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.
The three Funds-Contributing States - Egypt, Israel, and the United States - each contribute one third of the MFO's annual budget, less donations. Funds-Contributing and Donor States' review of MFO finances and effective MFO fiscal management of contributions have permitted the MFO to function effectively and efficiently. The directly interested Parties, Egypt and Israel, fund most of the costs of the MFO. Current Donor States include Finland, Germany, Japan, the Netherlands, Norway, the Republic of Korea, Sweden, Switzerland, and the United States.
Sources of MFO FY2020 funding
Force Protection Fund
The MFO is very thankful to Donor States for their strong commitment to the peace between Egypt and Israel and to regional stability, their recognition of the work we carry out in support of the Treaty Parties, and for their generous financial contributions. Donor funding is key to managing the modest, but ever increasing, cost of our mission. We welcome additional contributions to ensure we can continue to accomplish our mission and provide relief to Egypt and Israel who meet most of our costs.
Currently, some Donor contributions to the MFO are earmarked as follows: Japan provides restricted funding towards food and civilian salaries, Germany provides a supplemental contribution towards local employment in Sinai, and Norway, Sweden, and Switzerland support the costs of our Civilian Observer Unit. In addition, we receive special contributions from Japan and the United States to meet the costs of necessary physical protection to promote the safety and security of the men and women, civilian and military, who execute our mission in Sinai.
Other nations who have contributed to force protection funding in the past include the Netherlands in FY 2008, Spain in FY 2009, and Australia in FYs 2013 to 2018.
In 2008, the MFO established an independent Force Protection Fund for these types of contributions 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. Since MFO FY 2015, Japan has also provided supplemental funding for Force Protection needs. This fund is not tied to a specific financial year and is managed and accounted for separately from operating funds.
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
MFO Operating Expenses
The MFO Budget Process
The MFO's budgeting philosophy and the financial techniques used 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.
Meeting Unforeseen Contingencies
As the MFO must meet any significant unforeseen contingencies without reverting to the three Funds-Contributing States for supplemental appropriations, the MFO maintains three reserve funds: a Self-Insurance Fund (SIF) for losses not commercially insured, a Capital Asset Replacement Fund (CARF) to replace aging capital assets, and a Budget Stabilization Reserve Fund (BSRF) to offset budget deficits and maintain stabilized Funds-Contributing States contributions for as long as possible. Recent Donor contributions have greatly assisted us to meeting unforeseen contingencies and we greatly value this show of support.