February 15, 2011 | WebMemo on United Nations
Last year, the United Nations reported that it was holding $179 million owed to the United States from the U.N.’s Tax Equalization Fund (TEF) because the U.S. had failed to instruct the U.N. on how it wished to dispose of those funds. On February 9, 2011, Congress held a vote on legislation instructing the Administration to secure the return of that money from the U.N. In its effort to defeat the legislation, the Administration revealed that it had already allowed the U.N. to use $100 million of the $179 million for U.N. security upgrades that would be paid for entirely by the U.S.
Congress should press the Administration for details about this decision, examine whether the Administration had the authority to approve this transfer, and consider the implications of this decision for current and future efforts by Congress.
The $179 million owed to the U.S. from the TEF had accumulated for years despite the fact that, under U.N. financial rules and regulations, the money should be reimbursed at the end of each fiscal year. In fact, the U.N. had previously observed this rule and reported that a TEF credit had been applied to the U.S. regular budget assessment in 1997. The failure of the U.N. to dispose of the millions owed to the U.S. in subsequent years in the same manner was due only to the fact that the U.S. had failed to instruct the U.N. on how it wished to dispose of those funds.
The State Department has yet to explain why U.S. officials did not seek reimbursement for the TEF credit owed to the U.S. as had been done previously. At best, this failure represents negligence on the part of the State Department with regard to its fiduciary responsibilities.
Since late 2010, congressional offices have been seeking additional information from the State Department about the TEF and the Administration’s intentions for the funds owed the U.S. The issue gained publicity when House Majority Leader Eric Cantor’s (R–VA) “YouCut” Web site included “Obtain Refund of Funds Owed to the U.S. by the U.N. Tax Equalization Fund” as one of three options to cut government spending. It won the “YouCut” vote, and as a result, Representative Ileana Ros-Lehtinen (R–FL) introduced the United Nations Tax Equalization Refund Act of 2011 to seek the return of the TEF funds. Because the legislation was scheduled to be voted on under suspension of the rules, passage required two-thirds of all votes. Despite receiving support from 259 Members, it did not pass.
However, the introduction of the legislation led Esther Brimmer, Assistant Secretary of State for International Organization Affairs, to admit in an interview that the State Department had already given the U.N. permission to use $100 million of the TEF funds for security upgrades. The State Department confirmed this in a February 9 letter to Ros-Lehtinen, stating that the $100 million had been transferred to the U.N. and that the TEF surplus owed to the U.S. was “now approximately $80 million.”
Questions Congress Should Ask
State Department officials have acted unethically—and perhaps illegally—in giving the $100 million in TEF funds to the U.N. To determine the facts, Congress should ask:
More That Congress Can Do
In the aftermath of the State Department’s $100 million gift to the U.N., the State Department is acting as if nothing improper occurred. In response, Congress should:
Congress’s Crucial Role
Congress has a role to play in U.S. policy toward international organizations. The Administration’s decision to “repurpose” the TEF funds implies that the State Department believes that, once congressionally authorized and appropriated funds go to international organizations, it no longer has to abide by congressional authorization, instruction, or intent. This has profound implications. If the State Department can “repurpose” funds once they go to an international organization, that authority can be used to circumvent or ignore current or future prohibitions imposed by Congress.
If Congress wishes to retain the power of the purse and its ability to direct how U.S. taxpayer dollars are used, it should not take the Administration’s actions in “repurposing” the $100 million in funds owed to the U.S. from the U.N. Tax Equalization Fund lightly.
Brett D. Schaefer is Jay Kingham Fellow in International Regulatory Affairs in the Margaret Thatcher Center for Freedom, a division of the Kathryn and Shelby Cullom Davis Institute for International Studies, at The Heritage Foundation and editor of ConUNdrum: The Limits of the United Nations and the Search for Alternatives (Rowman & Littlefield Publishers, 2009).
The 1946 Convention on Privileges and Immunities of the United Nations states that officials and those employed by the U.N. shall “be exempt from taxation on the salaries and emoluments paid to them by the United Nations.” Most U.N. member states abide by this provision and exempt their citizens from paying taxes on U.N. compensation. The U.S., however, when ratifying the convention, reserved the right to tax the earnings of its nationals. To avoid having U.S. nationals “penalized” by receiving salaries that were de facto lower than the salaries received by other U.N. employees that were not taxed by their governments, the U.S. and the U.N. created the TEF in 1955. For details, see Brett D. Schaefer, “The U.N. Should Pay What It Owes the U.S. from Its Tax Equalization Fund,” Heritage Foundation WebMemo No. 3052, November 8, 2010, at http://www.heritage.org/research/reports/2010/11/the-un-should-pay-what-its-owes-the-us-from-its-tax-equalization-fund.
The Financial Regulations and Rules of the United Nations state that “any balance on a Member State’s tax equalization account [TEF] after the obligations referred to in regulation 4.11 have been satisfied shall be credited against the assessed contributions due from that Member State the following year.”
George Russell, “U.S. Footing $100M Bill for U.N. Security Upgrade,” FoxNews.com, February 9, 2011, at http://www.foxnews.com/world/2011/02/09/footing-m-security-upgrade/ (February 15, 2011).
A 2010 financial statement reported that the U.N. retained a “cumulative surplus for the United States of America [from the TEF] at the end of biennium 2008–2009 amounting to $179,010,326” that was “payable to the United States of America pending instructions as to its disposition.” See United Nations, “Financial Report and Audited Financial Statements for the Biennium Ended 31 December 2009 and Report of the Board of Auditors, Volume I,” A/65/5/Vol.1, at http://daccess-dds-ny.un.org/doc/UNDOC/GEN/N10/468/08/PDF/N1046808.pdf?OpenElement (February 15, 2011).
Press release, “Ros-Lehtinen Says Administration Ignores Will of American People by Giving ‘100 Million Dollar Gift Card’ to United Nations,” Committee on Foreign Affairs, U.S. House of Representatives, February 9, 2011, at http://foreignaffairs.house.gov/press_display.asp?id=1713 (February 15, 2011).
Russell, “U.S. Footing $100M Bill for U.N. Security Upgrade.”
George Russell, “U.N. Ignores Risk of Terror Attack, New York City Says,” FoxNews.com, September 17, 2010, at http://www.foxnews.com/world/2010/09/16/exclusive-ignores-risks-terror-attack-new-york-city-says/ (February 15, 2011).