UNODC FINANCIAL-GOVERNANCE WORKING GROUP

UNCLAS UNVIE VIENNA 000578

SENSITVE

SIPDIS

E.O. 12958: N/A
TAGS: SNAR UN KCRM
SUBJECT: UNODC FINANCIAL-GOVERNANCE WORKING GROUP

REF: State 112722

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SUMMARY
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1. (SBU) Co-chairs of the Open-ended Intergovernmental Working
Group on Improving Governance and Financial Situation of the UNODC
(FinGov) convened a two-hour informal meeting with key members on
October 23 to discuss options of improving the financial stability
of UNODC. The options included requesting a large allocation from UN
New York for UNODC's regular budget (RB),ways of increasing the
General Purpose Fund (GPF); the adoption of thematic and regional
programming by UNODC; and the establishment of separate funding
mechanisms for the UN Convention on Transnational Organized Crime
(UNTOC) and the UN Convention against Corruption (UNCAC). Counselor
delivered Reftel talking points. The meeting ended without definite
conclusions.

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Disagreement on the Regular Budget
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2. (SBU) Disagreement persisted regarding the size of the UNODC's
share of the UN's regular budget (RB). Argentina, Cuba, Pakistan and
Egypt vigorously advocated an increase in the UNODC's RB. All stated
current levels were inadequate and hampered the organization's
ability to carry out its mandates with integrity and independence.
Egypt had a somewhat subtler approach: it wants UNODC to define its
core functions which, in Egypt's opinion, should be funded from the
RB. These representatives referred repeatedly to UNODC's
Independence Evaluation Unit (IEU),which they described as a core
function that should be funded by the RB but is not. Cuba criticized
UNODC for increasingly resembling a private corporation, accountable
only to buyers with money (i.e., the major donors).


3. (SBU) Per reftel, Counselor voiced USG opposition to any request
to New York for a bigger allocation for the UNODC regular budget.
Japan and Canada urged UNODC to conduct a thorough review of its
internal management, and streamline its operations to eliminate
inefficiencies. Furthermore, they agreed with the U.S. that it is
UNODC Executive Director Costa's responsibility to make the case for
additional funds to the Secretary General and the Controller in UN
New York. Canada seemed to have softened its previous position,
stating it is willing to consider increased allocation for the RB if
it could be thoroughly justified.


4. (SBU) Many delegations--including Germany, Norway, Egypt and
Pakistan--repeatedly brought up the question of "core" versus
"non-core" activities. The IEU again was cited as an example of a
"core" activity that should be funded by RB funds. These delegations
all argued for the need for a clear articulation of "core"
activities as a way to justify the case for an increase in RB
funds.


5. (SBU) Disagreement also persisted over how member states should
advance a recommendation for increased RB funds. While Cuba and
others asserted that the fight for funds was a matter for the 5th
Committee in NY, they also agreed that the Drug Commission (CND) and
the Crime Commission (CCPCJ) could put forth formal recommendations
for increased RB funds. Russia disagreed, stating that the two
Commissions were not competent to make such a request. Russia
expressed its belief that any request for RB funds should go through
the General Assembly (GA).

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Skepticism on Proposals to Increase GPF
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6. (SBU) All delegations in attendance agreed on the need for
improved reporting and transparency regarding the use of GPF. Many
expressed continued frustration with the manner in which the UNODC
reports its GPF expenditures. Canada bluntly stated the hope that
Canadian "auditors don't look too closely at the UNODC reports."
Canada expressed the sentiment shared by others that better
reporting would help raise confidence in UNODC, and could lead to
increased GPF donations. Pakistan similarly expressed confusion
regarding how GPF is spent. Egypt expressed a desire for all
reports--including UNODC reports to donors--be made available to all
member states. (Note: In a subsequent conversation, a senior UNODC
official indicated to Counselor that such reports could not be
shared without the permission of the donors. End Note.)


7. (SBU) UNODC officers in attendance expressed dismay over the
transparency discussion. They reminded member states that the latest
results-based budget, created to address member state concerns, was
widely praised for its transparency and clarity. However, UNODC
watched as GPF contributions promptly declined 6%. UNODC stated that
it can always create more reports, but there comes a point when the
entire management and reporting process becomes unsustainable.

8. (SBU) Egypt, Cuba and Pakistan all agreed that Special Purpose
Funds (SPF) earmarked for specific projects, distort the role of the
UNODC. Egypt asserted that SPF donations are in violation of GA
resolutions. He proposed to have SPF donations heavily "taxed," a
proposal supported by Cuba and Pakistan. Russia, Japan, U.S. and
Canada all objected to such a proposal, pointing out that SPF are
already "taxed," since there is a 13% program support cost (PSC)
levy for such donations. (Note: In an earlier meeting, UNODC
indicated that the average PSC levy for UNODC projects was 6% to 7%.
We understand that the European Commission had negotiated such a
rate for its SPF contributions. Counselor underscored that the U.S.
always pays 13%. End Note.)


9. (SBU) There was little support for the adoption of a voluntary
indicative scale of contributions (VISC),although France stated if
it helps broaden the donor base, it would be willing to explore the
topic.

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Audience Receptive to Thematic Programming
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10. (SBU) Argentina was enthusiastic in its support for this
proposal. Other delegations also expressed openness to the idea.
UNODC officials warned of capacity problems if thematic and regional
programming is not implemented. They are currently considering a
policy of rejecting any SPF contribution that is less than 500,000
USD, as they state the costs associated with managing small programs
are simply too great. However, thematic and regional programming
could resolve such problems, they said. The UNODC head office will
set the themes, and the field office will develop the
programs/projects on the ground. Further, UNODC believes regional
programming would get more "buy-in" from the recipient countries, as
they would be the architects of the program, in partnership with
UNODC. Once a program is developed at the ground level, UNODC would
approach donor countries for funds. UNODC warned that there could
not be SPF within such programs, however. The costs associated with
managing SPF within these programs, they asserted, would be too
great.

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Separate Funding Mechanisms for UNTOC and UNCAC?
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12. (SBU) Argentina expressed support for the idea, but warned that
such mechanisms must be compulsory. Argentina pointed to UNESCO as
an example of how this structure can work. Argentina expressed
willingness to lead on the issue. Egypt and others were unclear how
the system would work, and for what purposes. U.S. and Japan
expressed opposition to compulsory assessments.

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COMMENT
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13. (SBU) While the meeting ended without definite agreements, it
did crystallize the positions of various delegations and reveal
areas of possible cooperation. There seems to be a growing consensus
that UNODC and its member states need to first define what core
activities are, and what are not. UNVIE has yet to find anyone,
either in UNODC or out, who is willing to give an opinion on this
topic. And UNODC officials are not nearly as enthusiastic about
member state attempts to increase the organization's RB
apportionment as they are about expanding contributions to the
General Purpose Fund, which allows more spending flexibility than
the regular budget. Nevertheless, there seemed to be little stomach
for a VISC mechanism, nor much enthusiasm for a voluntary agreement
to dedicate general purpose fund contributions.


14. (SBU) However, there seems to be some cross-regional interest
in thematic and regional programming. Although such funds would
still be considered earmarked, they may allow for increased UNODC
flexibility and buy-in by G-77 countries, and the ability for major
donors to retain control over where earmarked dollars are spent.
End Comment.

Schulte