ILO is a specialized agency of the United Nations

273rd Session
Geneva, November 1998

Programme, Financial and Administrative Committee



Cooperation between the ILO and multibilateral donors

1. Since 1993 the Committee has been kept informed of the difficulties the Office has encountered in meeting the financial and administrative arrangements required by the European Commission (EC) for the implementation of its projects, and of the negotiations that have taken place. The objective of these negotiations was to find acceptable arrangements that could be embodied in a standard agreement with the EC.

2. In March 1998 the Office submitted a paper to the Committee indicating the derogations from the Financial Regulations, an estimate of the budgetary provision to cover expenditure that would not be reimbursed by the EC, and the changes in financial procedures that would be required in order to accommodate the demands of the EC.(1) The Governing Body took note of the paper and referred it to the International Labour Conference without taking a position on its points for decision.

3. At the 86th Session (June 1998) of the International Labour Conference, the Finance Committee of Government Representatives considered a paper concerning cooperation between the ILO and multibilateral donors.(2) The Committee did not approve the proposed derogation from the Financial Regulations or the establishment of a specific budgetary provision to cover additional expenditure, but encouraged the Office to continue negotiations with the EC and to inform the Programme, Financial and Administrative Committee at the present session of the Governing Body of the status of negotiations. It also asked that information be provided on differences between the administrative requirements of the EC and the standard procedures applied to other multibilateral donors, as well as the experience of other agencies of the United Nations system in working with the EC.

4. The appendix to this document sets out in tabular form the administrative and financial requirements proposed by the EC to the United Nations and its funds and programmes (United Nations) in its latest draft agreement, and shows how they differ from those accepted by other multibilateral donors in their agreements with the ILO. The requirements set out in these latest proposals by the EC are not necessarily those that are currently applied by it.

5. As regards other agencies, the Committee was previously informed that the FAO(3) and UNESCO(4) had concluded individual agreements with the EC. Consultations with the United Nations and other specialized agencies have confirmed that they are in a very similar position to that of the ILO and are encountering the same difficulties with respect to the financial and administrative procedures, which severely limit their cooperation with the EC. As is the case with the ILO, these agencies take whatever practical measures they can either to avoid accepting clauses that are not in accordance with their financial rules and procedures, or to negotiate compromises that involve minimal additional cost and depart the least from legislative requirements.

6. Further discussions have taken place between representatives of the EC and the Office and also between representatives of the EC and the United Nations. The meeting between the EC and the Office provided an opportunity to clarify a number of issues. The representatives of the EC confirmed to Office that it was their intention to develop a standard model agreement with the United Nations that would also be applied to all United Nations specialized agencies. The representatives of the EC understood the issues confronting the Office and undertook to review the financial and administrative requirements that were perhaps more relevant to non-governmental organizations and commercial organizations than to the United Nations system, although they could give no assurances as to the likelihood of being able to make any compromises.

7. Subsequently, a revised draft standard agreement was proposed by the EC to the United Nations. The United Nations and the specialized agencies considered the draft to be unworkable in its current form, and agreed that further negotiations were essential. At the meeting of the Consultative Committee on Administrative Questions (CCAQ) in August 1998, the United Nations was requested to include interested specialized agencies in their negotiations with the EC. In preparation for such negotiations, the ILO communicated its concerns on the revised draft standard agreement to the United Nations.

8. In mid-September a meeting between a senior representative of the United Nations and the EC took place in Brussels, but did not result in any significant progress. However, it was agreed that negotiations would continue between the United Nations and the EC on this subject. The Committee will be kept informed of all future developments.

Geneva, 29 October 1998.


Differences between the administrative/financial requirements
applied by standard multibilateral donors to the ILO and
those proposed by the EC in the latest draft agreement
submitted to the United Nations

Multibilateral donors

European Commission

Provision for administrative and technical backstopping:

13 per cent flat rate

Sliding scale from 7 per cent to 1 per cent

Full funding as periodic advances of funds are made to the ILO to cover planned expenditure

No full funding due to the retention of a part of the funds pending project completion and submission of final report

All funds are integrated in the ILO cash management system to allow for efficient treasury operations

Separate bank accounts for EC funds

Interest credited to donors on temporarily surplus funds at rate earned by the ILO

Interest credited on temporarily surplus funds; however, in addition to this, penalty interest imposed by the EC, to be paid by the ILO for delays in delivery

Standard reporting format

Ad hoc budget and reporting formats

Financial reports expressed in US dollars, the ILO currency of account

Reporting to be in ECUs/Euros

Summarized financial report is basis for remittance of funds

Copies of supporting documents required to be appended to detailed financial reports, e.g. invoices, purchase orders, etc.

Project staff remunerated in accordance with UN common system provisions

Remuneration for project staff at fixed monthly rates, determined by the EC. This could preclude such staff from employment under the ILO Staff Regulations

Procurement is subject to international bidding

Procurement of goods and supplies limited to EC member countries and specified beneficiary countries

Recruitment is generally open to all nationalities

Recruitment limited to nationals of the countries of the European Union, the beneficiary countries and certain other countries

1. GB.271/PFA/7/8.

2. FC/D.2.

3. GB.256/PFA/5/10.

4. GB.265/PFA/6/3.

Updated by VC. Approved by RH. Last update: 26 January 2000.