United Nations Financial Indicators ‘Generally Sound’, Top Management Official Tells Budget Committee
While the Organization’s financial indicators for 2014 were generally sound, the United Nations senior management official told the Fifth Committee (Administrative and Budgetary) today that the regular budget’s cash position was low and under extra pressure from the emergency financing needs of the Capital Master Plan and emergency funding for the United Nations operations to control the Ebola outbreak.
Yakio Takasu, Under-Secretary-General for Management, told delegates that the regular budget’s cash position, including reserves, now stood at $419 million, yet disbursements through year-end 2014 were estimated to total about $800 million. The cash squeeze had been heightened by the use of the regular budget’s Working Capital Fund and Special Account as a temporary financing vehicle to meet the cash flow requirements of the Capital Master Plan. The use of those accounts was authorized in April, through General Assembly resolution 68/247 B, until the Assembly could act on the Plan’s financing dilemma during the main portion of its sixty-ninth session.
In addition, earlier this week the Committee approved the funding of $49.9 million for the newly created United Nations Mission for Ebola Emergency Response (UNMEER) through year’s end.
Mr. Takasu said the final cash position of the Organization’s regular budget at the end of December would depend largely on the payments made by Member States. Unpaid assessed contributions totalled slightly more than $1 billion in October 2014, $92 million more than the $945 million outstanding as of 1 October 2013. [The United States was responsible for $882 million of the $1.04 billion that remained outstanding as of 2 October 2014, according to a chart Mr. Takasu presented to the Committee.] Since that cut-off date, the United States had made a payment of $83.2 million. The chart showed that Brazil owed $77 million; Venezuela $28 million; and 65 other Member States were responsible for $50 million.
Mr. Takasu thanked the 125 Member States that had paid their regular budget assessments in full as of 2 October 2014, nine fewer than 1 October 2013 and 21 fewer than the 146 which had paid in full as of 31 December 2013. Two Member States had made their payments since the 2 October 2014 cut-off date, bringing the number of States that had not paid their assessed contributions to the regular budget to 66.
Mr. Takasu’s semi-annual snapshot of the Organization’s finances included details on the regular budget, United Nations peacekeeping operations, the international tribunals for the former Yugoslavia and Rwanda, and the Capital Master Plan account. That Plan’s account was created to manage the renovations of the world body’s New York City Headquarters.
As part of his presentation, Mr. Takasu laid out four main financial indicators — assessments levied on Member States, unpaid assessments, available cash resources and the Organization’s debt to Member States. [The Secretariat will incorporate this information into a report, which will be released for the Committee’s discussion at its 16 October 2014 meeting.]
As always, the shifting demands of the Organization’s peacekeeping activities — which run from a 1 July to 30 June fiscal year — made predicting the financial outcome for peacekeeping operations more difficult, Mr. Takasu said. In addition, assessment letters were sent out separately for each mission and issued for different periods throughout the fiscal year as they could only be issued through the individual mandate period approved by the Security Council. “All of these factors complicate a comparison between peacekeeping operations and regular budget,” he said.
Using the same 2 October 2014 cut-off date, Mr. Takasu said outstanding contributions for peacekeeping operations tallied $2.6 billion. A total of $5.8 billion had been levied for peacekeeping operations in 2014. That amount included $1 billion in assessments for the United Nations Interim Force in Lebanon (UNIFIL), United Nations Mission in Liberia (UNMIL) and African Union-United Nations Hybrid Operation in Darfur (UNAMID) that were sent out on 19 September. Contributions received so far in 2014 tallied $5.5 billion.
He expressed special gratitude to the 30 Member States which had fully paid the peacekeeping assessments due as of 2 October 2014. He acknowledged that the unpredictable amount and timing of peacekeeping assessments could heighten the difficulty Member States encountered in keeping fully current. Three more Member States had paid their peacekeeping assessment since 2 October 2014.
Total cash available for peacekeeping operation as of 2 October 2014 was about $4.25 billion, including $3.8 billion for active missions, $310 million for closed missions and $134 million in the Peacekeeping Reserve Fund.
Mr. Takasu said the Secretariat had made every effort to minimize the level of outstanding payments to Member States, which was expected to total $501 million by year’s end, compared with $513 million at the end of 2013. As of 3 October 2014, the Organization owed $585 million to Member States for troops and formed police units. Contingent-owned equipment claims totalled $1.3 billion, including $602 million for active missions and $86 million for closed missions. “The Secretariat is monitoring the peacekeeping cash with a view to making payments whenever possible,” said Mr. Takasu. “Payments are now being processed, and by tomorrow, the outstanding payments will be reduced from $1.3 billion to $815 million.”
[According to a chart presented to the Committee, Ethiopia was owed the largest amount at $137 million, followed by India at $110 million, Pakistan at $109 million and Bangladesh at $108 million.]
While noting the Secretary-General’s commitment to meet its obligations to Member States as quickly as the Organization’s cash situation permits, Mr. Takasu said the Organization is depending on Member States to meet their financial obligations in full and on time. It was also depending on the prompt completion of the memorandums of understanding with troop contributors for providing equipment.
Regarding the financial situation of the two international tribunals and the International Residual Mechanism, Mr. Takasu said their financial position was similar to 2013 and unpaid assessments for tribunals totalled $60 million on 2 October 2014. That amount matched the 1 October 2013 level. He noted that the number of Member States paying their assessed contributions for the tribunals in full was 98 as of 2 October 2014, two more than reported in 1 October 2014 of last year. [According to a chart presented by Mr. Takasu, the United States was responsible for $29 million or the $60 million in unpaid assessments as of 2 October 2014.]
Finally, Mr. Takasu outlined the financial position of the Capital Master Plan account. Most of the $1.87 billion assessed under this special account had been received, with $500,000 still outstanding. The account’s remaining cash balance [$33 billion as of 2 October 2013, according to a chart presented to the Committee], would be fully used in November. As mentioned earlier, the Assembly had authorized the use of the regular budget’s Working Capital Fund and Special Account, on an exceptional basis, to handle any financing needs of the Plan’s associated costs and secondary data centre expenditures, which totalled $154.8 million. “Such arrangement cannot last longer before the Working Capital Fund is to be exhausted,” said Mr. Takasu, adding that the Secretariat looked forward to a decision by the Assembly as soon as possible “to keep the solvency of the regular budget”.
He paid particular tribute to the 28 Member States that had paid in full their assessments that were due and payable as of 9 October 2014. “Given the limited reserves available, the financial health of the Organization continues to depend on Member States meeting their financial obligations in full and on time. On behalf of the Secretary-General, let me urge all Member States to continue to endeavour to do so.”
In other business today, the Committee also discussed the activities of the Office of Internal Oversight Services (OIOS) and the Independent Audit Advisory Committee, as well as the Organization’s use of International Public Sector Accounting Standards (IPSAS).
Carman Lapointe, Under-Secretary-General for Internal Oversight Services, introduced the OIOS reports regarding its activities ending on 30 June 2014, while Joseph Christopher Mihm, Chair of the Independent Audit Advisory Committee, introduced that body’s report on its activities for the year-long period ending 31 July 2014.
The Committee’s discussion on accounting standards began with the introduction of the Secretariat report on the Organization’s adoption of the international standards by Pedro Guarzo, Director of the Accounts Division of the Department of Management’s Office of Programme Planning, Budget and Accounting. Hugh O’Farrell (United Kingdom), Chair of the Audit Operations Committee of the Board of Auditors, then introduced the Auditing Board’s report on IPSAS implementation, while Carlos Ruiz Massieu, Chair of the Advisory Committee on Administrative and Budgetary Questions, introduced that body’s report.
Also speaking today were representatives of Bolivia (on behalf of the Group of 77 and China), Switzerland (also on behalf of Liechtenstein), Philippines, United States and Ethiopia, as well as the European Union Delegation.
The Committee will reconvene at 10 a.m. on Tuesday, 14 October, to discuss financial reports and reports of the Board of Auditors; the Joint Inspection Unit report on Implementing Partners, and construction and property management issues, which are part of the programme budget 2014-2015 agenda item.
Activities of Office of Internal Oversight Services (OIOS) & Independent Audit Advisory Committee (IAAC)
CARMAN LAPOINTE, Under-Secretary-General for Internal Oversight Services, introduced the reports of the Office of Internal Oversight Services on its activities for the period from 1 July 2013 to 30 June 2014 (documents A/69/308 (Part I) and Add.1).
Noting that this year marked the twentieth anniversary of the establishment of OIOS, she said that its key objectives continued to focus on supporting the Secretary-General in his oversight responsibilities. During the reporting period, the Office issued 326 oversight reports, including five reports to the General Assembly. A number of those reports focused on areas of particular strategic interest to the Organization, including implementation of Umoja and the International Public Sector Accounting Standards (IPSAS). The reports included 936 recommendations to improve internal controls, accountability mechanisms and organizational efficiency and effectiveness, of which 45 were classified as critical.
She said that audit recommendations had been categorized using the five components of internal control: control environment, risk assessment, control activities, information and communication, and monitoring. OIOS implemented internal improvements, including: updating operating procedures and manuals; articulating programme impact pathways for each division; developing key performance indicators for managing activities; and assessing its own operational risks with the assistance of the Enterprise Risk Management focal point. In addition, it was enhancing its risk-based planning process to leverage the results of the recently developed Organization-wide risk register.
JOSEPH CHRISTOPHER MIHM, Chair of the Independent Audit Advisory Committee, introduced that body’s report on its activities for the period from 1 August 2013 to 31 July 2014 (document A/69/304).
He said that the report contained his Committee’s detailed views, observations and recommendations. Regarding implementation of oversight bodies’ recommendations, management continued to make progress, although there was room for improvement. If the weaknesses identified by oversight bodies were properly addressed by management, one should expect to see a more accountable, effective and responsive Organization. On risk management and internal control framework, IAAC called on the Secretary-General to secure sufficient capacity to effectively implement and sustain the Enterprise Risk Management.
Turning to OIOS’s strategic direction and measures of effectiveness, he said that IAAC recommended that OIOS establish a long-term strategic plan to address, among other things, the alignment of its goals with the United Nations key risks and latest transformational initiatives. The strategy should also include a focus on the Organization’s major challenges such as procurement fraud and annual goals for each division consistent with the strategic plan.
On OIOS operational and budgetary independence, he said IAAC would closely follow any specific proposals relating to OIOS’s funding arrangement and the possible need for a legal advisor. As for public disclosure of OIOS internal audit reports, IAAC thought that Member States, key internal and external stakeholders and the public should have access to the work of OIOS. Managers reported that, to date, there had been no negative consequences. Given the apparent success of the pilot project, IAAC endorsed the continued publication of international audit reports and, as a next step, OIOS should consider the publication of its evaluation reports.
DAYANA ANGELA RIOS REQUENA (Bolivia), speaking on behalf of the “Group of 77” developing countries and China, stressed the independent nature of OIOS’ work. Its evaluations, however, should be carried out efficiently and effectively to implement programs and mandates of the Organization. The work must also be done in line with relevant mandates of intergovernmental bodies, particularly the Committee for Programme and Coordination. Along those lines, the Group reaffirmed the role of the General Assembly as the principal United Nations oversight organ and emphasized that the approval, change and discontinuation of legislative mandates were the exclusive prerogatives of intergovernmental legislative bodies.
She also stressed the importance of continued coordination between OIOS and other oversight bodies, namely the Board of Auditors and the Joint Inspection Unit (JIU). OIOS needed to establish fully integrated long-term strategic planning, with its objectives properly aligned with crucial United Nations risks and initiatives, such as staff mobility, IPSAS, Umoja and the Capital Master Plan. On OIOS’s investigations services, she said a high vacancy rate would jeopardize the Office’s ability to properly fulfil its mandates, especially in the field. Vacancies should be filled based on the principle of gender equality and equitable geographical distribution. The Group also looked forward to a comprehensive discussion on IAAC recommendations.
CARMEL POWER, a representative of the European Union Delegation, welcomed the OIOS efforts to work together with other United Nations oversight bodies and urged enhanced coordination to avoid duplication in their work. The Union would address issues of strategic planning, risk management and vacancy rates during the informal consultations. The bloc also welcomed IAAC’s views on the positive results of the pilot project on the public disclosure of OIOS international audit reports and endorsed its recommendation to continue the publication of the reports.
Ms. SCHWEIZ (Switzerland), speaking also for Liechtenstein, said that operational independence was a vital precondition for any oversight function, whether internal or external. The highly fragmented funding structure of OIOS could negatively impact its operational independence. Her delegation welcomed IAAC’s recommendation that OIOS establish a long-term strategic plan aligned with key United Nations risks. She was also pleased that Enterprise Risk Management was finally given the necessary attention by top management and saw merit in IAAC’s recommendation to bring together the collective good work of the oversight bodies in one place.
LIBRAN N. CABACTULAN (Philippines) said his delegation was pleased with the stronger functioning of OIOS, particularly its periodic external quality review process. Those reviews gave Member States a benchmark for more informative decisions when assessing the Office’s requests and proposals. He appreciated the Office’s efforts to assess and prioritize its audit recommendations based on risks and by highlighting the most critical recommendations. There were 45 critical recommendations for the reporting period and those with financial implications totalled about $13.8 million. He was also concerned that 25 critical recommendations, dating from previous recommendations made back to 2010, were still overdue. IAAC had provided significant observations on how OIOS could increase its effectiveness, including the need for a fully integrated long-term strategic plan. Another measure included addressing strategic goals aligned with risks and the Secretariat’s latest transformational initiatives, such as mobility, IPSAS, Umoja and the Capital Master Plan. He also noted the need for client surveys to measure the performance of the Investigations Division and the Office as a whole.
CHERITH A. NORMAN CHALET (United States) highlighted IAAC’s recommendation for the oversight bodies to explore doing a collaborative review of a single topic or organization. That would help Member States have a complete picture of the issues under consideration and better assist them in performing their oversight duties. Based on the overall success of the pilot project in public disclosure of OIOS internal audit reports, she urged the Assembly to make publication of those reports permanent. Her delegation felt that greater authority over its budget would allow OIOS to perform its oversight functions free of influence from the organizations and officials it oversaw. Her delegation looked forward to a review of the Office’s funding arrangement, including its impact on operational independence. Noting efforts to transfer all investigations to OIOS, she said that the Office should focus on proactively pursuing and investigating serious cases of fraud, mismanagement of resources, corruption and sexual exploitation.
TEKEDA ALEMU (Ethiopia), associating himself with the Group of 77 and China, said that language in paragraph 36 of the OIOS report might lead to a wrong interpretation of the work of the Economic Commission for Africa (ECA). Citing the reference to “limited evidence on how ECA’s research and analysis influenced policy formulation”, he said ECA had actually become a critical institution like a think tank.
Ms. LAPOINTE said OIOS recognized the work of ECA, but it could develop better measures to track such influence.
Mr. MIHM pointed to the recommendation that oversight bodies explore an opportunity to bring together short documents.
International Public Sector Accounting Standards (IPSAS)
PEDRO GUARO, Director, Accounts Division, Office of Programme Planning, Budget and Accounts, Department of Management, introduced the Secretary-General’s seventh progress report on the adoption of the International Public Sector Accounting Standards by the United Nations (document A/69/367), for the 12 months ended 31 August 2014.
He said that IPSAS implementation at the United Nations began as planned with peacekeeping operations on 1 July 2013. Currently, the Organization was preparing its first IPSAS-compliant financial statements for peacekeeping operations, due by 30 September 2014. A few remaining tasks must be completed before the delivery of those documents.
For the Organization’s other operations, he said, IPSAS-compliant accounting started on 1 January 2014 and all reporting entities, including the United Nations Environment Programme (UNEP), United Nations Office on Drugs and Crime (UNODC), United Nations Programme for Human Settlements (UN-Habitat), International Trade Center, United Nations Institute for Training and Research (UNITAR) and the tribunals, would produce IPSAS-compliant financial statements by 31 March 2015.
HUGH O’FARRELL (United Kingdom), Chair of the Audit Operations Committee of the Board of Auditors, introduced a note by the Secretary-General transmitting the Board’s fourth and final progress report on IPSAS implementation (document A/69/155).
He said that by the end of 2014, all United Nations system entities, including the United Nations and its funds and programmes, would have implemented IPSAS. The level of progress reflected the commitment and energy of the entities concerned and represented a major step towards the modernization of the United Nations system. All the entities that went live in 2012 received unqualified audit opinions, and the remaining entities going live in 2014 had made significant progress. The real test, and the focus of future audits, would be whether the entities could quickly translate the new information into measurable improvements in operations and the cost-effective delivery of mandates.
There was clear evidence that IPSAS implementation had led to improved financial management processes, but less evidence that the new financial information was being used outside of finance units to drive improvements in business functions, operations and the cost effectiveness of mandate delivery. Progress in transforming the role of the finance functions across United Nations entities had been uneven. Major issues with bank reconciliations, accounts payable and payroll had emerged following the implementation of the Organization’s new enterprise resource planning system in peacekeeping operations. The Board could not provide assurance over the control environment for the full consolidation process across the United Nations complex architecture for the production of IPSAS financial statements.
CARLOS RUIZ MASSIEU, Chair of the Advisory Committee on Administrative and Budgetary Questions (ACABQ), introduced that body’s related report (document A/69/414). He welcomed the achievement of important milestones for peacekeeping operations, especially the production of their first IPSAS financial statements. For the other operations, the Advisory Committee was confident that IPSAS financial statements would be delivered by 31 March 2015 and noted that the project expenditures had remained within the indicative budget of $27 million.
Expressing concern about the continued delay in Umoja implementation and the risk it posed to the realization of the full benefits of IPSAS, he said that the Advisory Committee recommended that the Secretary-General track and report on the realization of those benefits across the Secretariat. ACABQ was pleased to note that 21 of the 24 United Nations entities had successfully adopted IPSAS and had received unqualified audit opinions from the Board of Auditors on their 2013 financial statements.
Ms. RIOS REQUENA (Bolivia), speaking again for the Group of 77 and China, welcomed the progress made in the implementation of IPSAS across the United Nations system, particularly at the Secretariat. The Group noted that 21 out of 24 entities had successfully implemented those international standards and the Group looked forward to updates on the progress of the remaining three entities: the Secretariat, World Trade Organization (WTO) and the Food and Agricultural Organization (FAO). The Group noted that the delay in the deployment of Umoja had contributed to delays in the international standards’ use. The Group emphasized that the Umoja and IPSAS teams had to keep working together to mitigate significant risks and guarantee the expected benefits of the international accounting tools. The Group urged that the best practices and lessons — gained as key stakeholders were trained in the use of IPSAS — be extended to the training of end users and others in Umoja. The Group re-emphasized the need to track and record the expenditures and benefits of the project through its implementation.
Ms. POWER, a representative of the European Union Delegation, said that IPSAS implementation was not a goal in itself, and that it should lead to new and more accurate financial information. The Union was concerned that the new financial information was not being sufficiently used outside of finance units to drive improvements in business functions, operations and the cost-effectiveness of mandate delivery, given the fiscal and economic constraints and increased financial risks facing the United Nations. The Union remained also concerned about the delayed Umoja implementation, which could negatively impact the IPSAS reporting timeline.