US embassy cable - 03ROME5453

UNCLAS  ROME 005453 
 
SIPDIS 
 
 
AIDAC 
 
FROM U.S. MISSION IN ROME 
 
USAID FOR DCHA/FFP LANDIS AND DRUMMOND 
STATE FOR IO/EDA KOTOK 
USMISSION GENEVA FOR USAID/KYLOH 
USUN FOR TAMLYN 
 
E.O. 12958:  N/A 
TAGS: EAID, EAGR, WFP, UN 
SUBJECT: WFP Informal Consultation on the Business 
Process Review 
 
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Summary 
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1. World Food Program (WFP) presented an "information 
note on the business process review," a document that 
describes a new business model for WFP, at a membership 
consultation in Rome on November 20, 2003.  Seeking to 
improve the utilization of contributions and timeliness 
of relief aid, the new model generated lively 
discussion from member countries.  US Mission and/or 
USAID/FFP representatives will ensure that future 
iterations of WFP's model maintain compatibility with 
US legislative requirements.  End summary. 
 
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Background 
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2. WFP's decision to conduct a business process review 
is an outgrowth of several factors: the rapid growth in 
operations from US Dollar (USD) 1.4 billion in 1996 to 
USD 4 billion so far in 2003; increased directedness of 
contributions; introduction of information management 
technology, and its shift away from development to 
emergency and relief operations. 
 
3. With regard to resource utilization, WFP's current 
practice is to assume a worst-case budgeting scenario. 
The process improvement aspect of the new model 
anticipates multiple scenarios, establishes a single 
cash account at the project level, provides for rapid 
reconciliation at project end, and streamlines 
transactions. 
 
4. Since timely delivery of food aid is particularly 
critical in emergency situations, the financing aspect 
of the new model, if accepted, purports to make 
resources available to 20 percent more beneficiaries 
than currently served. 
 
5. The November 2003 consultation follows the first 
consultation in September and provides a basis for 
further discussions about the new model among members 
at the February 2004 Board session, if not earlier. 
 
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Interventions 
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6. By and large, the interventions were positive.  The 
Russian Federation was generally supportive; however, 
absent definitive information about the problematic 
idea of selling commodities to buy debt, its 
representative mused, "the devil is in the details." 
The Netherlands viewed the new model as being 
indicative of "donor weaknesses."  The Dutch delegate 
also observed that it should be an easy decision to use 
contributions to reduce donor risk, and he also recited 
his familiar mantra, "if we were all cash donors, the 
problem would not exist."  The UK proposed that under 
the new model donors should be given the opportunity of 
having excess funds returned, and it predicted that the 
Board would permit WFP to implement 80 to 90 percent of 
the proposed new business process model. 
 
7. The US intervention endorsed the new business 
process model, agreeing that it will improve project 
resource utilization and solve the problem of managing 
to worst-case scenarios by managing multiple scenarios, 
a single cash account, and quarterly or more frequent 
financial reconciliation. 
 
8. With regard to the financial model, like the UK, the 
US expressed some reservations.  For example, WFP 
should be prepared to return unspent balances to donors 
if required or preferred.  In addition, spending 
against forecasted contributions is a good idea in 
principle, and consolidating account balances and 
 
 
increasing the IRA are bold ideas.  Nevertheless, the 
degree and size of the increases may need to be 
discussed further. 
 
9. With regard to proposed risk reserve of 1 to 2 
percent of each contribution, the US doubted whether 
the use of external financing over the establishment of 
enhanced internal reserves is justified. In addition, 
the 1 to 2 percent seems excessive, especially if you 
define a contribution as inclusive of the value of in- 
kind donations.  USG gave an example of how much 
reserve funding WFP would have generated using the USG 
as only one donor based upon the level of donations in 
2003.  Lastly, the proposed sales of commodities to 
cover shortfalls would be viewed skeptically and would 
be counter to the direction of USG food aid programming 
of constraining the level of commodities that are sold. 
 
10. WFP's new business model is expected to be refined 
as further donor discussions ensue.  US Mission and/or 
USAID/FFP representatives will ensure that future 
iterations of WFP's model maintain compatibility with 
US legislative requirements. 
 
Hall 
 
 
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	2003ROME05453 - Classification: UNCLASSIFIED