RESTRICTED  
  
WT/BFA/W/453/Rev.1  
 
3 September  2018 
(18-5462) Page: 1/6 
Committee on Budget, Finance and Administration    
 
PROPOSED UTILIZATION  OF THE ACCUMULATED   
BUDGETARY SURPLUS  
Revision  
1  OVERVIEW  
1.1.  The WTO has an accumulated Budgetary Surplus , as at 31 December 2017 , of 
CHF 52.026 million.  
1.2.  According to Financial R egulation 23 the Director -General shall make proposals to the 
Committee on Budget, Finance and Administration ( "CBFA" or "Committee" ) regarding the use of 
the Budgetary Surplus . These may be:   
a. application as income against the budget for the second financi al period following that in 
which the surplus occurs, thereby reducing Members' contributions;  
b. transfer to the Working Capital Fund; or  
c. use for any other purpose decided upon by the General Council.  
 
1.3.  The Director -General's  three proposals for the use of  the Budgetary Surplus  are guided by 
the following considerations:  
a. CHF 26 .012 million towards assets for the reduction of the deficit between the  
accumulated financial liabilities and available financial assets of the organization : Since the 
adoption of International Public Sector Accounting Standards (IPSAS) in 2012, the WTO is 
obligated to reflect several long -term liabilities in its accounting records . These include 
pension fund liabilities and ASHI liabilities.  
The absence of a sustainable approach t o funding ASHI assets to offset the ASHI liabilities 
has been identified as a critical risk for the WTO.  
 
As at 31st December 2017, the balance of ASHI liabilities was CHF 229 million. This 
amount, which is calculated on an annual basis by external actuar ies, represents the 
present value of estimated future cash outflows to cover ASHI costs.  
 
There are  minimal assets in place to contribute towards the funding of the ASHI liabilities.  
Specifically, a Special Reserve Account for Medical Insurance was establ ished in 2017, in 
accordance with a decision of the CBFA. As at 31 December 2017 the Special Reserve 
Account included a balance of CHF 1.4 million, which consists of b udgetary savings of CHF 
0.7 million and savings from the WTO Medical Plan of CHF 0.7 million.  
 
The variance of views  amongst the Members of the CBFA has led to this changed proposed 
allocation, relative to the first version of the paper that had suggested a 50% allocation to 
fund ASHI Assets.  This new proposed allocation would enable the funds to be set aside for 
assets that can offset all types of long term liabilities.  
 
Regarding the WTO Pension Plan, the assets are also lower than the  liabilities. However, 
there is a sizeable amount of WTOPP assets and a set funding approach for future WTO 
Pension Plan liabilities.   WT/BFA/W/453/Rev.1  
 
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  b. CHF 19 million to cover operational expenditure : The average monthly expenditure for the 
WTO Secretariat is CHF 19 million. However , contributio ns come in a different rhythm. 
Most inflows during the year are from January to March and then in November and 
December. There is a lull in contributions from April through October.   
 
c. CHF 7.014 million to augment the Working Capital Fund : There is a financial risk of delay 
or deferment  or suspension of contributions by key contributors. Were this to come about, 
there would be adverse impact on the WTO budget, which would jeopardize the 
Organization's ability to implement its key activities.  
The Working Capital Fund is the vehicle that is designed as a mitigating measure were the 
above situation to arise. However, the current balance of CHF 10. 88 million in the Working 
Capital Fund is insufficient to cover even one month's expenditure.  
 
 
2  UTILIZATION OF THE BUDGETARY SURPLUS  IN PREVIOUS YEARS  
 
2.1.  In accordance with Financial Regulation 23, the Director General made a number of proposals 
to the CBFA which led to the following recommendations to the General Council:  
 
a. The Budgetary Surplus  of CHF 6,996,223 as at 31 December 2006 was allocated as 
follows1: 
i. CHF 1,500,000 to t he Restructuring Operating Fund ; and  
ii. CHF 5,496,223 was applied as  income against the budget for 2008 , thereby reducing 
Member s' contributions.  
b. Subsequent to a proposal in November 2008, the Budgetary Surplus  of CHF 12,051,716  as 
at 31 December 2007 was apportioned as follows2: 
i. CHF 8,051,716 to establish a Members'  Transition Operating F und (MTOF) . This Fund 
was used for the major building project  that was undertaken from 2009 to 2013 ; and  
ii. CHF 4,000,000 was used as income against the 200 9 budget, thereby reducing 
Members' contributions.3 
c. The Budgetary Surplus  of CHF 2,800,000 as at 31 December 2008 was used to reduce 
Member s' contributions to the 2 010 budget4. 
d. During the course of 2010, the remaining Budgetary Surplus  from 2009, amounting to CHF 
1,036,988, was transferred to the MTOF.  
e. The Budgetary Surplus  of CHF10,527,319  as at 31 December 2010 was transferred to the 
MTOF5. 
f. The Budgetary Surplus  as at 31 December 2011, amounting to CHF  739,756,  was 
transferred to the Building Renovation Fund . 
2.2.  No proposal has been presented  regarding the amount of CH 52.026 million  corresponding to 
Budgetary Surplus es from the years 2012  to 2017.  
                                                
1 WT/BFA/W/164 . 
2 WT/BFA/W/178/Rev.1 . 
3 This was permissible because the time -period was prior to the imp lementation of IPSAS. As such, the 
budgetary surplus and the financial result were, in the main, the same.  For periods after the 
implementation of IPSAS, the organization reported financial deficits  and thus the possibility to reduce 
contributions did not exist.  
4 WT/BFA/W 114, paragraph 15.  
5 WT/BFA /W/243, paragraphs 5 and 8.  WT/BFA/W/453/Rev.1  
 
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  2.3.  The Report  of CBFA to the General Council for the meeting that took place on 6th November 
20176 had the following  salient points:  
o Members urged that there be prudence and that only part of the  Budgetary Surplus  could 
be transferred to an ASHI Fund. They noted that t he accumulated  Budgetary Surplus  
should also be used for other core a ctivities of the O rganization.  
 
o Consideration was given for  the creation of a Fund with the current accumulated Budgetary 
Surplus es, where the savings from the WTO  Medical Plan could als o be included, without 
deciding at that stage  on its possible future uses and letting that decision be taken by the 
CBFA at a later stage. This drew comme nts that the aspect of how the Budgetary Surplus  
should be used was outside the scope of the Working G roup for an ASHI Fund  and could be 
taken up by the CBFA.  
2.4.  The table below summarizes the Budgetary Surplus  and financial results of the WTO for the 
years ended 31st December 2012 to 31st December 2017. That is, since IPSAS was introduced.  The 
net financial result was transferred to the Statement of Financial Performance, at the end of each 
year. 
Table 1: Evolution of Budgetary Surplus  and Financial Deficit since the Introduction of 
IPSAS (kCHF)  
Reconciliation of Budget ary 
and Financial Results  
(in 000' CHF)   2012  2013  2014  2015  2016  2017  Total  
WTO Budgetary Savings  11,328  10,090  14,476  4,557  1,056  503 42,010  
WTO Miscellaneous I ncome  2,224  -181 304 1,547  -51  635 4,478  
Other Income/Expenditures  1,311  4,140  -26 75  38  - 5,538  
Overall Budgetary Surplus   14,863  14,049  14,754  6,179  1,043  1,138  52,026  
IPSAS Adjustments  -   19,491  2,794  5,585  5,520  3,215  36,605  
Acquisition of Property, Plant 
and Equipment  5,430  2,048  1,922  1,046  304 1,113  11,864  
Depreciation and A mortization 
of Property, Plant and 
Equipment  -1,097  -4,068  -4,919  -4,973  -5,047  -4,997  -25,101  
Pension Benefits Actuarial 
Valuation  -25,386  -24,687  -13,231  332 -16,885  -20,357  -100,214  
ASHI Benefits Actuarial 
Valuation   -13,707  -11,907  -11,497  -14,755  -13,177  -11,058  -76,101  
Financial Result (IPSAS)   -19,897  -5,074  -10,177  -6,586  -28,242  -30,946  -100,922  
 
3  PROPOSED ALLOCATION OF THE ACCUMULATED BUDGETARY SURPLUS  AS AT 31ST 
DECEMBER 2017  
3.1.  The Director General's proposed allocation of the accumulated  Budgetary Surplus  of 
CHF 52.026 million as at 31 December 2017 takes sever al factors into consideration. It should be 
noted that there is a n accumulated  Financial Deficit of CHF 837.34 million  on the WT O's Statement 
of Financial Posit ion as at 31st Decembe r 2017 . Any discussions regarding how the Budgetary 
Surplus  can be allocated must bear the reality of this situation in mind.  
3.2.  The Director General , in keeping with the mandate vested upon him by Financial Regulation 
23, propose s that 50% of the budgetary surplus should be allocated to funding long term assets to 
bridge the funding gap between the accumulated long term deficit in the balance sheet ; and the 
other 50% be allocated for other priorities of the organization. The proposed allocation of the 
Budgetary Surplus  takes several fundamental factors into account:  
a. The extent of the net assets and Accumulated Financial Deficit of the Organization : As at 
31st December 2017, the total liabilities of the WTO exceeded the total assets by CHF  
515 million. A major component of this is the Accumulated Deficit of CHF 837.34 million. 
The main elements of th is deficit are shown in Table 2  below:  
                                                
6 WT/BFA/168, paragraphs 5 to 5.10.  WT/BFA/W/453/Rev.1  
 
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  Table 2: Main Elements of the  Accumulated Deficit in the Statement of Financial 
Performance as at 31 December 2017  
  (expressed in thousands of CHF)   
 Non-Current Assets  Non-Current Liabilities  Surplus/(Deficit)  
Pension  595,921  1,034,918  (438,997)  
After Service Health Insurance  - 228,938  (228,938)  
Removal Indemnity  - 1,033  (1,033)  
Separation Grant  - 7,281  (7,281)  
Experienced Actuarial Loss for 
the WTOPP  - 27,871  (27,871)  
Experienced Actuarial Loss for 
the ASHI  - 113,927  (113,927)  
Other  - 19,290  (19,290)  
 595,921  1,433,258  (837,337)  
 
b. The cash -flow patterns of the Organization : The average monthly expenditure for the WTO 
Secretariat is CHF 19 million. However , contributions come in at a different rhythm. Most 
inflows, during the year, are from January to March and then in November and December. 
There is a lull in contributions from April through October.  Figure  1 depicts the pattern of 
monthly contribution flows for 2015, 2016 and 2017:  
 
Figure 1 Contributions R eceived per Month in 2015 -2017 (million CHF)  
 
 
On a rolling monthly basis, the net contributions (i.e. contributions less expenditures per 
month) are depicted in Figure 2 below : Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2015 44.30 34.92 17.04 17.97 7.15 7.88 11.97 6.07 2.42 11.51 27.98 33.51
2016 30.17 32.51 32.71 15.70 7.87 9.48 16.71 12.58 6.95 2.05 22.23 47.13
2017 45.60 18.44 29.92 15.89 11.04 9.75 6.04 4.21 4.93 15.05 24.24 13.630.005.0010.0015.0020.0025.0030.0035.0040.0045.0050.00
2015
2016
2017WT/BFA/W/453/Rev.1  
 
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  Figure 2 Net Contributions per Month (Contributions less Expenditure) per Month 2015 -
2017 (in million CHF)  
 
 
As we can see, in the period between April (March in 2015) and October, the monthly 
balance of receipts after deducting the expenditure is negative. Due to a shift in 
contributions, the monthly balance in 2017 has also been negative in Decem ber. 
If we look at the yearly balance for the past ten years, we can see that we had several 
years in which the expenditure exceeded the yearly receipts of contributions. This confirms 
the need to hold a cash float at hand to cover periods  where the net ca sh for the annual 
budget is negative . These amounts will be restored upon receipt of contributions that 
restore the situation to positive net cash.  
Figure 3 Net Contributions (Contributions less Expenditure) per Year 2007 -2017)  
 
 
Given the above trends, it is proposed that CHF 19 million  of the accumulated Budgetary 
Surplus  be set aside for short-term temporary cash needs, pending receipt of annual cash 
receipts . 
c. The importance  of having an adequate buffer for financial needs , based on the risk  
assessment  of the Organization:  There is a financial risk of delay or deferment or 
suspension of contributions by key contributors. Were this to come about, t here would be 
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2015 30.78 21.38 -0.64 0.06 -8.68 -10.85 -8.93 -10.16 -14.92 -8.09 11.05 12.03
2016 11.41 18.46 16.30 -2.77 -8.67 -8.55 -7.16 -4.25 -10.60 -15.56 5.13 19.44
2017 32.71 2.37 13.45 -0.99 -8.29 -8.90 -13.04 -15.32 -15.43 -3.03 5.18 -4.05-20.00-10.000.0010.0020.0030.0040.00Net Contributions per Month 2015 -2017
(million CHF)
2015
2016
2017-20.00-15.00-10.00-5.000.005.0010.0015.0020.0025.0030.00
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Net ContributionWT/BFA/W/453/Rev.1  
 
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  an adverse impact on the WTO budget , which would jeopardi ze the Organization's ability to 
implement its key activities .  
The Working  Capital  Fund is the vehicle that is designed as a mitigating measure were the 
above situation to arise. However, the current balance of CHF 10.88 million in the Working 
Capital Fund is ins ufficient to cover even one month's expenditure.  
We propose that CHF 7.014 million be used to augment the Working Capital Fund.    
In view of the above:  
The Committee on Budget Finance and Administration recommends to the General 
Council that the accumulated Budgetary  Surplus  as at 31  December  2017 , amounting to 
CHF 52.026 million , be utilized as follows : 
 
a) 50% (amounting to CHF  26.012 million ) should be allocated to funding 
long-term  assets  to bridge the funding gap between the accumulated long 
term  assets and long term liabilities of the Organization ; 
b) CHF 19 million be held as a cash reserve to cover cash flow needs during 
the course of the year; and  
c) CHF 7.014 million) to be used to  augment the Working Capital Fund . 
 
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