Fiscal prudence dictates that management of public funds be subjected to careful scrutiny. International institutions that administer U.S.-contributed dollars certainly should not be exempt from such analysis. The Washington Post, therefore, is to be commended for its decision to examine the financial practices of the United Nations.
Regrettably, the conclusions that emerge from the two articles on this subject [A1, June 17 and 18] reflect an innocence of any acquaintance with accounting pocedures and a misunderstanding of how the United Nations system operates.
First, Post reporter Ronald Kessler contends that the $1.4 billion maintained in United Nations bank accounts around the world is "excessive." This figure only has meaning when it is applied against the liability side of the ledger, for out of this sum must come payment for current obligations and future commitments. The family, for example, with $10,000 in its checking account on July 1 may find itself in debt on Sept. 1 when college tuition bills come due.
Since most U.N. agencies do not have borrowing authority, meeting two- to four-year commitments out of unpredictable annual contributions requires the accumulation of substantial reserves to meet predictable payments as they come due. Too, many development organizations, such as AID, are required to maintain one dollar in the bank for every dollar of future expenditure commitments. But on December 31, 1977, UNICEF's cash balance of $131 million was less than one half its 1977 contractual commitments. Using AID's standards, UNICEF's deposits should have been $304 million.
The "commitment" discussion is further complicated when the subject of "pipelines" is introduced. In congressional jargon, this refers to undisbursed commitments. Funds are appropriated and then earmarked, but they are not instantly disbursed, since contracts have to be let, equipment purchased and personnel hired. To the untrained observer, these unliquidated obligations distort the "net worth" of the agency in question.
Second, the series asserts that the U.N. does not earn the highest possible return on its checking accounts. One should not compare 1977 interest rates with current rates, which are substantially higher. Further, it was only recently that federal statutes allowed any interest payment on demand deposits. And of course, the United Nations and its 40 agencies have more than a thousand accounts scattered throughout the world. Many countries retain their contributions, until callable by the United Nations, in their national treasures or in domestic financial institutions at rates that, as sovereign nations, they arbitrarily establish.
Third, The Post avers that United Nations financial procedures do not conform to accepted business principles. The United Nations simply cannot be equated with private enterprise. It may not borrow funds against shortfalls or in anticipation of revenues. Decisions of the "board of directors," comprised of representatives of 151 independent nations, often are politically motivated. Contributions of inconvertible currencies can be spent only in the donor's country.Uncollected assessments cannot be written off as "bad debts."
The timing of The Post's articles also is unfortunate.They come in the midst of the appropriation process for United States contributions to the various United Nations agencies when it is not easy to have orderly consideration of theses questions.
On June 27 two House foreign affairs subcommittees held joint hearings to consider The Post's allegations. Virtually every one of Mr. Kessler's charges was refuted or explained in its full context, convincing those present that his criticisms were unfair. Unfortunately, one could not discern this from The Post's June 28 account of the session.