VZCZCXRO2066
RR RUEHRN
DE RUEHRN #0022/01 0861144
ZNR UUUUU ZZH
R 271144Z MAR 09
FM USMISSION UN ROME
TO RUEHC/SECSTATE WASHDC 1064
INFO RUEHRN/USMISSION UN ROME 1134
RUEHGV/USMISSION GENEVA 0228
RUCNDT/USMISSION USUN NEW YORK 0305
RUEHRC/USDA FAS WASHDC
RUEHC/USAID WASHDC

UNCLAS SECTION 01 OF 03 UN ROME 000022 
 
SIPDIS 
 
USDA/FAS/ONA - REIMENSCHNEIDER, BERTSCH, DOUVELIS 
 
E.O. 12958: N/A 
TAGS: FAO EFIN AORC EAGR EAID KUNR UN
SUBJECT: FAO 125TH FINANCE COMMITTEE HIGHLIGHTS:  FUNDING FOR REFORM 
 
¶1. (SBU) Member representatives of the Food and Agriculture 
Organization's (FAO) Finance Committee (FC) met in Rome on March 
9-10 to discuss funding for FAO's ambitious new reform program 
and to review the agency's human resource management strategy. 
Noting a shortfall in voluntary financial contributions to 
launch all aspects of its reform plan, FAO management described 
cost-free steps it has already initiated regarding 
implementation of the Immediate Plan of Action (IPA) - FAO's 
reform package approved by members at the November 2008 
Conference.  Management highlighted changes underway in human 
resource management, financial accounting, procurement, and 
reporting structures, but presented uneven information on costs 
and savings associated with these changes.  The FC reaffirmed 
the primacy of IPA implementation and called for improved 
communications with members on progress, based upon transparent, 
understandable, and compelling financial reports.  FC members 
also called for management to clearly define a roadmap of action 
on reform implementation.   With the limited funds currently 
available in the IPA Trust Fund, FAO will proceed with drafting 
tenders for elements of the IPA with large cost implications (IT 
systems, Enterprise Risk Management Study, HR evaluation and 
training programs, and staff rotation policy).  But, without 
additional contributions by mid-year, it warned, issuance of 
tenders and the reform process could be delayed.  Several large 
EU donors argued that FAO should reprioritize funds toward 
reform on the basis of extra-budgetary contributions to 
technical and other programs (e.g., the EU's EURO one billion 
"food facility").  The absence of a USG pledge or contribution 
to the reform trust fund continues to be a source of criticism 
from both management and other members.  End summary. 
 
---------------------------- 
REVIEW OF THE IPA TRUST FUND 
---------------------------- 
 
¶2.  (U)  The 123rd Session of FAO's Finance Committee took place 
in Rome on March 9-10, chaired by Egypt, and attended by 
Cameroon, China, Denmark, France, Germany, Mexico, Pakistan, 
Panama, Uganda (not present), and the U.S. (Vice Chair, 
represented by USUN Rome Charge d'Affaires).  A full report of 
the meeting is located at:    HYPERLINK 
"http://www.fao.org/unfao/bodies/fc/fc125/ind ex_en.htm" 
www.fao.org/unfao/bodies/fc/fc125/index_en.ht m.  In keeping with 
recommendations of the recent FAO Independent External 
Evaluation (IEE), the FC opened its session to silent observers 
from all FAO member states.  Reviewing the status of the IPA 
Trust Fund as of March 6, FC members were told the fund 
contained voluntary contributions totaling USD 3,130,856 with 
total pledges from member states totaling USD 6.25 million.  The 
FC encouraged members to fulfil their pledges and called upon 
others to contribute as a demonstration of the shared ownership 
and commitment to the IPA.  The Committee requested that the 
status of the Trust Fund be a standing item on its agenda at 
future meetings, including a summary of expenditures charged 
against the Trust Fund. 
 
¶3. (U) Responding to complaints from some members regarding the 
quality of reports prepared for the FC, Deputy DG Butler 
promised to improve communications and outreach by FAO senior 
management, including fortnightly newsletters and briefings with 
Rome-based members.  The FC also considered possible designation 
of a member state "champion" to encourage further pledges to the 
Trust Fund.  The FC heard that DG Diouf and the CoC/IEE Chair 
had encouraged Trust Fund contributions during recent travel to 
member states.  The FC called upon member states to engage in 
fund-raising, and encouraged Management support, including at 
regional FAO conferences. 
 
------------------------------------------ 
UPDATE ON IPA COSTS AND FUNDING MODALITIES 
------------------------------------------ 
 
¶4. (U) Updated figures developed as part of a "bottom up" review 
of the IPA indicated a reduction in the requirement for 
voluntary funding in 2009 from USD 21.8 million (not including 
7percent project support costs) to USD 18.6 million (USD 19.9 
million including support costs).  This included an additional 
reduction of USD 0.42 million in preliminary cost estimates for 
2010-11.  While the lowered estimates for 2009 were due 
primarily to delays in planned expenditureto 2010-11, overall 
costs in 2010/11 were also reduced by USD 3.4 million, mainly 
attributable to lower estimated costs for staff redeployment and 
separation (from USD 12.4 million to USD 9 million). 
 
¶5. (U) In reviewing the cost estimates for the IPA, the FC 
stressed the paramount importance of a renewed Organization, 
making FAO more efficient and effective.  Members expressed 
concern that updated budget figures contained only updated 
 
UN ROME 00000022  002 OF 003 
 
 
costs, not savings. Furthermore, the document contained some 
editorial errors and inconsistencies between tabular and 
narrative presentation.  The FC suggested several changes in the 
presentation of data on this item in future sessions including: 
a more visible presentation of the savings that would be derived 
from IPA actions; improved formatting to align explanatory text 
adjacent to tabular presentation; and finally, an account of 
actual expenditures against forecasts and available budget. 
Timely availability of the document was important for full 
consideration by Members. 
 
¶6. (U) The Committee specifically requested that stage 2 costs 
and savings estimates from the Root and Branch Review be 
incorporated in the next IPA budget update.  The Committee noted 
that over half of the IPA actions could be initiated within the 
planned Program of Work and Budget 2008-09 and therefore did not 
require extra-budgetary funding. 
 
¶7. (U) The Committee received clarification that the estimated 
reduction in redeployment and separation costs in 2010-11 was 
due to more timely action than originally assumed to redeploy 
staff affected by delayering. In addition to the 13 headquarters 
D-level posts already delayered in 2008, 27 D-level posts would 
be delayered under the IPA, assuring that USD 17.4 million in 
savings would accrue in the 2010-11 biennium.  The Committee 
also received reassurance that the forecast savings of USD 0.9 
million in the TCP project cycle and approval processes was on 
track for 2010-11, and that further savings could be identified 
under the ongoing Root and Branch review.  The FC urged 
management to continue to search for savings during IPA 
implementation. 
 
¶8. (U) The Committee reiterated the importance of considering 
all avenues for identifying resources, such as windfall savings 
or from freed up Regular Program resources as a result of 
extra-budgetary contributions in support of technical programs, 
while ensuring that the planned Program of Work 2008-09 was 
fully implemented. 
 
¶9. (U) Regarding the progress made in meeting the efficiency 
savings targets of USD 22.1 million in 2008-09, management 
reported that USD 15.2 million in actual efficiency savings were 
expected to be achieved with the balance of USD 6.9 million to 
be found from one-time measures such as vacancies and a phased 
implementation of decentralization.  The Committee regreted the 
failure to fully meet targeted levels of efficiency savings and 
asked  to receive a detailed update on efficiency savings at its 
next session. 
 
¶10. (U) The Committee noted that Council at its 119th Session in 
November 2000 had endorsed a policy on support cost 
reimbursements based on the principle of a reasonable alignment 
of charges to actual costs of providing administrative and 
operational support to projects.  It appreciated that no waivers 
to this policy had been requested or granted since 2000, and 
recalled its concern at the persistent and growing 
under-recovery of administrative and operational support costs 
for extra-budgetary activities.  The Committee supported 
continuing interagency consultations on the harmonization of 
cost recovery policies. 
 
¶11. (U) In the case of the IPA Trust Fund, the Committee was 
satisfied that the proposed reduction of the project support 
cost to 7 percent was in accordance with the policy, since 
operational support was provided as a direct project cost in the 
project budget.  While acknowledging the application of the 
policy, some Members were of the view that the IPA Trust Fund 
contained a very unique package of activities to strengthen FAO 
and a more flexible application of the policy might be 
appropriate (Note:  A 13 percent support cost rate was applied 
to the previous IEE Trust Fund for preparation of the IEE 
report.  End note).  The Committee expressed concern that the 
only expenditure charged against the Trust Fund to date 
pertained to some of the interpretation and translation costs 
for the meetings for the Conference Committee and its subsidiary 
bodies.  The FC urged management to proceed with tenders for 
other key elements of the IPA such as the Enterprise Risk 
Management Study as a signal of its intent to proceed 
expeditiously with full IPA implementation and to boost donor 
confidence. 
 
¶12. (U) Management reported that it would need to prioritize 
actions in 2009 and postpone others to 2010-11 if substantial 
additional voluntary contributions were not received by mid-May 
¶2009.  It requested that this be fully considered in the next 
report to the Finance Committee. Senior management is looking 
carefully at regular program spending and possibilities for 
reprioritization of projected cost savings and program funding 
 
UN ROME 00000022  003 OF 003 
 
 
in areas where unanticipated extrabudgetary funding is expected. 
 The EU members of the FC (Italy, France, Germany) urged FAO 
management to consider ways to make use of a portion of the 
voluntary contribution to FAO from the EC EURO one billion "Food 
Facility"  to support the IPA. 
 
------------------------------------------ 
IMPLEMENTATION OF HUMAN RESOURCES STRATEGY 
------------------------------------------ 
 
¶13. (U) The FC took note of the Progress Report on the 
Implementation of the Human Resources Management Strategy and 
Policy Framework and stressed that human resources (HR) 
management was fundamental and constituted a key component of 
the FAO reform.  Looking forward, management reported that an 
initial review of cost estimates of the proposed rotation policy 
would likely reduce cost estimates.  Reaffirming that the HR 
strategy framework should be a standing item on the agenda of 
its future sessions, the Committee requested that a "road map" 
be developed with timelines and measurable indicators for the 
implementation of the actions prescribed in the strategy, for 
consideration at its 126th Session to be held in May 2009. 
 
---------------------------------------- 
WORKING METHODS OF THE FINANCE COMMITTEE 
---------------------------------------- 
 
¶14. (U) In accordance with recommendation of the Independent 
External Evaluation, the FC decided that the report of the 125th 
Session should be made available to all Members of the CoC-IEE 
as soon as it was formally adopted.  Recognizing the need for 
close coordination between the FC and the CoC-IEE, the FC asked 
its Chairman to coordinate with the Chairperson of the CoC-IEE 
on this issue. 
 
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COMMENT 
------- 
 
¶15. (SBU) The reform process at FAO is underway, with a growing 
momentum that we expect to continue even if the IPA is not fully 
funded.  That said, other members - developed and developing 
alike - have drawn attention in private and in public to the 
absence of a USG contribution to the reform trust fund.  They 
believe that our calls for major reforms at FAO should be 
followed by a financial commitment to the trust fund for reform. 
 The Europeans, in particular, who note frequently that they 
have provided over ninety percent of the trust fund 
contributions to date, question our commitment to the 
organization.  Even Brazil, having donated a hundred thousand 
dollars to the trust fund, is getting much mileage from its 
meagre contribution. 
BRUDVIGLA