WFP Informal Consultation on the Business

UNCLAS ROME 005453

SIPDIS


AIDAC

FROM U.S. MISSION IN ROME

USAID FOR DCHA/FFP LANDIS AND DRUMMOND
STATE FOR IO/EDA KOTOK
USMISSION GENEVA FOR USAID/KYLOH
USUN FOR TAMLYN

E.O. 12958: N/A
TAGS: EAID EAGR WFP UN
SUBJECT: WFP Informal Consultation on the Business
Process Review

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Summary
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1. World Food Program (WFP) presented an "information
note on the business process review," a document that
describes a new business model for WFP, at a membership
consultation in Rome on November 20, 2003. Seeking to
improve the utilization of contributions and timeliness
of relief aid, the new model generated lively
discussion from member countries. US Mission and/or
USAID/FFP representatives will ensure that future
iterations of WFP's model maintain compatibility with
US legislative requirements. End summary.

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Background
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2. WFP's decision to conduct a business process review
is an outgrowth of several factors: the rapid growth in
operations from US Dollar (USD) 1.4 billion in 1996 to
USD 4 billion so far in 2003; increased directedness of
contributions; introduction of information management
technology, and its shift away from development to
emergency and relief operations.


3. With regard to resource utilization, WFP's current
practice is to assume a worst-case budgeting scenario.
The process improvement aspect of the new model
anticipates multiple scenarios, establishes a single
cash account at the project level, provides for rapid
reconciliation at project end, and streamlines
transactions.


4. Since timely delivery of food aid is particularly
critical in emergency situations, the financing aspect
of the new model, if accepted, purports to make
resources available to 20 percent more beneficiaries
than currently served.


5. The November 2003 consultation follows the first
consultation in September and provides a basis for
further discussions about the new model among members
at the February 2004 Board session, if not earlier.

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Interventions
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6. By and large, the interventions were positive. The
Russian Federation was generally supportive; however,
absent definitive information about the problematic
idea of selling commodities to buy debt, its
representative mused, "the devil is in the details."
The Netherlands viewed the new model as being
indicative of "donor weaknesses." The Dutch delegate
also observed that it should be an easy decision to use
contributions to reduce donor risk, and he also recited
his familiar mantra, "if we were all cash donors, the
problem would not exist." The UK proposed that under
the new model donors should be given the opportunity of
having excess funds returned, and it predicted that the
Board would permit WFP to implement 80 to 90 percent of
the proposed new business process model.


7. The US intervention endorsed the new business
process model, agreeing that it will improve project
resource utilization and solve the problem of managing
to worst-case scenarios by managing multiple scenarios,
a single cash account, and quarterly or more frequent
financial reconciliation.


8. With regard to the financial model, like the UK, the
US expressed some reservations. For example, WFP
should be prepared to return unspent balances to donors
if required or preferred. In addition, spending
against forecasted contributions is a good idea in
principle, and consolidating account balances and


increasing the IRA are bold ideas. Nevertheless, the
degree and size of the increases may need to be
discussed further.


9. With regard to proposed risk reserve of 1 to 2
percent of each contribution, the US doubted whether
the use of external financing over the establishment of
enhanced internal reserves is justified. In addition,
the 1 to 2 percent seems excessive, especially if you
define a contribution as inclusive of the value of in-
kind donations. USG gave an example of how much
reserve funding WFP would have generated using the USG
as only one donor based upon the level of donations in

2003. Lastly, the proposed sales of commodities to
cover shortfalls would be viewed skeptically and would
be counter to the direction of USG food aid programming
of constraining the level of commodities that are sold.


10. WFP's new business model is expected to be refined
as further donor discussions ensue. US Mission and/or
USAID/FFP representatives will ensure that future
iterations of WFP's model maintain compatibility with
US legislative requirements.

Hall


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2003ROME05453 - Classification: UNCLASSIFIED