INTRODUCTION . 13 Strategy and services: UNRWA’s Medium Term Strategy (MTS) 2016-21 delineates its strategic vision and the objectives for its programmes and operations for this period. The MTS sets out five strategic outcomes towards which UNRWA is working: l Strategic outcome 1: Refugees’ rights under international law are protected and promoted. l Strategic outcome 2: Refugees’ health is protected, and the disease burden is reduced. l Strategic outcome 3: School-aged children complete quality, equitable and inclusive basic education. l Strategic outcome 4: Refugee capabilities are strengthened for increased livelihood opportunities. l Strategic outcome 5: Refugees are able to meet their basic human needs of food, shelter and environmental health. UNRWA provides assistance and protection to a population of some 5.5 million registered Palestine refugees to help them achieve their full human development potential. The Agency’s services encompass education, health care, relief and social services, camp infrastructure and improvement, protection, and microfinance as well as emergency assistance in times of crisis. UNRWA is committed to ensuring that the means made available to it are used in the most effective and efficient way possible. To this end, the MTS contains specific management and operational effectiveness commitments. Finances: UNRWA is primarily funded from voluntary contributions. The UNRWA programme budget expenses for the 2017 fiscal year were USD 774.77 million. Budget allocations are guided by the strategic objectives and priorities outlined in the MTS, with roughly half of this budget going to education. In response to emergency situations in the region, notably in the occupied Palestinian territory and in Syria, UNRWA has launched emergency appeals to cover assistance costs that are not covered by the programme budget. In recent years, UNRWA has suffered repeated shortfalls in its budgets. For example, UNRWA began 2018 with an overall budget shortfall of USD 146 million and, in January 2018, lost an additional USD 300 million in planned funding from the United States government, increasing the deficit significantly. Through a two-pronged approach of concerted fundraising efforts and internal cost saving measures, the Agency was able to overcome the funding shortfall and keep services operational throughout the year. However, the Agency’s funding outlook is deeply challenging, given its current financial deficit, increased demand for its services, and the impact of emergencies and protracted humanitarian crises. Organisational change initiatives: UNRWA has instituted organisational changes to further improve its effectiveness in protecting and assisting Palestine refugees. These changes are anchored in the organisational development process which began in 2007 and are managed in the difficult context of fluctuating resources. The Agency’s comprehensive reform programme accompanied by the development and roll-out of the MTS 2016-21 includes initiatives to strengthen management capacities. UNRWA also has instituted measures to support decentralised decision-making and to take account of differentiated needs while also seeking to retain flexibility going forward. The Agency further has introduced a number of policies and systems to align its budget to intended results. UNRWA has also undertaken major reform or improvement initiatives for each of its programme areas (education, health, relief and social services, and camp infrastructure and improvement) and microfinance to strengthen quality and delivery efficiency. In education and health, these reform efforts, distinct in their approach, have matured. Reforms to relief and social services (RSS) and to camp infrastructure and improvement are ongoing, although the severity of UNRWA’s recent financial constraints has stalled progress on the more recent, mapped-out reforms.