Sixty-third General Assembly

Fifth Committee

5^th Meeting (AM)

BUDGET COMMITTEE TAKES UP REPORTS OF INTERNAL AUDIT ADVISORY COMMITTEE,

OFFICE OF INTERNAL OVERSIGHT SERVICES

 

The newly-established Independent Audit Advisory Committee (IAAC) had “hit the ground running”, the representative of New Zealand, speaking also on behalf of Canada and Australia, said this morning, as the Fifth Committee (Administrative and Budgetary) began its review of the reports of that oversight body and the Office of Internal Oversight Services (OIOS).

All speakers in the Committee this morning welcomed the first annual report of the IAAC, which is comprised of five independent professionals who represent themselves, not their countries, and took up its duties only in January of this year.  It is mandated to advise the General Assembly on the scope, results and effectiveness of audit and other oversight functions and on measures to ensure management’s compliance with audit and other oversight recommendations.

David M. Walker, Chair of the IAAC, told the Committee that the IAAC’s terms of reference authorized it to hold only four sessions a year.  Those sessions had to be carefully timed to coincide with the sessions of the Board of Auditors, the Advisory Committee on Administrative and Budgetary Questions (ACABQ) and the General Assembly to facilitate engagement and discussion on relevant reports.  During the three sessions already held, the IAAC had received adequate access to the individuals, documents and reports from across the United Nations system, deemed necessary to conduct its work.

The United States’ representative was one of several countries who indicated they were impressed with the progress the IAAC had made in establishing itself and immediately undertaking review of the OIOS’ budget and other critical oversight topics.

Introducing the report of the OIOS this morning, Inga-Britt Ahlenius, Under-Secretary-General for Internal Oversight Services, described a number of key initiatives aimed at helping lay the groundwork for a more robust oversight office, including the refining of a quality assurance system in the Inspection and Evaluation Division; development of a new Inspection and Evaluation Manual; revision of the Internal Audit Manual and development of a standard training programme in the Internal Audit Division; creation of a Professional Practices Section in the Investigations Division; and work on a comprehensive investigation manual.

She added that “until the Organization developed and embedded a formal internal control framework to ensure that risks were managed effectively and systematically through focused control processes ... [OIOS’] work would continue to uncover deficiencies, which make the United Nations vulnerable to mismanagement and misuse of resources”.

Many delegates praised the volume of work carried out by the OIOS, as outlined in its report.  Over the reporting period, from 1 July 2007 to 30 June 2008, the Office had produced 305 oversight reports and issued 1,755 recommendations.  However, the representative of Antigua and Barbuda, speaking on behalf of the “Group of 77” developing countries and China, noted that 30 recommendations had received no response, representing an almost 100 per cent increase compared with the previous period.  The representative of the United States, joining in the praise for the volume of work the OIOS had carried out, stressed that “it was inappropriate to give the impression that implementation [of recommendations] was optional”.

Several delegations also expressed their approval of OIOS’ adoption of a risk-based workplan.  On risk management, delegations noted that the IAAC had made very helpful comments in that area, and agreed fully with the importance it attached to the development of an enterprise-wide approach to risk management and internal control.

The representative of France also spoke on behalf of the European Union.  Reports were also introduced by Nancy Hurtz-Soyka, Chief of the Accountability and Oversight Support Service.

The Committee will continue its work at 10 a.m. Tuesday, 14 October, when it is scheduled to take up the report on development-related activities in the programme budget for 2008-2009.

Background

The Fifth Committee (Administrative and Budgetary) met this morning to consider annual reports of the Office of Internal Oversight Services (OIOS) and the newly-established Independent Audit Advisory Committee (IAAC).

In its report for the period 1 July 2007 to 30 June 2008 (document A/62/302/Part I), the OIOS underscores the need to develop a formal internal control framework to ensure that risks are managed consistently and systematically through focused control processes across the United Nations.

During the reporting period, the Office issued 305 oversight reports, including seven reports to the Assembly, and 28 closure reports.  The reports included 1,755 recommendations to improve internal controls, accountability mechanisms and organizational efficiency and effectiveness.  Of those recommendations, 804 (46 per cent) were classified as critical to the Organization.  The financial implications of OIOS recommendations issued during the period amount to more than $12 million.  Those recommendations were aimed at cost savings, overpayment recoveries, efficiency gains and other improvements.  The financial implications of similar recommendations that were satisfactorily implemented during the period totalled $4.2 million.

In the report, the OIOS also highlights specific internal initiatives it has undertaken to heighten the quality of its work, including its 2008 risk-based workplans for audit, inspections and evaluation assignments.  The workplans are the product of significant and dedicated efforts on the part of OIOS staff to conduct comprehensive risk assessments of the entities in the Office’s “oversight universe”, to ensure that oversight assignments are prioritized according to the areas of highest risk to the Organization.

The Office also began testing phase II of its recommendation monitoring system -- Issue Track -- which was launched in February 2006.  Expected to become fully operational by 2009, the system will enable departments/offices to view respective OIOS recommendations online and to provide updates on implementation status directly into Issue Track.  Given that the system will become the primary source of exchange between the OIOS and departments/offices on recommendation implementation, a group of focal points were included in the process of formulating system specifications and testing updated software, to ensure that the system was user-friendly.

The report characterizes other organizational initiatives related to strengthening governance as “very much a work in progress”, including the accountability framework, results-based management, enterprise risk management and the internal control framework.  The oversight work during the reporting period observed numerous instances of deficiencies in internal control, which was a reminder of the need to fully develop and embrace such initiatives and make them an integral part of the Organization’s culture.

Related to the strengthening of oversight -- and a key recommendation in the World Summit Outcome -- was the establishment of the Independent Audit Advisory Committee.  Since the inception of that body, in January 2008, the OIOS has met with it on several occasions to present its work, and looks forward to its further guidance.

The addendum to the OIOS report (document A/63/302 (Part I)/Add.1) provides a detailed analysis of the status of implementation of the recommendations, a breakdown of recommendations with financial implications and an analysis of selected recommendations of particular concern.  As at 30 June 2008, 870 (50 per cent) of OIOS recommendations had been implemented by United Nations entities.  Also, 364 (45 per cent) of critical recommendations had been implemented.

On particular issues, the OIOS comments, among other things, on the implementation of the Assembly’s request that the Secretary-General “ensure that, in case of proven misconduct and/or criminal behaviour, disciplinary action and, where appropriate, legal action in accordance with established procedures and regulations will be taken expeditiously”.  In this connection, the Office notes with concern that the Executive Office of the Secretary-General and the Office of Legal Affairs have lagged behind in the prompt referral of cases to national authorities for criminal prosecution.  These delays diminish the potential for recovery of damages and prosecution.

The report also presents several cases to illustrate instances when the Organization has not energetically pursued taking appropriate action to recover losses and damages identified by the OIOS.  For instance, in an investigation by the Procurement Task Force, the OIOS recommended the use of all available means to seek restitution from staff members in courts in relevant jurisdictions through civil or criminal law processes.  The Office of Legal Affairs has responded, however, that the decision to engage in judicial proceedings is a policy matter that should be taken by the Executive Office of the Secretary-General, in consultation with the Department of Management and the Office of Legal Affairs.  As of 1 August 2008, no recovery has been sought through any mechanism.

In connection with another procurement case, the report states that the losing bidders sued the contract winner and settled the civil lawsuit for over $74 million.  The United Nations was not a party to that suit and has not sought any recovery, despite the fact that the Organization was the ultimate victim.  On the issue of civil liability, the Office of Legal Affairs claims that it has initiated an analysis of issues that would assist the Administration in reaching an informed decision.  The OIOS is concerned that this consultation process, which has been ongoing for well over 18 months, has not yet resulted in any action.

The report also contains information on a new OIOS policy, whereby the Office may designate a recommendation “closed without implementation”, if management continues to decline its implementation or has made insufficient or no progress in implementing a recommendation.

Addendum II to the report (document A/63/302/Add.2) contains the Secretary-General’s comments on part one of the OIOS report, as well as the addendum thereto.  The Secretary-General welcomes those reports and provides clarifications on a number of specific issues, including impediments to risk evaluation, operational challenges in procurement-related investigations, use of consultants by the Department of Economic and Social Affairs, management of United Nations laissez-passer, managing recruitment risks, and recovery of losses.

On recovery of losses, the Secretary-General notes in the addendum that recommendations of the OIOS that financial recovery actions be taken do not and cannot automatically result in such action.  Any such recommendation must first go through a careful evaluation process which encompasses an analysis of policy considerations, as well as those of a legal nature, involving all concerned units of the Organization.

In discussing United Nations oversight bodies, the report on the activities of the Independent Audit Advisory Committee (IAAC) for the period from 1 January to 31 July 2008 (document A/63/328) considers coordination and cooperation among the Joint Inspection Unit (JIU), the Board of Auditors and the OIOS in section III, parts A, B and C.  While those three entities meet on a regular basis to coordinate their activities, the IAAC recommends that the OIOS meet with the JIU and the Board of Auditors in an annual joint planning session before finalizing its own workplans to minimize duplication of effort.  The Audit Committee also recommends that the Oversight Office discuss annual plans for conducting joint or coordinated assignments with the JIU.

The implementation of oversight recommendations is a performance indicator in the compact between the Secretary-General and senior managers.  The Management Committee, chaired by the Deputy Secretary-General, monitors implementation of recommendations that the OIOS deems to be of concern; recommendations of the Board of Auditors that have been outstanding for two years; and critical OIOS recommendations over three years old that have not been fully implemented.  Management has made efforts to establish a monitoring and accountability mechanism, which the IAAC will continue to observe for effectiveness along with actions undertaken where managers’ performance targets have not been met.  Further, the IAAC agrees with the Department of Management that implementing a risk management framework and establishing acceptable levels of risk tolerance will assist managers in setting priorities for implementing recommendations.

Having considered the budget for the OIOS under the peacekeeping support account, the IAAC found the OIOS proposal for a hub and spoke structure for its Investigations Division to have conceptual merit, but suggested that it should be implemented in a phased manner to ensure that the transfer of investigators from peacekeeping missions to regional hubs will not leave operational gaps.  Also, the OIOS should have included more information on the cost implications of the proposed restructuring, as well as implications for the provision of investigative services to peacekeeping missions in the short and long terms, and recommended that some resources be provided in the budget to meet short-term needs.

All divisions of the OIOS, including the Investigations Division, should prepare annual workplans, which should be used as the basis for requesting resources, the report states.  Those plans should be completed prior to preparation of the budget, which was not the case for 2008/2009.  Nevertheless, the IAAC recognized the extensive work undertaken by the OIOS to develop its workplan using a risk-based approach and suggested that the Office consider highlighting risks in a high-risk list to give those programmes greater visibility.  Such a list could be issued and updated at least every two years.  Information on related challenges and progress made by departments and offices should also be noted.

Introduction of Reports

INGA-BRITT AHLENIUS, Under-Secretary-General for Internal Oversight Services, introduced the OIOS report, saying that until the Organization developed and embedded a formal internal control framework to ensure that risks were managed effectively and systematically through focused control processes, the prevalence of control deficiencies would remain a recurring theme for OIOS findings.  The Office’s work would continue to uncover deficiencies, which make the United Nations vulnerable to mismanagement and misuse of resources.  For example, in its audit of delegation of authority, the Office had identified a significant lack of clarity regarding the jurisdiction over which the Department of Management’s authority to delegate was exercised and the scope of relevant administrative issuances on delegation of authority.  In other words, delegation of authority -– the mechanism through which key financial and administrative decisions were made  -– was seriously flawed.  As a consequence, there was a risk that authority might not have been properly delegated or formalized.  That could adversely affect accountability and reduce the effectiveness of the Organization’s operations.

She said that, in another audit of the Department of Economic and Social Affairs, the OIOS had found significant deficiencies in the selection of consultants.  Contracts were being awarded repeatedly to a limited number of consultants.  In fact, it appeared that the spirit of competitive selection was largely disregarded.  In the report, one could find more examples illustrating where deficiencies and/or breakdown in internal control had exposed the Organization to unnecessary risk and, in some cases, waste of resources.

She described a number of key initiatives to lay the groundwork for a more robust oversight office, including:  the refining of a quality assurance system in the Inspection and Evaluation Division; development of a new Inspection and Evaluation Manual; revision of the Internal Audit Manual and development of a standard training programme in the Internal Audit Division; creation of a Professional Practices Section in the Investigations Division; and work on a comprehensive investigation manual.

NANCY HURTZ-SOYKA, Chief of the Accountability and Oversight Support Service, introduced the comments of the Secretary-General on the OIOS report.  She said that comments had been provided on the following matters:  OIOS risk assessment conducted at the United Nations Environment Programme (UNEP); measures to facilitate the cooperation of vendors during the conduct of investigations; the established policy and procedures concerning employment of consultants and individual contractors; further information on improvements in the administration of United Nations laissez-passer; and feasibility of reference checks for short-term staff.  Additional information was also provided regarding the standards of health care available to staff and the implementation of recommendations for referral of cases to national authorities for criminal prosecution and financial recovery.

Emphasizing the Secretariat’s commitment to full and timely implementation of OIOS recommendations, she also said that the Secretary-General had tasked the Management Committee with ensuring timely implementation of accepted recommendations.  He had also included the timely implementation of oversight recommendations in his compacts with senior managers.

DAVID M. WALKER, Chairman of the IAAC, introduced the first ever report of that newly established body.  The report represented the consensus views, comments and recommendations of the group of five individual experts that make up that body.  Those individuals represent themselves, not their countries.  The report commented on the OIOS’ budget under the peacekeeping support account and, in that regard, the Committee was looking forward to discussing the proposed restructuring of the OIOS Investigations Division, in the context of the 2009-2010 budget for the OIOS under the support account for peacekeeping operations.

The report also commented on the enterprise risk management and internal control framework portions of the Secretary-General’s report on the United Nations’ accountability architecture, as the only part of that report contained within the terms of reference of the IAAC.  Regarding forthcoming priorities, the focus of the IAAC agenda for its fourth session, which would be held in December 2008, would be on finalizing its three-year work plan; launching its website; and exploring the details of the OIOS risk-based workplanning and budgeting process.

He noted that, as the IAAC’s terms of reference authorized it to hold only four sessions a year, those sessions had to be carefully timed to coincide with the sessions of the Board of Auditors, the Advisory Committee on Administrative and Budgetary Questions (ACABQ) and the General Assembly to facilitate engagement and discussion on relevant reports.  During the three sessions already held, the IAAC had received adequate access to the individuals, documents and reports from across the United Nations system, deemed necessary to conduct its work.

Statements

CONROD HUNTE (Antigua and Barbuda), speaking on behalf of the “Group of 77” developing countries and China, expressed appreciation for the high quality of the IAAC report, taken in the context of the terms of reference establishing the Committee.  The Group supported the importance that the IAAC attached to greater cooperation among various oversight bodies, particularly in the sharing of assignment-related information and workplans.  The Group also shared the view of the IAAC that the Secretary-General’s proposal to establish a new Division for Accountability should be revisited, among other things, with respect to its responsibilities for risk management.  Such a proposal should also ensure that managers retained their primary responsibilities for the work done in their respective departments and programmes.  On the recommendation to establish a Chief Risk Officer function, the Group was of the view that it should not detract from the aforementioned primary responsibilities.

Regarding the observations of the IAAC on the Board of Auditors report, the Group reaffirmed its willingness to work with its partners to resolve the issue of end-of-service liabilities in a meaningful manner, he said, not only on their proper accounting treatment, but also on their funding.  He was also concerned about the lack of proper accounting for non-expendable property.  He shared the view of the IAAC that it represented a serious breakdown in the basic internal controls of the Secretariat.  The Group was also very concerned that the situation had not been highlighted earlier by the Secretariat or its internal audit unit.

Turning to the activities of the OIOS, he reiterated the Group’s support for its operational independence and its role in assisting the Secretary-General in fulfilling his internal oversight responsibilities.  Noting that the Office had issued 1,755 recommendations during the reporting period, he expressed concern that 30 recommendations had received no response, representing an almost 100 per cent increase compared with the previous period.  He was also concerned that the number of recommendations not started had almost tripled, from 40 to 117.  The Group noted with concern that certain entities had consistently failed to provide information about the implementation of OIOS recommendations.  In that regard, he emphasized the importance of implementing all recommendations and ensuring full cooperation of all departments with the OIOS.

The Group noted that the Inspection and Evaluation Division had identified 12 proxy indicators for its risk assessment methodology, which the IAAC had assessed to be a reasonable basis for establishing the 2008 audit, inspection and evaluation workplans.  He viewed such cooperation as vital in strengthening the overall oversight capability of the Secretariat.  In general, the Group noted various internal reform initiatives of the Office and would like to stress that the reports on external reviews of various OIOS departments should be shared with the Assembly.  He also reiterated the importance of achieving equitable geographic distribution and hiring suitably qualified personnel in the Office.

While noting with appreciation the work undertaken by the Internal Audit Division, bearing in mind the comments of the IAAC on inventory controls, the Group was concerned that the matter had not been detected by the Internal Audit Division.  With regards to the Investigations Division, the Group had previously stated its views in the context of the Secretary-General’s report on strengthening investigations.  Given that a response was yet to be received to the Assembly’s request for more information in its resolution 62/247, the Group was of the view that it would be premature to discuss the issue further.  He did note, however, that work on a comprehensive investigation manual was well advanced and looked forward to seeing the full draft.

And finally, he noted the OIOS comments on the audit of the Capital Master Plan and the United Nations Compensation Commission.  He looked forward to discussing its final report on the comprehensive review to the General Assembly (document A/63/266) in the context of the Capital Master Plan.  He also noted that the Compensation Commission had implemented all audit recommendations issued by the OIOS.

GREGORY CAZALET (France), speaking on behalf of the European Union, welcomed the high quality of the first annual report of the IAAC and assured that Committee of the ongoing support of the Union.

CHERITH NORMAN ( United States) said that the OIOS had played, and would continue to play, a central role in enhancing the effectiveness of all United Nations programmes by exercising appropriate internal oversight, promoting responsible administration of resources, and by identifying instances of abuse, fraud, waste and mismanagement, as well as relevant measures to correct such actions.  She further praised the extensive and productive volume of work OIOS the had carried out, noting that 804 of its recommendations were classified as critical for the Organization, and commended it for identifying $12 million in cost savings and realizing $4.2 million of them last year.  She said, further, that it was imperative to take appropriate action to realize the remaining savings recommended.

The operational independence of the OIOS was crucial to its effective functioning, she said, adding that the Office needed sufficient resources to perform its core functions, free of any real or perceived influence by the very bodies or officials it was intended to oversee.  That was particularly important as the Procurement Task Force’s caseload would be integrated into the Investigations Division within the OIOS, further increasing the demand on resources.  She expressed concern that there were insufficient posts and resources to adequately cover the caseload to be assumed by that division.  She also wanted to learn more about the proposal to redeploy investigators using a “hub” system.

Continuing, she singled out a number of areas in the report for praise or concern.  She welcomed OIOS implementation of a risk-based workplan for 2008, noting IAAC’s recommendation that OIOS’ Investigations Division also implement such a plan.  She shared the concern that the terms “Secretariat”, “Organization”, and “United Nations” lacked a clear definition and asked that the Department of Management clarify how they would address the issue.  She further expressed concern regarding closing recommendations that had not been implemented, stating that it was inappropriate to give the impression that implementation was optional.  She believed that recommendations should be fully implemented and urged the OIOS to report on “closed” recommendations and problems encountered in that regard in future reports.

She was also troubled by the lack of transparency, fair competition and adequate documentation in the selecting of consultants in the Department of Economic and Social Affairs, as reported by the OIOS.  At the same time, she was reassured to learn that those guilty of fraud and embezzlement at the Office for the Coordination of Humanitarian Affairs in Jakarta had been held accountable.  The report’s account of the investigation into weapons charges in Nairobi was disconcerting, she said.  With a gun being misplaced and a total lack of controls in the armoury, it seemed as if managers had abdicated their responsibility to safeguard the facility.  Finally, she expressed concern at the untimely referral of cases to national authorities for criminal prosecution by the Secretariat, particularly by the Office of Legal Affairs.

Regarding the report of the IAAC, she was impressed with the progress that body had made in establishing itself and immediately starting in on its work by reviewing the OIOS budget and other critical oversight topics.  She agreed with the Committee’s conclusion that enterprise risk management was not something that should be “piloted”, but implemented gradually, starting in units that were thought to be a good fit.  She further agreed with the Committee’s concern regarding delays in adopting International Public Sector Accounting Standards.

PAUL BALLANTYNE ( New Zealand), also speaking on behalf of Australia and Canada, said that the report before the Committee was a clear sign that the IAAC had “hit the ground running”.  One could already see that the IAAC could be a great asset in advising the Assembly in the discharge of its oversight responsibilities.  He remained committed to continuing to engage constructively with Member States to further strengthen the governance and oversight framework of the Organization, in general, and to put the expert advice of the IAAC to the best use.  He noted the rules of procedure adopted by the Committee, which were consistent with its terms of reference.  He saw clear benefits from the Committee’s proposed annual workplan and saw its inclusion in the report as a clear sign of the Committee’s commitment to transparency.  It was important that future workplanning provided for interaction with the ACABQ on budgetary issues it was responsible for advising upon.  It was unfortunate that the ACABQ had not considered IAAC advice on OIOS budgetary proposals.

Among other interesting issues raised in the reports, he mentioned the work done in the OIOS to develop a risk-based workplan.  Looking ahead, he hoped the IAAC would comment not only on that issue, but also on its completion rate.  The Board of Auditors had pointed out that the OIOS produced far fewer audits than planned.  Consistent with its mandate to advise on risk management, the IAAC had made very helpful comments in that area.  He agreed fully with the importance it attached to the development of an enterprise-wide approach to risk management and internal control.  The IAAC emphasized that it was not just a technical exercise, but a major change in organizational culture requiring clear leadership from the highest levels.  It was critical that the IAAC continued to be deeply engaged in further development of the risk management framework of the United Nations.  He looked forward to informal negotiations on more specific elaboration of what the IAAC would see as the logical next steps, what form the required leadership should take, the role of a possible Chief Risk Officer, and when such a function could be phased in.

Continuing, he said the IAAC drew attention to some of the key issues emerging from the Board of Auditors report, including the issues of end-of-service liabilities and key aspects of asset management.  He intended to engage constructively on those important issues under the relevant agenda items.  The IAAC also raised the question of what role it might play in the evaluation and review of the functions and reporting procedures of the OIOS and the selection of its future Under-Secretary-General, both during the sixty-fourth session.  Those were issues worth reflecting upon.  He looked forward to working closely with the Committee in the future.

At the conclusion of the meeting, Ms. AHLENIUS and Mr. WALKER thanked the delegates for their support and said they looked forward to further discussions in informals.

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For information media • not an official record