Sixty-first General Assembly

Fifth Committee

4^th Meeting (AM)

REPORTS OF BOARD OF AUDITORS, INTERNAL OVERSIGHT SERVICES

 

TAKEN UP BY BUDGET COMMITTEE

 

The Fifth Committee (Administrative and Budgetary) this morning took up the reports of two of the United Nations oversight bodies -– the Board of Auditors and the Office of Internal Oversight Services (OIOS) –- with speakers stressing the importance of implementing their recommendations and for finding the means to further improve their work, particularly in light of the ongoing review of governance and oversight.

Delegates expressed concern that the Board of Auditors, while issuing unqualified opinions for 12 of the 15 entities of the United Nations, had “modified” its opinion on the United Nations Development Programme (UNDP), the United Nations Environment Programme (UNEP) and the United Nations Population Fund (UNFPA).  They called for full implementation of the Board’s recommendations, and insisted on strict application of existing rules and regulations.  Among the issues of particular importance, Committee members highlighted the Board’s audits of procurement and relief efforts after the tsunami, as well as its comments on such cross-cutting issues as non-expendable property; liabilities for annual leave, end-of-service and post-retirement benefits; programme expenditure; inter-agency coordination; information technology; and fraud and presumptive fraud.

Several speakers also expressed agreement with the Advisory Committee on Administrative and Budgetary Questions (ACABQ) that the transition to International Public Sector Accounting Standards (IPSAS) by 2010 could present a considerable challenge for the United Nations.  Non-expendable property and inventory would appear as assets on financial statements and would have to be capitalized and accounted for, requiring a systematic, comprehensive and accurate recording of such equipment into information systems.

Introducing the ACABQ’s report, its Chairman, Rajat Saha, said that it appeared that a large part of the problem in implementing the Board’s recommendations lay in the seeming inability of administrations to pinpoint the responsible officials.  In that connection, ACABQ had stressed the need for further efforts to develop a strong culture of accountability within the United Nations, including the elaboration of a clear definition of accountability.

In that connection, the representative of South Africa, who spoke on behalf of the “Group of 77” developing countries and China, stressed the administration’s responsibility for accountability and implementation of oversight recommendations.  Expressing appreciation for the Board’s focus on management issues, she also noted that the findings showed little progress towards the goal of achieving equitable geographic distribution and gender balance of staff, and called for more concrete efforts to ensure the international character of the staff of the United Nations.

Speakers welcomed the focus of OIOS on high-risk areas and stressed that 932 “critical” recommendations of OIOS should be fully implemented, unless reasons were given for why that was not possible.  It was pointed out that the implementation rate of the recommendations reflected the Organization’s commitment to the maintenance of an effective system of internal control.  Among other positive developments, Committee members praised the launch of the “issue track”, a single recommendation database to streamline the monitoring of OIOS recommendations.

The representative of Bangladesh insisted that it was critically important that OIOS recommendations were implemented.  The Office had issued a total of 1,919 recommendations in the reporting period, identifying a total of $49.2 million in cost savings.  Actual savings and recoveries amounted to $14.2 million.  As of 30 June, 47 per cent of all recommendations and 42 per cent of critical ones had been implemented.  He understood that implementation might take some time, but still, there remained ample scope for improvement and raising the rate of implementation to a satisfactory level.  His delegation was seriously concerned about long-standing non-implementation of many recommendations.

Finland, on behalf of the European Union and associated States, also noted the issue of OIOS funding, as well as access to records and personnel.  The Union supported strengthening its operational independence.  OIOS should be provided with budgetary independence to eliminate potential conflict of interest arising from the processing of OIOS budget requests through the Department of Management.  Among other things, the risk assessment would allow OIOS to identify the resources required to conduct oversight assignments.  Thus, the risk assessment also provided the basis for OIOS funding requirements.

The representative of Switzerland welcomed the current momentum for strengthening oversight, and said that the rate of implementation was still too low, especially in the first six months after the issuance of critical recommendations, when quick action by the Secretariat was needed.  She was also concerned about the age of some outstanding recommendations, as well as the number of recommendations not accepted.

Pakistan’s representative said that OIOS external review should lead to improvements in several areas, strengthening its independence, capacity in core functions and coordination with other oversight bodies.  It was also important to consolidate all legislative mandates pertaining to the oversight role and responsibilities of OIOS.  It should continue to maintain its central evaluation functions in the Secretariat, which could not be left to the programme managers alone.  It should bring more coherence in the evaluation, inspection, investigation and internal audit activities.  As a matter of principle, OIOS should have its own budget approved by the Fifth Committee.

Also this morning, the Committee approved a draft resolution (document A/C.5/61/L.2), by the terms of which nine countries -- Central African Republic, Comoros, Georgia, Guinea-Bissau, Liberia, Niger, Somalia, Tajikistan and Sao Tome and Principe -– would be allowed to vote in the Assembly through the end of the current session.  By the text, the Assembly would agree that those countries’ failure to pay the minimum amount necessary to avoid the application of Article 19 of the Charter was due to conditions beyond their control and they should be thus exempt from its sanctions.

[According to Article 19, a Member State falling behind in the payment of its dues to the United Nations by an amount equal to its assessments for the two most recent years, loses its right to vote in the Assembly, unless it was determined that non-payment is a consequence of factors beyond its control.]

Also taking the floor today were representatives of the United States and Nepal.  The reports before the Committee were introduced by the Chairman of the Audit Operations Committee of the Board of Auditors, Sabiniano Cabatuan; Chief of the Oversight Support Unit of the Department of Management, Jonathan Childerly; Under-Secretary-General for Internal Oversight, Inga-Britt Ahlenius; and Chief of Administration, ad interim, at the Economic and Social Commission for Western Asia (ESCWA), Hany Abdel-Aziz.

The Committee will continue its work at 10 a.m. on Thursday, 12 October, when it is scheduled to take up financing of the United Nations Operation in Burundi.

Background

The Fifth Committee (Administrative and Budgetary) met this morning to begin its consideration of two of the United Nations oversight bodies -- the Board of Auditors and the Office of Internal Oversight Services (OIOS).

The Committee had before it a series of reports of the Board of Auditors and audited financial statements of the funds and programmes of the United Nations (documents A/61/5, vols. I, III, IV, V and Add. 1-12) and a concise summary that presents the auditors’ principal findings (document A/61/182), addressing major deficiencies in programme and financial management within the Organization, cases of inappropriate or fraudulent use of resources and measures taken in that regard. The Board issued unqualified opinions for 12 of the 15 entities of the United Nations and “modified” its opinion with emphasis of matter for the remaining three (United Nations Development Programme (UNDP), United Nations Environment Programme (UNEP) and United Nations Population Fund (UNFPA)).

On the financial statements of UNEP, the Board drew attention to a $10 million discrepancy between the value of non-expendable property in the notes to the financial statements and the inventory report.  That variation occurred because the financial statement disclosure ($11.2 million) was based on acquisition costs, while items in the inventory report ($1.2 million) were stated at fair-market value.  The Board also reports non-submission of inventory reports by out-posted projects and regional offices, the absence of valuation of certain inventory items and non-issuance of personal property receipts for portable items at UNEP.

The Board further notes deficiencies in the maintenance of property records and reporting at the United Nations Human Settlements Programme (UN-HABITAT), the United Nations Children’s Fund (UNICEF), the Office of the United Nations High Commissioner for Refugees (UNHCR) and the United Nations International Drug Control Programme (UNDCP).  It was not possible to locate 2,549 assets with a total acquisition value of $1.4 million and depreciated value of $127,523 during a physical verification at UNHCR.

The opinion on the financial statements of UNDP and UNFPA was modified to emphasize the Board’s concerns regarding nationally executed projects, for which independent auditors had issued a significant number of qualifications.  The extent and impact of those qualifications could not be properly assessed, since, as of June 2006, they had yet to be analysed.  The Board was, therefore, not able to obtain full assurance that the funds provided for nationally executed expenditure had been properly utilized.  Similarly for UNHCR, audit certificates covering expenditures of $66.7 million in 2002 and $68.5 million in 2003 were not submitted by implementing partners by 1 April 2006 and, therefore, the extent of qualifications could not be determined.  UNHCR agreed to address the issue in 2006.

In the case of UNDP, which holds 615 bank accounts, the Board also modified its opinion with respect to the financial statements, pointing out that, due to the lack of monthly reconciliations, fraud and errors could have remained undetected.  Owing to weak controls, differences between UNDP accounting records and those of other agencies persist regarding to the amounts owed to UNDP.  Furthermore, the Board was unable to reconcile a difference of $5.6 million between UNDP and United Nations balances on the current account.

For the period that ended 31 December 2005, 9 of the 15 audited United Nations organizations reported cases of fraud and presumptive fraud.  The administrations informed the Board that they had taken action against the staff and perpetrators involved, in addition to strengthening controls to prevent recurrences.  The Board noted that some country offices had not submitted information on fraud to their respective headquarters, however.  Also, according to the report, at $37.4 million, the combined value of cash, receivables and property written off in 2004-2005 was $5.55 million higher than the total of $31.79 million written off in 2002-2003.

Although the Ethics Office has been established and financial disclosure statements have been introduced, a common approach to fraud prevention has yet to be defined, the Board states.  UNDP, UNFPA and the United Nations Office for Project Services (UNOPS) together have taken the following initiatives: compiled a fraud prevention strategy that included training staff on principles of fraud awareness; published a handbook on fraud prevention; and established a fraud hotline in March 2006.  In February 2006, UNHCR launched the “Accountability Portal”, accessible to all staff on the UNHCR Intranet.  It served as a repository of information related to the human and financial resources of UNHCR.

The document also includes comments on previous recommendations of the Board that have not been fully implemented, as well as observations on a number of cross-cutting issues, such as non-expendable property; liabilities for annual leave, end-of-service and post-retirement benefits; programme expenditure; treasury and cash management; funding strategies; inter-agency coordination; emergency response; procurement and contract management; human resources management; information technology; and fraud and presumptive fraud.  The Board has summarized, in an annex to each report, the status, as of mid-2006, of each organization’s implementation of the Board’s recommendations for the financial period ending 31 December 2003.

In the first report on the implementation of the recommendations of the Board of Auditors for the financial period ended 31 December 2005 (document A/61/214), the Secretary-General concurs with almost all of the Board’s recommendations.  The report also includes explanations of the setting of time frames for implementation by the department heads accountable.  The report also includes an explanation of a number of Board recommendations that were not accepted by various entities within the Secretariat.  In these cases, the administration will continue discussion with the Board in order to resolve how to proceed.

For example, on one of the recommendations, the Economic Commission for Europe (ECE) pointed out that equitable regional distribution applies to the Secretariat at the global level, and not within the Commission itself.  The Economic Commission for Africa (ECA) partially accepted the recommendation that it follow up with agencies and organizations on outstanding rentals for 2004, and specify payment terms and penalty clauses in memorandums of understanding.  Particularly, penalties for late rental payments will not be implemented.

The Office for the Coordination of Humanitarian Affairs (OCHA), among other things, explained that, in the absence of a new accounting system, manual processing cannot be avoided.  OCHA also said that it could not take steps to obtain bank statements for all accounts in Indonesia and Sri Lanka and perform a monthly reconciliation, because all accounts had been closed and authority to approve financial transactions and manage bank accounts had not been delegated.  OCHA also noted several other areas where it could not implement recommendations because it did not have the responsibility to do so; for instance, observing that it could not ensure a common anti-fraud and anti-corruption strategy in emergency relief efforts, though it could initiate or take the lead in working towards one.

An addendum to the report (document A/61/214/Add.1) included the responses from 11 United Nations funds and programmes, the executive heads of which have concurred with almost all of the Board’s recommendations.

UNDP noted that many of the Board’s recommendations require close collaboration with other United Nations agencies.  United Nations Institute for Training and Research (UNITAR) said that the adequacy of resources and staffing level is a management issue, not a financial one, and that non- or late implementation of donor agreements does not occur due to the lack of staff resources.  Therefore, it did not agree with the Board’s recommendation that it assess the adequacy of its resources and staffing level against its actual operational needs.  The United Nations Office on Drugs and Crime (UNODC) disagreed with the recommendation that external auditors of nationally executed expenditures refer explicitly to United Nations accounting procedures, because they are recorded on a cash basis in accordance with UNDP procedure.

The Advisory Committee on Administrative and Budgetary Questions (ACABQ), in a related report (document A/61/350), welcomes the Board’s efforts to improve the presentation of its reports and the thematic approach it has adopted.  It is essential for the Board to condense and prioritize the information, in order to maximize the usefulness of the reports.  The Board could cast its recommendations in clearer and stronger language with more specific time frames for implementation.

In connection with $2.3 billion liabilities for annual leave, end-of-service and retirement benefits, ACABQ recalls that the administration has proposed funding mechanisms for its estimated liabilities for after-service health insurance, but did not explore funding mechanisms for its accrued annual leave and other benefits.  The International Public Sector Accounting Standards (IPSAS), which are to be instituted system-wide by 2010, will require disclosure of such liabilities in the financial statements.  High priority should, therefore, be accorded to this issue.  Further, emphasizing the importance of close coordination across the system in the field of information and communication technology, the Advisory Committee urges the administration to take lessons from the experiences of the funds and programmes in the implementation of the new enterprise resources programme (ERP) systems and update existing procedures and rules in that regard.

According to the report, the Board’s recommendations on geographic representation are “extremely general”.  ACABQ requested a clarification concerning the Board’s statement that, of 156 recruits from the roster of successful national competitive examination candidates, 47, or 30 per cent, were from overrepresented States.  On another human resources issue, ACABQ concurs with the Board’s recommendation that the administration make more of an effort to ensure strict adherence to the administrative instructions on hiring, remunerating and evaluating the performance of consultants and individual contractors.

ACABQ notes that UNDP and UNFPA have accepted the Board’s recommendations regarding nationally executed expenditure, but expresses concern over persistent gaps and weaknesses in the management of such expenditure.  It agrees with the recommendations that UNDP follow up on long outstanding advances by finalizing implementation of the reporting tool of the Atlas system and ensuring regular monitoring of outstanding advances.

Sharing the Board’s concerns on the lack of basic financial controls and delays in implementing the necessary Atlas modules, ACABQ urges the United Nations, UNDP, UNFPA and other partners, as a matter of the highest priority, to adopt compatible, effective and harmonized working procedures.  Organizations should also develop effective funding strategies and diversify funding sources.

In connection with the Board’s concern regarding sustainability of UNHCR expenditures, as, for the past six years, expenditures have been higher than income, the importance of predictability and flexibility of funding is stressed in the report.  It is also important to expand the base, since 97 per cent of UNHCR resources come from voluntary contributions.  ACABQ welcomes the implementation of centrally managed and incentive-based fundraising at the field level, and encourages further efforts to increase private-sector funding.

In light of limited coordination and cooperation in the area of procurement, the ACABQ is of the view that the Inter-Agency Procurement Working Group could be more active in promoting inter-agency cooperation, disseminating information on the modernization of procurement practices and making proposals for cost-effective sharing of resources.  Deeply concerned by widespread failure to comply with procurement rules and regulations, the Advisory Committee states that the Organization’s rules and policies on this subject are clear and comprehensive.  It is essential to develop appropriate mechanisms for enforcing strict compliance with regulations and introduce sanctions for non-compliance.  All failures to adhere to rules and regulations should be recorded and responsibility clearly attributed, with explanations and justifications for the decisions made.

According to the annual report of the Office of Internal Oversight Services (OIOS) (document A/61/264), during the period from 1 July 2005 to 30 June 2006, the Office issued 234 oversight reports, including 18 reports to the Assembly.  The reports included 1,919 recommendations to improve internal controls, accountability mechanisms and organizational efficiency.  Of those recommendations, 932 were classified as critical to the Organization.  Through the recommendations, the Office identified a total of $49.2 million in cost savings.  Actual savings and recoveries amounted to $14.2 million.  To the extent possible, oversight efforts focused on the five high-risk areas: health, security and safety; programme management; information and communication technology; Capital Master Plan; and integrity violations.

A significant component of the recommended cost savings stemmed from the advice issued to the Department of Peacekeeping Operations relating to their management of strategic deployment stocks.  Another significant amount was based on a recommendation issued to the United Nations Mission of Support in East Timor/United Nations Transitional Administration in East Timor (UNMISET/UNTAET) regarding the supply of rations contracts.  According to the addendum to the report, none of these savings had been realized as of 30 June 2006.

Of over 60 United Nations entities for which OIOS provides oversight services, some pose particular challenges owing to their high financial exposure and/or to their complexity as a result of geographical dispersion or a broad scope of work.  The report provides a synopsis of work conducted by OIOS in five such departments and offices; the Department of Management, OCHA; UNHCR; the United Nations Joint Staff Pension Fund; and the United Nations Compensation Commission.

With ongoing reform efforts stressing the importance of effective measurement of programme delivery and achievement of results, OIOS sees the adoption of a formal internal control framework as the next logical step in strengthening oversight at the Secretariat.  Coupled with that is the requirement that programme managers report on the effectiveness of internal control in the programmes under their leadership.  OIOS is also strongly encouraging the Organization to consider launching its own risk-management framework.  While it could be separate from the internal control framework described above, in an ideal situation both could be integrated under one robust framework.

An addendum to the OIOS report (document A/61/264 (part I)/add.1) highlights critical recommendations that have not yet been fully implemented.  OIOS provides updated statistics on the implementation rate, noting that, as of 30 June 2006, programme managers had implemented 47 per cent of all recommendations and 42 per cent of the critical recommendations.  Compared to the same period last year, the overall implementation rate has declined slightly.  OIOS notes that this decline is a variation from previous periods, which showed a positive trend.  That change might be partly due to the 26 per cent increase in the number of critical recommendations issued by OIOS during the latest period.  Acknowledging that critical recommendations can be complicated and may require more time to implement fully, OIOS stresses that there is still room for improvement.

OIOS expresses particular concern about some long outstanding recommendations, noting that 34 recommendations issued prior to 1 July 2002 are still outstanding, including 17 deemed critical.  Among the outstanding recommendations of greatest concern to OIOS is a 2002 recommendation to the Department for Disarmament Affairs to develop a plan of action to ensure the financial stability of the United Nations Regional Centre in Africa.  OIOS also notes that the United Nations Regional Centre in Asia and the Pacific has not yet been redeployed to Kathmandu, Nepal.  Another matter of concern is the slow implementation of a recommendation addressed to the Department of Management in 2000 on the follow-up review of programme and administrative practices at UN-HABITAT.

OIOS registered continuing concern that, following an investigation of sexual exploitation and abuse by a peacekeeper in the Democratic Republic of the Congo in 2001, the contingent member was not and will not be held accountable for his actions by the national authorities of his country.  OIOS had recommended that the Department of Peacekeeping Operations advise the victim and her family of the investigation conducted by the national authorities and actions taken by the United Nations.  In its audit of the United Nations Monitoring, Verification and Inspection Commission (UNMOVIC) in 2005, the Office found that, despite drastic changes in Iraq since March 2003, the Commission’s programme of work had not been revised.  The Office recommended that the Commission revise its plans annually to respond to the changed situation on the ground.

According to the OIOS report on its inspection of the programme and administrative management of the Economic and Social Commission for Western Asia (ESCWA)(document A/61/61), the Commission, through a reform process it launched in 2001, is consistently striving to attain its vision of becoming an action-oriented “regional centre of excellence”.  There is more active interest and involvement of countries in its work, which shows increased recognition of its value to the region.  OIOS expresses satisfaction that tools for results-based management are consistently promoted at ESCWA and that training was provided to management and staff on its methodology and implementation.  It is important now to build up quality control of the Commission’s deliverables.

OIOS states that for ESCWA to realize its potential fully, however, five main challenges need to be addressed: the organizational structure has to be normalized; the Statistical Division needs to be re-established; the comparative advantages of ESCWA have to be reassessed and its collaboration with regional partners strengthened; information and knowledge management must be advanced to a level commensurate with its regional role; and the Commission’s executive management culture should become more consistent, objective and transparent.  OIOS did not agree to the request by the Commission’s management that the list of challenges be redrafted to include only two main ones: strengthening the statistics subprogramme; and advancement of information and knowledge management to a qualitatively new level.

Implementation of OIOS 20 recommendations would considerably improve the effectiveness of ESCWA, the report states.  The recommendations relate to such aspects of the Commission’s work as completion of an internal review; cooperation with the Subregional Office for North Africa of ECA; engaging the UNDP Regional Bureau for Arab States in developing a framework for longer-term cooperation; automating processes and workflows; undertaking a cost-benefit analysis of all the databases; and developing an information technology strategy.

However, ESCWA management does not agree with several recommendations in the report, including the proposal that the Chief of the Human Resources Management Section should take measures to ensure that all personnel decisions are in line with established policies and procedures and are properly reflected in staff members’ files.  Records of personnel actions should be kept and monitored for compliance, the report states.  Among other things, ESCWA also “rejects totally” the recommendation that the Executive Secretary should ensure that the norms of transparent and effective oversight are adhered to, by observing established reporting lines and addressing accountability issues in a consistent and fair manner.

An addendum to the report (document A/61/61/Add.1) provides further clarification on the issues raised by OIOS, particularly those regarding organizational structure; information and knowledge management; programme support; and executive management.  The document emphasizes, among other things, that the decisions by the Human Resources Management Section are taken in full compliance with the regulations and rules governing human resources policies and in full coordination with the Office of Human Resources Management and other concerned departments.  The Chief of the Human Resources Management Section has established good communication with senior management, and there is a process of regular consultation and exchange of views.

In addition to the achievement of full Performance Appraisal System (PAS) completion, the Human Resources Management Section of ESCWA reports working closely with programme managers to achieve an improvement in performance appraisal through training in a number of areas and by creating a culture of regular discussion between staff members and supervisors on performance and staff development.  ESCWA maintains that it has always adhered to the norms of transparent and effective oversight and the principle of addressing accountability in a consistent and fair manner.  The observations regarding “ad hoc and arbitrary decision-making” are, therefore, not accepted by ESCWA management.

Board of Auditors Reports

SABINIANO CABATUAN, Director of External Audit of the Philippines and Chairman of the Audit Operations Committee of the Board of Auditors, introduced that body’s reports.  He said the Board had taken into consideration the advice of ACABQ in respect of the ageing of the Board of Auditors’ previous recommendations that had not yet been fully implemented.  The annex to each report now identified the financial period in which such recommendations had been initially made.  The Board, at its own initiative, had also introduced a section entitled “executive summary”, which provided a synopsis of the body of the report.

Regarding liabilities for end-of-service and post-retirement benefits, he said that the Board had taken cognizance of the actuarial valuations initiated by the administration in respect to after-service health insurance, although, at the time of the audit, only some $200 million had been funded out of the estimated combined liability of over $3 billion.  Although the issues concerning non-expendable property and end-of-service and post-retirement benefits were nothing new, their impact on the implementation of IPSAS should not be underestimated.

He said there was room for improvement in terms of emergency response to natural disasters, like the tsunami of 2004.  For instance, the United Nations and its funds and programmes had not shared a common rapid assessment methodology, which might have contributed to inter-agency coordination problems on the ground.  While a common expenditure tracking system had been put in place, some agencies had not provided any expenditure information, rendering the system less useful in the overall assessment of the delivery.

JONATHAN CHILDERLY, Chief of the Oversight Support Unit, Department of Management, introduced the Secretary-General’s reports on the implementation of the recommendations of the Board, saying that, in the past, there had been concerns about assignment of responsibility for the implementation of recommendations and establishment of time frames.  Reflected in the reports before the Committee was the fact that the United Nations and its funds and programmes had assigned responsibility for implementation at the programme manager level.  It was the normal practice for programme managers to then assign responsibility at a lower level, within their own departments and offices.  Every effort had been made to ensure that programme managers assigned target dates for implementation.  However, in a significant number of cases where the recommendations were of continuous nature, it was not possible to do so.  In terms of overall implementation, it should be noted that good progress had been made with the United Nations already implementing over 20 per cent of recommendations, and the funds and programmes generally achieving a higher level of success.

RAJAT SAHA, Chairman of ACABQ, introduced that body’s report.  Highlighting the main findings of the Committee, he said that it appeared that a large part of the problem in implementing the Board’s recommendations lay in the seeming inability of administrations to pinpoint the responsible officials.  In that connection, ACABQ had stressed the need for further efforts to develop a strong culture of accountability within the United Nations system, including the elaboration of a clear definition of accountability.

A number of changes would be instituted with the migration to IPSAS by 2010, he continued.  Non-expendable property and inventory would appear as assets on financial statements and would have to be capitalized and accounted for, requiring a systematic, comprehensive and accurate recording of such equipment into information systems.  That requirement could present a considerable challenge, given the existing gaps in data entry and discrepancies between inventory reports and physical counts, as well as other weaknesses highlighted by the Board.  The Committee recommended that each organization establish workable procedures with strong controls and that rational valuation methods for recording and depreciating assets and determining the cost basis for inventory items be developed and harmonized.

On inter-agency coordination, he said that the Board’s review showed that much remained to be done before the United Nations mission or country presence could truly function as one integrated entity.  ACABQ was convinced that a true integration of country teams at the operational level would require the involvement, determination and commitment of senior management to drive the process on a day-to-day basis.  ACABQ emphasized the strategic nature of those initiatives, which were important elements of the Secretary-General’s reform and requested the Board of Auditors to follow up on that in its next audits.

KATJA PEHRMAN (Finland) speaking on behalf of the European Union and associated States, noted with concern that three reports of the Board expressed qualified opinions with regard to financial statements of United Nations entities.  She hoped the Board’s recommendations could be implemented as soon as possible.  She appreciated the improvement of the presentation of the report, and encouraged the Board of Auditors to set an order for recommendations according to the gravity of problems identified.

She took note of the need to set reserves for after-service health insurance, and wanted to enter into debate on the subject with information from the Secretariat, and recommendations for all United Nations entities, as noted by ACABQ.  She then said that some programmes were still late in establishing financial strategies.  She called the strict application of financial rules of procurement essential, and hoped, in the future, to avoid the kind of discrepancies observed by auditors in the report.  She congratulated the Board of Auditors for their work on relief efforts after the tsunami, and said the development of inter-agency cooperation allowed strengthening of the effectiveness of the United Nations system.

Turning to accounting questions, she was concerned that the inventorying of goods and assets was not always correct within certain entities, and needed to be settled as soon as possible with the changeover to IPSAS.  She regretted the delay of reforms for improved cash-flow management, and hoped that could be resolved by the next report.  The non-publication of the financial statements of UNOPS showed the need for coordinated, targeted computerization within the United Nations.  She said that all lessons learned by the Board of Auditors regarding difficulties in the Atlas programme should be applied, and stressed that the problems of Atlas needed to be resolved as soon as possible to cover all auditing and accounting needs.  With the change to IPSAS, she asked the Board of Auditors to identify further steps to be taken in forthcoming reports.

In the area of human resources management, she noted with interest the matter of the recruiting of consultants, and called for measures to combat fraud.  She took note of proposals on human resources management in procurement relating to mobility and training.

KAREN LOCK ( South Africa) speaking on behalf of the “Group of 77” developing countries and China, commended the Board of Auditors for refining the presentation of their reports.  She expressed concern regarding the lack of implementation of some of the Board’s recommendations, and urged all entities to fully implement them, particularly those that dated back to the 2000-2001 biennium.  Responsibility fell on the administration for implementation and accountability, and effective and expeditious implementation of oversight recommendations was part and parcel of efforts to improve accountability within the Secretariat.  She sought the Board’s view on the practical implications on the Board’s independence of ACABQ’s recommendations.  She also called coordination between oversight bodies in the United Nations system a prerequisite for effective oversight.

She took note of certain concerns about UNDP, UNFPA and UNEP, but added that those entities had generally concurred with the recommendations of the Board and were proceeding with implementation.  She trusted that the delay of the audit of UNOPS by the Board would not be repeated in the future.  She sought a clarification of the matter, concerned that failure to receive those financials indicated a worsening of the situation.  She remained concerned about UNHCR, the financial position of which continued to weaken, as expenditures exceeded income, and was equally concerned that no formal policy existed to lower the risk of currency fluctuations.

She appreciated the Board’s focus on management issues.  She noted that the findings showed little progress made towards the goal of achieving equitable geographic distribution and gender balance of staff, and called for more concrete efforts to ensure the international character of the staff of the Organization.   She would have preferred a clear indication of the problems encountered by the administration relating to ensuring equitable geographical distribution.  She expected the administration to adhere to relevant administrative instructions guiding the use of consultants and individual contractors.  She noted that it was imperative that procurement entities strictly abide by relevant regulations.  She trusted that the Secretariat would monitor developments relating to the implementation of enterprise resource planning and IPSAS.

ANDREW HILLMAN ( United States) said that the Board of Auditors needed to reach delegations in sufficient time to permit detailed analysis of their findings and recommendations.  He had found it difficult to conduct proper examination and consultations, because several reports were issued as recently as a week ago.  He called the problem chronic, and welcomed suggestions for a remedy from other delegations and the Board.

He highlighted some critical findings of the auditors: adverse and qualified opinions on implementation of UNDP program expenditures executed by Governments and non-governmental organizations; UNDP’s failure to complete monthly bank account reconciliations; internal control weaknesses in UNDP’s implementation of the enterprise resource planning system; qualified opinions of UNFPA’s project auditors; and discrepancies in the reports of the value of non-expendable property for UNEP headquarters.

He was also deeply troubled with additional non-expendable properties-related findings, such as failure to confirm or locate $23.45 million in items in United Nations financial statements; total lack of physical inventory for the United Nations University Program for Biotechnology in Latin America and the Caribbean since 2001; and no physical inventory carried out for UNODC headquarters.  He agreed with ACABQ that the transition to IPSAS could be a considerable challenge.  His delegation planned to pursue the matter further, as it attached importance to the transition.

He then expressed concern over the lack of compliance with the Procurement Manual and General Assembly resolutions on procurement, and concurred with ACABQ’s view that it was a serious matter.  Staff and officials found responsible should be held accountable, because of the possibility for fraud, waste, abuse and mismanagement, which could damage the reputation and resources of the Organization.  He supported mandatory periodic rotation of staff responsible for procurement services.  He was pleased to note the overall decrease in the number of inactive United Nations trust funds from 65 to 35 in the current biennium, with a combined reserve and fund balance of $27.5 million.  He welcomed hearing more from the Secretariat on the Board’s observation that the trust fund management effort might not be sustained.  He then said that timely implementation of recommendations was critical, and worried that 7 recommendations from the 1998-1999 biennium had yet to be fully implemented.

Office of Internal Oversight Services

INGA-BRITT AHLENIUS, Under-Secretary-General for Internal Oversight Services, introduced the reports of OIOS.  Among the Office’s other projects, she highlighted the audits of information and communication technology management at ECE and the United Nations Conference on Trade and Development (UNCTAD), which disclosed the need for improvement in the areas of information technology governance, strategic planning, access security and contingency and business-continuity planning.  OIOS provided continuous audit coverage of the Capital Master Plan -– the most ambitious construction project the Organization had ever taken.  OIOS had also commenced a quick-impact audit of the Organization’s compliance with the pandemic planning and preparedness guidelines and undertaken investigations of potential fraud in the United Nations procurement activities.  A special OIOS Procurement Task Force had been established in January this year.  An investigation into reports of alleged misuse of vehicles had resulted in a senior official being found to have inappropriately used United Nations vehicles and drivers for private purposes.

Now was the time for the Organization to institutionalize a culture of risk management, compliance and control consciousness, she said.  The implementation of a robust internal control framework would be an important and necessary step in that direction.  In that connection, she stressed that responsibility for internal control rested with management.  The implementation of an internal control framework would also provide the guidelines, under which programme mangers must take full ownership of internal control and be called on to report on the effectiveness of internal control in the programmes under their leadership.

Regarding the audit of ESCWA, she said that, subsequent to the inspection, she had been informed that ESCWA’s management had established an action plan to address the recommendations made by OIOS and that, in several areas, action was under way.  She was pleased that the comments of the Secretary-General on the report welcomed the OIOS report and the recommendations contained therein.  That said, she saw that the Secretary-General merely transmitted ESCWA’s comments, which were well known to OIOS and already partially reflected, in italics, in the body of its report.  OIOS would like to stress that all recommendations in document A/61/61 aimed at helping ESCWA to improve its management and administration.  Therefore, OIOS would encourage the Commission’s management to implement all of them.

WARREN SACH, United Nations Controller, then introduced the comments of the Secretary-General on the OIOS annual report.  He said, among other things, that a strong OIOS was essential to the functioning of the United Nations.  Providing clarifications to the report, he also addressed the issue of the OIOS funding restrictions, saying that table 2 in the note contained in document A/61/264 (part I)/add.2, detailed the resources approved by the Assembly for three biennia.  The overall approved funding would appear to be adequate, and some $1.4 million of unspent funds had been surrendered for 2004-2006, for example.

HANY ABDEL-AZIZ, Chief of Administration, ad interim, at ESCWA, said the Commission had accepted 14 of the 20 recommendations of OIOS, and most of them were under implementation.  Six recommendations had been rejected by the Commission, however.  The Commission had carried out a number of important reforms over the years.  It pursued excellence in management and looked forward to continued cooperation with OIOS, in particular in implementing the recommendations it had accepted.

Ms. PEHRMAN ( Finland), speaking on behalf of the European Union and associated States, said that the Union welcomed the clear reporting from OIOS on its annual activities.  OIOS critical recommendations should be fully implemented, unless reasons were given for why that was not possible.  The implementation rate of the recommendations reflected the commitment of the United Nations to the maintenance of an effective system of internal control.  Thus, she wished to hear more about the reasons for non-implementation of recommendations, including why many of the critical recommendations from prior years had not been acted upon.

The efforts of OIOS to improve its own working methods were welcomed and must be encouraged, she continued.  One example was the new system of “issue track”, which had replaced seven disparate databases, to ensure a better follow up of the implementation of the recommendations.  That was a real innovation in the oversight debate.  She also welcomed the Office’s continuing efforts to strengthen the results-based management culture within the United Nations.  The Union was interested in the quick-impact audits to assess the preparedness of the Organization to address future challenges and have more information about that process.  The Office’s cooperation with other oversight bodies was a necessary element in the oversight framework everybody wanted to achieve.

Turning to the high-risk areas of health, security and safety, programme management, information and communication technology, Capital Master Plan and integrity violation, she said that the European Union looked forward to discussing them during informals.  OIOS had also drawn attention to the systemic issue of its funding, as well as access to records and personnel.  The Union supported strengthening the operational independence of OIOS, including providing it with budgetary independence to eliminate potential conflict of interest arising from the processing of the Office’s budget requests through the Department of Management.  The resources must be adequate and access to information unencumbered and prompt, so that any audit assignments could be finalized and the maintenance of an effective oversight system could be guaranteed.  She welcomed the recently adopted risk-assessment approach and supported further progress in that direction.  Among other things, the risk assessment would allow OIOS to identify the resources required to conduct oversight assignments.  Thus, the risk assessment also provided the basis for OIOS funding requirements.  She looked forward to discussing the strengthening of the evaluation function of OIOS, particularly in the context of the governance and oversight review.

Regarding the ESCWA inspection, she said that many of the recommendations would improve the effectiveness of the Commission, and noted with satisfaction that results-based management in ESCWA was one of the most advanced in the United Nations and that solid training had been provided to management and staff.  She also noted that ESCWA had not accepted all the OIOS recommendations and looked forward to discussing those in more detail.

Ms. LOCK (South Africa), speaking on behalf of the Group of 77 and China, expressed concern over the denial to OIOS of access to records and personnel, and said she would be looking further into preventing such instances from again occurring.  She welcomed OIOS efforts to engage the Joint Inspection Unit and the Board of Auditors and avoid duplication.  She shared the view that OIOS needed to adopt and adhere to a formal internal control framework, and praised the launch of a systematic risk-assessment methodology and the issue track system for monitoring of the implementation of OIOS recommendations as steps forward, in that regard.  She was pleased with the 1,919 recommendations resulting in $49.2 million in identified potential savings, of which $14.2 million had actually been saved.  She was concerned with the non-implementation by programme managers of recommendations and sought to examine the reasons behind it, especially relating to critical recommendations.

She welcomed the OIOS investigations of sexual exploitation and abuse, and said they needed to proceed based on General Assembly resolution 59/300.  She wished to draw attention to OIOS investigations related to procurement.  She sought more information and copies of the final reports of the Procurement Task Force, and sought more information about the funding arrangements of the Task Force, as well as the amount of resources that had been expended to date in carrying out procurement-related investigations.  She sought further elaboration on the planned comprehensive audit of the Department of Management’s accountability measures, as well as the comprehensive and objective review of the delegation of authority from the Department of Management to the Department of Peacekeeping Operations.  She then stressed that OIOS audits and investigations should not be done at the expense of evaluation and monitoring.

Finally, on the matter of ESCWA, she welcomed the positive findings of the review of the body by OIOS, and called it one of the most advanced Secretariat entities in applying results-based management.  She noted that ESCWA had not accepted six of the OIOS findings, and stressed the importance of the implementation of such recommendations.  She trusted that OIOS and ESCWA could resolve any possible differences of opinion.

Mr. HILLMAN ( United States) commended OIOS for identifying $49.2 million in recommended cost-savings in United Nations operations in the past year.  But, he noted that actual savings and recoveries, as of 30 June 2006, totalled only $14.2 million, so he called it imperative that appropriate action be taken to realize the remaining savings.  He appreciated the 1,919 recommendations issued by OIOS to United Nations entities to improve accountability, internal controls and overall organizational efficiency and effectiveness.  He was concerned that only 42 per cent of the recommendations identified by OIOS as critical to successful functioning of the Organization had been implemented by programme mangers.  He was also concerned that 34 recommendations issued prior to 1 July 2002 -- 17 of which were deemed critical -- had not yet been fully implemented, and said that demanded explanation by the Secretariat.  He was concerned with the failure of UNDP, UNEP, and UN-HABITAT to implement recommendations that were more than three years old, and sought to understand why 68 OIOS recommendations were not accepted by programme managers.

He welcomed the establishment of OIOS recommendations issue track system.  He said it would be helpful to learn what access programme mangers had to the system, including any measure that would deny access to users if a mandatory update had not been made.  He welcomed initiatives launched by OIOS to develop risk-based work plans to assist in identifying oversight priorities, and welcomed learning more about OIOS estimated requirements to conclude that initiative.  He requested further clarification from OIOS on its future proposed role in conducting internal audits of the Untied Nations Compensation Commission.  He took note of the long delay in filling an auditor position that had been approved for 18 months, and sought more understanding of why OIOS needed more resources to audit the Commission in 2007.  He sought expedited review and reporting to the General Assembly on OIOS findings related to sexual exploitation and abuse cases and possible instances of fraud in United Nations procurement.  Finally, he looked forward to discussions concerning proposals to strengthen OIOS and further its operational independence.

IMTIAZ HUSSAIN ( Pakistan) said that OIOS had played an important role in promoting a culture of accountability and responsibility at the United Nations.  He was concerned over the large number of recommendations and, in particular, the lack of implementation of the critical ones.  He was concerned at the decline in the overall implementation of critical recommendations, as well as the age of unimplemented ones.  Those indicators were a measure of the impact of the Office’s work.  Poor implementation represented a failure to respond on the part of the Secretariat, especially the senior management.

Pakistan urged the Department of Peacekeeping Operations, the Department of Disarmament Affairs, UN-HABITAT and UNMOVIC to fully respect the recommendations of OIOS, he continued.  He fully endorsed the five areas that, in the view of the OIOS, fell in the category of the “highest risk”, and urged programme mangers in those areas to demonstrate vigilance and ensure full implementation of relevant rules, regulations and procedures.  He also welcomed the launch of a more systematic risk assessment methodology by OIOS and a new system of monitoring the implementation of recommendations known as “issue track”.  The responsibility for internal control and management of risks lay squarely with programme managers and, in that context, he supported the call for a formal, internal control framework.  Strengthened accountability and transparency were essential.

He looked forward to the audit of the Department of Management, especially the examination of the method of assigning responsibility within the Department and effective accountability, as well as the measures in place to ensure transparent and effective operation.  He noted with concern the breaches of financial regulations in procurement cases.  Similarly, the issues pertaining to the delegation of authority by the Department of Management to the Department of Peacekeeping Operations should be comprehensively and objectively reviewed.  OCHA should fully implement the recommendations on improving coordination and better organization of its work.  He also addressed the irregularities observed in UNHCR and regretted the continuous failure of the Compensation Commission to pay heed to the critical recommendations of OIOS, especially those relating to avoiding the possibility of fraud and duplication of payments in claims.

Turning to the external review of OIOS, he said that it should lead to improvements in several areas, including operational and financial independence of OIOS; strengthening of its capacity in core functions; streamlining the budgetary process; coordination with other oversight bodies; and consolidation of all legislative mandates pertaining to its oversight role and responsibilities.  OIOS should continue to maintain its central evaluation functions in the Secretariat, which could not be left to the programme managers alone.  It should bring more coherence in the evaluation, inspection, investigation and internal audit activities.  OIOS should have full access to information and personnel in the conduct of its functions.  The General Assembly should be informed of the representation of developing countries in various branches of OIOS, such as the investigation department.  The Independent Advisory Committee should not encroach on the budget or the administrative authority of OIOS.  As a matter of principle, OIOS should have its own budget approved by the Fifth Committee.

MUHAMMAD MUHITH ( Bangladesh) said that the report on the activities of OIOS had come out at a crucial time when the United Nations was facing many challenges and undergoing reform amidst calls for greater accountability and transparency.  It reflected the outcome of the groundwork OIOS had been pursuing for a more robust oversight office.  He agreed with the Under-Secretary-General that the United Nations had to align itself within a framework that adhered to best practice in governance and oversight and that the management of risks lay squarely with programme managers.

Continuing, he commended OIOS for fostering its working relationship with its functional peers outside its oversight mandate, and specifically for its interactions with the Board of Auditors and Joint Inspection Unit in order to avoid duplication and optimize synergies.  That would surely contribute to better oversight outputs by those bodies.  He also took note of reported impediments to the work of OIOS, which included inadequate funding.  Due to shortages of funds, OIOS had not been able to provide oversight on many cases.  His delegation, in light of resolution 48/218 B, which emphasized the operational independence of the OIOS under the authority of the Secretary-General, looked forward to discussing the issue.  He was also concerned over the fact that one Special Representative of the Secretary-General of a peacekeeping mission had obstructed OIOS in the course of its mandated tasks. 

He noted with appreciation several initiatives by OIOS, including the launching of a systematic risk-assessment methodology in June 2006, streamlining the audit process to increase quality and quantity of services with the help of information and communication technology, introducing a single recommendations database and initiating the process of establishing dedicated professional practice units, or focal points, in each division of the Office.  It was critically important for the health of the Organization that OIOS recommendations were implemented.  The Office had issued a total of 1,919 recommendations in the reporting period, out of which 932 were considered critical.  As of 30 June, 47 per cent of all recommendations and 42 per cent of critical ones had been implemented.  He understood that implementation might take some time, but there still remained ample scope for improvement and raising the rate of implementation to a satisfactory level.  His delegation was seriously concerned about long-standing non-implementation of recommendations, as mentioned in the report.

ANA ZOBRIST RENTENAAR ( Switzerland) welcomed the current momentum for strengthening oversight in the United Nations and said that the first part of the OIOS annual report covered many issues that deserved to be pursued further.  Highlighting several issues of particular interest to her delegation, she welcomed the launch of the “issue track” -– a single recommendation database to streamline the monitoring of OIOS recommendations.

The rate of implementation was still too low, she continued, especially in the first six months after the issuance of critical recommendations, when quick action by the Secretariat was necessary.  She was also concerned about the age of some outstanding recommendations, as well as the number of recommendations not accepted.  That was a reflection of the accountability of management -– or the lack thereof -– and the representation of internal controls; issues that would be addressed in the context of the governance and oversight review.

While there had been an increase in complex inter-agency programmes, there were no established procedures for integrated oversight, she said.  The participating agencies were conducting their own audit and oversight of their share of the programme, potentially leading to oversight gaps and duplications.  The tsunami relief operation was a case in point.  Despite a request from the Assembly, coordination efforts by OIOS had proven to be very difficult, resulting in a lack of accountability for the financial resources involved, as well as the lack of coherence in the audit approach.  While the oversight of jointly funded and operated programmes had to be taken up more comprehensively in the context of the governance and oversight review, in the concrete case of tsunami relief operations, she urged the Secretary-General to invite the entities involved to collaborate with OIOS in order to facilitate progress on the consolidated report mandated by the Assembly.

She added that, pursuant to a request of the World Summit, OIOS was elaborating, in annex II of the annual report, on the feasibility to expand its services to provide internal oversight to United Nations agencies that might request such services.  It had concluded that it was feasible to provide such services with a memorandum of understanding determining the scope and financial modalities.  The Steering Committee report had taken up that question as well, asking for a clarification of the responsibility of OIOS with regard to organizations that did not have separate independent oversight.  That issue was of great importance to her delegation and should be addressed by the Assembly in the context of its resolution on governance and oversight review.

Mr. BASNET ( Nepal) agreed that OIOS needed to be provided unhindered access to information, so it could carry out its mandate without impediments.  He welcomed the joint annual meeting of OIOS with the Board of Auditors and the Joint Inspection Unit, and appreciated initiatives such as issue track for the monitoring of implementation of recommendations and the launch of the systematic risk assessment methodology.  Finally, he welcomed OIOS investigations into sexual exploitation.

Ms. AHLENIUS, responding to the delegates’ statements, offered thanks for the strong support of her work and pledged to spare no effort in clarifying and submitting additional information.  Concerning the Controller’s comment on the OIOS budget, she observed that she had never questioned the level of resources OIOS received, but noted that control of the body’s funding was an infringement of operational independence.  For effective oversight, all elements of OIOS must be independent of management, including its budget.

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For information media • not an official record