Identifier
Created
Classification
Origin
05ROME1735
2005-05-19 15:24:00
UNCLASSIFIED
Embassy Rome
Cable title:  

FAO FINANCE COMMITTEE: PROGRAM OF WORK AND

Tags:  AORC EAGR EAID FAO WFP 
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UNCLAS ROME 001735 

SIPDIS


STATE FOR IO/EDA KOTOK AND BEHREND
AID FOR FFP LANDIS AND THOMPSON
USDA/FAS FOR REICH, HUGHES AND CHAMBLISS
IO FOR ABRAHAMS AND JACOBS

FROM THE U.S. MISSION TO THE UN AGENCIES IN ROME

E.O. 12958: N/A
TAGS: AORC EAGR EAID FAO WFP
SUBJECT: FAO FINANCE COMMITTEE: PROGRAM OF WORK AND
BUDGET

---------------
Summary
---------------

UNCLAS ROME 001735

SIPDIS


STATE FOR IO/EDA KOTOK AND BEHREND
AID FOR FFP LANDIS AND THOMPSON
USDA/FAS FOR REICH, HUGHES AND CHAMBLISS
IO FOR ABRAHAMS AND JACOBS

FROM THE U.S. MISSION TO THE UN AGENCIES IN ROME

E.O. 12958: N/A
TAGS: AORC EAGR EAID FAO WFP
SUBJECT: FAO FINANCE COMMITTEE: PROGRAM OF WORK AND
BUDGET

--------------
Summary
--------------


1. With the biennial conference scheduled for the
end of 2005, one of the Finance Committee's more
important discussions was over the program of work
and budget for 2006/7. The Secretariat, as usual,
had prepared a "Summary Programme of Work and Budget"
(SPWB) document, which was intended to provide a
basis for Finance and Program Committee discussions
that, in turn, would provide initial input for the
final "Programme of Work and Budget" publication that
will be issued during the summer. The SPWB included
the three budget scenarios requested at the last
Conference: zero nominal growth (ZNG),zero real
growth (ZRG),and real growth (RG). The Secretariat,
as would be expected, supported RG.


2. The purpose of this consideration, however, was
neither to debate nor issue a recommendation on a
budget scenario. This sitting was intended to
discuss PWB methodology and programs, to outline the
estimated implications each scenario would have on
the institution, and to seek approval for various
budget requests that would be made, regardless of
scenario. In the last category were two issues of
importance to us: the manner miscellaneous income is
handled in the budget, and financing after cost
medical benefit obligations.


3. This is the first cable on the May 9-13 FAO Finance
Committee meeting.

--------------
Budget: Scenarios
--------------


4. The budget discussion had somewhat fewer emotional
interventions on the organization's dwindling
resource base than we saw at the last conference. An
important reason for this was the Program (Dutch) and
Finance (Peru) chairmen's efforts to avoid any debate
on resources, per se, in favor of discussion on the
implications of the program and budget process.
Nevertheless, the G77 pushed an effort through the
meeting of the joint committees to have the
secretariat revise its real growth scenario to a 9.25

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percent growth estimate. The OECD group made it
clear that asking for such an unrealistic real growth

estimate was self-defeating for those who promoted
it. However, the G77 persisted, probably as a face
saving effort, since the US's and Japan's continued
support for a ZNG scenario made it clear that RG was
not, in the end, a viable option.


5. In its presentation the Secretariat noted that since
1994, it had succeeded in finding in the biennial budget
$120 million in savings, and it was difficult to find a
great deal more. Nevertheless, the adoption of a ZNG
budget in 2006/7 would require another real cut of $43
million. This would entail a further loss of 190
positions, following a reduction of 232 posts in the
current biennium. Severance and relocation costs were
estimated at an additional $10 million to what is
included in the current ZNG scenario. (In response to
the USDEL request, the Secretariat provided a single
table budget comparison of the three scenarios. We are
emailing it to the Department. Also in response to
USDEL request, the Secretariat elaborated the use of
arrears to cover 2004/5 redeployment costs, noting that
of the 232 posts abolished, 83 posts were already
vacant, and 60 posts were occupied by incumbents
reaching retirement age before the biennium. Of the
remaining 89, 58 were redeployed and 31 received agreed
termination packages that ranged from 12-18 months
salary, among other costs.)

--------------
Budget: Misc. Income
--------------


6. FAO's past budget practice has been to reach
agreement on the budget, then subtract "miscellaneous
income" from the needed appropriation, and finally to
distribute the net figure for assessed contributions.
(Miscellaneous income includes assorted receipts, such
as rental of conference and office facilities and


investment earnings. It is estimated at $9.2 million in
the 2004/5 budget.) The Secretariat claimed that this
is not a common practice in other UN organizations and
that given the large and increasing budget deficit, it
is no longer appropriate. The secretariat therefore
requested members to "fully fund the budget request" by
assessing contributions equal to the budget level.


7. A large Committee majority supported the request.
Without talking points on miscellaneous income, USDEL
did not take a position, but refused to support a
Committee report in support of the proposal. The
report's wording, instead, noted that "many members
expressed support for the proposal," as it forwarded the
matter to the Council.

-------------- --------------
Budget: After Service Medical Costs (ASMC)
-------------- --------------


8. In the September Finance Committee meeting the
Secretariat had sought committee support for its

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proposal to fully fund ASMC amortization at $30 million
per biennium. A decision was postponed when USDEL
requested more than one option for covering the
amortization. In the May session the Secretariat
provided the requested options paper.


9. Two important points came out in the paper and the
subsequent discussion. First, all UN agencies were
struggling with the issue, and FAO was one of the few to
have actually started to deal with it. A UN study on
how to fund the obligation was underway. And second,
the amount necessary to fund ASMC was based on an
actuarial estimate made on December 31 of each
conference year. There were early indications that
staff medical costs were inflating faster than expected,
and therefore the full amortization estimate available
on December 31, 2005, could require even more than the
$30 million now under consideration.


10. To USDEL's suggestion that FAO await the UN report,
the Secretariat responded that the UN General Assembly
had been expecting the results of this study for two
years. The delay was essentially due to a lack of
options. The obligation was a legal one that must be
covered, and the cost of amortization in New York would
be huge. That was no reason to delay confronting the
problem at FAO, the Secretariat responded. Although,
excluding ourselves, there was a near consensus to
propose that the Council approve the full $30 million
amortization immediately, the Committee agreed to USDEL
request that before reaching a proposal we see whether
this year's actuarial estimate could be available during
the coming summer. That would allow any eventual
Conference decision to have the benefit of a current
estimate.

-------------- --------------
Methodology and the Struggle to Reach a Budget
-------------- --------------


11. The major part of the SPWB discussion in both
Program and Finance Committees as well as in the joint
committee meeting centered on the difficulties involved
in reaching agreement on the program and budget. The
massive PWB volumes, the 2-3 scenario options, and the
three-period plans (PWB, Medium Term Plan, and Strategic
Framework) were cumbersome, time-consuming, and
expensive. The Secretariat, under its new dynamic
Director for Program and Budget, Manoj Juneja, said this
structure was not typical of other UN organizations. He
sought to streamline the process.


12. The committees agreed that the suggestion to shorten
both the SPWB and PWB in length and detail in order to
allow them a more user-friendly approach could be
useful. The UK's suggestion of scrapping the long-term
framework in favor of a more robust medium-term plan
found a good deal of support. The Program Committee
discussed favorably a proposal to simplify the budget
presentation process. The idea would be to reach an
agreement on an indicative budget number in advance of
the conference. The Secretariat would then develop a
budget scenario for Conference consideration based on
the already agreed overall budget figure. One
possibility, for example, would be for the June Council
meeting during a Conference year to agree to the budget


number. The matter was referred to the Secretariat to
elaborate in a paper to be further discussed at the
September Finance and Program meetings. The intention
would be to reach an agreement on an improved program
and budget methodology for use in subsequent biennia,
not 2006/7.

--------------
Comment
--------------


13. The methodology discussion was important in that it
shifted the focus from the immediate budget crunch
toward a longer-term effort that might more effectively
deal with the way the organization does its business.
If done thoughtfully it could provide easier and more
effective ways of matching resources to programs, and of
establishing a simpler political process required for
doing so.


14. The short-term budget issue, of course, is already
upon us. Whereas there was an informal agreement among
all major members to respect the purpose of this meeting
by not engaging in a profitless budget scenario debate,
the outline of the positions was perfectly clear. The
G77 will go into the June and November Councils pushing
hard for a massive real budget increase. The European
Group is split mainly between a moderate real increase
and a ZRG budget. The UK nominally supports ZNG but
probably with add-ons, such as ASMC, removing the
miscellaneous income line from the budget assessment,
and providing extra funding for severance and security
costs. Canada will nominally support ZNG, but its
permrep says it will move in the direction of any
consensus. Japan will take a hard-line position in
favor of ZNG. Australia (but not likely New Zealand)
will join Japan and US in support of ZNG.

HALL


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2005ROME01735 - Classification: UNCLASSIFIED