Speakers Concerned about Impact of Employee Benefits Liabilities on Regular Budget, as Fifth Committee Examines Board of Auditors’ Reports
While welcoming the overall sound financial health of the United Nations, delegates in the Fifth Committee (Administrative and Budgetary) meeting today expressed concern about the potential of the employee benefits liabilities decimating the regular budget over time should it remain unfunded.
In the meeting, a key Board of Auditors official set forth the results gleaned from its audits of the financial statements of 20 United Nations entities, and noted that employee benefit liability, excluding pensionary benefits, was one of the major liabilities for most of the entities.
For 11 entities, employee benefits liabilities were more than half of the total liabilities, and were as high as 94 per cent for one entity, and more than 75 per cent of total liabilities for several others, highlighted Anand M Bajaj (India), Director of External Audit and Chair of the Audit Operations Committee, adding: “It is important for entities to have a funding plan for this liability”.
While the United Nations had sufficient assets to cover its liabilities, the issue of employee benefits liabilities had yet to be adequately addressed, underscored the representative of the United States, warning: “The significant and financial impact of these liabilities on the regular budget, valued at approximately $4.4 billion for 2016, cannot be understated”. It would be critical to get a clear picture of those liabilities through accurate census data to ensure proper financial planning, she emphasized.
That view was echoed by India’s representative, who stressed that the Board’s concerns about the lack of appropriate funding arrangements to fulfil long‑term employee benefits liabilities must be addressed expeditiously.
Noting that all entities had documented anti‑fraud and anti‑corruption frameworks, the Board of Auditors report also pointed out that all reporting entities indicated they had adequate strategies in place to prevent fraud. Nevertheless, the Board also noted that seven entities had not conducted fraud risk assessment, without which it would be difficult to identify areas vulnerable to fraud and procedural weaknesses that may lead to it.
The representative of the European Union said the bloc supported the Board’s requirements for intensified fraud awareness training and specific guidance. Based on the 2016 anti‑fraud and anti‑corruption framework, further efforts were needed to strengthen the United Nations culture of good and transparent governance, he added.
On the implementation of audit recommendations, the Board of Auditors noted that the overall rate of implementation had increased to 45 per cent in 2016, compared to 43 per cent in 2015. However, the Board was concerned that there were 53 recommendations pending for more than two years, which was 9 per cent of the total recommendations outstanding as of 31 December 2015.
The representative of Ecuador, speaking on behalf of the “Group of 77” developing countries and China, expressed concern that the implementation of audit recommendations had fallen short. The different United Nations entities and the Secretariat must work towards the implementation and eventual closure of old audit recommendations, she said, adding that the Group would closely follow the matter in the next report on the accountability of the United Nations system.
Bettina Tucci Bartsiotas, Assistant Secretary‑General and Controller of the United Nations, introduced the Secretary‑General’s reports on implementation of the Board of Auditors’ recommendations contained in its reports for the year ended 31 December 2016 on the United Nations and on the capital master plan and on the United Nations funds and programmes.
Carlos Ruiz Massieu, Chair of the Advisory Committee on Administrative and Budgetary Questions, presented its corresponding reports.
The Fifth Committee will meet again at a date and time to be announced in the Journal.
Board of Auditors’ Reports and Audited Financial Statements
ANAND M. BAJAJ (India), Director of External Audit and Chair of the Audit Operations Committee, introduced the main findings from the Board’s concise summary and the reports for audits conducted on financial statements for the period ended 31 December 2016. He noted that the concise summary report covered the common themes and major issues identified in the Board’s reports addressed to the General Assembly on 20 entities. All those entities received unqualified audit opinions, while the International Criminal Tribunal for Rwanda and International Criminal Tribunal for the Former Yugoslavia received unqualified opinions with an emphasis of matter.
The financial reports and audited financial statements included the United Nations (document A/72/5 (Vol. I) and A/72/5 (Vol. I)/Corr.1); International Trade Centre (A/72/5 (Vol. III)); United Nations University (A/72/5 (Vol. IV)); United Nations Development Programme (UNDP) (document A/72/5/Add.1); United Nations Capital Development Fund (document A/72/5/Add.2); United Nations Children’s Fund (UNICEF) (document A/72/5/Add.3); United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA) (document A/72/5/Add.4); United Nations Institute for Training and Research (UNITAR) (document A/72/5/Add.5); Voluntary funds administered by the Office of the United Nations High Commissioner for Refugees (UNHCR) (A/72/5/Add.6); Fund of the United Nations Environment Programme (UNEP) (document A/72/5/Add.7); United Nations Population Fund (UNFPA) (document A/72/5/Add.8); United Nations Human Settlements Programme (UN-Habitat) (document A/72/5/Add.9); United Nations Office on Drugs and Crime (UNODC) (document A/72/5/Add.10); United Nations Office for Project Services (UNOPS) (document A/72/5/Add.11); United Nations Entity for Gender Equality and the Empowerment of Women (UN-Women) (document A/72/5/Add.12); International Criminal Tribunal for Rwanda (document A/72/5/Add.13); International Criminal Tribunal for the Former Yugoslavia (document A/72/5/Add.14) and the International Residual Mechanism for Criminal Tribunals (document A/72/5/Add.15); and the note by the Secretary‑General transmitting a concise summary of the principal findings and conclusions in the reports of the Board of Auditors for the annual financial period 2016 (A/72/176 and A/72/176/Corr.1).
He noted that 8 entities closed the financial year with a surplus, while 11 entities recorded a deficit. Except the International Trade Centre, all entities had positive net assets, although the net assets of 10 entities declined over the previous year. The Board noted that employee benefits liabilities, excluding pensionary benefits, were major liabilities for most of the entities. For 11 entities, employee benefits liabilities were more than half of the total liabilities, and were as high as 94 per cent for UNCDF, and more than 75 per cent of total liabilities for Volume I, UNFPA, UNITAR, UNRWA and UNHCR, he highlighted, adding: “It is important for entities to have a funding plan for this liability”.
The Board also noted that all entities had documented anti‑fraud and anti‑corruption frameworks, he said. All reporting entities indicated they had adequate strategies in place to prevent fraud, although the Board also noted that seven entities had not conducted fraud risk assessment, without which it would be difficult to identify areas vulnerable to fraud and procedural weaknesses that may lead to fraud.
Having reviewed the implementation of old recommendations, the Board noted that the overall rate of implementation had increased to 45 per cent in 2016, compared to 43 per cent in 2015, he said. However, the Board was concerned that there were 53 recommendations pending for more than two years, which was 9 per cent of the total recommendations outstanding as of 31 December 2015.
In the revised financial statements, the Administration disclosed that the amounts of unused commitments were still being finalized and that they had preliminarily determined that the level of unused commitments increased in 2014‑2015 to approximately $45.6 million. Uncommitted balances of the appropriations at the end of the budget period and expired balances of appropriations retained from the prior periods were to be reported as provisions for credits to the Member States, he said, although the provisions had not been made by the Administration in the accounts for the year ended 31 December 2016.
There was inadequate control over the whole exercise of collecting and collating staff details for onward transmission to the actuary, as well as important omissions in the data sent for actuarial valuation which indicated that sufficient checks were not carried out at Headquarters for ensuring their completeness, he said. Procurement authority was not delegated in a structured and well‑organized manner, he underlined, adding that the organization and structure of procurement authority was fragmented and responsibilities and accountability were not clearly defined.
He went on to discuss findings contained in other reports from individual agencies and entities covering areas such as project oversight, monitoring and review, enterprise risk management, and governance structures.
BETTINA TUCCI BARTSIOTAS, Assistant Secretary‑General and Controller of the United Nations, then introduced the Secretary‑General’s reports on implementation of the Board of Auditors’ recommendations contained in its reports for the year ended 31 December 2016 on the United Nations and on the capital master plan (document A/72/355) and on the United Nations funds and programmes (document A/72/355/Add.1). She said the Secretary General and the executive heads of the United Nations funds and programmes had concurred with most of the Board’s recommendations and had made every effort to comply with the General Assembly’s request regarding their implementation.
Turning first to Volume I of the Board of Auditors’ report, she said 107 of the 210 recommendations relating to the previous five financial periods had been fully implemented. Sixty‑six were under implementation, 10 were not implemented and 27 were closed by the Board or overtaken by events. Regarding 53 recommendations pending for more than two years, she said delays in implementation had been due to such factors as the need to change policies and introduce additional controls. She then addressed the Board’s recommendations vis‑à‑vis the capital master plan, saying that 8 of its 23 recommendations relating to the previous four financial periods had been fully implemented, 10 were under implementation and 5 were closed by the Board or overtaken by events, as of 31 December 2016.
CARLOS RUIZ MASSIEU, Chair of the Advisory Committee on Administrative and Budgetary Questions, presented its corresponding reports (document A/72/537), noting that all entities had again received unqualified audit opinions from the Board. Full and timely implementation of audit recommendations, particularly those pending for more than two years, remained a concern, however. The Advisory Board concurred with the Board of Auditors that more effort must be made to resolve old audit recommendations and welcomed the Board’s continued assistance to audit clients by defining specific implementation timelines and other measurable steps, when appropriate, he said.
While the Advisory Committee noted that the financial position of the audited entities remained sound with generally high solvency and liquidity ratios, it would be useful for Member States if future audit reports included comparative data on various ratios as well as related analysis. With respect to the level of reserves held across the audited entities, he emphasized the need for a balanced approach, particularly for those entities funded primarily from voluntary resources, adding that the Secretary‑General should strive to develop reasonable reserve level benchmarks. The Advisory Committee also requested that the Secretary‑General explain to the General Assembly why the average time required to fill a vacant post had sharply increased from 163 days in 2015 to 202 days in 2016, as highlighted by the Board of Auditors and significantly above the 120‑day benchmark mandated by the Assembly through its resolution 65/247.
AMERICA LOURDES PEREIRA SOTOMAYOR (Ecuador), speaking on behalf of the “Group of 77” developing countries and China, noted that all the audited entities had once again received unqualified audit opinions and stressed the need for entities to sustain gains while addressing identified weaknesses. She welcomed that the financial health of the United Nations as a whole remained sound, but drew attention to the potential of the employee benefits liabilities decimating the regular budget over time should it remain unfunded. The Group noted the development of methodology to measure the Sustainable Development Goals, particularly Tier 3, and said delays in finalizing standards for collecting data for Tier 3 indicators must be avoided as such delays would impede measurement of progress of up to one‑third of the Goals. On procurement, the Group said that procurement authority was not delegated in a structured and well‑organized manner, particularly as it was driven more by tradition rather than by substantive requirements. The organization and structure of procurement authority, responsibilities and accountability must be clearly defined and developed. The Group had concerns about the lack of monitoring of the Secretariat’s implementation of the Secretary‑General’s bulletin on employment and accessibility for staff members with disabilities. The work days lost due to mental health disorders could cause institutional risk to the Organization.
Noting the high level of investment in Umoja, the Group looked forward to Umoja opening new avenues for redrawing the Organization’s processes in order to deliver better value, she said. The Group anticipated that the Secretariat would leverage that opportunity to overcome deficiencies such as in the process of collecting and collating information for submission to the actuary for valuation of employee benefits liabilities. The Group believed that the implementation of audit recommendations had fallen short and the different United Nations entities and the Secretariat must work towards the implementation and eventual closure of old audit recommendations. In that context, the Group welcomed all efforts of the Board aimed at increasing the rate of implementation of audit recommendations and would closely follow matters related to the implementation of audit recommendations in the next report on the accountability of the United Nations system.
THOMAS HYNDRAK, European Union delegation, welcomed the Board’s findings and recommendations on the United Nations financial position, financial performance and cash flows. The European Union welcomed that nine United Nations entities were able to prepare, for the first time, their financial statements through Umoja, and that those statements were provided to the Board in a timely manner. That indicated Umoja stabilization, he said, expressing confidence in further transparency, efficiency and cost‑effectiveness in the coming years. The European Union also welcomed the Board’s note of continuous improvement in the application of the International Public Sector Accounting Standards (IPSAS) in the preparation of financial statements across the United Nations system. IPSAS‑compliant reports on the United Nations financial position and performance would increase the confidence of Member States and donors in the Organization’s accountability. In that regard, the European Union fully supported the Board’s work.
On fraud prevention, the European Union supported the Board’s requirements for intensified fraud awareness training and specific guidance, he said. Base on the 2016 anti‑fraud and anti‑corruption framework, further efforts were needed to strengthen the United Nations culture of good and transparent governance. Concerning the level of implementation of the Board’s recommendations, the bloc appreciated the increase of the overall rate, but noted that the implementation rate, especially of recommendations pending for more than two years, was not yet satisfactory.
CHERITH NORMAN CHALET (United States) said her delegation was pleased that all examined United Nations entities had received unqualified audit opinions from the Board of Auditors. They had demonstrated solvency and the ability to meet their short- and long‑term liabilities, she said, expressing continued confidence in the integrity of the Organization’s financial statements. She said the United States was carefully considering the Board’s concerns about project management and reported procurement delays in the implementation of the strategic heritage plan, and insisted that that project — to renovate the United Nations Office in Geneva — be completed within budget and within its planned timeline by 2023. The Secretary‑General must also address the Board’s numerous concerns about procurement, including the need for better and more transparent delegations of authority, contracting requirements, data management and transactional processing through Umoja, she said.
While the United Nations had sufficient assets to cover its liabilities, the issue of employee benefits liabilities had yet to be addressed, she said. “The significant and financial impact of these liabilities on the regular budget, valued at approximately $4.4 billion for 2016, cannot be understated,” she said, emphasizing that it would be critical to get a clear picture of those liabilities through accurate census data to ensure proper financial planning. She went on to call on the Organization to better integrate the Board of Auditors’ recommendations into its day‑to‑day operations. Through implementation, supported by strong leadership, the United Nations could achieve real, demonstrable improvements in mandate delivery, she added.
RAGHAV LAKHANPAL (India), associating himself with the Group of 77 and China, agreed with the Board of Auditors on further aligning long‑term strategies with activities relating to the 2030 Agenda for Sustainable Development. The Board’s concerns about the lack of appropriate funding arrangements to fulfil long‑term employee benefits liabilities must be addressed expeditiously. Effective implementation of the Secretariat’s anti‑fraud and anti‑corruption framework would be an important step towards maintaining a culture of integrity, he said, emphasizing also the need for a prompt follow‑up of recommendations from the Board which had been pending for two‑years or more.