FINANCIAL Financial report and consolidated ... - UNESCO

United Nations Educational, Scientific and

Cultural Organization

FINANCIAL STATEMENTS

2018

Contents

FINANCIAL REPORT OF THE DIRECTOR-GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

STATEMENT ON INTERNAL CONTROL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

OPINION OF THE EXTERNAL AUDITOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

I.CONSOLIDATED STATEMENT OF FINANCIAL POSITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

II.CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

III.CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS/EQUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

IV.CONSOLIDATED STATEMENT OF CASH FLOW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

V. CONSOLIDATED STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS ? GENERAL FUND . . . . . . . . . . . . 39

VI. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

NOTE 1 ? REPORTING ENTITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 NOTE 2 ? SIGNIFICANT ACCOUNTING POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 NOTE 3 ? ACCOUNTING ESTIMATES, ASSUMPTIONS AND JUDGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 NOTE 4 ? ACCOUNTING STANDARDS ISSUED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 NOTE 5 ? CHANGES IN ACCOUNTING POLICIES AND NOTE DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 NOTE 6 ? CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 NOTE 7 ? INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 NOTE 8 ? ACCOUNTS RECEIVABLE FROM NON-EXCHANGE TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 NOTE 9 ? ADVANCE PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 NOTE 10 ? OTHER RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 NOTE 11 ? PROPERTY, PLANT AND EQUIPMENT (PP&E) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 NOTE 12 ? INTANGIBLE ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 NOTE 13 ? EMPLOYEE BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 NOTE 14 ? TRANSFERS PAYABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 NOTE 15 ? VOLUNTARY CONTRIBUTIONS WITH CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 NOTE 16 ? ADVANCE RECEIPTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 NOTE 17 ? BORROWINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 NOTE 18 ? OTHER LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 NOTE 19 ? NET ASSETS/EQUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 NOTE 20 ? REVENUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 NOTE 21 ? EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 NOTE 22 ? CONTINGENT LIABILITIES, COMMITMENTS AND CONTRACTUAL RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 NOTE 23 ? APPROVED BUDGET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 NOTE 24 ? FINANCIAL RISK MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 NOTE 25 ? RELATED PARTY DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 NOTE 26 ? SEGMENT INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

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FINANCIAL REPORT OF THE DIRECTOR-GENERAL

INTRODUCTION

In accordance with Article 11.1 of the Financial Regulations, I have the honour to submit the financial statements and financial report of the Organization for the year ended 31 December 2018.

The External Auditor has expressed an unqualified (clean) opinion on the financial statements. His report is submitted to the Executive Board in accordance with Article 12 of the Financial Regulations.

This section, the financial report, presents the Director-General's discussion and analysis of UNESCO's consolidated financial position and financial performance for the financial year ended 31 December 2018.

OVERVIEW OF THE FINANCIAL STATEMENTS

The financial statements have been prepared in accordance with International Public Sector Accounting Standards (IPSAS) as required under Article 11.1 of the Financial Regulations of the Organization. Consolidated financial statements are prepared for all UNESCO operations and entities including the nine category 1 institutes. The financial statements cover all four business segments, namely;

The General Fund (GEF) This segment, financed from the assessed contributions of Member States, covers the main operations of the Organization. The programme appropriations for the financial period are voted by the General Conference of Member States.

Other Proprietary Funds (OPF) Includes revenue-generating activities, programme support costs for special accounts and trust funds, the Staff Compensation Fund, the Terminal Payment Fund and Headquarters-related special accounts.

Programme Fiduciary Fund (PFF) This segment relates to programmes and activities financed from funding provided by donors through agreements or other legal authority. The UNESCO category 1 institutes which are set up as separate entities are accounted for under this segment.

Staff Fiduciary Funds (SFF) Activities/funds under this segment have been established for the benefit of UNESCO's staff members through the Medical Benefits Fund, the Restaurant Services and the Day Nursery and Children's Club.

The financial statements consist of:

A Statement of Financial Position This provides information about the net assets/equity at the reporting year-end date ? the difference between UNESCO's total assets and liabilities. It gives information about the extent to which resources are available to support future operations and the unfunded liabilities.

A Statement of Financial Performance This measures the net surplus or deficit of the reporting year ? the difference between revenues and expenses. It provides information about the Organization's cost of programme delivery and the sources of revenue.

A Statement of Changes in Net Assets/Equity Which highlights the sources of changes in the overall financial position.

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FINANCIAL REPORT OF THE DIRECTOR-GENERAL

A Cash Flow Statement This provides information about UNESCO's liquidity and solvency including how the organization raised and used cash during the period and the repayment of borrowing. It measures the difference between the actual cash coming in and cash going out.

A Comparison of Budget and Actual Amounts This highlights whether resources where used in accordance with the approved budget. It shows differences between the actual expenditure and the approved budget appropriation.

Notes to the Financial Statements Which assist in understanding the financial statements. Notes comprise of a summary of significant accounting policies and other explanatory information. It provides additional information on the financial statements as required under IPSAS.

ORGANIZATIONAL BACKGROUND, OBJECTIVES, STRATEGY AND PROGRAMMES

UNESCO was created in 1945 with an aim of contributing to peace and security by promoting collaboration among the nations through education, science and culture in order to further universal respect for justice, for the rule of law, human rights and fundamental freedoms which are affirmed for the peoples of the world, without distinction of race, sex, language or religion, by the Charter of the United Nations Organization. Membership of the Organization comprises of 193 Member States and 11 Associate Members as at 31 December 2018.

The current Medium-Term Strategy (37 C/4), approved by the General Conference in November 2013, sets out the strategic vision and programmatic framework for UNESCO's actions over the period 2014-2021 built around the following mission statement: "As a specialized agency of the United Nations, UNESCO ? pursuant to its Constitution - contributes to the building of peace, the eradication of poverty and sustainable development and intercultural dialogue through education, the sciences, culture, communication and information". The strategy defines two overarching objectives ? peace and equitable and sustainable development ? as well as two global priorities ? Africa and gender equality. The Strategy further defines nine strategic objectives.

These strategic objectives are translated into programmatic priorities through main lines of action and expected results in the C/5 Programme and Budget document adopted by the General Conference. Programmes are defined for four years while the budget allocation is approved every two years.

The following section provides a summary of key achievements of the implementation of UNESCO's Major Programmes during 2018.

MAJOR PROGRAMME I ? EDUCATION

Throughout 2018, UNESCO's leading role in coordinating SDG 4 ? Education 2030 ? has contributed to ensuring that education remained high on the global development agenda. Following a series of regional consultations and the first-ever G20 Education Ministers meeting to which UNESCO contributed, the year culminated in the Global Education Meeting (Brussels, December 2018), which set key education recommendations to guide the global implementation of SDG 4.

In November, UNESCO released the 2019 Global Education Monitoring Report, which focused on migration and displacement, and provided concrete recommendations on how to address education barriers for refugees and migrants. The #RightToEducation campaign, which ran from October to December 2018 and marked the 70th anniversary of the Universal Declaration of Human Rights, raised awareness on this crucial human right and the bottlenecks impeding its realization. At the end of the campaign, UNESCO convened the International Expert Meeting on Public Policies Supporting the Right to Education of Refugees (Barcelona, December 2018), resulting in policy recommendations for providing quality education for refugees in a lifelong learning perspective.

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FINANCIAL REPORT OF THE DIRECTOR-GENERAL

Noteworthy progress was made on the recognition of higher education qualifications and academic mobility. At the global level, the first intergovernmental consultation meeting was convened (Paris, December 2018) to review the Global Convention on the Recognition of Higher Education Qualifications. In LAC, participants at III Regional Conference on Higher Education (Cordoba, Argentina, June 2018), adopted a plan of action (2018-2028) to guide the strengthening of higher education systems.

UNESCO supported over 40 Member States to strengthen their teacher policies and provided a series of teacher trainings in different regions: More than 15,000 teachers, teacher educators and non-formal literacy providers from over 25 countries were trained in gender-responsive pedagogy, skills development in the delivery of content that promotes gender equality, healthy relationships and skills for life and work. UNESCO also continued to advocate for increasing the supply of and support to qualified teachers, notably through the Joint ILO/UNESCO Committee of Experts on the Application of the 1966 and 1977 Recommendations on Teachers (CEART), (Geneva, April 2018), World Teachers Day (Paris, 8 October) and the International Task Force on Teachers' 11th Policy Dialogue Forum (Montego Bay, November 2018).

MAJOR PROGRAMME II ? NATURAL SCIENCES

Programme implementation in the Natural Sciences Sector (SC) is generally on track, despite the challenge of decreasing operational budget. Overall priority continued to be given to Africa, with particular focus on initiatives that promote scientific research and innovation capacity on the continent, in particular under the "Afrimpulse" initiative.

Gender equality in the sciences was also at the centre of Major Programme II's work: five outstanding women scientists received the 2018 UNESCO-L'Or?al for "Women in Science" Awards in life sciences, marking the 20th anniversary of this strategic partnership. This important achievement was flagged during the UNESCO's Partners Forum: Structured Financing Dialogue (September 2018), where partners gave evidence of the impact of UNESCO's work in gender mainstreaming in STI, among others. Moreover, the online Global Observatory of STI Policy Instruments (GO-SPIN) with a specific focus on gender in STI was launched, and allows for countries to monitor all SDGs notably Targets 9.5 and 17.6.

Major achievements over the period also included the launching of the BIOPALT project, a multisectoral flagship project addressing SDGs 6, 11 and 15, and aimed at safeguarding and sustainably managing the hydrological, biological and cultural resources of the Lake Chad Basin utilizing an inclusive, demand-driven and communitybased approach. The Synthesis Report of SDG 6 presented at the United Nations High-level Political Forum on Sustainable Development (HLPF) was coordinated by the UNESCO World Water Assessment Programme (UNESCO WWAP) on behalf of UN Water. UNESCO and United Nations Economic Commission for Europe (ECE) also prepared a global report dedicated to SDG 6 Indicator 6.5.2.

INTERGOVERNMENTAL OCEANOGRAPHIC COMMISSION (IOC)

The end of the year 2017 was very special for the Intergovernmental Oceanographic Commission (IOC) with the endorsement by the 72nd session of United Nations General Assembly of the IOC's proposal to proclaim the years 2021-2030 as the United Nations Decade of Ocean Science for Sustainable Development (the Decade). IOC is working with Members States, United Nations, all partners and stakeholders to develop an implementation plan for the Decade. This is a once-in-a-life-time opportunity for all to achieve a breakthrough in the capacity of oceanography to serve people and the planet.

Significant progress was made in the development of the methodology to support Member States' implementation of and reporting on SDG targets 14.3.1 and 14.a, for which the IOC has been assigned the custodian's role. Both indicators have been upgraded to Tier 2 status, meaning that the indicator is now conceptually clear, has an internationally established methodology, and standards are available, but data are not yet regularly produced by countries. After more than four years of international collaboration coordinated by IOC, the South China Sea region now has its own dedicated Tsunami Advisory Centre. The IOC showcased its experience in supporting countries in the implementation of maritime spatial planning through three flagship events at the Sustainable Blue Economy conference organized by Kenya and Canada, 26-28 November 2018 in Nairobi. As part of its awareness raising strategy with regard to gender equality, the side event "Making waves: Women in Ocean Science" was organized with the support of Canada at the High-Level Scientific Conference "From COP21 towards the United

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