I. PURPOSES

The purposes of this Administrative Memorandum are as follows:

1. To provide expanded guidelines and definitions regarding financial obligations;

2. To reiterate the requirement that all obligations must be based upon firm commitments when they are approved and recorded in the budgetary accounts of the General Secretariat;

3. To emphasize that all obligations must observe strict adherence to the criteria established in the General Standards;

4. To clarify the role and responsibilities of the Department of Program Budget in the obligation review process; and

5. To review pertinent policies and procedures regarding the funding, authorization, and recording of Obligations.

II. BACKGROUND

1. Administrative Memorandum No. 84 established the framework to decentralize among the program managers the authority and responsibility to record obligations under objects 3 to 9.

2. The annual 1997 review by the External Auditors of unliquidated obligations revealed several cases which were not in compliance with Article 94 of the General Standards. In their report, the Board of External Auditors stated that..."In some areas, the General Secretariat continues to refine its policy..."

3. The Board of External Auditors further recommended that Management provide training and further instructions on the obligation process and conduct checks of compliance.

III. ARTICLE 94 OF THE GENERAL STANDARDS

Article 94 of the General Standards states:

Appropriations shall be available to meet the obligations incurred during the year for which they were approved. However, and only to the extent necessary to liquidate obligations pending at the close of the year for which they ywere approved, the appropriations mentioned may be extended, but not beyond December 31 of the following year, on which date they shall expire irrevocably.

In the case of FEMCIDI, in accordance with its Statutes, resources from voluntary contributions made by the member states shall be appropriated and obligated prior to December 31 of the year in which the contributions are received and the obligations shall be liquidated prior to December 31 of the following year.

For the purpose of this article, obligations shall be understood as those arising from any agreement, contract, purchase order, or other document concluded with a natural or legal person under which the General Secretariat is legally obligated to disburse funds to the corresponding natural or legal person in order to execute approved activities in keeping with the provisions of the Charter, the resolutions of the General Assembly, and the General Standards. The obligations shall be recorded on the date on which the commitment becomes legally binding.

IV. ADDITIONAL GUIDELINES FOR FINANCIAL OBLIGATIONS

1. A financial obligation is a purchase order, agreement, or contract issued in writing by the General Secretariat to a third party, natural or legal person, to obtain goods and services in exchange for the financial resources of the OAS.

2. A financial obligation may also be contained in or arise out of a written letter of understanding, memorandum of understanding, or agreement with:

a. another organ of the Organization of American States having its own legal personality;

b. a Member State;

c. an agency of a Member State, and

d. another public international organization.

inasmuch as the letter of understanding, memorandum of understanding, or agreement requires the disbursement of a financial resources to or on behalf of that State, Agency, organ, or other international organization.

3. An obligation is NOT an agreement, contract, or memorandum of understanding with a unit or other unincorporated dependency of the General Secretariat.

4. Obligations shall be issued and recorded by the program managers of the units, offices, and departments of the General Secretariat. They are based on appropriations in the approved program budget and the Plan of Activities submitted to the Department of Program-Budget and approved by the Assistant Secretary for Management as allotments for the requesting area in accordance with Administrative Memorandum 84. In this regard, appropriations of the Regular and FEMCIDI Budgets automatically expire on the last day of the fiscal year for which they were appropriated, unless this date is specifically extended by an appropriate political body as described in the norms of the organization. Specific Fund resources are available as prescribed by the terms and conditions of the instruments that established the specific fund.

5. Managers are responsible for the contents and accuracy as well as for the maintenance of supporting documentation for each obligation.

6. The following are examples of the supporting obligation documents acceptable by object major:

Object major Example

2. Overtime - slip signed by the director of the area for work performed;

3. Fellowships - Written offer and acceptance by the grantee, invoice from an airline, or from an educational      institution;

4. travel order, copy of airline invoice;

5. in-house work order issued and/or copy of a purchase order issued to an outsider;

6 & 7. Copy of purchase order issued to a third party;

8. Copy of a signed performance contract ("CPR") with contracted party; and

9. Administrative actions for common services purchased by the General Secretariat under binding contract with an outside supplier and/or copy of a purchase order issued to a third party.

7. Obligations are usually established to absorb expenses within a fiscal year. Obligations may be for non-discretionary, discretionary and technical cooperation expenses, as defined as follows:

a. Non discretionary expenses are those that cover the costs of maintaining the basic infrastructure of the General Secretariat. Such as but not limited to: rent, utilities, communications -long distance telephone calls, postage, network, internet, couriers- cleaning services, insurance, and photocopies.

b. Discretionary expenses are those such as the purchase of office furniture and equipment, overtime, subscriptions to periodicals, travel and some services for conferences and meetings.

c. Technical cooperation expenses are those for the acquisition of goods and services directly related to services to the member states, such as: training, scholarships, contracts with experts providing consulting services, travel, purchase of technical equipment.

8. All obligations must have a beginning and an end date.

1. The Department of Program Budget is responsible for the overall control of the program budget entrusted to the General Secretariat. It oversees that all appropriations are maintained in compliance with the General Assembly resolutions and mandates as well as with resolutions from other political bodies of the Organization. Controlling and recording obligations related to personnel actions, objects 1. and 2. continues under the Department of Program-Budget.

2. Since early 1998 the Department of Program-Budget has been and will continue to hold periodic training sessions or workshops to provide guidance on recording and reviewing obligations. Duration and frequency of the workshops will be adjusted, as it may be deemed necessary.

3. The staff of the Department of Program-Budget shall be available for consultation and/or assistance regarding the process of recording, reviewing, and maintaining obligations in good standing.

VI. THE OBLIGATION REVIEW PROCESS

1. The Department of Program-Budget shall develop an annual plan to review obligations recorded by the areas of the Secretariat. In this regard the Department of Program-Budget shall:

a. In coordination with the areas, perform quarterly reviews of all obligations recorded during the budget execution progress. The primary purpose of this review is to assist the various departments offices and units to insure quality control within the process;

b. Provide the program managers and/or administrative officer/assistant an advanced notification as to the date when the review is to take place;

c. Explain that the review is to be based on the approved program-budget, plans submitted and funding availability;

d. Verify that obligations comply with established rules, regulations and procedures; and

e. Provide assistance in the form of budget analysis and schedule variances.

2. Within five working days following its termination of its review of an area, the Department of Program Budget will report its conclusions to the Assistant Secretary for Management and that area.

3. The Department of Program Budget will follow-up the obligation review process with remedial action when necessary.

VII. FUNDS FOR FINANCING ALLOTMENTS

All activities of the General Secretariat must be financed with appropriations from the Regular Fund budget, the voluntary multilateral fund (FEMCIDI) and/or specific funds. Following is an illustration of how the budget is financed and the procedure to establish allotments by the Secretariat for Management.

1. The Regular Fund is financed by quotas paid by the member states, the contributions from other funds for technical supervision and administrative support, and miscellaneous income. The Assistant Secretary for Management issues guidelines on the level of execution for the Regular Fund. As described in Administrative Memorandum 84, funds for projects and activities are allotted based on the approved budget and/or programming plans, which must be submitted to the Secretariat for Management through the Department of Program-Budget.

2. The Voluntary Multilateral Fund ("FEMCIDI") is financed by pledges paid by the member states. The Secretariat for Management provides information on the revenue for the voluntary funds to the Executive Secretariat for Integral Development ("SEDI"). Based on that information the Permanent Executive Committee for the Inter-American Council for Integral Development ("CEPCIDI") issues specific resolutions to establish maximum appropriation levels by account.

3. Specific Funds are financed with contributions from donors (including international entities, national institutions, non-governmental organizations ("NGOs") and private enterprises) on the basis of formal agreements or grants. No activities to be financed with specific funds shall be initiated by the General Secretariat prior to its receipt of those funds from the donor. The Department of Program Budget shall issue the corresponding allotments once it has received notice from the Department of Financial Services that the funds have been received and in accordance with the areas' programmed requirements to carry out its activities.

VIII. APPLICABLE DISCIPLINARY MEASURES FOR FAILURE TO OBSERVE RULES AND REGULATIONS IN THE OBLIGATION PROCESS

Section 5.3 of Chapter IV. of the Budgetary and Financial Rules states as follows:

It will be considered a grave offense subject to disciplinary actions under due process for any staff member willfully, maliciously or by negligence to fail to comply with the regulations and procedures of the Secretariat, and cause:

a. Fraudulent obligation to be entered;

b. A false certification to be issued;

c. An unjustified disbursement to be made;

d. The unreasonable retention of monies of the Organization; or

e. Use of any currency not in the best interest of the Organization.

This Administrative Memorandum shall enter into force on the date of its signature.

James R. Harding
Assistant Secretary for Management