34033 CGIAR 1993 Financial Report Consultative Group on International Agricultural Research Questionsor suggestionsabout the 1993 CGIAR Financial Report should be sent to: CGIAR Secretariat (attention: Ravi Tadvalkar) The World Bank 1818 `H' Street, N.W. Washington, D.C., USA 20433 July, 1994 Table of Contents CGIAR 1993 Financial Report page I. INTRODUCTION ........................................... 1 II. 1993 HIGHLIGHTS. ......................................... I Financial Plans - Core Grant Funding. ............................ 1 Financial Plans - ComplementaryGrant Funding. ..................... 1 CGIARGrants ........................................... 3 ResourcesAvailable to CGIAR Centersin 1993. ...................... 4 ResourcesUsedby CGIAR Centersin 1993. ......................... 4 Overall Financial Outcomefor 1993 ............................. 5 StafJingPatterns. ......................................... 6 External Factors .......................................... 6 III. 1993 CGlAR FUNDING ....................................... 7 A. 1993 Core Grants ........................................ 7 Contribution Profile ........................................ 8 Structure of Core Grants ..................................... 8 Balancing Support. ........................................ 9 DisbursementSchedule ..................................... 11 B. 1993 ComplementaryGrants. ................................ 11 OverheadRecovery ....................................... 12 IV. 1993 CGIAR EXPENDITURES. ................................. 13 Regional Distribution. ..................................... 14 Researchand Research-RelatedActivities. ......................... 14 V. 1993 FINANCIAL POSITION OF CGIAR CENTERS...................... 15 Liquidity Indicators........................................ 18 Concluding Observations. ................................... 19 Index of Annex Tables Table I-l : 1993 Revenueand Expenditureof CGIAR Centers Table II-l : 1993 CGIAR Funding by Donor Table II-2 : CGIAR Core Grants by Donor (1989-93) Table II-3 : CGIAR Donor Ranking of Core Grants (1989-1993) Table II-4 : CGIAR SystemFunding (1989-l993) Table II-5 : 1993 CGIAR Funding by Center Table II-6 : 1993 Core Contributions by Donor and by Center Table II-7 : 1993 ComplementaryContributionsby Donor and by Center Table II-8 : World Bank Grants (1989-l993) Table II-9 : 1993 DisbursementScheduleby Donor and by Month Table III-l : CGIAR Expenditure (1989-l993) Table III-2 : 1992 Program OperatingExpenditure ($`OOO) Table III-3 : 1992 Regional OperatingExpenditure ($`OOO) Table III-4 : 1992 Object Operating Expenditure ($`000) Table III-5 : 1992 Core OperatingExpenditure, by Activity ($`OOO) Table III-6 : 1992 Core OperatingExpenditure, by Activity - OverheadsLoaded ($`OOO) Table III-7 : 1992 ComplementaryOperatingExpenditure,by Activity - OverheadsLoaded ($`OOO) Table III-8 : 1992 Total OperatingExpenditure,by Activity - OverheadsLoaded ($`OOO) Table III-9 : 1993 Program OperatingExpenditure ($`OOO) Table III-l 0: 1993 Regional OperatingExpenditure ($`OOO) Table III-l 1: 1993 Object Operating Expenditure ($`OOO) Table III-1 2: 1993 Core OperatingExpenditure, by Activity ($`OOO) Table III-l 3: 1993 Core OperatingExpenditure, by Activity - OverheadsLoaded ($`OOO) Table III-I 4: 1993 ComplementaryOperatingExpenditure, by Activity - OverheadsLoaded ($`OOO) Table III-l 5: 1993 Total Operating Expenditure,by Activity - OverheadsLoaded ($`OOO) Table III-l 6: CGIAR Staflng, 1989-l 993 TableIII-1 7: CGIAR Centers'Inflation Rates (1989-1993)- Calculatedby Uniform Measurement Table N-1 : CGlAR Centers'Financial Position (1993) 1993 CGIAR FINANCIAL REPORT I INTRODUCTION The CGIAR Secretariat reports each year on the financial performance of the CGIAR system. The principal objective of this report is to summarizeand placethe 1993 results in context. Centersissue other documents,including their annualreports and project reports preparedfor donors, to describetheir activities and results in detail. The CGIAR Secretariatissuesan annual report as well. The 1993 CGIAR financial report includes standardinformation which hasbeenpresentedin the past, as well as several new items, which are intendedto provide additional context and background for the interpretation of the basic core funding and expenditure data. The latter include detailed center staffing information, complementaryexpendituredata, and inflation statistics. The report is organized as follows: Section II presentsCGIAR highlights, i.e. an overview of the main featuresof the 1993 financial outcome. SectionIII discusses1993 systemfunding patterns, and Section IV discussesthe expenditure patterns for 1993 focusing on system changes in resource use. SectionV describesthe CGIAR's financial position aggregatingthe dataprovided in the centers'financial statements. Annex tables provide detailed information for each center, used to draw systemaggregates discussed in the main text of the report. Highlights of 1989-93 resources at the system level are summarized in table 1. II 1993 HIGHLIGHTS Financial Plans - Core Grant Funding In view of the ongoing developmentof the CGIAR's Medium Term Plan (MTP), 1993 became an interim year during which no referenceto prior MTPs would be made by centers. Accordingly, at ICW92, the Group approved 1993 core programs of $264.4 million. Core funding for 1993 was estimatedwithin a range of $254 to $264 million. ("1993 Funding Requirements:Update and Proposed Revisions" (ICW/92/07)). By early 1993, the core funding estimatewas reduced to $241 million, and centerswere requestedto plan 1993 operationsat that level. At mid-year, mainly as a result of further reductions in contributions, the availability of funding decreasedto $233 million. The final result was $235 million in core grant funding, i.e. 11% below the program approved at ICW92. Financial Plans - Complementary Grant Funding At ICW92, centers'1993 complementary programs were approved at a funding level of $75 million, and at year end actual 1993 complementaryfunding amountedto $76 million. Table 1: CGIAR Financial Indicators, 1989-1993 (US0 million & %) 1989 (A) RESOURCE SUMMARY ($1 Core Total Core Total Core Total Grants CGIAR contributions 224.5 271.8 234.9 287.9 231.9 291.1 247.3 318.7 234.7 311.3 Annual Change (X1 6% 4x 5% 6% (1%) 1% 7% 9% (5%) (2%) Other Revenue Stabilization Fund 10.7 10.7 2.5 2.5 4.7 4.7 0.0 0.0 0.0 0.0 Adjustment, Ug Grant 0.0 0.0 0.0 0.0 0.0 0.0 1.9 1.9 (4.1) (4.1) Other Income (net) 13.7 13.7 19.5 19.5 13.8 13.8 18.4 14.2 18.4- 11.0 Total Revenue 248.9 296.2 256.9 309.9 250.4 309.6 267.6 334.8 249.0 318.2 Svstem Expenditure '/ Oberations 223.8 262.6 231.9 280.7 248.4 295.1 258.7 318.5 254.1 321.4 Capital 18.1 27.0 17.6 26.6 0.D 11.1 0.0 0.01.9 Total Expenditure 241.9 289.6 249.5 307.3 248.4 306.2 258.7 & 254.1 323.3 Net Surplus/(Deficitl 7.0 6.6 7.4 2.6 2.0 3.4 8.9 8.9 (5.1) (5.1) Net, as % of revenue 2.8% 2.2% 2.9% 1.0% 0.8% 1.1% 3.3% 2.7% (2.0%) (1.6%) Core Funding, % of Total 83% 82x 82% 78% 75% % CG Funds Unrestricted 84% 70% 83% bs% 84% 69% 82% 63% 83% 63% # Contributing CC Donors 37 33 39 36 38 CGIAR grants as % ODA 0.49% 0.59% 0.44% 0.54% 0.41% 0.51% 0.41% 0.52% 0.43% 0.57% (8) EXPENDITURE SHARE PROFILE (%) Prosram Research Programs 47% 48% 46% 45% 46% 47% 49% 49% 48% 49% Research Support 10% 10% 13% 10% a% 10% 9% 9% 8x TrainingKomnunications iax 22 18% 18% 18% 22% 16% 20% 15% 19% Research Management 25% 22% 26% 24% 27% 23% 27% 22% 28% 24% Region (operations) Sub-Saharan Africa 41% n/a 42% n/a 43% n/a 39% 42% 37% 39% Asia 30% n/a 30% n/a 29% n/a 33% 31% 34% 35% LAC 17% n/a 16% n/a 15% n/a 16% 17% 15% 15% WANA 13% n/a 13% n/a 13% n/a 12% 11% 13% 11% Object Personnel 55% n/a 54% n/a 58% n/a 57% 52% 59% 54% Supplies/Services 31% n/a 32% n/a 28% n/a 30% 33% 28% 34% Travel 6% n/a 7% n/a n/a 6% 8% 6% 6% Depreciation 0% n/a 0% n/a E n/a 7% 6% 7% 5% Capital 7% n/a 7% n/a 0% n/a 0% 2% 0% 1% (Cl CGIAR STAFF (#) International Staff 772 916 757 912 760 882 808 973 787 941 Support Staff 10.929 10,749 10,915 lo.837 9.708 Total Staff 11,845 11,661 11,797 ii,aio 10,649 (0) CGIAR FINANCIAL INDICATORS Total Assets - S 468.0 401.0 405.9 434.6 435.8 Fixed Assets - S 264.5 215.2 214.5 215.7 220.8 Current Ratio 1.5 1.6 1.6 1.6 Operating Fund - S 32.1 39.9 35.9 38.0 3::: Capital Fund - S 4.9 4.7 11.8 25.6 34.1 Other Funds - 8 a.7 12.8 10.2 a.9 7.5 Memo Notes: Centers' Cost Deflator (1993 = I) 1.08 1.05 1 .Ol 0.99 1.00 IMF Deflator of OECD countries 1.16 1.10 1.06 1.03 1.00 (1993 = 1) Total ODA (Sb, 1993 estimated) 45.7 53.0 56.7 60.8 54.8 Number of Centers 13 13 13 ia ia '/ Effective 1992, core capital expenditures flow through the capital fund financed by annual depreciation provisions which are included in the operating expenditures. Complementary capital expenditures are shown as expenses to the extent they are not subjected to depreciation. 2 CGIAR Grants In 1993, total grunts from donors in 1993 was $311 million, of which $235 million supported core programs, and $76 million complementary programs. Core grants decreasedby 5 % in 1993, relative to 1992 ($247 million). Complementary grants, on the other hand, increasedby 7% in 1993. Total grants decreasedby 2% or $7.4 million comparedto 1992. Chart 1 illustrates the evolution of CGIAR grant funding from 1989-1993, confirming that the recenttrend towards relatively higher complementarysupport continued in 1993. Core grants as a share of total grants have decreasedsignificantly, from 83% in 1989 to 75% in 1993 . Chart 1: 1989-1993 CGIAR Funding CI ml I I ton, Chart 2 shows the evolution of CGIAR funding in both nominal and real terms, using the International Monetary Fund (IMF) index for inflation in OECD countries (see table 1). The chart implies that in real terms, 1993 total contributions for 18 centerswere 1% below the 1989 levels for 13 centers. In 1993 core contributions have contracted by lo%, in real terms, in relation to the levels provided in 1989. Chart 2' CGIAR Funding CbbrniMlIl"d 1989P, 3 ResourcesAvailable to CGIAR Centers in 1993 Total resourcesavailable for core activities were $249 million, i.e. 7% below the 1992 level. This included $231 million21 in grants, $7 million in complementaryproject overheadrecovery, and $11 million in miscellaneous center income. For complementary activities, $69 million was available, exclusive of the $7 million overheadcomponentwhich supportedcore programs; this is 3 % above the 1992 level. Total resourcesavailable to centersdeclined by 5 % from 1992. ResourcesUsed bv CGIAR Centers in 1993 Centers' 1993 core expenditure ($254 million) declined by 2% from the 1992 level ($259 million); total expenditure in 1993 ($323 million) declined by 1% from the 1992 level ($326 million). The three broad categories of expenditure - by program, by region, and by object, show some evolution in 1993: a by program, expenditurefor research remainedat 48% of core operations (49% total) in 1993, about the same as it was in 1992. This representsan increasefrom the earlier years, however. Expenditure on training and communications decreasedsomewhat in 1993 from 1992 levels, possibly reflecting the greater degreeof flexibility in centers'managing theseactivities. In the aggregate, core research management costs increasedin 1993 by three percentagepoints over 1989, and by two points over 1992. An analysis of the detailed data (Table III-2 and 111-9) indicatesthat there was a wide variation among centerswith regard to changesbetween 1992 and 1993: six centers virtually maintained the share of research management in total core expenditures; four centers saw this share decreasing in a range of 13% to 44% ; and, in six centersthe shareincreasedin a range of 10% to 244%. The remaining center, CIFOR, started its operations in 1993 and thus reported expenditure for the first time in that year. 0 by region, expenditurepatterns- for which total data is available only in 1992 and 1993 - showed changesin 1993 which, however, should be interpreted with caution. Specifically, centershave re-cast the regional distribution of expenditure in the framework of the MTP, and there are ambiguities with respect to the criteria used to allocate resourcesregionally. A more detailed discussion of this dimension follows in section IV. 0 by object of expenditure, the share of personnel costs increasedby two percentagepoints in 1993, which is significant becausethis componentis suchan important shareof total expenditure, which declined by 1% comparedto 1992. Other functional costs changedonly marginally. */ Of the $235 million core grants, $231 million were available to centers: an advance of 81.9million from the 1993 World Bank grant had been made available to centers in 1992; in addition, 82.2 million of the 1993 World Bank grant remained unallocated pending final confirmation from the Bank that the full 340 million for 1993 could be disbursed as originally budgeted. 4 Overall Financial Outcome for 1993 The significant and abrupt drop (5%) in available resourcesresulted in an aggregatednet core operating deficit in 1993 of $5.1 million. This represents2% of revenueand compareswith an average core operating surplus of 2.5% during the period 1989-92. As can be seenin annex I, the aggregatedeficit was virtually all accountedfor by five centers, eachwith a deficit exceeding$1 million (CIAT, CIMMYT, ICARDA, ILCA, and ILRAD). Thesewere partially offset, at the systemlevel, by CIFOR's large surplus ($2.7 million). The impact of the overall deficit was to decreasethe aggregateoperating fund balance (i.e. retained earnings) of the CGIAR centersfrom $38 million in 1992 to about $35 million. However, as discussedin a later section, this does not causean immediatefinancial problem in the system, as several of the centers which experienceddeficits had adequateoperating fund levels at the beginning of 1993. Furthermore, the introduction of capital budgeting in 1991hasfacilitated the building of reserves,through depreciation provisions, for replenishmentof capital assets;this capital fund increasedby $8.5 million to $34 million. The relationship between expenditure and available revenue can be seen in table 2, which summarizesthe 5-year pattern of the ratio of expenditureto revenue. More detailed data for eachcenter in 1993 are provided in section IV. In all years, expenditure exceededdonor grants, but in 1993 it also exceeded- for the first time at the system level - total revenue (i.e. grants, complementary overhead recovery, and miscellaneouscenter income). 5 Table 2: Ratio of Expenditure to Revenue, 1989-1993 Total Expenditure Core Expenditure as % (Core) (Total) Expend. as % of All Revenue Year Bm AL of Total Expend. Core Total 1989 241.8 289.6 83% 97% 98% 1990 249.5 304.1 82% 97% 99% 1991 248.4 297.0 84% 99% 98% 1992 258.7 325.9 79% 97% 97% 1993 254.1 323.3 79% 102% 102% Staffins- Patterns A significant highlight in the CGIAR in 1993 was the changein staffing patterns. The data for 1993 show that centersmade significant reductions in personnel numbers. Total centers'personnel was reduced by 10% from 1992. The reductions, however, were not evenly distributed. Pre-expansion centers'staff positions fell by nearly 12%, and internationally-recruited staff for thesecentersdecreased in 1993 by 4%. Both internationally-recruited and total staff increasedmarginally in the expansion centers. Annex table III-16 provides detailed information on centers'staff positions from 1989 to 1993. Chart 3 shows graphically the changesin personnel at the pre-expansioncenters compared to the 1989 level. Since, in the aggregate,over half of centers'expenditureis for personnelcosts,funding decreases should result in reduction in this category of expenditure, as the overall activity level decreases. However, there is a time lag before the full savings on salariesand benefits can be realized, as there is a significant transaction cost to separationof personnel. Therefore, centers'actions to reduce the size of the payroll will start to pay off in financial terms -- i.e. savings -- in future years. 6 External Factors The costs at CGIAR centersare affected by both inflation and fluctuations of currency values - the relationship betweenthe exchangeratesof expenditurecurrenciesand the US dollar which is the unit of account in the CGIAR. Using data provided by centerson the proportion of expendituresin various currencies, and the annual exchangerates of currencies as reported by the IMF as well as by centers, eachcenter'srelative purchasingpower canbe calculated. Annex table III-17 illustrates centers'weighted inflation rate from 1989-93. The averageCGIAR systeminflation rate is a weightedaggregationof the individual centerrates. The data for 1989-1993are shown in table 1. In relation to 1989 expenditurelevels of 13 centers, 1993 total expendituresof 18 centershave declined by 3% in real terms; total grant funding declined by 1% in real terms over the sametime period. III 1993 CGIAR FUNDING A. 1993 Core Grants CGIAR donors'core grants of $235 million were 11% below the level of $264 million approved at ICW92. Table 3 illustrates the changesin core funding from 1992to 1993by grouping of donors, and indicates the details of national currency and US dollar amountscan be found in annex table 11-2. Table 3: CGIAR Core Funding, Changes 1992 to 1993 by Donor GrOUD (S million and %) 1992 % of 1993 % of <--------- Change, 1992 to 1993 ------------> Actual Total Actual Total Amount Percent Due to Vol. Due to Foreign Exchange Industrialized Countries Europe 79.4 32% 68.6 2% (10.8) (14%) (4.1) (6.7) North America 65.7 27% 56.2 24% (9.4) (14%) (8.4) (I .O) Pacific Rim 31.3 13% 36.9 16% 5.6 18% 1.6 4.0 Subtotal 176.3 71% 161.7 69% (14.6) (8x1 (10.9) (3.8) Dev. Countries 1.8 1% 2.3 1% 0.5 21% 0.5 0.0 Foundations 4.1 2% 3.6 2% (0.51 (14%) (0.5) 0.0 Int. & Reg. Orgs. 65.1 m 67.2 29% 2.1 2 3.0 (1.0) Subtotal 71.0 29% 73.0 32% 2.1 10% 3.0 (1-O) TOTAL 247.3 100% 234.7 100% (12.6) (5%) (7.9) (4.7) Table 3 shows that about one-third of the reduction of $12.6 million was due to unfavorable exchange rates on non-dollar disbursements,while two-thirds was due to actual reductions in donor contributions; lower contributions were received from three groups, the North American and European countries and the Foundations. 7 The decreasein systemcore funding causedby exchange lossesoccurred mostly in the European donors'contributions asmost Europeancurrenciesweakenedagainstthe US dollar. Exchangelossesalso account for the $1 million loss on the European Community's contribution included in the International and Regional Organizationsgroup. Finally, there was a similar loss due the weakeningof the Canadian dollar. Offsetting theseexchangelosseson non-dollar contributions was the Pacific Rim group which gained $4 million as a result of a stronger Japaneseyen. The largest reduction in volume was in the North American group ($8.4 million) where both donors reducedtheir contributions: the USA by $7.6 million (16%) - the largest reduction in amount by a single donor - and Canadaby $0.8 million (5%). Contributions from European countries, expressedin their currencies, were also lower than in 1992, by $4.1 million. Two thirds of the reduction are accountedfor by Italy ($1.6 million) and France ($1.5 million). Contributions from the Foundations declined by $0.5 million, due to reduced center expenditure on core projects funded by IDRC and the Rockefeller Foundation. The reductions in contributions described above were partially offset by increasesby the other three donor groups. The International and Regional Organizations,led by the World Bank ($2.2 million) and the African Development Bank ($0.8 million), registered the highest increase in funding volume. In the Pacific Rim group, Japan increased its contribution by 3% in Yen (or about $1.5 million equivalent). The Developing Countries group increasedits contributions by $0.5 million as a result of Indonesiajoining the CGIAR in 1993. Chart 4 illustrates major changesin individual donor core contributions (expressedin dollar terms) from 1992 to 1993. Chart 4: Major Changes, q992-93