Sixty-sixth General Assembly

Fifth Committee

5^th Meeting (AM)

Adopting Consensus Text, Budget Committee Ensures Six Countries Maintain

 

Voting Rights in General Assembly, Despite Budget Arrears

 

Also Takes Up Reports on Work of Board of Auditors, Focusing on Voluntary

Funds Administered by Office of United Nations High Commissioner for Refugees

In a session during which the General Assembly was slated to scrutinize the complex methodology used to determine each Member State’s annual budget contribution, the Fifth Committee (Administrative and Budgetary) today adopted a consensus resolution that allowed six countries to retain their voting rights even though they had fallen behind in paying their annual dues to the Organization.

The resolution would give the Central African Republic, Comoros, Guinea-Bissau, Liberia, Sao Tome and Principe and Somalia a reprieve from the application of Article 19 of the United Nations Charter — which prevents a Member State from voting in the General Assembly if the amount of its arrears equals or exceeds the amount of contributions due from it for the preceding two years.

In its resolution, the Fifth Committee agreed that the six nations’ budget woes stemmed from conditions beyond their control.  They will be able to cast their votes during this year’s sixty-sixth session as the Assembly gears up to review the complex methodology behind the gauge — the so-called scale of assessments — for 2013-2015.  The scale’s methodology is periodically reviewed to reflect economic changes as will as the concerns of Member States, and the present methodology has been in use for the three-year period ending in 2012.

In other business, the Committee weighed several reports issued by the Board of Auditors and Joint Inspection Unit, two of the Organization’s oversight bodies, and the Secretariat.  Speaking on behalf of the Group of 77 and China, the representative of Argentina backed the work of the Organization’s internal and external oversight mechanisms.  The Group also called on 15 United Nations entities to fully and rapidly carry out all the Board of Auditors’ recommendations and strengthen inter-agency coordination when implementing recommendations that cover more than one organization.

Liu Yu, Director of External Audit and Chair of the Audit Operations Committee, introduced a Board of Auditors report that reviewed the financial statements of the voluntary funds administered by the Office of the United Nations High Commissioner for Refugees (UNHCR) for 2010, and another Board report on the implementation of Board recommendations for the biennium 2008-2009.

Although the auditors had found no material errors on the refugee agency’s financial statements, the High Commissioner’s Office was “seriously unprepared” for the final audit and lacked audit trails to enable reconciliation from its accounting systems to the financial statements, said Mr. Yu.  In addition, UNHCR’s reports had a large number of errors and its accounting policies did not reflect accounting practices.  Also, the agency faced obstacles to successfully adopt the International Public Sector Accounting Standards, particularly the ability to produce accurate and timely year-end accounts — a crucial test of readiness for implementation of the Standards.

Susanne Frueh, speaking on behalf of Mounir Zahran, Chair of the Joint Inspection Unit, introduced the Secretary-General’s note transmitting the Joint Inspection Unit’s report on United Nations audit functions.  She said that survey had identified internal audit challenges to the follow-up and implementation of audit recommendations, including management threats and interferences.  The report noted that five organizations had yet to set up audit/oversight committees with an advisory role to management and legislative bodies, and those that had been established focused mainly on internal audits only. 

Collen Kelapile, chair of the Advisory Committee on Administrative and Budgetary Questions (ACABQ), introduced several reports.  Regarding the Board of Auditors’ report on UNHCR, the Advisory Committee recognized the challenges resulting from the refugee agency’s operational environment, but expected it to take the necessary measures to address the issues raised and ensure full and timely implementation of the Board’s recommendations.

He said the Advisory Committee had noted that weaknesses in financial management control, also noted by the Board, had to be addressed to ensure successful implementation of the international accounting standards in 2012.

Kenneth Herman, Senior Adviser on Information Management Policy Coordination, Secretariat of the United Nations System Chief Executives Board for Coordination (CEB), introduced the note of the Secretary-General transmitting his comments on the Joint Inspection Unit’s report.  He noted the range of responses that agencies provided to the Joint Inspection Unit’s recommendations and said organizations in the United Nations system valued the report and welcomed its comprehensive nature.

Kumiko Matsuura Mueller, Controller and Director of the Division of Financial and Administrative Management of UNHCR, introduced the Secretary-General’s note transmitting the agency’s report on transitional measures concerning its financial reporting under the international accounting standards.

The Committee will reconvene at 10 a.m. Friday, 7 October, to take up programme planning and the programme budget:  biennium 2010-2011.

Background

The Fifth Committee (Administrative and Budgetary) met today to take action on a draft resolution under its agenda item on the scale of assessments, as well as to discuss financial reports and audited financial statements and reports of the Board of Auditors, and special subjects of the proposed programme budget of the biennium 2012-2013.

Under the financial reports heading, the Committee had before it the financial reports and audited financial statements, and reports of the Board of Auditors for the period ended 31 December 2010 and implementation of the recommendations of the Board relating to the biennium 2008-2009 (document A/66/377), which notes that the Advisory Committee on Administrative and Budgetary Questions (ACABQ) had considered the Board of Auditors’ reports on the financial statements of the voluntary funds administered by the Office of the United Nations High Commissioner for Refugees (UNHCR) for the year ended 31 December 2010 and the Board’s report on implementing the recommendations relating to the biennium 2008-2009.

ACABQ notes no material errors in the United Nations refugee agency’s financial statements and welcomes its progress, saying that was the reason it issued an unmodified opinion for the year ended 31 December 2010.  The ACABQ recognizes that UNHCR’s operating environment, which requires a rapid response to emergency situations, poses challenges to financial management and controls.  Nonetheless, it expects the refugee agency to fully adhere to the Organization’s financial regulations and rules and take appropriate steps to fully implement the Boards’ recommendations, making every effort to do so in line with the deadline set forth on document A/AC.96/1099/Add.1. 

ACABQ also expresses concern that weaknesses concerning financial management and controls, coupled with low financial management capacity in the field, significantly threatened UNHCR’s ability to produce financial statements compliant with the International Public Sector Accounting Standards.  It trusts that senior management will give that priority attention to ensure the successful implementation of the Standards in 2012.

Further, ACABQ reiterates its call for full, rapid implementation of the Board’s recommendations relating to the biennium 2008-2009 and says senior managers must give the matter priority attention to ensure the root causes of problems are addressed systematically.  It recalls the Assembly’s request to hold managers to account for identifying priorities, setting clear time frames and assessing actions in that regard. 

The Secretary-General’s note that transmits the report of the Board of Auditors on implementation of the recommendations of the Board of Auditors relating to the biennium 2008-2009 (document A/66/139) reflects the status of implementation as of 31 March 2011 of recommendations to 15 entities.  They include:  the United Nations, International Trade Centre of the United Nations Conference on Trade and Development (UNCTAD)/World Trade Organization, United Nations University, United Nations Development Programme (UNDP), United Nations Children’s Fund (UNICEF), and United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA).

Also included are:  the United Nations Institute for Training and Research (UNITAR), United Nations Environment Programme (UNEP), United Nations Population Fund (UNFPA), United Nations Human Settlements Programme (UN-Habitat), United Nations Office on Drugs and Crime (UNODC), International Criminal Tribunal for Rwanda, International Tribunal for the Former Yugoslavia, United Nations Joint Staff Pension Fund and the United Nations Office for Project Services (UNOPS).

According to the report, compared to the 2006-2007 period, the number of Board recommendations increased 16 per cent from 507 to 590; the rate of implementation remained about the same, at 47 per cent; the rate of partial implementation increased slightly to 48 per cent; and the rate of recommendations not implemented also increased slightly to 5 per cent. 

The administrations of the listed specialized agencies and programmes seriously considered the recommendations and bolstered their efforts to implement them.  For example, senior management teams are using the Board’s reports and recommendations to determine areas for priority action and monitoring as part of their ongoing corporate reporting arrangements; identifying and developing action plans to address the root causes of recurring audit observations; and setting clear target dates and completion standards to implement the recommendations. 

But the Board points to areas which require greater efforts on the part of the organizations, in particular the need to create dedicated follow-up mechanisms or functions and to monitor action aimed at addressing the root causes of Board-identified problems. 

The financial report and audited financial statement for the year ending 31 December 2010 and the report of the Board of Auditors of the voluntary funds administered by the United Nations High Commissioner for Refugees (A/66/5/Add.5) includes the Board’s financial overview and findings of UNHCR’s financial statements for the period under review.

Also before the Committee is the Secretary-General’s note transmitting the report of the Joint Inspection Unit (JIU) on the audit function in the United Nations system on its review of those functions (document A/66/73).  According to the report, despite significant progress in the past decade, system-wide coherence and coordination among the Organization’s internal and external audit entities was still lacking and many bodies need to improve independence, capabilities, resources and processes to overcome performance gaps and to more closely meet stakeholders’ expectations.  The report gives 18 major recommendations for enhancing efficiency and effectiveness, and identifies major challenges faced by internal audit and oversight heads and external auditors.  It also lauds the recent creation of audit/oversight committees with an advisory role to management and legislative bodies as a major step to improving audit/oversight functions.

The Secretary-General’s note transmitting his comments and those of the United Nations System Chief Executive Board for Coordination on the JIU report (document A/66/73/Add.1) states that United Nations agencies have generally concurred with the Joint Inspection Unit’s recommendations and that several of the recommendations are already in line with established practice.  They note that agencies concurred with the recommendations to review the internal audit charter and financial rules and regulations pertaining to the internal audit function.  They also agree that legislative and/or governing bodies should submit internal audit plans and resource requirements to senior management and the board for review and approval, but note that the definition of “board” is broad and should cover a wide range of public and private sector organizations.

While agreeing that audit plans should seek input from senior management but be prepared independently from it, agencies felt the annual planning process for internal audit functions should duly take into account the priorities of executive heads and senior management, according to the note.  They believe that the proposal to consolidate all internal oversight functions into one unit works for some agencies, but it lacks justification in large, complex organizations.

Under the special subjects of the proposed programme budget for the biennium 2012-2013 heading, the Committee had before it the Secretary-General’s note (document A/66/352) transmitting UNHCR’s report on transitional measures concerning financial reporting by the Office of the United Nations High Commissioner for Refugees under the International Public Sector Accounting Standards.  It notes UNHCR’s intention to comply with the standards as of 1 January 2012 and to submit for approval to its Executive Committee’s sixty-second session in early October revised financial rules for voluntary funds it administers, in accordance with the United Nation system’s accounting standards.  In order to implement the rules in a timely way, UNHCR asked the Assembly to authorize it to apply mutatis mutandis the Financial Regulations and Rules to its voluntary funds accounting process and financial reporting.

The report of the Advisory Committee on Administrative and Budgetary Questions (document A/66/376), which considers the Secretary-General’s above-mentioned note on UNHCR’s report, states that the ACABQ has no major objections to the proposed revisions to the UNHCR financial rules for voluntary funds, nor did it object to UNHCR’s request to apply mutatis mutandis to them.

Action on Draft

The Committee began its work by adopting without vote a resolution on the scale of assessments for the apportionment of the expenses of the United Nations:  requests under Article 19 of the Charter (A/C.5/66/L.2).  That text allows the Central African Republic, Comoros, Guinea-Bissau, Liberia, Sao Tome and Principe and Somalia to vote in the General Assembly until the send of the sixty-sixth session.  Further, the Committee agreed that that the failure of those six Member States to pay the full minimum amount necessary to avoid the application of Article 19 of the Charter was due to conditions beyond their control.

Introduction of Reports

Opening the Committee’s consideration reports, LIU YU, Director of External Audit (China) and Chair of the Audit Operations Committee, introduced the reports of the Board of Auditors on the financial statements of the voluntary funds administered by the Office of the United Nations High Commissioner for Refugees for the year ended 31 December 2010 (document A/6/5/Add.5) and on the status of implementing the Board’s recommendations for the biennium 2008-2009 (document A/66/139).

Commenting on the first report, he said that although the auditors found no material errors on UNHCR’s financial statements, the High Commissioner for Refugees was seriously unprepared for the final audit, lacking audit trails to enable reconciliation from its accounting systems to the financial statements; UNHCR’s report had a large number of errors; and its accounting policies did not reflect accounting practices.  Those issues were resolved satisfactorily during the course of the audit, with some $39 million of misstatements corrected.  That had enabled the Board to issue an unmodified audit opinion, which meant that the financial statements fairly presented UNHCR’s financial position in all material respects.  The Board did identify and comment on significant concerns about UNHCR’s financial management in the long-form report, however.

For example, the inherent uncertainties of UNHCR’s heavy reliance on voluntary funding impacted resource management and decision-making, prompting it to focus on short-term activities that may not always represent the best value, he said.  He also pointed to weaknesses in financial management and control, including a backlog in bank reconciliations — which was a key basic financial control; an absence of rigorous management checks on both the financial statements production and during the year in key areas such as receivables and inventory; and low financial management capability in the field.  The agency faced obstacles to successfully adopt the International Public Sector Accounting Standards, particularly the ability to produce accurate and timely end of year accounts — a critical test of readiness for International Public Sector Accounting Standards implementation.

The long-form report also noted UNHCR’s slow progress in implementing improved performance reporting and results-based management, the absence of a formal and systematic organization-wide approach to risk management despite attempts in 2005 and 2009 to implement enterprise risk management, and weaknesses in the management of implementing partners on which UNHCR was heavily dependent for the delivery of some 1,600 projects worldwide and management of one third of its expenditures, he said.  Moreover, UNHCR’s response to protracted refugee situations — a major and growing strategic area with significant resource management implications — was fragmented due to the lack of robust financial and performance data to aid decision-making.

The report, he said, concluded that the United Nations refugee agency was not yet able to demonstrate tangible benefits from its change programme.  The Board had identified significant concerns over important aspects of UNHCR financial, risk and performance management and the agency’s difficulties in putting value for money at the heart of its decision-making and operations.  “As a result, UNHCR cannot fully and objectively demonstrate that it is using its resources cost-effectively,” he said.  

Commenting on the second report concerning the Board’s recommendations for the biennium 2008-2009, he said the Board encouraged the organizations’ administrations to bolster efforts to consider and follow up recommendations to ensure a higher rate of fully implemented recommendations.  As the recommendations covered a wide range of topics across many organizations, with implementation rates varied among them, the Board could not identify any patterns or trends.  The Board had no major overall concern over the level of partial implementation.   

COLLEN KELAPILE, chair of the Advisory Committee on Administrative and Budgetary Questions, introduced that body’s report (document A/66/377) on the Board of Auditor’s document regarding the financial statements of the voluntary funds administered by the Office of the United Nations High Commissioner for Refugees for the year ended 31 December 2010.

While welcoming the progress made by UNHCR in 2010 that led to the issuance of an unmodified opinion by the Board, the Advisory Committee had noted that the Board had raised concerns about aspects of the agency’s financial, risk and performance management.  The Advisory Committee recognized the challenges resulting from the operational environment in which UNHCR operates, but expected it to take the necessary measures to address the issues raised and ensure full and timely implementation of the Board’s recommendations.

The Advisory Committee had particularly highlighted the weaknesses in financial management control, also noted by the Board, to be addressed so as to ensure successful implementation of the International Public Sector Accounting Standards in 2012.

Turning to the report on the status of implementation of the Board’s recommendation’s related to the 2008-2009 biennium (document A/66/139), he said the Advisory Committee had noted a slight drop in the number of recommendations which had been fully implemented, compared to the previous biennium.  The Advisory Committee had reiterated its call for the full and rapid implementation of the Board’s recommendations and stressed the need for senior managers to address the root causes of the problems noted by the Board.

SUSANNE FRUEH, speaking on behalf of Mounir Zahran, Chair of the Joint Inspection Unit, introduced the Secretary-General’s note (document A/66/73) transmitting the Unit’s report on United Nations audit function.  She said the report identified internal audit challenges in follow-up and implementation of audit recommendations, resources, auditing, the “One United Nations” coordination with other oversight bodies, and independence.  Among them were management threats and interferences, as well as constraints concerning authority, decentralization, structure, planning, reporting and quality assessment of the internal audit activity and internal auditors’ performance and competence. 

The report pointed to external auditor challenges, such as the lack of competitiveness in the selection process, relevant requirements and audit committees to assess performance, and implementation of adequate handover procedures between departing and new supreme audit institutions, he said.  The report noted that five organizations had yet to set up audit/oversight committees with an advisory role to management and legislative bodies, and those that had been established focused mainly on internal audits only. 

There was no only ad-hoc cooperation and coordination among internal and external audit committees.  Such cooperation should be made system-wide to ensure the sharing of experiences, information and practice among the committees.  Moreover, external auditors, audit/oversight committees and legislative/governing bodies should be informed of all third-party verifications in order to adhere to a single audit principle and avert any misunderstandings in that regard.

KENNETH HERMAN, Senior Adviser on Information Management Policy Coordination, Secretariat of the United Nations System Chief Executives Board for Coordination (CEB), introduced the note of the Secretary-General transmitting his comments on the Joint Inspection Unit report just introduced (document A/66/73/Add.1).  Board members welcomed the comprehensive review of the audit functions contained in the Joint Inspection Unit report, which included comments on three issues:  consolidation of oversight functions; the internal audit planning process; and the definition of the internal audit board.  Board members largely accepted most of their recommendations.

While in many cases agencies had noted that the practices suggested in the report were either already in place or being implemented, some recommendations did elicit clarifying remarks from the agencies, he said.  For example, agencies had commented on recommendation 14, which concerned procedures for notifying governing bodies of all requests for third-party audits.  Agencies had strongly supported the need to inform governing bodies of these requests and cited the “single-audit principle” as an option.  However, they had noted that the donor community may have a different view and suggested that a clear decision by the Assembly could help address the issue.

Mr. Herman noted the range of responses that agencies provided to the Joint Inspection Unit recommendations and said organizations of the United Nations system found much value in the report and welcomed its comprehensive nature.

Statements

Speaking on behalf of the Group of 77 and China, NATALIA HANDRUJOVICZ ( Argentina) said the Group believed the work of the internal and external oversight mechanisms of the United Nations was very important and that their observations and recommendations were crucial for Member States.

Regarding the Board’s conclusions that UNHCR had not developed mature and effective performance, financial and risk management systems, the Group agreed with the Advisory Committee that the refugee agency should follow all appropriate measures to ensure the full implementation of the Board’s recommendations.  The Group was concerned that 7, or 29 per cent, of the 24 recommendations made for 2009 were not implemented, and there was a drop in the rate of implementation to 13 per cent, down from 42 per cent in 2008.  Regarding the agency’s progress towards implementing the international standards, the Group agreed with the Advisory Committee’s comments to call on UNHCR to work toward finalizing a successful implementation of International Public Sector Accounting Standards in 2012.

Turning to the implementation of the Board’s recommendations by 15 United Nations entities during the biennium 2008-2009, she said the Group noted that the implementation rate was 46 per cent, nearly the same as the biennium 2006-2007, even though the number of recommendations increased by 16 per cent.  The Group called on the 15 United Nations entities to fully and rapidly implement all the Board recommendations, ensure an effective follow-up mechanism, and strengthen inter-agency coordination when implementing the recommendations that pertain to more than one organization.  In addition, the Group would like more information on efforts by the United Nations Development Programme to enhance its audit tracking database.

Introduction of Reports

The Committee then turned to its agenda item on the proposed programme budget for the biennium 2012-2013.

KUMIKO MATSUURA MUELLER, Controller and Director of the Division of Financial and Administrative Management of UNHCR, introduced the Secretary-General’s note transmitting UNHCR’s report on transitional measures concerning UNHCR’s financial reporting under the International Public Sector Accounting Standards (document A/66/352). 

She noted that UNHCR consulted with other United Nations system organizations, particularly those that had adopted the International Public Sector Accounting Standards early on, as well as the United Nations Board of Auditors, the Office of Internal Oversight Services (OIOS) and UNHCR’s Legal Advice Section, to revise the financial rules for the voluntary funds it administers.  The ACABQ reviewed the final draft containing the amendments to the rules on 7 September.  Its comments were reflected in a corrigendum to the document submitted by the Executive Committee. 

Taking the floor a second time, Mr. KELAPILE introduced the ACABQ report (document A/66/376) that considers the Secretary-General’s note transmitting UNHCR’s report on transitional measures concerning UNHCR’s financial reporting under the International Public Sector Accounting Standards.  He said the ACABQ had communicated its view that it had no major objection to the proposed revisions to the UNHCR financial rules for voluntary funds, nor to UNHCR’s request to apply mutatis mutandis to them so that the Agency could comply with the International Public Sector Accounting Standards as of 1 January 2012.

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