenditure pattern of 
staff members, to set a post adjustment for each duty station. ICSC 
monitors changes in the cost of living at each duty station monthly 
and updates post adjustments periodically to account for these 
changes. As a result, UN employees may receive a net salary increase 
during the year if ICSC's calculation shows that the cost of living in 
their duty station has increased. In addition, at least once every 5 
years, ICSC conducts surveys of UN employees and collects price data 
to ensure that post adjustments reflect the typical expenditure 
pattern of UN employees at each location, as well as differences in 
prices between each duty station and New York City. ICSC has statutory 
authority to set post adjustments without General Assembly approval. 
According to ICSC documents and ICSC officials, the UN pays 
professional employees a post adjustment to ensure that UN employees 
at each duty station receive a net salary with the same purchasing 
power as the net salary of UN employees in New York. UN employees in 
duty stations with a higher cost of living than that of New York 
receive a higher percentage of their base salary as their post 
adjustment. As of February 1, 2013, staff members stationed in Romania 
received the lowest post adjustment, 26 percent of their base salary, 
and staff members stationed in Japan received the highest post 
adjustment, 119.7 percent of their base salary. Staff members 
stationed in New York received a post adjustment equal to 68.7 percent 
of their base salary. 

ICSC monitors changes in exchange rates, inflation, and other factors 
at each duty station on a monthly basis to calculate the change in 
cost of living. ICSC also periodically updates the post adjustment for 
each duty station to account for these changes. As a result, UN 
employees may receive a net salary increase one or more times 
throughout the year if ICSC decides to implement a higher post 
adjustment based on its calculation of the change in cost of living at 
their duty station. ICSC generally updates post adjustments to account 
for inflation in duty stations with more stable currencies, called 
Group I duty stations, less frequently than in duty stations, called 
Group II duty stations, where currencies may fluctuate rapidly and UN 
employees may need to spend a larger portion of their income outside 
the duty station to import goods not available on the local 
market.[Footnote 10] In Group I duty stations, such as New York, ICSC 
typically updates post adjustments every 12 months to account for 
inflation and other cost increases, although it may change post 
adjustments earlier if it determines that the cost of living has 
changed at least 5 percent. For example, UN professional employees in 
New York received a salary increase in August 2011 when ICSC increased 
the post adjustment for New York from 61.3 percent of base salary to 
65.7 percent of base salary based on its calculation of the increase 
in the cost of living in New York. In Group II duty stations, ICSC 
generally reviews post adjustments every 4 months. 

ICSC conducts surveys of staff members and collects price data on the 
cost of goods, services, housing, and other items in each duty station 
at least once every 5 years. ICSC uses these data to set a new 
baseline for each duty station's post adjustment. ICSC then follows 
its procedures described above to monitor changes in the cost of 
living and update post adjustments as necessary until it conducts a 
new set of surveys. According to ICSC officials, this process ensures 
that post adjustments reflect the cost of living for UN employees, who 
are often living outside their home country and may have different 
spending patterns than permanent residents of an area. ICSC conducts 
surveys to estimate the average spending pattern of UN employees. ICSC 
then calculates the cost of each of five categories of expenditures 
relative to New York and weights each category based on the spending 
patterns of UN employees at that duty station: 

* In-area expenditures. In-area expenditures include goods and 
services purchased on the local market at the duty station, such as 
food and clothing. To set this component, ICSC staff or independent 
pricing agents collect the prices of over 300 goods and services that 
are commonly purchased by UN staff at locations popular among UN staff 
members. 

* Housing. ICSC calculates this component based on rental prices and 
the cost of other housing expenses, such as utilities and maintenance. 

* Medical insurance contributions. ICSC compares data on the amount 
that staff members pay for medical insurance premiums at each duty 
station to calculate this component. 

* Pension contributions. The amount of this component is the same for 
all duty stations, since all staff members at the same grade and step 
contribute the same amount to their pensions, regardless of their 
location. 

* Out-of-area expenditures. This includes expenditures made outside of 
a staff member's assigned duty station, such as to purchase items that 
are not available at the duty station, the cost of private travel 
outside the duty station, and education costs for dependents living 
abroad. This component is weighted more heavily in duty stations where 
staff members may need to import a larger number of items. 

ICSC generally follows the same process to calculate the cost of 
living at all duty stations, although there are some differences 
between Group I and Group II duty stations. In Group I duty stations, 
ICSC relies less heavily on survey data and uses more data on prices 
from sources outside of their own surveys. For example, in Group I 
duty stations, ICSC uses data from licensed real estate agents to 
calculate the cost of rent relative to New York, rather than survey 
data from staff members. In Group II duty stations, ICSC conducts 
surveys more frequently to account for significant changes in the cost 
of living due to rapid inflation or devaluation of local currency. 

ICSC Calculates Difference between UN Net Salaries and U.S. Civil 
Service Salaries and May Adjust UN Salaries to Ensure They Fall within 
Approved Range: 

The General Assembly requires ICSC to continually review the margin, 
or percentage difference, between UN and U.S. civil service salaries. 
ICSC annually calculates the percentage difference between average UN 
net salaries in New York and average U.S. civil service salaries in 
Washington, D.C., and submits the results of its calculation to the 
General Assembly in a report each August. ICSC calculates average UN 
net salaries in New York using the base salary scale in effect during 
that year, the post adjustment in effect, and an estimate of any post 
adjustment increases that are scheduled to take effect later in the 
year (for a detailed explanation of ICSC's margin calculation process, 
see the following section). On the basis of the results of this 
calculation, ICSC may recommend changes to bring UN net salaries 
within the approved range of 110 to 120 percent of U.S. civil service 
salaries the following year. 

If its annual margin calculation shows that average UN net salaries, 
including any post adjustment increases scheduled to take effect later 
in the year, are within the approved range, ICSC implements the post 
adjustment increases as scheduled. In addition, ICSC recommends an 
increase in the base salary scale for the following year to align with 
changes to U.S. civil service salaries, according to its usual process 
for adjusting the base salary scale. For example, ICSC calculated 
that, in 2011, average UN net salaries were 114.2 percent of average 
U.S. civil service salaries, using the UN base salary scale in effect 
in 2011 and the estimated post adjustment for New York in 2011. Since 
the margin was within the approved 110 to 120 range, ICSC increased 
the post adjustment for New York from 61.3 percent of base salary to 
65.7 percent of base salary in August 2011, as scheduled. ICSC 
recalculated the margin once the actual post adjustment increase went 
into effect and reported a final margin of 114.9 for 2011 in its 
annual report. ICSC recommended that the General Assembly increase the 
base salary scale 0.13 percent on January 1, 2012, to align with 
changes to U.S. civil service salaries. In addition, ICSC recommended 
that the General Assembly decrease post adjustments for all duty 
stations by an equivalent amount to ensure that the base salary 
increase did not provide an additional increase in net salaries. 

If the annual margin calculation shows that average UN net salaries 
have fallen below 110 percent of average U.S. civil service salaries, 
ICSC makes a recommendation to the General Assembly to increase UN 
base salaries. According to ICSC officials, the General Assembly has 
the authority to decide the amount of the increase. The General 
Assembly may choose to increase the base salary scale to bring the 
margin up to 110, to the midpoint of 115 that the General Assembly 
established as a desirable target, or to some other point within the 
range. For example, in 2002, ICSC determined that the margin was 109.3 
and, as a result, recommended an increase in the UN base salary scale, 
without decreasing the post adjustment, to bring the margin up to 115. 
The General Assembly approved a smaller increase in the base salary 
scale than ICSC had recommended which, combined with other changes 
that affected the margin calculation, increased the margin to 111.9 
for 2003. 

If ICSC's calculation shows that average UN net salaries would exceed 
120 percent of average U.S. civil service salaries, ICSC officials 
said that they have the authority to act immediately to freeze UN 
salaries. If ICSC's calculation shows that an estimated increase in 
the post adjustment in New York scheduled to go into effect later in 
the year would cause the margin to exceed 120 percent, ICSC officials 
said that they would not enact the full post adjustment increase. 
However, officials said that they might enact part of the increase. 
For example, according to an ICSC report, if granting a scheduled 5-
percent increase in post adjustment would increase the margin to 123 
percent, ICSC would not grant the full 5-percent cost-of-living 
increase but might grant a 2-percent increase to keep the margin at or 
below 120 percent. ICSC officials said that if they were to freeze 
scheduled post adjustment increases for New York, they would also 
freeze post adjustments for all other duty stations. In practice, ICSC 
has not reported a margin above 120 percent since 1986, the first year 
after the General Assembly decided that UN salaries should remain 
within a margin of 110 to 120 percent of U.S. civil service salaries. 

ICSC's Reported Difference between UN and U.S. Civil Service Salaries 
Has Increased; ICSC's Process and Related Assumptions for Calculating 
This Difference Lack Clarity: 

According to ICSC, the margin between UN and U.S. civil service 
salaries increased from 109.3 percent in 2002 to 116.9 percent in 
2012.[Footnote 11] We determined that ICSC has a complex process for 
calculating the margin. The process relies on several assumptions that 
we found to be reasonable, as they adhere to the General Assembly's 
intent to compare the salaries of UN professional employees to those 
of U.S. civil service employees in comparable professional grades. 
Nevertheless, our analysis shows that using the same process but 
incorporating alternative reasonable assumptions would yield different 
results. ICSC has explained some of its assumptions in documents 
focused on discrete parts of the margin calculation process. However, 
we found that ICSC does not clearly state all of its assumptions when 
reporting the margin in its annual reports, and it has not 
comprehensively explained the process and its assumptions in any 
single source. This lack of clarity may limit member states' ability 
to provide oversight of the margin calculation process, consider 
alternatives, and decide whether the ICSC's recommendations are 
consistent with the goal of managing the UN budget as effectively as 
possible. 

ICSC's Calculated Margin between UN and U.S. Civil Service Salaries 
Increased between 2002 and 2012: 

The results of ICSC's annual calculations show that the margin, or 
percentage difference, between the average salaries of UN employees in 
New York and those of U.S. civil service employees in Washington, 
D.C., increased from 109.3 in 2002 to 116.9 in 2012 (see table 1). As 
noted above, ICSC calculates the margin each year to compare UN with 
U.S. salaries and to ensure that any changes to the post adjustment 
for New York do not result in a margin outside of the approved range 
of 110 to 120 percent, while generally aiming for a 5-year average of 
115 percent. ICSC presents the results of the margin calculation, 
along with any recommendations for salary adjustments, to the General 
Assembly in its annual reports. Since the last increase in U.S. civil 
service base salaries and locality pay in January 2010, ICSC's 
reported margin has increased from 113.3 in 2010 to 116.9 in 2012, due 
to changes in the post adjustment for UN employees in New York. 
According to ICSC officials, they have not recommended that the 
General Assembly freeze UN salaries because the margin has not 
exceeded 120. Nevertheless, the General Assembly decided in December 
2012 to freeze the implementation of the updated New York post 
adjustment for 6 months. 

Table 1: International Civil Service Commission's Reported Margin 
between UN and U.S. Salaries, 2002 to 2012: 

Year: 2002; 
Net salary margin: 109.3; 
5-year average: 112.5. 

Year: 2003; 
Net salary margin: 110.9; 
5-year average: 111.7. 

Year: 2004; 
Net salary margin: 110.3; 
5-year average: 111.0. 

Year: 2005; 
Net salary margin: 111.1; 
5-year average: 110.5. 

Year: 2006; 
Net salary margin: 114.3; 
5-year average: 111.2. 

Year: 2007; 
Net salary margin: 114.0; 
5-year average: 112.3. 

Year: 2008; 
Net salary margin: 114.7; 
5-year average: 112.9. 

Year: 2009; 
Net salary margin: 113.8; 
5-year average: 113.6. 

Year: 2010; 
Net salary margin: 113.3; 
5-year average: 114.0. 

Year: 2011; 
Net salary margin: 114.9; 
5-year average: 114.1. 

Year: 2012; 
Net salary margin: 116.9; 
5-year average: 114.9. 

Source: GAO analysis of ICSC data. 

[End of table] 

ICSC Uses a Complex, Six-Step Process for Calculating the Margin: 

Since 1976, ICSC has conducted an annual calculation of the margin 
between UN and U.S. salaries, using a complex process with six steps, 
shown in figure 3. The first two steps of the margin calculation are a 
Noblemaire study, to determine which country has the best-paid civil 
service, and a grade equivalency study, to match UN and U.S. pay 
scales. ICSC conducts each of these studies every 5 years, and the 
results serve as the foundation for ICSC's annual margin calculation. 
The third, fourth, and fifth steps in the process are to calculate UN 
net salaries by grade in New York, average U.S. salaries by grade in 
Washington, D.C., and the margin by grade. In the sixth step, ICSC 
adjusts these margins by grade for cost of living, to determine the 
margin between UN and U.S. salaries. See appendix III for a detailed 
description of each step in ICSC's margin calculation process, along 
with the assumptions associated with them. 

Figure 3: International Civil Service Commission's Net Salary Margin 
Calculation Process: 

[Refer to PDF for image: process illustration] 

ICSC performs each of these steps every 5 years: 

Step 1: 
Determine which country has the best paid civil service: 
a. Compare salary data of large member states; 
b. Compare major benefits of highest compensated member states 
(optional). 

Step 2: 
Match UN and U.S. pay scales by occupation: 
a. Collect data on UN professional staff; 
b. Determine occupations with the largest numbers of UN staff; 
c. Match UN occupations to U.S. occupations. 

ICSC performs an annual calculation to determine the difference 
between UN and U.S. salaries: 

Step 3: 
Calculate UN average salary by grade: 
a. Collect data for UN employees with dependents; 
b. Calculate average salary by grade. 

Step 4: 
Calculate U.S. average salary by grade: 
a. Obtain data on individual employees from OPM; 
b. Filter for matching occupations identified in step 2; 
c. Adjust each individual salary for federal and state taxes; 
d. Match U.S. grades to UN grades, by occupation; 
e. Calculate average salaries, by UN grade, weighted by the
distribution of occupations identified in step 2. 

Step 5: 
Calculate the margin for each grade: 
a. Divide the UN average salary (step 3) by the U.S. average salary 
(step 4) for each grade; 
b. Apply weights to reflect the distribution of employees who have 
dependents, identified in step 3. 

Step 6: 
Adjust for cost of living: 
a. Hire a contractor to estimate a cost of living index (every 2 
years); 
b. Apply cost of living index to margin for each grade (step 5); 
c. Sum the adjusted margins for each grade to calculate the overall 
margin. 

Total of all calculations = Margin between U.S. and UN salaries. 

Source: GAO analysis based on ICSC documents. 

Note: ICSC officials noted that some parts of steps 5 and 6 have been 
done in a different order, and not as completely separate steps. 
However, we found that the order of these steps does not change the 
calculated margin, and describing the steps separately increases the 
clarity of the process. 

[End of figure] 

ICSC's process for calculating the margin is complex, in part because 
it is difficult to make a direct comparison between UN and U.S. 
salaries. To address this challenge, ICSC compares a subset of UN and 
U.S. employees that have similar characteristics rather than make a 
direct comparison of all employees. For example, in the grade 
equivalency study (step 2 of the process), ICSC limits the comparison 
to UN staff who are in occupations with a large number of professional 
staff. More specifically, we determined from ICSC officials and 
documents that ICSC does the following in performing its grade 
equivalency study: 

a. Collects individual data on UN staff from all UN common system 
organizations. 

b. ICSC analyzes the UN staff data to determine the occupations in the 
UN common system that have the largest numbers of professional staff. 
ICSC officials said that they usually include occupations until at 
least 80 percent of all UN professional staff are represented in their 
calculation. 

c. ICSC matches UN occupations to U.S. occupations. To do so, ICSC 
purchases data from the Office of Personnel Management (OPM) on U.S. 
civil service positions in the Washington, D.C., area and analyzes 
these data to request U.S. agency job descriptions with similar job 
titles.[Footnote 12] The UN then analyzes job descriptions for these 
matches, using OPM's Handbook of Occupational Groups and Families, and 
applies UN criteria to determine how they would be graded under the UN 
system. Finally, ICSC creates a grade equivalency matrix with the 
results, which show how frequently a specific occupation type in a 
U.S. grade is classified in particular UN grades. 

ICSC's Process for Calculating the Margin Relies on a Reasonable Set 
of Assumptions: 

ICSC's process for calculating the margin between UN and U.S. civil 
service salaries relies on several assumptions that define the subset 
of employees it is comparing. We found these assumptions to be 
reasonable because they are consistent with the General Assembly's 
broad goal of comparing the salaries of UN professional staff to those 
of comparable U.S. civil service employees. Consistent with Generally 
Accepted Government Auditing Standards, a process has reasonable 
assumptions if the evidence it produces is sufficient and appropriate 
to decision making.[Footnote 13] In order to determine the 
reasonableness of ICSC's assumptions, we considered whether the 
reported margin was consistent with the General Assembly's goal of 
comparing the salaries of UN professional staff with those of U.S. 
civil service employees for the purpose of determining whether UN 
salary levels are consistent with the Noblemaire Principle. 

In defining the subset of UN and U.S. civil service employees whose 
salaries are being compared, ICSC's margin calculation process makes 
eight assumptions, as shown in table 2. We clarified the reason that 
ICSC made each assumption with ICSC officials and found that the 
assumptions were consistent with the General Assembly's goal for this 
analysis. For example, ICSC assumes that UN employees on the 
dependency rate are the most appropriate comparison group because UN 
staff members with dependents account for the majority of UN 
employees. ICSC officials said that they exclude employees without 
dependents because most new hires fall into this category, so 
including these employees in the margin calculation might reflect 
changes in hiring patterns rather than changes in actual salary 
levels. According to ICSC officials, excluding employees without 
dependents leads to a more stable and consistent margin value over 
time and prevents the need for corrections in the margin calculation. 

Table 2: Assumptions the International Civil Service Commission Makes 
in Calculating the Margin between UN and U.S. Civil Service Salaries: 

Steps: 1; 
Assumption: Per capita income is representative of civil 
service salaries in a country; 
Impact on margin calculation process: 
Potentially leads to exclusion of countries with civil service salaries 
that are outliers relative to their country's average, but provides a 
simple way to narrow the list of comparators. 

Steps: 1, 2, 3, 4, 5, 6; 
Assumption: Employees in headquarters 
locations are representative of all employees; 
Impact on margin calculation process: Potentially excludes employees 
in locations that are outliers relative to headquarters, but reduces 
time and staff needed for step 6 while focusing on areas with the most 
employees. 

Steps: 2, 3, 4, 5; 
Assumption: Employees receiving the dependency rate 
are representative of UN salary of all professional staff; 
Impact on margin calculation process: Excludes employees without 
dependents, who are paid lower salaries and who are more likely to be 
distributed at the lower UN grades, but prevents shocks in the annual 
margin calculation due to the greater stability of dependency rate 
employees. 

Steps: 2, 3, 4, 5; 
Assumption: Occupations with the most staff are 
representative of all UN occupations; 
Impact on margin calculation process: Excludes employees in 
occupations with fewer staff who may be paid differently than those in 
more common occupations, but increases the likelihood that there are 
sufficient data to draw a comparison between UN and U.S. civil service 
employees. 

Steps: 3, 4, 5; 
Assumption: The proportion of staff in each occupation 
is relatively stable for a 5-year period; 
Impact on margin calculation process: Includes occupations in the 
annual margin calculation that may have shrunk and excludes those that 
may have grown since the most recent grade equivalency study, but 
reduces the cost of conducting more frequent grade equivalency studies. 

Steps: 4, 5; 
Assumption: All U.S. civil service employees are married 
and file jointly; 
Impact on margin calculation process: Decreases the accuracy of U.S. 
average net salary calculations, but enables ICSC to make a comparison 
despite limited data and uses the U.S. filing status that is most 
comparable to the UN dependency rate. 

Steps: 4, 5; 
Assumption: U.S. civil service employees use the average 
deductions in their state; 
Impact on margin calculation process: Decreases the accuracy of U.S. 
average net salary calculations, but enables ICSC to make a comparison 
despite limited data on U.S. civil service employees' state income 
taxes. 

Steps: 6; 
Assumption: Differences in salary between two locations are 
associated with the cost of living in those locations; 
Impact on margin calculation process: Margin comparison considers the 
purchasing power of employees rather than the cost of labor for those 
employees as in U.S. locality pay differentials, but the former is 
consistent with the UN's post adjustment. 

Legend: 
Step 1 = Determine which country has the best paid civil service; 
Step 2 = Match UN and U.S. pay scales, by occupation; 
Step 3 = Calculate UN average salary by grade; 
Step 4 = Calculate U.S. average salary by grade; 
Step 5 = Calculate the margin for each grade; 
Step 6 = Adjust for cost of living. 

Source: GAO analysis of ICSC source documents and interviews. 

[End of table] 

In addition, ICSC limits its comparison to UN employees in New York 
City and U.S. civil service employees in Washington, D.C. ICSC 
acknowledges that some of the difference in salaries between the two 
groups is due to the difference in their locations, and uses a cost-of-
living adjustment to correct for this difference. This adjustment 
assumes that the differences in salary reflect differences in 
purchasing power in New York City versus Washington, D.C. The margin 
calculation adjusts for the differences in costs for some expenses 
common to both locations, including housing, transportation, and food. 
ICSC hires an independent organization to estimate the total cost-of-
living difference between the two locations. This adjustment is 
commonly used in economics to control for such cost differences, and 
it allows for a more accurate comparison of UN and U.S. employees' 
salaries than if no adjustment had been made. 

Alternative Margin Calculation Assumptions Would Also Achieve the 
General Assembly's Goal but Change the Results: 

While we found that the ICSC makes reasonable assumptions when 
calculating the margin, we found that making different assumptions, 
which are also reasonable, changes the results. Our analysis of some 
potential alternatives produced a range of different margins that vary 
from 105.2 to 126.7. Specifically, we recalculated the 2012 margin by 
changing one or more of ICSC's assumptions, resulting in five 
alternative scenarios (see table 3).[Footnote 14] The first assumption 
we modified was ICSC's assumption that employees receiving the 
dependency rate are representative of the average net UN salary of all 
professional staff. To examine the impact of this assumption on the 
final margin result, we calculated the margin in a scenario where only 
employees without dependents are included, and another scenario where 
employees receiving both the dependency and the single rates are 
included. Changing these assumptions resulted in changes in two inputs 
to ICSC's calculation: average UN salary[Footnote 15] and the 
distribution of staff among UN professional grades. Including only 
employees without dependents, who receive a lower salary, resulted in 
a lower margin of 105.2, while including both those employees and 
employees with dependents resulted in a margin of 108.0.[Footnote 16] 

Table 3: 2012 Margin Results under Selected Alternative Scenarios: 

Scenario[A]: ICSC Reported Margin for 2012; 
New margin result[B]: 117.7. 

Scenario[A]: 1. Assume that employees without dependents are 
representative of all UN staff (only include them in the 
calculation)[C]; 
New margin result[B]: 105.2. 

Scenario[A]: 2. Do not assume a specific salary rate distribution for 
UN employees (include both dependency-rate and single-rate UN 
employees); 
New margin result[B]: 108.0. 

Scenario[A]: 3. Assume that cost of labor explains the difference in 
salary in the two locations (use cost of labor instead of cost of 
living); 
New margin result[B]: 126.7. 

Scenario[A]: 4. Assumptions 1 and 3 above: only include UN employees 
without dependents and use cost of labor; 
New margin result[B]: 113.3. 

Scenario[A]: 5. Assumptions 2 and 3 above: include both dependent-rate 
and single-rate UN employees, and use cost of labor; 
New margin result[B]: 116.3[C]. 

Source: GAO analysis of ICSC data. 

Notes: 

[A] Because relevant data were not available, we did not analyze 
scenarios in which a different subset of occupations, or all 
occupations, were included, nor did we analyze scenarios with 
alternative assumptions about the tax liabilities of U.S. civil 
service employees. Such scenarios would likely have different results 
from those included. 

[B] In scenarios 1, 2, 4, and 5, the comparison group is U.S. civil 
service employees who are married and filing jointly. These results 
would be different if only single U.S. employees, or both single and 
U.S. employees with dependents, were included, as they would be in an 
ideal comparison. However, we did not analyze these scenarios because 
we did not have ICSC data on U.S. tax liabilities. 

[C] Because relevant data on UN salaries were not available, we used 
step 4 of the base salary with the New York post adjustment in 
scenarios 1,2,4 and 5. 

[End of table] 

The next assumption we modified was the assumption that differences in 
salary between two locations are associated with the cost of living in 
those locations. To examine the impact of this assumption on the final 
margin result, we calculated the margin using the cost of labor, as 
used by the federal government in setting U.S. civil service locality 
pay. The UN uses the cost of living in the margin calculation process 
to estimate the purchasing power of UN employees' salaries. The cost 
of labor that we used in our alternative scenario represents an 
estimate of the market wage for a U.S. government position.[Footnote 
17] Using a cost-of-labor measure, we calculated a higher margin of 
126.7. 

We also modified both of these previous assumptions, resulting in two 
additional scenarios. The first includes only employees without 
dependents and uses the cost of labor to adjust for differences 
between New York and Washington, D.C. The second scenario includes 
both employees with dependents and those without dependents, and also 
uses the cost of labor. Overall, the change from using the cost of 
living to using the cost of labor led to the highest calculated margin 
result, and including only employees without dependents led to the 
lowest calculated margin result. 

ICSC's Presentation of the Margin Calculation Process and Underlying 
Assumptions Are Unclear: 

ICSC has not adequately described its margin calculation process, or 
its underlying assumptions, in its annual reports to the General 
Assembly or other documents. The Standards for Internal Controls in 
the Federal Government states that information should be recorded and 
communicated to management and others within the entity who need it 
and in a form and within a time frame that enables them to carry out 
their internal control and other responsibilities.[Footnote 18] We 
reviewed ICSC annual reports, as well as various internal reports and 
summary documents that ICSC provided us, and found that none of these 
documents comprehensively described the ICSC margin calculation 
process and its underlying assumptions. For example, when adjusting 
U.S. average salaries for tax liabilities, ICSC assumes that all U.S. 
civil service employees are married and filing their taxes jointly 
with their spouse, even though some of these employees may file as 
single or as married but filing separately from their spouse. However, 
ICSC does not note in its annual report that this assumption does not 
precisely reflect the population of U.S. civil service employees 
included in the calculation, and therefore member states are not given 
adequate information to understand how ICSC has defined this 
population. ICSC officials told us that the data available to ICSC do 
not indicate actual filing status or tax liability for U.S. civil 
service employees and that the assumed filing status of married filing 
jointly and with dependents is the most comparable to employees 
receiving the dependency rate in the UN, thus allowing for a better 
comparison of the two populations. As noted above, the assumptions 
underlying the margin calculation process directly affect how the 
populations are being compared, and different assumptions yield 
different results. 

Additionally, ICSC has not provided a comprehensive explanation to 
member states about its process. Representatives from four UN member 
states, including representatives from the U.S. Mission to the UN in 
New York, said that they did not understand the entire margin 
calculation process and that ICSC's attempts to explain the process 
had not improved their understanding of it. Although officials from 
ICSC provided us with a range of historical and summary documents 
about parts of their process, no single document comprehensively 
described the entire margin calculation process, including its 
underlying assumptions. While ICSC has documented aspects of specific 
steps of the margin calculation, we found that ICSC has generally not 
documented the process as a whole. 

UN Benefits Are Generally Similar to Those Offered to U.S. Civil 
Service Employees, and UN Allowances Are Similar to Allowances for 
U.S. Civil Service Employees Serving Overseas: 

The UN Secretariat provides numerous benefits that are similar to U.S. 
civil service benefits, and UN employees receive a number of 
allowances that are similar to those available to U.S. civil service 
employees serving overseas. The UN offers its staff various benefits, 
including retirement, health insurance, and life insurance benefits, 
that are similar to benefits offered to U.S. civil service employees. 
The UN also provides allowances, such as education grants and rental 
subsidies, to its employees. Eligibility for these allowances depends 
on each employee's unique circumstances, which makes it difficult to 
compare UN allowances to U.S. civil service allowances. However, UN 
employees are eligible for a similar array of allowances as U.S. civil 
service staff serving outside of the United States. 

UN Retirement and Insurance Benefits Are Similar to U.S. Civil Service 
Benefits, but UN Secretariat Employees Accrue More Leave than U.S. 
Employees: 

Retirement benefits: 

Retirement benefits for both UN and U.S. employees are administered 
through separate agencies. UN retirement benefits are administered by 
the UN Joint Staff Pension Fund, which was established in 1949 to 
provide retirement, survivor, and disability benefits for UN staff. 
U.S. civil service retirement benefits are administered by OPM, under 
two systems: the Civil Service Retirement System (CSRS), and the 
Federal Employees Retirement System (FERS), which generally covers 
employees first hired in 1984 or later. According to a UN official, 
the UN retirement benefits package is structured to be comparable to 
CSRS. 

The UN and U.S. retirement systems share some similarities in terms of 
retirement age, contribution amounts, and the amount of the retirement 
benefit. The age at which UN employees generally qualify for 
retirement benefits is 60 for employees who began working at the UN 
before January 1, 1990, and 62 for employees who began after January 
1, 1990. For U.S. civil servants under CSRS and FERS, employees can 
retire at 60 with at least 20 years of service or 62 with at least 5 
years of service, though a person with 30 years or more of service may 
retire earlier. UN employees contribute 7.9 percent of their salary to 
their retirement plan, and CSRS employees contribute 7, 7.5, or 8 
percent, depending on their position.[Footnote 19] FERS employees 
contribute a much lower amount of their salary to their retirement 
plan, 0.8 percent, and receive a smaller annual retirement, but also 
have the option of contributing to a defined contribution plan with a 
federal matching component, called the Thrift Savings Plan (TSP). As 
of January 1, 2013, newly hired employees covered by FERS contribute 
3.1 percent and the employer contributes 9.6 percent. FERS employees 
also pay an additional 6.2 percent of their salary (up to $113,700) in 
Social Security taxes. In 2013, federal employees could contribute a 
maximum of $17,500 to their TSP. Appendix IV contains detailed 
information about UN and U.S. civil service retirement plans. 

The value of the retirement benefit for UN and U.S. civil service 
employees differs from employee to employee, depending on their years 
of service, their highest salary, and, for U.S. civil service staff 
under the FERS plan, the amount that they contributed to their TSP. 
For example, for a UN employee who retired at age 65 with 20 years of 
service and a final average remuneration of $100,000, the annual 
retirement benefit would be $36,250.[Footnote 20] An equivalent U.S. 
civil service employee who retired at age 65 with 20 years of service 
and an average final salary of $100,000 would also have an annual 
retirement benefit of $36,250 under the CSRS system. An equivalent 
U.S. civil service employee under the FERS system would have an annual 
retirement benefit of $22,000 plus any additional income earned from 
his or her TSP, depending on his or her contributions and investment 
choices. 

In 2011, ICSC published a study comparing UN and U.S. retirement 
plans, and concluded that UN and U.S. FERS employee income replacement 
rates, the percentage of pre-retirement income replaced by retirement 
income, are comparable if employee contributions are similar.[Footnote 
21] The study found that the income replacement rate for UN retirees 
was 55.6 percent, meaning that UN employees can expect to replace 55.6 
percent of their salaries after they retire. According to the study, 
U.S. employees can expect to replace 54.7 percent of their salaries 
after retirement if they contribute 0.9 percent of their salaries to 
TSP, or 78.4 percent if they contribute 9.4 percent of their salaries 
to TSP. 

Health Benefits and Life Insurance: 

Both UN and U.S. civil service employees are eligible for health 
insurance and life insurance. UN Secretariat employees working in 
headquarters have a choice of several preferred provider organization 
plans, and the amount they pay for their insurance depends on whether 
their insurance also covers their spouse and children. UN Secretariat 
employees working outside of the United States are covered by a self-
funded health benefit plan that reimburses employees for medical 
expenses around the world. For UN Secretariat employees working at the 
UN headquarters in New York City, the UN covers 33 percent of the cost 
of the health insurance premium, and for employees working outside of 
the United States, the UN covers 50 percent. The monthly cost of UN 
employee health insurance premiums in 2012 ranged from $610 to $2,286, 
depending on the plan chosen and whether dependents were insured. The 
amount that UN employees contributed ranged from 3.4 percent of their 
salary to 9.7 percent of their salary, depending on the plan and 
whether dependents are insured. U.S. civil service employees are 
eligible for a much wider array of health insurance plans, which vary 
from state to state, and also range in cost depending on whether the 
insurance covered the employee's spouse and children. Employee 
premiums for nationwide plans in 2012 ranged from $93 to $638 per 
month, depending on the plans and whether it covered dependents. U.S. 
civil service employees working outside of the United States are also 
generally eligible for health insurance. 

The UN Secretariat offers its employees the option of enrolling in a 
group life insurance plan, but covers none of the cost of the 
insurance. U.S. civil service employees are automatically enrolled in 
a group life insurance plan, unless they waive the coverage. The U.S. 
government covers one-third of the cost of this insurance and two-
thirds is covered by the employee. 

Leave Benefits: 

While both organizations offer leave benefits, UN Secretariat 
employees are eligible for more generous leave benefits than U.S. 
civil service employees. For example, UN employees earn more annual 
leave than U.S. civil service employees. UN employees on fixed terms 
contracts earn 30 days of annual leave a year, while U.S. civil 
service employees earn 26 days a year once they have 15 or more years 
of service. U.S. civil service employees with fewer than 3 years of 
service earn 13 days of annual leave a year, and those with 3 but less 
than 15 years of service earn 20 days per year. In addition, UN 
employees can be eligible for more sick leave than U.S. civil service 
employees, depending on length of service. UN employees do not earn 
sick leave the way they earn annual leave. Those with a need for sick 
leave who have worked for the UN for fewer than 3 years are entitled 
to sick leave of up to 3 months on full salary and 3 months on half 
salary. UN employees who have completed 3 or more years of service are 
entitled to up to 9 months of sick leave. In contrast, U.S. civil 
service employees earn 4 hours of sick leave per pay period, or 1 day 
per month, and may carry over unlimited amounts of sick leave into 
subsequent years. In addition, UN employees are entitled to paid 
maternity and paternity leave as well as paid leave to adopt a child, 
which is not offered to U.S. civil service employees; they are 
entitled to take certain amounts of time away from work for these 
purposes, but must use either their paid leave or unpaid leave under 
the Family and Medical Leave Act to account for their absences. Both 
UN and U.S. employees have 10 holidays per year, though this number 
may vary for UN employees depending on their duty station. U.S. civil 
service employees have some types of paid leave not available to UN 
Secretariat employees, including leave to serve as a juror or a 
witness, leave for bone marrow and organ donation, limited amounts of 
leave for certain types of military service, and leave sharing 
programs which allow employees to donate annual leave to colleagues 
who have certain emergency needs. Table 4 compares leave benefits for 
UN and U.S. civil service employees. 

Table 4: Comparison of Leave Benefits for UN Secretariat and U.S. 
Civil Service Employees: 

Annual leave; 
UN employees: UN employees on fixed-term contracts accrue 2.5 working 
days per month (30 days per year), and may carry over up to 60 days 
per year; 
U.S. Civil Service employees: Full-time employees with fewer than 3 
years of service earn 4 hours annual leave per bi-weekly pay period 
(13 days per year.) Those with 3 but less than 15 years of service 
earn 6 hours of annual leave per bi-weekly pay period and 10 hours of 
annual in the last pay period of the year (20 days per year.) Those 
with 15 or more years of service earn 8 hours per bi-weekly pay period 
(26 days per year). Senior Executive Service, Senior Level, Scientific 
or Professional employees and employees in equivalent pay systems earn 
8 hours of leave per bi-weekly pay period, regardless of years of 
service. At its discretion, an agency may advance annual leave to an 
employee in an amount not to exceed the amount the employee would 
accrue within the year. Employees stationed in the United States may 
carry over 30 days of annual leave. Those stationed overseas may carry 
over 45 days, and Senior Executive Service employees may carry over 90 
days. 

Sick leave; 
UN employees: Employees with fewer than 3 years of service are 
entitled to up to 3 months of full salary and 3 months on half salary, 
of certified sick leave. Employees with more than 3 years of service 
are entitled to up to 9 months of full salary and 9 months of half 
salary of certified sick leave. Employees are also entitled to up to 7 
days of uncertified sick leave, which can be used for purposes such as 
family emergencies. UN employee sick leave does not 
accumulate; 
U.S. Civil Service employees: Full-time employees accrue 4 hours of 
sick leave for each bi-weekly pay period (13 days per year.) There is 
no limitation on the amount of sick leave that can be accumulated. 
There is no limitation on how much sick leave an employee may use for 
his or her own personal medical needs. A full-time employee may only 
use up to 13 days of sick leave for general family care and 
bereavement purposes and up to 12 weeks of sick leave to care for a 
family member with a serious health condition each year. An employee is 
entitled to no more than a combined total of 12 weeks of sick leave 
each year for all family care purposes. At its discretion, an agency 
may advance up to 13 or 30 days of sick leave (depending on the reason 
for which sick leave is advanced) to an employee, when required by the 
exigencies of the situation, for the same reasons it grants sick leave 
to an employee. 

Maternity leave; 
UN employees: Leave with full pay for a total period of 16 weeks 
(usually 6 weeks prior to anticipated date of delivery and 10 weeks 
after birth.) Annual leave accrues during maternity leave if employee 
returns to work after a maximum of 6 months; 
U.S. Civil Service employees: The Family and Medical Leave Act of 1993 
allows a birth mother to use up to 12 weeks of unpaid leave after 
childbirth. A birth mother may also use accrued sick leave and annual 
leave for pregnancy and childbirth. 

Paternity leave; 
UN employees: Employees are entitled to leave with pay for up to 4 
weeks (up to 8 weeks within the 12 months following the child's birth); 
U.S. Civil Service employees: The Family and Medical Leave Act of 1993 
allows a birth father to use up to 12 weeks of unpaid leave after 
childbirth. A birth father may also use up to 12 weeks of sick leave 
and accrued annual leave to care for the mother during pregnancy and 
childbirth. 

Adoption leave; 
UN employees: Employees are entitled to special leave with full pay 
for the adoption of a child; 
U.S. Civil Service employees: The Family and Medical Leave Act of 1993 
allows parents to use up to 12 weeks of unpaid leave to adopt a child. 
Parents may also use accrued sick and annual leave for purposes 
related to the adoption of a child. 

Special leave; 
UN employees: Employees are entitled to full, partial, or no pay for 
advanced study or research in the interest of the organization. 

Official holidays; 
UN employees: 10 holidays per year; 
U.S. Civil Service employees: 10 federal holidays per year. In 
addition, federal employees located in Washington, D.C., may receive a 
federal holiday on Inauguration Day, which occurs every 4 years. 

Source: GAO analysis of UN and Office of Personnel Management data. 

[End of table] 

UN Allowances Are Similar to Allowances for U.S. Civil Service 
Employees Serving Overseas: 

UN employee allowances are generally similar to the allowances that 
are offered to U.S. civil service employees serving overseas.[Footnote 
22] The UN offers numerous allowances, such as education and travel 
benefits, some of which are intended to compensate their staff for 
extra expenses that they may incur if they are moving to another 
country to work for the UN. The rules of eligibility for these 
allowances vary, so a UN employee's eligibility for an allowance 
depends on their individual circumstances. U.S. civil service 
employees working outside of the United States are eligible for some 
similar allowances. It is difficult to compare UN Secretariat 
allowances with U.S. civil service allowances because the allowances 
can vary widely across employees, depending on where they are located, 
their salary level, and whether they have dependents. 

Rental Subsidy: 

One example of an allowance that the UN offers to its employees is 
rental subsidies. UN employees who are newly appointed or reassigned 
are eligible for this entitlement, which is paid to staff members who 
are generally paying higher rent than what the UN considers to be an 
average cost for their duty station. Newly hired employees or 
employees assigned to another duty station are eligible for the rental 
subsidy for 7 years, and the subsidy declines over time. UN officials 
explained that the UN's rationale for offering this rental subsidy is 
that over time, an employee should adjust to their new duty station 
and find more economical accommodations than they might when they 
first arrive. For example, an employee who earns a monthly salary of 
$6,687 might qualify for a maximum rental subsidy of $866 a month if 
the employee's rent is $2,164 but the UN has determined that the 
reasonable maximum monthly level is $1070. 

Education Grant: 

UN employees who are serving outside their home country are also 
eligible for education grants to cover part of the cost of educating 
their children. This allowance covers 75 percent of costs for children 
up to age 25 and up to the fourth year of postsecondary education. The 
maximum that the UN will pay varies by country. As of August 2012, the 
proposed maximum education grant for employees working in the United 
States was $32,255. In addition, the UN pays 100 percent of boarding 
costs for employees posted at some locations where educational 
facilities are inadequate, in addition to the education grant, up to a 
maximum amount. The UN also provides travel expenses for the child for 
one return journey each year between the school and the duty station, 
if they are in different countries. If employees are reassigned to 
their home country after having been eligible for an education grant, 
they may, to ease the transition, continue to receive the grant for 
the balance of the school year. 

Other Allowances: 

Other allowances that the UN offers to its employees include 
dependency, hardship, and mobility allowances, as described below: 

* Children's allowance. The UN offers an annual, flat-rate children's 
allowance to all eligible staff. As of August 2012, the amount was 
$2,929 per child under age 18, or under age 21 if the child was a full-
time student. Professional staff with children who do not have a 
dependent spouse are not eligible for the children's allowance for 
their first child because they are paid at the dependent rate, though 
they would receive the allowance for other eligible children. 

* Mobility allowance. The UN provides a mobility allowance to staff on 
an assignment of 1 year or more who have had 5 consecutive years of 
service in the UN system. As of January 2012, the mobility allowance 
ranged from $2,020 to $16,900. Employees qualify for the mobility 
allowance if they have accrued 5 consecutive years of service in the 
UN system. The amount an employee receives varies by the number of 
assignments, the duty station category whether the employee has 
dependents, and the employee's salary grade. 

* Hardship allowance. The UN provides a hardship allowance to staff on 
assignment in duty stations where living and working conditions are 
difficult. The hardship allowance varies by position level and 
dependency status. The allowance varies depending on the employee's 
duty station, salary level, and whether the employee has dependents. 
As of August 2012, the allowance ranged from $4,360 to $22,680. 

Most of the U.S. allowances that are similar to UN allowances apply 
only to a small percentage of U.S. civil service employees, 
specifically those serving overseas. As of December 2012, according to 
OPM data, approximately 2 percent of US federal civil service 
employees in professional and administrative occupations were working 
in other countries.[Footnote 23] These U.S. civil service employees 
serving overseas are eligible for housing allowances, relocation 
expenses, education allowances, and hazard pay, among others. 

Conclusions: 

Since the UN was founded in 1945, it has used U.S. civil service 
salaries as the basis for establishing its own salaries in an effort 
to attract civil servants from all over the world, including from the 
countries that pay the highest civil service salaries. The UN 
compensation package includes a base salary and a cost-of-living 
adjustment designed to enable UN employees to adhere to the same 
standard of living no matter where in the world they are posted. The 
package also includes retirement benefits, health insurance, and 
allowances that compensate staff for living overseas. UN salaries have 
risen compared with U.S. civil service salaries since 2002, but ICSC's 
annual margin calculation has helped the UN to ensure that the 
difference between its salaries and U.S. civil service salaries has 
generally remained within the approved range of 110 and 120 percent. 
Although we determined that ICSC's margin calculation relies on a 
reasonable set of assumptions, we also found that reasonable 
alternative scenarios would change the results. However, without an 
adequate description of ICSC's current process and the underlying 
assumptions, member states cannot effectively evaluate whether ICSC's 
process represents the most appropriate method of comparing the two 
populations, or determine if another approach would address the 
General Assembly resolution. Since ICSC uses the margin as the primary 
basis for making recommendations to adjust UN salaries, member states 
need this information to adequately consider ICSC's recommendations 
before deciding whether to accept or reject them. 

Recommendation for Executive Action: 

To enable member states to effectively oversee ICSC's process for 
setting and adjusting salaries and ensure that its work is in line 
with General Assembly decisions, the Secretary of State should direct 
the U.S. Mission to the UN to work with other member states to request 
that ICSC clarify its process and the underlying assumptions for 
comparing UN and U.S. salaries and make this information available to 
member states. 

Agency Comments and Our Evaluation: 

We provided a draft of this report for comment to the Secretary of 
State; the U.S. Ambassador to the United Nations, who transmitted the 
draft to ICSC; and the Acting Director of OPM. OPM and ICSC provided 
us with technical comments, which we incorporated into the report as 
appropriate. State and ICSC also provided written comments, which are 
reprinted in appendices VI and VII. 

State agreed with our recommendation and noted that it believes that 
our report provides timely and useful information that will support 
its efforts to make sure that UN compensation can attract and retain 
talented staff while ensuring fiscal discipline at the UN. State 
responded that it would have been useful for the report to express an 
opinion about which of the alternative assumptions would be optimal 
for ICSC; to examine the justification for the margin range of 110 to 
120 percent; and to quantify the value of UN and U.S. benefits and 
allowances. We provided information about ICSC's process so that 
member states may have a better understanding of how ICSC calculates 
the margin. We did not comment on the justification for setting the 
margin range at 110 to 120 percent of U.S. civil service salaries, 
because that was outside the scope of our review. We plan to provide 
more in-depth information on the value of the allowances and benefits 
for both UN professional staff and U.S. civil service employees in a 
forthcoming report. 

ICSC's letter expressed concern about our use of the cost-of-labor 
factor as one of the alternative margin calculation scenarios, noting 
that the cost-of-living factor that it uses in the margin calculation 
is also used in the post adjustment system. ICSC also pointed out that 
our reference to our Standards for Internal Controls in the Federal 
Government as criteria for information standards does not apply to 
ICSC, and that they are confident that their methodology is 
transparent and has been fully described and explained. With regard to 
our use of the cost-of-labor factor, we noted that since UN's 
remuneration system is based on the Noblemaire Principle, and 
accordingly UN salaries are based on U.S. civil service salaries, it 
is reasonable to consider using the same calculation that the U.S. 
government uses in setting its own locality pay. We also noted that 
when we changed this assumption in an alternative scenario, it 
resulted in a calculation of the margin that was above the 110 to 120 
range. With regard to ICSC's transparency in reporting, we also noted 
that we were not able to fully describe the margin process until after 
extensive document review, use of supplemental data, and several 
interviews with ICSC officials. Finally, with regard to our use of our 
own criteria for clarity of information, while we acknowledge that 
these standards do not apply to ICSC, we note that this is a best 
practice and that without such information, member states cannot 
effectively assess whether ICSC's process best satisfies the General 
Assembly resolution. 

We are sending copies of this report to the appropriate congressional 
members, the Secretary of State, the U.S. Ambassador to the United 
Nations, the OPM Acting Director and other interested parties. In 
addition, the report is available at no charge on the GAO Website at 
[hyperlink, http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact me at (202) 512-9601 or melitot@gao.gov. Contact points for 
our Offices of Congressional Relations and Public Affairs may be found 
on the last page of this report. GAO staff who made key contributions 
to this report are listed in appendix VIII. 

Signed by: 

Thomas Melito: 
Director, International Affairs and Trade: 

List of Requesters: 

The Honorable Bob Corker: 
Ranking Member: 
Committee on Foreign Relations: 
United States Senate: 

The Honorable Lindsey Graham: 
Ranking Member: 
Subcommittee on State, Foreign Operations, and Related Programs: 
Committee on Appropriations: 
United States Senate: 

The Honorable John Barrasso: 
United States Senate: 

The Honorable Richard Burr: 
United States Senate: 

The Honorable Tom Coburn: 
United States Senate: 

The Honorable James Inhofe: 
United States Senate: 

The Honorable Johnny Isakson: 
United States Senate: 

The Honorable Mike Lee: 
United States Senate: 

The Honorable James Risch: 
United States Senate: 

The Honorable Marco Rubio: 
United States Senate: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

This report examines (1) how the United Nations (UN) sets salaries for 
Secretariat professional staff; (2) how the UN compares its employees' 
salaries with U.S. civil service salaries, including the assumptions 
underlying its process; and (3) how benefits and allowances provided 
to UN employees compare with benefits and allowances provided to U.S. 
civil service employees. 

To examine how the UN sets salaries for Secretariat professional 
staff, we reviewed relevant documents and data from the UN, including 
International Civil Service Commission (ICSC) annual reports and other 
documents, and General Assembly resolutions. We conducted interviews 
in New York City, New York, with several UN offices, including ICSC, 
and the Office of Program Planning, Budget and Accounts. We met with 
officials from ICSC's Salaries and Allowances Division to obtain 
additional information on the UN's process for setting base salaries 
and met with ICSC's Cost of Living Division to obtain additional 
information on ICSC's process for establishing post adjustments. 

To examine how the UN compares its employees' salaries with U.S. civil 
service salaries, including the assumptions underlying its process, we 
analyzed ICSC's annual reports showing their calculation of the 
difference between UN employee and U.S. civil service salaries. We 
replicated some parts of their process by supplementing the data in 
ICSC's 2012 annual report with data received from ICSC and from 
published UN and U.S. salary scales and locality adjustments. We 
gathered data from ICSC and the UN Chief Executives' Board for 
Coordination (CEB) documents to replicate ICSC's margin calculation. 
We reviewed relevant documentation and interviewed ICSC officials, and 
determined these data were sufficiently reliable for the purposes of 
presenting the reported margin result from 2002 to 2012, and analyzing 
how alternative assumptions would affect the margin result. To obtain 
additional information on ICSC's process for calculating the 
difference between UN and U.S. civil service salaries, we met with 
officials from ICSC and CEB. We reviewed relevant documents, including 
documents on ICSC's grade equivalency study, margin calculation 
process, and the cost of living study used in the margin calculation. 
To supplement this information, we met with officials from the U.S. 
Mission to the UN in New York and three other member states to obtain 
their views on ICSC's process for comparing UN and U.S. civil service 
salaries. 

To examine how benefits and allowances provided to UN employees 
compare with benefits and allowances provided to U.S. civil service 
employees, we analyzed documents from ICSC and other UN organizational 
units, as well as documents from the U.S. Office of Personnel 
Management (OPM) and the Department of State. To obtain additional 
information on the benefits and allowances provided to professional 
staff of the Secretariat, we interviewed officials from the UN's 
Office of Human Resources Management. We interviewed officials from 
the UN Joint Staff Pension Fund to obtain additional information on 
retirement benefits for UN staff members and met with officials from 
the Insurance Division of the UN's Office of Human Resources 
Management to obtain additional information on health insurance plans 
available to UN staff members. We conducted interviews with U.S. 
government officials in Washington, D.C., including officials from OPM 
and State, to obtain additional information on benefits and allowances 
offered to U.S. civil servants. 

We conducted this performance audit from August 2012 to May 2013 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: UN Staff Assessment and the Tax Equalization Fund: 

As a part of its process for determining the base salary that an 
employee at each level receives, the United Nations (UN) deducts an 
amount, called the staff assessment, from the gross salary (see fig. 
4). The UN deducts a higher staff assessment from staff members 
without dependents than from staff members with one or more dependents 
at the same grade and step. The staff assessment funds are credited to 
an account called the Tax Equalization Fund (TEF). Since policies 
regarding taxation of UN employees may vary among member states, the 
UN created the TEF as a means to reimburse staff members who are 
required to pay taxes to their home country and to equalize the net 
salaries of all UN staff members, regardless of their national tax 
obligations. Officials from the UN Secretariat's budget office said 
that currently the United States is the only country that requires its 
citizens employed at the UN to pay taxes on their UN earnings. 
Therefore, in practice, the TEF is used to reimburse Americans 
employed at the UN for the federal, state, and local income taxes they 
pay on their UN earnings. All other member states, which do not 
require their citizens to pay taxes on their UN earnings, receive a 
portion of the TEF as a credit toward their assessed dues to the UN 
budget. 

Figure 4: UN Deducts the Staff Assessment from Gross Salaries: 

[Refer to PDF for image: illustration] 

Staff member with one or more dependents pay a smaller staff 
assessment; 
[Gross salary = base salary and staff assessment] 

Staff member with no dependents pay a larger staff assessment; 
[Gross salary = base salary and staff assessment] 

Each employee's staff assessment goes into the Tax Equalization Fund. 

Source: GAO analysis based on ICSC documents. 

[End of figure] 

The UN reviews staff assessment rates from time to time to ensure 
sufficient funds are available to reimburse staff members for taxes 
paid or to address any substantial increases in the fund. We 
previously reported that the amount of credits in the TEF had 
increased significantly over the period from 2002 to 2009.[Footnote 
24] As a result of this increase, the UN's budget office requested 
that ICSC lower staff assessment rates. The General Assembly approved 
ICSC's recommendation and the updated staff assessment rates went into 
effect on January 1, 2012. 

[End of section] 

Appendix III: ICSC's Margin Calculation Process: Steps, Assumptions, 
and Alternatives: 

In this appendix, we describe in detail the ICSC margin calculation 
process and discuss the assumptions underlying the process, which we 
have determined are reasonable because they enable ICSC to compare UN 
and U.S. salaries, as required by the General Assembly. Further, we 
present a range of potential alternatives to these assumptions, which 
would also reasonably enable ICSC to compare UN and U.S. salaries. 

Steps in ICSC's Net Salary Margin Calculation Process: 

ICSC has a complex, six-step process for calculating the margin, or 
difference between, the average net salaries of UN professional staff 
in New York City and U.S. civil service employees in Washington, D.C., 
which relies on a reasonable set of assumptions, as noted in this 
report. Figure 5 presents a flow chart illustrating the six steps of 
the margin calculation process. 

Figure 5: Steps in the International Civil Service Commission's Net 
Salary Margin Calculation: 

[Refer to PDF for image: process illustration] 

ICSC performs each of these steps every 5 years: 

Step 1: 
Determine which country has the best paid civil service: 
a. Compare salary data of large member states; 
b. Compare major benefits of highest compensated member states 
(optional). 

Step 2: 
Match UN and U.S. pay scales by occupation: 
a. Collect data on UN professional staff; 
b. Determine occupations with the largest numbers of UN staff; 
c. Match UN occupations to U.S. occupations. 

ICSC performs an annual calculation to determine the difference 
between UN and U.S. salaries: 

Step 3: 
Calculate UN average salary by grade: 
a. Collect data for UN employees with dependents; 
b. Calculate average salary by grade. 

Step 4: 
Calculate U.S. average salary by grade: 
a. Obtain data on individual employees from OPM; 
b. Filter for matching occupations identified in step 2; 
c. Adjust each individual salary for federal and state taxes; 
d. Match U.S. grades to UN grades, by occupation; 
e. Calculate average salaries, by UN grade, weighted by the
distribution of occupations identified in step 2. 

Step 5: 
Calculate the margin for each grade: 
a. Divide the UN average salary (step 3) by the U.S. average salary 
(step 4) for each grade; 
b. Apply weights to reflect the distribution of employees who have 
dependents, identified in step 3. 

Step 6: 
Adjust for cost of living: 
a. Hire a contractor to estimate a cost of living index (every 2 
years); 
b. Apply cost of living index to margin for each grade (step 5); 
c. Sum the adjusted margins for each grade to calculate the overall 
margin. 

Total of all calculations = Margin between U.S. and UN salaries. 

Source: GAO analysis based on ICSC documents. 

Note: ICSC officials noted that some parts of steps 5 and 6 have been 
done in a different order, and not as completely separate steps. 
However, we found that the order of these steps does not change the 
calculated margin, and describing the steps separately increases the 
clarity of the process. 

[End of figure] 

Step 1: Determine Which Country Has the Highest Compensated Civil 
Service: 

Since its founding, the UN has set salaries for professional staff 
according to the Noblemaire Principle, which states that employees' 
compensation should be set high enough to attract nationals from all 
member states, including those member states with the highest-
compensated national civil service employees. In practice, ICSC has 
used net salary, rather than total compensation, to make this 
comparison in its annual margin calculation. Before ICSC can conduct 
the annual margin calculation, it must identify what it calls the 
comparator--the nation with the best-compensated civil service 
employees.[Footnote 25] The General Assembly endorsed ICSC's 
recommendations to conduct a study to identify the comparator using a 
two-phase methodology. ICSC conducts the study, called the Noblemaire 
study, every 5 years. 

Phase I of ICSC's methodology for the Noblemaire study reduces a list 
of candidate national civil services to a manageable number by 
comparing the average cash salaries of national civil service 
employees of selected nations. Only those nations deemed to have a 
reasonable possibility of replacing the current comparator are then 
considered for phase II, which involves the collection and evaluation 
of data on additional compensation elements. 

ICSC begins phase I by identifying nations with a high enough level of 
economic resources to potentially qualify them as candidates to 
replace the United States as the comparator nation. For this step, it 
considers three sources of economic information: (1) the top 15 
nations in per capita gross national income from a World Bank source, 
(2) the top 17 nations as determined by the U.S. Department of Labor 
based on per capita gross domestic product and employment rates, and 
(3) the 15 nations with the highest minimum wage according to the 
Global Wage Report from the International Labour Organization. ICSC 
selects for further consideration only nations that appear in at least 
two of these lists in phase I. 

ICSC continues phase I by identifying nations with "significant 
numbers of staff at relevant levels." ICSC excludes nations with small 
numbers of civil service staff relative to the number of staff in the 
UN common system because it needs to compare similar occupations, and 
civil services with small numbers of staff are not likely to have 
sizable populations of the same types of occupations as the UN. After 
excluding nations with small civil services, ICSC reviews the pay 
structure of the remaining countries and also excludes systems whose 
pay structures are unlikely to be comparable to the UN professional 
grades. 

ICSC completes phase I by comparing the after-tax cash salary, 
including any cash bonuses, of civil service employees at headquarters 
locations of each civil service. They compare a midpoint salary 
between the entry level and highest senior level salaries for each 
civil service, and adjust these midpoint salaries for cost of living 
and exchange rates in each headquarters location. On the basis of the 
results of this analysis, ICSC issues a report to the General Assembly 
as to whether any of the highest paid countries might qualify to 
replace the United States as the comparator and recommends whether 
phase II should be conducted for any country deemed a possible 
candidate to become the comparator. 

Phase II, when conducted, is a seven-step process. First, ICSC obtains 
a sample of occupations in each civil service comparable to UN 
professional and higher categories, and classifies them according to 
the UN grading system. For these positions, ICSC quantifies the after-
tax cash and non-cash compensation, including the estimated value of 
retirement benefits, health, life, and accident insurance benefits for 
each, and adjusts the resulting numbers for cost of living and 
exchange rates at headquarters locations. Finally, ICSC recommends 
that the General Assembly choose the comparator with the highest net 
compensation, based on its phase II calculation and other 
considerations, such as the cost of switching comparators. The General 
Assembly then decides whether the United States should remain the 
comparator or be replaced by a nation with higher net compensation for 
its national civil service employees. 

Step 2: Match UN and U.S. Pay Scales by Occupation: 

Every 5 years, ICSC conducts a three-step grade equivalency study to 
determine which UN salary grades are equivalent to the civil service 
salary grades of the comparator. First, the UN's Chief Executives 
Board for Coordination (CEB) collects individual data on staff 
receiving the dependency rate salary from all UN common system 
organizations. Second, ICSC analyzes the UN staff data to determine 
the most populous occupations in the UN common system. ICSC officials 
said they aim to include occupations representing approximately 80 
percent of all UN professional staff. Third, ICSC matches the most 
populous UN occupations to U.S. occupations. To do so, ICSC obtains 
data from the Office of Personnel Management (OPM) on U.S. civil 
service staff living in the Washington, D.C., area and analyzes these 
data to determine likely occupation matches based on similar job 
titles and professional expertise. ICSC then analyzes job descriptors 
of these matches and applies UN criteria to determine how they would 
be graded under the UN system. Because these steps introduce an 
element of subjectivity, which could potentially threaten the validity 
of the results, ICSC has OPM check these determinations for validity 
against U.S. criteria. Finally, ICSC creates a grade equivalency 
matrix with the results, which shows for each specific occupation type 
in a U.S. grade how often it is classified in particular UN grades. 
[Footnote 26] 

Step 3: Calculate UN Average Salary by Grade: 

For the third step in the margin calculation, ICSC calculates the 
average salary of UN professional staff in New York by grade. To do 
so, ICSC first obtains data on all UN professional staff and then 
filters this data to match the assumptions of the previous steps. 
Specifically, ICSC filters out all staff who are not located in New 
York, then all employees who receive the single rate, and then 
employees who are not in the most populous occupations identified in 
the most recent grade equivalency study. Once ICSC has narrowed the 
data set through this filtering process, it calculates the average 
salary of professional staff in New York in each grade. 

Step 4: Calculate U.S. Average Salary by Grade: 

For the fourth step in the margin calculation, ICSC calculates the 
average salary, after taxes, of U.S. civil service employees by grade. 
This step includes five substeps. First, ICSC purchases data each year 
from OPM that includes individual occupations, salaries, and General 
Service grade levels of U.S. civil service employees in Washington, 
D.C. Second, ICSC filter these data to include only occupations that 
appear in the most recent grade equivalency study. Third, ICSC treats 
all U.S. civil service employees as if they are married, filing 
jointly, and uses publicly available data on federal tax filings in 
Washington, D.C., Maryland, and Virginia to estimate the percentage of 
those tax filers in each of two groups: those who claim the standard 
deduction and those who itemize deductions. ICSC then applies these 
percentages to the OPM data on U.S. civil service employees in 
Washington, D.C., to estimate the number of employees for each 
occupation type and grade that claim the standard deduction versus the 
number that itemize deductions. For the first group, ICSC determines 
the after-tax net salaries by subtracting the standard deduction, and 
for the second group, it subtracts the average itemized deduction. 
Third, using tax tables from Washington, D.C., Maryland, and Virginia, 
ICSC determines the net salaries after state taxes by subtracting the 
appropriate tax amount from each individual salary. Once these steps 
have been performed, ICSC uses the grade equivalency matrix to match 
the U.S. employee grade levels into the UN grade system. Finally, once 
distributed among UN grades, ICSC calculates the average salary, by UN 
grade. 

Step 5: Calculate the Margin for Each Grade: 

ICSC calculates the ratios between UN professional staff in New York 
and U.S. civil service employees in Washington, D.C., for each grade, 
and adjusts those ratios to reflect the distribution of UN staff 
across grades from step 3 using weights based on the proportion of UN 
staff in each grade. Each of these ratios could be considered a margin 
for an individual grade. This is the simplest step of the margin 
calculation process, as the average UN salary in a grade is divided by 
the average U.S. salary in that grade, and then multiplied by the 
weight for that grade. 

Step 6: Adjust for Cost of Living: 

Once the initial ratios are calculated, ICSC adjusts them based on the 
cost of living in the two headquarters locations. This adjustment is 
similar to the post adjustment, which also represents a cost of living 
estimate. ICSC hires an independent contractor to conduct a study of 
the cost of living in the two locations every 2 years. This contractor 
develops cost-of-living estimates based on several categories of 
spending that are common between the two populations in their 
respective locations, including selected goods and services, 
transportation, and housing. Ultimately, this study provides a single 
adjustment factor, which ICSC applies to each of the weighted average 
salary ratios from step 5. The adjustment factor, like the UN post 
adjustment, represents a measure of purchasing power. However, the 
post adjustment is developed using information from only UN employees, 
while this adjustment factor is based on information from a much 
larger population. Finally, after ICSC applies the cost-of-living 
adjustment factor to the average salary ratio for each grade, it 
calculates the overall margin by summing the adjusted ratio values for 
all grades. 

Assumptions in ICSC's Margin Calculation Process: 

We determined that ICSC's margin calculation process relies on eight 
assumptions, each of which affects the annually calculated margin (see 
table 5). ICSC introduces two assumptions when conducting the 
Noblemaire study. First, ICSC assumes that civil service employees 
receive a similar amount of total national income across potential 
comparators. This assumption is implicit in the decision to use the 
measures of average per capita wages as an exclusion criterion in 
phase I of the study. Underlying these exclusion criteria is an 
assumption that general economic indicators are likely to identify the 
nations with the highest production and highest wages and that the 
nation with the highest compensated civil service would be found among 
them. However, because these criteria are not related directly to data 
on the salary received by civil service employees, it is possible that 
nations whose civil service salaries are high relative to the general 
population are being excluded. Second, by focusing comparisons on 
headquarters locations, ICSC assumes that employees in these locations 
are the most appropriate comparison group. According to ICSC 
officials, this assumption enables them to focus calculations on the 
locations with the most staff for each organization. For consistency, 
ICSC also limits its comparisons to the headquarters locations in 
steps 2 through 6 of the process. 

Table 5: Assumptions the International Civil Service Commission Makes 
in the Margin Calculation Process: 

Steps: 1; 
Assumption: Per capita income is representative of civil service 
salaries in a country; 
Impact on margin calculation process: Potentially leads to exclusion 
of countries with civil service salaries that are outliers relative to 
their country's average, but provides a simple way to narrow the list 
of comparators. 

Steps: 1, 2, 3, 4, 5, 6; 
Assumption: Employees in headquarters locations are representative of 
all employees; 
Impact on margin calculation process: Potentially excludes employees 
in locations that are outliers relative to headquarters, but reduces 
time and staff needed for step 6 while focusing on areas with the most 
employees. 

Steps: 2, 3, 4, 5; 
Assumption: Employees receiving the dependency rate are representative 
of UN salary of all professional staff; 
Impact on margin calculation process: Excludes employees without 
dependents, who are paid lower salaries and who are more likely to be 
distributed at the lower UN grades, but prevents shocks in the annual 
margin calculation due to the greater stability of dependency rate 
employees. 

Steps: 2, 3, 4, 5; 
Assumption: Occupations with the most staff are representative of all 
UN occupations; 
Impact on margin calculation process: Excludes employees in 
occupations with fewer staff who may be paid differently than those in 
more common occupations, but increases the likelihood that there are 
sufficient data to draw a comparison between UN and U.S. civil service 
employees. 

Steps: 3, 4, 5; 
Assumption: The proportion of staff in each occupation is relatively 
stable for a 5-year period; 
Impact on margin calculation process: Includes occupations in the 
annual margin calculation that may have shrunk and excludes those that 
may have grown since the most recent grade equivalency study, but 
reduces the cost of conducting more frequent grade equivalency studies. 

Steps: 4, 5; 
Assumption: All U.S. civil service employees are married and file 
jointly; 
Impact on margin calculation process: Decreases the accuracy of U.S. 
average net salary calculations, but enables ICSC to make a comparison 
despite limited data and uses the U.S. filing status that is most 
comparable to the UN dependency rate. 

Steps: 4, 5; 
Assumption: U.S. civil service employees use the average deductions in 
their state; 
Impact on margin calculation process: Decreases the accuracy of U.S. 
average net salary calculations, but enables ICSC to make a comparison 
despite limited data on U.S. civil service employees' state income 
taxes. 

Steps: 6; 
Assumption: Differences in salary between two locations are associated 
with the cost of living in those locations; 
Impact on margin calculation process: Margin comparison considers the 
purchasing power of employees rather than the cost of labor for those 
employees as in U.S. locality pay differentials, but the former is 
consistent with the UN's post adjustment. 

Legend: 
Step 1 = Determine which country has the best paid civil service; 
Step 2 = Match UN and U.S. pay scales, by occupation; 
Step 3 = Calculate UN average salary by grade; 
Step 4 = Calculate U.S. average salary by grade; 
Step 5 = Calculate the margin for each grade; 
Step 6 = Adjust for cost of living. 

Source: GAO analysis of ICSC source documents and interviews. 

[End of table] 

ICSC introduces two additional assumptions in the grade equivalency 
study. First, it assumes that employees receiving the dependent rate 
are the most appropriate population for this comparison of UN and U.S. 
salary grades. This assumption stems from ICSC's decision to limit the 
comparison to employees with dependents, and officials said it 
decreases the year-to-year volatility of the margin because it 
excludes single-rate employees. This assumption also applies to steps 
3 through 5 of the margin calculation process. Second, ICSC assumes 
that the most populous occupations constitute the most appropriate 
population for the margin comparison. This assumption is also implicit 
and results from the decision to exclude populations with a small 
number of staff. This assumption reduces the time and staff needed to 
review job descriptors and generate the grade equivalency matrix. 
However, it also limits the occupations that can be considered in 
steps 3 through 5. 

ICSC uses a fifth assumption in step three of its process. 
Specifically, ICSC assumes that the most populous occupations in the 
year of the margin calculation are similar to the most populous 
occupations in the most recent grade equivalency study. This 
assumption is unstated but is a result of the grade equivalency study 
being conducted every 5 years, and also applies to steps 4 and 5. By 
using this assumption, ICSC reduces the time and staff resources that 
would be needed for more frequent grade equivalency studies. 

When calculating U.S. average salaries, ICSC introduces two more 
assumptions, both related to how ISCS adjusts U.S. gross salaries to 
net salaries after taxes. According to ICSC officials, these 
assumptions are necessary because ICSC does not have access to 
individual tax data for U.S. citizens. The first assumption is that 
all U.S. civil service employees file their taxes as married, filing 
jointly. The second is that the amount of those itemizing deductions 
is similar to the total population in their state of residence and 
that their average amount of deductions is likewise similar. ICSC uses 
the first assumption because the married, filing jointly tax status is 
the one most similar to the UN's salary rate for employees with 
dependents. ICSC uses the second assumption because this adjustment 
for the amount of taxes paid results in a more accurate average net 
salary than if no adjustment were used. Both of these assumptions 
affect the ratio calculations in step 5. 

ICSC introduces an eighth assumption when it adjusts the ratios from 
step 5 for the cost of living. By choosing to use a cost of living 
adjustment, ICSC is implicitly assuming that any difference in 
salaries between two locations is a result of the cost of goods and 
services in those locations. This assumption is commonly used in 
economic analyses to control for cost differences in different 
locations and results in a more accurate margin calculation than if no 
adjustment were made. 

Alternative Assumptions: 

As noted in this report, we determined that ICSC's assumptions were 
reasonable, but that other assumptions, which are also reasonable, 
would change the results. The alternative assumptions described in 
this section represent illustrative examples and are not intended to 
be a comprehensive list. Further, because any determination of the 
most appropriate alternative is dependent on the need for information 
to make decisions, and because member states and the General Assembly 
are ultimately the users of this information, we are not endorsing 
ICSC's assumptions or any of these alternatives as the most 
appropriate. Instead, we discuss the benefits and drawbacks of 
individual assumptions to present tradeoffs that could be considered 
by decision makers when deciding which assumptions are the most 
appropriate for their information needs. 

ICSC's assumption that per capita income is representative of civil 
service salaries in a country is a low-cost way to reduce the number 
of countries for which it must do further calculations in the 
Noblemaire study because it allows for the use of readily available 
data and is at least somewhat related to the actual income of civil 
servants in those countries. However, this assumption may lead to the 
exclusion of outlier countries where civil services receive unusually 
high or low salaries, relative to the general population. To avoid the 
potential for unintentionally excluding countries that pay their civil 
service abnormally high salaries, ICSC could modify its exclusion 
criteria with some data related to actual government pay in member 
states, or by comparing cash compensation for civil service employees 
in all member states. The first option would maintain the benefit of 
requiring ICSC to compare only a subset of countries but may be more 
costly because data on government salaries in all countries are not 
readily available and might have to be gathered or purchased. The 
second option would guarantee that no countries are excluded 
unintentionally but would require ICSC to perform analysis on all 
member countries, which would likely be much more costly and time-
consuming than the current approach because of both the lack of data 
from many countries and the magnitude of analysis that would be 
required. 

ICSC's assumption that employees in headquarters locations are 
representative of all employees is beneficial because these locations 
tend to have a wide representation of occupations, and because 
limiting the comparison to two locations requires less time and staff 
resources than a comparison that includes all duty stations. However, 
if civil service staff outside of headquarters locations are 
systematically different from those in headquarters locations, this 
may reduce the accuracy of the margin calculation because the result 
may not be representative of all UN professional staff or of the 
entire civil service of the comparator. As one alternative, ICSC could 
choose to compare the UN and United States in a single location, which 
would simplify ICSC's process by eliminating the need for a cost-of-
living adjustment, but which might reduce ICSC's ability to have a 
wide representation of occupations. As another alternative, ICSC could 
compare UN and U.S. employees in multiple locations, which would 
mitigate the risk of excluding or misrepresenting the respective staff 
but would increase the complexity of the process by requiring 
additional cost-of-living adjustments. This approach would also likely 
require increased time and resources to conduct the additional 
analysis. 

According to ICSC officials, the assumption that employees receiving 
the dependent rate are the most appropriate population for the margin 
comparison has the benefit of increasing the stability of the margin 
calculation. However, this assumption leads to the exclusion of single-
rate employees at the UN. As noted in our analysis of alternatives, 
ICSC could choose to include only single-rate employees, or they could 
choose to consider employees both with and without dependents. The 
first option could be beneficial if single-rate employees could be 
compared more directly to a particular U.S. tax filing status, but 
this option would also be limited because it would exclude employees 
with dependents. The second option would likely increase the accuracy 
of the margin calculation because no employees would be systematically 
excluded, but it could potentially result in more year-to-year 
fluctuation in the value of the margin, according to ICSC officials. 

ICSC's assumption that the most populous occupations are the most 
appropriate population for the margin comparison also supports ICSC's 
goal of having stability in the calculation. This is because the 
average salaries of occupations with a low number of staff are 
affected more by an individual with a salary that is an outlier within 
the corresponding occupation and grade. However, as in the previous 
exclusion, this assumption further reduces the subset of employees 
included at the margin calculation. As an alternative, ICSC could 
determine grade equivalencies by including all employees in all 
occupations, which would result in a comparison of the full population 
of UN professional staff in New York with the full U.S. civil service 
in Washington, D.C. However, such a change would be more complex, 
costly, and time consuming than the current approach. According to 
ICSC officials, it could also result in less stability of the margin 
calculation over time. 

ICSC assumes that the most populous occupations in the year of the 
margin calculation are similar to the most populous occupations in the 
most recent grade equivalency study. This assumption allows ICSC to 
conduct a grade equivalency study every 5 years. However, the 
distribution of occupations does change over time, and occasionally 
can do so abruptly. For example, ICSC said that some occupations, such 
as the position of librarian, have fallen off the list over time. As a 
result, in each year, the margin result reflects the difference in pay 
of occupations that were most populous in the year of the grade 
equivalency study, and not necessarily in the year of that specific 
margin calculation. ICSC could conduct the grade equivalency study 
less often, which might reduce the number of times such a study had to 
be paid for, but would also increase the likelihood that changes in 
the distribution of occupations are obscuring changes in the margin. 
ICSC could also choose to conduct the study more often, which would 
reduce this likelihood, but would also require the extra time and 
resources needed to conduct the study more frequently. ICSC could also 
perform some simplified analysis to assess whether the distribution of 
occupations has likely changed since the most recent grade equivalency 
study, which would provide a basis for deciding whether another study 
was needed. The costs and benefits of this option would depend on the 
complexity of this analysis, the cost of performing it, and the 
resulting frequency of grade equivalency studies. 

ICSC's two assumptions about U.S. taxes are interrelated because both 
are a result of the data ICSC uses for the margin calculation. Because 
ICSC does not have data on the filing status of civil service 
employees, it assumes that everyone is married, filing jointly, and 
that they itemize their deductions at similar rates and in similar 
amounts to other employees in their state of residence. These 
assumptions enable a comparison with the UN dependent-rate employees, 
but because ICSC has not validated the assumptions against actual tax 
filing data of U.S. civil service employees, its estimates of tax 
liabilities may not be accurate. ICSC could attempt to obtain data on 
the filing status and amounts paid by U.S. civil service staff; 
however, it is likely that these data would be restricted from ICSC 
due to privacy concerns, or could be costly to procure. 

ICSC assumes that a comparison of purchasing power, as defined by the 
cost of living, is the most appropriate measure for comparing the 
salaries of the two populations. This assumption is consistent with 
the UN post adjustment system, which seeks to equalize purchasing 
power across UN posts and is commonly used to control for differences 
in the cost of living in two locations. However, a cost-of-labor 
measure, such as the locality pay system used by the U.S. civil 
service, could be a reasonable alternative. As with cost of living, 
cost of labor is commonly used to control for differences in wages in 
two locations. Using the U.S. locality pay adjustments would have the 
benefit that it could be done at a lower cost, as opposed to ICSC's 
current practice of contracting an independent study, but would have 
the drawback of being a departure from the UN's practice of using cost 
of living in its pay-setting process. 

[End of section] 

Appendix IV: UN and U.S. Civil Service Retirement Benefits: 

Retirement age (normal retirement and early retirement): 
United Nations: 
Normal retirement age is 60 for employees who began working at the UN 
before January 1, 1990. Normal retirement age is 62 for employees who 
began working at the UN after January 1, 1990; Participants whose age 
at separation is at least 55 years but less than 
normal retirement age and have at least 5 years of service are eligible 
for a reduced retirement benefit; The retirement age for UN employees 
hired on or after January 1, 2014, is 65; 
United States Civil Service: Under the Civil Service Retirement System 
(CSRS), full retirement age is 55 with 30 years of service, age 60 
with 20 years of service, or age 62 with 5 years of service; CSRS 
participants who retire before age 55 are eligible for a reduced 
retirement benefit; For Federal Employee Retirement System (FERS) 
employees, normal retirement age is 60 with at least 20 years of 
service or 62 with at least 5 years of service. A person with 30 years 
or more of service may retire earlier; the minimum retirement age 
ranges from 55 to 57; A FERS employee at the minimum retirement age is 
eligible to retire with at least 10, but less than 30 years of 
service, at a reduced benefit; For both CSRS and FERS, employees may 
retire early for involuntary separations or during major 
reorganizations or reductions in force. For CSRS, employees can retire 
early at any age with 25 years of service. For FERS, employees can 
retire at age 50 with 20 years of service, or at any age with 25 years 
of service.[A] 

Pension contribution: 
United Nations: 
The current rate of contribution to the Fund is 23.7 percent of 
pensionable remuneration. The employee pays 1/3, or 7.9 percent, of 
that amount. The UN pays the remaining 2/3, or 15.8 percent; 
United States Civil Service: 
Most CSRS employees contribute 7 percent of their salary and the 
employer contributes a matching amount; In fiscal year 2012, FERS 
employees contributed 0.8 percent of their salary and the employer 
paid 11.9 percent, for a total of 12.7 percent; As of January 1, 2013, 
newly hired employees covered by FERS must contribute 3.1 percent and 
the employer contribution is 9.6 percent; FERS employees also 
contribute to the Defined Contribution Plan (Thrift Savings Plan); 
Certain groups of federal employees have different retirement 
contribution levels under CSRS and FERS. Law enforcement officers and 
firefighters, congressional employees, members of congress, bankruptcy 
judges, judges of the United States Court of Military Appeals, and 
United States magistrates have higher contribution rates. 

Pension benefit: 
United Nations: 
For employees who reach full retirement age and have at least 5 years 
of service, the annual pension is calculated as 1.5 percent of the 
final average remuneration for each of the first 5 years of service, 
plus 1.75 percent of the final average remuneration for each of the 
next 5 years of service, plus 2 percent of the final average 
remuneration for each year of service between year 10 and year 35 of 
service; plus an additional 1 percent of final average remuneration 
for any years of service above 35, up to a maximum total accumulation 
rate of 70 percent of final average remuneration; Final average 
remuneration generally means the highest average salary (or 
pensionable remuneration) for 36 months of the last 5 years of 
service; 
United States Civil Service: 
CSRS employee annual pension is calculated as 1.5 percent of the high 
three salary for each of the first 5 years of service, plus 1.75 
percent of the high 3 salary for each of the next 5 years of service, 
plus 2 percent of the high-three salary for each year of service 
beyond year 10, up to a maximum of 80 percent of the high-three salary 
plus credit for unused sick leave. The high-three salary is defined as 
the highest average salary over any contiguous 3-year period of 
service; For FERS employees age 62 or older, and with 20 years or more 
of service, the annual pension is calculated as 1.1 percent of the 
high-three salary for each year of service. For FERS employees 
retiring earlier than age 62 or with less than 20 years of service, 
the annual pension is 1 percent of the high-three salary for each year 
of service. 

Defined contribution plan: 
United Nations: 
No UN equivalent; 
United States Civil Service: 
Thrift Savings Plan (TSP); CSRS: Employees may contribute income to 
TSP up to federal limit. Government does not match contributions; 
FERS: Government contributes 1 percent of pay automatically to TSP. 
Employees may contribute pre-or post-tax income to TSP up to the 
federal limit ($17,500 in 2013). The government matches up to 4 
percent. 

Disability benefit: 
United Nations: 
Disability benefits payable when a participant cannot perform his or 
her duties because of injury or illness of permanent or long duration; 
United States Civil Service: 
CSRS: Employees are eligible for disability retirement at any age, with 
at least 5 years of service. Employees must have a disability expected 
to last at least 1 year; 
FERS: Employees are eligible for disability retirement at any age, 
with at least 18 months of service. Employees must have a disability 
expected to last at least 1 year. 

Widow and widower benefit: 
United Nations: 
Widow and widower benefits payable to surviving spouse if participant 
was entitled to retirement benefits or died while in service; 
United States Civil Service: 
A monthly survivor annuity is available to employees who have worked 
for at least 18 months, were covered by FERS/CSRS and provided that the 
widow/widower meets certain conditions; Note: The spouse of a FERS-
covered employee may be eligible for the Basic Employee Death Benefit, 
which is equal to 50 percent of the employee's final salary (average 
salary, if higher), plus $15,000. The $15,000 has increased to 
$30,792.98 for deaths on or after December 1, 2011. 

Dependent children benefits: 
United Nations: 
Benefits payable to dependent children of employees who are entitled 
to retirement or disability benefits or who died while in service. 
Benefits paid up to age 21. Benefits are payable to a dependent child 
over 21 if child is incapacitated by illness or injury; 
United States Civil Service: 
Unmarried children who are dependent upon the employee/annuitant may 
receive monthly benefits until they reach age 18, marry, or die. 
Monthly survivor annuity payments for a child can continue after age 
18, if the child is a full-time student attending a recognized school. 
Benefits can continue until age 22. 

Secondary dependent benefits: 
United Nations: 
Secondary dependent benefits payable to a survivor, such as mother or 
father, of an employee who was entitled to retirement benefits and 
died in service; 
United States Civil Service: 
If the employee has no spouse or children, a payment may be made to 
the employee's parents, the administrator of the employee's estate, or 
next of kin as determined in the laws of the employee's state. 

Source: GAO analysis of UN and Office of Personnel Management data. 

Note: 

[A] CSRS generally applied to employees hired before 1984. FERS 
generally applies to employees first hired after 1984. 

[End of table] 

[End of section] 

Appendix V: UN Allowances and Allowances for U.S. Civil Service Staff 
Serving Overseas and Foreign Service Officers: 

Housing Subsidy: 
UN: 
UN employees are eligible for a rental subsidy intended to provide 
equity in accommodation expenses among UN staff in duty stations where 
rents vary considerably; and to alleviate hardships staff may face if 
their rent is higher than average for reasonable standard 
accommodations. For duty stations in Europe and North America, the UN 
determines a reasonable maximum rent level (or ceiling) that is used 
to determine how much an employee should pay, taking into account 
their rent, their income, and whether they have dependents. Newly 
hired staff are eligible to receive a subsidy for the portion of their 
rent that exceeds the reasonable maximum. They can receive the subsidy 
for up to 7 years, and it declines over time. In years 1 through 4, 
the subsidy is 80 percent, in year 5 the subsidy is 60 percent, in 
year 6 it is 40 percent, and in year 7 it is 20 percent. For duty 
stations outside Europe and North America, the standard rental subsidy 
is 80 percent of the rent exceeding the threshold, up to a maximum of 
40 percent of rent. 
US Civil Service Employees Serving Overseas and Foreign Service 
Officers: 
U.S. civilian employees are eligible for housing subsidies, called 
quarters allowances, that are designed to reimburse employees for 
substantially all costs of residing in either temporary or permanent 
living quarters. A quarters allowance is not granted when government 
housing is provided. A temporary quarters subsistence allowance is 
granted to an employee for the reasonable cost of temporary quarters, 
meals, and laundry expenses incurred by the employee and/or family 
member at the foreign post upon initial arrival or preceding final 
departure. A living quarters allowance is granted to an employee for 
the annual cost of suitable, adequate living quarters for the employee 
and his or her family. An extraordinary quarters allowance is granted 
to an employee who must vacate permanent quarters due to renovations, 
or unhealthy or dangerous conditions. 

Cost of living (exclusive of quarters cost): 
UN: 
The UN pays a post adjustment to employees to ensure equity in 
purchasing power of staff members across duty stations. The post 
adjustment is a part of the employee's salary and is not considered an 
allowance. The post adjustment is higher for employees with dependents. 
US Civil Service Employees Serving Overseas and Foreign Service 
Officers: 
The U.S. government grants a post allowance to employees officially 
stationed at a post in a foreign area where the cost of living is 
substantially higher than in Washington, D.C. The post allowance is 
designed to permit employees to spend the same portion of their 
salaries for their standard living expenses as they would if they were 
residing in Washington, D.C. The amount paid is a flat rate that 
varies by basic salary, size of family, and post. 

Relocation expenses: 
UN: 
UN employees are eligible for an assignment grant that is intended to 
provide staff with a reasonable cash amount at the beginning of the 
assignment for the costs incurred as a result of appointment or 
reassignment. The amount of the grant varies by duty station and 
whether the employee has dependents. For example, a staff member with 
two dependents assigned to headquarters for a period of 2 years might 
earn an assignment grant of $7,200 to compensate for 30 days at the 
beginning of the assignment. The UN also pays removal and shipment 
costs for employees. Employees may ship personal effects only, or 
household goods and personal effects in some cases. The UN has 
established weight limits for this allowance, which depend on the 
employee's number of dependents. 
US Civil Service Employees Serving Overseas and Foreign Service 
Officers: 
The U.S. government grants a foreign transfer allowance to employees 
for extraordinary, necessary, and reasonable expenses, incurred by an 
employee transferring to any post of assignment in a foreign area, 
prior to departure. This allowance includes a miscellaneous expense 
portion, a wardrobe expense portion, a pre-departure subsistence 
expense portion, and a lease penalty expense portion. The U.S. 
government offers a home service transfer allowance for extraordinary, 
necessary, and reasonable expenses for employees prior to transferring 
back to a post in the United States. This allowance includes a 
miscellaneous expense portion, a wardrobe expense portion, a 
subsistence expense portion, and a lease penalty expense portion. 

Maintaining family at separate location: 
UN: 
For a UN staff member located in a duty station that lacks appropriate 
schools and medical facilities to meet family members' needs, and who 
is obliged to pay rent in another city for their family, the staff 
member's rent at the duty station and the rent for the family in the 
capital city can be considered one combined rent for the purposes of 
determining the rental subsidy. 
US Civil Service Employees Serving Overseas and Foreign Service 
Officers: 
The U.S. government offers a separate maintenance allowance to assist 
an employee who is required to maintain family members at locations 
other than his/her overseas post of assignment either due to (a) 
dangerous, notably unhealthful, or excessively adverse living 
conditions at the post; (b) because of special needs or hardship 
involving the employee or family member; (c) if the family needs to 
stay temporarily in commercial quarters, such as a hotel. 

Education allowance: 
UN: 
UN employees serving outside their home country are eligible for an 
education grant to cover part of the cost of educating children in 
full-time attendance at an educational institution. The amount of the 
grant is equivalent to 75 percent of allowable costs, subject to a 
maximum that varies from country to country. Employees are eligible 
for the grant up to the fourth year of their child's postsecondary 
education, or age 25. For U.N. employees in the United States, the 
maximum education grant in August 2012 was $32,255. At designated 
locations where educational facilities are inadequate, UN also covers 
up to 100 percent of boarding costs, up to a maximum amount, for 
children at the primary or secondary level, in addition to the 
standard maximum amount of education grant. 
US Civil Service Employees Serving Overseas and Foreign Service 
Officers: 
The U.S. government provides an allowance to assist an employee in 
meeting the extraordinary and necessary expenses in providing adequate 
elementary and secondary education for dependent children at an 
overseas post of assignment. The amount of the grant depends on whether 
the child is in a school at post, at a school away from the post, or in 
home study or at a private institution. 

Educational travel: 
UN: 
In addition to the educational allowance, UN employees are entitled to 
travel expenses for their child for one return journey from the 
educational institution to their duty station, if the educational 
institution is outside the country of the duty station. At some duty 
stations, the UN allows an additional round-trip journey in a non-home 
leave year. 
US Civil Service Employees Serving Overseas and Foreign Service 
Officers: 
The U.S. government pays the expenses for a child to travel to and 
from a secondary school or post-secondary school, once each way 
annually. The age limitation for secondary education travel is 20 
(before the 21st birthday), and for post-secondary education the age 
limitation is 22 (before the 23rd birthday). 

Danger pay allowance: 
UN: 
The UN provides a special allowance for staff required to work under 
dangerous conditions. The danger pay is granted for up to 3 months at 
a time, subject to ongoing review. For internationally recruited 
staff, the allowance is $1,600 per month. For locally recruited staff, 
the allowance is based on the local salary scale. 
US Civil Service Employees Serving Overseas and Foreign Service 
Officers: 
The U.S. government provides additional compensation of up to 35 
percent over basic compensation to employees, for service at places 
in foreign areas where dangerous conditions that could threaten the 
health or well being of an employee exist. 

Representation allowance: 
UN: No comparable allowance. 
US Civil Service Employees Serving Overseas and Foreign Service 
Officers: 
The U.S. government provides an allowance intended to cover 
expenditures by employees when these expenditures are made to help 
establish and maintain relationships of value to the U.S. in foreign 
countries. The allowance covers expenses such as entertainment of a 
protocol nature; purchases of flowers, wreaths, or other tokens made 
in accordance with local custom; or printing, engraving, or purchasing 
of invitations to official functions. 

Official residence expenses: 
UN: No comparable allowance. 
US Civil Service Employees Serving Overseas and Foreign Service 
Officers: 
The 
U.S. government provides an allowance to assist principal 
representatives with the unusual expenses that they incur in the 
operation and maintenance of a suitable official residence. 

Advance of pay: 
UN: No comparable allowance. 
US Civil Service Employees Serving Overseas and Foreign Service 
Officers: 
The head of an agency may provide for the advance payment of up to 3 
months pay to or for the account of an employee proceeding to or 
arriving at a post of assignment in the foreign area. Advance of pay 
may also be paid for certain medical emergencies. 

Rest and recuperation travel: 
UN: No comparable allowance. 
US Civil Service Employees Serving Overseas and Foreign Service 
Officers: 
The United States may grant Foreign Service employees and their 
eligible family members rest and recuperation travel to the United 
States, its territories, or other locations abroad. 

Children's allowance: 
UN: 
The UN provides eligible staff members an annual children's allowance 
of $2,929 per child under age 18 or under 21 if a full-time student). 
Staff without a dependent spouse do not receive a children's allowance 
for their first dependent child. 
US Civil Service Employees Serving Overseas and Foreign Service 
Officers: No comparable allowance. 

Mobility allowance: 
UN: 
To encourage movement from one duty station to another, the UN 
provides an annual mobility allowance to staff on an assignment of 1 
year or more who have had 5 consecutive years of service in the UN 
system. The amount of this allowance varies by the employee's number 
of assignments, duty station, and whether the employee has dependents. 
As of August 2012, this allowance ranged from $1,970 to $16,490. 
US Civil Service Employees Serving Overseas and Foreign Service 
Officers: No comparable allowance. 

Hardship allowance: 
UN: 
The UN provides an annual hardship allowance to staff on assignment in 
duty stations where living and working conditions are difficult. The 
hardship allowance varies by position level and dependency status. The 
allowance varies depending on the employee's duty station, salary 
level, and whether the employee has dependents. As of August 2012, the 
allowance ranged from $4,360 to $22,680. 
US Civil Service Employees Serving Overseas and Foreign Service 
Officers: 
The U.S. government provides a post hardship differential, which is 
additional compensation of 25, 30, or 35 percent of salary to 
employees for service at places in foreign areas where conditions of 
environment differ substantially from conditions of environment in the 
continental United States and warrant additional compensation as a 
recruitment and retention incentive. A hardship differential is 
established for locations where the living conditions are 
extraordinarily difficult, involve excessive physical hardship, or 
are notably unhealthy. A U.S. government agency may also grant a 
difficult-to-staff incentive differential to employees assigned to a 
hardship post upon a determination that additional pay is warranted to 
recruit and retain employees at that post. The allowance is an 
additional 15 percent of salary. 

Travel expenses: 
UN: 
The UN pays travel expenses for employees when they are initially 
appointed, when they change their duty station, when they separate 
from service, when they travel on official business, when they travel 
for home leave, and when they travel to visit family members. The UN 
pays travel expenses for employee dependents on the initial 
appointment, on separation from service, and on education grant travel 
and home leave. Employees also receive a daily allowance while on 
travel. 
US Civil Service Employees Serving Overseas and Foreign Service 
Officers: 
The U.S. Foreign Service pays travel and related expenses for members 
of the Foreign Service and their families under a number of 
circumstances, including when they are proceeding to and returning 
from assigned posts of duty; for authorized or required home leave; 
for family members to accompany, precede, or follow a foreign service 
member to a place of temporary duty; for representation travel; 
medical travel; rest and recuperation travel; evacuation travel; or 
other travel as authorized.[A] 

Home leave: 
UN: 
The UN offers employees who are posted outside their home country paid 
travel to their home country every 2 years. This includes travel for 
the employee and the employee's dependents. No additional annual leave 
is granted for this purpose, but reasonable time off is given to cover 
the duration of travel between the duty station and the place of home 
leave. Home leave may be granted every 12 months at some duty stations. 
US Civil Service Employees Serving Overseas and Foreign Service 
Officers: 
The Foreign Service Act of 1980 requires home leave for all employees 
following completion of 3 years continuous service abroad. In some 
cases, home leave must be taken after 12 months of service. The 
purpose of home leave is to ensure that employees who live abroad for 
an extended period undergo reorientation and re-exposure in the United 
States on a regular basis; it is not considered an employee benefit.[A] 

Family visit travel: 
UN: 
The UN may pay for the travel of an employee to visit a family member 
if none of the employee's eligible family members have traveled to 
the duty station at the organization's expense during the preceding 12 
months. Employees may take family visit travel every other year, 
provided it takes place in the non-home leave year. 
US Civil Service Employees Serving Overseas and Foreign Service 
Officers: 
Foreign service employees assigned to some hardship posts receive 
family visit travel. This travel permits a member to visit family who 
would reside at post with the member if the post were not within a 
hostile area at which family members cannot reside. In addition, the 
U.S. government offers emergency visitation travel, which pays for the 
employee to travel from their post to the United States or to other 
locations in case of a family emergency.[A] 

Transportation of an automobile: 
UN: 
The UN pays part of the cost of transporting an employee's privately 
owned automobile to some duty stations outside of Europe and the 
United States. 
US Civil Service Employees Serving Overseas and Foreign Service 
Officers: No comparable allowance. 

Source: GAO analysis of UN and Office of Personnel Management data. 

Note: 

[A] The information for this allowance is relevant to Foreign Service 
Officers only. 

[End of table] 

[End of section] 

Appendix VI: Comments from the Department of State: 

Note: GAO comments supplementing those in the report text appear at 
the end of this appendix. 

Note: GAO comments supplementing those in the report text appear at the 
end of this appendix. 

United States Department of State: 
Comptroller: 
1969 Dyess Avenue: 
Charleston, SC 29405: 

May 13, 2013: 

Dr. Loren Yager: 
Managing Director: 
International Affairs and Trade: 
Government Accountability Office: 
441 G Street, N.W. 
Washington, D.C. 20548-0001: 

Dear Dr. Yager: 

We appreciate the opportunity to review your draft report,
"UN Compensation: United Nations Should Clarify the Process and 
Assumptions Underlying Secretariat Professional Salaries" GAO Job Code 
320935. 

The enclosed Department of State comments are provided for 
incorporation with this letter as an appendix to the final report. 

If you have any questions concerning this response, please contact 
Matt Glockner, Program Analyst, Bureau of International Organization 
Affairs at (202) 647-6413. 

Sincerely, 

Signed by: 

James L. Millette: 

cc: GAO — Thomas Melito; 
I0 — Dr. Esther D. Brimmer; 
State/OIG — Evelyn Klemstine. 

Department of State Comments on GAO Draft Report: 

UN Compensation: United Nations Should Clarify the Process and
Assumptions Underlying Secretariat Professional Salaries 
(GAO-13-526, GAO Code 320935): 

Thank you for the opportunity to comment on your draft report entitled 
UN Compensation: United Nations Should Clarift the Process and 
Assumptions Underlying Secretariat Professional Salaries. The 
Department of State notes that GAO was requested to explain how the UN 
sets salaries for its professional staff and to compare compensation 
(salaries, benefits, and allowances) for UN professional staff and 
U.S. federal civil servants and believes that the GAO report provides 
timely and useful information that will support our efforts to make 
sure UN compensation can attract and retain talent meeting the highest 
standards of efficiency, competence, and integrity while ensuring 
fiscal discipline at the UN. 

The Department of State recalls that the UN sets salaries in 
accordance with the Noblemaire Principle. The Noblemaire Principle 
requires salaries for UN professional staff to be set in comparison to 
the highest-paid national civil service. Since 1945, this has been the 
U.S. federal civil service. The UN uses a complex methodology to 
compare salaries for each and make sure that salaries for UN 
professional staff stay between 110% and 120% of salaries for U.S. 
federal civil service. 

The GAO report notes that the comparison methodology is complex and 
not clearly communicated to UN member states. The Department of State 
generally endorses this conclusion and accepts the GAO recommendation 
to work with other member states to request the International Civil 
Service Commission (ICSC) to clarify the methodology and its 
assumptions to facilitate more effective oversight by member states. 

On salaries for UN professional staff, the Department of State notes 
other areas for study that we believe can inform our engagement on UN 
compensation matters in the future. We found the section in the GAO 
report on alternative assumptions for the comparison methodology 
particularly interesting, and we believe that it would have been 
useful if the report had expressed an opinion on which of the 
alternative assumptions tested is optimal. We also believe that it 
would have been useful for the report to examine the justification for 
setting the margin at 110-120% as opposed to a lower range. [See 
comment 1] 

The GAO report presents clear and concise information about the 
benefits and allowances for UN professional staff but the Department 
of State notes that further study of the comparison between benefits 
and allowances packages for UN professional staff and U.S. federal 
civil servants could also inform our engagement. We agree with the GAO 
assessment that UN professional staff and U.S. federal civil servants 
get similar types of benefits and allowances. Like all U.S. civil 
servants, UN professional staff receive annual and sick leave, 
retirement benefits, and life and health insurance. Also, UN 
professional staff are eligible for the same allowances as U.S. 
federal civil servants serving overseas (e.g., education grant and 
rental subsidy). We believe that it would have been useful for the 
report to quantify the differences in benefits and allowances to help 
us understand whether total compensation for UN professional staff and 
U.S. federal civil servants are aligned. It would have also been 
useful for the report to attempt a direct comparison between salaries, 
benefits, and allowances as a whole. [See comment 2] 

The Department of State remains committed to working with ICSC and 
other member states to make further progress on improving transparency 
of the calculations for UN professional staff compensation. The United 
States has led the charge to clarify the methodology used to set and 
adjust UN salaries and benefits. Due to lobbying by the United States 
and other member states, the Fifth Committee of the UN General 
Assembly recently requested a comprehensive review of the UN 
compensation package and the underlying methodology behind it. The 
intent of this review is to recommend to the General Assembly what is 
needed to attract and retain talent while taking into account that UN 
organizations face financial constraints and recommend ways to 
streamline the methodology to make it more clear and accountable to 
member state oversight. 

The following are GAO's comments on the State Department's letter dated 
May 13 2013. 

GAO Comments: 

1. As we note in the report, member states and the General Assembly are 
ultimately the users of this information, and are best suited to select 
the approach that is the most appropriate for their needs, which is why 
we do not specifically endorse any of the alternatives. The report is 
intended to provide information about how ICSC calculates the margin 
between UN and U.S. civil service salaries. Member states may be able 
to use the information in this report as they deliberate on whether to 
approve ICSC's recommendations to change UN salaries each year. 
Regarding the margin, the General Assembly made the decision that 
average UN net salaries should fall within a 110 to 120 percent of 
average U.S. civil service net salaries. It is outside of the scope of 
our review to examine the justification for the General Assembly's 
decision. 

2. We plan to provide more in-depth information about the value of UN 
and U.S. civil service employee benefits and allowances in a 
forthcoming report. 

[End of section] 

Appendix VII: Comments from the United Nations: 

Note: GAO comments supplementing those in the report text appear at 
the end of this appendix. 

United Nations: 
International Civil Service Commission: 
Office of the Chairman: 
Two United Nations Plaza, 10th Floor: 
New York, NY 10017: 
Fax: (212) 963-0159/963-1717, Tel: (212) 963-8464: 

Reference: ICSC 60-40-1-6: 

13 May 2013: 

Mr. Thomas Melito: 
Director, International Affairs and Trade: 
Government Accountability Office: 
Washington, D.C. 

Dear Mr. Melito, 

We thank you for affording us the opportunity of providing our views 
on the draft GAO Report (May 2013) on UN Compensation. We worked 
closely with the GAO team from the beginning of their assignment to 
provide them with all of the information they requested and granted 
them open access to our data. Along the way, we held in-depth 
discussions and provided a wealth of explanatory material both in 
writing and by teleconferencing to correct and clear up 
misunderstandings and misconceptions about how the UN compensation 
system functions. We hope that these corrections will find their way 
into the final Report. At this stage of the report process we will 
limit ourselves to some general comments aimed at facilitating a 
better understanding of the way the International Civil Service 
Commission carries out its mandate, and more specifically on the 
perception that our reports to the General Assembly lack clarity and 
transparency, particularly with regard to the calculation of the net 
UN/US remuneration margin. 

It is recalled that when the General Assembly established the ICSC as 
its subsidiary expert body and adopted its statute, it assigned to the 
Commission a set of specific responsibilities. It also differentiated 
between matters for which the authority was entrusted to the 
Commission and those on which the Assembly would decide. So, while the 
General Assembly decides on the broad principles for the determination 
of the conditions of service of the staff, the Commission establishes 
the methods by which these principles should be applied. In the case 
of the net remuneration margin, the Commission elaborated a 
methodology which was approved by the Assembly. ICSC has consistently 
continued to apply that methodology and the Assembly has consistently 
continued to endorse it. [See comment1] 

The Commission has always endeavored to provide in its annual reports 
to the General Assembly the necessary and appropriate amount of 
information required for Member States to understand its 
recommendations and decisions, particularly those of a technical 
nature, all the while confining the length of its reports to the 
stringent documentation limits established by the Assembly. The 
Commission seems to be caught between the horns of a dilemma, 
receiving criticism from some quarters for its perceived lack of 
clarity and failure to provide sufficient comprehensive information on 
the highly complex and technical subjects for which it is responsible, 
and from other quarters, complaints that its annual reports are too 
long, too technical and too complex to be easily understood. The ever 
changing composition and turnover of Member State delegations 
responsible for ICSC reports presents its own particular challenge. 
[See comment 1] 

That is why it has been long-standing practice to complement the 
Commission's report with additional information, both in the form of 
written supplementary papers and oral briefings, on any item deemed 
necessary by the Assembly. The Commission's secretariat arranges on a 
regular basis for in-depth presentations, either on its own initiative 
or at the request of the Fifth Committee Further, the Commission's 
decisions on all major items are summarized in the Commission's 
compendium which is posted and regularly updated on the Commission 
website. We therefore consider that the information provided to the 
Assembly is both transparent and comprehensive and that we have done 
our best to facilitate and enhance understanding through supplementary 
briefings and presentations given the highly technical nature of some 
of the items. 

Turning to the net remuneration margin, we were pleased to note 
recognition in the draft Report that the GAO team found the 
assumptions used by the ICSC in that calculation to be reasonable. 
These are the same underlying assumptions that have been relied upon 
over the years to calculate a margin that, as noted above, has 
heretofore met with the Assembly's approbation. 

We would add that while all of the information related to the 
calculation of the margin may not be available in a single document, 
all relevant information is in fact reported to the Commission and/or 
the General Assembly—-most of which was given to the audit team. It is 
worth recalling that the legislative base of this particular matter, 
like many others in the UN, is a dynamic one. It is not a static 
process, but one which is constantly evolving, with new resolutions 
and decisions coming forward at least on an annual basis. A complex 
matter such as the net remuneration margin requires review and 
consideration of actions taken by the Assembly and the Commission over 
time (i.e., a span of years) in order to have a full understanding of 
the underlying process and rationale of the decisions. [See comment 1] 

Now to some specific points that were either mentioned, or omitted, in 
the draft Report. One of the alternative scenarios put forward by the 
GAO team uses cost of labour indicators instead of a cost of living 
factor, though the team understood that such an approach would not be 
compatible with the post adjustment system, one of the underpinning 
elements of the UN remuneration system. The UN salary system of 
necessity must equalize the purchasing power of salaries across the 
world in order to maintain the principle of equal pay for work of 
equal value. [See comment 2] 

Further, the Commission has long felt frustrated by its inability to 
gain access to a key element of the margin calculation—-data on pay 
systems other than the General Schedule and the Senior Executive 
Service. Data gaps as significant as these may hinder the ability of 
the Commission to estimate the margin as accurately as it would like. 
By some accounts, including a 2007 study on the characteristics and 
pay of the Federal civilian employees by the Congressional Budget 
Office, the absence of data on these systems may have a distorting 
effect on the UN/US margin comparison. This is a critical example of a 
key lacuna which is not addressed in the GAO draft Report. [See 
comment 3] 

We also note that the United States civil service has a number of 
added pay flexibilities including recruitment, retention and 
relocation allowances, a difficult-to-staff incentive differential 
housing supplements for some employees assigned to high-cost locations 
within the US and a student loan repayment program, in addition to the 
benefits offered to expatriate employees in the United States civil 
service. These top-ups are significant features of the United States 
remuneration package and should be indicated in the broader summary 
table presented in the GAO report even if they are not used in the 
United Nations/United States comparisons. [See comment 4] 

Lastly, the reference to the Standards for Internal Controls in the 
Federal Government implies a responsibility on the part of ICSC to 
comply with US standards for information. Clearly, this is not the 
case and, as already noted, we are confident that our methodology is 
transparent and has been both fully described and fully explained. 
[See comment 5] 

In closing, we would like to express our appreciation for the 
understanding and cooperation shown by the GAO team in carrying out 
this review. 

Yours sincerely, 

Signed by: 

Kingston Rhodes: 

The following are GAO's comments on ICSC's letter dated May 13, 2013. 

GAO Comments: 

1. While ICSC notes that it faces challenges in reporting on its 
highly complex and technical process for calculating the margin 
between UN and U.S. salaries, nevertheless, ICSC can, though 
supplementary reports and oral briefings, provide more clarity on this 
process to the General Assembly. As we reported, representatives from 
several member states said that they did not understand the margin 
calculation process. Further, as ICSC points out in their letter, 
there is no single document that provides all the relevant information 
about the margin calculation. As we described in Appendix I of our 
report, we reviewed numerous documents to try to gain a clear 
understanding of the margin calculation process. We also supplemented 
the data ICSC provided with published information we obtained 
independently and some additional data from the UN Chief Executives' 
Board in order to replicate some parts of their process. However, we 
were not able to fully describe ICSC's margin calculation until we met 
several times with ICSC officials to clarify various aspects of the 
process. We believe that more clarity is needed about the margin 
calculation process and its underlying assumptions to better inform 
member states, so that they can effectively oversee ICSC's process for 
setting and adjusting salaries and ensure that its work is in line 
with the General Assembly resolution. 

2. In our report, we noted the ICSC utilizes cost-of-living measures 
for two different purposes: when it sets the post adjustment for each 
duty station, and when it compares UN salaries in New York to U.S. 
civil service salaries in Washington D.C. We do not question the 
ICSC's use of a cost-of-living measure to set the post adjustment to 
equalize the purchasing power of UN Secretariat salaries. However, the 
UN's remuneration system is based on the Noblemaire Principle, and in 
practice the UN bases its salaries on the U.S. civil service; thus it 
is reasonable to note that the United States uses a cost-of-labor 
factor in setting its locality pay adjustments when comparing New York 
and Washington, D.C. Using this measure, we calculated a margin of 
126.7, which is outside the margin range of 110 to 120 percent. 

3. This issue is outside the scope of our review. ICSC officials we 
met with noted that their process generally is based on the U.S. 
General Schedule and that they request information on other pay 
scales. We have added a footnote to the report to reflect ICSC's 
comment. 

4. Appendix V of the report discusses allowances such as difficult-to-
staff incentives and housing supplements offered under the Department 
of State's Standardized Regulations. We plan to provide more in-depth 
information about other allowances, such as student loan 
reimbursement, in a forthcoming report. 

5. We agree that ICSC does not have to comply with U.S. federal 
internal control standards, however, we cite our own standards for 
internal control as a best practice and note that key information 
should be recorded and communicated to management and others within 
the entity who need it, and in a form and within a time frame that 
enables them to carry out their internal control and other 
responsibilities. Without such information, member states cannot 
effectively evaluate whether ICSC's process best satisfies the General 
Assembly resolution. Our recommendation is that State and the U.S. 
Mission to the UN should work with other member states to make sure 
that they can get the information they need for effective oversight of 
ICSC's process. 

[End of section] 

Appendix VIII: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Thomas Melito, (202) 512-9601 or melitot@gao.gov: 

Staff Acknowledgments: 

In addition to the staff named above, Valérie Nowak (Assistant 
Director), Diana Blumenfeld, Debbie Chung, David Dayton, Leah DeWolf, 
Mark Dowling, Etana Finkler, Joy Labez, Erin McLaughlin, Rhiannon 
Patterson, Steven Putansu, Jeremy Sebest and Roberta G. Steinman made 
significant contributions to this report. 

[End of section] 

Footnotes: 

[1] The Noblemaire Principle, originating in the League of Nations, 
was formulated by the Noblemaire Committee in its 1921 report. 

[2] Professional staff members are recruited internationally and 
typically perform work that is analytical, evaluative, conceptual, or 
creative, and requires at least a bachelor's degree. The UN also 
employs general service staff members who are recruited locally, such 
as messengers, clerks, typists, secretaries, and administrative 
support staff. 

[3] When the 6-month freeze ended on February 1, 2013, UN Secretariat 
employees in New York received an increase in their cost-of-living 
adjustment, which resulted in an almost 2-percent increase in their 
salaries. 

[4] We plan to provide more in-depth information about the value of UN 
and U.S. civil service employee benefits and allowances in a 
forthcoming report. 

[5] United Nations, Composition of the Secretariat: Staff 
Demographics, Report of the Secretary General, A/67/329 (Aug. 2012). 

[6] UN General Assembly Resolution A/40/244. For the remainder of this 
report, we will use the phrase, "the approved margin range," to 
describe the 110 to 120 percent range and the 5-year average of 115. 

[7] The UN provides an annual hardship allowance to staff on 
assignment in duty stations where living and working conditions are 
difficult. 

[8] The UN defines a dependent as a spouse with no income or income 
less than a set threshold, a child under the age of 18, a child 
between the ages of 18 and 21 who is a full-time student, or a child 
with a permanent disability, regardless of age. 

[9] Currently, the United States is the only member state whose 
citizens employed by the UN are reimbursed by the TEF. 

[10] Group I duty stations include those in the United States, Canada, 
Europe, and Australia, as well as China (Hong Kong), Japan, and French 
Guiana. ICSC classifies all other duty stations as Group II duty 
stations. 

[11] ICSC officials told us that they recalculate the margin before 
the General Assembly makes a decision on pay adjustments, and that, if 
necessary, they present a revised margin figure, which appears in the 
General Assembly resolutions. In such cases, we use the revised 
figure, rather than the original one in the annual report. 

[12] ICSC officials said that they are not always able to obtain data 
from other agencies that use pay plans other than the GS. 

[13] GAO, Government Auditing Standards, 2011 Revision, [hyperlink, 
http://www.gao.gov/products/GAO-12-331G] (Washington, D.C.: December 
2011) and Designing Evaluations, 2012 Revision, [hyperlink, 
http://www.gao.gov/products/GAO-12-208G] (Washington, D.C.: January 
2012). 

[14] We did not comprehensively analyze all of the alternative 
assumptions that could be made in ICSC's process, but rather analyzed 
an illustrative few for which we were able to obtain relevant data. 
Because the most appropriate alternative is dependent on the need for 
information to make decisions, and because member states and the 
General Assembly are ultimately the users of this information, we are 
not endorsing any of these alternatives as the most appropriate. 

[15] Because we did not have data on actual UN salaries, we used the 
base salary with the New York post adjustment at step 4 of each grade 
in these calculations. The results would likely be different if actual 
salary data were used. 

[16] One limitation of these two results, however, is that we did not 
have ICSC data on U.S. tax liabilities, and thus the comparison group 
was still U.S. civil service employees who were assumed to be married 
and filing jointly. Ideally, we would consider only those U.S. 
employees whose filing status is single for the first comparison, and 
all U.S. employees in the second comparison. 

[17] In calculating its own locality pay among different regions, OPM 
uses the cost of labor. 

[18] GAO, Standards for Internal Control in the Federal Government 
(supersedes AIMD-98-21.3.1), AIMD-00-21.3.1 (Washington, D.C.: 
November 1999). We are suggesting this as a best practice. 

[19] Regular federal employees contribute 7 percent of their basic pay 
to their pensions under CSRS. Law enforcement officers, firefighters, 
and congressional employees pay 7.5 percent. Members of Congress, 
bankruptcy judges, judges of the U.S. Court of Military Appeals, and 
employees of the United States Magistrate contribute 8 percent. 

[20] The UN defines final average remuneration as the annual average 
pensionable remuneration within the 36 completed calendar months of 
highest pensionable remuneration within the last 5 years of service. 
OPM defines the average high-three salary for CSRS and FERS employees 
as the largest annual rate resulting from averaging an employee's 
basic pay in effect over any period of 3 consecutive years of service, 
with each rate weighted by the length of time it was in effect. 

[21] United Nations, Comparison of the United States/United Nations 
Income Replacement Ratios, ICSC/72/R.4 (2011). 

[22] For a list of UN employee allowances and comparable allowances 
for U.S. civil service employees posted overseas, please see Appendix 
V. 

[23] These data are from OPM's Enterprise Human Resources Integration 
data warehouse, which is made available through OPM's FedScope 
program. The data exclude certain agencies in the Executive branch and 
the Legislative branch, and all Judiciary branch agencies. 

[24] GAO, United Nations Renovations: Best Practices Could Enhance 
Future Cost Estimates [hyperlink, 
http://www.gao.gov/products/GAO-12-795] (Washington, D.C.; July 25, 
2012). 

[25] For the purposes of the Noblemaire study, compensation is 
measured as total net salary and the value of major additional 
benefits, including pension, health insurance, and life and accident 
insurance. 

[26] U.S. grades include the General Schedule grades 9-15 and Senior 
Executive Service. 

[End of section] 

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