September 2017: Non-earmarked funding flows for the UN development system have stagnated, while the volume of humanitarian assistance increased, according to the 2017 report on financing of the Dag Hammarskjold Foundation and the UN Multi-Partner Trust Fund Office. The publication presents the major trends, opportunities and challenges around financing the UN development system, aiming to stimulate “fresh thinking” around priorities for the financing reform.

The first part of the report examines the revenue, income sources and expenditure of the UN development system. The second part identifies possible pathways for the UN’s role in financing the 2030 Agenda for Sustainable Development. It contains 28 essays by senior experts from within and outside the UN system on a range of issues: blended finance; pooled funds, multi-sectoral funds, and other joint funding mechanisms; financing for prevention and sustaining peace; financing global goods; enhancing the UN’s role to convene and leverage resources; generating maximum return on UN and official development assistance (ODA) resources; and opening access to public finance information.

In 2015, the UN allocated US$21 billion to five entities: UNICEF, UNDP, WHO, WFP and UNHCR.

The report notes that, in 2015, the total revenue for the UN system was US$48 billion, with US$9 billion allocated to peacekeeping and US$27 billion to operational activities for development, of which US$21 billion went to five entities: the UN Children’s Fund (UNICEF); the UN Development Programme (UNDP); the World Health Organization (WHO); the World Food Programme (WFP); and the Office of the UN High Commissioner for Refugees (UNHCR). On allocations for the UN’s major functions, the data indicate that operational activities for development received 60% of the funding, compared to 20% for peacekeeping and 20% for norms, standards, policy and advocacy.

Average UN expenses per country are highest for low income countries and decrease as countries move into low and upper middle income status. The highest level of UN development system spending per country goes to crisis-affected countries. Africa is the largest region beneficiary of UN operational activities (37% of the expenditure), followed by the Western Asia (19%), and Asia and Pacific (15%). The report notes that Western Asia is receiving an increasing portion of the UN’s overall operational expenditures because of the number and severity of the crises that have affected the region in recent years.

Of the US$48 billion revenue, earmarked contributions (tied to countries or themes) comprised 53% of the funding, assessed contributions (the price of membership) made up 30%, while core funding (voluntary untied contributions) represented 10%. The largest portion of UN expenditures in countries also comes from earmarked resources.

The publication indicates that, in 2015, 47% of contributions to UN operational activities came from only three donors: US, UK and Japan. The top ten donors accounted for 73% of the total contributions, nine of of them having provided more earmarked than core contributions.

Pooled funds accounted for 6% of total contributions to operational activities for development, with the pooled funding contributions for humanitarian purposes comprising two-thirds of the total deposits. The report notes an upward trend for pooled funding for transition and crisis-affected situations, while other development-related interventions received less funding.

Based on the data, the authors reflect that the UN development system funding arrangements are both very stagnant and highly volatile, and both very concentrated and highly fragmented.

The report concludes that the UN development system needs to reposition its role in the global financing landscape as well as revitalize its financing mechanisms. To that end, the authors provide several recommendations, including:

• better aligning finance to function;
• developing more core-like characteristics in earmarked revenue;
• strengthening the UN’s leveraging role and impact;
• developing robust system-wide financial data and strategies;
• employing professional capabilities and developing the skills needed to partner effectively with a range of financing actors, especially with the international financial institutions (IFIs);
• reinforcing the sustaining peace approach and creating a strategic platform for financing prevention and peacebuilding;
• and pursuing stronger normative and global public goods agendas, as those represent UN’s points of difference.

[Publication: Financing the UN Development System]