Sunday, September 28, 2014

Don't let UNESCO's engine get overheated!

Imagine you own a small car with a small trailer behind it to go on holidays. Imagine that a couple of friends who go in the same direction ask you if you mind if they hook up their trailers to your car too. You agree, because of course you want to help them. Then your car starts having trouble because it can't pull the weight of the extra trailers. Then other friends start asking you if they can hook up their trailers too. If you don't do something quickly your engine will burn. So what do you do? You decide to ask your friends to give you some money so you can have your car's engine upgraded. Otherwise the whole caravan will ultimately come to a standstill and everybody will be very unhappy.

This parabola describes the risk UNESCO is currently running according to this document we will discuss in the upcoming 195th session of the Executive Board. Let me explain this in terms of the parabola.

The poor little engine is UNESCO's staff that is paid with the mandatory contributions its Member States pay to the organization. This engine produces UNESCO's "corporate" activities like the recruitment of staff and financial management, and some programme activities like the official meetings of Member States about world heritage.

The extra trailers are so called "extrabudgetary projects" financed by donors. These projects come on top of UNESCO's standard programme and represent most of UNESCO's actual work in the field. It's very good that donors (often governments) ask UNESCO to implement these extra activities because it will increase UNESCO's impact. But it can only work if the donors pay for these extra projects. How do donors pay for this?

The extra activities they ask for generate two types of costs. Firstly they generate costs for extra staff and logistics that are directly related to these extra activities (consultant fees, travel costs, rental of meeting rooms). The donor pays for these costs directly. Secondly these extra activities generate indirect or "invisible" costs that put an extra burden on the corporate (administrative) services of the organization. Some examples:
  • the Human Resources Department has to work harder (e.g. recruit more consultants) 
  • the Legal Advisor will have to study and draft more contracts
  • the Financial Departement will have to take care of more financial administration
  • the Audit Department (IOS) will have to do more audits
  • etc.
The good news is that donors also pay for these indirect "invisible" costs, meaning that UNESCO "recovers" these costs. This is how it works: UNESCO ask donors to pay a supplement between 10% and 13% on top of the total direct costs to pay for extra indirect costs (extra work done by staff in the corporate services for the organization).

But then the UNESCO engine starts getting overheated because the supplement UNESCO currently receives from donors to pay for "extra hands" in the corporate services is not enough to pay for all the extra work. Because the extra activities don't only require extra work from UNESCO's corporate/administrative staff but also from UNESCO's programme staff, meaning the staff that directly manages the work related to education, oceans, cultural heritage etc. This extra time spent by these programme staff members should also be "recovered", meaning that donors should pay for it so that extra staff can be hired to do this work for them.

However I just read that the Organization only recovers less than 1% of programme staff time:

I once again pay tribute to UNESCO's transparency about its own shortcomings, like its insufficient cost recovery pointed out here in this official Executive Board document.
This is a problem because in reality programme staff spends much more than 1% of its time on supervising extra projects.

One of the reasons for this "under recovery" is that international organizations often have to compete for donors, so they all try to keep their project fees as low as possible to attract donors. This is an understandable, but unhealthy situation. UNESCO must recover all its costs because otherwise its staff will become so overburdened that it can no longer implement even its standard programme activities.

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