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FINANCIAL RULES OF THE WORLD FOOD PROGRAMME

I. DEFINITIONS

(Regulation 1.1)

For the purpose of these Rules, the following definitions shall apply:

"Administrative budget" shall mean the biennial budget for programme supportand administrative services.

"Allocation" shall mean a financial authorization issued by the ExecutiveDirector to enter into obligations and incur expenditures within specified limitsand during a specified time, in respect of Programme activities other than thosefunded by the administrative budget.

"Allotment" shall mean a financial authorization issued by the ExecutiveDirector, pursuant to appropriations voted, to an ofticial to incur obligations forspecific purposes within the administrative budget, within specitied limits andduring a specitied time.

"Appropriation" shall mean an amount approved by the Committee for specifiedpurposes within the administrative budget.

"Committee" shall mean, wherever not otherwise specified, the Committee onFood Aid Policies and Programmes.

"Contribution" shall mean a donation of appropriate commodities, relatednon-food items, acceptable services or cash made in accordance with proceduresset out in these Regulations.

"Dollars" refers to United States dollars.

"Executive Director" shall mean the Executive Director of the World FoodProgramme, or the official to whom the Executive Director has delegatedauthority and responsibility for the matter in question.

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"Ex gratia payment" shall mean a payment made when there is no legalliability, but the moral obligation is such as to make payment desirable.

"FAO" shall mean the Food and Agriculture Organization of the UnitedNations.

"Finance Committee" shall mean the Finance Committee of FAO.

"Financial period" shall mean a two-year period starting on 1 January of eacheven-numbered year.

"Financial Regulations" shall mean the Regulations established by the Committeeto govern the management of the Fund.

"Financial Rules" shall mean the Rules established by the Executive Directoras mandated in the Financial Regulations.

"Fund" shall mean the World Food Programme Trust Fund which wasestablished by the Director-General of FAO under FAO Financial Regulation6.7.

"General Regulations" shall mean the arrangements and procedures for theestablishment and operation of the World Food Programme, as approved by theEconomic and Social Council of the United Nations and the Council of FAO.

"IEFR" shall mean the International Emergency Food Reserve.

"Obligation" shall mean a written commitment of funds resulting in a liabilityagainst approved allocations or allotments.

"Pledge" shall mean a promise to make a contribution.

"Programme" shall mean the World Food Programme.

"Programme support and administrative services" shall mean the activitiesundertaken by the Programme to provide management, technical, administrative,financial and logistic support to its activities.

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"Project" shall mean a separately identified undertaking executed with assistancefrom the Programme.

"Project agreement" shall mean a document, which may also be termed "letterof understanding" or "plan of operations", executed in accordance with theprovisions of General Regulation 22.

"Special account" shall mean an identifiable subdivision of the Fund, establishedby the Executive Director in order to account for a special contribution or forfunds especially earmarked.

"Trust Fund" shall mean an identifiable subdivision of the Fund, established bythe Executive Director in order to account for a special contribution of whichthe purpose, scope and reporting procedures have been agreed with the donor.

II. APPLICABILITY

(Regulations 2. J and 2.2)

Rule 102.1 These Financial Rules are established by the Executive Directorpursuant to the Financial Regulations and under the authority given to him/herin Regulation 2.2. They shall govern the financial management of theProgramme.

Rule 102.2 The Executive Director may make documented exceptions to theseRules. A record of those exceptions shall be made available to the ExternalAuditor.

Rule 102.3 The Executive Director shall issue from time to time suchadministrative instructions or manuals as may in hislher judgement beappropriate for the detailed administration of these Rules.

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+ +III. ACCOUNTABILITY

(Regulation 3.1)

Rule 103.1 All staff members of the Programme are accountable to theExecutive Director for the regularity of the actions taken by them in the courseof their official duties. Any staff member who takes any action contrary tothese Regulations and Rules, or to instructions which may be issued pursuantto these Regulations and Rules, may be held personally responsible andfinancially liable for the consequences of such action.

IV. RESOURCES

(Regulation 4.1)

Rule 104.1 The Executive Director, after consultation with theSecretary-General of the United Nations and the Director-General of FAO, shallrecommend to the Committee a target for the subsequent pledging period.

(Regulations 4.2, 4.3 and 4.4)

Rule 104.2. Appropriateness of commodities, and acceptability of services andsources, as referred to in Regulations 4.2 and 4.3, shall be determined bydiscussions between prospective contributors and the Executive Director in thelight of operational requirements, taking into account the need to avoidunsustainable changes in consumption patterns in the recipient countries.

Rule 104.3 Commodity pledges may be made in terms of either their monetaryvalue or fixed physical quantities of specified commodities.

Rille 104.4 Pledges made in, or subsequently translated into, physical quantitiesof specitied commodities shall be recorded both at the time when commoditiesare pledged, and as contributions at the time when commodities are receivedby the Programme, as may be decided by the Executive Director, at a valuebased on one of the following:

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+ +(a) world market prices;

(b) the Food Aid Convention (FAC) price; or

(e) the donor's invoice price.

Rule 104.5 Contributions of acceptable services shall be valued either at worldmarket prices or, where the service is of a local character, at the pricecontracted for by the Executive Director.

Rule 104.6 Pledged contributions of commodities and services shall be heldavailable for commitment to the Programme until the end of the pledgingperiod, or for such additional period as may be agreed upon in consultationbetween the Executive Director and the donor country.

Rule 104.7 In unforeseen circumstances, a donor country may, in consultationwith the Executive Director, defer delivery of any part of the commoditiespledged, or substitute other commodities therefor, provided that the commoditiesconcerned have not yet been committed to recipient countries. After appropriatenotice has been given, cash in convertible currencies of equal value to theportion of the commodity pledge withdrawn may be substituted therefor.

Rule 104.8 The Executive Director shall keep donor countries informed ofcontemplated and tinal commitments of commodities and services pledged bythem. Pledged commodities which have been committed shall be held in thecontributing country until called for by the Executive Director, and thendelivered at export ports free on board at the cost of the contributing country.Any committed commodities remaining undelivered by the end of the period forwhich they have been pledged shall remain available for delivery for suchextended period as maybe agreed upon in consultation between the ExecutiveDirector and the donor country. Committed services shall be treated in thesame manner.

Rule 104.9 In agreement with the Executive Director, cash in convertiblecurrencies may be substituted for pledged services which have not beencommitted by the Programme, or for specitic pledged commodities in order topermit the Programme to purchase such commodities.

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Rule 104.10 Any participating government that initially pledges more than onethird of its total contribution in cash and/or services may, in agreement withthe Executive Director, at any time during the pledging period offer appropriatecommodities up to a value limit of two thirds of its total initially pledgedcontributions. To the extent that such additional commodities are utilized by theProgramme, there shall be offset, against any unpaid portion of the country'sinitial pledge, their value on the basis of:

(a) world market prices; or

(b) the Food Aid Convention (FAC) price; or

(c) the donor's invoice price.

(Regulation 4. 7)

Rule 104.11 Pursuant to Regulation 4.5, the Executive Director mayexceptionally accept cash contributions in non-convertible currencies when suchcurrencies are deemed to be usable within a reasonable period of time in lightof the operational requirements of the Programme.

Rule 104.12 Countries shall, with regard to each pledging period, pay theircash contributions in equal annual instalments, except as otherwise agreed withthe Executive Director.

Rule 104.13 The annual instalment of cash pledges shall be paid for each yearof the pledging period to which it relates within 60 days after the beginningof the country's fiscal year. Countries which for internal legal or budgetaryreasons are not in a position to meet this time limit may announce at thePledging Conference the times at which they intend to make their cashcontributions available to the Programme.

Rule 104.14 The Executive Director shall maintain a record of pledges andcontributions. Pledges and contributions in cash in other than United Statesdollars shall be recorded in the equivalent of United States dollars convertedat the United Nations operational rate of exchange on the date the pledge wasrecorded or the contribution received.

(Regulations 4.8 and 4.9)

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v. PROJECT ACTIVITIES

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(Regulations 5. 1 to 5.3)

Rule 105.1 Every project proposal shall include a project budget, covering theentire duration of the project, which will set out: (a) the expected contributionsto the project, in cash or in kind, by the government. the Programme and. asappropriate. other donors; and (b) a phased plan of expenditure. subdividedwhere applicable by calendar years.

Rule 105.2 Agreements may provide for projects under which assistance fromthe Programme would be available for a maximum period of five years.provided that such agreements also carry the qualification that their fullexecution beyond the relevant pledging period is conditional upon resourcesbecoming available.

(Regulation 5.4)

Rule 105.3 In respect of cash components of project budgets. the ExecutiveDirector shall issue allocations which will specify the ofticer or officers of theProgramme who will be responsible, on behalf of the Executive Director. forentering into obligations and authorizing expenditures. Such allocations may beissued on a project-by-project basis, or may combine all or part of the cashcomponents of two or more projects.

(Regulation 5.5)

Rule 105.4 Project agreements shall be signed by the representative of therecipient country and by the Executive Director, or his or her representative,on behalf of the Programme.

(Regulation 5.6)

Rule 105.5 Except as provided in Regulation 4.6, costs of unloading, internaltransport and distribution. warehousing. reconditioning, packaging, preservingand maintaining of condition from the point of transfer of title and of anynecessary technical assistance and supervision shall normally be borne by therecipient government. The Executive Director may, howeve_r, waive part or allof this provision if satisfied that the government is unable to meet these costs

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or arrange for them to be met from sources outside the Programme. If theExecutive Director so waives, the related costs shall constitute a charge to theProgramme. If reconditioning, packaging or preservation of a consignment ismade necessary because of damage occurring prior to the passage of title, thecosts shall be for the account of the Programme or the donor, as appropriate.

Rule 105.6 The Executive Director may, after consulting the recipientgovernment, sell commodities internally for the purpose of meeting the costsreferred to in Rule 105.5. In such cases, he/she will retain responsibility forthe financial management of the funds so generated.

Rule 105.7 Commodities shall be delivered to the recipient government asgrants without payment. If, from the point of transfer of title such commoditiesare sold internally for local currency, the proceeds thereof shall be used forthe particular purposes and activities specified in the project agreement.

Rule 105.8 Before accepting a project that requires additional externalassistance to make such a project feasible, the Executive Director shall assurehimself/herself that such assistance is available. The recipient country shall beresponsible for obtaining and arranging for such additional assistance as maybe necessary from multilateral and other sources, or the Programme mayundertake to seek such assistance on behalf of the country concerned.

(Regulation 5. 7)

Rule 105.9 The provIsIons of Regulations 5.4 and 5.6, and of Rules 105.4,105.5 and 105.6, shall apply to emergency operations.

(Regulations 5.8 to 5.10)

Rule 105.10 The Executive Director shall submit evaluation reports, orportions thereof, dealing with specific projects to the recipient countriesconcerned for their comments. He/she shall make any such comments availableto the Committee.

Rule 105.11 For the purpose of project evaluation as set out in Regulation5.10, the Executive Director shall seek the assistance of the United Nations andFAO and, as appropriate, of other interested and cooperating agencies andbodies to carry out an analytical review of the implementation of projects.

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+ +VI. THE PROGRAMME SUPPORT AND ADMINISTRATIVE BUDGET

(Regulations 6.1 to 6. 7)

Rule 106.1 After the biennial budget has been approved by the Committee,the Executive Director shall issue each year authorizations to incur obligationsand make payments. These authorizations shall be issued to specifically namedofficials and may take the form of:

(a) authorized staffing tables indicating the number and level of postsfor the organizational unit or units concerned;

(b) allotments of funds for specified objects of expenditure controlled bythe official so identified; or

(c) any other authorization to commit funds for a specific purposewithin a specified period.

Rule 106.2 The official to whom an authorization has been issued pursuant toRule 106.1 shall be responsible for ensuring that expenditures remain within therelevant authorization and are incurred for the purposes for which they wereauthorized. Any expenditure beyond the level of the authorization shall requirethe prior authorization of the Executive Director.

Rule 106.3 The Executive Director may exceptionally make commitmentsagainst resources anticipated for future financial periods if he/she decides it isin the interest of the Programme to enter into such commitments, which shallnormally be restricted to administrative requirements of a continuing nature.

(Regulations 6.8 to 6.10)

VII. THE FUND

(Regulations 7.1 to 7.9)

Rule 107.1 Monies received in respect of which no purpose IS specified shallbe treated as miscellaneous income.,

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+ +VIII. MANAGEMENT OF FUNDS

(Regulation 8. 1)

Rule 10B.1 For purposes of bank designation under Regulation 8.1, theExecutive Director shall normally avail of the banking network and relatedservices established by the Director-General of FAO under FAO FinancialRegulation VITI.

Rule 10B.2 The Executive Director shall designate signatories for each bankaccount, as well as officials authorized to amend the signatory panels.Signatories shall not at the same time be certifying or approving officers sodesignated under Rule 109.1.

Rule 1OB.3 If at an office away from the Programme headquarters it isnecessary to open a bank account at such short notice that there is not timeto make the necessary arrangements, the head of the office may open theaccount subject to the following:

(a) wherever possible, the bank shall be a branch of one of the banksdesignated under Regulation 8.1;

(b) the bank shall be informed that the account is an official account ofthe Programme, and that the bank is authorized to provide to theExecutive Director any information he or she may requestconcerning the account; and

(c) an immediate report by telex or cable shall be made to theExecutive Director.

Rule 10B.4 All bank accounts shall be reconciled on a regular basis with thestatements submitted by the banks.

(Regulation 8.2)

Rule 10B.5 For purposes of investment of funds under Regulation 8.2, theExecutive Director shall normally avail of the investment services establishedby the FAO under FAO Financial Regulation IX. The Executive Director mayalso avail of appropriate outside expertise.

(Regulation 8.3)

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+ +IX. INTERNAL CONTROL

(Regulations 9.1 and 9.2)

Rule 109.1 All obligations must be properly certified, and all expendituresproperly approved:

(a) Certification of an obligation means that the officer so certifyingattests that the charge or claim being made can properly be recordedagainst the relevant project budget allocation, allotment or otherauthorization, and that funds are available in that allocation,allotment or other authorization to satisfy that charge or claim.

(b) Approval of an expenditure means that the officer so approving issatisfied, on the basis of supporting documentation, that the goodsor services for which payment is claimed have been received orrendered in accordance with the terms of the contract or obligation;that payment has not previously been made; and that no otherinformation is available which would bar the payment.

(c) The Executive Director shall designate a certifying officer or ofticersfor each allocation, allotment or other financial authorization.

(d) The Executive Director shall also designate approving officers.

(e) Except where physically impossible in the case of small tield dutystations, no certifying officer shall at the same time be an approvingofficer.

(f) The responsibilities of certifying and approving officers are personal,and cannot be delegated.

Rule 109.2 All proposed expenditures shall first be obligated at the time theobligation legally arises, except:

(a) if the proposed expenditure is less than 5,000 dollars or itsequivalent; or

(b) in case of urgency when there is not time for entering an obligation.Such expenditures, however, shall always be certified by theappropriate certifying officer.

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+ +Rule 109.3 The Executive Director shall have certification authority for allaccounts of the Programme.

Rule 109.4 In the case of charges in currencies other than the United Statesdollar, obligations and expenditures shall be recorded at the prevailing UnitedNations operational rate of exchange. Differences between that rate and the rateactually applied to a payment shall be charged to gains or losses on exchange.(See also Rule 110.5.)

Rule 109.5 All payments shall be made by cheque or bank transfer, exceptto the extent that cash payments are authorized by the Executive Director or,in the field, by a duly authorized official on hislher behalf. All cheques orpayment instructions shall be signed by two authorized signatories. Receiptsshall be obtained for all payments.

Rule 109.6 Payments shall be recorded in the accounts on the date the chequewas issued, the bank transfer requested or the cash disbursed.

Rule 109.7 For monies received by the Programme, an official receipt shallbe issued by a duly authorized official as of the date monies are received andshall be sent to the donor concerned. All monies received shall be depositedin an official bank account not later than the business day following the dayof receipt, and shall be entered into the accounts as of that date.

Rule 109.8 Petty cash advances may be made to officials designated by theExecutive Director, the amount thereof being held to a minimum compatiblewith working requirements.

Rule 109.9 Officials to whom petty cash advances are issued shall use themonly for the purposes for which the advance was authorized, and shall be heldpersonally responsible and financially accountable for the proper managementand safekeeping of the cash advanced. They shall keep all cash and negotiableinstruments in safe custody.

Rule 109.10 field offices may obtain funds through remittances fromHeadquarters, at a level established by the Executive Director for each office.

Rule 109.11 Staff and consultants may be engaged only under the writtenauthority of the Executive Director and within the limits approved for thatpurpose in project allocations and budgetary allotments, or as may be providedin trust funds and special accounts established under Regulation 7.2.

(Regulation 9.3)

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Rule 109.12 The Executive Director may make ex gratia payments in caseswhere, although there appears to be no legal liability of the Programme, themoral obligation is such as to make payment desirable in the interest of theProgramme.

(Regulation 9.4)

Rule 109.13 The Executive Director may, after full investigation, authorize thewriting off of losses of cash, accounts receivable and notes receivable deemedto be irrecoverable. The investigation shall, in each case, fix the responsibility,if any, attaching to any official of the Programme for the loss. Such officialmay be required to reimburse the loss either partially or in full.

Rule 109.14 The Executive Director may, after full investigation in each case,authorize the writing off of losses of property belonging to the Programme orsuch other adjustment of the records as will bring the balance shown by therecords into conformity with the actual quantities verified. The ExecutiveDirector shall make a determination as to recoveries, if any, to be made fromstaff members or other as a result of losses. (See also Rule 109.34).

(Regulation 9.5)

Procurement of foodstuffs and containers

Rule 109.15 For the purchase of foodstuffs and containers, the followingguidelines shall apply:

(a) Purcha~e of foodstuffs and containers may be made either throughinternational tender, or in a country or countries where the requiredcommodity is known to be available for economical purchase. TheExecutive Director shall in each case decide on either of these twomethods, or a combination thereof, in the light of availability, easeand speed of transport, and other relevant factors.

(b) Except where prices and/or other terms of commodity sales arecontrolled by national legislation, normally at least three bids shallbe requested; and

(i) invitations to bid will be addressed to recognized reputablesuppliers of the commodity in question, of which suppliersthe Programme shall maintain a list;

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+ +(Ii) where prices and/or other terms of commodity sales are

controlled by national legislation, the government agencyconcerned will be asked to submit its lowest quotation.

(c) In every case, the request for bid or for quotation will specifyofficial grades or standards, where applicable and accepted in trade,or specifications of variety or type, quality and condition.

(d) Where bidding has been invited, the most economical responsive bidshall be selected, taking into account specification, transportationcosts, timeliness of delivery, packaging and other relevant factors.

(e) Where the purchase is effected from a government agency, theExecutive Director shall ensure that the price offered is competitive,taking into account price indications, including transport costs, fromalternative sources of supply for a comparable type and grade ofcommodity.

(f) In equality of conditions, preference will be given to purchase fromdeveloping countries.

Procurement of transportation and insurance

Rule 109.16 For the transportation of commodities arranged by theProgramme, and related insurance and superintendence services, the followingguidelines shall apply:

(a) In the case of liner vessels, the rate of freight shall be asdetermined through negotiation with the shipping conference or lineconcerned, or as may be determined by applicable trade tariffs. Inall case.s the decision on the choice of carrier shall take intoaccount, inter alia, the rate of freight, the reputation of the line andthe quality of the service offered.

(b) In the case of charter vessels, competitive proposals shall be soughtthrough a panel of international ship-brokers appointed by theExecutive Director. Selection of an offer shall be based on the rateoffered, the suitability of the vessel and the reputation of the owner,and on the result of any subsequent rate negotiations.

(c) In the case of overland transport:

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+ +(i) for consignments of up to 1,000 tonnes, clearing and

forwarding agents may be appointed on a competitive basisand the selection shall be made on the basis of the rateoffered, corporate credentials submitted, and prior Programmeexperience if any; and

(ii) for consignments of over 1,000 tonnes, at least three locallyregistered companies in the transit or recipient countries shallbe invited to quote for transportation including, whereapplicable, bagging and stevedoring services in accordancewith established delivery terms and other relevant conditions.The selection shall be made on the basis of the rate offered,capacity, adherence to delivery terms and other conditions ofthe contract and, where applicable, prior experience.

(d) Air transport shall require the specific authorization of the ExecutiveDirector. Competitive offers shall where possible be sought fromsuitable aircraft owners or operators and from one or more reliableair-brokers. Selection shall be made after negotiation, in the light of:

(i) the rates quoted for freight, costs of positioning anddepositioning, daily standing charges, war risk insurancepremium, if any, and other related expenses;

(ii) the suitability of the aircraft and reputation of its owner oroperator; and

(iii) the immediate availability of the aircraft.

(e) Insurance arrangements in respect of transportation and relatedactivities shall be periodically reviewed, by obtaining indications ofrates from various markets for diverse types of cover, to ensure thatthe Programme's coverage is the most suitable available in the lightof cost and other relevant factors. In the case of chartered vessels,a charterer's legal liability shall be placed at regular intervals on thebasis of an evaluation of quotations received from reputableinsurance companies or brokers. The Executive Director mayauthorize write-offs or waivers of insurance claims if, in hislheropinion, these are irrecoverable.

(f) Arrangements for stevedoring, warehousing, reconditioning ofdamaged cargo, special ad hoc insurance arrangements and otherancillary services and supplies shall be concluded as required by the

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+ +Programme in the light of operational needs of the rates and qualityof service offered.

(g) Forwarding agents, overland forwarders, superintendents andchartering brokers shall be appointed wherever possible after reviewof questionnaires or invitations to bid sent to selected companies andof subsequent interviews. Selection shall be made on the basis ofperceived competence and quality of services offered. Where theseprocedures are not practicable because of the limited number ofavailable candidates, the limited scope of the operation, or becauseof urgency, the appointment shall be made on the basis of the bestinformation available to the Executive Director. The ExecutiveDirector shall arrange for regular evaluation of the performance ofagents, forwarders, superintendents and brokers referred to in thissubparagraph.

(71) Demurrage resulting from failure by the recipient government toensure quick berthing and unloading of a vessel shall be a chargeto the government, and dispatch earned by prompt turn-arounds shallbe credited to the government. However, in cases where theProgramme has made special arrangements, for operational reasons,resulting in the Programme assuming responsibility for demurrage ordispatch, neither demurrage will be charged nor dispatch credited tothe recipient government.

Rule 109.17 The Executive Director shall establish a Committee onCommodities, Transport and Insurance, which will review on an ongoing basisthe adequacy of the arrangements set out in Rules 109.15 and 109.16 and, inparticular, the manner in which relevant selection procedures have been used,and will make related recommendations to the Executive Director. TheCommittee on Commodities, Transport and Insurance shall specifically review:

(a) ex post Jacto:

(i) all contracts concluded for the purchase of foodstuffs andcontainers, with an estimated value of over 100,000 dollars;

(ii) all contracts concluded for transportation by sea, land or airwith a value of over 50,000 dollars;

(iii) all general rate agreements concluded by the Programme;

(iv) all insurance arrangements entered into;

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+ +(v) appointments of agents, forwarders, superintendents and

brokers concluded under Rule 109.16(g); and

(vi) agreements for stevedoring, warehousing and ancillary serviceswith a value of over 50,000 dollars;

(b) with a view to making related recommendations to the ExecutiveDirector:

proposed insurance write-offs and waivers of demurrage claimsagainst recipients with an estimated value of over 25,000 dollars.

Procurement of other goods and services

Rule 109.18 For the procurement of goods and services, other thancommodities, transportation and related services covered by Rules 109.15 and109.16, all procurement actions shall normally be carried out by means ofeither invitations to bid or requests for proposals.

Rule 109.19 Invitations to bid shall be advertised in accordance withprocedures established by the Executive Director. All bids in respect ofproposed contracts in an amount of over 50,000 dollars shall be opened at atime and place specified in the invitation to bid, and an immediate record madethereof. Bidders may attend the opening of bids.

Rule 109.20 Requests for proposals shall be advertised or otherwise issued inaccordance with procedures established by the Executive Director.

Rule 109.21 There shall be established a Contracts Committee, which shallrender advice to the Executive Director on:

(a) all contracts for the purchase of foodstuffs and containers with anestimated value of over 100,000 dollars;

(b) all contracts, other than those for commodities, transportation andrelated services, in an amount of over 50,000 dollars, or whichwould increase a previously awarded contract to an amount over50,000 dollars; and

(c) such policy issues resulting from the review of contracts as it mayconsider appropriate to submit to the Executive Director.

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+ +Rule 109.22 Contracts, other than those for commodities, transportation andrelated services, shall be awarded in light of the following guidelines:

(a) In the case of invitations to bid, contracts shall be awarded to thequalified and responsive contractor submitting the lowest bid,provided that if the interests of the Programme so require any orall bids may be rejected. In the latter instance, the reasons forrejection shall be recorded and a determination made whether toinvite new competitive tenders or to enter into a negotiated contract.

(b) In the case of requests for proposals, contracts shall be awarded tothe qualified contractor whose proposal is considered to be the mostresponsive to the needs of the Programme.

Rule 109.23 In cases where the Executive Director decides not to follow theadvice of the Committee on Contracts, he/she shall record the reasons for suchdecision.

Rule 109.24 The requirements for invitations to bid under Rule 109.19 or forrequests for proposals under Rule 110.19, may be waived:

(a) if the proposed contract involves commitments of less than20,000 dollars, provided that, for commitments of over1,000 dollars, there has been made a recorded assessment ofcompetitive and responsive quotations;

(b) if the proposed contract involves commitments of 20,000 dollars ormore and one or more of the following conditions apply:

(i) the prices or rates are fixed pursuant to national legislationor by regulatory bodies;

(ii) a standardization of supplies, equipment or spare parts renderscompetition impracticable;

(iii) requireme1Jt~ of emergency operations, or other immediateoperational needs do not permit the delay attendant oninvitations to bid or requests for proposals;

(iv) the proposed contract relates to procurement from a solesource of supply or to the procurement of perishable supplies;

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+ +(v) bids for identical items have been obtained during the

preceding twelve months, unless there has in the meantimebeen a substantial change in price or market trends;

(vi) the proposed contract is for services of individuals other thanstaff members;

(e) when one or more of the conditions enumerated 10 (b) aboveapplies:

(i) such condition or conditions shall be appropriately documentedand recorded;

(ii) if the proposed contract involves an amount of over50,000 dollars it shall be referred to the Committee onContracts for review and advice.

Rules common to all purchases

Rule 109.25 Written contracts or written purchase orders shall be used forevery award made to a single contractor or vendor in an amount of1,000 dollars or more. They shall specify:

(a) the nature of the goods or services being provided;

(b) the quantity being provided;

(e) the unit prices, if any;

(d) the period covered;

(e) the conditions to be fulfilled;

(f) the terms of delivery and of payment, and the currency of payment;and

(g) the procedure for settlement of disputes.

Rule 109.26 Except where normal commercial practice or the interests of theProgramme so require, no payment shall be made in advance of the deliveryof goods or performance of serviFes contracted for. Progress payments mayhowever be made when the interests of the Programme so require.

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+ +Rule 109.27 Each determination or decision taken by an official pursuant toRules 109.15 through 109.26 above shall be appropriately recorded and shallbe supported by the written findings of that official.

Rule 109.28 The Executive Director shall maintain documentation and recordsof the acquisition, movement and delivery of commodities, including theestablishment of any food reserve which may be approved by the Committee.Records of commodities shall be expressed in quantities and show equivalentcash value as may have been determined under Rule 104.4.

Rule 109.29 The Executive Director shall maintain adequate property recordsfor the equipment, supplies and other property of the Programme. Physicalinventories shall be taken of such equipment, supplies and other property onceeach year, or at such shorter intervals as may be required to ensure adequatecontrol over such property.

Rule 109.30 All supplies, equipment or other property received by theProgramme shall immediately be inspected to ensure that the item complies withthe specifications of the purchase contract and that its condition issatisfactory. On receipt of the item, it shall be entered, if required under Rule109.29, into the property records.

Rule 109.31 Supplies, equipment and other property shall be issued only toofficials authorized by a certifying officer to requisition them.

Rule 109.32 The issue to individuals of equipment or other property for theirown official use, such as personal computers, calculators or tools, shall berecorded in the property records as issued on loan. The records shall besupported by a receipt from the individual concerned, and an inventory shallbe made, and the receipt renewed, each year. On separation from service orwhen the equipment is no longer needed, the item is to be returned to stockand the loan record cancelled.

Rule 109.33 The Executive Director shall establish procedures for the review,at Headquarters and in the field, of:

(a) shortages and overages of, and damage to, property ascertainedthrough inventories or by other means; and

(b) inventoried property that becomes surplus or unserviceable throughobsolescence or normal wear and tear.

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+ +Rule 109.34 Reviews of property:

(a) Reviews of property under Rule 109.33 above shall comprise:

(i) an investigation into the cause of any shortages or overagesof and damage to property, and recommended actions to betaken thereon;

(Ii) recommendations on disposal of property which has becomesurplus or unserviceable through obsolescence or normal wearand tear.

(b) Such reviews shall in each instance indicate the degree ofresponsibility, if any, attaching to any official of the Programme forshortages, overages or damage.

Rule 109.35 Sales of property declared surplus or unserviceable shall be madeby competitive bidding, provided that such competitive bidding is not necessarywhen:

(a) the inventoried value is less than 5,000 dollars;

(b) the exchange of surplus property in partial or full payment forreplacement equipment or supplies will be in the interests of theProgramme;

(c) the destruction of the surplus or unserviceable material will be moreeconomical or is required by law or by the nature of the property;or

(d) the interests of the Programme will be served by disposal by giftor sale at nominal prices to a government or other non-profitorganization.

Rule 109.36 Sales of property shall be on the basis of cash payments on orbefore ddivery.

Rule 109.37 The proceeds from the sale of property shall be credited asmiscellaneous income to the source of funds charged with the purchase thereof(the Fund, or a trust fund or special account thereof) except that:

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applied directly against the purchase price of replacement property,only the excess, if any, shall be credited as miscellaneous income;

(b) the trade-in of property is not considered as a sale, and the trade-inallowance shall be applied against the cost of the replacementproperty;

(c) the proceeds from the sale of surplus project equipment shall becredited to the accounts of that project provided they have not beenclosed;

(d) where equipment is transferred from one project to another and theaccounts of the releasing project are open, the fair market value ofthe equipment shall be credited to the releasing project and chargedto the receiving project.

Rule 109.38 Internal audit reviews, conducted in accordance with generallyaccepted common auditing standards, shall provide comments andrecommendations to the Executive Director in respect of:

(a) the effective management of the Programme and the economic useof its resources;

(b) the soundness, adequacy and application of financial systems,procedures and internal controls;

(c) the compliance of financial transactions with established regulations,rules and instructions;

(d) the regularity of the receipt, custody, expenditure, accounting andreporting of the resources of the Programme;

(e) the conformity of expenditures with the purposes for which the fundswere authorized.

X. THE ACCOUNTS

(Regulation 10.1)

Rule 110.1 The Executive Director shall establish and maintain tinancialrecords, systems and procedures providing accurate and timely information

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Rule 110.2 The principal accounts shall consist of:

(a) project accounts by source of funds, showing:

(i) project identification number;

(ii) approved project budget allocations;

(iii) disbursements;

(iv) unliquidated obligations; and

(v) unencumbered balances of project budget allocations;

(b) programme support and administrative budget accounts showing, bymam budget lines:

(i) approved appropriations;

(ii) allotments made;

(iii) disbursements;

(iv) unliquidated obligations;

(v) unencumbered balances of allotments; and

(~'i) unencumbered balances of appropriations;

(c) general ledger accounts showing, for the Fund, all income,expenditure, cash at banks, investments, receivables and other assets,reserves, payables and other liabilities;

(d) such accounts, structured as under (a), (b) and (c) above, as maybe appropriate for each trust fund or special account administered bythe Programme.

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Rule 110.3 Financial records and supporting documents shall be retained forsuch periods as may be agreed with the External Auditor, after which they maybe destroyed on the authority of the Executive Director.

Rule 110.4 Except as may be otherwise required by the terms of any trustfund or authorized by'the Executive Director, all income shall be accounted foron a cash basis and all expenditures shall be accounted for on an accrual basis.

(Regulation 10.2)

Rule 110.5 Conversion of records into other currencies:

(a) Where records have been authorized to be kept in currencies otherthan the United States dollar, they shall be converted into UnitedStates dollars at the United Nations operational rate of exchange ineffect on the date of the transaction or on the date of the report,as appropriate.

(b) Where there is a conversion of United States dollars into localcurrency, or vice versa, the actual amounts obtained shall be takeninto account; any difference between that amount and the amountwhich would have been obtained at the operational rate of exchangeunder (a) above shall be recorded in the accounts as a loss or gainin exchange.

(c) For project accounts, losses and gains on exchange shall be chargedor credited to the account of the project concerned. Foradministrative budget accounts, losses or gains shall be charged orcredited to miscellaneous income. For trust funds and specialaccounts, losses or gains shall be charged or credited to the relevanttrust fund or special account.

(Regulation 10.3)

Rule 110.6 Certification of the accounts shall attest that, to the best of theExecutive Director's knowledge and information, all material transactions havebeen properly entered in the accounting records and are properly reflected inthe financial statements and supporting schedules.

Rule 110.7 In addition to the accounts, there shall be provided to the ExternalAuditor a summary of signiticant accounting policies and information on:

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(a) ex gratia payments;

(b) inventoried property;

(c) losses of cash and write-offs of other assets;

(d) exceptions to these Financial Rules;

(e) such other information as the External Auditor may require.

Xl. EXTERNAL AUDIT

(See Regulations 11.1 to II. /0, qnd Annex)

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