This record is a partial extract of the original cable. The full text of the original cable is not available.

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 
 
SIPDIS 
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