Department of State and U.S. Information Agency

Recommendations and Actions

DOS09: Change UN Administrative and Assessment Procedures


The end of the Cold War has produced a changed international system-- a system in which the United Nations (UN) plays a central role. For example, regional security issues have replaced the former Soviet threat, and multilateral diplomacy--as practiced through the UN-- takes on new importance. Additionally, transnational issues such as the environment and illegal narcotics trafficking require global solutions, and the UN plays a prominent role in framing a global approach.

The United States bears a disproportionate share of UN costs. Increases in these costs and--more importantly--what is accomplished with United States contributions are of special interest to the American people and Congress. They need assurance that the UN is using its resources efficiently, effectively, and as intended. Domestic constraints also require that the United States find ways to encourage other nations to share the UN's financial burden more equitably. While the United States is in the process of presenting a series of reform proposals to the UN, the United States should also try to simplify and streamline some of its own administrative procedures with respect to the UN.

The United States should seek to ensure that an effective oversight mechanism is established in the UN that would provide improved accountability and the means to guarantee that UN programs are accomplishing their approved intent and properly using resources assessed from members. The announced establishment by the Secretary General of an Office of Assistant Secretary General (ASG) for Inspections and Investigations is an excellent start. Part of this improved accountability should be the requirement that UN managers report frequently on the organization's financial performance.

The immediate creation of a UN Office of Inspector General (OIG) or similar office would be an effective follow-up to the Office for Inspections and Investigations in addressing the oversight and accountability question. Establishing such an office will ensure that an independent evaluation of operational and management practices is conducted on a regular basis. The UN does have a Joint Inspection Unit with 11 inspectors plus staff. However, this unit does not function as an effective OIG. There are not a sufficient number of inspectors to cover the far-flung operations of the UN, nor are inspectors allowed access to all the information they need to complete a thorough inspection or audit. Currently, UN managers do not allow personnel from the Joint Inspection Unit to see financial records and accounts. Without the ability to review this information, it is impossible for the inspectors to perform a bona fide OIG role.

In addition to ensuring--through increased reporting and the creation of an oversight office--that member states are getting value for their UN payment of assessments, the UN's procedures for computing the assessment scales should be reexamined. The cost to the U.S. government of supporting the UN falls into two categories--the UN regular budget and the UN peacekeeping budget. These assessments are made separately and have grown considerably over the years, with the most significant increases in the peacekeeping budget. For example, the U.S.-assessed requirements under the regular budget rose from $259 million to $291 million--a 12 percent increase--between fiscal years 1992 and 1994. The basic peacekeeping budget requirement, as reflected in the State Department Contributions for International Peacekeeping Activities (CIPA) account, rose 43 percent during that period, from $419 million to $598 million.(1)

The rise in peacekeeping costs is a matter of genuine concern. The 43 percent increase cited is a conservative estimate of the true growth rate. It covers only one portion of overall costs--the State Department CIPA contribution. The total 1994 UN peacekeeping budget, which will be shared by UN members, is approximately $3.8 billion. The U.S. government has recently undertaken a separate study of how best to structure executive branch support for UN peacekeeping and to ensure regular payment of the U.S. share of growing UN peacekeeping expenses.

The assessment scales determine what portion of the regular and peacekeeping budgets each member country must pay. Under current procedures, the United States pays the ceiling rate of 25 percent of the UN regular budget and more than 30 percent of peacekeeping costs.(2) Capacity to pay is the fundamental criterion in setting the scale of assessments for the UN.(3) However, the peacekeeping scale is not equitable in all cases. A 1992 General Accounting Office report notes that 15 countries have sufficiently high per-capita gross national products that indicate they could assume a greater share of the UN budgets. Additionally, 20 countries are upper- middle- and high-income economies that should bear more of the burden of peacekeeping.(4)

Changes cannot be made without the support of other UN members. The United States must build a consensus for proposed changes, such as establishing an inspections office and reexamining the basis for, and equity of, UN assessment scales. As a first step in generating member support, the United States should determine how other countries, particularly Security Council members, monitor their UN payments and what their level of customer satisfaction is regarding current UN management practices.

Two related items, which are entirely under United States control, should also be addressed. First, the Foreign Assistance Act of 1961 has a reporting requirement, commonly called the Bonker report, which requires the President to submit semiannual reports to Congress on voluntary contributions to international organizations (IOs). This reporting requirement should be eliminated. Second, the tax treatment of salaries of U.S. personnel working for the UN and other IOs should be changed.

The Bonker report is a complex summary of all the voluntary contributions to IOs by federal agencies. The report involves transferring data from various agencies through OMB, to the State Department, and finally to Congress. There is no evidence the information in the Bonker report is used for any purpose.

The tax issue arises from the fact that U.S. nationals working for the UN or for any one of at least 26 other IOs must pay U.S. income tax on their IO earnings, even though these organizations establish pay levels on the basis that pay will not be taxed. For example, the Convention on Privileges and Immunities of the United Nations states that salaries and emoluments are tax-exempt, but the United States has specifically reserved the right to tax its nationals.(5) In order not to penalize U.S. personnel working for IOs, a mechanism has been established whereby the United States taxes IO salaries, the IO refunds the taxes paid by U.S. employees, and the United States reimburses the IO for such amounts through bilateral tax reimbursement agreements and tax equalization funds.

The failure to make IO salaries tax-exempt necessitates this complex process and produces no net gain for the United States. Any tax collected from U.S. nationals is offset by payments made to the IOs under tax reimbursement agreements or through tax equalization funds. The payments to IOs at times exceed the amount reimbursed to U.S. personnel. In fact, the United States was overassessed in its payments to the UN tax equalization fund as evidenced by the current $32.2 million surplus in this account.(6) Additionally, there are administrative costs involved in monitoring and reviewing the reimbursement claims and in reimbursing the IOs. There is also the opportunity for fraud and abuse through devices such as amended tax returns. These difficulties are apparently incurred solely for the appearance of taxing U.S. citizens working for IOs.


1. Seek UN member support for establishment of a consolidated oversight and accountablility mechanism such as an Office of Inspector General.

The UN Secretary General has announced that the new position of ASG for Inspections and Investigations is the first step toward the establishment of a higher post with broader audit, evaluation, and investigation authority. Endorsement of this appointment and the Secretary General's commitment to a full Office of Inspector General will be sought in the General Assembly. The United States should fully support approval. Increased reporting by UN managers on their financial performance and program effectiveness is essential. An oversight mechanism is an effective way to achieve this end. Any oversight entity must have full access to all financial and operational records.

2. The President should seek UN member support for a thorough reexamination of UN assessment procedures and practices.

Emphasis must be placed on the peacekeeping scale, and the objective should be to ensure a more equitable scale for the United States.

3. Legislation should be enacted to amend the Foreign Assistance Act of 1961 to eliminate the reporting requirement on voluntary contributions to international organizations.

The requirement for reporting on voluntary contributions to international organizations should be eliminated by deleting subsections 306(b)(1), (2) and (3) of 22 U.S.C. 2226. This will end an obviously unnecessary reporting requirement levied on all federal agencies that might choose to make a voluntary contribution to an international organization.

4. Legislation should be enacted to eliminate the collection and reimbursement of income taxes on international organization pay.

Congress should amend Section 893(a) of the federal tax code to include U.S. citizens under the rule for exclusion of wages, fees, or salary of employees of international organizations. This modification would make U.S. personnel salaries received from IOs tax-free and eliminate the need for the complicated taxing and reimbursement procedures currently used.


Emphasis on UN budgeting practices, financial reporting, and accountability will help ensure that burgeoning UN expenditures are contained. No specific savings can be associated with these management procedures, but some basic controls are critical to checking rising UN costs. An active inspector general or similar official can make immediate and lasting contributions to the UN in the form of improved management practices. Overlapping and duplicative functions and programs within the UN can be eliminated and greater financial stability achieved. Elimination of the Bonker report is mandated by common sense. Unnecessary reporting should, by definition, be stopped.

Taxing IO income and then reimbursing the taxpayer is also unnecessary reporting at its worst. The current tax procedures involve not only reporting in the sense of filing returns and claims but necessitate the transfer of funds. Additionally, an unnecessary opportunity for fraud and abuse in claiming reimbursements will be eliminated when the taxing of IO income, and its concomitant reimbursement process, is eliminated.

Fiscal Impact

A reexamination of assessment practices should result in reduced costs to the United States for UN support.

Elimination of the Bonker report would save the considerable indirect costs currently expended to produce a report of no demonstrated value.

There are also savings from the avoidance of overpayment to tax equalization funds and to tax reimbursement agreement accounts. The accumulated overpayments in the UN tax equalization fund were $32.2 million as of 1993. This represents funds that were not available to the U.S. government. The overpayments were unnecessary expenditures. While the funds may be recovered, the United States loses the use of this money while the UN draws interest on it.

In May 1993, the Secretary of State informed the UN that "the United States will credit $32.2 million toward its calendar year 1993 assessment."(7) This represents a one-time savings of that amount in fiscal year 1994 outlays because the payment for the United States' 1993 calendar year assessment will be reduced by that amount. The overpayments vary from year to year and cannot be predicted accurately. However, a conservative estimate of annual savings of $0.8 million appears justified.(8)

Indirect savings will also be realized by not claiming and processing reimbursements and transferring funds to IOs. The State Department estimates that over 400 annual work hours with an approximate value of $17,000 are lost monitoring tax reimbursements.

Budget Authority (BA) and Outlays (Dollars in Millions) 

Fiscal Year

         1994     1995     1996     1997    1998    1999     Total

BA        -32.2*    -0.8    -0.8      -0.8     -0.8     -0.8     -36.2

Outlay  -32.2*    -0.8     -0.8     -0.8     -0.8     -0.8     -36.2

in FTEs     0         0          0           0         0          0         0

* The UN must agree to this crediting of the $32.2 million toward the assessment in order for this to be a real savings. Otherwise the UN will consider the United States to be that amount in arrears. Although the United States may reduce its outlay, the technical obligation to make the payment would remain.


1. The amounts cited are the 1992 enacted amount and the 1994 budget request amount, less $38 million and $22 million in arrearages, respectively.

2. For example, the U.S. regular budget scale for 1992 was 25 and the peacekeeping scale was 30.387. This means the United States was assessed 25 percent of the UN regular budget and 30.387 percent of the peacekeeping budget.

3. U.S. General Accounting Office, U.S. Participation in Peacekeeping Operations, NSIAD-92-247 (Washington, D.C.: U.S. General Accounting Office, September 1992), p. 49.

4. Ibid., p. 22.

5. United Nations, General Assembly, Convention on the Privileges and Immunities of the United Nations, New York, February 13, 1946, p. 26.

6. Telegram from Warren Christopher, U.S. Secretary of State, to U.S. Mission to the United Nations, May 20, 1993.

7. Ibid.

8. Overpayments in 1992 were $8.1 million. However, in some years there have been underpayments. The net increase in the fund balance from 1983 through 1992 was $8.3 million. This produces a 10-year average of $830,000. It must also be noted that there will be a very slight decrease in the total U.S. tax base because non-IO income of U.S. personnel working for IOs will become first income and be taxed at a lower rate.

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