Financing the UN Development System: Time for Hard Choices

Time is short. Not only is 2030 approaching, but there is little time to take the necessary actions to prevent irreversible setbacks and development losses. Climate change, health, migration, armed conflict and inequality- all need urgent action and multilateral approaches to be at the centre of global action.

It is, as a result, time for hard choices. Choices that governments, lead­ers, investors and citizens need to make about when and how to fund a multilateral approach to address these global development challenges. The case for a multilateral approach needs to be based on evidence; it needs to demonstrate effectiveness and impact.

This report strives is to advance the quality of this evidence-based debate and to expand the marketplace of ideas related to the United Nations and development financing.

It asks, how and by whom is the UN funded? And where and on what does the UN spend? How can the UN spur greater and more diverse financing flows for the 2030 Agenda? The answers to these questions are key to understanding the multilateral financial architecture of the UN and informing future debates on the funding of the UN.

The following is an overview of the findings of the larger report, Financing the UN Development System 2019: Time for Hard Choices. The publication is the result of a collaborative partnership between the Dag Hammarskjöld Foundation and the UN Multi-Partner Trust Fund Office.

Download full report (pdf)

Part One


This first part of the report provides accessible UN funding data on revenue and expenditures. It is in essence a deep dive into the financial engine room of the UN. It also looks at issues of data quality.

Part One, Chapter One:

Revenue


The total revenue received by the UN in 2017 was US$ 53.2 billion. This represents an increase of US$ 3.9 billion compared to 2016. The table below provides an overview of total revenue by UN entity and financing instrument.

Total revenue of the UN system by entity and by financing instrument, 2017 (US$ million)

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Who provided this revenue to the UN? The simple answer is that governments still provide the lion’s share of the funding for the UN development system (UNDS). As we can see in the figure, they constituted 74% of the direct funding to the UNDS in 2017.

Funding sources for UN operational activities, 2017

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The majority of government contributions actually came from a small group of UN Member States. In fact, 12 countries provided 65% of the total contributions in 2017.

In the visualisation below you can explore in greater detail the financial flows from the top contributors to UN entities over the past seven years. Scroll over the country or agency to see the flows or hit the play button to see the flows by year.

The next question is, how is the UNDS financed? It is an important question because how the UN is financed affects how it operates and influences, for example, the level of flexibility and accountability for the UN entities.

Broadly speaking, there are five different channels of revenue in the UN and here is an overview of them.

The spectrum of UN financing instruments

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Knowing the definitions helps us in the next step when looking at the size and mix of these revenue channels in the UN system for 2017. During that year, more than half of all UN revenue was earmarked to a certain degree (57%). This is a three percentage point increase since 2016.

It is part of a long-term trend in UN financing that has seen a shift away more flexible contributions (assessed and voluntary core) towards the more constrained earmarked contributions, which can clearly be seen in this graph.

Distribution of total UN system revenue, by financing instrument, 2010–2017

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How do different countries mix their earmarked and core contributions? The two graphs below show the funding mix for 24 countries with contributions broken down into core and three different types of earmarked funds.

Funding mix of the top 12 OECD-DAC members to UN operational activities, 2017

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Funding mix of the top 12 non OECD-DAC countries contributing to UN operational activities, 2017

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The next question is what is being funded by the UN? In 2017, 32% of the funding went to humanitarian assistance, which is a growth of four percentage points compared to the previous year. The share of funding for development and peacekeeping has remained stable, while the category of global norms, standards, policy and advocacy has decreased by four percentage points compared to 2016.

Funding of UN system-wide activities, 2017

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If we then turn to how the UN fits into the funding picture of the broader multilateral system we see in the figure below how important the UN is as a multilateral channel. Indeed, the UN remains the largest channel of multilateral assistance with US$ 20.9 billion in contributions in 2017, representing 33% of the total.

Channels of total multilateral assistance from OECD-DAC countries, 2017

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However, compared to other multilateral institutions the UN has a higher level of earmarked funding and it has also increased substantially in recent years. In 2017, 71% of the multilateral aid channelled through the UN development system was earmarked, compared to 64% in 2013.

Channels of total multilateral assistance from OECD-DAC countries, 2013 and 2017

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Of this earmarked funding, 5% was channelled through UN inter-agency pooled funds. The figure below looks at the top 12 contributors to UN inter-agency pooled funds. The data points to the need to increase the funding to this type of financial instrument if the target set in the recent UN Funding Compact is to be met.

The core idea of this Funding Compact is to give incentives for Member States to contribute more qualitatively, flexibly and predictably, alongside incentives for UN development entities to increase coherence, cooperation and transparency and make full use of efficiency gains.

Deposits to UN inter-agency pooled funds from the 12 largest contributors, 2017

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Part One, Chapter Two:

Expenditure


So we have now looked at how, who and what of UN funding. The next question then is where does the UN invest? In 2017, Africa continued to be the region with the proportionally highest UN expenditures. However, when comparing the UN expenditures with previous years, the share of the Western Asia region has grown the most, from 17% in 2015 to 23% in 2017.

Expenditure on UN operational activities by region, 2017

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With regards to UN expenditure by income status, we see it is concentrated in low-income countries, and 48% of the total country-level expenditure in 2017 took place in this group of countries. Moreover, expenditure in the group of 50 countries defined as crisis-affected was in total 76% of the total country-level operational expenditures the same year.

A clearer picture of spending in crisis-affected countries is shown in the visualisation below. Here you can dive into expenditure data by country over the past seven years and see a breakdown of the different types of spending (humanitarian, development and peace operations). Click on the bubbles or hit the play button to begin.

Part One, Chapter Three:

Moving ahead on data quality


The UN system-wide financial data is far from perfect. Most of the issues are linked to the limitations of the two existing UN system-wide datasets used as the main data sources for this report. These sources did not – up until recently – share a common system of data governance or a shared set of definitions.

However, the UN has awoken to the importance of having good quality, system-wide financial data. This is clear by the major efforts made by the UN over the past two years to improve its financial data through the Data Cube Initiative. The main result so far was the adoption of a set of data standards for UN system-wide financial reporting in the fourth quarter of 2018. A roadmap for implementing the data standards has also been developed.

The introduction of the data standards is not only expected to improve data quality, but also to have a positive impact on transparency and accountability as access to quality financial data will be improved through an online data platform. Nonetheless, the introduction of data standards is not the end, but rather the beginning of a longer process of improving the UN’s system-wide financial data. Much more will need to be done, but this is an encouraging start.

Part Two


The 2030 Agenda requires a deeper understanding of the complexities and of the opportunities that the financing of the agenda represent. Delve into one of the following essays and hear from authors from outside and inside the UN system present their ideas and initiatives on the financing trends impacting the SDGs.

Part Two, Chapter Two:

Earmarking: Making smart choices


UN pooled funding: ‘Healthy’ financing for better multilateral results
By the UN Multi-Partner Trust Fund Office (MPTFO)
Shades of grey: Earmarking in the UN development system
By Max-Otto Baumann, Erik Lundsgaarde and Silke Weinlich
Improving the World Health Organization’s financing
By Brian Elliott and Maximilian Sandbaek
Current and future pathways for UN system-wide finance
By Silke Weinlich and Bruce Jenks

Conclusion


This report has attempted to provide the necessary evidence to make the case for a multilateral approach, showcasing the funding of the UN development system and its role within the financing dynamics of the 2030 Agenda. A number of headline messages and questions have emerged from this work.

What kind of multilateralism supports financing and funding of sustainable development and is there a sufficient sense of urgency and evidence for meaningful investment? How do global norms get funded and support these larger investment and financing choices? Does the big picture of financial flows to development countries – apparently increasing – point to any net impact?

How can some of the most impactful drivers of change – technology, science and innovation – help to reduce inequality, ‘leave no one behind’ and leapfrog transformation? And what are the financing approaches most likely to accelerate these drivers? How can impact be credibly measured to underpin hard investment choices and track outcomes and return for future investment? What are today’s (and tomorrow’s) models of ‘good multilateral donorship’? And where are the pathways to ensure the model becomes a firm structure?

In order to support countries in their achievement of the SDGs, the required repositioning of the UNDS was advanced by recent milestones. These include the Secretary-General’s 2018 reform agenda adopted by Member States, the major global financing events for sustainable development held in 2018 and 2019, and the Funding Compact with Member States.

These steps, if well reinforced can serve as financing cornerstones for the UN’s contribution to a stronger multilateral order. The hard choices ahead rest on further strengthening this multilateral foundation, where strength is needed especially in times of uncertainty.