Identifier
Created
Classification
Origin
09UNROME52
2009-08-17 09:34:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
UN Rome
Cable title:  

FAO FINANCE COMMITTEE REVIEWS SIGNIFICANT BUDGET INCREASE

Tags:  EFIN EAGR EAID PREL UN FAO 
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UNCLAS SECTION 01 OF 03 UN ROME 000052 

SENSITIVE
SIPDIS

NSC FOR CHRIS PRATT, USDA FOR RIEMENSCHNEIDER/DOUVELIS

E.O. 12958: N/A
TAGS: EFIN EAGR EAID PREL UN FAO
SUBJECT: FAO FINANCE COMMITTEE REVIEWS SIGNIFICANT BUDGET INCREASE
REQUEST; REPORT OF 128TH FINANCE COMMITTEE SESSION

REF: A. STATE 84087 (NOTAL) - DEMARCHE ON PWB

B. UNUN 51 (NOTAL) - FAO FIN CHIEF ON REVISED PWB

UNCLAS SECTION 01 OF 03 UN ROME 000052

SENSITIVE
SIPDIS

NSC FOR CHRIS PRATT, USDA FOR RIEMENSCHNEIDER/DOUVELIS

E.O. 12958: N/A
TAGS: EFIN EAGR EAID PREL UN FAO
SUBJECT: FAO FINANCE COMMITTEE REVIEWS SIGNIFICANT BUDGET INCREASE
REQUEST; REPORT OF 128TH FINANCE COMMITTEE SESSION

REF: A. STATE 84087 (NOTAL) - DEMARCHE ON PWB

B. UNUN 51 (NOTAL) - FAO FIN CHIEF ON REVISED PWB


1. (U) This message is sensitive but unclassified. Please
handle accordingly.



Summary

--------------


2. (SBU) The FAO Finance Committee (FinCom) held its 128th
session from July 27-31 in Rome, giving particular attention to
a controversial biennial budget proposal tabled by FAO
management, representing not only an entirely new system for
results-based budgeting but also a proposed budget increase
totaling near ten percent over the previous biennium. Of
particular concern to members was a FAO proposal to fund the
bulk of its reform program through voluntary contributions, vice
the core assessed budget. Responding to member concerns,
management agreed to provide additional information on the new
budget framework to allow comparisons with the previous budget.
Likewise, the Finance Committee agreed to hold a "special
session" in mid-September to review the proposed Program of Work
and Budget. On other issues, members discussed financing for a
planned November food summit hosted by FAO, including a Saudi
offer to pay logistical costs of up to USD 2.5 million. Members
also heard details of FAO plans to address "Enterprise Risk
Management" via internal means, plans by FAO to re-advertise for
its Inspector General position, deferred agreement on draft
terms of reference on a "Ethics Committee, and confirmed that an
Ethics Officer should be hired by September. (Note: Septel to
provide latest news on FAO plans to revise its draft PWB,
including funding modalities for its reform package. End note).
End summary.



Draft PWB - Significant Increase Requested; More Info Needed

--------------




3. (SBU) Earlier in July, FAO released a controversial draft
"Program of Work and Budget" (PWB) for the 2010-2011 biennium.
Despite repeated assurances over the past year from Director
General Diouf and his senior staff that this "maintenance" PWB
would not include real growth, and would include the costs of

FAO's reform program (the "Immediate Plan of Action, or IPA"),
the draft PWB represents a seven-plus percent increase (not
including exchange rate calculations). Most troubling, however,
was FAO's inclusion of 80 percent, or roughly USD 48 million, of
the cost of IPA implementation under a "Core Voluntary
Contribution" column of the PWB. Diouf explained his decision
by pointing to the November 2008 Conference resolution which
states that IPA implementation will be "treated under the PWB" -
an approach that nearly all members flatly rejected during
Finance and a concurrent Program Committee session. During a
prepared speech to a joint session of the Finance and Program
Committees on July 29, Diouf told members FAO would review the
cost estimates associated with the IPA but did not commit to
adding IPA costs under the net appropriation.




4. (SBU) Responding to the draft PWB, particularly its
significant proposed budget increase, the U.S. delegate (Vice
Chair of the FinCom) complained that the proposal ran counter to
earlier assurances by Diouf and his senior managers regarding
its size and IPA funding. While the new results-based structure
and format - as called for in the IPA - was a welcome reform,
the claim by FAO that the draft PWB represented a "maintenance

UN ROME 00000052 002 OF 003


budget" was incorrect, since the document contained significant
programmatic and budgetary shifts. In the absence of two
documents - one in the former budget format and another in the
new format - clear comparison and analysis was extremely
difficult. Following U.S. insistence on this point, echoed by
many other delegations, management agreed to provide additional
information to enable a programmatic comparison of the old and
new budgets, "to help in their further understanding and
deliberation of the proposals." The same outcome resulted from
the joint session of Finance and Program Committees, whose
report likewise questioned the proposed IPA funding modalities
and the need for additional information. Responding to the need
for additional clarification and debate, the Finance Committee
agreed to a one-day "Special Session" in mid-September.



Finances for November Food Summit; Saudi "Generosity"

--------------




5. (SBU) During discussions on planned financing for the
November Food Security Summit in Rome, members were informed
that the Saudi Arabian King had written the DG on 24 July
offering to pay the full logistical costs for the Summit,
estimated by FAO at USD 2.5 million. Through questioning by the
U.S. Vice Chair, it was clear that no other contributions for
the Summit had been confirmed, apart from commitments by the
cities of Rome and Milan for side events during the Summit.
With little to no help from other FinCom members, the U.S. Vice
Chair insisted on language in the final report regarding the
paramount importance of FAO's IPA implementation, the absence of
calculations of staff costs for the Summit, and insistence on a
further review of Summit finances during the next FinCom meeting
in September. A request by the Vice Chair for additional
information and transparency on the two trust funds being
created for Summit financing was resisted by both Management and
the Egyptian FinCom Chair (Note: Shortly after the "generous"
Saudi pledge was announced, news leaked that a new head for the
FAO's Regional Office in Cairo had been selected, with no other
candidates interviewed - a Saudi prince. End note).



Enterprise Risk Management; Inspector General Replacement

--------------




6. (SBU) FinCom members endorsed Management plans to implement
an organization-wide Enterprise Risk Management (ERM) strategy
that would be internally-led, vice a more expensive external
consultant-led process as called for in the IPA (and by USUN
Rome). The effort would be conducted by the Office of the
Inspector General (OIG) and would be assisted by consultants
from Deloitte. Furthermore, the ERM concepts would be
mainstreamed within the organization and included as an aspect
of the new performance evaluation system (PEMS) being
implemented in FAO. Some delegates requested terms of
reference, a roadmap, and cost details on the new ERM strategy.
(Note: In private, the FAO DDG, an Amcit, told USUN Rome that
FAO was currently suffering "consultancy fatigue" after
conclusion of the Root and Branch Review by Ernst and Young, and
the decision to handle ERM internally was influenced heavily by
that factor. Both privately to the DDG and in FinCom meetings,
the U.S. representative pointed to the value of continued
external evaluations of FAO management and structures, as a
means to avoid "stove-piping" and "risky" management practices.
This included an admonition to FAO regarding the importance of
"proper financial prudence throughout the Organization" - a

UN ROME 00000052 003 OF 003


point included at USUN insistence in the final report. End
Note.) Finally, the FinCom was informed that the selection
process for a new OIG (the current OIG, an Amcit, will retire by
the end of 2009) remained ongoing, and the position would be
re-advertised shortly, as the initial process did not result in
a selection by the DG. In any case, FinCom members were told
that the process should be completed by end-2009.



Ethics Committee, Ethics Officer

--------------




7. (SBU) During discussions on draft terms of reference for a
proposed Ethics Committee at FAO (a recommendation included in
the IPA),the U.S. Vice Chair called for deferral of the issue,
pending the outcome of a UN system-wide approach on ethics being
pursued by the UN Secretariat and the UN Chief Executives Board.
Members agreed to the U.S. suggestion, which also paralleled a
recommendation found in the 2008 External Auditor's report to
first hire an Ethics Officer who could support formation of an
Ethics Committee. On the hiring issue, members were informed by
Management that the hiring process for a new Ethics Officer was
near completion, and the officer should be on board by
September. This new officer would be responsible for
implementation of a new system-wide ethics program, a new
whistle-blower policy, and a financial disclosure policy for
senior FAO employees and those with financial responsibilities.



Comment

--------------




8. (SBU) The issue of the draft PWB and its new results-based
budgeting format dominated discussions of both the FinCom and
Program Committees, especially the issue of IPA funding. This
issue will continue to be at the center of FAO discussions
leading up to the November Conference (to be chaired by the
United States, and following immediately upon the Food Summit).
While it may not be surprising that FAO is seeking a funding
increase given the renewed international focus on food security,
the manner in which it has presented its draft PWB has left many
delegations disappointed. In particular, no states openly
supported FAO's inclusion of the IPA costs under "voluntary
contributions." Regarding the proposed PWB, which appears to
contain a nearly ten percent increase in member assessments (if
IPA costs are included),many states are opposed to the plan,
and are likely to join us in demanding a lower budget. Canada,
Australia, Mexico, Japan, Germany, Switzerland, and other key
partners are likely to demand "zero nominal growth" as a
starting point for negotiations, and will likely insist that IPA
costs be included in the net assessment. As we begin
consultations with key partners on the budget, we may want to
stress the large number of members already in arrears, the
difficult global financial situation, and the need for FAO
reform to precede any major budget increase for the
organization - particularly after the 17 percent increase for
the '08-09 assessment. We also need to be specific with FAO on
what information we need to help us make the necessary
comparisons and analysis on programmatic budget requests.
GLOVERMP