United States General Accounting Office

GAO Testimony

Before the Subcommittee on Health and Environment,

Committee on Commerce,

House of Representatives

For Release

on Delivery

Expected at

10:00 a.m. EDT

Wednesday

July 30, 1997

INTERNATIONAL

ENVIRONMENT

Operations of the Montreal

Protocol Multilateral Fund

Statement by Lawrence Dyckman, Associate Director,

Environmental Protection Issues,

Resources, Community, and Economic

Development Division

GAO/T-RCED-97-218

Mr. Chairman and Members of the Subcommittee:

We are pleased to be here today to discuss our work on the Montreal

Protocol Multilateral Fund. The Montreal Protocol is an international

environmental agreement, concluded almost 10 years ago, with the

objective of eliminating the use of substances that deplete the thin layer of

ozone in the stratosphere. Such substances include

chloroflurocarbons—referred to as CFCs—which have long been used in

refrigeration and air-conditioning and as propellants in aerosol containers;

halons, which have been used extensively in firefighting; and compounds

such as carbon tetrachloride, which find wide application as solvents in a

variety of industries. The ozone layer is critical because it protects the

Earth’s plant and animal life from the harmful effects of excessive levels of

ultraviolet light. In the first years after the Protocol was signed in 1987,

most of the developed nations of the world made commitments to reduce

and eventually eliminate their use of ozone-depleting substances, but

relatively few of the developing countries (referred to as Article 5

countries)1

 made a similar commitment. By 1990, it became clear that

unless the developing nations also signed the Protocol, the use of

ozone-depleting substances could not be eliminated.

Amendments to the Protocol made at the 1990 Meeting of the Parties in

London addressed this concern by providing for the establishment of the

Multilateral Fund to which the developed countries would contribute

funds to assist the developing countries in their efforts to reduce and

ultimately eliminate the use of ozone-depleting substances. Generally, all

developed countries are assessed for contributions to the Fund as are the

few developing countries that consume more than 0.3 kilograms of

ozone-depleting substances per capita per year. The contributions are

based on the United Nations’ scale of assessments. Countries that

consume less than 0.3 kg per capita per year are eligible to receive

assistance from the Fund. After the establishment of the Multilateral Fund,

many developing countries agreed to the Protocol, and as of May 1997, 110

developing countries had committed to implementing the Protocol. The

Multilateral Fund relies on four international organizations to implement

the bulk of the projects it approves. These implementing agencies are the

World Bank, the United Nations Development Programme (UNDP), the

United Nations Environment Programme (UNEP), and the United Nations

Industrial Development Organization (UNIDO). In addition, a relatively

1

Article 5 of the Montreal Protocol allows developing countries with less than a 0.3 kg per capita

consumption of ozone-depleting substances a grace period before they must comply with the treaty’s

control provisions.

Page 1 GAO/T-RCED-97-218
small percentage of projects is implemented by a few contributing

countries, including the United States, through bilateral assistance.

You asked us to develop information on the functioning of the Multilateral

Fund. Specifically, you asked us to identify (1) principal contributors to

the Fund; (2) identify the principal recipients of disbursements made from

the Fund; (3) the purposes for which disbursements were made; (4) what

has been accomplished with these expenditures; and to (5) describe and

generally assess the controls and accountability mechanisms in place to

ensure proper use of money disbursed from the Fund. As agreed with the

Subcommittee, we also obtained information on the level of administrative

costs associated with project implementation. Our testimony today will

discuss the results of our work on each of these questions. In summary,

we found the following:

• The United States is the largest contributor to the Multilateral Fund,

accounting for about 25 percent of the contributions. For 1997 through

1999, the United States is expected to contribute about $39 million per

year. We estimate that the United States could avoid interest expenses of

between $2 million and $3 million associated with its annual contributions

by using an alternative payment method.

• From its establishment in 1991 through May 1997, the Multilateral Fund

has allocated about $570 million for projects in more than 100 Article 5

countries. China has been the largest recipient, accounting for almost

$150 million or 26 percent of the total.

• There are seven broad purposes for which projects have been funded, but

over 80 percent of the funds have been for investment projects, which help

businesses to convert their operations from the use of ozone-depleting

substances and to cease the production of goods containing them.

• Projects approved to date are projected to phase out the annual use of

about 84,000 ODP-weighted metric tons of ozone-depleting substances, or

about 40 percent of the estimated consumption of ozone-depleting

substances in Article 5 countries.2

• The Multilateral Fund has a number of mechanisms in place that are

designed to ensure that funds are properly accounted for and that the

amounts of funds allocated to specific projects are reviewed and verified.

• The Multilateral Fund currently pays a 13-percent administrative fee to the

implementing agencies for their costs associated with project

implementation. However, efforts are under way to evaluate the

2

The ozone-depleting potential (ODP) value is the ratio of a given compound’s ability to deplete ozone

compared with the ability of a similar mass of CFC-11.

Page 2 GAO/T-RCED-97-218
appropriateness of the fees, with the goal of reducing the support costs to

about 10 percent over the next 3 years.

Contributions to the

Multilateral Fund

For the period 1991 through 1996, 49 countries were assessed about

$688 million. The United States’ share was about $174 million, or about 25

percent of the total. Appendix I shows the assessments, payments, and

outstanding balances for all 49 countries as of January 31, 1997. For the

3-year period 1997 through 1999, the Parties to the Protocol approved

$466 million in new assessments. The United States’ share of the new

assessment is about $39 million for each of these 3 years. For 1997, the list

of contributors has been reduced to 34 countries primarily because

countries that had not ratified the 1990 amendments (which established

the Fund) were deleted from the list of contributors.

There is substantial variability among the countries in paying their

assessments. As of January 31, 1997, 22 countries had fully paid their

assessments for 1991 through 1996, 13 countries (including the United

States) had paid most of their assessments, 3 had paid less than half, and

11 had not paid anything.3

 The countries that had not paid any part of their

assessments were primarily those of the former Soviet Union. These

countries, because of their economic position, are referred to as

“economies in transition.” While not eligible for funding support from the

Multilateral Fund, they are eligible to receive assistance for their efforts to

phase out ozone-depleting substances from the Global Environment

Facility.4

 Cumulatively, as of January 31, 1997, of the $688 million assessed

for the period 1991 through 1996, about $550 million, or about 80 percent,

had been paid.

Countries can pay their assessed contributions with cash or promissory

notes, or by providing bilateral assistance to recipient countries.5

 In 1993,

the Parties to the Montreal Protocol agreed that promissory notes would

be acceptable as payment of a country’s contribution to the Fund. Since

that time, five countries have used promissory notes to pay at least part of

3

According to the international advisor for the Environmental Protection Agency’s Stratospheric

Protection Division, the United States paid the remainder of its assessments for 1991 through 1996 in

May 1997. We did not update the contribution status for other countries past January 31, 1997.

4

The Global Environment Facility is an international financial institution established in 1991 to provide

developing countries with grants and low-interest loans for projects that protect the global

environment. Funding is available to assist countries that do not meet the eligibility criteria for

assistance from the Multilateral Fund but need assistance in their efforts to comply with the provisions

of the Montreal Protocol.

5

Bilateral assistance is limited to 20 percent of a country’s assessed contribution.

Page 3 GAO/T-RCED-97-218
their assessments, deferring the actual outlay of cash. In essence, these

contributors benefit from the time value of money between the date a note

is provided to the Fund and the date it is cashed. While the Fund can cash

promissory notes at any time to meet its needs, the general practice is to

cash the notes in six equal payments over a 3-year period.

We estimate that based on current U.S. Treasury borrowing rates and the

Fund’s general practice for cashing the notes over time, the U.S.

government could save between $2 million and $3 million on each of its

annual contributions to the Multilateral Fund by using the promissory

notes.6

 Although the U.S. government makes its payments to the Fund in

cash, the Department of the Treasury currently administers over 10

international accounts using letters of credit, which also defer payments,

similar to promissory notes.

Multilateral Fund

Recipients

Since the establishment of the Multilateral Fund in 1991 through May 1997,

the Fund’s Executive Committee has approved a total of 1,810 projects in

more than 100 countries and allocated about $570 million to fund these

projects. The geographical distribution of projects supported by the

Multilateral Fund shows that the Asia and Pacific region has both the

largest number of approved projects, 826, and the greatest share of

approved funding—over $330 million or almost 60 percent of the total

funding approved. China has been the Fund’s largest recipient with almost

$150 million, or 26 percent, of all approved funding. The dominant share of

projects and approved funding represented by the Asia and Pacific region

is explained by the region’s rapidly expanding economies and population

and by its current consumption and enormous potential for the use of

ozone-depleting substances. Six of the 10 top recipients of aid from the

Multilateral Fund are countries in the Asia and Pacific region, which

together have been allocated nearly 50 percent of the total approved

funding.

The Latin American and Caribbean region ranks next with 473 projects

having total approved funding of almost $130 million or nearly 23 percent

of all funding approved to date, followed by the Africa region with 320

projects and approved funding of about $67 million. Europe has the

smallest number of projects—56—with approved funding of about

$21 million. This reflects the fact that relatively few European countries

are eligible for assistance. The Fund also supports a category of projects,

6

The United States’ contribution is jointly paid by the Environmental Protection Agency and the

Department of State.

Page 4 GAO/T-RCED-97-218
known as global projects, that transcend regional boundaries. As of

May 31, 1997, the Fund had approved 135 global projects with a total

allocation of almost $22 million. The table below shows funding for the top

10 recipient countries; appendix II provides a breakdown of approved

funding by regions and by types of projects.

Table 1: Top 10 Recipients of

Approved Project Funding (as of

May 1997) Country Amount

Percentage of all

approved funds

China $148,525,560 26.0

India 39,799,560 7.0

Argentina 32,406,150 5.7

Egypt 28,982,860 5.1

Malaysia 27,389,820 4.8

Thailand 27,025,660 4.7

Brazil 26,865,340 4.7

Philippines 20,107,380 3.5

Mexico 19,941,390 3.6

Indonesia 19,568,120 3.4

Total $390,611,830 68.4

Purposes for Which

the Multilateral Fund

Has Been Used

There are seven broad purposes or categories for which the projects have

been funded: (1) country program preparation, (2) institutional

strengthening, (3) technical assistance, (4) training, (5) demonstration

projects, (6) project preparation, and (7) investment projects.

Preparation of a country program is generally the starting point for a

country that is seeking the Fund’s assistance in converting to

non-ozone-depleting technologies. A country program sets out a country’s

strategy for phasing out ozone-depleting substances. It provides basic

information on the use of ozone-depleting substances, the institutional

framework for controlling them, relevant industry and government

involvement, an action plan with time frames and budgets, and a list of

specific projects requiring financial support from the Multilateral Fund. To

date more than $7 million has been approved for the preparation of 108

country programs.

Institutional strengthening projects build a country’s capacity to phase out

ozone-depleting substances. The establishment of a national ozone unit

within the country’s national government is frequently a key element of

Page 5 GAO/T-RCED-97-218
this activity with the goal of satisfying the basic need for institutional,

legal, and regulatory capacity to support the implementation of national

phaseout plans. As of the most recent meeting of the Fund’s Executive

Committee (May 1997), a total of 97 institutional strengthening projects

had been approved in 81 recipient countries with a total approved funding

of slightly more than $15 million.

Technical assistance, training, and demonstration projects constitute

vehicles for transferring state-of-the-art technologies to recipient countries

to help them meet their phaseout obligations under the Montreal Protocol.

As of May 31, 1997, 394 demonstration, technical assistance, and training

projects had been approved by the Fund’s Executive Committee, with a

combined approved funding level of over $60 million.

Project preparation, which involves developing projects for conversion

from ozone-depleting to ozone-benign technologies, is an important

prerequisite for investment projects. As of May 31, 1997, the Multilateral

Fund had approved a total of 383 project preparation activities with a total

approved funding level of over $30 million. Project preparation activities

typically result in the development of a group of investment project

proposals. Investment projects are the largest category of projects and the

most important from the standpoint of protecting the stratospheric ozone

layer. These projects, which account for slightly over 80 percent of total

approved funding, assist business entities in recipient countries in

converting domestic and commercial refrigeration, manufacturing,

firefighting, and other economic sectors from processes that use

ozone-depleting substances to technologies and products that are not

ozone-depleting or are at least significantly less so. A typical investment

project in the refrigeration sector, for example, may involve eliminating

CFCs in the manufacture of domestic refrigerators and freezers. It may

also include conversion to CFC-free technology in the manufacture (or

“blowing”) of the polyurethane foam used in insulating the refrigerators

and freezers. To date, 813 investment projects, with funding allocations of

about $458 million, have been approved in 55 countries in all major regions

of the world.

Accomplishments in

Phasing Out

Ozone-Depleting

Substances

When fully implemented, projects approved to date are expected to phase

out the annual use of almost 84,000 metric tons of ozone-depleting

potential. This is about 40 percent of the estimated ODP-weighted

consumption of ozone-depleting substances in Article 5 countries.

Appendix IV provides a breakdown of ODP metric tons to be phased out by

Page 6 GAO/T-RCED-97-218
type of project and by implementing agency as of May 31, 1997. As of

December 31, 1996, however, only 20,487 ODP metric tons had actually

been phased out. This difference is attributable to two factors. First,

because of time lags between project approvals and the start of project

implementation, the number of projects actually in progress or completed

at a particular point in time is significantly smaller than the total number

of projects approved by the Multilateral Fund’s Executive Committee.

Second, projects that are under way, particularly investment projects,

often take longer to complete than originally projected. As of

December 31, 1996, only 688, or 45 percent of the 1,537 projects approved

since 1991 had been completed. Of the approved funding of $485 million

for these projects, only $197 million (41 percent) had been disbursed,

leaving an undisbursed balance of about $288 million for completion of

those projects. Planned spending commitments by the four implementing

agencies in 1997 total about $128 million, meaning that less than half of the

undisbursed funds approved for projects through 1996 is expected to be

disbursed by the end of 1997.

Some of the reasons cited for delays in project implementation and

completion include the following:

• Recipients attempted to renegotiate projects after Executive Committee

approval.

• The business entity needed more time to secure financing from

counterparts.7

• The grant recipients decided to change project specifications.

• The business entity chose to delay conversion until competitors’ projects

were approved by the Executive Committee.

• The business entity wanted government regulations passed before

allowing implementation to proceed.

• The bidding process resulted in higher costs than budgeted for the project.

Delays in the start of projects and slower than anticipated progress once

they have begun have concerned the Multilateral Fund’s Executive

Committee. In May 1997, the Executive Committee required the

7

As provided for in the Montreal Protocol, the Multilateral Fund covers only the agreed incremental

costs of converting existing enterprises from ozone-depleting to non-ozone-depleting technologies. In

practical terms, this means that the Fund will defray all additional costs above and beyond those costs

Article 5 countries would have expected to incur as they developed their infrastructure and consumer

markets in the absence of the Protocol. Furthermore, the Fund will cover incremental costs only up to

the proportion of local (or other Article 5 country) ownership of the enterprise. Thus, if a business

entity has 60-percent local ownership and 40-percent ownership by a multinational corporation, the

Fund will cover only 60 percent of the agreed incremental costs of a project approved for that

enterprise.

Page 7 GAO/T-RCED-97-218
implementing agencies to submit reports, by the next meeting of the

Executive Committee, for projects (1) where no disbursement has

occurred for 18 months after project approval and (2) that remained

uncompleted 12 months after the prescribed completion date. Information

from these reports will be used to develop guidelines to ensure that the

project preparation process includes measures to prevent delays in

implementation or completion in the future. The Executive Committee

also decided projects that have had their funding requests significantly

reduced during the review process could not proceed until the intended

recipients confirm that they have additional funding available to allow for

prompt project implementation.

Summary data on project type, approved funding, and project status are

detailed in appendix III.

Mechanisms to

Ensure the Proper

Use of Funds

The Multilateral Fund has a number of mechanisms in place that are

designed to ensure that funds are properly accounted for and that the

amount of funds allocated to specific projects is reviewed and verified.

When it was established in 1991, the Fund accepted the accounting and

auditing mechanisms of the implementing agencies and relied primarily on

the implementing agencies’ long-established institutional procedures.

According to a 1995 report by COWIconsult,8

 an international consultant,

the implementing agencies have elaborate procedures, long experience in

accounting for financial resources used in developing countries, and

well-established auditing mechanisms. The report stated that the study

team found no evidence that the agencies’ procedures were less elaborate,

implementation less careful, or auditing less thorough for activities

financed by the Multilateral Fund.

UNEP serves as the Fund’s treasurer. As a part of its agreement with the

Executive Committee, UNEP is responsible for obtaining and distributing

contributions, entering into agreements with the implementing agencies,

and submitting the Fund’s accounts to the Executive Committee for each

calendar year. UNEP receives certified and/or audited reports from the

implementing agencies, which provide aggregate expenditure or

disbursement figures. These figures are reported annually to the Executive

Committee. Because the Multilateral Fund is considered to be an integral

8

At their fourth meeting, held in November 1992, the Parties to the Montreal Protocol directed that a

study be undertaken to review and evaluate the effectiveness of the financial mechanism established

in the Protocol. UNEP retained COWIconsult of Copenhagen, Denmark, in association with Goss

Gilroy Inc., to perform this study. The study, entitled Study on the Financial Mechanism of the

Montreal Protocol, was issued in March 1995.

Page 8 GAO/T-RCED-97-218
part of UNEP’s and the United Nations’ accounts, its audits are the sole

responsibility of the Internal and External Audit of the United Nations.

The report of the United Nations Board of Auditors for the 2-year period

ending December 31, 1995,9

 reported findings and made recommendations

related to UNEP’s program and financial management, procurement, and

other areas, but the overall results revealed no material weaknesses or

errors considered material to the accuracy, completeness, or validity of

the financial statements as a whole. The auditors rendered an opinion that

the financial statements presented fairly UNEP’s financial position and the

results of its operations for that financial period; the statements were

prepared in accordance with the stated accounting policies; and

transactions were in accordance with the financial regulations and

legislative authority.

In addition, the implementing agencies are required to provide the Fund’s

Executive Committee with an annual progress report on the

implementation of approved work programs and activities related to

country programs and projects. These reports include information on

project approvals and disbursements; updates on project completions;

global and regional project highlights; performance indicators; status of

agreements and project preparation, by country; and administrative issues

(operational, policy, financial, and others). Finally, each recipient country

is required to report annually to the Executive Committee on the progress

of the implementation of its country program.

With regard to individual projects, the Multilateral Fund has developed a

multilevel review process:

• The implementing agencies review project proposals to ensure that they

meet eligibility criteria and arrange for external technical and cost reviews

of investment projects before submitting them to the Fund Secretariat.

• The Secretariat determines whether the proposals meet eligibility and

policy requirements and checks the proposed costs against data on past

costs and suppliers’ estimates. It may also consult with outside experts on

technical and cost issues before making a recommendation to the

Executive Committee.

• The Executive Committee’s Project Review Subcommittee examines the

recommended proposals and reports to the full committee.

• The Executive Committee’s individual members consider the

Subcommittee’s report and may also assess the projects independently,

9

UNEP’s accounts are maintained on a biennial, or 2-year, basis.

Page 9 GAO/T-RCED-97-218
sometimes requesting a fresh round of external technical and cost reviews

before the Committee makes its final funding decisions.

The project review process frequently results in significant alterations to

projects, cost reductions, and in outright rejection of some projects. These

alterations may be agreed to by the Secretariat and the implementing

agency before a proposal is submitted to the Executive Committee, or they

may occur during the meetings of the Project Review Subcommittee or the

Executive Committee itself. Most often, the dialogue on these issues

occurs mainly between the implementing agencies and the Fund

Secretariat.

The 1995 COWIconsult report concluded that the project review process

introduces a strong element of discipline into the project development and

approval procedure. COWIconsult reviewed a sample of 23 projects

submitted to the Fund Secretariat and found that the Secretariat’s views

appeared to carry great weight with the Executive Committee in that the

review process resulted in cost reductions in 13 of the 23 projects, with an

overall average reduction of 20 percent. Moreover, in 6 of the 23 projects

reviewed there was a very significant difference in the amount of support

originally requested and the final request reviewed by the Secretariat and

the Executive Committee. Overall, the study concluded that the review

process results in significant but not excessive reductions in the approved

costs of projects supported by the Fund.

We also reviewed a sample of projects to determine the current effect of

the review process on the cost of projects, and as a result, on the

cost-effectiveness of the Fund’s expenditures for them. We selected a

sample of 10 projects approved by the Executive Committee in 1996 that

comprised 7 investment projects, 2 technical assistance projects, and 1

institutional strengthening project. Each of the four implementing

agencies was represented by two projects in the sample, which also

included two bilateral projects.

For seven of the projects, we found reductions ranging from 9 to almost

70 percent resulting from the review by the Secretariat staff, whose

recommendations were generally endorsed by the Executive Committee.

The overall average reduction for these seven projects amounted to

48 percent. However, this average is heavily influenced by major

reductions on two very large investment projects made between the

original submissions and the final approvals. Even the one bilateral

investment project we reviewed had experienced a 23-percent reduction

Page 10 GAO/T-RCED-97-218
as a result of the review process. The three remaining projects were

approved by the Executive Committee as originally submitted.

An important consequence of the reduction in approved funding for these

projects was that their cost-effectiveness, expressed in terms of dollar cost

per kilogram of ozone-depleting substances eliminated, improved

significantly. In the cases of the two projects with the largest percentage

reductions in cost, the cost-effectiveness ratios went from $8.91/kg to

$2.80/kg and from $6.95/kg to $4.12/kg, respectively. A third project had a

similarly impressive improvement in cost-effectiveness, going from

$6.42/kg to $3.97/kg.

In addition to the control and review mechanisms and practices already in

place, the Executive Committee has realized that it could strengthen its

oversight by requiring project completion reports and developing a project

monitoring and evaluation system. The Multilateral Fund is currently

developing a uniform format for project completion reports that is

expected to be submitted to the Executive Committee for its review before

the end of 1997. In addition, a Subcommittee on Monitoring, Evaluation,

and Finance was recently established to address the need for a monitoring

and evaluation system. The Subcommittee developed a monitoring and

evaluation program to be implemented over the next year. When fully

implemented, the system may help the Executive Committee enhance the

Fund’s effectiveness by drawing on lessons learned from completed

projects.

Administrative

Support Costs Paid to

the Implementing

Agencies

In addition to funds allocated for projects of various types, the Multilateral

Fund pays the implementing agencies for administrative support costs

associated with project implementation. These costs include, among other

things, staff, office space, office equipment, and supplies; accounting,

audit, and procurement services; management backup; and travel needed

to properly oversee project implementation. In the case of UNDP, UNEP, and

UNIDO, payment for administrative support has, by agreement with the

Fund, been fixed at a flat 13-percent of the amount approved by the

Executive Committee for projects’ implementation. In the case of the

World Bank, up until mid-1995, reimbursement for administrative support

was based on actual expenditures reported by the Bank. But, from that

time forward, the Bank also has been compensated for administrative

support on the 13-percent flat fee basis. This level of administrative

support costs is generally consistent with prevailing administrative cost

allowances within the United Nations system.

Page 11 GAO/T-RCED-97-218
Nevertheless, in 1994 some members of the Executive Committee began to

question the continued appropriateness of a uniform 13-percent fee paid to

the implementing agencies. They expressed the view that with the initial

start-up phase of operations completed and with experience gained in

implementing a wide assortment of projects and activities, the continued

payment of administrative support at this level could result in

unnecessarily high costs to the Multilateral Fund. At its March 1994

meeting, the Executive Committee requested that the Secretariat perform

an analysis of each implementing agency’s administrative costs. The

Secretariat contracted with a consultant to perform this study, who

reported in September 1994 that the administrative cost levels were not

excessive. In fact, the consultant’s report concluded that the flat

13-percent administrative support fee had been insufficient to cover all of

the costs that the implementing agencies might legitimately have charged

the Fund and, as a result, the agencies were, in effect, subsidizing part of

the cost of projects. However, the report recognized that over time the

Fund’s administrative costs could be expected to decline as a percentage

of overall project costs as a result of getting past the high cost of start-up,

greater experience and resulting increased efficiency, economies of scale,

and other factors. In November 1996, the Parties to the Montreal Protocol

directed the Executive Committee to work toward the goal, over the next

3 years, of reducing agency support costs to an average of below

10 percent to make more funds available for other activities.

In February 1997, the Executive Committee decided that an independent

consultant should be recruited to work with the Secretariat and

implementing agencies to identify options and approaches for reducing the

overall level of administrative costs, focusing on revising the current

uniform, fee-based system. The Chief Officer of the Fund’s Secretariat

informed us that a consultant has recently been selected to carry out this

work and is expected to submit a report in September 1997. He said the

Secretariat and the Executive Committee will be working over the next 3

years, in consultation with the implementing agencies, to reduce

administrative support costs to an overall average of less than 10 percent.

Recommendation Because of the potential for considerable interest savings, we recommend

that the Administrator of the Environmental Protection Agency and the

Secretary of State implement an alternative payment method such as

promissory notes or letters of credit for the U.S. contribution to the

Multilateral Fund and seek the assistance of the Department of the

Treasury in implementing this recommendation. In commenting on a draft

Page 12 GAO/T-RCED-97-218
of this testimony, the Environmental Protection Agency and the

Department of State agreed in concept to our recommendation and are

exploring options for using an alterative payment method.

Mr. Chairman, this concludes my prepared remarks. At this point, I would

be glad to respond to any questions you or Members of the Subcommittee

may have.

Page 13 GAO/T-RCED-97-218
Appendix I 

Summary of Contributions to the

Multilateral Fund for 1991-96 as of January

31, 1997

Party

Agreed

contributions

Cash

payments

Bilateral

assistance

Promissory

notes

Outstanding

contributions

Australia $12,169,842 $11,422,914 $746,928 $0 $0

Austria 6,212,240 6,080,450 116,628 0 15,162

Azerbaijan 63,182 0 0 0 63,182

Belarus 3,309,593 0 0 0 3,309,593

Belgium 8,588,289 8,588,289 0 0 0

Brunei Darussalam 34,833 0 0 0 34,833

Bulgaria 897,207 753,523 0 0 143,684

Canada 24,948,120 17,570,667 2,186,483 0 5,190,970

Cyprus 148,670 148,670 0 0 0

Czech Republic 2,849,573 2,849,573 0 0 0

Denmark 5,399,598 5,194,598 205,000 0 0

Finland 4,574,634 4,359,543 103,440 0 111,651

France 48,598,094 5,921,449 1,571,603 41,105,042 0

Georgia 90,020 0 0 0 90,020

Germany 72,415,467 39,905,823 1,355,296 31,154,348 0

Greece 2,938,344 2,938,344 0 0 0

Hungary 1,420,925 1,420,925 0 0 0

Iceland 241,067 241,067 0 0 0

Ireland 1,498,654 1,446,898 0 0 51,756

Israel 1,574,736 1,574,736 0 0 0

Italy 34,042,507 28,644,156 0 0 5,398,351

Japan 98,501,042 76,783,706 0 0 21,717,336

Kuwait 286,549 0 0 0 286,549

Latvia 143,684 0 0 0 143,684

Liechtenstein 80,356 80,356 0 0 0

Lithuania 148,038 0 0 0 148,038

Luxemburg 499,552 499,552 0 0 0

Malta 28,052 28,052 0 0 0

Monaco 59,787 59,787 0 0 0

Netherlands 12,426,686 9,661,853 0 2,764,833 0

New Zealand 1,928,536 1,928,536 0 0 0

Norway 4,436,982 4,436,982 0 0 0

Panama 16,915 16,915 0 0 0

Poland 3,327,029 473,318 0 0 2,853,711

Portugal 1,708,280 1,229,333 0 0 478,947

Russian Federation 54,813,611 0 0 0 54,813,611

Singapore 531,221 459,245 71,976 0 0

(continued)

Page 14 GAO/T-RCED-97-218
Appendix I 

Summary of Contributions to the

Multilateral Fund for 1991-96 as of January

31, 1997

Party

Agreed

contributions

Cash

payments

Bilateral

assistance

Promissory

notes

Outstanding

contributions

Slovakia 956,372 583,249 0 0 373,123

Slovenia 61,290 0 0 0 61,290

South Africa 3,201,108 2,859,433 30,000 0 311,675

Spain 16,532,425 16,532,425 0 0 0

Sweden 9,271,415 8,682,563 0 0 588,852

Switzerland 9,116,083 8,869,839 242,600 0 3,644

Turkmenistan 56,603 0 0 0 56,603

Ukraine 12,841,967 785,600 0 0 12,056,367

United Arab Emirates 1,623,182 559,639 0 0 1,063,543

United Kingdom 40,096,675 19,664,354 0 20,432,321 0

United States 173,751,570 144,189,080 10,296,412 0 19,266,078

Uzbekistan 1,362,934 0 0 0 1,362,934

Subtotal $679,823,539 $437,445,442 $16,926,366 $95,456,544 $129,995,187

Disputed contributions 8,098,267 0 0 0 8,098,267

Total $687,921,806 $437,445,442 $16,926,366 $95,456,544 $138,093,454

Note: The testimony uses the term “assessments” to refer to the agreed contributions shown on this

table.

Source: Report of the 21st Meeting of the Executive Committee of the Multilateral Fund for the

Implementation of the Montreal Protocol, UNEP/OzL.Pro/ExCom/21/96 (Feb. 20, 1997).

Page 15 GAO/T-RCED-97-218
Appendix II 

Approved Funding by Major Geographic

Regions and Types of Projects

Type of

project Africa

Asia and the

Pacific Europe

Latin America

and Caribbean Global Total Percentage

Country

program

preparation

$2,111,660 $2,423,230 $623,520 $1,734,030 $200,000 $7,092,440 1.24

Institutional

strengthening

4,225,730 4,919,170 722,500 5,209,010 • 15,076,460 2.64

Technical

assistance

4,135,660 12,518,630 465,000 10,781,010 16,353,320 44,253,630 7.75

Training 1,526,380 3,124,970 116,630 3,131,820 2,602,880 10,502,680 1.84

Demonstration 720,130 2,453,390 • 2,358,120 250,000 5,781,640 1.01

Project 

preparation

2,853,070 16,476,480 1,589,090 8,344,870 1,653,430 30,916,940 5.41

Investment

projects

51,766,470 289,777,480 17,555,250 98,089,370 500,000 457,688,570 80.11

Total $67,339,100 $331,693,350 $21,072,020 $129,648,250 $21,559,630 $571,312,350 100.00

Percentage 11.79 58.06 3.69 22.69 3.77 100.00

Source: Montreal Protocol Multilateral Fund, Inventory of Approved Projects.

Page 16 GAO/T-RCED-97-218
Appendix III 

Summary Data by Project Type and Status

as of December 31, 1996

Type

Number of

approvals

Number

completed

Percentage

completed

Approved

funding as

adjusted

Funds

disbursed

Percentage

of funds

disbursed Balance

Planned

commitments

in 1997

Country

program

preparation

112 91 81 $5,089,872 $4,456,464 88 $633,408 $434,000

Institutional

strengthening

85 12 NA 13,936,759 5,693,830 41 8,242,929 3,546,219

Technical

assistance

208 123 59 32,324,137 19,483,385 60 12,840,752 5,648,950

Training 107 69 64 9,121,870 7,213,034 79 1,908,836 1,371,270

Demonstration

projects

35 16 46 6,257,875 3,723,973 60 2,533,902 1,614,967

Project

preparation

303 245 81 21,603,966 20,056,292 93 1,547,674 676,000

Investment

projects

687 132 19 396,642,263 136,677,671 34 259,964,592 114,619,694

Total 1,537 688 45 $484,976,742 $197,304,649 41 $287,672,093 $127,911,101

Source: Montreal Protocol Multilateral Fund, Consolidated Progress Report.

Page 17 GAO/T-RCED-97-218
Appendix IV 

ODP Metric Tons to Be Phased Out as of

May 31, 1997

Project type World Bank UNDP UNEP UNIDO Bilateral Total

Country program

preparationa

• • • • • •

Institutional strengtheninga • • • • • •

Technical assistance 1,380.00 627.06 27.20 61.00 52.50 2,147.76

Training 0.00 0.00 310.90 0.00 15.40 326.30

Demonstration projects 135.00 38.16 0.00 0.00 354.50 527.66

Project preparationa • • NAb • • •

Investment projects 44,440.72 19,797.04 NAb 15,743.72 619.47 80,600.95

Total 45,955.72 20,462.26 338.10 15,804.72 1,041.87 83,602.67

Percentage 54.97 24.48 0.40 18.90 1.25 100.00

Note: The ozone-depleting potential (ODP) value is the ratio of a given compound’s ability to

deplete ozone compared with the ability of a similar mass of CFC-11.

aCountry program preparation, institutional strengthening, and project preparation projects do not

directly contribute to the phaseout of ozone-depleting substances.

bNA indicates not applicable. UNEP is prevented by its charter from implementing investment

projects and, unlike the other three Multilateral Fund implementing agencies, does not undertake

project preparation activities.

Source: Montreal Protocol Multilateral Fund, Inventory of Approved Projects.

(160372) Page 18 GAO/T-RCED-97-218
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