1. Cost Recovery Policy: HLCM-UNDG Consultation
New York 4 April, 2008
WHO – Erik Blas

2. The Policy and its Environment
The Evolving Policy
Harmonization
Definitions:
Direct,
Fixed indirect, and
Variable indirect
Rates
13% 7%
Other
Starting to view the budget by segments
Base programmes
Outbreak and Crisis Response
Partnerships and Collaborative Arrangements
Within the Programme Budget
Outside of the Programme Budget
Current Finance and Administrative Systems
Do no lend themselves easily for detailed analysis of income and costs
Therefore also the analysis in this presentation should be take with some grains of salt
Global Management System
Roll-out starts in June of this year
Improve processing efficiency
Allow off-shoring and economies of scale
Better tracking and analysis of work plans, budgets, incomes and expenditures
Facilitate cost attribution, direct costing, and cost recovery

3. Cost Structure 2006-07 Nature of the 'Business' WHO is
An organization of member states
Decentralized with regional governance structures and considerable autonomy
Knowledge-based, BUT
Rapid growth in new 'business lines'
"Partnerships"
Outbreak and crises responses
Other collaborative arrangement
'Projects' in the traditional areas of work are typically
Relatively small
Very diverse, and
Involving large numbers of external experts, institutions and transactions

4. Financing (2006-07 in US$ Thousand)
For 'Leadership & Direction' and 'Enabling Functions'
Much larger share of AC compared to Technical Areas
Indication of AC 'subsidizing' VC?

5. Sources of AS financing in 2006-07
Current income for AS not sufficient to fund the indirect costs
Large share of the total VC income does not generate any PSC
Achieving 7% effective PSC for Collaborative Arrangements, partnerships and response would go a long way in eliminating the shortfall

6. Current Challenges Rapid growth in 'low PSC-earning' VC-incomes
AC subsidizing indirect costs related to growth in new types voluntary funded projects – financing gap
Adjusting to and accommodating the new business lines
Standard costing and budget control
Stream-line operation and cost control
Increase direct cost recovery without losing it to increased bureaucracy and transaction costs
Costing services and charging housed partnerships appropriately
The large proportion of income currently not generating PSC, but incurring indirect costs – this includes transfers between UN agencies