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WT/BFA/173  
 
12 July 2018 
(18-4401) Page: 1/7 
Committee on Budget, Finance and Administration    
 
REPORT OF THE MEETIN G HELD ON 26 JUNE  2018  
 
The Committee on Budget, Finance and Administration (CBFA) met on 26 June 2018 under the 
Chairmanship of Ambassador Juan Esteban Aguirre Martínez (Paraguay ). The Terms of Reference 
and composition of the Committee are set out in document WT/L/44/REV.1. The Agenda is 
contained in the document WTO/AIR/BFA/ 26.  
 
The Chairman informed the C ommittee that a request had been m ade to remove Item F from the 
Agenda, since bilateral discussions were still ongoing.  The subject will be tabled at a future CBFA 
meeting. Furthermore, the Secretariat requested that Agenda  Items  C and D be swapped, in view 
of the close relationship of Ag enda Item D to the first two items on the agenda.  
 
1  WORLD TRADE ORGANIZA TION - 2017 FINANCIAL PERFO RMANCE REPORT – 
WT/BFA/W/4 50 
1.1.  An Official from the Secretariat presented the WTO  Financial Performance  Report  for the year 
ended  31 December 2017. The Official  informed the Committee that 99% of the WTO income 
comprised of Member s' contributions and 1% comprised of  miscellaneous income. The Official 
stated that the receipts of miscellaneous income ha d slightly exceeded the projected receipts as a 
result of  the reimbursement of  a prior  year's unutilized budget by the  ITC, amongst other 
elements.   
1.2.  The Official presented the 2017 c onsolidated expenditure by s ection, highlighting the 
variances  that occurred in 2017. As for the "Staff Expenditure ", the Official expl ained that the 
overspendin g under "Temporary Assistance" had  been offset by a saving under regular salaries , 
emanating from vacant posts . Within "Other Resources", savings were realized  by adhering to 
strict budgetary discipline  under  expenses on electrici ty, supplies , travel and hospitality . 
1.3.   Under "Implementing Partners" , the Official explained that a provision had been made for 
pending cases submitted to the  International Labour Organization ( ILO) Administrative Tribunal. 
She pointed out t hat, an additio nal amount had been allocated to the Building Renovation Fund, 
under Part C "Other Funds and ITC" . 
1.4.  In conclusion , the Official presented the 2017 budget  and expenditure  figures by Output  
Chapter . 
1.5.  Another Official from the Secretariat presen ted the F inancial Statements  for the year 2017. 
He explained  the distinction between the budgetary  surplus and th e financial deficit. The Official 
pointed out  that the drivers of the large variance between budgetary result and financial result in 
2017 were mainly d ue to a negative impact of the actuarial cost for After Service Health Insurance 
benefits (ASHI) and the WTO Pension  Plan. 
1.6.   In conclusion, the Official stated that the budgetary surplus, comprising of CHF 503,000 for 
the consolidated budgetary sur plus and CHF 635,000 miscellaneous income surplus, was 
CHF 1.138 million. He noted that after making adjustments mandated by IPSAS, the result was a 
financial deficit of CHF 30.9 million .  
1.7.  Questions related to this Agenda Item were asked after the External Auditor presented his 
report.   WT/BFA/173  
 
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  2  REPORT OF THE INDEPE NDENT EXTERNAL AUDIT OR ON THE AUDIT OF T HE 
FINANCIAL STATEMENTS  OF THE WORLD TRADE O RGANIZATION (WTO) FO R THE YEAR 
ENDED 31 DECEMBER 20 17 – WT/BFA/W/454  
2.1.  The representatives of the German Supreme Audit Institution (the Auditor) expressed their 
gratitude for the collaboration of the Secretariat during the audit. The Auditor indicated that the 
report was focused on the audit of the WTO 2017 Financial S tatemen ts and performance audits of 
the WTO's T ravel and Consultant s. 
2.2.  The Auditor highlighted the key findings and associated recommendations  from his report .  
2.3.  On the outstanding contributions, the Auditor recommended that the WTO Secretariat 
prepare a plan on how it would run the WTO in the event that outstanding contributions grew . 
2.4.  The Auditor underlined the necessity of further significantly increasing the provision for 
invalidity case s and recommended that the Secretariat consider  whether it would be economical to 
contract an insurance policy  to mitigate the risk of invalidity . 
2.5.   In conclusion, the Auditor inform ed the Committee that  he has  placed an unqualified audit 
opinion on the  Financial S tatements of the WTO and those  of the WTO Pension Plan  
2.6.  Members thanked the Auditor and the Secretariat for their comprehensive report s. Regarding 
the performance audit on travel expenses, one M ember asked  the Auditor whether the WTO Travel 
Policy was in line with the travel polic ies of other organizations , in terms of class of air travel for 
official meetings . He observed that  the WTO travel expenses, approximat ed 8% of total expenses, 
and asked the Auditor how this compared with  other international organizations.  In addi tion, the 
Member wanted to know  if the r eported travel expenses included the travel for the Ministerial 
Conference in Argentina.  
2.7.  The Auditor stated that it would be inappropriate to compare WTO travel with other 
international organization s because the nature and scope of work  differ. He nonethe less said that 
the level of travel expenses seemed reasonable and in line with that in other organizations .  
2.8.  The Auditor stated that travel for Ministerial Conferences  is funded out of the Ministerial 
Conference Operating Fund . An Official from the Secreta riat explained  that travel  expense s 
included amounts paid for travel for trainees from Member countries who participated in Technical 
Assistance and other activities financed out of Trust Fund resources.   
2.9.  DDG Brauner commented  that the WTO Travel Policy w as revised in 2015  and underlined  that 
the class of travel  for destinations within six hours  from Geneva had been modified to economy 
class for employees travelling on official business whilst for training purpose s, the class of travel is 
econom y. He further informed the Committee that the daily subsi stence allowance was no longer 
tiered according to level of seniority and that everyone now receive s the same UN rates . 
2.10.   Citing a recommendation expressed by the Auditor for the introduction of a focal poin t in 
one of the Divisions, a Member said that a focal point should indeed be assigned in order to ensure 
that requested documents would be given to the Auditor  on time .  
2.11.   The sam e Member express ed concern about the variance between  the budgetary result and 
financial re sult due to  IPSAS postings such as the ASHI and WTO Pension Plan actuarial cost s. She 
then underlined that the financing needs of ASHI should not be dealt with on a "pay-as-you-go" 
basis. Finally, she enquired when the Secretariat would submit the paper it had indicated it would 
submit to make proposals on how to address the issue of outstanding contributions , as cited in the 
External Audit recommendations.   
2.12.   An Official from the Secretariat answered that the audit recommendation was seeking a plan 
on how  to run the WTO in case of growth of outstanding contributions . She stated that this aspect 
was included in the paper on the proposed utilization of the accumulate budgetary surplus . WT/BFA/173  
 
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  2.13.   Another M ember enquired about the observation  made  by the External Auditor that the risk 
of negative  interest charged was growing given that two of the WTO's main bankers had changed  
the thresholds below which no interest was charged.   
2.14.    An Official stated that the WTO Secretariat  was in constant negotiat ions with the WTO's two 
main banks, bearing in mind that the market conditions had deteriorated in the last year  and that 
the issue of negative interest is systemic . The Official also stated that, as a further measure, a 
document on budgetary s urplus had been issued. If the proposals therein contained were to be 
approved, the WTO Secretariat would  proceed to inve st a large portion of the accumulated 
Budgetary Surplus with a medium/long -term perspective and thus broaden the asset classes 
beyond cash and mone y market funds. This would mitigate the risk of  negative interest.  
2.15.   Another Member expressed concern over the mistake that the current actuary had made in 
determining the 2016 ASHI liabilities.  And she further enquired on the “China development 
cooperation research fund ” which is included in para 4.9 (page 38) of the 2017 Financial 
performance statement report . She added that this fund looks similar in its objective with the 
proposed fund to be established under the “ Agreement on economic and technical coope ration 
between the Government of China and the WTO ”, but that it is not very clear when this fund was 
established and whether the CBFA gave consent to it.  This question was not addressed at the 
Committee because the Chair wanted the Committee to revert to it when the issue of Agreement 
mentioned above is discussed in the future.  
2.16.   An Official from the Secretariat explained that that inaccuracy  was due to the fact that the 
new actuary was appointed in March 2017 . Consequently,  he had little time to communicat e with 
the former actuary . This had led to the lack of  in-depth  consideration of the ageing factor 
assumption in the calculation of the liability figure s. The Official from the Secretariat went on to 
point out that the 2016 amounts had been restated.  
2.17.   One Member enquired whether the columns showing the status of recommendations 
reflect ed the auditor's opinion or that of the Secretariat. In addition , the Member stated that the 
report contained too many abbreviations and suggest ed that either abbreviations be completely  
avoided or that the Secretariat should ensure that it includes a complete list of all abbreviations 
and the full terms .  
2.18.   The Auditor clarified  that the recommendation status in the annex was a consideration of 
the Auditor, adding  that it was presented  to, and agreed with  by, the Secretariat. The Auditor 
welcomed th e suggestion made by the delegate  regarding the abbreviations . 
2.19.   The same M ember reminded the Committee that the WTO own s the WTO Buildings . 
Therefore he suggested  that the WTO ensure to set aside sufficient resources for  the Building 
Renovation Fund  on the basis of a predictable funding model, specifically augmentation of the 
contributions in the regular budget assigned to the Building Renovation Fund . 
2.20.   The Chairman thanked the External  Auditor for their work and presentation. The Committee 
took note of the report and proposed the following recommendation to the General Council:  
2.21.   The Committee recommends that the General Council approve the transfers  
between budgetary sections as outlined  in paragraphs 2.29 and 2.34 of document 
WT/BFA/W/450. The Committee further recommends that the General Council approve 
the WTO Audited Financial Statements for the year ended 31st December 2017 . 
3  ANNUAL REPORT ON THE  ACTIVITIES OF THE OF FICE OF INTERNAL O VERSIGHT (OIO) 
2017 -2018  – WT/BFA/W/4 51 
3.1.  The Head of the Office of Internal Oversight (OIO) presented a report of the activities 
conducted by the OIO from July 2017 to June 2018, as well as the internal oversight activity plan 
for 2018 -2019. He reaffirmed the independence of his office and indica ted that this independence 
is reinforced by the fact that the OIO has its own operational budget, which remained unchanged 
since 2017. The Head of the OIO then noted the good collaboration between the OIO, the Director -
General and the entire Secretariat. H e highlighted that management at the WTO Secretariat WT/BFA/173  
 
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  demonstrated strong willingness to improve the governance and internal control procedures within 
the Organization.  
3.2.  The Head of the OIO indicated that the OIO annual budget was not entirely spent due to 
challenges encountered to fully staffing the Office. Due to unexpected reasons, the position of 
Internal Auditor/Investigator had been vacant since February 2018, and the Administrative 
Assistant had been on sick leave since several months. However, he further informed the 
Committee that a new staff member would be joining the OIO mid -July 2018, as Internal 
Auditor/Investigator, for a period of six months. The Head of the OIO emphasized that  the person 
has extensive experience in investigations, from other international organizations.  
3.3.  Subsequently, the Head of the OIO provided a list of actions taken to strengthen the OIO's 
foundations at the WTO in 2017 -2018. These included reviewing the pr ocedure for administrative 
investigations and disciplinary actions; drafting an anti -fraud policy; issuing an anti -harassment 
procedure; establishing an internal control framework; and conducting a quality self -assessment in 
order to measure the compliance  of the OIO's work with international professional standards.  
3.4.  In terms of internal audits, the Head of the OIO indicated that the initial internal audit plan 
for 2017 -2018 was modified taking into consideration emerging priorities and existing constraints.  
The audit of dependency allowances was added to the plan and the audits of Enterprise Risk 
Management and Information Security were postponed to 2019.  
3.5.  He then informed the Committee that the OIO was carrying out two audits: one on gifts and 
gratuities an d the other on dependency allowances. He announced that an audit of procurement 
would be initiated during the third quarter of 2018. He then presented the internal audit plan for 
2018-2019 to the Committee.  
3.6.  With regards to the follow -up of the implementati on of internal audit recommendations, the 
Head of the OIO informed the Committee that 78% of the internal audit recommendations were 
considered closed, 16% were in the process of being implemented and only 6% remained totally 
open at this stage.  
3.7.  With rega rds to investigations, the Head of the OIO informed the Committee that 14 intakes 
of alleged misconducts were received since July  2017 and that two investigations were conducted. 
Both investigations resulted in disciplinary sanctions adopted by the Directo r-General.  
3.8.  Several Members welcomed the report and expressed their gratitude to the Head of the OIO. 
Members appreciated the substance and clarity of the report, and the fact that the WTO had been 
making progress in terms of implementing the recommendation s.  
3.9.  One Member wished to know whether there were, in fact, three actual posts in the OIO and if 
these had been included in the OIO budget for 2018 -2019. The Head of the OIO confirmed that the 
budget covered three posts whilst the actual number of current r egular posts allocated to the OIO 
was two, given the pressure for posts in other Divisions of the WTO Secretariat.  
3.10.   The same Member then enquired how the situation would be handled after the six months 
contract of the short term staff member ended. The Hea d of the OIO recalled that the staff count 
at the WTO Secretariat had a cap which could not be exceeded, at this stage, due to the current 
ceiling in the number of approved posts. Nevertheless, he expressed the hope that a long -term 
solution would be found .  
3.11.   The same Member enquired whether the Head of the OIO would share the results of the 
audit of dependency allowances. The Head of the OIO said that a detailed summary of the report 
would be submitted to the Committee, as part of the OIO's annual report.  
3.12.   A Member commended the Head of the OIO, on the level of detail and clarity with which the 
report was presented. He noted the progress that the WTO was making in implementing 
recommendations and that the OIO self -assessment was of a high standard. Further he  welcomed 
the prioritization of the OIO's activities. The Member stated that the establishment of an Audit 
Committee is considered best practice and signalled that it would be good for the CBFA to look into 
this question again in the future.    WT/BFA/173  
 
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  3.13.   Another Mem ber highlighted the importance for the OIO to be adequately staffed. She then 
enquired whether the Head of the OIO could share the policy on anti -harassment, as well as the 
OIO Charter with the Members. The Head of the OIO said he would arrange for the ant i-
harassment policy to be sent to Members. He also indicated that the OIO Charter would be 
circulated once finalized.  
3.14.   The Head of the OIO thanked the Members for their comments and the support of the 
Committee.  
3.15.   The Committee took note of the report.  
4  STATU S OF IMPLEMENTATION OF THE EXTERNAL AUDIT RECOM MENDATIONS   
4.1.  An Official from  the Secretariat presented an update on the status of implementation of 
External Audit recommendations. He indicated that the update  was based on various audits 
conducted from 2015 to date. He added that in the last update to the CBFA , the WTO had had 
44 recommendations pending out of a total of 55 issued since the German Supreme Audit Court 
had commenced its mandate.  
4.2.  He informed the Committee since the last update, 40 of the 44 rec ommendations  that had 
been outstanding had been successfully closed.  
4.3.   In conclusion, the Official informed the Committee that 11 new  recommendations had been 
issued in 2018, two relate to the financial and accounting area and nine to the area s of travel an d 
consultants .  
4.4.  The Committee took note of the report.  
5  PROPOS ED UTILIZATION OF THE A CCUMULATED BUDGET ARY SURPLUS – 
WT/BFA/W/4 53 
5.1.  An Official from the Secretariat presented  a paper on the proposed utilization of the 
accum ulated budgetary surplus. She made reference to the evolution of the budgetary surplus and 
the financial deficit since the introduction of IPSAS in 2 012. She stated that the  accumulated 
budgetary surplus from 2012 until the end of 2017 is CHF 52.026 million and  the associated  
accumul ated financial  deficit is CHF 100 .9 million .  
5.2.  The Official made reference to Financial Regulation 23 , which  stipulates that the 
Director -General should propose  how the budgetary surplus at the end of a given year should be 
utilized. She said that the possible uses are stated as: application as income against the budget for 
the year following that in which the budgetary surplus occurred; transfer to the Working Capital 
Fund; and use for any other purpose decided upon by the General Council. The Official info rmed 
the Committee that the budgetary surpluses from 2006 to 2011 had been applied against the 
following year's budget or for other purposes such as the Members' Transition Operating Fund and 
the Building Renovation Fund. She noted that no allocation had b een made to the Working Capital 
Fund, from any of the budgetary surplus es, during th at period.  
5.3.  Turning to the specific elements of the proposed allocation of the accumulated budgetary 
surplus for the period 2012 to 2017 , the Official stated that with the introduction of IPSAS in 2012, 
the WTO had to show certain long -term liabilities and associated assets in its balance s heet, 
notabl y those related to P ension and After Service Health Insurance (ASHI). In view of this, the 
Committee had, at that point, agre ed that the budgetary surplus of CHF 43,665,433, for the years 
2012, 2013 and 2014  be allocated to cover the long -term cost estimates of the same years in 
order to align budget and financial results.  This agreement was the genesis of the first ASHI 
Working  Group. The Offic ial indicated that there had been two subsequent ASHI working groups , 
being the ASHI Strategy Development Monitoring Grou p and the Working Group on an ASHI Fund . 
The Official indicated that the Working Group on an ASHI Fund had made the fo llowing two 
recommendations to the CBFA: that a Special Reserve Account for ASHI be established; and given 
that consensus was not reached on the funding models, in the Working Group , the discussion be 
further taken up in the CBFA.  WT/BFA/173  
 
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  5.4.  The Official informed the  Committee that  the factors that were taken into account when 
making the proposal were: the extent of the net assets of the Organization; the cash  flow patterns 
of the Organization ; and the importance of having an adequate buffer for future financial needs . 
She informed the Committee that the unfunded ASHI liability had been identified as a critical risk 
by the Secretariat for several years running -and that it currently stood at CHF  229 million.  
5.5.  With that context,  the D irector -General 's propos ed allocation of the accumulated budgetary 
surplus of CHF52.06 million  was presented. This is as follows :  
o 50% (amounting to CHF 26 .012 million ) for ASHI liabilities;  
o 25% (amounting to CHF 13 .007 million ) to be held in cash to cover cash  flow needs for 
operational expe nditure during the course of the year; and  
o 25% (amounting to CHF13.007 millio n) to augment the Working Capital Fund.  
5.6.  Several Members agreed on the p roposed allocation  and underlined the fact that it was 
imperative to set funds aside to cover the ASHI l iabilities. They emphasizes that  a sustainable 
approach  for funding ASHI liabilities, t hrough building up assets to offset the ASHI liabilities , was 
of high importance .  
5.7.  Some Members stated that they would have preferred for all , if not most , of the budgetary  
surplus to be allocated to ASHI. However, in a bid to reach a compromise after the variant views 
that had been stated during the course of the ASHI working groups, they were supportive of the 
current proposal.  One Member went on further to say that her de legation was in a position to 
conclude the discussions of this subject today, favouring the proposed allocation.  
5.8.   One Member recommended that when a decision is taken on the utilization of the budgetary 
surplus, it should be worded in a manner that would encompass the budgetary surplus that may 
be derived in 2018, if any.  
5.9.  One Member said t hat although he appreciated participating in detailed discussions related to 
ASHI liabilities, i n his Government's  view, prior to deciding  on any attribution of the budge tary 
surplus to ASHI, was that it was necessary to first agree upon a basic framework, principles and 
parameters for funding ASHI liabilities. He added that the budgetary surplus should be considered 
for funding critical and unfunded projects. He said that  the liabilities should be prioritized. He 
further added that he is supportive of the proposal to allocat e an amount for  cash flow needs and 
an amount for risks and emergent exigencies.    
5.10.   A Member noted that the Enhance Integrated Fund (EIF) had agreed to make a contribution 
to the Surplus Reserve Account, for its employees under L -Posts.  
5.11.   He thanked the Secretariat for the document on its proposal for the  utilization of the 
budgetary surplus , noting that it was a first step in the right direction. He stated that his 
Government's position regarding  budgetary surpluses was inclined to Financial Regulation 23(a), 
i.e. the allocation of the budgetary surplus to reduce Member contributions.  He recalled that his 
delegation had made proposals on ASHI in the ASHI working groups in the previous years and that 
their position had not changed. He called for a careful analysis of all relevant aspects. He 
concluded that, at this stage, it would be pre-matur e to take a decision on the proposed allocation.   
5.12.   Another  Member thanked the Secretariat for its pro-active approach and preparation of the 
paper . She stated that the Committee needs to bear the WTO's current financial situation in mind. 
She further stated  that before agreeing upon allocation of the budgetary surplus, a few core issues 
needed to be taken into consideration. She said an equilibrium between long -term liabilities and 
the current liabilities, as well as the balance between financial risks and c apital costs  should be 
under discussion , she recalled that there was no consensus on the funding models of the ASHI 
fund, whether a one -time contribution to ASHI is better than a long -time funding solution is still 
not sure without a further research. She stated that these  needed to be further researched, 
discussed  and agreed  to decid e whether  this proposal  would be the best way . WT/BFA/173  
 
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  5.13.   The same member enquired whether the norm used by the WTO for assessing long -term 
liabilities and long -term assets was IPSAS 25 or IPSAS 39. The Member wished to know what 
would be the potential impact to the ASHI liabilities if IPSAS 39 had been considere d.  
5.14.   In response, an Official from the Secretariat stated that IPSAS 39 replaced IPSAS 25 in 
2017 and that the 2017 financial statements had been prepared in accordance with IPSAS 39. He 
said that no modification or impact assessment was needed.  
5.15.   A Member p ointed out that a statement in the paper that "there are no assets to offset ASHI 
liabilities" is inaccurate. He asked what the balance in the Surplus Reserve Account was.  
5.16.   An Official from the Secretariat responded that indeed the statement was too absolu te an d 
thus incorrect. She said that the emphasis was borne of the fact that the amount that can 
realistically be transferred to the Surplus Reserve Account, fell way short of the ASHI liability of 
CHF 229 million. She said the amount transferred to the Su rplus Reserve Account in 2017 was 
CHF 1.4 million. It was agreed that the report of the meeting should correct the misstatement and 
state that, in fact, there was a certain amount attributable to ASHI assets in the form of the 
CHF 1.4 million in the Surplu s Reserve Account.  
5.17.   A few Members stated that they were not inclined to support the allocation of funds to ASHI 
and that instead they wanted to see an allocation to offset long -term liabilities as a conglomerate.  
5.18.   Referring to Financial Regulation 23(c), a  Member asked whether his understanding was 
correct that the utilization of the budgetary surplus for other needs was precluded since there was 
a financial deficit.  
5.19.   In response, an Official fr om the Secretariat stated that the allocation to other needs is 
permissible on condition that this  would result in a reallocation within the  equity part of  balance 
sheet . Even though this would increase the accumulated financial deficit, this would be offset by a 
contra increase of the same amount in the working capital  fund.. He informed the Committee that 
what is not permissible is the distribution of the budgetary surplus to Members, be it through 
return of actual funds or by reducing Members' contributions in the following year. The Official 
stated that these two latter aspects are not appropriate because they would have the effect of 
increasing the financial deficit by the amount concerned  without a  counterbalance within the 
equity. 
5.20.   A Member said that while her delegation  understand s the call to have a careful review, and 
though the Committee could analyse the issue, that would not change the fact that the 
organization has liabilities. She said that her delegation was aligned with those Members that were 
in support of the proposed all ocation of the budgetary surplus as presented .  
5.21.   A Member said that her delegation takes note of the paper that was submitted as well as 
the deliberations by the Committee during its meeting. She  stated that her delegation stands 
ready to actively participa te in discussing this issue as they had in previous instances , particularly 
their involvement in the ASHI working groups.  
5.22.   The Chairman thanked the Committee for its constructive comments and stated that the 
Secretariat would take these into consideration  ahead of the next meeting . He said that he trusted 
that at its next meeting, the Committee would be in a position to arrive at a recommendation to 
make to the General Council.  
5.23.   The Committee took note of the report  and agreed that this item should be inclu ded on the 
agenda of  the next CBFA meeting .  
 
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