UNICEF fundraising committees have notably steep expenses, cash reserves, auditors find

Halloween is an important event for the United Nations Children's Fund, or UNICEF, as hundreds of thousands of trick-or-treaters go house-to-house asking for  pennies or dollars to help the world’s needy children. But according to the U.N. Board of Auditors, which monitors the organization’s finances, the cost of funneling such private sector money through UNICEF’s national committees to the global organization is getting so expensive that it merits special notice.

A report by the auditors that was published last June, but won’t be considered by UNICEF’s supervisory executive board until next year, highlights the fact that those national committees last year kept an average of 29 percent of overall private sector  contributions for themselves, either as expenses or as stockpiled cash.

In all, more than $341 million in donations was held back by administrators in 2012, and more than $2.39 billion over the period from 2006 to 2012, amounts that the auditors dryly labeled as “high.”

In fact, for six of ten unnamed biggest donors the hold-back rate was higher than 30 percent, the report noted, and in one case, it reached a towering 61 percent.

The target that UNICEF suggests for expenses and reserves is more like 25 percent.

Alongside the elevated cost of its private sector fundraising, the 133-page report cited “lack of sufficient oversight” of UNICEF’s national fund-raising committees “as a unique mechanism in private-sector fundraising” along with “deficiencies in budget formulation,” “insufficient” monitoring of cash transfers to organizations that carried out its programs, and  “weaknesses in performance reporting” of UNICEF’s various program activities., as elements of concern in the agency’s operations.

At the same time, the auditors patted the roughly $3.8 billion-a-year children’s organization on the back for doing better than it has in years past.

Private-sector funding is only one part of the funding for UNICEF, which also gets money from governments, multilateral financial institutions like the World Bank, and organizations like the Global Fund to Combat AIDS, Tuberculosis and Malaria to carry out its activities involving vaccination, health care, education and emergency feeding for children in more than 150 countries.

But it is a big part: roughly one-third of the global organization’s money—about $1.175 billion last year, before expenses and reserves were deducted--flowed from its 36 national committees, including its biggest single donor, the U.S. Fund for UNICEF (USF)
The committees are unique in that they are registered local charities linked to global UNICEF through individual legal agreements.

While the national committees are probably best known for such grass-roots fund-raising ventures as UNICEF’s Halloween trick-or-treat, or its sales of Christmas greeting cards, these are largely p.r.-oriented ventures that yield a relative trickle of UNICEF’s private-sector funds. In the case of USF, its most recent report lists trick-or-treating and greeting cards as bringing in roughly 1 percent each of its $501 million in revenue.

The great majority of the U.S. Fund for UNICEF’s private sector money comes instead from foundations and corporations—74 percent of the total—as well as individuals.

(Another $131.8 million—not included in the private-sector total—in 2012 came from the U.S. government, which is “advised” by UNICEF’s Office of Public Policy and Advocacy in Washington about the importance of its contribution. While the government money is not included as revenue in UNICEF-USA’s official financial highlights, the expenses related to garnering that money are deducted from the private sector results. UNICEF in 2012 listed roughly $10.7 million as expenses for “public information” and “advocacy.”)

CLICK HERE FOR THE U.S. FUND'S FINANCIAL HIGHLIGHTS

The unique relationship between UNICEF’s national committees and the global organization is clearly a matter of concern for the  international auditors, who fretted that some of the committees retained cash cushions well in excess of the three-months’ worth of operating costs recommended by UNICEF.

At the same time the auditors noted that some  UNICEF offices had  sometimes used funds designated for its programs to cover administrative costs, and worried about a general lack of documentation, oversight and evaluation of programs carried out in the field by UNICEF operating partners who had received, overall, more than $1.1 billion in cash transfers from the agency.

CLICK HERE FOR THE AUDITORS' REPORT

In response to questions from Fox News about the auditor’s report, Jeremy Hartley, communication chief for UNICEF’s private fund-raising and partnerships division, declared that “national committees strive to maintain acceptable cost-to-income ratios that depend on the size, development stage and the respective national conditions of the NGO sector of each committee. Expenses for different fundraising activities vary substantially from one country to another.”

On the national committee financial reserves, Hartley said that “UNICEF is fully aware of the  reserves held by the national committees and there are no funds due to UNICEF in these balances.”

In response to the auditors’ concerns about “inadequate justification” of $665 million worth of other UNICEF “advocacy, program development and inter-country programs,” he declared that “The budgets for these programs are detailed and justified in the project proposals submitted to donors and summarized in [an Executive] Board-approved document.”

Lisa Szarkowski, vice-president of marketing and communications for UNICEF-USA, told Fox News that “the U.S. Fund for UNICEF spends 6.7 percent on fundraising costs, and 2.8 percent on administration. 90.3 percent  goes to program expenses.”
The U.S. Fund, she added, “is subject to, and in 100 percent compliance with, all U.S. laws, Internal Revenue Codes and regulations and best practices for non-profit governance and U.S generally accepted accounting principles. Our accounting practices would be in violation of the aforementioned if governed by U.N policy.”

The auditors’ report is not scheduled to be taken up by UNICEF’s 36-nation supervisory executive board until February 2014.

George Russell is editor-at-large of Fox News and can be found on Twitter @GeorgeRussell