In progress at UNHQ

GA/AB/3042

FIFTH COMMITTEE CONCLUDES CONSIDERING BOARD OF AUDITORS' REPORTS

14 November 1995


Press Release
GA/AB/3042


FIFTH COMMITTEE CONCLUDES CONSIDERING BOARD OF AUDITORS' REPORTS

19951114 Major procurements by the United Nations should be contracted out by open international tender and the United Nations High Commissioner for Refugees (UNHCR), in particular, should publicize its bulk purchases to take advantage of world-wide competition, the Fifth Committee (Administrative and Budgetary) was told this afternoon, as it concluded discussing financial statements and reports of the Board of Auditors.

The representative of Malaysia made that statement, adding that bidding should become the rule rather than the exception. There should be proper planning in procuring goods and services to minimize urgent requests for items that bypassed bidding procedures.

On other matters relating to the Board, Canada, also speaking for Australia and New Zealand, said that its members' terms of office should be extended from three to six years. That would allow them to acquire more knowledge about the entities they audited and increase their effectiveness. A decision should be taken on the matter at this session.

While accepting the Board's proposal for an extension of its members' terms of office, the United States proposed that the terms should be phased in through the election process, beginning with the next scheduled election to the Board.

Norway, Japan, Venezuela, Brazil and the Chairman of the Board of Auditors and Comptroller and Auditor-General of India, C.G. Somiah, also addressed the Committee. The Director of the Financial Management Division of the Department of Administration and Management, Susan Mills, spoke under the item on the Organization's financial situation.

At the outset of the meeting, Assistant Secretary-General for the Office of Human Resources Management, Denis Halliday, spoke on a procedural issue relating to recent smoking regulations in United Nations premises. Costa Rica, Cuba, Canada and Yemen spoke on the issue.

The Committee will meet again at 3 p.m., on Monday, 20 November, to take up the United Nations common system.

Committee Work Programme

The Fifth Committee (Administrative and Budgetary) met this afternoon to continue considering how to improve the financial situation of the United Nations and discussing financial statements and reports of the Board of Auditors.

Improving Organization's Financial Situation

For its consideration of the Organization's financial situation, the Committee had before it a note by the Secretary-General by which he transmits a 1993 report prepared by the Independent Advisory Group on United Nations Financing, sponsored by the Ford Foundation, under the co-chairmanship of Shijuro Ogata and Paul Volcker.

To improve Member States' payment of their contributions to the regular and the peace-keeping budgets, the Group proposes changes in the schedule for Member States' payment of their contributions and the charging of interest on late payments. It also recommends unifying the Organization's peace-keeping budgets and that they should be financed by a single annual assessment. The Secretary-General agrees with a number of the Group's recommendations, but expresses reservations on others, such as the changes in the period of payment of dues. He also expresses disagreement with some proposals, such as the recommendation that the Organization should not be authorized to borrow. (For background, see Press Release GA/AB/3029, of 31 October.)

Financial Statements and Auditors' Reports

The Committee had before it reports of the Board of Auditors on the United Nations Institute for Training and Research (UNITAR) and on voluntary funds administered by the United Nations High Commissioner for Refugees (UNHCR). It also had before it notes by the Secretary-General transmitting a summary of the Board's findings and recommendations on the two agencies and the Board's report on the liquidation audit of the United Nations Transitional Authority in Cambodia (UNTAC). Also before the Committee was a report of the Advisory Committee on Administrative and Budgetary Questions (ACABQ) on UNITAR, UNHCR and UNTAC. (For background, see Press Release GA/AB/3036, of 6 November.)

Statements on Financial Reports

TRYGGVE GJESDAL (Norway) said the time had come to strengthen the attention given by the Assembly to compliance with the Board of Auditors' recommendations. The Board operated on a shoestring budget; it should be provided with adequate resources by the Organization to carry out its assigned tasks. The Board had shown undue modesty in that matter. He said he favoured

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frequent reports by the Board on peace-keeping operations and would support the necessary increase in audit fees to facilitate annual reporting arrangements.

The report on UNTAC was timely and had dealt with many troubling questions which had been the subject of speculation and press reports, he said. The most important finding was that there were serious shortcomings in the United Nations system of asset management and that comprehensive prior planning for the liquidation of assets should be undertaken. Improving the management of the Organization's assets in the field was a general concern for both peace-keeping and humanitarian operations.

On the UNHCR, he said the high degree of public support which the body enjoyed should never be taken for granted. It was of utmost importance to assure the public that funds channelled to humanitarian operations were well spent. Situations which could give rise to criticism of the way funds were administered must be avoided. The Secretariat should address the question of implementing the Board's recommendations on a continuing basis. Citing the number of irregularities dealing with the lack of control by the UNHCR of its implementing agencies, he stressed the need for more budgetary and financial control of the implementing partners by the field offices.

The Fifth Committee should be devoted to ensuring that adequate programming management and control systems were in place and that persistent types of irregularities were dealt with, he continued. It should also ensure that the Board's recommendations were given due importance. The UNHCR needed a stable modus operandi. Its approach should be characterized by an understanding that internal control was a managerial responsibility and could not be left exclusively to the Organization's oversight services. Oversight should be an integral part of day-to-day activity. A supportive attitude of senior management towards internal control was therefore required as a foundation for all other components of such control. That would be an important part of the culture of accountability that was now being fostered in the United Nations Secretariat. He added that he would follow the UNHCR implementation of the Board's recommendations.

ALFRED DECOTIIS (United States) said his Government strongly favoured close and frequent scrutiny by the Board of Auditors of peace-keeping operations since they currently absorbed the vast majority of the Organization's resources. The Board's focus on procurement reviews last year was especially timely; the United States endorsed the Board's intention to continue its review of that function. The Board's recommendations had gone unheeded and deficiencies it had identified remained uncorrected. He urged the Board and the ACABQ to address the matter with the Office of Internal Oversight Services. He called on "management to take the necessary steps to hold programme managers accountable for implementation of recommendations, with failure to comply resulting in appropriate sanctions".

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On the extension of the terms of office of the Board's members, he said he concurred with the proposed extension from three to six years, in order to allow each auditor to consider three budget bienniums in the course of one term. However, the transition arrangements which would result in a six-year term could not be submitted. He proposed that the six-year terms be phased in through the election process, beginning with the next scheduled election to the Board. On UNITAR, he said he was concerned by the observations that UNITAR had not followed United Nations procurement regulations and stressed the need for full compliance.

Regarding the UNHCR, he said good management practices were critical as that body strove to cope with a marked increase in emergency situations. The UNHCR must redouble its efforts to ensure that each dollar of its billion dollars annual programme was properly accounted for and used with maximum effectiveness. The UNHCR must establish a consistent policy regarding overhead costs of its implementing partners, in order to enhance programme and financial controls. Persistent problems relating to procurement practices and personnel matters, especially the hiring of consultants, also required prompt attention.

The Office of Internal Oversight Services should pay particular attention to the UNHCR existing internal oversight functions, to ensure that an effective implementation and compliance mechanism was in place to respond to recommendations emanating from both internal and external oversight bodies. It was apparent that the Department of Peace-keeping Operations urgently needed to learn from the UNTAC experience and ensure that it had in place a system for cost-effective disposition of assets at the conclusion of peace-keeping operations. The writing off of assets to the amount of $62.6 million was distressing. In addition, there were large amounts not accounted for. He urged the Oversight Office to review the entire liquidation of UNTAC so that accountability would be ensured.

JOCELYNE BIBEAU (Canada), also speaking for Australia and New Zealand, said those delegations found the situation regarding the liquidation of UNTAC troubling. The Board's report had painted a disturbing picture of the way the mission had been managed. The auditors had reported that large amounts of inventories had been stolen or that discrepancies had not been fully explained. It was hoped that the new electronic coding system introduced by the Secretariat would enhance control of assets in the field and of those being transferred to other missions.

The delegations supported the ACABQ recommendation that the capacity of the Secretariat to control and account for the Organization's assets could be enhanced by developing and using inventory software for tracking assets, she said. The authorities concerned should act to resolve the problems highlighted by the Board as quickly as possible. The Secretariat should urgently submit a feasibility study on procedures for the valuation and

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transfer of costs of assets redeployed from a liquidating peace-keeping mission to another or other United Nations bodies.

She said weaknesses in UNHCR programmes had been unsettling. An appropriate system for collecting, recording and analysing information at its headquarters was essential if the UNHCR was to regularly monitor the implementation of programmes and projects by outside offices and operational partners. The delegations also supported the Board's recommendations for the tightening up of programme planning. The UNHCR should be more selective in choosing its operational partners and limit their numbers. Concerned that some partners had withdrawn funds without authority and kept $590,800 in interest, the delegations would inquire in informal consultations about those partners' identities and measures taken to obtain compensation from them.

She reiterated the delegations' support for the Board's proposals that the term of office of its members be lengthened from three to six years. That would allow Board members to acquire greater knowledge of the entities they audited and increase their own effectiveness. She expressed support for the Board's intentions to carry out, in the current biennium, reviews on budget formulation and budget performance reporting and on programme planning and performance, and to continue to review "procurement" in all of the Organization's units.

FUMIAKI TOYA (Japan) said his delegation supported the proposal to increase the term of office of the Board members due to the very technical nature of their work and the time it took to develop the expertise required to carry it out. The UNITAR should strictly comply with financial rules and regulations and rules concerning procuring goods and services.

He said the Board had discovered that too many agencies were operating in certain areas, resulting in the duplication of work and of avoidable spending. There also were irregularities in appointing consultants. One case of fraud had been discovered and disciplinary action, in the form of dismissal, had been taken against the staff member concerned. He welcomed the willingness of the UNHCR to take remedial measures. The UNHCR worked in difficult conditions; the selection of implementing partners was very limited in remote field locations, and the assessment of optimum manageable level depended on local situations and time constraints. There was constant pressure to recruit staff and consultants rapidly due to the emergency nature of the work. Japan trusted that the Office of the High Commissioner would ensure that there would be no duplication of activities as it carried out its mission. His delegation concurred with the ACABQ view that there were instances in which the UNHCR must respond quickly under very difficult circumstances, and that it must sometimes do so in a way that did not conform with guidelines and current rules and regulations. Therefore, if the Board's findings led the administration to conclude that for the most part current rules were not enforceable, amendments should be proposed to the ACABQ.

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As for UNTAC, failure to manage property adequately seemed to be the source of its problems, he said, adding that corrective actions should be taken. It was essential for other peace-keeping operations to learn from the lessons of UNTAC and engage in comprehensive prior planning for the disposition of their assets.

UMARDIN ABDUL MUTALIB (Malaysia) said he had been disturbed by the auditors' observations of discrepancies, irregularities and negligence at Headquarters as well as in mission areas. Many of those could have been avoided if all those involved in management and finance were well-versed in the Organization's financial rules and regulations. The problems appeared perennial in nature. He questioned UNITAR purchasing and contracting practices, adding that awarding a contract to a firm that was not on the list of acceptable contractors was highly irregular.

He said he shared the Board's view that major procurements should be contracted out by open international tender. In that regard, the UNHCR should provide maximum publicity for bulk purchase of commodities in order to take advantage of the best prices from worldwide competition. Bidding should become the rule rather than the exception. There should be proper planning in the procurement of goods and services to minimize the level of urgent requests for items which bypassed the bidding procedures. Piecemeal procurement should be avoided. He supported the recommendations that agreements with implementing partners should clearly establish the latter's duties and responsibilities for each project awarded. That would enable better budget and financial control over the implementing partners.

He said the discrepancies and losses at UNTAC needed to be investigated. Those losses and discrepancies included $2.5 million worth of communication and electronic data processing equipment and the "infamous case of the 705 minibuses mistakenly purchased for UNTAC". Officers handling financial matters should be provided with adequate training in financial matters. Noting that the UNTAC liquidation exercise had not yet been completed, two years after the mission had ceased operations, he said troop-contributing countries, including Malaysia, had yet to be reimbursed for their contingent- owned equipment. He supported the Board's intention to carry out a final audit on UNTAC. Member States who were in arrears to the mission should fully settle their dues.

JUAN GOLDNICK (Venezuela) said that the Board's report had shown some mistakes in administrative management. Two factors had led to such circumstances. One of them was the deficiencies in the criteria for selecting staff to carry out work in the administrative area. The other was the mistake that had been shown regarding biddings. There was a lack of adequate publicity, which had made it impossible to have competitive biddings, as Malaysia had stated. The Board's recommendations on the matter were relevant. Efforts should be made to solve the irregularities highlighted by the Board,

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particularly in the case of the UNHCR. International standards should be applied and there should be a personnel policy that conformed with the United Nations standards.

MARCIO FAGUNDES (Brazil) said the auditors' reports were valuable for assessing the agencies' cost effectiveness. While a level of transparency had been achieved in UNITAR, it had decided to award contracts without complying with United Nations procurement procedures. Procurement practices were still a source of concern for Member States. All tenders should be amply advertised and summaries of contracts circulated among Member States in a timely manner.

He said irregularities identified in the UNHCR should be promptly rectified to ensure the achievement of the agency's lofty goals. Duplication and waste of resources should be avoided. No one should lose sight of the fact that increasing demands were being placed on the Office of the High Commissioner. Brazil supported the strengthening of auditing mechanisms and not just in relation to the UNHCR. Due to the increasing number of refugees, the responsiveness of the UNHCR should be strengthened as its virtues exceeded its temporary deficiencies.

C.G. SOMIAH, Chairman of the Board of Auditors and Comptroller and Auditor-General of India, reassured the Committee that the Board would rededicate efforts towards helping the Organization achieve the best value for money. The administrations of the bodies that had been audited should redouble their efforts to prevent the recurrence of irregularities. The responsibility for preventing and detecting fraud and presumptive fraud rested with management. The Board trusted that the Office of Internal Oversight Services could play an effective role in that regard.

The UNHCR had started preliminary work to establish a strategic planning framework which would be implemented in two phases, he said. The Board would watch that with keen interest. It also agreed with the ACABQ that the development of a software package would minimize some shortcomings and that the necessary expertise for organizing and supervising the liquidation of the assets of peace-keeping missions should be established in the Secretariat. The Board would carry out another, and hopefully the final, review of the status of liquidation of UNTAC during its spring 1996 audit and would include its findings in the report on peace-keeping operations for the biennium ending 31 December 1995.

Statement by Director of Financial Management Division

SUSAN MILLS, Director of the Financial Management Division, Department of Administration and Management, responded to a statement made by the representative of Algeria during the last meeting of the Fifth Committee in which he requested recognition of advanced payments by Member States, including his own, to the 1995 regular budget. She said Algeria was one of a

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number of Member States that had made payments prior to 1 January. That had been documented in the January 1995 issue of the monthly publication "Status of Contributions", which provided the details of Member States' contributions to the regular budget. Annex 2 of the January 1995 issue contained a footnote indicating that a number of Member States, including Algeria, had made payments or held credits which had been applied against the regular budget on 1 January 1995.

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For information media. Not an official record.