FAO 126TH FINANCE COMMITTEE OUTCOMES: FUNDING FOR FOOD

UNCLAS SECTION 01 OF 03 UN ROME 000038

SIPDIS

E.O. 12958: N/A
TAGS: FAO UN EFIN EAID
SUBJECT: FAO 126TH FINANCE COMMITTEE OUTCOMES: FUNDING FOR FOOD
SECURITY

REF: USUN ROME 28


1. (U) This message is sensitive but unclassified and for
official use only; not for transmission outside USG channels.

Summary
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2. (SBU) The Finance Committee (FC) of the UN's Food and
Agriculture Organization (FAO) held its 126th session from May
11-15 in Rome, concurrent with FAO's Program Committee (PC). A
joint session of the two committees was held on May 13. The FC
reviewed several items regarding FAO's reform program (the
Immediate Plan of Action, or "IPA"),the status of FAO finances
(including liabilities, assessments, and arrears),human
resource matters, and governance oversight issues - including
FAO DG Diouf's plan to host a food security summit in Rome in
November 2009. The joint FC/PC session sought to define the
idea of "reform with growth" - a phrase included in a 2007
external evaluation of FAO - and it's possible impacts on future
FAO budgets. Developing states sought to define the term as
meaning higher budgets for FAO, regardless of quantitative and
qualitative success in FAO's ongoing reform program. Review of
IPA implementation was mostly pro forma, as was a review of
member state contributions to the IPA Trust Fund (no significant
change to figures cited in reftel). Draft Terms of Reference
for an Enterprise Risk Management (ERM) study was met with
criticism from many members, resulting in a delay of further
consideration. On FAO finances, the Chief Financial Officer
presented a detailed report, emphasizing the slow pace of member
payments in 2009, large arrears, and an enormous obligation for
staff after-service medical costs. A USG announcement that it
would soon pay its 2008 arrears was well received. Nonetheless,
France and others pushed punitive measures to punish late
payers. Developing states sought increased support for FAO
technical support programs. The absence of the Indian External
Auditor during debate elicited criticism, as did a French
violation of the agreement on allowing "silent observers." On
the DG's vetted summit, Mgmt presented a paper with cost
estimates (USD 1.5 - 2.5 million, all from voluntary
contributions),a list of four "objectives" for the event, and
assurances that substantive preparation would be completed in
the context of a separate October conference: "How to Feed the
World in 2050." The FC will meet in May to review WFP finances,
and in July for its regularly quarterly session. The current FC
Chair (Egyptian MFA official based in Cairo) is scheduled to be
replaced at the end of 2009. End summary.

126th Session of Finance Committee - Agenda
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3. (U) The FAO Finance Committee (members listed at paragraph
X) met in Rome from May 11-15, to review a lengthy list of
topics related to FAO's comprehensive reform plan, the IPA. It
also reviewed a list of financial/budgetary items, including FAO
investments, staff- related liabilities, member arrears, as well
as human resource matters and oversight matters. The following
topics were included on its agenda: a report on FAO's budgetary
performance, its scale of contributions, terms of reference for
a proposed Enterprise Risk Management study, a review of
contributions for the IPA trust fund, findings of a
recently-released "Root and Branch" review of FAO
administration,

Status of FAO Reform Plans (IPA)
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4. (SBU) FAO management provided a broad overview of progress
on IPA implementation, noting an overall positive trajectory
despite the shortfall in funding for the IPA trust fund to
finance 2009 costs of reform. A presentation by the OIG on
draft terms of reference for an Enterprise Risk Management study
(ERM) - an item included in the 2008 Conference resolution and
the IPA - was met with discomfort and criticism, with members
questioning expected results and a seemingly high price tag.
Discussion of the subject was kicked to the Conference Committee
for follow-up to the Independent External Evaluation (CoC/IEE),
where Mgmt will attempt to convince a skeptical membership how
the ERM study will assist FAO reform. Regarding the IPA trust
fund, no major changes in the account were noted. FC members
agreed, in light of underfunding and no signs of reprogrammed
FAO program funds in sight, additional efforts were needed to
encourage additional contributions. The FC reiterated that the
IPA was a top priority for the organization which constituted a
necessary investment for its future. The FC pressed management
to come up with innovative proposals to finance the IPA in part
from the regular budget. The FC expressed a willingness to
support prudent budget flexibility to fund the IPA in ways that
would not undermine the implementation of the 2009 Program of
Work for the organization, inter alia, in cases where
extra-budgetary resources offer opportunities for freeing up
resources from the regular budget.

FAO Financial Snap-Shot, Arrears a Concern

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5. (SBU) FAO's CFO reviewed organization finances, pointing to
the relatively slow pace in 2009 of member state dues payments,
investment losses in FAO's overall portfolio as a result of the
current global economic downturn, and significant long-term
obligations for staff after-service medical care. FAO Mgmt
noted the requirement in late 2008 to borrow externally to cover
expenses. A large amount of arrears over a long period of time
continued to "undermine the financial health of the
organization," according to the FAO report. Regarding
under-funding for after-service medical coverage liabilities,
Mgmt noted the figure as exceeding one billion USD, of which USD
787 was unfunded. On the issue of arrears, Mexico inserted
language in the FC's final report noting FC concern that nearly
half of all FAO members had not paid assessed contributions
during the period 2005-09.

A Food Security Summit in November?
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6. (SBU) FC members debated a Mgmt paper entitled "Follow-up to
Conference Request for Provision of Relevant Information on the
Proposed Summit in November 2009: Organizational and Financial
Aspects." The discussion was led by one of FAO's top managers,
ironically, one who had earlier written DG Diouf to suggest
postponing the summit until a later date, citing its likely
negative impacts on the organization. The paper insisted costs
related to hosting the summit would bel between USD 1.5 and 2.5
million, entirely paid for by voluntary contributions (NOTE:
Mgmt noted "firm commitments" of one million USD from an
undisclosed source, but stated FAO would only solicit additional
donations after Council approved the item. END NOTE). Costs,
the paper stated, would be entirely related to security and
administration, with substantive input completed for a separate
October event at FAO entitled: "Feeding the World in 2050"
(NOTE: this event remains underfunded, also via voluntary
contributions. END NOTE). Mgmt said costs of side events such
as a parliamentary gathering (US House and Senate leaders
invited),and a private sector event in Milan would be covered
by Italy. The US delegation questioned FAO cost estimates,
noting the June 2008 High Level Event had cost over USD 4
million. Germany and Mexico also expressed concerns with FAO
cost estimates, though final report language contained no
references to member doubts, nor any plan to review summit
related finances at its next meeting in July. In fact, the
Egyptian Chair refused, in the absence of support from other
members, to add language proposed by the U.S. to add an agenda
item for July session on reviewing summit financial planning if
approved by Council.

Defining "Reform With Growth"
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7. (SBU) The independent external evaluation (IEE) of FAO
contained language referring to "reform with growth" yet left
the term undefined. At a joint FC/PG session, members attempted
to set parameters for its definition, with developing states
insisting it meant larger budgets and "real" growth. OECD
countries argued that growth was both "static" and "dynamic" and
must reflect growth in both assessed contributions and voluntary
funding, the latter having grown exponentially in past years for
specific areas such as pandemic and emergency response. A Mgmt
paper prepared for the debate stated that the "significant
nominal increase in the regular budget for 08-09 was equivalent
to zero real growth after taking into account USD 13.3 million
in planned efficiency savings and USD 22.1 million of unplanned
efficiency savings."

Controversy Over FAO's Technical Support Programs (TCP)
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8. (SBU) A perennial area of contention, Mgmt provided a
briefing and paper on TCP funding and explanations why the 06-07
biennium funding for TCP had not been fully disbursed. Mgmt
also provided a report on TCP funding contributions to FAO's
"Initiative for Soaring Food Prices" which provided seeds,
fertilizer and other inputs to countries hit hardest by the
recent food crisis. Developing country representatives strongly
criticized Mgmt for its handling of TCP management, with
Pakistan accusing it of using TCP as a "de facto reserve
account." Mgmt noted that full and early funding for TCP was
impossible, as some reserve was required for emergencies.
Mexico noted that "more money would not solve problems" with
TCP, and called for general improvements to FAO delivery.
Noting an IPA decision to decentralize to FAO's five Regional
Offices responsibility for TCP programs and funding by 2010,
Mgmt suggested the possibility of using some unspent TCP funds
for training of FAO Regional Office staff in TCP management.
Mgmt noted the need to link TCP with broader reforms, to ensure
compatibility with FAO's new Strategic Framework, Results-Based
management, and its future Programs of Work and Budget.

Membership of Finance Committee

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9. (U) Current membership of the FAO Finance Committee is
comprised of 11 members: Egypt (Chair),USA (Deputy Chair),
Cameroon, China, Denmark, France, Germany, Mexico, Pakistan,
Panama, and Uganda. Member representatives of Pakistan and the
U.S. are scheduled to depart Rome this summer. The Chair of the
FC (currently Egyptian MFA official Yasser Sorour) requested the
Egyptian government to allow Sorour to remain as Chair for the
remainder of the year, despite Sorour's full-time posting in
Cairo at the MFA as Deputy Director of the UN Affairs Division.
Discussions on a replacement to Sorour on the FC have not yet
taken place within the committee.

Comment
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10. (SBU) The DG appeared for the Joint Program and Finance
Committees meeting to reiterate his commitment to full
implementation of the IPA reform program. Nevertheless, he
remains hesitant to agree to internal reprogramming of regular
program funds to offset at least part of the 2009 costs of
reform. Top FAO management report that the DG now recognizes
that IPA implementation will serve his own interests in
delivering a lasting "legacy" - but notes that a number of G-77
members are lobbying forcefully against any reprioritization of
regular budget funds, fearing that programs of particular
interest to individual countries might be cut. End comment.
BRUDVIGLA