VZCZCXYZ0001
PP RUEHWEB

DE RUCNDT #0053/01 0241701
ZNR UUUUU ZZH
P 241701Z JAN 07
FM USMISSION USUN NEW YORK
TO SECSTATE WASHDC PRIORITY 1182

UNCLAS USUN NEW YORK 000053 
 
SIPDIS 
 
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E.O. 12958: N/A 
TAGS: AORC UNGA KUNR
SUBJECT: UN CAPITAL MASTER PLAN: GENERAL ASSEMBLY APPROVES 
FINANCING PLAN AND BUDGET 
 
REF: A. USUN 2116 
     ¶B. SECSTATE 190201 
     ¶C. USUN 2194 
     ¶D. SECSTATE 193094 
     ¶E. USUN 2228 
     ¶F. SECSTATE 198796 
 
¶1.  SUMMARY: After several years of debate over how to 
finance the project, during which time the cost has 
significantly increased, the General Assembly (GA) decided 
that Member States should be directly assessed for their 
share of the total costs for the UN Capital Master Plan 
(A/61/251).  The General Assembly also approved a project 
budget of $1,876.7 million, the establishment of a letter of 
credit facility, and a $45 million working capital reserve 
fund.  The resolution includes U.S. language emphasizing the 
importance of the project staying on schedule and within 
budget and does not include language critical of the U.S. as 
host country.  Due to the late issuance of the 
Secretary-General's report, the Fifth Committee did not have 
 
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much time to consider the very technical issues related to 
the financing of the project.  However, since all delegations 
desired to reach a conclusion on the topic during the main 
session of the 61st UN General Assembly in order to allow the 
project to move ahead without further delay, the Committee 
worked through many important issues in a generally 
cooperative spirit.  Discussions principally focused on 
issues related to the letter of credit and the amount of time 
Member States would have to make payments.   END SUMMARY. 
 
¶2.  The Fifth Committee made all the decisions requested by 
the Secretary-General in his report, including approving a 
project budget, deciding on a financing plan, agreeing to the 
establishment of a letter of credit facility, and creating a 
working capital reserve fund.  At this stage, the General 
Assembly has made all of the necessary decisions that are 
required for the Capital Master Plan (CMP) to move forward. 
It is now up to the Secretary-General to implement the 
project and to ensure the work stays on schedule and within 
budget.  The GA will continue its oversight of the project 
through yearly progress reports. 
 
¶3.  Pre-construction work will continue in 2007, with 
construction expected to begin in early 2008.  In order to 
ensure that the Secretary-General has obligation authority 
equal to expected expenditures in 2007, the GA approved an 
additional appropriation of $42 million.  In combination with 
previous appropriations, this amount provides authority for 
expected spending in 2007.  The cash required to fund this 
appropriation will come from the 2007 assessments of Member 
States and does not represent an additional cost. 
 
 
STAYING ON SCHEDULE AND WITHIN BUDGET 
------------------------------------- 
 
¶4.  The GA approved a project budget of $1,876.7 million, 
including additional scope options for security, redundancy 
and sustainability.  This budget level does not include any 
fees associated with a letter of credit facility; those costs 
will be assessed separately.  The resolution includes 
U.S.-initiated language that emphasizes the importance of 
staying on schedule and within budget.  The GA requested the 
Secretary-General to make every effort to avoid budget 
 
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increases through sound project management practices and to 
ensure that the CMP is completed within the approved budget 
and time schedules.  There is also language emphasizing the 
importance of effectively managing the multiple relocation of 
staff that will be necessitated in order to keep the entire 
project on schedule.  Finally, noting that forward pricing 
escalation is already included in the approved budget level, 
the General Assembly requested the Secretary-General to 
provide options on how to remain within the approved budget 
level in the unlikely event the cost will exceed the approved 
budget. 
 
 
LETTER OF CREDIT 
---------------- 
 
¶5.  Members of the Group of 77 and China (G-77) were 
particularly concerned about the letter of credit, and in 
particular, possible drawdowns, especially if the normal 
thirty-day rule applied for payments. (NOTE: The UN Financial 
Rules and Regulations state that Member States have thirty 
days from receipt of an assessment letter in which to make 
their payments.  Most Member States do not make their 
payments in this time period, but there are no punitive 
actions for not doing so.  In the case of the CMP, those 
Member States that do not make their payments in full and 
within the prescribed payment period will be assessed a 
portion of the interest charges incurred from a drawdown on 
the letter of credit.  END NOTE.)  Based on these concerns, 
 
 
the G-77 sought to defer a decision on the letter of credit 
and make an exception to the thirty-day payment period for 
CMP assessments, suggesting a 120-day period to make payments 
and to be considered "on time."  The EU, CANZ, and 
Switzerland preferred the normal 30 days and resisted 
attempts to lengthen the payment period.  After being 
provided clarifications from the Secretariat regarding the 
need for the letter of credit (and the need for a decision on 
it at the main session of the General Assembly), the G-77 
agreed to move ahead with its establishment as part of a 
larger deal that would include a longer payment period. 
 
¶6.  The resolution therefore allows the Secretary-General to 
proceed with the establishment of a letter of credit as well 
as with any drawdowns that may be necessary.  In agreeing to 
drawdowns, the GA also requested the Secretary-General to 
advise Member States, as far in advance as possible, but 
preferably ninety days in advance, if a drawdown was likely. 
The GA also agreed to allow the Secretary-General to assess 
Member States for their share of the interest charges related 
to the drawdown, using the methodology proposed in his report 
to determine each Member State's share.  Only Member States 
that have not paid their full assessment within the 120-day 
payment period AND whose lack of payment caused the need for 
a drawdown will be charged.  Therefore, a Member State whose 
payment is simply late, but does not cause a cash flow 
problem, will not be charged.  As instructed, USDel stated 
that the U.S. could agree to this mechanism, but was 
legislatively prohibited from paying interest charges should 
the U.S. be so assessed.  Only the EU commented on the U.S. 
position.  The UN will report on the status of negotiations 
on the letter of credit in the next progress report, due in 
the fall of 2007.  This report will also update the GA on the 
fees associated with the letter of credit and will request 
authority to assess Member States for their share of the fees 
for 2008. 
 
 
ASSESSMENTS AND TIMING 
----------------------- 
 
¶7.  The General Assembly agreed to give Member States the 
option of paying their assessments for the project either 
through a one-time payment or through five equal 
installments.  The default plan is the multi-year payment 
plan, so if the one-time payment is chosen, the Member State 
must notify the Secretariat of this decision within 60 days 
of the issuance of the assessment in 2007.  After an 
additional 60 days (total of 120 days from the date of 
assessment), this decision will be irrevocable.  However, a 
Member State that is on the multi-year payment plan can at 
anytime choose to pay its outstanding remaining balance in 
one payment, a point that was clarified in the formal meeting 
by the Controller.  The assessment rate is fixed at the 2007 
scale as decided in December 2006 by the GA, even if a Member 
State chooses to pay over five years.  As stated above, 
Member States are given 120 days from the date of assessment 
to make their payments.  If the full payment is received 
during that time period, the Member State will be considered 
to have paid on time.  Assessments will be issued during the 
first working week of January each year.  The total to be 
assessed to Member States is $1,716,700,000, the net amount 
of the budget after taking into account appropriations to 
date.  For the U.S. this equals $377,674,000, for a one time 
payment or five yearly payments of $74,534,800.  Should the 
budget ever increase over the approved level of $1,876.7 
million, all Member States, regardless of the payment plan 
chosen, will be required to fund their share of the 
additional costs.  However, the UN cannot go over the 
authorized budget level without GA approval. The UN will earn 
interest on the funds and each Member State will receive a 
credit (at its 2007 assessment rate) at the end of the 
construction period.  Member States can apply this credit to 
another assessment if they so choose. 
 
 
WORKING CAPITAL RESERVE 
------------------------ 
 
¶8.  In the event that the cash on hand does not cover 
anticipated expenditures, the first source of additional cash 
for the UN would be the working capital reserve fund.  It is 
set at $45 million and all Member States will be assessed in 
2007 for a one-time contribution to the fund.  The U.S. share 
at 22 percent is $9.9 million. 
 
 
OTHER ISSUES 
------------- 
 
¶9.  In addition to the decisions noted above, there are a few 
other issues that should be highlighted: 
 
 
-- The Secretary-General is requested to have consultations 
with the host country regarding possible ways the letter of 
credit could be established without the imposition of fees or 
charges to the United Nations.  As instructed, USDel agreed 
to the language but clarified that agreeing to have 
consultations did not guarantee any particular outcome. 
 
-- The resolution includes previously agreed language on 
oversight and procurement, emphasizing the importance of 
oversight and the need for procurement processes to be 
conducted in a transparent manner.  In addition, the GA 
emphasized that contracts for the CMP should stipulate that 
the UN will not be responsible for any delays, damage or loss 
on the part of the contractor. 
 
-- The Secretary-General is requested to ensure that gifts 
and works of art are handled appropriately, and that related 
costs are foreseen.  According to the Secretariat, the CMP 
budget includes funds to handle unmovable works of art, while 
the Facilities Management office will request funding in the 
context of the regular budget to deal with movable works of 
art.  In addition, those Member States that wish to take care 
of their gifts may do so, but there is no obligation in this 
regard. 
 
-- Finally, concerning financing for the CMP, the GA made a 
number of exceptions to the Financial Rules and Regulations 
and other normal ways of dealing with financial issues.  The 
resolution clarifies that the CMP is unique and exceptional 
and shall not be construed as setting a precedent for or 
creating any permanent changes to the Financial Rules and 
Regulations. 
 
¶10.  In addition to the statement made by the Controller 
referenced in paragraph 7 above, the Controller made other 
points, all at delegations' request, during the formal 
meeting, prior to the adoption of the resolution.  He 
clarified the CMP schedule, stating that all work was to be 
completed by 2014, and noted that contributions would be 
considered as received once the physical check arrived in the 
contributions service or the funds were electronically 
transferred into the UN's account.  He also stated that 
Member States that pay their contribution in full within the 
120 day period would not be at risk of being charged for any 
interest incurred by the UN from a drawdown on the letter of 
credit.  He also explained again the methodology to be used 
to apportion interest charges to Member States. 
 
¶11.  After the adoption of the resolution during a formal 
meeting of the Fifth Committee, several delegations, 
including USDel, made brief statements welcoming the adoption 
of the resolution.  In its statement, South Africa, on behalf 
of the Group of 77 and China, noted that the original swing 
space envisioned for the project was no longer available and, 
bearing in mind host country responsibilities, hoped that 
consultations with the host country would be productive. 
Cuba stated that it was regrettable that the host country had 
not offered an interest-free loan, especially given the 
benefits received from the UN presence generally and from 
this project in particular.  Jamaica reiterated its interest 
in having a permanent building on the North Lawn and asked 
delegations to reconsider the planned demolition of the 
temporary conference building. 
 
¶12.  USUN appreciates the Department's prompt responses to 
requests for guidance, which helped ensure that USUN could 
effectively pursue U.S. interests on this matter. 
 
WOLFF