Delegates Urge Greater Budget, Financial Management Activities, as Fifth Committee Considers Board of Auditors' Annual Report Reviewing United Nations Finances
Delegates at the Fifth Committee (Administrative and Budgetary) today urged the Secretariat to bolster its budget and financial management activities after considering more than a dozen reports issued by the United Nations top auditing watchdog as part of its annual review of the Organization’s finances.
Cuba’s representative, speaking for the Group of 77 and China, noted that the Board of Auditors’ review of the 2022 financial statements of the United Nations and its agencies, funds and programmes had generally assessed that the respective financial positions, along with the solvency and liquidity ratios, remained at least sufficient, except for UN peacekeeping operations. “We stress this is a trend that should be monitored systematically in light of the periodic cash shortage in the major part of regular budget and payments not made in a timely manner,” he said. Concerned with several issues raised in the Board reports, he added: “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 financial and budget management.
Echoing the importance of the Organization’s financial and budget administration, the representative of China said her delegation is concerned about the reports’ disclosure that existing UN administrative rules, regulations and guidelines are yet to be followed. She underlined that complying with these frameworks is essential to strengthening organizational governance and enforcing accountability. She hoped the Secretariat and relevant agencies will step up financial management and oversight accountability and urged the Secretariat to effectively implement audit recommendations and improve implementation rates to set an example for other UN entities.
Delegates then turned their attention to ongoing renovation projects at the Palais des Nations at the United Nations Office at Geneva and the Africa Hall at the Economic Commission for Africa (ECA) in Addis Ababa.
Speaking for the African Group, the representative of Ethiopia said the Africa Hall renovation project can help strengthen the unique relations between the African continent and the UN. As the birthplace of the Organization of African Unity and the seat of the ECA for decades, the Hall “continues to be a place where present day aspirations to development, equity, security and human welfare is deliberated and agreed on”. He commended the Secretariat’s efforts to move the project along despite difficulties with the main contractor and expected its completion within the allocated time and resources. He also noted the Secretary-General’s efforts to mobilize voluntary contributions and hoped for a formalization and payment of the pledge to support the Hall’s visitors’ centre.
Cuba’s delegate, speaking again for the Group of 77 and China, also noted the Africa Hall’s historical significance while adding the renovation project is now slated for completion in June 2024, an overall delay of 42 months. “We stress the importance of effective governance, oversight, internal control and accountability to ensure that the project is implemented within the approved budget and within the revised project schedule,” he said. He noted the Board audited the Commission, including the Africa Hall renovation project, and made one recommendation. This recommendation, to diligently assess potential strategies for recovering losses and minimizing inefficiencies, was accepted by the Commission.
Turning to the Strategic Heritage Plan now underway at the UN’s Geneva Office, he noted the current budget forecast indicates the project will exceed the overall budget by 3 per cent. He expected more information on the overall construction schedule’s comprehensive revision, the negotiation of the guaranteed maximum price contract for Building E and estimated cost overruns. “We stress that all pertinent and approved recommendations of the Board of Auditors must be implemented expeditiously to help business transformation,” he added.
Switzerland’s delegate said the Organization’s investment in the Strategic Heritage Plan will help guarantee the modernization, efficiency and sustainability of the UN. Despite difficult circumstances, work progressed during the year even as further delays are likely. She also reiterated the importance of accounting for the project's potential as well as the costs of its underuse. “As the host country, Switzerland remains strongly committed to supporting the SHP [Strategic Heritage Plan], including with an interest-free loan totalling CHF 400 million,” she said.
Maria Costa, Director of the Finance Division of the Office of Programme Planning, Finance and Budget, in the Department of Management Strategy, Policy and Compliance, introduced the Secretary-General’s reports regarding both the Board of Auditors and the construction and project management issues. This included the reports on implementing the Board of Auditors’ recommendations for the year ended 31 December 2022 for the UN and its funds and programmes; the Secretary-General’s tenth annual progress report on the Strategic Heritage Plan; and the Secretary-General’s eight annual progress report on the renovation of Africa Hall at ECA.
Abdallah Bachar Bong, Chair of the Advisory Committee on Administrative and Budgetary Questions (ACABQ), introduced its related documents.
Financial Reports and Reports of Board of Auditors
OSAMA MAHMOUD ABDELKHALEK MAHMOUD (Egypt), Chair of the Fifth Committee, first drew its attention to the financial reports and audited financial statements for the year ended 31 December 2022 and the reports of the Board of Auditors as well as the Secretary-General’s note (document A/78/215) transmitting the “Concise summary of the principal findings, conclusions and recommendations contained in the reports of the Board of Auditors for the annual financial period 2022”. The findings, conclusions and recommendations included in the note relate to the common themes and major issues identified in the Board’s reports, addressed to the General Assembly, on 17 of the 18 entities listed in annex I. He said the report does not include the contents of the Board’s reports to the Security Council and other governing bodies are not summarized herein.
The Committee Chair also drew the Committee’s attention to the Board’s related introductory statement, which will be posted on the Committee’s website after the meeting. The Board reports include Volume I United Nations “Financial report and audited financial statements for the year ended 31 December 2022” (document A/78/5 (Vol. I); International Trade Centre (document (Vol.III)); United Nations University (document (Vol.IV)); United Nations Development Programme (UNDP) (document A/78/5/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); International Residual Mechanism for Criminal Tribunals (document Add.15); and the United Nations Joint Staff Pension Fund (document Add.16).
MARIA COSTA, Director of the Finance Division of the Office of Programme Planning, Finance and Budget, in the Department of Management Strategy, Policy and Compliance, then 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 2022 on the United Nations” (document A/78/333) and “Implementation of the recommendations of the Board of Auditors contained in its reports on the United Nations funds and programmes for the year ended 31 December 2022” (document Add.1).
She said the reports provide additional information to comments already submitted to the Board, which in some cases were included in the Board’s final reports to the Secretary-General and to the executive heads of the respective United Nations organizations. They include information on the status of implementation of recommendations, the department responsible, the estimated completion date and the priority for each recommendation contained in the respective Board reports. They also include an update on the status of implementation of recommendations relating to prior periods that the Board considered not to have been fully implemented, namely, on the Umoja system, Strategic Heritage Plan, information and communications technology and the Capital Master Plan.
Turning first to the implementation of recommendations contained in the Board’s report on United Nations Volume I for 2022, she said out of the 84 Board recommendations, the Administration requested closure for 17, with the remaining 67 already under implementation as of August 2023. In annex I of the report, the Board provided a summary of the implementation status, as of December 2022, of its 262 existing recommendations relating to eight prior financial periods. Of those 262 existing recommendations, 111, or 42 per cent, were fully implemented, and 11, or 4 per cent, had been overtaken by events. The remaining 140, or 54 per cent, were under implementation. For the third year in a row, more than 100 open recommendations were closed by the Board for United Nations Volume I. This led to a decline in the number of open recommendations from 262 at the beginning of 2022, to 224. “This reflects the significant efforts made by the administration to close outstanding recommendations,” she said.
Turning to the report on the concise summary of the principal findings conclusions and recommendations contained in the Board’s reports for 2022, she said the Board noted that the overall implementation of existing recommendations relating to prior periods was 53 per cent both in 2022 and 2021 and that the decline in the implementation rates and delays in the implementing recommendations for some entities were the result of several factors. One factor is the planned implementation dates indicated by the entities themselves, which may cover more than one audit period, allowing the entities to make phased progress; a second factor is the recommendations may be composed of several elements that collectively address one finding. Consequently, there are cases where an entity displays concrete improvements for most of the elements, but not all of them. In such cases, the overall status of the recommendation is listed as being under implementation.
On the Secretary-General’s behalf, she thanked the Board for the “constructive spirit” in which it discharged its oversight function and said the Administration is committed to the timely and thorough implementation of the Board’s recommendations.
ABDALLAH BACHAR BONG, Chair of the Advisory Committee on Administrative and Budgetary Questions (ACABQ), introducing the Advisory Committee’s report on financial reports, audited financial statements and reports of the Board of Auditors for the period ended 31 December 2022 as well as the Secretary-General’s report on the implementation of the recommendations of the Board of Auditors for the same period on the United Nations and its funds and programmes (document A/78/578), noted that all entities under review have again received unqualified audit opinions from the Board, with their overall financial position as at 31 December 2022 judged to be sufficient. On cost recovery for the 2022 programme budget performance report, he underscored the need for enhanced compliance with UN policy and guidelines on cost recovery services as well as the importance of monitoring the accumulation of surpluses and the overrecovery of shared services costs.
The Advisory Committee agrees with the Board of Auditors on the health insurance programme that an institutional mechanism to review the performance of the plan be established, its reserve balance be closely monitored and necessary actions be recommended. The Secretary-General is expected to provide additional information to the General Assembly on any related financial implications during its consideration of the present report. Concerning human resources issues, he expressed concern on the overreliance on consultants and contractors, recommending that “the Secretariat conduct a thorough workforce review of the ICT staffing support service, and submit its findings and analysis in the next proposed programme budget”. The Advisory Committee aligns with the Board’s recommendations on the establishment of a joint vendor committee, expecting an update in the next proposed programme budget.
Turning to development reform, he said his Committee considers the UNDP “integrator” function as a policy matter to be considered by the General Assembly and the Economic and Social Council and hopes the Administration will provide clarity on the mandate and detailed justifications to the Assembly when considering the present report. He stressed the importance of independent and effective oversight of the entities and hoped that they will strengthen efforts to ensure the emplacement of relevant mechanisms to perform such oversight functions, to comply with the findings and decisions of oversight bodies. Budgetary regulations, rules and guidelines should also be strictly adhered to. The Advisory Committee recommends that the General Assembly request entities to review their policy frameworks and monitor compliance to strengthen budgetary discipline and accountability and expects future budget submissions to provide a holistic presentation of all sources of funding and activities.
RICHARD TUR DE LA CONCEPCIÓN (Cuba), speaking on behalf of the Group of 77 and China, first noted that the Board of Auditors’ reports were signed by the Board at the end of July, but delegates did not receive them until mid-October. Reports of the Secretary-General and ACABQ came out even later. This important agenda item has been postponed several times and the delay leaves the Committee with insufficient time to deliberate on substantive issues, he said. The Group reiterates that each agenda item needs adequate time and practical measures are needed to ensure that all reports are issued in a timely manner. The Group notes that of 17 audited entities, eight concluded the financial year with a surplus, and nine recorded a deficit, compared to 15 and two, respectively, in 2021. The Group is also concerned that that the International Trade Centre and UNRWA showed negative net assets for the fourth consecutive year.
He reiterated that more efforts are needed to improve their financial situation. Despite these deficits, the Board had assessed that the financial position of all entities, along with the solvency and liquidity ratios, remained at least sufficient at the end of 2022, except for UN peacekeeping operations. “We stress this is a trend that should be monitored systematically in light of the periodic cash shortage in the major part of regular budget and payments not made in a timely manner,” he added. The Group is concerned with several issues raised by the Board in its reports, including the cost recovery fund, disclosure of special commitments, development reform, fund and asset management, delegation of authority, information and communication technology, procurement, lack of transparency of extrabudgetary resources in the proposed programme budget and their use to fund the establishment of high-level positions, among others.
“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, noting that the United Nations Office for Project Services (UNOPS) again received a recommendation to take all measures necessary within its remit to recover the funds associated with the Sustainable Investments in Infrastructure and Innovation investment losses. The Group looks forward to additional information on the internal controls and actions being taken to address this issue. Turning to the status of the implementation of the Board recommendations, the Group notes that the overall implementation rate was 52.49 per cent in 2022, similar to 2021. All entities must act promptly to ensure the Board’s accepted recommendations are given priority and implemented, and programme managers must be held accountable for their non-implementation. He reiterated the Group’s request for a full explanation of delays in the implementation of all outstanding recommendations.
GUO ZHIQI (China), aligning herself with the Group of 77 and China, said independent and efficient auditing is necessary to enhancing the transparency, compliance and accountability of the Organization’s financial management. With the world still facing multiple challenges, and countries’ economies and finances under great pressure, the United Nations must review the financial contributions of Member States and further improve the effective use of funds, at the same time enhancing the efficiency of administrative operations, as oversight plays an irreplaceable role in safeguarding the interests of Member States. China is concerned about the report’s disclosure that existing UN administrative rules, regulations and guidelines are yet to be followed and underlines that complying with these frameworks is essential to strengthening organizational governance and enforcing accountability. It further hopes that the Secretariat and relevant agencies will step up financial management and oversight accountability, she said. She urged the Secretariat to effectively implement audit recommendations and improve implementation rates to set an example for other UN entities.
Construction and Property Management
Ms. COSTA, Director of the Finance Division of the Office of Programme Planning, Finance and Budget, in the Department of Management Strategy, Policy and Compliance, then took the floor again to introduce the Secretary-General’s report “Progress in the renovation of Africa Hall at the Economic Commission for Africa in Addis Ababa” (document A/78/350). During the reporting period, the Commission awarded several contracts, including for the main renovation works in August 2022; the conference and information technology systems in November and December 2022; and for artwork restoration services in October 2022 and September 2023. The related service deliveries have begun and are progressing well, she said. Substantial project completion is now expected in June 2024, one month later than expected in the Secretariat’s previous progress report. Procurement activities are ongoing for the permanent exhibition package; remaining services under the conference and information technology systems; and minor artwork restoration services. The proposed actions for the General Assembly are set out in section VIII of the report.
Ms. COSTA then introduced the Secretary-General’s report “Tenth annual progress report on the Strategic Heritage Plan of the United Nations Office at Geneva” (document A/78/503). The report provides an update on progress, updated costs and schedule estimates and a revised valorization strategy. She said construction and renovation works are advancing, though more slowly, due to continuing supply chain delays and necessary changes to the work. Challenges emerged regarding the contractor’s ability to manage its scheduling and sequencing of the works, as well as securing sufficient resources to move the works forward at the required pace. The project team is working proactively to counter the overall delays by introducing a lean management methodology to prevent further slippages and improve management and productivity at the worksite.
Despite these challenges, the project moved forward in 2023, she said. Advances included the January signing, within budget, of the contract for renovation works of Building E, with work started on the design and the pre-construction phase. The first section of the renovated historical buildings was substantially completed in May and conferences and meetings are now being routinely held in this section of the Palais des Nations. In addition, Office Building D was substantially completed in August. Due to tight cost control measures to achieve the current benchmark P80 confidence level, the risk model currently projects that an additional 39.5 million Swiss francs would be needed, about 4.7 per cent more than the current approved budget.
MR. BONG, Chair of the ACABQ, introducing ACABQ related reports on the Strategic Heritage Plan (document A/78/7/Add.18) and the renovation of Africa Hall (document A/78/7/Add.19), said that while the ACABQ acknowledges the challenges associated with the renovation of the historic buildings at the Palais des Nations in Geneva, it is concerned about the delays in the overall project schedule and related cost overruns. It hopes that further information will be presented to the Assembly, including on the comprehensive revision of the overall construction schedule and the guaranteed maximum price contract for Building E, possible costs arising from the revised schedule forecast and costs related to the variations in the renovation works of the historic buildings. He recalled that the ACABQ had earlier been informed that proposing scope reductions will become necessary if the forecast cost increase arising from schedule delays, inflation and other cost pressures, is not fully mitigated. He expected that clarification on the timing of the expected project contractual and legal decisions as well as any possible related Secretary-General’s proposals on the project scope for approval will be provided to the Assembly.
Noting the contingency amounts presented in the progress reports represent balancing figures between estimated core project cost and overall budget amounts approved, he said: “Further clarity in the reporting of contingency provisions, with clear disclosure of amounts approved, utilized and available balances, would enhance understanding at a given stage of the project”. On the valorization strategy for the UN-owned land in Geneva, he said the Secretary-General’s report contains only partial information on the strategy and future resource requirements, and that significant resources would be required from Member States for its implementation. “The Committee is therefore not convinced of the proposed approach,” he said, adding that the Geneva Office should continue its outreach to potential tenants within existing resources for the parcels of land already identified with potential for valorization and provide updates to the Assembly when more concrete prospectives become available.
On Africa Hall, he said considering the exhausted escalation provision and under 10 per cent remaining in the contingency provision, the ACABQ hopes that efforts to contain costs will not impact the quality of work yet to be performed. It also notes that the updated top five project risks include two that fall within the scope of the Administration’s control — timeliness of decision-making and owner directed changes — and have the highest implication on the project. The ECA should make a concerted effort to address and limit these risks so as to ensure the timely delivery of the project within the approved overall budget of $56.9 million.
ROBERTO HERNANDEZ DE ALBA FUENTES (Cuba), speaking on behalf of the Group of 77 and China, first turned to the Strategic Heritage Plan, and noted the current budget forecast indicates the project will exceed the overall budget by 3 per cent. This implies the project may not achieve the fully approved baseline scope within the approved budget and the final completion date is likely to go into 2026. He expected more information on the overall construction schedule’s comprehensive revision, the negotiation of the guaranteed maximum price contract for Building E and estimated cost overruns. He also noted that of the Board of Auditor’s 29 outstanding recommendations at the end of 2022, 17 had been implemented; nine were under implementation; two had been overtaken by events; and one had not been implemented. “We stress that all pertinent and approved recommendations of the Board of Auditors must be implemented expeditiously to help business transformation,” he added.
Turning to the ECA renovation, he noted the Africa Hall’s historical significance, the importance of conserving its heritage and that the project’s completion is now forecast for June 2024, an overall delay of 42 months. “We stress the importance of effective governance, oversight, internal control and accountability to ensure that the project is implemented within approved budget and within the revised project schedule,” he said. He noted the Board audited the Commission, including the Africa Hall renovation project, and made one recommendation. This recommendation, to diligently assess potential strategies for recovering losses and minimizing inefficiencies, was accepted by the Commission. The Group also encourages the project team to increase efforts to use local knowledge, material, technology and labour. Noting the revised business case for the Africa Hall visitors’ centre, the Group would like more information on the start-up funding required for the centre and stresses that fees for services to the public should be affordable to a wide range of society, he said.
YOSEPH KASSAYE YOSEPH (Ethiopia) speaking on behalf of the African Group, said the renovation project of the Africa Hall presents a great opportunity to strengthen the unique relations between the African continent and the UN. The birthplace of the Organization of African Unity and the seat of the Economic Commission for Africa (ECA) for decades, the Hall “continues to be a place where present day aspirations to development, equity, security and human welfare is deliberated and agreed on.” He commended the Secretariat’s efforts to bring the project to its current stage despite difficulties concerning the main contractor and anticipates a timely completion within the allocated time and resources. He welcomed the Secretary-General’s efforts to mobilize voluntary contributions for the project and hoped for a formalization and payment of the pledge in support of the visitors’ centre.
Considering that, once completed, the Hall will be able to sustain itself which is predicated on its enhanced visibility and application of fees that is cognizant of different income levels, the Group takes note of and expects more information on the revised business case of the visitors’ centre. “While we appreciate the fee scheme in the revised business case, we still believe there is a need to use as model, the affordable fee schemes of other surrounding attraction sites”, he said, adding that children and students be included in the fee waiver programme. The heritage of the Hall’s landmark site should be conserved and respected in its originality, with consultation and involvement of experts from countries of origins of the art works being observed. The Group reiterates the General Assembly’s decision to ensure the use of local knowledge, material and expertise.
Speaking in his national capacity, he said his country, as host to ECA, attaches great significance to the successful completion of the project with all administrative arrangements in place and successfully implemented throughout the project’s life cycle. Ethiopia has also donated land that will be used by the visitors’ centre of the Africa Hall. “We will continue this support until the successful completion of the project,” he said. Appreciating countries that have voluntarily contributed to the project, he invited “other friends of Africa to use this unique opportunity to put their mark in this Africa House”, which, when completed, “will be a space where the United Nations will strengthen its relations with the people”.
PASCALE CHRISTINE BAERISWYL (Switzerland) said Member States have the duty to strengthen the multilateral system through a modern, efficient and sustainable Organization. The Organization’s investment in the Strategic Heritage Plan project will help guarantee the modernization, efficiency and sustainability of the UN. She noted that despite difficult circumstances, work progressed during the year even as further delays are likely. She thanked the project management team for continuously identifying measures to ensure that the project’s renovation and construction achieves the original goals. She encouraged the application of lessons learned and welcomed the Secretariat’s work to update the valorization strategy. She also reiterated the importance of accounting for the project's potential as well as the costs of its underuse. “As the host country, Switzerland remains strongly committed to supporting the SHP [Strategic Heritage Plan], including with an interest-free loan totalling CHF 400 million,” she said.