Speakers Urge United Nations Entities, Secretariat to Better Manage Organization’s Financial Resources, as Fifth Committee Reviews Board of Auditors Reports
Troubled by repeated concerns raised by the Board of Auditors, delegates in the Fifth Committee (Administrative and Budgetary) today urged Secretariat officials to better manage the Organization’s financial resources while efficiently and quickly carrying out all recommendations of the United Nations top auditing watchdog.
Valentina Monasterio Gálvez, Director of External Audit of Chile and Chair of the Audit Operations Committee of the Board of Auditors, today laid out the 2021 financial reports and audited financial statements for the United Nations and several of its funds and programmes, as well as a summary of its principal findings and conclusions of audits on 18 United Nations system entities. The financial position of all entities remained at least sufficient in general, with the solvency ratios and liquidity ratios comfortably high for most of them, she said, noting that 15 entities closed the financial year with a surplus and two entities recorded a deficit.
While pleased that all entities under the Board’s review have received unqualified audit opinions, Pakistan’s delegate, speaking for the “Group of 77” developing countries and China, said these entities must address identified weaknesses and preserve current accomplishments. Moreover, the Group is seriously concerned that the United Nations Office for Project Services (UNOPS) again received an “emphasis of matter” audit opinion related to its Sustainable Infrastructure Impact Investments.
Despite recent improvements in the overall implementation rate of the Board’s recommendations to 53 per cent in 2021, he said there is room for enhancement, compared to the 65 per cent rate realized in the biennium 2008-2009, especially for entities whose implementation rate was less than 50 per cent. All entities and the Secretariat must to take appropriate steps to quickly implement the recommendations and hold themselves accountable for delays. Also troubling is the Board’s continued concern with cost recovery, transfer of resources from the regular budget fund to the cost-recovery fund and deficiencies in the creation of fund commitments, he said.
Echoing worries over budgetary and human resources issues repeatedly raised by the Board and noting the financial pressures facing Member States, China’s delegate said the Secretariat must take these matters more seriously and better manage the Organization’s financial resources. She also noted the “emphasis of matter” audit opinion given again to UNOPS and stressed that all relevant bodies should learn from its financial irregularities and strengthen their financial management, oversight and accountability.
Chandramouli Ramanathan, Controller and Assistant Secretary-General of Programme Planning, Finance and Budget in the Department of Management Strategy, Policy and Compliance, introduced the Secretary-General’s reports on implementation of the Board’s recommendations for the United Nations and its funds and programmes. Abdalla Bachar Bong, Chair of the Advisory Committee on Administrative and Budgetary, introduced its related report.
Gopinathan Achamkulangare, Inspector of the Joint Inspection Unit, introduced its report on review of the management of implementing partners in United Nations system organizations. Federica Pietracci, Senior Programme Management Officer of the United Nations Chief Executives Board for Coordination (CEB), introduced the Secretary‑General’s related note on the Unit’s report, which conveys the comments of the Secretary‑General and CEB members.
The Fifth Committee will reconvene at 10 a.m. on Monday, 21 November, to discuss a subvention for the Extraordinary Chambers in the Courts of Cambodia and several construction and property management issues.
Financial Reports and Reports of Board of Auditor
VALENTINA MONASTERIO GÁLVEZ, Director of External Audit of Chile and Chair of the Audit Operations Committee of the Board of Auditors, introduced the financial report and audit financial statements for the year ended 31 December 2021 and the reports of the Board of Auditors including for the United Nations (document A/77/5 (Vol. I)), International Trade Centre (document (Vol. III)), United Nations University (document (Vol.IV)), United Nations Development Programme (UNDP) (document A/77/5/Add.1), United Nations Capital Development Fund (document Add.2), United Nations Children’s Fund (UNICEF) (document Add.3), United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA) (document Add.4) and the United Nations Institute for Training and Research (UNITAR) (document Add.5) and Voluntary funds administered by the Office of the United Nations High Commissioner for Refugees (UNHCR) (document Add.6).
Also included were: Fund of the United Nations Environment Programme (UNEP) (document Add.7), United Nations Population Fund (UNFPA) (document Add.8), United Nations Human Settlements Programme (UN-Habitat) (document Add.9), United Nations Office on Drugs and Crime (UNODC) (document Add.10), United Nations Office for Project Services (UNOPS) (document Add.11), United Nations Entity for Gender Equality and the Empowerment of Women (UN-Women) (document Add.12) and the International Residual Mechanism for Criminal Tribunals (document Add.15).
She also introduced the Secretary-General’s note (document A/77/240) transmitting the “Concise summary of the principal findings and conclusions contained in the reports of the Board of Auditors for the annual financial period 2021”. It summarizes the key issues of the audits in the Board’s reports addressed to the General Assembly on 18 entities, including 16 agencies, programmes and funds, and United Nations peacekeeping operations and the United Nations Joint Staff Pension Fund. All these entities received unqualified audit opinions and UNOPS received an unqualified opinion with an emphasis of matter.
She noted that 15 entities closed the financial year with a surplus and two entities recorded a deficit. The financial position of all entities remained at least sufficient in general, she added, with the solvency ratios and liquidity ratios comfortably high for most of the entities. However, she stressed that the trend analysis of liquidity should be constantly monitored to manage liquidity risks.
In every audit report, the Board reviewed the status of old recommendations and noted that the overall rate of implementation of the recommendations of the previous year had increased from 48 per cent in 2020 to 53 per cent in 2021. Identifying implementing partners as one of the six critical risks related to fraud and corruption, she pointed out that the Board decided to include a special Chapter on Management of Implementing Partners.
CHANDRAMOULI RAMANATHAN, Controller and Assistant Secretary-General for Programme Planning, Finance and Budget, Department of Management Strategy, Policy and Compliance, introduced the Secretary-General’s reports on implementation of the recommendations of the Board of Auditors contained in its report for the year ended 31 December 2021 on the United Nations (document A/77/322) and on the United Nations funds and programmes (document Add.1).
These reports provide additional information beyond comments already submitted to the Board, which were included in the Board’s final reports to the Secretary-General and to the executive heads of the respective United Nations Organizations in some cases, he explained. They also include information on the status of implementation, the department responsible, the estimated completion date and the priority for each recommendation. Also included is an update on the status of implementation of recommendations relating to prior periods that the Board considered not to have been fully implemented, specifically for information and communications technology (ICT) affairs and the Capital Master Plan.
He said it is important to note that all entities received unqualified audit opinions, with only UNOPS receiving an “emphasis of matter”. This intends to draw users’ attention to a matter presented or disclosed in the financial statements that, in the auditor’s judgement, is fundamental to users’ understanding of the financial statements.
Regarding the Secretary-General’s report on United Nations Volume I for the year ended 31 December 2021, out of the Board’s 102 recommendations, the Administration requested the closure of 10 recommendations and the other 92 recommendations were under implementation as of August 2022. In annex I to this report, the Board provided a summary of the status of implementation of the 278 extant recommendations relating to prior financial periods. Of that amount, 98 (35 per cent) had been fully implemented; an additional 20 (7 per cent) had been overtaken by events; and 160 (58 per cent) were under implementation. For the second year in a row, more than 100 open recommendations were closed by the Board for United Nations Volume I, reflecting the Administration’s significant efforts, he said.
Turning to the concise summary of the principal findings and conclusions contained in the Board’s reports for the 2021 annual financial period, he said the Board indicated that the overall implementation of extant recommendations relating to prior periods was 53 per cent in 2021, up from 48 per cent in 2020. The Board noted the decline in the implementation rates for some entities stemmed from several factors. One was the planned implementation dates indicated by the entities themselves, which may cover more than one audit period to let them make gradual progress. Another factor was the recommendations may be composed of several elements that collectively address one finding. Therefore, an entity displays concrete improvements for most of the elements, but not all of them, he explained. In such cases, the recommendation’s overall status is listed as being under implementation. Another factor is several Organizations are migrating to a new enterprise resource planning system.
“The Administration is committed to the timely and thorough implementation of the Board’s recommendations, as evidenced by the improved implementation rate for the 2021 financial period,” he said.
ABDALLA BACHAR BONG, Chair of the Advisory Committee on Administrative and Budgetary Questions, introduced its related report on the financial reports and audited financial statements, and reports of the Board of Auditors for the period ended 31 December 2021 (document A/77/574). While noting the “emphasis of matter” related to UNOPS, the Advisory Committee welcomed that all entities under review again received unqualified audit opinions. He noted the Board’s conclusions that the audited entities’ overall financial position was sufficient at year-end 2021. The Advisory Committee acknowledges the overall implementation rate of the Board’s recommendations has sustainably increased during the last few years. Yet considering the significant risks and internal control weaknesses identified by the Board, he said further efforts are required to improve implementation. The Board’s review is also needed on matters such as cost recovery; general temporary assistance; the use of personnel engaged by UNOPS, UNDP and third-party service providers; as well as the management of consultants and contractors.
Regarding cost recovery, ACABQ concurs with the Board’s recommendations and emphasizes the need for a comprehensive analysis of the $448.54 million accumulated surplus. This would identify any subsidization across sources of funding with a breakdown by entities, with a view to returning funds to Member States, as appropriate. A surplus of $14.78 million, related to charges for services already covered by the regular budget for the United Nations Support Mission in Libya (UNSMIL), should have been credited to Member States.
The Advisory Committee trusts that the Secretary-General will provide additional justification to the General Assembly on its decision to transfer $28.72 million from the regular budget account to the cost-recovery account for business continuity purposes during the COVID-19 pandemic. Noting the low level of expenditures, ACABQ is not convinced the business continuity investments are needed. It also trusts the Administration will develop guidelines on the exceptional use of special funds commitments, such as those created at the end of 2019 ($55.32 million) and 2020 ($116.66 million), to respond to the liquidity crises, with clear criteria that comply with the Financial Regulations and Rules. These would be presented to the Assembly, he said.
Turning to human resources matters, he said the Advisory Committee agrees with the Board about insufficient disclosure of general temporary assistance positions. It recommends greater clarity, transparency and consistency in their presentation and full compliance with relevant rules and regulations, and stresses the need for the same regarding the widespread use of personnel recruited by various entities through arrangements with UNOPS, UNDP and third parties. The Secretary-General should disaggregate the number and costs of personnel employed through such arrangements in future proposed budgets. The Advisory Committee also sees merit in a comprehensive review of personnel hired through these modalities, along with a workforce planning and cost-benefit analysis. He noted the overreliance on consultants and contractors across the audited entities and the related operational exposure risks, accountability implications, over-expenditure and recurring deficiencies in their management and said the Advisory Committee sees merit in the Board’s comprehensive thematic analysis on the use of consultants and contractors.
GOPINATHAN ACHAMKULANGARE, Inspector of the Joint Inspection Unit, introduced its report titled “Review of the management of implementing partners in United Nations system organizations” (document JIU/REP/2021/4). Outlining its key findings, he said that organizations should engage in appropriate inter-agency mechanisms to agree on the key principles, standards and processes in respect of their implementing partner management policies and practices. Noting that information is still fragmented, impeding monitoring, performance monitoring and partner performance assessments, he pointed to a lack of systematic and regular reporting to the legislative organs and governing bodies in some organizations. Highlighting that not all organizations have adopted policies for all categories of implementing partners, he stressed that dedicated implementing partner units should be set up in organizations with significant activity. He added that a holistic and systematic risk management process should be put in place, as partnerships expose entities to operational, reputational, legal, compliance, contractual and financial risks.
He went on to state that key performance indicators should be aligned to the organization’s strategic plan and results framework. While encouraging organizations to provide training on specific aspects of implementing partner management, he underscored that many implementing partners lack adequate capacity in robust management systems, accounting, human resources or procurement policies and processes. In this regard he called for stronger inter-agency coordination and collaboration, emphasizing that “capacity-building of implementing partners, strengthening national capacities, and promoting national ownership are key objectives and guiding criteria in the delivery of programmes through partners.”
FEDERICA PIETRACCI, Senior Programme Management Officer of the United Nations Chief Executives Board for Coordination (CEB), introduced the related note by the Secretary‑General (document A/77/317/Add.1) on the Joint Inspection Unit’s report, which conveys the comments of the Secretary‑General and CEB members. She noted that while recognizing the importance of alignment and coherence in the frameworks that govern implementing partnerships, entities acknowledged the substantial differences between their operational procedures, financial rules, business models and governance. She added that organizations highlighted that the use and management of implementing partners represents both a programmatic and a financial oversight issue and that inter-agency coordination should adhere to the commitments made in the quadrennial comprehensive policy review monitoring framework 2021-2024. While some United Nations Secretariat entities have set up their own guidelines on the engagement of implementing partners, she continued, all Secretariat entities follow the same process in the enterprise resource planning system. Although several of the timelines were considered unrealistic, she pointed out that organizations emphasized their commitment to contribute to inter-agency initiatives resulting from the proposed recommendations.
JIBRAN KHAN DURRANI (Pakistan), speaking on behalf of the “Group of 77” developing countries and China, said he appreciated the Board’s high-quality reports, which are essential in helping members keep track of the Organization's expenditures and efficiently fulfil its mandates. While pleased all entities have received unqualified audit opinions, he asked these entities to address identified weaknesses while preserving current accomplishments. The Group is seriously concerned that UNOPS again received an “emphasis of matter” related to its Sustainable Infrastructure Impact Investments initiative and welcomed more information on the Project’s internal controls, risk management and governance structures. The Group is also concerned with issues raised by the Board related to financial and budgetary matters, including cost recovery, transfer of resources from the regular budget fund to the cost-recovery fund and deficiencies in the creation of fund commitments. “We emphasize that budget management is a key issue to the operating of the UN and request the Secretariat to make further efforts to improve the financial and budget management,” he said.
He went on to express serious concern over compliance issues disclosed in the Board’s reports, referring to those not in full compliance with the United Nations legal framework, including the Charter of the United Nations and the Financial Regulations and Rules. He reiterated that any activity of the administrations are subject to the Organization’s legal framework. Turning to the overall rate of implementation of recommendations, he noted it was 53 per cent in 2021, up from 41 per cent in 2019 and 48 per cent in 2020. Yet there is room for improvement, compared to the 65 per cent rate realized in the biennium 2008-2009, especially for entities whose implementation rate was less than 50 per cent, he said. He underscored that all entities need to take appropriate measures to ensure that the Board’s recommendations are quickly implemented, with proper accountability arrangements for delays. The Group again asks the Secretariat to enhance its efforts to fully and effectively implement Board-endorsed recommendations and fully explain the delays in implementating all outstanding ones, he said.
GUO ZHIQI (China), aligning herself with the Group of 77, stated that as they face great financial pressures, Member States expect efforts by the Secretariat to improve the efficiency in the use and administration of its financial resources. Recalling that UNOPS again received an audit opinion with an emphasis of matter, she underscored that all relevant bodies should learn a lesson from its financial irregularities and strengthen their financial management, oversight and accountability. Highlighting issues repeatedly raised by the Board, including financial and budgetary matters as well as human resources management, she stressed that the Secretariat should take them more seriously and address them with effective measures. Pointing to the five entities with an implementation rate of the Board’s recommendations at below 50 per cent, she urged the Secretariat to pay greater attention and set an example for the other entities in the United Nations system.
Mr. RAMANATHAN said he usually does not like to take the floor yet felt compelled to do so related to the suggestion that there was poor budget management. He strongly refuted that argument, stressing that Member States were well aware that the Organization faced an unprecedented situation and if it had not acted the way it did, the Organization could not function properly in 2021. In 2019, the Secretary-General presented a report and Member States could not agree on what actions to take. The Secretariat acted in the spirit of the regulations.
“If you receive $330 million in the last 10 days of the year, Member States have not complied with their part of the bargain,” he said, adding the Secretariat did the best it could to mitigate the crisis. There is an inadequate understanding of the underlying circumstances and he urged Member States to look closely at the regulatory framework. “If Member States don’t have the ability to pay on time, the regulatory framework does not work,” he added. The Secretariat acted responsibly and with utter transparency. All the information is available and ready to be audited. He urged Member States to pay close attention during the informals to circumstances under which actions were taken and not take them out of context.