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P R 211615Z MAY 09
FM USMISSION UN ROME
TO RUEHC/SECSTATE WASHDC PRIORITY 1100
INFO RUEHC/USAID WASHDC
RUEHRC/USDA FAS WASHDC
RUCNDT/USMISSION USUN NEW YORK 0325
RUEHRN/USMISSION UN ROME 1174

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 
------- 
¶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 
--------------------------------------- 
¶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) 
--------------------------------- 
¶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 
 
UN ROME 00000038  002 OF 003 
 
 
--------------------------------- 
¶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? 
-------------------------------------- 
¶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" 
--------------------------------- 
¶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) 
--------------------------------------- 
¶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 
 
UN ROME 00000038  003 OF 003 
 
 
---------------------------- 
¶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 
------- 
¶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