Sixty-sixth General Assembly

Fifth Committee

17^th Meeting (PM)

Budget Committee Hears Introduction of Reports on Organization’s Efforts

To Implement International Public Sector Accounting Standards

The Organization’s ongoing efforts to shift to international accounting standards has been set back by delays in the implementation of its enterprise resources planning system, known as Umoja, Secretariat officials told the Fifth Committee (Administrative and Budgetary) today.

Colleen Kelapile, Chair of the Advisory Committee on Administrative and Budgetary Questions (ACABQ), told the Committee that the use of International Public Sector Accounting Standards (IPSAS) at the United Nations was critically dependent on Umoja, which now was scheduled for completion by the end of 2015, rather than year-end 2013.  Umoja — the Swahili word for “unity” — is an administrative reform initiative meant to transform how the United Nations delivers its mandates by using best-practice business processes, system-wide accountability and state-of-the-art information and communications technology.

Introducing the Advisory Committee’s report on that issue, he recognized that contingency plans were being readied if there were further delays in Umoja’s implementation.  While aware of the importance of contingency planning, the Advisory Committee was concerned, he said, that significant resources would be spent on temporary, unsustainable solutions that would not ensure successful IPSAS implementation.  These temporary solutions could also divert vital resources away from Umoja’s implementation.

The decades-long push to harmonize financial reporting practices across the United Nations system led to the General Assembly’s decision in 2006 to endorse the recommendation of the United Nations System Chief Executives Board for Coordination (CEB) and approve the Organization’s use of these International Standards.

Liu Yu, Chair of the Audit Operations Committee, introduced the Board of Auditor’s report on the Organization’s progress in implementing those Standards as of 30 June 2011.  Regarding the Organization’s peacekeeping operations, Mr. Liu said that Department’s IPSAS adoption strategy was dependent on the successful implementation of Umoja, and delays with Umoja meant it would not be completed in time to support IPSAS as envisaged.  Until a clear overarching implementation plan had been made on Umoja, he continued, it was not possible for the Board to provide any firm assurance that the United Nations was on track to deliver IPSAS adoption by 2014.

Chandramouli Ramanathan, Officer-in-Charge, Office of Programme Planning, Budget and Accounts, introduced the Secretary-General’s fourth progress report on the adoption of IPSAS and noted that the nine United Nations organizations that had successfully implemented the Standards as of 31 December 2010 had obtained a “clean” audit opinion — an important first step.  Fourteen more organizations, listed in annex I of the report, were on schedule to adopt them in accordance with their respective target dates, ranging from 2011 to 2014.

The Secretariat aimed to deliver IPSAS-compliant financial statements for the period ending 30 June 2014 for peacekeeping operations, by 30 September 2014.  For all other Secretariat operations, the first set of IPSAS-compliant financial statements for the period ending 31 December 2014 had to be ready by 31 March 2015.

Speaking on behalf of the “Group of 77” developing countries and China, Argentina’s delegate noted that the Secretariat’s target for adoption of IPSAS had been postponed by four years to 2014, mainly due to the delay in implementing Umoja.  The Secretariat needed to take prompt and effective actions to address the Board’s key concerns in order to meet the target timeline of implementing IPSAS and plan for contingencies and specific measures to mitigate risks.

During informal consultations, the Group of 77, he said, would request additional information on the level of involvement of the United Nations oversight bodies and system-wide team in the United Nations Secretariat’s efforts to reach the 2014 target.

The Fifth Committee will reconvene at 10 a.m., Tuesday, 15 November, to take up financing of United Nations Organization Stabilization Mission in the Democratic Republic of Congo (MONUSCO).

Background

Meeting this afternoon to continue discussions related to the proposed programme budget for the biennium 2012-2013, the Fifth Committee (Administrative and Budgetary) had before it several reports relating to the Organization’s ongoing shift to the use of International Public Sector Accounting Standards (IPSAS).

After 25 years of attempts to harmonize financial reporting practices across the United Nations system of organizations to improve the comparability of their financial statements, the General Assembly in 2006 endorsed the recommendation of the United Nations System Chief Executives Board for Coordination (CEB) and approved the adoption by the United Nations of those International Standards.  Other United Nations organizations soon followed.

In the fourth progress report on the adoption of the International Public Sector Accounting Standards by the United Nations (document A/66/379), the Secretary-General lays out the United Nations system’s progress in implementing those International Accounting Standards during 1 August 2010 to 31 August 2011.

At the end of December 2010, 9 of 23 organizations within the system had completed the process and the 14 remaining organizations were on schedule.  The report lays out the steps taken within the Secretariat along with the risks that could jeopardize the implementation deadlines and the strategies taken to mitigate those risks.  The Secretary-General’s first progress report was submitted in 2008.

The Committee also had before it a note on progress in the implementation of the International Public Sector Accounting Standards (document A/66/151), in which the Secretary-General transmits a report of the Board of Auditors on the Organization’s progress in implementing these Standards, as of 30 June 2011.

During the last Assembly session, the Advisory Committee on Administrative and Budgetary Questions recommended that the Board of Auditors prepare an annual report on the implementation of the Standards in light of delays, the imminent deadlines and previous concerns expressed by the Board.  Building on its previous work, the Board examined progress made by the United Nations (including peacekeeping operations) towards its own 2014 implementation target, and the progress of other funds and programmes towards their 2012 target.

The Board’s first IPSAS progress report includes detailed recommendations.  The main recommendations of the 37-page report are first that the United Nations and peacekeeping operations fully examine all of the potential interdependencies, risks, costs and benefits of a phased implementation of Umoja and IPSAS; include contingency plans if the phased implementation of Umoja proves impossible or fails; complete a practical and detailed implementation plan for the United Nations and peacekeeping operations as soon as possible after a decision has been made on the Umoja implementation strategy; and develop an effective risk framework for IPSAS implementation.

Second, the report also recommends that all entities that have not already done so, including the United Nations and peacekeeping operations, prepare model financial statements and produce clear plans for a “dry run” set of accounts with real accounting data and factor in sufficient time for the Board’s review; establish a fully resourced and expert IPSAS implementation team; establish a clear plan for data collection, cleansing and migration for IPSAS implementation, communicate the requirements to relevant staff, and begin immediately; and establish an Organization-wide change management programme for IPSAS, including a comprehensive communications plan to lay out the changes and benefits that IPSAS will bring, and how senior managers must deliver the intended benefits.

The Advisory Committee on Administrative and Budgetary Questions weighed in on the issue with its report on the fourth progress report of the Secretary-General on the adoption of the International Public Sector Accounting Standards by the United Nations and report of the Board of Auditors (document A/66/536).

Among its recommendations regarding the Secretary-General’s report, the Advisory Committee recognizes the need to manage accounting diversity among organizations.  Yet, it emphasizes the importance of ensuring consistency in the interpretation and application of IPSAS and improving the comparability of the financial statements of the various entities of the United Nations system.

Regarding the Board of Auditors report, the Advisory Committee said the Board has an important role to play in providing advice and guidance to the implementing entities and close collaboration between the Board of Auditors and the entities had to be sustained throughout the implementation process.  The Advisory Committee encourages active engagement on all outstanding matters and recommends that all entities expedite full implementation of the Board’s recommendations.

Finally, the Committee had before it a note by the Secretary-General on preparedness of United Nations system organizations for the International Public Sector Accounting Standards (document A/66/308), which transmits the Joint Inspection Unit (JIU) report (document JIU/REP/2010/6) of the same name.

The JIU review shows that the adoption of IPSAS is beginning to have a major impact on United Nations system organizations, extending well beyond accounting.  The conversion to these International Standards should allow for stronger management of resources and business processes and improve results-based management across the United Nations system.

The report says that the transition was a major undertaking for most organizations as it impacts accounting, financial reporting and associated information technology systems.  The reporting of assets, liabilities, revenue and expenses in accordance with independent international standards is expected to significantly improve the quality, comparability and credibility of the United Nations system.

Issued last year, the JIU report recommends that executive heads on organizations implement the 16 best practices.  It also includes two recommendations for the entities’ respective legislative bodies.  The Inspector is aware that most of the recommended practices are being or have already been implemented by many organizations.

JIU reviewed 22 organizations.  One, the World Food Programme (WFP) had already been receiving unqualified (i.e. favourable) opinions from its external auditor on its financial statements for 2008 and 2009, and was presented as IPSAS compliant.  Its experience and best practices are presented in annex IV of the report.

The eight organizations that had introduced the Standards by the original target of 2010, and whose external auditors will determine during 2011 whether they are indeed compliant are the International Civil Aviation Organization (ICAO); International Maritime Organization (IMO); International Telecommunication Union (ITU); Pan American Health Organization (PAHO); United Nations Educational, Scientific and Cultural Organization (UNESCO); United Nations Industrial Development Organization (UNIDO); World Intellectual Property Organization (WIPO); and the World Meteorological Organization (WMO).

Two organizations — the International Atomic Energy Agency (IAEA) and the Universal Postal Union (UPU) — were expected to implement IPSAS in 2011; nine organizations — the Food and Agriculture Organization (FAO), International Labour Organization (ILO), United Nations Development Programme (UNDP), United Nations Population Fund (UNFPA), Office of the United Nations High Commissioner for Refugees (UNHCR), United Nations Children’s Fund (UNICEF), United Nations Political Office in Somalia (UNPOS), United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA) and the World Health Organization (WHO) — were expected to implement it in 2012; and two — the United Nations and the World Tourism Organization — in 2014.

In an addendum note (document A/66/308/Add.1), the Secretary-General transmits his comments and those of the United Nations System Chief Executives Board for Coordination (CEB) on the JIU report (document JIU/REP/2010/6).  Released 17 August 2011, this report presents the views of the United Nations system organizations on the JIU recommendations.  Agencies generally accepted the proposed benchmarks.

Introduction of Reports

CHANDRAMOULI RAMANATHAN, Officer-in-Charge, Office of Programme Planning, Budget and Accounts, introduced the Secretary-General’s fourth progress report on the adoption of the International Public Sector Accounting Standards (IPSAS) (document A/66/379).  He noted that the nine United Nations organizations that had successfully implemented the Standards as of 31 December 2010 had obtained a “clean” audit opinion — an important first step.

Fourteen more organizations, listed in annex I of the report, were on schedule to adopt them in accordance with their respective target dates, ranging from 2011 to 2014.  He said the Secretariat aimed to deliver IPSAS-compliant financial statements for the period ending 30 June 2014 for peacekeeping operations by 30 September 2014.  For all other Secretariat operations, the first set of IPSAS-compliant financial statements for the period ending 31 December 2014 had to be ready by 31 March 2015.  The report outlined challenges in meeting those two deadlines and how such challenges were being addressed.

He cited significant progress in the past year to finalize the framework of IPSAS-compliant accounting policies, which was necessary to support the Umoja design phase.  The report also outlined steps to progressively mitigate the high levels of risk associated with implementing IPSAS, such as the introduction of a risk management framework to identify and manage risks at offices away from Headquarters and in missions.  The IPSAS project was also building contingency plans and workaround solutions, in close consultation with the Umoja project, to mitigate risks.  It continued to rely on centrally coordinated change management and project management, but local IPSAS support teams in offices away from Headquarters and field missions were beginning to take ownership of implementation activities.

LIU YU, Chair of the Audit Operations Committee, introduced the note by the Secretary-General on progress in the implementation of the International Public Sector Accounting Standards (document A/66/151), in which the Secretary-General transmitted a report of the Board of Auditors on the Organization’s progress in implementing those standards, as of 30 June 2011.

Mr. Liu said there were a number of critical risks to reaching IPSAS implementation on time and realizing the benefits envisaged by the Assembly.  “Unless urgent and effective action is taken to address these risks, it is unlikely that IPSAS will be successfully implemented on target within the [United Nations], its peacekeeping operations,” he said.

The Board of Auditors believed the 2012 implementation target was possible for all of the remaining entities, but there were “significant and pressing risks” to be managed in the period leading up to 1 January 2012.  The achievement of unqualified audit opinions alone would not signal successful IPSAS implementation.  It was the benefits to improved decision-making and more cost-effective delivery that were important.  “Securing these benefits will require engagement across all operational areas and significant cultural change,” he said.  “The delivery of such benefits will not be immediately achieved, but will come from careful management over time.”

He said the Board had emphasized the importance of adequate plans to realize those benefits and noted that in nearly all entities, appropriate change management arrangements were not yet in place to reach the necessary transformations.

Turning to the Organization’s peacekeeping operations, Mr. Liu said that Department’s IPSAS adoption strategy was dependent on the successful implementation of a new enterprise resource planning system, Umoja.  Delays with Umoja meant that it would not be completed in time to support IPSAS as envisaged.  The Board had yet to see any firm plans on how the Umoja project would be reprioritized to support IPSAS implementation.

Until a clear overarching implementation plan had been made on Umoja, he continued, it was not possible for the Board to provide any firm assurance that the United Nations was on track to deliver IPSAS adoption by 2014.

Turning to the Board’s key findings on the United Nations funds and programmes, Mr. Liu said most organizations had not yet finalized all accounting policies despite the 2012 deadline, and significant work remained to adequately collect, cleanse and migrate data for IPSAS implementation.  Delays in the completion of accounting policies could result in staff in field offices not being trained and familiar with the new policies and procedures necessary for IPSAS implementation.  Fully resourced and expert implementation teams were not in place in some entities, and UNRWA particularly lacked a specific project leader or dedicated implementation team, while UNHCR was over reliant on external consultants.

COLLEN KELAPILE, Chair of the Advisory Committee on Administrative and Budgetary Questions (ACABQ), introduced that body’s report (document A/66/536), which weighed in on the Secretary-General’s fourth progress report on IPSAS adoption and the related Board of Auditor’s report.  Regarding the activities of the United Nations systems, he said, the main development during the reporting period was the transition to IPSAS by eight additional organizations in 2010.  The remaining organizations were on track for implementation within their respective timelines.

The delay in implementing the enterprise resource planning system, Umoja, was a key factor impacting the United Nations IPSAS project, which was critically dependent on Umoja.  He said the Secretary-General had proposed a revised and phased approach for Umoja implementation, focusing on IPSAS requirements in the first phase.  Full implementation of Umoja was now planned for year-end 2015, instead of year-end 2013.  The Advisory Committee also noted that if there were further delays in implementing Umoja, contingency plans were being devised to produce the first IPSAS-compliant financial statements by the target dates, using a combination of temporary solutions.

He said the Advisory Committee recognized the importance of planning for contingencies, but was concerned that significant resources could be devoted to implementing temporary, unsustainable solutions that would not ensure successful IPSAS implementation.  Temporary solutions could also divert vital resources away from the implementation of Umoja.  The Committee emphasized the need for strict oversight over the implementation of IPSAS, as well as effective mechanisms for the rapid resolution of daily issues so as to contain costs, avoid further delays and ensure a viable solution was put into place.

GERARD BIRAUD, Inspector of JIU, introduced the Secretary-General’s note on preparedness of United Nations system organizations for the IPSAS (document A/66/308), which transmitted the eponymous JIU report (document JIU/REP/2010/6).  He said that of the 22 organizations reviewed thus far, only WFP had successfully completed the transition to IPSAS.  The report had compared the status of the IPSAS projects in 2010 and, in response to JIU questionnaires it had identified, the 16 best practices for executive heads to implement on various aspects.  They included recommendations concerning the links between governance of the organization and that of the project; project strategy, management, human resources and financial resources; a project’s links with the information environment, particularly enterprise resource planning; and the need to convince all stakeholders, including the Fifth Committee and personnel involved in changes, in close dialogue with the external and internal auditors.

That work had revealed that, taken together, the risks, costs and complexity of making the transition to IPSAS, the actual time it would take and the importance of its links to other administrative reforms were only perceived in a very abstract way and had been underestimated, he said.  It confirmed that the success of any major administrative reform required the consent of all stakeholders and risked failure if one link in the chain was lacking.  JIU also issued two recommendations for the United Nations entities’ respective legislative bodies.

He said the first recommendation to those bodies was useless for the United Nations because there already existed a well-informed ACABQ report published at the same time as the JIU report and the annual Secretary-General’s report on progress made.  The second recommendation called on the Fifth Committee to provide the necessary support, staffing and financing to ensure the entities successfully made the transition to IPSAS.  He said the third recommendation was addressed to chiefs in the Secretariat, asking them to ensure implementation of the 16 best practices identified in the report.

KENNETH HERMAN, Senior Adviser on Information Management Policy Coordination, Secretariat of CEB, introduced the Secretary-General’s note (document A/66/308/Add.1), transmitting his comments and those of CEB on the JIU report on IPSAS, which, he said, contained three recommendations.  The first two told legislative bodies to expect reports on the IPSAS implementation process and to support it.  The third called on executive heads to ensure implementation of the 16 best practices defined by JIU.  He said that CEB members welcomed the analysis and largely accepted the results of the comprehensive report, thanks to close coordination between JIU and United Nations agencies during the report preparation process.

He said that in their responses, many agencies had indicated that they had either adopted many of the proposed benchmarks or were in the process of doing so.  Others, however, had not.  They had disagreed with the call to perform continuous testing of internal controls during the preliminary implementation stage of an IPSAS project, as proposed in benchmark 15, saying the testing should be within the internal audit function.  Agencies had also expressed concern over the practicality of implementing benchmarks 13 and 16.

Statement

Speaking on behalf of the “Group of 77” developing countries and China, MARCELO SUÁREZ SALVIA (Argentina) said his delegation had always been supportive of management reform initiatives aimed at increasing the Secretariat’s efficiency and capacity to deliver better results for the Organization.

The Group commended the organizations that had successfully implemented IPSAS.  He noted that the Secretariat’s target for adoption of IPSAS had been postponed by four years to 2014, mainly due to the delay in implementing Umoja.  The Secretariat needed to take prompt and effective actions to address the Board’s key concerns in order to meet the target timeline of implementing IPSAS and plan for contingencies and specific measures to mitigate risks.  During informals, the Group of 77 would request additional information on the level of involvement of the United Nations oversight bodies and system-wide team in the United Nations Secretariat’s efforts to reach the 2014 target.

The Group of 77 expected the Secretary-General to fully implement the recommendations of the Board of Auditors and the Advisory Committee, including those regarding the preparation of model financial statements and producing clear plans for a set of “dry run” accounts with real accounting data.  Those plans should factor in sufficient time for review by the Board.  In addition, fully resourced and expert IPSAS implementation teams should be established, along with a clear plan for data collection, cleaning and migration of IPSAS implementation.

In addition, he said that, as Chair of the United Nations System Chief Executives Board for Coordination, the Secretary-General should continue to coordinate all aspects related to the transition from the United Nations System Accounting Standards to the International Standards.

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For information media • not an official record