Recovery of indirect costs for co-financing

The Executive Board

1. Takes note of documents DP/FPA/2005/4 and DP/FPA/2005/5;

2. Further takes note of the harmonized cost-recovery principles contained in document DP/FPA/2005/5, recognizing that the adoption of these principles by United Nations organizations constitutes a step towards increased transparency and comparability of cost recovery throughout the United Nations system;

3. Encourages UNFPA to intensify consultations for further harmonization of cost-recovery principles within the United Nations Development Group, with the objective of clearly identifying common elements under each cost category and justifying differences resulting from different mandates and operating modalities;

4. Endorses, on an interim basis, the UNFPA-specific implementation of these harmonized principles and their application in the recovery policy for indirect costs, consisting of a rate of 5 per cent on nationally executed cost-sharing expenditures financed by programme countries and 7 per cent on all other co-financed expenditures; confirms the current rate of 5 per cent for third-party procurement expenditures; and also confirms the limits of indirect cost recovery by non-governmental organizations and United Nations agencies, as authorized by the Executive Board in decision 2000/6;

5. Stresses that UNFPA must ensure full recovery, at an aggregate level, of all actual costs for implementing activities financed from UNFPA other (non-core) resources;

6. Requests the Executive Director to prepare a detailed report, to be presented to the Executive Board at the annual session 2007, that reviews the indirect cost-recovery policy on the basis of the actual data from the Atlas system, proposing amendments, as necessary, based on whether the goal of no cross subsidization is attained and whether there are categories of co-financing activities that have significantly higher or lower indirect costs compared to the rates applied;

7. Encourages UNFPA to continue to monitor the level of costs recovered from other (non-core) resources;

8. Further encourages UNFPA to continue to refine its strategic cost-management system, including through the implementation of the Atlas system, in order to better attribute indirect costs to programmes and projects; and

9. Reiterates that regular resources must remain the bedrock of contributions to UNFPA.

28 January 2005