United States General Accounting Office

GAO Report to Congressional Requesters

November 1996 UNITED NATIONS

Status of Alternative

Revenue Raising

Proposals

G O A

years

1921 - 1996

GAO/NSIAD-97-31

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-274545 

November 8, 1996

The Honorable Jesse A. Helms

Chairman, Committee on Foreign Relations

United States Senate

The Honorable Judd Gregg

Chairman, Subcommittee on Commerce, Justice,

 State, the Judiciary, and Related Agencies

Committee on Appropriations

United States Senate

In response to your request, we are providing information on the United

Nations’ ability to raise revenues outside of member assessments.

Specifically, this report deals with

• whether U.N. organizations receive substantial contributions from private

sources;

• whether the United Nations has authority to implement revenue-raising

options, including the imposition of taxes or fees within the jurisdictions

of member states, and how the proposals would be processed in the U.N.

system;

• the U.S. position on U.N. authority to impose taxes within the jurisdictions

of member states; and

• U.N. proposals for raising revenues and the status of these proposals.

Background The six principal components of the United Nations are the General

Assembly, the Security Council, the Economic and Social Council, the

Trusteeship Council,1

 the International Court of Justice, and the

Secretariat. Numerous committees, commissions, programs, and other

subsidiary bodies fall under the main components of the United Nations.

For the 1994-95 biennium, the U.N. regular budget was $2.6 billion. In 1995,

the U. S. assessment was $315 million.2

 In addition, the U.N. family of

organizations includes numerous specialized agencies and other

autonomous bodies, some of which have their own separate membership,

system of governance, and financing structures. (See app. I.) We limited

our review to the main components of the United Nations and the

subsidiary bodies that receive funding through, or are directly controlled

by, the main U.N. components.

1

The Trusteeship Council has suspended operations.

2

This figure excludes assessments for peacekeeping.

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B-274545 

Results in Brief The United Nations receives only a small part of its financial support from

private sources. U.N. operations are funded primarily from three sources:

regular budget assessments, special assessments for peacekeeping

missions, and voluntary contributions funded by member governments.3

 In

addition, the United Nations receives some funding through contributions

from nongovernmental entities, such as foundations or other private

international organizations. Of the $5.9 billion voluntary contributions

received in 1995, only $584 million came from nongovernmental sources.

The United Nations also generates income from commercial sales of

products such as U.N. publications or from gift shop operations and fees

for services. In addition, the United Nations has on two occasions

borrowed funds from member states.

Because the United Nations is an organization of sovereign states with no

independent power of its own, it has no authority to impose taxes within

the jurisdictions of its member states. Granting such authority would, at a

minimum, require an amendment to the U.N. Charter. An amendment

requires approval and ratification in accordance with the respective

constitutional processes by two-thirds of the members of the General

Assembly, including all permanent members of the Security Council.4

 The

official position of the U.S. government is that it would veto any proposal

to amend the U.N. Charter for this purpose. In early 1996, the United

States and 77 other countries said that they would consider only voluntary

funding approaches for the United Nations.

Alternative revenue-raising ideas have been solicited within the U.N.

system. However, no formal proposals have been made. Some U.N.

member states, under the auspices of the Economic and Social Council,5

have studied various financing mechanisms, some of which involve the

imposition of taxes within the jurisdictions of the U.N. member states. The

financing mechanisms studied include levies on international air and

maritime transport, telecommunications, trade, and international currency

transactions. The United States has encouraged delegations to the United

Nations to discuss alternative funding sources; however, it has opposed

any suggestion that the United Nations be granted authority to impose

taxes.

3

For a discussion of regular and peacekeeping budget assessments, see United Nations: How Assessed

Contributions for Peacekeeping Operations Are Calculated (GAO\NSIAD-94-206, Aug. 1, 1994).

4

Permanent members of the Security Council are China, France, the Russian Federation, the United

Kingdom, and the United States.

5

In the July 1996 Substantive Session of the U.N. Economic and Social Council, position papers were

solicited from member states on new and innovative ideas for generating funds.

Page 2 GAO/NSIAD-97-31 United Nations
B-274545 

Funding for U.N. Main

Components and

Their Subsidiary

Bodies

In addition to member assessments that finance the regular budget of the

United Nations, the main U.N. components and their subsidiary bodies6

receive voluntary contributions from member governments and monies

from nongovernmental entities such as businesses or foundations. It also

obtains funds through a variety of other sources, such as sales of

publications, gifts, and greeting cards; rental income; interest on trust

funds; and gains from currency exchanges.7

While each U.N. agency accounts for funds received from such sources,

the United Nations has no systemwide consolidated list of voluntary

contributions or other funds received. Voluntary contributions may fund

an organization’s normal operations and/or be earmarked for specific

programs or projects. U.N. financial systems are not harmonized, making it

difficult to depict how voluntary funds are distributed. However,

contributions to the U.N. Conference on Trade and Development (UNCTAD),

the U.N. Development Program (UNDP), the U.N. Population Fund, and the

U.N. Children’s Fund (UNICEF), illustrate the diversity of U.N.

organizations’ funding.

UNCTAD provides technical assistance on trade promotion issues primarily

to developing countries. In 1994-95, UNCTAD received its $113.6 million

regular budget from the U.N. Secretariat, and $43.8 million in

extrabudgetary support. In contrast, UNDP, the U.N. Population Fund, and

UNICEF do not receive funding from the U.N. regular budget assessment but

are funded by voluntary contributions from governments;

nongovernmental organizations; and, in the case of UNICEF, partly through

entrepreneurial endeavors.

UNDP’s regular program is funded by voluntary contributions from member

countries. In addition, member countries and private and international

organizations voluntarily contribute funds for specifically earmarked trust

funds or for specific projects through cost-sharing agreements.8

 Both the

6

The subsidiary bodies include the Office of the U.N. High Commissioner for Refugees, the Office of

the U.N. High Commissioner for Human Rights, the U.N. Children’s Fund, the U.N. Conference on

Trade and Development, the U.N. Development Program, the U.N. Capital Development Fund, the U.N.

Development Fund for Women, the World Food Program, the World Food Council, the U.N.

Environment Program, the U.N. Population Fund, the U.N. International Drug Control Program, and

the U.N. Research Institute for Social Development.

7

The United Nations sells postage stamps, operates a gift center and newsstand, sells publications, and

provides visitor services. Between 1994 and 1995, the United Nations earned about $9 million from

these activities.

8

Cost-sharing agreements are designed to allow donors to contribute to specific projects within a

country at their discretion. Recipient governments also make contributions to specific projects

through cost-sharing agreements.

Page 3 GAO/NSIAD-97-31 United Nations
B-274545 

Ford and Rockefeller Foundations, for example, have contributed to

cost-sharing projects, as have the multilateral development banks and the

European Union.

The U.N. Population Fund, whose 1994-95 budget was $586 million, is also

funded by voluntary contributions, largely from donor governments. In

addition, the Fund receives income by providing procurement services to

governments. The Fund purchases contraceptives in bulk for recipient

governments. In 1994-95, for example, the Fund earned about $3 million

from these services. Like UNDP, the U.N. Population Fund receives funds

through cost-sharing agreements with governments.

In addition to voluntary contributions from member governments, UNICEF

generates substantial income from other sources. For example, in 1995

UNICEF received $655 million from governments to fund its programs and

earned $308 million by selling greeting cards and conducting private sector

fund-raising activities. In 1994, UNICEF sold 158 million cards. UNICEF also

conducts direct mail campaigns and other fund-raising activities, such as

collecting British Airways’ passengers’ unwanted foreign currency.

Fund-raising activities are also conducted by national committees located

in 37 countries.

The United Nations

Lacks Authority to

Tax Members

Although its members are sovereign nations, the United Nations itself does

not possess the attributes of sovereignty. The United Nations was created

as a forum to mediate international disputes, maintain international peace,

develop friendly relations among nations, promote social and economic

progress, and foster respect for human rights. It is endowed by its

members with certain powers necessary to discharge its functions. Those

powers are limited to carrying out only those activities that are within the

scope of its Charter.

Regarding financial matters, article 17 of the Charter vests the General

Assembly with responsibility for the U.N. budget. Article 17 authorizes the

General Assembly to “consider and approve the budget of the

Organization.” It provides that the “expenses of the Organization shall be

borne by the Members as apportioned by the General Assembly.” As noted

by the International Court of Justice, “article 17 is the only article in the

Charter which refers to budgetary authority or to the power to apportion

expenses, or otherwise raise revenue.”9

9

1962 I.C.J. 151.

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B-274545 

Article 17 authorizes the General Assembly to approve a budget and to

apportion expenses among members; it does not authorize the United

Nations to independently raise revenue by imposing fees or taxes on

international transactions. More important, a basic underlying principle of

the U.N. Charter acknowledges the sovereignty of all nations and generally

prohibits the United Nations from intervening in matters that are

essentially within the domestic jurisdiction of any state.10 Consistent with

this underlying principle, at least one U.S. court has ruled that the United

Nations has no power to legislate within the realm of the municipal law of

the United States.11 The power to tax, an attribute of sovereignty, is clearly

within the U.S. domestic jurisdiction and the United Nations cannot

independently impose taxes on U.S. citizens.

Implementation of any of the suggested taxes or fees on international

transactions would, at a minimum, require an amendment to the U.N.

Charter. A U.N. Charter amendment requires approval and ratification by

two-thirds of the members of the General Assembly in accordance with

their respective constitutional processes, including all the permanent

members of the Security Council.12 To be effected, an amendment requires

ratification by the United States, a permanent member of the Security

Council. In the United States, ratification requires the advice and consent

of the Senate, provided two-thirds of the Senators present concur.13

U.N. Borrowing As discussed above, the U.N. ability to raise revenue is limited to measures

authorized under article 17.14 In addition to assessments and

contributions, the General Assembly has authorized, in connection with its

authority to consider and approve a budget, the United Nations to borrow

funds to finance operations on at least two occasions. In both cases, the

United States was the major lender and did not question the capacity or

the authority of the United Nations to issue bonds or borrow money.15

10U.N. Charter, article 2(7).

11United States v. Keeney, 111 F. Supp. 233 (1953), reversed on other grounds, 218 F. 2d 843 (1954).

12U.N. Charter, article 108.

13U.S. Constitution, article II, § 2.

14The regular budget of the United Nations, U.N. specialized agencies, and the International Atomic

Energy Agency are generally financed with assessed contributions that members are obligated to pay

under article 17. Special programs, such as UNICEF, are financed with voluntary contributions.

Peacekeeping operations are typically financed with special assessments.

15Under article 104 of the U.N. Charter, the United Nations enjoys in the territory of each of its

members such legal capacity as may be necessary for the exercises of its functions and the fulfillment

of its purposes.

Page 5 GAO/NSIAD-97-31 United Nations
B-274545 

In the 1940s, the General Assembly authorized the Secretary General to

negotiate a loan agreement with the United States for construction of the

U.N. headquarters.16 The U.S. Congress authorized the President to enter

into the loan agreement, which was brought into effect on August 11,

1948.17 On the second occasion, in the 1960s, the General Assembly

authorized the Secretary General to issue $200 million in bonds as part of a

plan to alleviate a financial crisis.18 The bonds were offered to members of

the United Nations; specialized agencies; the International Atomic Energy

Agency; and if the Secretary General determined, after consultation with

the Advisory Committee on Administrative and Budgetary Questions,

non-profit institutions or associations.19 The U.S. Representative to the

United Nations voted in favor of the bond issue and the Congress

authorized appropriations in the amount of $100 million.20 The Congress

regarded the bond issue as an extraordinary remedy that was not intended

to set a precedent for future financing.21 The authorizing legislation

specifically provided that it did not authorize the United States to

participate in any future U.N. borrowings.22

Options for Raising

Revenues

Various options to raise revenues have been discussed within the U.N.

system, but none have been formally proposed by any U.N. official or

member state. Options discussed included (1) the issuance of bonds and

borrowing money, which the United Nations has used in the past; (2) an

international lottery; (3) obtaining fees from a U.N.-issued credit card;

(4) the imposition of levies on international transportation-related

activities and financial transactions; (5) obtaining fees from a

U.N.-established international currency exchange; or (6) the borrowing of

funds from international financial institutions such as the World Bank.

State Department officials note that the World Bank can lend only to

sovereign governments, and since the United Nations is not a sovereign

entity, this option is not viable.

16General Assembly Resolution 182(II), November 20, 1947.

17U.N. Headquarters Agreement Act, Public Law No. 80-357, 61 Statute 756 (1947).

18General Assembly Resolution 1739 (XVI), December 20, 1961.

19Conceivably, if the General Assembly had chosen to at the time, it could also have authorized sale of

the bonds to commercial institutions.

2022 U.S.C. 287g.

21Senate Report Number 1277, 87th Congress 2d Session (1962).

2222 U.S.C. 287j.

Page 6 GAO/NSIAD-97-31 United Nations
B-274545 

According to State Department officials, the United Nations has not

formally raised for discussion any of these options at economic summits.

In May 1995, the U.N. Secretary General sent a letter to the Group of 7

(G-7) heads of state prior to the June 1995 meeting in Halifax, Nova

Scotia.23 The letter discussed the financial challenges facing the United

Nations and the need to streamline operations and improve management.

The Secretary General said in the letter that he would be relying on the

General Assembly’s High-Level Open-Ended Working Group on the

Financial Situation to identify options but without mentioning specific

proposals. According to State Department officials, none of the proposals

were on the agenda of the 1996 G-7 meeting held in Lyon, France. Many of

the options lack broad international support. For example, in early 1996,

the United States and 77 other countries said that they would consider

only voluntary funding mechanisms for the United Nations.

U.S. Position on

Involuntary Levies

The official U.S. policy is that the United States opposes involuntary

methods of raising additional revenue within the U.N. system. The U.S.

Representative for U.N. Management and Reform stated at the High-Level

Open-Ended Working Group on the Financial Situation of the United

Nations in January 1996 that the United States does not support any

involuntary funding approach to support the United Nations. Further,

State Department officials said that the United Nations does not have the

authority to impose or collect any form of tax, and the U. S. government

would not consent to any proposal to grant such authority. In March 1996,

the U.S. Permanent Representative to the United Nations stated that the

United States supports addressing the U.N. financial situation with

management reforms and encourages the United Nations to discuss

alternative funding sources. She also stated that the United States would

oppose any plan to finance U.N. activities by taxing member states. The

U.S. veto power would prohibit implementation of any tax. According to

State officials, no formal proposals to impose a tax on U.S. citizens have

been made, and State has not assessed the impact of a tax on U.S. bilateral

or multilateral agreements.

Agency Comments The Department of State reviewed a draft of this report and agreed with its

contents. The Department’s comments are reproduced in their entirety in

appendix II.

23The G-7 comprises the following industrialized countries: Australia, Canada, France, Germany, Italy,

the United Kingdom, and the United States.

Page 7 GAO/NSIAD-97-31 United Nations
B-274545 

Scope and

Methodology

For information on the funding sources available to U.N. organizations, we

obtained financial and other documentation from the United Nations and

its subsidiary bodies. To identify U.N. authority to implement

revenue-raising options, we reviewed the U.N. Charter. To identify U.N.

proposals for raising revenues, we interviewed officials at and obtained

documentation from the United Nations, the Department of State, and the

U.S. Mission to the United Nations. To determine the U.S. position on U.N.

authority to impose taxes within the jurisdictions of member states, we

spoke with officials at the Department of State and the U.S. Mission to the

United Nations. As an agency of the United States, we have no direct audit

authority to review international organizations, including the United

Nations or its specialized agencies. However, these organizations

cooperated with us in our data collection efforts, although we could not

independently verify the accuracy of the data they provided. We

performed our review between June and September 1996 in accordance

with generally accepted government auditing standards.

We are sending copies of this report to the Secretary of State, the Director,

Office of Management and Budget, and interested congressional

committees. Copies will also be made available to others upon request.

Please contact me at (202) 512-4128 if you or your staff have any questions

concerning this report. Major contributors to this report were LeRoy W.

Richardson, Patricia L. Martin, Joseph C. Brown, and Mark C. Speight.

Harold J. Johnson, Associate Director

International Relations and Trade Issues

Page 8 GAO/NSIAD-97-31 United Nations
Page 9 GAO/NSIAD-97-31 United Nations
Appendix I 

The United Nations System

The U.N. Principal

Components

The General Assembly

The Security Council

The Economic and Social Council

The Trusteeship Council1

The International Court of Justice

The Secretariat

Related U.N.

Programs and

Subsidiary Bodies

Office of the U.N. High Commissioner for Refugees

Office of the U.N. High Commissioner for Human Rights

U.N. Children’s Fund

U.N. Conference on Trade and Development

U.N. Development Program

U.N. Development Fund for Women

World Food Program

World Food Council

U.N. Environment Program

U.N. Population Fund

U.N. International Drug Control Program

International Trade Center

Specialized Agencies

and Other

Autonomous Bodies

Food and Agricultural Organization

General Agreement on Tariffs and Trade

International Trade Center

International Atomic Energy Agency

International Consultative Group on Food Irradiation

International Civil Aviation Organization

International Fund for Agricultural Development

International Labor Organization

International Maritime Organization

International Monetary Fund

International Telecommunication Union

U.N. Educational, Scientific, and Cultural Organization

U.N. Industrial Development Organization

Universal Postal Union

World Health Organization

World Bank Group International Bank for Reconstruction and Development

International Development Association

1

The Trusteeship Council has suspended operations.

Page 10 GAO/NSIAD-97-31 United Nations
Appendix I 

The United Nations System

International Finance Corporation

Associated Organizations:

 Consultative Group on International Agricultural Research

 International Center for the Settlement of Investment Disputes

 Multilateral Investment Guarantee Agency

Regional Development

Banks

African Development Bank

Inter-American Development Bank

Institute for Latin American Integration

Asian Development Bank

Caribbean Development Bank

Peacekeeping

Operations

U.N. Truce Supervision Organization in Palestine

U.N. Military Observer Group in India and Pakistan

U.N. Peacekeeping Force in Cyprus

U.N. Disengagement Observer Force (between Israel and Syria in the

 Golan Heights)

U.N. Interim Force in Lebanon

U.N. Iraq-Kuwait Observation Mission

U.N. Mission for the Referendum in Western Sahara

U.N. Mission in Bosnia and Herzegovina (includes International Police

 Task Force)

U.N. Preventative Deployment Force (in the former Yugoslav Republic of

 Macedonia)

U.N. Observer Mission in Liberia

U.N. Observer Mission in Georgia

U.N. Support Mission in Haiti

U.N. Angola Verification Mission III

U.N. Mission of Observers in Tajikistan

U.N. Transitional Administration for Eastern Slavonia, Baranja, and

 Western Sirmium

U.N. Mission of Observers in the Prevlaka

Source: Congressional Research Service.

Page 11 GAO/NSIAD-97-31 United Nations
Appendix II 

Comments From the Department of State

Page 12 GAO/NSIAD-97-31 United Nations
Appendix II 

Comments From the Department of State

(711208) Page 13 GAO/NSIAD-97-31 United Nations
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