The flexibility and independence of the unique MFO management structure, and its conscious political insulation, are three reasons for its success. They have permitted cost-effective innovation with a minimum of intrusion by extraneous political agendas and the bureaucracy that hamper effectiveness and change. Constructive trilateral review of the MFO has proven to be a persistent characteristic quality, along with a history of firm MFO fiscal management rewarded by consistent, responsive and cooperative support from our three Funds-Contributing States, Egypt, Israel and the United States, and from Donor States.
The three Funds-Contributing States each contribute one third of the MFO's annual budget, less donations and any other external contributions which may be received. The directly interested Parties, Egypt and Israel, fund most of the costs of the MFO. Current Donor States are Germany, Japan, the Netherlands, Norway, Spain, and Switzerland, who together contribute nearly 5% of the MFO's current revenue.
Recent Donor Efforts
Recent efforts to increase Donor State support of the MFO have led to additional assistance from the Netherlands, which has made project-specific contributions in MFO fiscal years (FY) 2006-2008, Norway which will underwrite expenses of the MFO Civilian Observer Unit for FYs 2007-2009, and Spain which will contribute to the purchase of Fully Armored Vehicles in FY 2008. Increases in contributions by Germany and Switzerland have also been gratefully received. These have helped the MFO undertake a number of recent projects aimed at Remote Site kitchen and latrine renewal, North Camp main dining facility rehabilitation and replacement of the North Camp water distribution system. MFO efforts continue to find Donor funds for other urgently needed replacements of equipment and renewals of facilities.
Protecting Our Personnel
Recent terrorist activities in the Sinai have also impacted on the MFO, requiring operational changes and measures to promote the safety of our personnel. Special contributions by the U.S. Government and the U.S. Army have enabled the MFO to meet the costs of extensive physical protection measures enacted since these activities began in October 2004.
To ensure the safety and security of the men and women, civilian and military, who execute the mission, the MFO is obliged to obtain the financial resources necessary to provide requisite equipment, facilities and protective measures. In addition, the MFO must also provide for the health and welfare of its Sinai members, fund all mission-related activities and maintain its readiness to serve the Parties, as recently witnessed by the MFO's additional responsibilities related to the new Border Guard Force mission along the Gaza-Egypt border. To enhance the safety of our personnel in this high threat area, the MFO will purchase a number of fully armored vehicles with funding provided by the Netherlands and Spain in FY 2008.
New Mission Costs
The MFO was able to meet the initial start-up costs of the new mission thanks to generous supplementary support provided by the U.S. and Dutch Governments in FYs 2006-2007. On-going costs related to the new mission are being absorbed within the MFO budget with no permanent change in personnel levels. This reflects a longstanding MFO management policy to control costs and where possible find ways to offset inflation.
Inflation
Though the MFO's application of a commercial "bottom line" approach to peacekeeping has met with exceptional results, the bane of the annual budget remains inflation. The MFO experiences both foreign currency exchange rate fluctuations against its operating currency the U.S. dollar, inflation in all areas of its financial operations and climbing oil prices. Inflation alone continues to add over two million dollars a year to MFO expenses.
The MFO Budget Process
The MFO's budgeting philosophy and the financial techniques it uses are commercially oriented and comparable to the private sector. The MFO's financial operations are based on an integrated budgeting and funding procedure, designed to meet the particular needs of the organization. The MFO's financial reporting and accounting procedures follow United States generally accepted accounting principles, supplemented by MFO-specific conventions set forth in notes to the financial statements. The annual financial statements are audited by one of the major international auditing firms. Financial integrity is assured through a comprehensive program of internal controls subject to regular, external review. Financial results of each fiscal year are presented to the Funds-Contributing States at the annual Trilateral Meeting.
Each Spring, the MFO prepares and submits to the Funds-Contributing States for their approval an initial budget amount for the next FY, commencing 1 October. At the beginning of each FY, the three Funds-Contributing States provide the MFO with a letter of credit or equivalent commitments to cover the year's contributions. There is an implicit undertaking by the MFO to withdraw monies against these letters of credit only on a monthly basis and only in amounts needed to meet short term cash requirements. The MFO identifies and forecasts its near term (30 to 45 day) requirements, limits funds withdrawals accordingly, and makes prompt payment to its creditors. Any funds authorized but not expended for the fiscal year are credited against the next fiscal year's contribution from the Fund-Contributing States, while any fiscal year deficit is met from the following year's revenue.
Meeting Unforeseen Contingencies
The organization meets any significant unforeseen contingencies without reverting to the Funds Contributors for supplemental appropriations, an impracticable approach to emergency funding from three different countries. A combination of commercial insurance tailored to the MFO's needs and situation, a complementary Self-Insurance Fund (SIF) for losses not commercially insured, and a Capital Asset Replacement Fund (CARF) assist in meeting contingencies while maintaining budget stability. Donor funds are essential in reducing the impact on the CARF of the increasing expense to replace our aging structures and equipment.
For current financial information please refer to our Document Library.
