MFO Financial Information

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 Finland, Germany, Japan, the Netherlands, Norway, the Republic of Korea, Sweden, Switzerland and the United Kingdom.  In MFO FY2015, Donor States contributed approx. 6% of the MFO's operating revenue.  In addition, Australia, Japan, Germany and the United States provided funding for Force Protection purposes.

The MFO's three Funds-Contributing States are Egypt, Israel and the United States.

Recent Donor Efforts

Recent efforts to increase Donor State support of the MFO led to:

  • New donor support from the Republic of Korea in MFO FY 2015 and from Australia and the United Kingdom in MFO FY 2013;
  • Additional contributions from Japan and Germany in MFO FY 2015 for Force Protection needs;
  • Increased contributions from Switzerland in MFO FY 2014;
  • Increased contributions from Germany and the Netherlands in MFO FY 2013; and
  • Increased contributions from Finland, Norway and Sweden in MFO FY 2012.

MFO efforts continue to find Donor funds to support the modest, but ever increasing, cost of this important mission. Other Governments can help by making a significant annual financial contribution to demonstrate the visible and strong commitment to the peace between Egypt and Israel and to regional stability, and to ensure that the MFO can continue to accomplish its mission.


Substantial financial support would provide relief for Egypt and Israel who meet most of the costs of the MFO; as the cost of the MFO inevitably increases, the principle of other countries sharing the burden with the Treaty Parties in financing MFO peacekeeping takes on increased urgency.

Donor contributions demonstrate a visible and strong commitment to the peace between Egypt and Israel and to regional stability.

Protecting Our Personnel

The changed security environment in the Sinai since 2004 has impacted the MFO mission, 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 then.


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 and meet their requirements such as the additional responsibilities assigned to the MFO in 2005 and 2007 related to the Border Guard Force mission along the Gaza-Egypt border.


To enhance the safety of our personnel in this high threat mission area, the MFO purchased a number of fully armored vehicles with funding provided by the Netherlands in FY 2008, Spain in FY 2009 and the United States in FYs 2010, 2011 and 2012. Additional fully armored vehicles will be purchased, and existing ones maintained, using funds provided specifically for force protection purposes by the United States government.


The MFO established an independent Force Protection Fund in 2008 following a financial contribution by the United States to be used for unanticipated security and force protection costs. Each subsequent year, the U.S. Congress has reaffirmed its commitment to the MFO with additional contributions. This fund is not tied to a specific financial year and is managed and accounted for separately from operating funds. Commencing in MFO FY 2013, the Government of Australia pledged to contribute $500K to the MFO for Force Protection enhancements for three fiscal years.  In MFO FY 2016, that amount was increased to $667K for a further three years.  

The MFO relies greatly upon donor funding to carry out needed Force Protection improvements.

New Mission Costs

The MFO was able to meet the initial start-up costs of the Border Guard Force mission, given to the MFO in 2005, 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 were 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 volatile oil prices.  Inflation alone continues to add between two and three 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.


Also at the annual Trilateral Meeting, the Funds-Contributing States review the MFO's multi-year financial plan for the following four fiscal years. The multi-year financial plan forms the basis of the following FY's detailed operating budget preparation which is submitted to the Funds-Contributing States each Spring.


Following review and approval of the annual operating budget, the three Funds-Contributing States provide the MFO with a letter of credit or equivalent commitments to cover the year's contributions commencing 1 October. 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 to a reserve account to reduce future FY's funding requirements of the Funds-Contributing States, while any fiscal year deficit is met from the following year's revenue.


The MFO is committed to maintaining a "no-real-growth" budget policy, excepting adjustments for inflation and foreign currency exchange differences, or any change in mission.

Meeting Unforeseen Contingencies

The organization must meet any significant unforeseen contingencies without reverting to the three Funds-Contributing States for supplemental appropriations, an impracticable approach to emergency funding.  A combination of commercial insurance tailored to the MFO's needs and situation, a complementary Self-Insurance Fund (SIF) for losses not commercially insured, a Capital Asset Replacement Fund (CARF) assists in meeting contingencies while maintaining budget stability and a Budget Stabilization Reserve Fund (BSRF) helps stabilize contributions from the three Funds-Contributing States in future years when budgeted expenditure exceeds revenue.  Donor contributions are essential in funding the ongoing refurbishment of our aging Sinai facilities and reducing the burden of funding the MFO currently borne by the three Funds-Contributing States.