Sixtieth General Assembly

Fifth Committee

55^th Meeting (AM)

Budget committee continues discussion of procurement investigations

Several members of the Fifth Committee (Administrative and Budgetary) today continued to pose serious questions regarding the handling of procurement investigations by the Organization’s senior management and expressed dissatisfaction with the responses provided by the Secretariat last week.

Egypt’s representative requested the Secretariat to withdraw its written responses dated 25 May (see Press Release GA/AB/3737 of 25 May) and answer the delegates’ questions in a more specific manner.  Member States were looking for information, rather than opinions.  In particular, the answer provided to the question referring to the fact that the administration had allowed senior management to “create a myth if pervasive corruption in the United Nations” was not what had been sought.  The Secretariat should not try to defend anybody in the Secretariat for wrongdoings or mismanagement.  There were procedures in place, which needed to be followed by management at all levels.

A number of questions were also asked about a study into allegations of procurement irregularities that was awarded to the consulting firm Deloitte & Touche at an approximate cost of $500,000 last October.

Presenting additional information on that issue, Jayantilal Karia, the Director of the Accounts Division, Office of Programme Planning, Budget and Accounts (OPPBA), who is also Officer-in-Charge of Procurement Services, said that the Deloitte study of internal controls of the Procurement Service had been conducted under the Secretary-General’s authority and had not required any separate authorization.  The Secretary-General, as the Organization’s Chief Administrative Officer, was required to administer the Organization according to the highest standards of efficiency and integrity.  Given the problems arising in procurement in mid-2005, it had been the Secretary-General’s responsibility to ensure an immediate and thorough response to address the situation.

Regarding the bidding and selection process, he said that after the receipt of quotations, an urgent technical evaluation had been undertaken in the Office of the Controller.  The evaluation had found that the lowest quotation had been given by Deloitte & Touche in the total amount of $449,280, with estimated travel-related costs of some 6 to 8 per cent.  The other company’s bid was substantially higher at $736,421.  Deloitte was also found to be the most responsive to the terms of the scope of work.  After a formal review of the case, the Headquarters Committee on Contracts had unanimously recommended approval of the firm and the case had been formally approved on 19 August 2005.

Commenting on the Secretariat’s “selective information”, Singapore’s representative wondered if the Fifth Committee should have discussed the findings of the Deloitte & Touche report.  There had only been a brief presentation of the report by the Under-Secretary-General for Management, but it had yet to be considered in detail by Member States.  Was that the way to deal with a report that was meant to review internal controls on an urgent basis?

Some of his other questions related to the fact that Deloitte & Touche had been commissioned to conduct another study in the Office of Programme Planning, Budget and Accounts “to the tune of $480,000”.  He wanted a clear explanation as to why, through what process and on whose authority that firm had been asked to conduct the study.  It made him wonder why the Secretary-General had come to Member States for more flexibility, when it was already being exercised by his senior officials.  Conversely, this was a clear example of the perils of allowing flexibility without having adequate accountability mechanisms in place.

Speaking on behalf of the “Group of 77” developing countries and China, South Africa’s representative asked for clarification as to what had happened and what follow-up had been taken since the external audits had been commissioned.  The commissioning of audits should not replace the General Assembly’s oversight role.  It was important, therefore, that the Assembly was briefed and made aware of follow-up actions.  To what extent had the various investigations been verified by the Board of Auditors or the OIOS?  She also asked for specific examples of wrongdoings with specific references to case numbers, as well as statistics on United Nations Headquarters contracts where disputes had arisen in the past few years that had resulted in the Organization losing money.

Referring to the fact that the supplementary information provided by the Secretariat talked about findings of fraud by the Volcker Commission within United Nations Procurement, India’s representative asked the Secretariat to indicate where the Volcker Commission had cited such findings, as he was unable to locate them.  The only finding of the Volcker Commission regarding procurement was the case of one individual, who had revealed bid values to the Mission of one of the permanent five countries who, in the Volcker Commission’s own words, were in day-to-day operational control of the “oil-for-food” programme.  That individual had been dismissed, but then had had to be reinstated.  What was the relation, therefore, between the Volcker Commission findings and the present investigation?

Several speakers also referred to the fact that eight staff members had been placed on administrative leave “to facilitate the ongoing audit and investigation into the Organization’s procurement activities”.  The Committee had been told in February that the investigation of 27 priority cases involving the eight individuals would be concluded and a report submitted to the General Assembly by June, India’s representative noted.  Now the Committee had learned that that was unlikely even in July.  If the 27 priority cases could not be concluded in six months, given that the Procurement Task Force had 500 cases on its hands, would the investigations take 10 years to complete?

The Committee’s next formal meeting will be announced in the Journal.

Background

The Fifth Committee (Administrative and Budgetary) met this morning to conclude its consideration of the administrative and budgetary aspects of peacekeeping financing.

Statements

JAYANTILAL KARIA, Director, Accounts Division of the Office of Programme Planning, Budget and Accounts, and Officer-in-Charge, Procurement Services, presented additional information requested by delegates regarding the Organization’s fact-finding into allegations of procurement irregularities.

Regarding the Deloitte & Touche study, he noted that, as the study was to be conducted on internal controls in the Procurement Service itself, the Assistant Secretary-General/Controller acting as the official in charge of procurement at that time, had requested the United Nations Development Programme (UNDP) for access to its Long-Term Agreements with management consulting firms.  That was to avoid any perception of conflict of interest.  From the UNDP list of approved management consulting firms, a shortlist of three suitably qualified consultancy firms had been selected.  A solicitation had been issued to each of the three shortlisted firms, with a request for quotations within the framework of the existing Long-Term Agreements.

On the issue of authority, he noted that, as indicated in the written response of 25 May, the Secretary-General, as the Organization’s Chief Administrative Officer, was required to administer the Organization according to the highest standards of efficiency and integrity.  Given the problems arising in procurement in mid-2005, it had been the Secretary-General’s responsibility to ensure an immediate and thorough response to address the situation.  The Deloitte study of internal controls of the Procurement Service had been conducted under the Secretary-General’s authority within the framework and had not required any separate authority.

The award of the related contract had been made after acceptance of the recommendation by the Headquarters Committee on Contracts to the Chief Procurement Officer, he said.  As the initial request for consulting services and the related solicitation of bids had been made by the Controller, under the authority delegated to him under the Financial Rules by the Under-Secretary-General for Management, the acceptance of that Committee’s recommendation had not been handled by the Controller, who had rescued himself, but rather had been approved by another Programme Planning Office official formally authorized to act in his place.

Regarding the bidding and selection process, he said that, after the receipt of the quotations, an urgent technical evaluation had been undertaken in the Office of the Controller.  The evaluation had found that the lowest quotation had been given by Deloitte & Touche in the total amount of $449,280, with estimated travel-related costs of some 6 to 8 per cent.  The other company’s bid was substantially higher, at $736,421.  Deloitte was also found to be the most responsive to the terms of the scope of work.  Subsequently, a memorandum had been sent to the Chief of the Procurement Service requesting the Service to process the Deloitte quotation.  The Procurement Service had proceeded with a presentation to the Headquarters Committee on Contracts.  After a formal review of the case, the Headquarters Committee on Contracts had unanimously recommended approval and the case had been formally approved with acceptance of the recommendation on 19 August 2005.

YASSER ELNAGGAR ( Egypt) sought additional information in connection with the handout on procurement, dated 25 May (see Press Release GA/AB/3737 of 26 May).  The Secretariat had not encompassed all the questions raised, and the answers could be characterized as contradictory.  They attempted not to answer questions, but to provide justifications.  The answer provided to question 7 [referring to the fact that the administration had allowed senior management to “create a myth of pervasive corruption in the UN”] was not what was sought.  The response tried to make it seem as if the delegations that raised questions were supportive of fraud and corruption.  “We need a clear answer to question 7”, he insisted.  The Secretariat should not try to defend anybody in the Secretariat for wrongdoings or mismanagement.  There were procedures in place, which needed to be followed by management at all levels.

Other answers seemed to provide for the fact that, simply because 5 per cent of procurements were handled by the Department of Peacekeeping Operations, one should not actually investigate and assess the lines of responsibility within that Department.  One of the responses he found really interesting, because, from it, he had understood that procurement service was now under the responsibility of the United Nations Controller.  In that connection, he wanted to know “what kind of conflict of interest was there when procurement was under the charge and responsibility of the Controller himself”.  He had also looked with interest at the information regarding Deloitte & Touche, which in one instance tried to defend the firm and its findings, but was actually saying that the Office of Internal Oversight Services (OIOS) and previous audits had not found anything in procurement.  According to the responses, some 47 previous audits had been transaction-based.  A logical question arose in that connection:  if it was, indeed, a transaction audit, then it would be more inclined to find fraud and corruption.  Audits by internal control bodies were actually more systematic.  He was thus puzzled by the answers.

He would like the Secretariat to withdraw its responses from 25 May and answer the delegates’ questions in a more scientific manner, he said.  Member States were looking for information, rather than opinions.

Also recalling last week’s responses to procurement-related questions by several delegations, RAZIFF ALJUNIED ( Singapore) said that he wanted to point out some facts before “this piece of selective information from the Secretariat leads some of us to draw any wrong conclusion”.

First, the need for delegation of authority from the Office of Central Support Services to the Department of Peacekeeping Operations had been recognized as far back as 2000.  In fact, one of the recommendations of the Brahimi report had been to increase the level of procurement authority delegated to field missions from $200,000 to as high as $1 million.  The recommendation had been endorsed by the Assembly and supported by the Department of Peacekeeping Operations.  Then, Under-Secretary-General for Management Joseph Connor had authorized delegation of authority up to $1 million to the Under-Secretary-General for Department of Peacekeeping Operations on 5 January 2001.  That decision was also an attempt to deal with the illogical and unsatisfactory chain of command that existed then.  However, he understood that the Under-Secretary-General for the Department of Peacekeeping Operations had strong reservations about the onus being placed on him for any re-delegation of authority.  A subsequent proposal by the Department of Peacekeeping Operations Procurement Division joint working group that the Assistant Secretary-General for Central Support Services and the Assistant Secretary-General for Peacekeeping Operations jointly delegate procurement authority to field procurement officers was rejected by the Assistant Secretary-General for Central Support Services.  In February 2005, the group had finally agreed that delegated procurement authority and accompanying responsibilities should be given solely to the Assistant Secretary-General for Peacekeeping Operations up to the amount of $1 million.  The delegation of authority was issued in February 2005, but only accepted by the Assistant Secretary-General for Peacekeeping Operations in June 2005.

It was clear from that sequence of events that the Department of Management, in particular the Office of Central Support Services, had recognized the serious anomaly in respect of responsibility and accountability for delegated procurement authority as early as 2000.  The fact that senior Department of Peacekeeping Operations officials had refused to accept delegated authority for five years did not diminish their responsibility or accountability in any way.  It was clearly illogical for the Assistant Secretary-General for Central Support Services to be held responsible for the activities of the Department of Peacekeeping Operations staff when he did not have managerial oversight of the latter or any involvement in the activities of that Department.  The fact that the Assistant Secretary-General for Peacekeeping Operations had finally accepted responsibility in June 2005 confirmed beyond any doubt that the Department recognized the existence of that anomaly and accepted that Department of Peacekeeping Operations managers and senior officials should be responsible for the activities of their staff and their operations.  It also effectively acknowledged that the five-year delay and procrastination had been unwarranted.  He would like to ask why the Under-Secretary-General for Management had, therefore, decided to shift the responsibility from the Department of Peacekeeping Operations to the Office of Central Support Services by default.  Why had he decided to pin the blame only on the Assistant Secretary-General for Central Support Services?

What seemed to have been overlooked in the Secretariat’s response was that during the 65-month period in question, there had been more than one Assistant Secretary-General for Central Support Services, he continued.  That was an important point, because the impression given by the Secretariat was that the current Assistant Secretary-General (who had been placed on administrative leave) was the only one involved.  The fact was that Toshiyuki Niwa had been Assistant Secretary-General until February 2003, when Andrew Toh took office, first as Acting Assistant Secretary-General and then was confirmed as an Assistant Secretary-General in June.

He had also been given to understand that the OIOS had not involved the Office of Central Support Services in its audit.  Could the OIOS clarify that?  If it had, was it aware of the five years of discussion on delegation of authority that had taken place between the Department of Management and the Department of Peacekeeping Operations?  That also raised questions as to how comprehensive the OIOS audit had been.  As far as he knew, the OIOS had only become aware of the delegation of authority after the report had been finalized.  The OIOS should provide some answers.  Also, had the OIOS taken into account the views of the Assistant Secretary-General for Central Support Services when it prepared its comprehensive audit report?  He was given to understand that OIOS had informed the Assistant Secretary-General for Central Support Services that it was for the Under-Secretary-General for Management to “provide a response or incorporate responses of his managers if he so wishes”.  That challenged the claim that the OIOS was the highest independent body within the Secretariat where staff could go with crucial and controversial information.  As it stood, the OIOS was suggesting that it could only act on information provided by senior United Nations management.  That, in turn, raised doubts as to whether the Office was indeed playing its role as a watchdog of senior management and the Secretariat.

The Office of Programme Planning, Budget and Accounts had at least acknowledged that it had not supported requests for additional staff for 2003-2004 and the prior periods, he said.  That was a crucial period when there had been a spurt of peacekeeping and when additional staff in the United Nations Procurement Service would have been most needed.  More details should be provided about specific additional staff requests by the Procurement Service.  Also, according to the supplementary response, the Controller had requested the UNDP for access to its Long-Term Agreements with management consulting firms.  That was ostensibly to avoid a perception of a conflict of interest.  Was there any particular reason why UNDP Long-Term Agreements had been accessed, as opposed to using the OIOS?  Given the stated severity of the situation and the amount of payment involved, why had the OIOS or the Board of Auditors not conducted an audit as a matter of priority?  Also, which were the three firms that had been shortlisted from UNDP Long-Term Agreements?

Among other things, he also asked if the Fifth Committee should have discussed the findings of the Deloitte & Touche report, given its urgency.  There had only been a brief presentation of the report by the Under-Secretary-General for Management, but it had yet to be considered in detail by Member States.  Was that the way to deal with a report that was meant to review internal controls on an urgent basis?  The Secretariat had also not responded to his question as to whether the Advisory Committee on Administrative and Budgetary Questions (ACABQ), Procurement Service and the OIOS had been given an opportunity to provide their views on the Deloitte & Touche report.  How many of the recommendations of that report had been implemented to date?  He understood that Deloitte & Touch had now been commissioned to conduct another study to the tune of $480,000.  Again, he asked for more details on that and a clear explanation as to why, through what process and on whose authority that firm had been asked to conduct the study.  It would appear that management had already exercised a fair amount of flexibility in doing what it though was fit without consulting Member States.  It did make him wonder why the Secretary-General had come to them for more flexibility, when it was already being exercised by his senior officials.  Conversely, this was a clear example of the perils of allowing flexibility without having adequate accountability mechanisms in place.

Had the Yakovlev indictment and the Volcker Commission’s report resulted in changes to the procurement practices of the Organization? he asked.  The same allegedly flawed procurement practices were still being utilized.  If the Yakovlev case was the primary reason for eight staff being placed on administrative leave, one would have thought that that development would have resulted in major changes.  Given the alleged seriousness of the issue, should not the investigations be speeded up so as to enable a major overhaul of the procurement system?  By the way, it was one thing to raise the spectre of the Volcker Commission findings, but had any United Nations staff member been charged or convicted as a result of those findings?

With the Secretariat indicating that prior audits had been transaction-based and, as such, had not addressed system and control issues, he asked for further clarifications.  If the core purpose of an audit was not control, why was it needed?  Another answer by the Secretariat read that the “Procurement Task Force has over 500 cases that have been reported to the OIOS...  Certainly no Member State would want the OIOS to rush an investigation and jeopardise the integrity of its findings.  In fact, the United Nations is dedicated to a full, thorough and fair investigation and to pursue allegations of corruption in the UN”.  He would like to know what the 500 cases had to do with the 8 staff placed on administrative leave.  Even if all the 500 cases were related to those staff members, surely five months of investigations would have adduced some evidence to incriminate at least some of them.  He also asked about the linkage drawn by the Secretariat between the Yakovlev case and the eight staff placed on administrative leave.  The Yakovlev case should not be used as a red herring to engage in a witch-hunt or a fishing expedition in search of evidence “which does not appear to exist”.

The Secretariat had also commented that the investigation must be allowed to run its course and should not be subject to public debate, he said.  However, it had been the Under-Secretary-General for Management who had gone to the media on the draft OIOS report to paint a picture of pervasive corruption at the United Nations and give an impression that there was solid, irrefutable evidence against the eight staff.  That reminded him of what Paul Volcker had told a hearing of the United States Congress.  When asked if he thought there was a culture of corruption at the United Nations, he had said:  “No, I don’t think there is a culture of corruption, but there is inaction, a culture of inaction.”  That could perhaps be extrapolated to the ongoing protracted investigation into the eight staff.  There was clearly a culture of inaction -– inaction in acting speedily to conclude the investigations.  Such inaction was not good for the image of the United Nations.

KAREN LOCK (South Africa), on behalf of the “Group of 77” developing countries and China, said it was unusual for the Committee to find itself in a formal setting at the request of a delegation that had not asked the questions to which the Secretariat had been asked to respond.  Where delegations asked for clarification in a formal setting, they should be provided in a formal setting.  That was not always possible, however.  The delegations of Egypt and Singapore had raised a number of important questions and observations on the information provided by the Secretariat.  The Group wanted clarification on several matters.

She said she was aware of the fact that a large number of external audits and investigations were being undertaken of the Procurement Service at the request of Management.  In that regard, she requested a list of those that had been undertaken in the last two years.  She also wanted clarification as to what had happened since the external audits had been commissioned.  What follow-up had there been on the findings?  How had the General Assembly been informed of the findings of the various commissioned audits and investigations and how had the Assembly been informed of the follow-up actions by management and the Secretariat?  The commissioning of audits should not replace the General Assembly’s oversight role.  It was important, therefore, that the Assembly be briefed and was made aware of follow-up actions.  To what extent had the various investigations been verified by the Board of Auditors or the OIOS?

On the Deloitte & Touche report, she asked what action had been taken by the Secretariat to implement its recommendations.  Regarding the intention to undertake a forensic audit based on the findings of the Deloitte report, she asked for a status report on the forensic audit and an indication as to what actions had been taken, as well as if it had been subject to normal bidding procedures.  How did it relate to General Assembly resolution 59/288, and what action had been taken by the Secretariat to implement the resolution of the Assembly, which was the Organization’s primary oversight body?

Turning to the Department of Peacekeeping Operations report, she said she wanted to know how many staff in the Procurement Service had been interviewed, as well as how many chief procurement officers in the field.  How did the audit relate to the horizontal audit of procurement management by OIOS?  Why had it not been shared with the General Assembly?  She asked for specific examples of wrongdoings with specific references to case numbers, as well as statistics on United Nations Headquarters contracts where disputes had arisen in the past few years that had resulted in the Organization’s losing money.

JAIDEEP MAZUMBAR ( India) said he had listened carefully to the statements before the Committee.  The representative of Egypt had been amazed by the Secretariat’s responses.  He had long since ceased to be amazed.  Perhaps that was a sign that it was time to leave the Committee.  South Africa’s delegate had also raised important points, including on the studies and audits conducted over the last two years.  Perhaps the information to be provided to the Committee could state who had commissioned the individual studies.  The supplementary information provided by the Secretariat talked about findings of fraud by the Volcker Commission within United Nations Procurement, with a capital “P”, indicating the Procurement Division.  Could the Secretariat indicate where in the Volcker Commission report such findings had been cited, as he was unable to locate any?  The only finding of the Volcker Commission regarding procurement was the case of one individual, who had revealed bid values to the Mission of one of the permanent five countries who, in the Volcker Committee’s own words, were in day-to-day operational control of the “oil-for-food” programme.  That individual had been dismissed, but then had had to be reinstated.  What was the relation, therefore, between the Volcker Commission findings and the present investigation?

Continuing, he said action had been taken against eight individuals involved in 27 cases.  Why had no action been taken against individuals involved in the 200 other cases which had been initially taken up?  The Committee had been told in February that the investigation of 27 priority cases involving the eight individuals would be concluded and a report submitted to the Assembly by June.  Now the Committee learned that that was unlikely even in July.  If the 27 priority cases could not be concluded in six months, given that the Procurement Task Force had 500 cases on its hands, would the investigations take 10 years to complete?  Was the Procurement Task Force under the authority of the OIOS or under the Department of Management?

There had been an attempt to hang the entire Procurement Division on the name of one individual whose reference appeared again and again in the supplementary information, he said.  If the Task Force had not been able to build any case against the eight individuals in the 27 cases, it would be logical to withdraw the administrative action taken against them.  If investigations had to be conducted in other cases, they should be placed on the same footing as the individuals involved in the 500 other cases who had not had their reputations tarnished without access to due process.

Point 7 of the Secretariat’s handout put the onus on Member States to share evidence or information with the Secretariat, he added.  What kind of information was being sought?  Member States being asked to provide information to the Secretariat was a complete reversal of all logic.  On the matter of previous audits being transaction-based, what use was it if the audit of transactions did not result in an evaluation of the control environment?  What were the lessons to be drawn there?

At the conclusion of the meeting, Mr. KARIA said that he would be able to respond to the questions -- either in a formal or informal meeting -- only after consulting with the management.  To that, Egypt’s representative reiterated his request that the Secretariat withdraw its previous responses and provide answers that were technically sound and informative.  “We do not want an opinion or an assessment of what delegations were saying”, he said.  Clear-cut answers were needed.

Several speakers, including representatives of India and Singapore, said that, while they had not been the ones who asked for responses to be provided at a formal meeting, the procedure of the Committee should be respected, under which questions raised in a formal meeting should be answered in a formal setting, as well.  Speaking on behalf of the Group of 77, South Africa’s representative said:  “Let’s be clear why we are at this point.”  On 25 May, a delegation had requested that answers be provided in a formal meeting to the questions by the Group of 77.  It was not the intention of the Group to delay informals or prolong the debate.  So, she would be happy if the Secretariat could answer today, in line with the request made last week.  However, the Secretariat needed to consult further.  That was unfortunate, but it needed to be very clear that the Group had not requested a formal meeting.

Speaking on behalf of the European Union, Austria’s representative, however, said that the Committee should be the master of its own procedure.  As no request for a formal meeting had been made, he would prefer to receive written answers in an informal setting.  In that connection, the representative of Egypt said that he did not share Austria’s point of view.  He simply looked at the Rules of Procedure.  Further, what the Secretariat had provided was a judgement, not information or answers.

India’s representative said that, since the Committee was “going a formal route”, he also wanted to receive an answer to a question regarding the case of a Legal Affairs officer who was accused of disqualifying the lowest bidder.

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For information media • not an official record