1. Projected Statutory and Inflationary Adjustments to the Regular Fund Program-Budget for 2007 GENERAL SECRETARIAT OF THE ORGANIZATION OF AMERICAN STATES Secretariat for Administration and Finance - Department of Budgetary and Financial Services

2. - Projected Statutory and Inflationary Adjustments p. 2 - Preamble

3. - Projected Statutory and Inflationary Adjustments p. 3 -  In his presentations, the Secretary General concluded that the principal cause of the OAS’ financial weakness was the systematic reduction of its budget due to the freeze in ordinary (RF) income, accompanied by an increase in mandates.  Special and Regular GA’s took corrective steps by: a.Updating the scale of quota assessments, b.Raising the 2007 budget ceiling, and c.Approving a 3% quota increase in 2007.  In addition, in 2005 and 2006 the Permanent Council gave the Secretariat additional budget authority to permit it to respond to essential requirements.  The SG, in his June 5 speech, urged resolution of the recurrent cost- of-living adjustment issue as the last critical link in strengthening RF financing. Discussions and Decisions of the 2006 Special and General Assemblies

4. - Projected Statutory and Inflationary Adjustments p. 4 - Our role, as representatives of Member States and as managers in the Secretariat, is to ensure that the Organization is strong and effective, able to achieve its mandates. While financial resources alone will not guarantee an organization’s success, it cannot lead and cannot prosper without a sound, trained and well-equipped human and operational base. It is through its people, systems and facilities that the Organization delivers on its mission of strengthening hemispheric democracy and governance, human rights, multidimensional security and integral development. It is with this broader focus in mind that we review the specific issues in this presentation. Strategic Considerations

5. - Projected Statutory and Inflationary Adjustments p. 5 - Contents Objective Background Personnel Costs Operating Costs Projected Totals Financing Options and Expenditure Control Measures

6. - Projected Statutory and Inflationary Adjustments p. 6 - Objective To address the projected RF budget shortfall in 2007 arising from: –Statutory adjustments to personnel costs; and –Loss of purchasing power for operating costs due to inflation. To provide options for addressing the shortfall. To incorporate a workforce planning mechanism and revised personnel policies to control and contain future personnel costs.

7. - Projected Statutory and Inflationary Adjustments p. 7 - Background

8. - Projected Statutory and Inflationary Adjustments p. 8 - Background January 2006: Special GA mandated a RF budget ceiling for 2007 not to exceed $81.5 million. June 2006: GA Budget Resolution for 2007 RF: 2007 Program-Budget Operating Costs $30.3 M Personnel $51.2 M

9. - Projected Statutory and Inflationary Adjustments p. 9 - Budget authorization does not contain sufficient funds to cover: –Statutory adjustments to personnel costs; and –Inflation-driven increases in cost of operations. GA considered “that an increase in object 1, coupled with other mandatory increases … could … require a revision of the 2007 program-budget …” 2007 Program-Budget Background (cont.)

10. - Projected Statutory and Inflationary Adjustments p. 10 - Current OAS salary policy is based on Resolutions of GA and PC 1994 Resolutions AG/RES. 1275 and CP/RES. 631, both titled “Modification of the General Secretariat’s Staff Compensation System” General Standards - Article 40 (“Salaries”) –“The salaries in force for the staff of the General Secretariat shall be the salaries in force at the United Nations Secretariat …” Background (cont.)

11. - Projected Statutory and Inflationary Adjustments p. 11 - To absorb required inflationary and statutory adjustments, the Organization was forced to downsize by: Suspending replacements for retiring / departing personnel; Freezing recruitment; Curtailing training and others staff investments; Reducing services; and Postponing required maintenance and timely replacement of equipment. Background (cont.) Therefore, the Organization reduced its capacity to comply with mandates.

12. - Projected Statutory and Inflationary Adjustments p. 12 - Have these actions worked? Regular Fund Budget reductions were realized. However, they have adversely affected the activities of the Organization by: – Creating gaps in priority areas; – Weakening internal controls; and – Reducing response capability. Background (cont.)

13. - Projected Statutory and Inflationary Adjustments p. 13 - Need to fill existing vacancies to adequately comply with mandates and reduce vulnerabilities. Requirement to fill nine new positions without affecting budget ceiling. Background (cont.) The 2007 budget presents additional challenges:

14. - Projected Statutory and Inflationary Adjustments p. 14 - Personnel Costs

15. - Projected Statutory and Inflationary Adjustments p. 15 - Personnel Costs Regular Fund – Monthly Payroll The monthly total RF payroll cost has not changed significantly since 1995. The cost per RF staff member has risen at a rate of 3.9% annually since 1995. From 1995 through 2005, the number of RF staff members decreased by 31.5%.

16. - Projected Statutory and Inflationary Adjustments p. 16 - Personnel Costs (cont.) Regular Fund – Monthly Payroll December 1995 June 2001 December 2005 June 2006 Actual Cost (US$ million) RF Staff Avg. Cost per Staff Member (US$) $3.9 $3.5 $3.7 $4.1 709 555 486 502 $5,500 $6,300 $7,600 $8,200

17. - Projected Statutory and Inflationary Adjustments p. 17 - Key Factors in Payroll Cost Increases: Revisions to Post Adjustment for Professional Staff. Revisions to Basic Salary Scale for General Services Staff. –Both are calculated by the United Nations. Retirement Fund Contributions. –Lower than those of the UN system. Health Insurance Premiums. –Increased by over 80% over the last five years, despite reductions in benefits. Personnel Costs (cont.)

18. - Projected Statutory and Inflationary Adjustments p. 18 - UN Post Adjustment and cost is higher in New York than in Washington DC Post Adjustment: OAS vs. UN Annual Basic Salary, P4 Step 8, without dependents $67,909 Post Adjustment$45,635$31,034$22,750 Total net remuneration$113,544$98,943$90,659 Retirement Contribution$23,026$20,546 Total Cost$136,570$119,489$111,205 NY, USDC, US Nicaragua

19. - Projected Statutory and Inflationary Adjustments p. 19 - Monthly RF Payroll Components: (US$ million) Basic Salary (Prof./GS) Post Adjustment Retirement Fund Health Insurance Other Components* TOTAL December 1995 2.40.60.50.30.083.9 June 2001 2.40.40.50.20.063.5 December 2005 2.30.6 0.20.073.7 June 2006 2.40.70.60.30.094.1 * Other Components: Allowances, Life Insurance. Personnel Costs (cont.)

20. - Projected Statutory and Inflationary Adjustments p. 20 - Payroll Components 2007 Approved Budget Non-budgeted adjustments Projected Total 2007 1 - Basic Salary 29.80.3830.2 2 – Post Adjustments 9.50.9910.5 3 – Retirement Fund 7.70.278.0 4 – Health Insurance 3.40.353.7 5 – Others 0.80.020.8 Totals51.22.0153.2 Projected Statutory and Inflationary Adjustments for 2007 (US$ million) Personnel Costs (cont.)

21. - Projected Statutory and Inflationary Adjustments p. 21 - Projected Statutory and Inflationary Adjustments for 2007 (US $ Million) Personnel Costs (cont.)

22. - Projected Statutory and Inflationary Adjustments p. 22 - Projected Statutory Adjustments for 2007 – Basis for Calculations Basic Salary: –General Services at Headquarters 5% –General Services away from Headquarters 3% Post Adjustment: –Professionals at Headquarters 4.5% of total remuneration –Professionals away from Headquarters 2.5% of total remuneration Retirement Fund Contributions: –Represents approximately 13% of remuneration adjustments Health Insurance Premiums: –10% (Blue Cross Blue Shield, Kaiser) Others: –3% (Allowances, Life Insurance) Personnel Costs (cont.)

23. - Projected Statutory and Inflationary Adjustments p. 23 - Operating Costs

24. - Projected Statutory and Inflationary Adjustments p. 24 - Operating Costs Evolution From 1995 through December 2005 the Operating Cost Budgets (Objs. 3-9) decreased by 28%. Historical trend is reversed beginning in 2006. APPROPRIATION Objects 3-9 1995 – 2007 (US$ 1,000)

25. - Projected Statutory and Inflationary Adjustments p. 25 - Projected Inflationary Adjustments for 2007 – Objects 2 - 9 Object of Expense 2007 Approved Budget Non-budgeted adjustments Projected Total 2007 2- Non-recurrent Personnel 1.20.11.3 3 – Fellowships 7.0- 4 - Travel 1.50.21.7 5, 6, and 9 – Documents, Equipment and Other Costs 7.90.28.1 7 – Building Maintenance 5.90.26.1 8 – Performance Contracts 6.80.27.0 Totals30.30.931.2 Operating Costs (cont.)

26. - Projected Statutory and Inflationary Adjustments p. 26 - Projected Totals

27. - Projected Statutory and Inflationary Adjustments p. 27 - Projected Totals Object of Expense 2007 Approved Budget Non-budgeted adjustments Projected Total 2007 1 – Personnel 51.22.053.2 2- Non-recurrent Personnel 1.20.11.3 3 – Fellowships 7.0- 4 – Travel 1.50.21.7 5, 6, and 9 – Documents, Equipment and Other Costs 7.90.28.1 7 – Building Maintenance 5.90.26.1 8 – Performance Contracts 6.80.27.0 Totals81.52.984.4 Projected Totals

28. - Projected Statutory and Inflationary Adjustments p. 28 - Financing Options and Expenditure Control Measures

29. - Projected Statutory and Inflationary Adjustments p. 29 - Financing Options and Expenditure Control Measures Adjustments up to a cap of 3% approved automatically. Increase budget authority only for 2007. Adopt a proactive workforce planning strategy.

30. - Projected Statutory and Inflationary Adjustments p. 30 - Financing Option # 1 – Adjustments up to a cap of 3% approved automatically Adopt a mechanism to adjust annual budget ceilings up to 3% to cover statutory and inflationary costs. Pros: Predictable resources to insure proper implementation of mandates. Simplifies decision-making process for the governing bodies. Resolves a long-standing problem. Challenge: Requires General Assembly approval to adjust budget ceilings and quota assessments automatically up to a capped percentage.

31. - Projected Statutory and Inflationary Adjustments p. 31 - UN Regular Budget Assessments are adjusted annually (US$ millions) Financing Option # 1 – Adjustments up to a cap of 3% approved automatically (cont.)

32. - Projected Statutory and Inflationary Adjustments p. 32 - Financing Option # 2 – Increase Budget Authority only for 2007 Authorize $2.9 million from RF Reserve Subfund to cover adjustments (3.6%) Pros: Resources are available. Resolves an immediate problem. Cons: Short-term solution to a long-standing problem. May adversely affect liquidity. Postpones resolution of 2008 budget ceiling.

33. - Projected Statutory and Inflationary Adjustments p. 33 - Reserve Subfund 2006 Outlook Financing Option # 2 – Increase Budget Authority for only 2007

34. - Projected Statutory and Inflationary Adjustments p. 34 - Expenditure Control Measure: Workforce Planning Adopt a workforce planning strategy to: Manage and sustain human resources in a cost- effective, efficient and integrated manner; Contain projected rate of growth in personnel costs; and Relieve the RF of cost associated with activities appropriately financed by specific funds.

35. Workforce Planning THE RIGHT PEOPLE IN THE RIGHT PLACE AT THE RIGHT TIME GENERAL SECRETARIAT OF THE ORGANIZATION OF AMERICAN STATES Secretariat for Administration and Finance Department of Human Resources

36. - Projected Statutory and Inflationary Adjustments p. 36 - Contents Workforce Planning Objectives Past Practices Current Situation Challenges and Opportunities Plan of Action - Workforce Planning p. 36 -

37. - Projected Statutory and Inflationary Adjustments p. 37 - Workforce Planning Objectives Manage and control growth of staffing costs Match resources to needs Respond effectively to changing needs Increase organizational efficiency Enhance job satisfaction and productivity - Workforce Planning p. 37 -

38. - Projected Statutory and Inflationary Adjustments p. 38 - Past practices Lack of workforce planning resulted in: Redundancies and shortages in functions & skills Distortions in the staffing structure RF workforce downsizing and freezing irrespective of need Uncontrolled increase in CPR’s and other hiring mechanisms Uneven enforcement of Human Resources policies and rules - Workforce Planning p. 38 -

39. - Projected Statutory and Inflationary Adjustments p. 39 - Staff Member Count 1995 - 2005 As of 9/30/06.This does not include an estimated 48 CPR’s who perform staff functions and Temporary Support / Local Professionals Past practices (cont.) - Workforce Planning p. 39 - 1 1

40. - Projected Statutory and Inflationary Adjustments p. 40 - Current Situation 652 Staff Members as of 9/30/06 Type of AppointmentRF StaffSF Staff Career146 0 Continuing Contract40 0 Long Term Contract158 50 Short Term Contract105 60 Local Professional0 2 Trust/ Non- Career56 0 Trust/ Career3 0 SOC0 28 Others* (Associate, TSP) 04 Total508144 Total 652 - Workforce Planning p. 40 - * * * Record for local proffesionals and support personnel is incomplete at this time

41. - Projected Statutory and Inflationary Adjustments p. 41 - OAS Types of Appointments - Workforce Planning p. 41 -

42. - Projected Statutory and Inflationary Adjustments p. 42 - Staff by Funds 652 Staff Members Current Situation (cont.) - Workforce Planning p. 42 -

43. - Projected Statutory and Inflationary Adjustments p. 43 - RF Staffing Staff by Level 301 Staff Members at Professional Level (59%) 207 Staff Members at General Services level (41%) By type of appointment 508 staff members as of 9/30/06 Current Situation (cont.) - Workforce Planning p. 43 - Staff

44. - Projected Statutory and Inflationary Adjustments p. 44 - SF Staffing 106 Staff Members at Professional Level (73%) 38 Staff Members at General Services level (27%) By type of appointment 144 staff members as of 9/30/06 Current Situation (cont.) - Workforce Planning p. 44 - Staff

45. - Projected Statutory and Inflationary Adjustments p. 45 - Challenges Manage all positions irrespective of funding source Match available skills with functional needs Allocate workforce based on predictable funding Optimize use of projected RF vacancies Emphasize coordinated staff development Institutional competencies not aligned to emerging vision and mission In the next 5 years 25% of the RF workforce will retire Minimal recruitment and staff development has left the Secretariat ill-prepared to confront future requirements Opportunities Challenges and Opportunities - Workforce Planning p. 45 -

46. - Projected Statutory and Inflationary Adjustments p. 46 - Projected retirements 2006-2011 YearG-1G-2G-3G-4G-5G-6G-7TotalP-1P-2P-3P-4P-5D-1TotalTOTAL 20061 11 227 116 8 15 20071 1 4 61 64112 18 2008 221 5 1 8 9 14 2009 1123 71 255 13 20 2010 11241911 2217 16 2011 1 1 316 1 32 6 12 Total214610134403241727255 95 Challenges and Opportunities (cont.) - Workforce Planning p. 46 -

47. - Projected Statutory and Inflationary Adjustments p. 47 - Plan of Action Regular fund: core, permanent functions & skills Top and mid level management Public information & external relations Legal counsel Conferences & meetings Administration: central areas and country offices Project administration Audit oversight Specific funds: variable needs & special requirements Technical programs Special missions Projects 1. Target allocation of RF and SF resources - Workforce Planning p. 47 -

48. - Projected Statutory and Inflationary Adjustments p. 48 - Regular Fund: Maintain a stable RF-funded workforce within statutorily adjusted budget Uniform classification system to avoid grade creep Facilitate rotation of staff members to strengthen areas Facilitate outplacement as appropriate Specific Funds: Focus existing resources on priority mandates Seek and expand use of SF to finance emerging mandates Apply uniform HR policies & practices to SF, including indirect costs recovery 2. Human Resources objectives by funding source Plan of Action (cont.) - Workforce Planning p. 48 -

49. - Projected Statutory and Inflationary Adjustments p. 49 - 3. Optimize use of projected RF vacancies Position conversion according to organizational needs (e.g., replacing higher grades position with a greater number of lower ones) without increasing costs 4. Fill vacant posts Redefine job descriptions Implement generic job descriptions Streamline administrative functions in technical areas 5. Staff Development Redirect training programs to focus on highest functional needs Put in place an effective performance management system Improve performance reward mechanisms Promote confidence in and use of central administrative systems Develop succession planning Enhance individual job satisfaction Plan of Action (cont.) - Workforce Planning p. 49 -

50. - Projected Statutory and Inflationary Adjustments p. 50 - Thank you