United Nations
Funding Arrangement Impede Independence of Internal Auditors Gao ID: GAO-06-575 April 25, 2006With contributions to United Nations (UN) organizations totaling more than $1.6 billion in 2006-2007, the United States has advocated strong UN oversight. In 1994, the United States provided support to establish the Office of Internal Oversight Services (OIOS). The findings of the Independent Inquiry Committee (IIC) into the Oil for Food Program have renewed concerns about UN oversight, and the 2005 World Summit proposed actions to improve OIOS. We were asked to examine (1) the extent to which UN funding arrangements for OIOS ensure independent oversight, and (2) the consistency of OIOS practices with key international auditing standards.
UN funding arrangements constrain OIOS's ability to operate independently as mandated by the General Assembly and required by international auditing standards that OIOS has adopted. First, while OIOS is funded by a regular budget and 12 other revenue streams, UN financial rules severely limit OIOS's ability to reallocate resources among revenue streams, locations, and operating divisions. Thus, OIOS cannot always direct resources at high-risk areas when they arise. Second, OIOS is dependent on the funds, programs, and other entities it audits for reimbursement for its services. The managers of the programs OIOS intends to examine can deny OIOS permission to perform work or not pay OIOS for services. UN entities could thus avoid OIOS audits or investigations, and high-risk areas can be and have been excluded from examination. OIOS has begun to implement key measures for effective oversight, but some of its practices fall short of applicable international auditing standards. OIOS develops an annual work plan, but the risk management framework on which the work plans are based is not fully implemented. Moreover, OIOS annual reports do not assess risk and control issues facing the UN organization or the consequences if these are not addressed. OIOS officials report that the office does not have adequate resources, but they also do not have a mechanism to determine appropriate staffing levels. Moreover, OIOS has no mandatory training curriculum for staff or systematic procedures for ensuring the reliability of data used for their audits. OIOS also does not require all staff to document their independence. Although two OIOS divisions have recently undergone external reviews, the other two have not undergone such a review within the last 5 years. OIOS monitors and reports on the status of its recommendations and is making efforts to improve follow up on oversight recommendations.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-06-575, United Nations: Funding Arrangement Impede Independence of Internal Auditors
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Report to Congressional Committees:
April 2006:
United Nations:
Funding Arrangements Impede Independence of Internal Auditors:
GAO-06-575:
GAO Highlights:
Highlights of GAO-06-575, a report to congressional committees.
Why GAO Did This Study:
With contributions to United Nations (UN) organizations totaling more
than $1.6 billion in 2006-2007, the United States has advocated strong
UN oversight. In 1994, the United States provided support to establish
the Office of Internal Oversight Services (OIOS). The findings of the
Independent Inquiry Committee (IIC) into the Oil for Food Program have
renewed concerns about UN oversight, and the 2005 World Summit proposed
actions to improve OIOS. We were asked to examine (1) the extent to
which UN funding arrangements for OIOS ensure independent oversight,
and (2) the consistency of OIOS practices with key international
auditing standards.
What GAO Found:
UN funding arrangements constrain OIOS‘s ability to operate
independently as mandated by the General Assembly and required by
international auditing standards that OIOS has adopted. First, while
OIOS is funded by a regular budget and 12 other revenue streams, UN
financial rules severely limit OIOS‘s ability to reallocate resources
among revenue streams, locations, and operating divisions. Thus, OIOS
cannot always direct resources at high-risk areas when they arise.
Second, OIOS is dependent on the funds, programs, and other entities it
audits for reimbursement for its services. The managers of the programs
OIOS intends to examine can deny OIOS permission to perform work or not
pay OIOS for services. UN entities could thus avoid OIOS audits or
investigations, and high-risk areas can be and have been excluded from
examination.
Figure: Funding Arrangements Constrain OIOS's Ability to Operate
Independently:
[See PDF for Image]
Source: GAO analysis of OIOS data.
[End of Image]
OIOS has begun to implement key measures for effective oversight, but
some of its practices fall short of applicable international auditing
standards. OIOS develops an annual work plan, but the risk management
framework on which the work plans are based is not fully implemented.
Moreover, OIOS annual reports do not assess risk and control issues
facing the UN organization or the consequences if these are not
addressed. OIOS officials report that the office does not have
adequate resources, but they also do not have a mechanism to determine
appropriate staffing levels. Moreover, OIOS has no mandatory training
curriculum for staff or systematic procedures for ensuring the
reliability of data used for their audits. OIOS also does not require
all staff to document their independence. Although two OIOS divisions
have recently undergone external reviews, the other two have not
undergone such a review within the last 5 years. OIOS monitors and
reports on the status of its recommendations and is making efforts to
improve follow up on oversight recommendations.
What GAO Recommends:
We recommend that the Secretary of State and the Permanent
Representative of the United States to the UN work with member states
to support budgetary independence for OIOS, complete a risk management
framework, develop a workforce planning methodology, report to the
General Assembly on risk and control issues facing the UN, and
institute mandatory training requirements, among other things.
The Department of State and OIOS generally agreed with our overall
findings and recommendations.
To view the full product, including the scope
and methodology, click on the link above.
For more information, contact Thomas Melito (202) 512-9601
(MelitoT@gao.gov).
[End of Section]
Contents:
Letter:
Results in Brief:
Background:
UN Funding Arrangements Hinder Independent Oversight:
OIOS Has Not Fully Met Key Elements of International Auditing Standards:
UN Oversight Entities Undertake Activities to Coordinate Efforts but Do
Not Provide Reasonable Assurance for a Comprehensive Approach to
Oversight:
U.S. Prioritizes Efforts to Strengthen UN Internal Oversight, but
Influence Is Limited by a Key Vacancy at the U.S. Mission to the UN:
Conclusion:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendixes:
Appendix I: Scope and Methodology:
Appendix II: OIOS Oversight Authority:
Appendix III: OIOS Organizational Structure:
Appendix IV: Process for Developing OIOS Budget:
Appendix V: Resources of Selected UN Oversight Entities:
Appendix VI: Comments from the Office of Internal Oversight Services:
Appendix VII: Comments from the Department of State:
GAO Comments:
Appendix VIII: GAO Contact and Staff Acknowledgments:
Related GAO Products:
Figures:
Figure 1: Development of OIOS:
Figure 2: UN Oversight Bodies:
Figure 3: Trends in UN and OIOS Regular Budget and Extrabudgetary
Resources, Fiscal Bienniums 1996-1997 to 2006-2007:
Figure 4: OIOS Extrabudgetary Resource Estimates, by Funding Source,
Fiscal Biennium 2006-2007:
Figure 5: OIOS's Progress on Key Elements of International Standards
for the Professional Practice of Internal Auditing:
Figure 6: Key Forums to Facilitate Coordination among UN Oversight
Entities:
Figure 7: UN Organizations and OIOS's Oversight Authority Over Selected
Entities:
Figure 8: OIOS Organizational Structure and Number of Staff Positions
by Division, Fiscal Biennium 2006-2007:
Figure 9: OIOS Presence Worldwide as of January 31, 2006:
Figure 10: Process for the Preparation, Approval, and Execution of OIOS
Regular Budget[A]:
Figure 11: Budget Comparison of Selected UN Oversight Entities,
Biennium 2004-2005:
Figure 12: Total Budget and Staff Resources of Selected UN
Organizations and Number of Internal Oversight Professional Staff:
ACABQ: Advisory Committee on Administrative and Budgetary Questions:
CEB: Chief Executives Board:
IAEA: International Atomic Energy Agency:
IIA: Institute of Internal Auditors:
IIC: Independent Inquiry Committee:
INTOSAI: International Organization of Supreme Auditing Institutions:
OIOS: Office of Internal Oversight Services:
OPPBA: Office of Program Planning, Budget, and Accounts:
UN: United Nations:
United States Government Accountability Office:
Washington, DC 20548:
April 25, 2006:
The Honorable Norm Coleman:
Chairman:
The Honorable Carl Levin:
Ranking Minority Member:
Permanent Subcommittee on Investigations Committee on Homeland Security
and Governmental Affairs:
United States Senate:
The Honorable Henry J. Hyde:
Chairman:
The Honorable Tom Lantos:
Ranking Minority Member:
Committee on International Relations:
House of Representatives:
As the largest financial contributor to the United Nations (UN) with
assessed and voluntary contributions totaling more than $1.6 billion to
the UN in 2006,[Footnote 1] the United States has advocated the need
for strong oversight for years and provided early support to establish
the Office of Internal Oversight Services (OIOS) in 1994. The findings
of the Independent Inquiry Committee (IIC) into the UN's Oil for Food
Program in February 2005 renewed long-standing concerns about the
independence, resources, and professional standards of internal
oversight functions at the UN.[Footnote 2] To address these concerns,
in September 2005, heads of member states of the UN approved the World
Summit Outcome Document that called for a series of reforms to
strengthen the OIOS.
In response to your request for a study on the internal oversight
function at the United Nations, we examined (1) the extent to which UN
funding arrangements for OIOS ensure independent oversight, (2) the
consistency of OIOS's practices with key international auditing
standards, (3) coordination among UN oversight entities, and (4) U.S.
government efforts to advance UN reforms to strengthen internal
oversight.[Footnote 3] In addition, as requested, we are providing
information on the budget and staff resources of selected UN oversight
entities.
To address our objectives, we reviewed relevant UN and OIOS reports,
manuals, and numerous program documents, as well as international
auditing standards such as those of the Institute of Internal Auditors
(IIA) and the International Organization of Supreme Auditing
Institutions (INTOSAI). The IIA standards apply to internal audit
activities--not to investigations, monitoring, evaluation, and
inspection activities. However, we applied these standards OIOS-wide,
as appropriate, in the absence of international standards for non-audit
oversight activities. We met with senior Department of State (State)
officials in Washington, D.C., and senior officials with the U.S.
Missions to the UN in New York, Vienna, and Geneva. At these locations,
we also met with OIOS management officials and staff; representatives
of Secretariat departments and offices, as well as the UN funds,
programs, and specialized agencies;[Footnote 4] and the UN external
auditors--the Board of Auditors (in New York) and the Joint Inspection
Unit (in Geneva). To assess the reliability of OIOS's funding and
staffing data for fiscal bienniums 1996-1997 to 2006-2007, we reviewed
the OIOS's budget documents and discussed the data with relevant
officials. To review OIOS's recommendations monitoring process, we
discussed the data collection procedures with relevant officials. We
determined that the data we used to examine the budget, staffing, and
recommendations were sufficiently reliable for the purposes of this
report. We performed our work between April 2005 and March 2006 in
accordance with generally accepted U.S. government auditing standards.
(Appendix I provides a detailed discussion on our scope and
methodology.)
Results in Brief:
UN funding arrangements constrain OIOS's ability to operate
independently as mandated by the General Assembly and required by
international auditing standards that OIOS has adopted. According to
these standards, an institution's financial regulations should not
restrict an audit organization from fulfilling its mandate, and the
audit organization should have appropriate and sufficient resources to
achieve its mandate. First, while OIOS is funded by the UN's regular
budget and 12 other revenue streams, UN financial regulations and rules
severely limit OIOS's flexibility to reallocate resources among revenue
streams, locations, and operating divisions. As a result, OIOS cannot
always deploy the resources necessary to address high-risk areas that
may emerge after its budget is approved. Second, OIOS is dependent on
UN funds and programs (and other UN entities) for resources for the
services it provides. OIOS must obtain permission to perform audits or
investigations from the managers of funds and programs, and negotiate
the terms of work and payment for those services with them. Moreover,
the heads of these entities have the right to deny funding for the
oversight work OIOS proposes. By denying OIOS funding, UN entities
could avoid, and have avoided, OIOS audits; high-risk areas could
therefore be excluded from adequate examination. For example, the
practice of allowing the heads of programs the right to approve funding
of internal audit activities prevented OIOS from examining high-risk
areas in the UN Oil for Food program, where billions of dollars were
subsequently found to have been misused.
Although OIOS has developed and begun to implement key components of
effective oversight, some of OIOS's audit practices fall short of
meeting the international auditing standards it has adopted.
Specifically, while OIOS develops an annual work plan, it has not fully
implemented a risk management framework to provide reasonable assurance
that its annual work plans are based on a systematic assessment of
risks. As a result, OIOS may not be allocating resources to areas in
the UN with the highest exposure to fraud, waste, and abuse. Moreover,
OIOS annual reports do not provide an overall assessment of risk
exposures and control issues facing the UN organization as a whole, or
the consequences to the organization if the risks are not addressed. In
terms of resource management, OIOS officials report that the office
does not have adequate resources; however, they do not have a mechanism
in place to determine appropriate staffing levels and help justify
budget requests. Moreover, OIOS has no mandatory training curriculum
for staff to develop their expertise, nor does the office have guidance
and systematic procedures to ensure that the data it uses to support
its work are reliable. Except for the Investigations Division, OIOS
also has no requirement for staff to document their independence as
called for by international auditing standards. In terms of quality
assurance, although two OIOS divisions have undergone external reviews,
the other two have not complied with the requirement for such a review
every 5 years. To monitor the disposition of the recommendations it has
made, OIOS has a system to track and report regularly on the status of
its recommendations, and efforts to strengthen this system are under
way.
The internal and external oversight bodies of the various UN
organizations have made efforts to coordinate their activities;
however, responsibilities for ensuring a comprehensive approach to
oversight are unclear. To avoid duplication and leverage resources
within the UN oversight community, the General Assembly and many member
states have emphasized the importance of coordination between OIOS and
the UN external oversight bodies--the Joint Inspection Unit and the
Board of Auditors--and among the oversight offices of the UN funds and
programs, specialized agencies, and other entities. However, existing
forums to foster coordination primarily provide opportunities for
sharing information and best practices. They are not meant to fully
explore joint activities that could avoid duplication of efforts and
leverage resources. OIOS, the Joint Inspection Unit, and the Board of
Auditors share annual work plans--which can help identify gaps in
oversight coverage and avoid unnecessary duplication. Also, OIOS is
required to provide copies of its reports to the Joint Inspection Unit
and the Board of Auditors for comment as appropriate. However, the
practice of sharing work plans and the requirement to share reports do
not apply to the internal oversight entities of separately administered
UN funds and programs, and specialized agencies. Many of these UN
entities are not subject to OIOS oversight but represent a substantial
portion of UN-wide activities and report to their respective governing
bodies. Without clear responsibilities for coordination and concerted
efforts to collaborate on joint activities, it is difficult to
ascertain gaps in oversight coverage, identify opportunities to avoid
duplication of effort, or fully leverage the resources of the UN
oversight community.
The United States has made advancing UN reforms to strengthen internal
oversight a priority, but a key senior-level vacancy at State may have
limited the U.S. ability to influence management reforms. As part of
U.S. efforts to reform UN management, State has adopted a multifaceted
approach to creating a culture of transparency, accountability, and
efficiency. In addition, a State representative co-chairs the Geneva
Group Focal Group on Oversight. The focal group is completing an
overview of internal oversight in the UN agencies and plans to issue
its report in fall 2006. Although the United States has made efforts to
advance UN reforms to strengthen internal oversight a priority, the
position of U.S. Representative for UN Management Reform at the U.S.
Mission to the UN in New York was vacant for more than a year. This
position was recently filled in March 2006. U.S. Mission officials
stated that this vacancy limited the mission's ability to influence
oversight and other management reform proposals during the months
leading up to the 2005 World Summit and the resulting document.
This report makes recommendations to the Secretary of State and the
Permanent Representative of the United States to the UN to work with
member states to support budgetary independence for OIOS and OIOS's
efforts to more closely adhere to international auditing standards,
including measures to:
* ensure reliable funding arrangements that do not undermine the
independence of OIOS, and provide it with sufficient resources that it
can reallocate or deploy as may be necessary to meet high-risk areas as
they arise;
* complete the implementation of OIOS's risk management framework;
* report to the General Assembly on the status of significant risks and
control issues facing the UN organization;
* develop a workforce planning methodology;
* institute a mandatory training curriculum for OIOS professional staff;
* establish guidance and procedures for assessing the reliability of
data used to support significant findings in OIOS reports; and:
* require all OIOS professional staff to file statements of
independence and financial disclosures, and institute procedures to
adequately review such statements.
In commenting on the official draft of this report, OIOS and State
agreed with our overall conclusions and recommendations. OIOS stated
that observations made in our report were consistent with OIOS's
internal assessments and external peer reviews. State fully agreed with
GAO's finding that UN member states need to ensure that OIOS has
budgetary independence. However, State does not believe that multiple
funding sources have impeded OIOS's budgetary flexibility. We found
that current UN regulations and rules are very restrictive, severely
limiting the ability to move funds across revenue streams to emerging
or high priority areas. OIOS and State also reviewed a draft of this
report for technical accuracy. We incorporated their technical comments
and updates throughout the report, as appropriate. We have reprinted
OIOS's and State's comments in appendixes VI and VII, respectively.
Background:
OIOS was created in 1994 to assist the Secretary-General in fulfilling
internal oversight responsibilities over UN resources and staff. (See
fig. 1 for a timeline of the development of OIOS since 1994.) The
stated mission of OIOS is "to provide internal oversight for the United
Nations that adds value to the organization through independent,
professional, and timely internal audit, monitoring, inspection,
evaluation, management consulting, and investigation activities and to
be an agent of change that promotes responsible administration of
resources, a culture of accountability and transparency, and improved
program performance." As an internal auditor, OIOS audit reports were
previously available to only the Secretary-General and the heads of UN
entities under examination. However, in December 2004, the General
Assembly passed a resolution making all OIOS's reports available to any
member state upon request.[Footnote 5]
Figure 1: Development of OIOS:
[See PDF for image]
Source: GAO based on OIOS data.
[End of figure]
The UN oversight structure consists of internal and external oversight
bodies (see fig. 2). Internal oversight is provided by OIOS for the UN
Secretariat and other UN organizations under the authority of the UN
Secretary-General; many UN funds and programs, specialized agencies,
and other UN organizations have their own internal oversight offices.
External oversight is provided by the Board of Auditors,[Footnote 6]
which examines the UN Secretariat and other UN organizations within the
Secretary-General's authority; and the Joint Inspection Unit, which has
UN systemwide authority.[Footnote 7] In general, the Board of Auditors
audits the financial statements of the UN Secretariat and UN funds and
programs. The Joint Inspection Unit primarily examines thematic areas,
such as the possibility of outsourcing certain services that cut across
UN organizations, although the unit also examines some single-
organization issues.[Footnote 8] In addition, UN organizations that
have their own internal oversight offices appoint external auditors who
serve fixed terms. These external auditors are often from the national
auditing office of a member state that has an expressed interest in
providing an external auditor.[Footnote 9]
Figure 2: UN Oversight Bodies:
[See PDF for image]
Source: GAO Based on UN data.
[End of figure]
Organization of OIOS:
OIOS is headed by an Under Secretary-General who is appointed by the
Secretary-General, with the concurrence of the General Assembly, for a
5-year fixed term with no possibility of renewal.[Footnote 10] The
Under Secretary-General may be removed by the Secretary-General only
for cause and with General Assembly approval.
OIOS's authority spans all UN activities under the Secretary-General.
These include the UN Secretariat in New York, Geneva, Nairobi, and
Vienna; the five regional commissions for Africa, Asia and the Pacific,
West Asia, Europe, and Latin America and the Caribbean; peacekeeping
missions and humanitarian operations in various parts of the world; and
numerous UN funds and programs, such as the UN Environment Program, UN
Human Settlements Program (UN-HABITAT), and the Office of the UN High
Commissioner for Refugees. OIOS's authority does not extend to UN
specialized agencies such as the Food and Agriculture Organization,
International Labor Organization, and World Health Organization (see
app. II).
To carry out its responsibilities, OIOS is organized into four
operating divisions: (1) Internal Audit Division I (New York); (2)
Internal Audit Division II (Geneva); (3) Monitoring, Evaluation and
Consulting Division; and (4) Investigations Division.[Footnote 11] An
executive office supports the Under Secretary-General and these four
divisions. (See app. III for a chart of the OIOS organizational
structure and the number of staff in each division.)
Funding Structure:
OIOS derives its funding from (1) regular budget resources, which are
funds from assessed contributions from member states that cover normal,
recurrent activities such as the core functions of the UN
Secretariat;[Footnote 12] and (2) extrabudgetary resources, which come
from the budgets for UN peacekeeping missions financed through
assessments from member states, voluntary contributions from member
states for a variety of specific projects and activities, and budgets
for the voluntarily financed UN funds and programs. UN regular budget
resources are determined on a biennial basis and are estimated at
approximately $3.8 billion UN-wide for 2006-2007, the current biennium.
OIOS's share of regular budget resources is estimated at about $31.3
million for fiscal biennium 2006-2007.
Extrabudgetary resources are estimated at $5.6 billion for the biennium
2006-2007; OIOS's share of extrabudgetary resources is about $54
million.[Footnote 13]
UN Funding Arrangements Hinder Independent Oversight:
The General Assembly mandate creating OIOS calls for it to be
operationally independent. In addition, according to international
auditing standards, an internal oversight unit should have sufficient
resources to effectively achieve its mandate. In practice, however,
OIOS's independence is impaired by constraints that UN funding
arrangements impose. First, while OIOS is funded by a regular budget
and 12 other revenue streams, UN financial regulations and rules
severely limit OIOS from reallocating its resources between funding
sources, locations, and operating divisions as may be necessary.
Second, OIOS is dependent on UN funds and programs and other UN
entities for resources and reimbursement for the services it provides.
As a result of these structural constraints, OIOS may not be able to
examine high-risk areas as appropriate.
UN Mandate and International Auditing Standards Require Independence:
In passing the resolution that established OIOS in August 1994, the
General Assembly stated that the office shall exercise operational
independence and that the Secretary-General, when preparing the budget
proposal for OIOS, should take into account the independence of the
office.[Footnote 14] The UN mandate for OIOS was followed by a
Secretary-General's bulletin in September 1994 stating that OIOS
discharge its responsibilities without any hindrance or need for prior
clearance.[Footnote 15]
In addition, the Institute of Internal Auditors (IIA) standards for the
professional practice of auditing,[Footnote 16] which OIOS and its
counterparts in other UN organizations formally adopted in 2002, state
that audit resources should be appropriate, sufficient, and effectively
deployed. These standards also state that an internal audit activity
should be free from interference and that internal auditors should
avoid conflicts of interest. International auditing standards also
state that financial regulations and the rules of an international
institution should not restrict an audit organization from fulfilling
its mandate.[Footnote 17]
Funding Arrangements Hinder OIOS's Flexibility to Reallocate Resources
to Address High-Risk Areas:
In addition to funding from the UN regular budget, OIOS receives
extrabudgetary funding from 12 different revenue streams. These include
funds and programs, a peacekeeping support account, and tribunals for
Rwanda and the former Yugoslavia.[Footnote 18] Although the UN's
regular budget and extrabudgetary funding percentages over the years
have remained relatively stable, an increasing share of OIOS's budget
is comprised of extrabudgetary resources (see fig. 3). OIOS's
extrabudgetary funding has steadily increased over the past decade,
from 30 percent in fiscal biennium 1996-1997 to 63 percent in fiscal
biennium 2006-2007 (in nominal terms). The majority of OIOS's staff
(about 69 percent) is funded with extrabudgetary resources. The growth
in the office's budget is primarily due to extrabudgetary resources for
audits and investigations of peacekeeping operations, including issues
related to sexual exploitation and abuse.
Figure 3: Trends in UN and OIOS Regular Budget and Extrabudgetary
Resources, Fiscal Bienniums 1996-1997 to 2006-2007:
[See PDF for image]
Source: GAO analysis based on UN and OIOS data.
[End of figure]
In fiscal biennium 2006-2007, the majority of OIOS's extrabudgetary
funds--about $40.7 million or about 75 percent of the total--represents
funding for peacekeeping services, primarily resident auditors and
investigators in the field.[Footnote 19] (Figure 9 in app. III shows
the number of resident auditors and investigators OIOS has in each of
its duty stations worldwide.) Figure 4 provides a breakdown of OIOS's
extrabudgetary resources by funding source.
Figure 4: OIOS Extrabudgetary Resource Estimates, by Funding Source,
Fiscal Biennium 2006-2007:
[See PDF for image]
Source: GAO analysis of OIOS data.
[A] The General Assembly is not expected to approve the peacekeeping
budget, a key component of extrabudgetary resources, until May or June
2006. Extrabudgetary figures for the fiscal biennium 2006-2007 are
estimated.
[End of figure]
UN funding arrangements severely limit OIOS's flexibility to reallocate
its resources among its multiple funding sources, OIOS locations
worldwide, or among its operating divisions--Internal Audit Divisions I
and II; Investigations Division; and Monitoring, Evaluation, and
Consulting Division--to address changing priorities. In addition, the
movement of staff positions[Footnote 20] or funds between regular and
extrabudgetary resources is not allowed. (Appendix IV illustrates the
UN budget processes.) For example, one section in the Internal Audit
Division may have exhausted its regular budget travel funds, while
another section in the same division has travel funds available that
are financed by extrabudgetary peacekeeping resources. However, OIOS
would breach UN financial regulations and rules if it moved resources
between the two budgets.
In addition, the movement of staff positions from one duty station to
another can be time consuming. According to the UN budget office and
OIOS officials, the redeployment of staff positions between duty
stations requires approval by the Fifth Committee,[Footnote 21] and is
reflected in the budget document and consequently in a staffing
authorization. For example, OIOS officials requested a reallocation of
11 staff positions from the Investigations Division in New York to the
Investigations Division in Vienna to save travel funds and to be closer
to the entities they examine. According to OIOS officials, this change
was approved only after repeated requests by OIOS over a number of
years. Although OIOS can move staff positions between and across its
four divisions to address priority areas, the positions must be funded
from the same source as the priority area addressed.
According to OIOS officials, for the last 5 years, OIOS has
consistently found it necessary to address very critical cases on an
urgent basis. A recent example is the investigations of sexual
exploitation and abuse in the Republic of Congo and other peacekeeping
operations that identified serious cases of misconduct and the need for
increased prevention and detection of such cases. However, the ability
to redeploy resources quickly when situations arise has been impeded by
restrictions on the use of staff positions. The Under Secretary-General
for OIOS has proposed that the office be allowed the flexibility to
direct the resources as necessary.
Reliance on Other Entities for Funding Could Infringe on OIOS's
Independence:
OIOS is dependent on UN funds and programs and other UN entities for
resources, access, and reimbursement for the services it provides.
These relationships present a conflict of interest because OIOS has
oversight authority over these entities, yet it must obtain the
permission of funds and programs to examine their operations and to
receive payment for its services. OIOS negotiates the terms of work and
payment for services with the manager of the program it intends to
examine, and heads of these entities have the right to deny funding for
oversight work proposed by OIOS. By denying OIOS funding, UN entities
could avoid OIOS audits or investigations, and high-risk areas could
potentially be excluded from adequate examination. In some cases, the
fund and program manager have disputed the fees OIOS has charged after
investigative services are rendered. For example, 40 percent of the $2
million billed by OIOS after it completed its work is currently in
dispute, and since 2001, less than half of the entities have paid OIOS
in full for investigative services it has provided. According to OIOS
officials, the office has no authority to enforce payment for services
rendered and there is no appeal process, no supporting administrative
structure, and no adverse impact on an agency that does not pay or pays
only a portion of the bill.
UN funds and programs limit OIOS's ability to independently set its
work priorities because they exercise the power to decide whether to
fund OIOS oversight activities and to negotiate the level of funding.
OIOS officials stated that, because of OIOS's funding arrangements,
some high-priority work was not undertaken. For example, the practice
of allowing the heads of programs the right to fund internal audit
activities prevented OIOS from examining high-risk areas in the UN Oil
for Food program where billions of dollars were subsequently found to
be misused. The Independent Inquiry Committee into the Oil for Food
Program previously reported that the UN Office of the Iraq Program
denied OIOS's request in May 2001 for two resident investigators to
cover Iraq.[Footnote 22] Also, according to the head of the
Investigations Division, the division would like to undertake more
investigative work in certain funds and programs, but it does not have
the resources to do so. A senior OIOS official said that there are
contracts valued in the hundreds of millions of dollars, including
certain high-risk UN Procurement Service air contracts that have not
been audited in several years because OIOS does not have sufficient
staff to perform the work. In addition, the official said that OIOS has
not audited the UN Secretariat's budget office in a systematic manner.
In November 2005, the Under Secretary-General for OIOS proposed to the
Advisory Committee on Administrative and Budgetary Questions
(ACABQ)[Footnote 23] that a single source of funding be established for
the office; however, it is unclear whether this proposal is under
consideration. OIOS officials said they would prefer that OIOS be
allocated a percentage of the UN budget, which would be placed in a
trust fund for its use. As envisioned by the Under Secretary-General,
the funding would come from one source and provide the flexibility and
the independence OIOS needs to perform its oversight functions.
Pursuant to the 2005 World Summit, in January 2006, the UN Secretary-
General commissioned a study on governance and oversight in the UN.
OIOS officials told us that the report is expected to be issued in the
summer of 2006. According to OIOS officials, they intend to use the
report to help them determine their resource requirements.
OIOS Has Not Fully Met Key Elements of International Auditing Standards:
Since its formal adoption of the IIA international standards for the
professional practice of internal auditing in 2002, OIOS has begun to
develop and implement the key components of effective oversight.
However, the office has yet to fully implement them (see fig. 5).
Specifically, OIOS develops annual work plans, but these plans are not
fully based on a systematic risk assessment process as required by
international auditing standards and called for by OIOS's risk
management framework. Moreover, OIOS annual reports do not provide an
overall assessment of risk exposures and control issues facing the UN
organization as a whole or the consequence to the organization if the
risks are not addressed. In terms of human resource management, OIOS
officials report that the office does not have adequate resources, but
they do not have a mechanism in place to determine appropriate staffing
levels and help justify budget requests. OIOS has no mandatory training
curriculum for staff to develop their expertise nor does it have
guidance and systematic procedures to provide reasonable assurance that
data it uses are reliable. OIOS also does not require all staff to
document their independence. Although OIOS has quality assurance
measures in place, it falls short of meeting the international auditing
standards in areas such as external assessments. OIOS monitors and
reports regularly on the implementation status of its recommendations,
but a committee established by the Secretary-General to follow up on
the implementation of oversight recommendations is not yet operational.
Figure 5: OIOS's Progress on Key Elements of International Standards
for the Professional Practice of Internal Auditing:
[See PDF for image]
Source: GAO based on IIA and OIOS data.
[End of figure]
OIOS Has Developed Annual Work Plans but Has Not Fully Implemented a
Risk Management Framework:
Figure: IIA Standards for: Managing the internal audit activity-
planning:
* Establish risk-based plans to determine the priorities of the
internal audit activity, consistent with the organization's goals;
* Plan of engagements should be based on a risk assessment undertaken
at least annually.
Source: IIA
[End of Figure]
OIOS has adopted a risk management framework[Footnote 24] to link the
office's annual work plans to risk-based priorities, but it has not
fully implemented this framework. Thus, OIOS cannot provide reasonable
assurance that its annual work plans give the highest priority to the
highest-risk audits. OIOS began implementing a risk management
framework in 2001 to enable the office to prioritize the allocation of
resources to oversee those areas that have the greatest exposure to
fraud, waste, and abuse. OIOS's risk management framework includes
plans for organization-wide risk assessments, to categorize and
prioritize risks facing the organization, and client-level risk
assessments, to identify and prioritize risk areas facing each entity
for which OIOS has oversight authority.[Footnote 25] According to OIOS
officials, the annual work planning process included discussions of the
work that OIOS would undertake and identified 31 risk areas for
prioritizing its work. In addition, OIOS officials stated that they
consider program budget size, time elapsed since the last audit, number
of staff, and risks to the UN's reputation if fraud and waste go
undetected when deciding which audits to perform. Although OIOS's
framework includes plans to perform client-level risk
assessments,[Footnote 26] as of April 2006, out of 25 entities that
comprise major elements of its oversight universe, three risk
assessments had been completed, three were in progress, and four more
are planned for 2006.
In practice, however, OIOS annual work plans are not fully based on the
risk assessments it has completed or called for in its risk management
framework. OIOS officials stated that the office does not
systematically rank audit proposals in the annual work plan by risk
level or weight more significant risk factors.[Footnote 27] The
office's 2005 annual report stated that 70 percent of its work was risk-
based. However, OIOS officials stated that this estimate includes a
number of oversight activities that have risk areas assigned to them
retroactively (instead of during the preliminary planning process).
OIOS officials told us they plan to assign risk areas more consistently
to audits proposed in their annual work plan during the planning phase
so that, by 2008, at least 50 percent of their work is based on a
systematic risk assessment. As a result, OIOS officials cannot provide
reasonable assurance that the entities they choose to examine are those
that pose the highest risk, nor that their audit coverage of a client
focuses on the areas of risk facing that client.
OIOS Not Reporting on Status of Overall Risk and Control Issues Facing
the UN:
Figure: IIA Standard for: Managing the internal audit activity-
reporting to senior management:
Reporting should include significant risk exposures and control issues,
corporate governance issues, and other matters needed or requested by
senior management.
Source: IIA
[End of figure]
Although OIOS's annual reports contain references to risks facing OIOS
and the UN organization, the reports do not provide an overall
assessment of the status of these risks or the consequence to the
organization if the risks are not addressed. For instance, in February
2005, the IIC reported that many of the Oil for Food program's
deficiencies, identified through OIOS audits, were not described in the
OIOS annual reports submitted to the General Assembly. A senior OIOS
official stated that the office does not have an annual report to
assess UN-wide risks and controls and that such an assessment does not
belong in OIOS's annual report in its current form, which focuses
largely on the activities of OIOS. The official agreed that OIOS should
communicate to senior management on areas where the office has not been
able to examine significant risk and control issues, but that the
General Assembly would have to determine the appropriate vehicle for
such a new reporting requirement.
OIOS Lacks a Mechanism to Determine Appropriate Resource Levels:
Figure: IIA Standard for: Managing the internal audit activity-resource
management:
Ensure that internal audit resources are appropriate, sufficient, and
effectively deployed to achieve the approved plan.
Source: IIA
[End of figure]
While OIOS officials have stated that the office does not have adequate
resources, they do not have a mechanism in place to determine
appropriate staffing levels to help justify budget requests, except for
peacekeeping oversight services. For peacekeeping audit services, OIOS
does have a metric--endorsed by the General Assembly--that provides one
professional auditor for every $100 million in the annual peacekeeping
budget. Although OIOS has succeeded in justifying increases for
peacekeeping oversight services consistent with the large increase in
the peacekeeping budget since 1994, it has been difficult to support
staff increases in oversight areas that lack a comparable metric,
according to OIOS officials.
OIOS Offers Training Opportunities but Does Not Require or
Systematically Track Continuing Professional Development:
Figure: IIA standard for: Proficiency-continuing professional
development:
Internal auditors should enhance their knowledge, skills, and other
competencies through continuing personal development.
Source: IIA
[End of figure]
OIOS staff have opportunities for training and other professional
development, and OIOS officials said that they encourage staff to seek
training and professional certifications. UN personnel records show
that OIOS staff took more than 400 training courses offered by the
Office of Human Resources Management in 2005. Further, an OIOS official
said that, since 2004, OIOS has subscribed to IIA's online training
service that offers more than 100 courses that are applicable to
auditors. According to the official, the service tracks all courses
completed (and who completed them), making this information available
to OIOS management. Since subscribing, 49 OIOS staff have completed and
passed a total of almost 200 online IIA courses. OIOS officials
reported that they encourage staff to seek professional certifications
such as Certified Internal Auditor, for example, by reimbursing the
costs of course materials for those who certify. According to an OIOS
official, about 80 percent of the auditors from the Geneva division
have current professional certifications.[Footnote 28]
Despite these professional development opportunities, OIOS does not
formally require staff training, nor does it systematically track
training to provide reasonable assurance that all staff are maintaining
and acquiring professional skills. OIOS policy manuals list no minimum
training requirement. OIOS officials stated that, although they gather
some information on their use of training funds for their annual
training report to the UN Office of Human Resources Management, they do
not maintain an officewide database to systematically track all
training their staff has taken. The 2005 training report, for example,
lists about 50 different training courses and conferences attended by
OIOS staff members. However, the report also shows that the Monitoring,
Evaluation, and Consulting Division used 30 times more OIOS training
funds than the Investigations Division, even though the Investigations
Division has more than 5 times as many staff. Therefore, it is
difficult to assess whether all OIOS staff are getting training and
other professional development opportunities to maintain or acquire the
skills needed to perform the oversight duties to which they are
assigned. Board of Auditors' reviews, for example, have noted a lack of
information technology expertise in OIOS.
OIOS Has No Guidance or Systematic Framework for Assessing Data
Reliability:
IIA Standard for: Due professional care:
Exercise due professional care by considering, among other things, the
probability of significant errors, irregularities, or noncompliance.
Source: IIA
[End of figure]
Although OIOS uses program data in its oversight activities, it has not
developed guidance or a framework to help its staff determine the
reliability of the data it uses to support the findings and
recommendations in its reports. OIOS division manuals do not provide
guidance on data reliability checks. OIOS officials stated that they
expect staff to use professional judgment in determining which data to
use to support their findings, but that they do not require them to
document that they have determined the data to be sufficiently
reliable. The Board of Auditors reported that OIOS's auditors routinely
use field missions' applications and databases as part of their audits,
particularly in the areas of asset control, financial management, and
procurement and that OIOS noted that their capacity to perform
information technology audits was not sufficient. Computer-processed
data require a more technical assessment than other forms of evidence
and the very nature of information systems allows opportunities for
errors to be introduced by many people. Unreliable data are a
significant risk because key management decisions may be based on the
information that these automated systems generate. However, because
OIOS does not have systematic guidance or a framework on data
reliability, it cannot provide reasonable assurance that data
reliability assessments are risk-based and geared to the specific
circumstances of the audit.
Most OIOS Staff Are Not Required to Submit Independence and Financial
Disclosure Statements:
Figure: IIA standards for: Individual objectivity and impairments to
independence or objectivity:
* Internal auditors should have an impartial, unbiased attitude and
avoid conflicts of interest;
* If independence or objectivity is impaired in fact or appearance, the
details of the impairment should be disclosed to appropriate parties.
Source: IIA
[End of figure]
OIOS does not require all staff to attest to their independence and, in
OIOS, only the Under Secretary-General and senior managers are required
to complete an annual financial disclosure statement. All UN staff are
expected to follow UN staff rules and regulations, but OIOS has no
office-wide policy for documenting that oversight staff are free from
impairment to their independence. Only the Investigations Division
requires its staff to sign a statement of independence, which OIOS
officials said is kept in personnel files. According to a UN official,
the UN ethics policy was recently changed to require approximately
1,000 UN staff at the D-1 level and above[Footnote 29] to submit
financial disclosures, but it still does not include staff-level
employees in OIOS.[Footnote 30] OIOS officials stated that, in the
absence of official statements of independence, they rely on
individuals to voluntarily report potential conflicts of interest when
they are assigned to work on a specific audit or investigation.
OIOS Has Key Quality Assurance Measures, but Work Remains to Meet
International Standards:
Figure: IIA Standards for: Quality assurance:
* Develop and maintain a quality assurance and improvement program;
* External assessments such as quality assurance reviews should be
conducted at least once every 5 years by an independent reviewer or
review team from outside the organization.
Source: IIA
[End of figure]
OIOS has some quality assurance policies and processes in place, but
external reviews of OIOS have revealed weaknesses. We found that all
OIOS divisions have an internal report review process as a quality
check before their reports are sent to the General Assembly. In
addition, the Internal Audit Division in New York has a checklist for
draft reports that requires supervisors to document when quality
assurance processes are completed; and the Internal Audit Division
manual contains a chapter devoted to quality assurance policies and
procedures.
Although periodic external reviews required by the IIA could provide
reasonable assurance of the quality of OIOS's work, two out of four
OIOS divisions have not undergone an external review since its
inception in 1994. Although not required to follow IIA standards, the
Investigations Division was reviewed in 2004 by a team from the
European Anti-Fraud Office on the occasion of OIOS's 10TH
anniversary.[Footnote 31] The Internal Audit Division in Geneva became
the second division to undergo an external review. The final report of
the team, led by the chief auditor of the UN Children's Fund, was
released to OIOS management in December 2005. The Internal Audit
Division in New York and the Monitoring, Evaluation, and Consulting
Division have not undergone an external review. Audit officials in New
York said they must complete an external review by January 2007 in
order for the Internal Audit Division to continue reporting that its
work complies with IIA standards.[Footnote 32] The external oversight
bodies of the UN--the Joint Inspection Unit and Board of Auditors--have
never fully reviewed OIOS's quality assurance framework. Both have
reviewed some elements of the office's management practices, but
officials representing both bodies said that a full and regular
external review of OIOS's quality assurance framework is outside their
mandates and would not be feasible with their limited resources.
Without a comprehensive external review by bodies with access to OIOS
internal documents and staff, it is difficult to fully assess OIOS's
compliance with IIA quality assurance standards.
External reviews of OIOS have also found weaknesses limiting OIOS's
ability to provide reasonable assurance as to the quality of its work.
The Board of Auditors has noted that OIOS work papers show inconsistent
documentation of supervisory review, and that OIOS lacks expertise to
assess the effectiveness of client information and communications
technology. In this regard, an OIOS official said a vacancy
announcement for an Information and Communications Technology Auditor
has recently been issued, and the announcements for two more are
planned. The European Anti-Fraud Office[Footnote 33] reported that some
sampled files[Footnote 34] from the Investigations Division had
incomplete interview records, work plans, and documentation regarding
the results of recommendations made or proposed follow-up. The peer
review team for the Internal Audit Division in Geneva reported on
deficiencies in supervisory reviews and some other aspects of
documenting their work. In response to the report, the head of the
division issued instructions requiring supervisors to complete a
working paper confirmation form to ensure working papers were completed
and organized in a manner that could be easily reviewed by someone
independent of the audit assignment.
OIOS Has a Process to Regularly Monitor Disposition of Recommendations:
IIA Standards for: Monitoring progress:
* Establish and maintain a system to monitor the disposition of results
communicated to management;
* Establish a follow-up process to monitor and ensure that management
actions have been effectively implemented or that senior management has
accepted the risk of not taking action.
[End of figure]
OIOS has a process in place that tracks and reports on the status of
its recommendations. The recommendations from each of OIOS's four
divisions are consolidated into one database that is updated formally
twice per year--once to prepare the annual report in September, and
once in January for the semi-annual report on open recommendations to
the Secretary-General. According to OIOS officials, OIOS has been
tracking recommendations in various databases since at least 1997, and
OIOS's four divisions have seven separate databases to record and track
recommendations. OIOS has recognized the need for a single system and
on April 1, 2006, launched an automated recommendation tracking system.
The system will be able to record, track, and monitor recommendations
data for each OIOS division. OIOS officials stated that in the future,
the system will allow online interaction and communication with OIOS
clients for reporting the status of recommendations, rather than the
current process of sending electronic files to clients to obtain the
status of recommendations.
Although OIOS reports that about 80 percent of its recommendations from
2001 to 2005 have been implemented, some of its critical
recommendations--including those made to high-risk areas such as
procurement, the Department of Peacekeeping Operations, the UN Office
at Nairobi, and the UN Interim Administration Mission in Kosovo--have
not yet started, or were not fully implemented by audited entities as
of June 2005.[Footnote 35] For example, the implementation of three
recommendations from a report on the Economic Commission for Africa's
procurement and inventory store management issued in 2001-2002 are
still in progress. According to OIOS, the UN Office in Nairobi has not
fully implemented a critical recommendation issued in a report between
2001 and 2002 on contracting and procurement services; neither has it
begun to address a critical recommendation issued in 2002-2003
regarding alleged procurement irregularities in awarding a UN staff
transportation contract. According to OIOS officials, although they
have noted a generally positive trend in implementing recommendations
more expeditiously, they are not entirely satisfied with the situation.
Several recommendations, some of which are critical, have remained open
for up to 6 years. As a result, OIOS proposed and the General Assembly
concurred that a high-level mechanism be established to address, among
other things, the implementation of recommendations.[Footnote 36]
In September 2005, the Secretary-General endorsed the establishment of
a high-level committee to ensure, among other things, proper
implementation of all oversight recommendations--including those made
by OIOS, the Board of Auditors, and the Joint Inspection Unit.[Footnote
37] The oversight committee is to provide independent advice to the
Secretary-General on all Secretariat activities relating to internal
and external oversight and investigations, including internal controls
and the monitoring of corrective actions recommended by internal and
external auditors. However, the committee had not convened as of March
2006. In addition, the Department of Management is in the process of
considering a management control tracking system, which is expected to
be operational within a year. According to a Department of Management
official, this system will have the capacity to interface with the new
recommendations tracking system that OIOS is implementing. In addition,
the official stated that the department does not currently prepare
statistics on implementation rates of recommendations since this
responsibility is assigned to the oversight bodies; however, with the
new monitoring system, the department would be able to provide these
statistics.
UN Oversight Entities Undertake Activities to Coordinate Efforts but Do
Not Provide Reasonable Assurance for a Comprehensive Approach to
Oversight:
UN oversight entities have undertaken a number of activities to
coordinate efforts, but these activities are not geared toward ensuring
a comprehensive approach to oversight or minimizing duplication of
effort. No single entity in the UN oversight community is clearly
responsible for identifying gaps in oversight, identifying
opportunities to avoid unnecessary duplication of effort, or leveraging
the resources of the UN oversight community. Although several forums
have been established to foster coordination, these forums are aimed at
sharing information and best practices, rather than focusing on joint
activities that could minimize duplication and leverage resources.
While it is not a common practice, some UN oversight entities made
efforts to collaborate. The Joint Inspection Unit, Board of Auditors,
and OIOS share annual work plans and reports; however, these practices
do not apply to the internal oversight entities of the separately
administered UN funds, programs, and specialized agencies. These
separately administered entities represent a significant part of UN
activities, and report to their own respective governing bodies.
UN Resolutions Call for Coordinating Efforts to Ensure Comprehensive
Approach to Oversight:
Although the General Assembly and many member states have emphasized
the importance of coordination among UN oversight entities to ensure a
comprehensive approach, avoid unnecessary duplication, and leverage
resources, the General Assembly does not clearly designate
responsibility for this effort. In this regard, when OIOS was
established in 1994, the Secretary-General issued a bulletin directing
the office to coordinate with the Board of Auditors, the Panel of
External Auditors, and the Joint Inspection Unit; and to maintain a
close working relationship with other inspection and internal audit
offices in the UN system.[Footnote 38] More recently, the General
Assembly passed a resolution reaffirming the importance of effective
coordination between the Joint Inspection Unit, the Board of Auditors,
and OIOS. This resolution aimed to maximize the use of resources, and
to share experiences, knowledge, best practices, and lessons
learned.[Footnote 39] Similarly, member states have also encouraged the
Joint Inspection Unit, the Board of Auditors, and OIOS to continue
working together to ensure greater coordination and avoid duplication.
Toward this end, the Joint Inspection Unit--the only independent
external oversight body whose authority includes the specialized
agencies--recently completed a report that calls upon internal and
external oversight entities within the UN system to provide effective
coordination and cooperation with each other to avoid duplication and
ensure leveraging resources.[Footnote 40] However, the report has not
yet been reviewed or endorsed by the General Assembly.
Responsibility for Ensuring a Comprehensive Approach and Minimizing
Duplication Is Unclear:
Notwithstanding these calls for coordination, OIOS's ability to
coordinate is limited. Its authority does not extend to specialized
agencies; in practice, coordination activities among the entities
overseeing funds and programs are geared toward sharing information--
not toward ensuring comprehensive oversight or avoiding duplication.
The Board of Auditors' authority also does not extend to specialized
agencies and is limited to the UN organizations that have a direct
reporting relationship to the Secretary-General. The Joint Inspection
Unit has systemwide authority, but is not required to track the work
performed by the various UN oversight entities. Thus, no one entity in
the UN oversight community is charged with the responsibility of
tracking the work performed by all the oversight entities for the
purpose of ensuring a comprehensive approach to oversight. Without
clear designation of this responsibility, it is not possible to
ascertain whether there are any gaps in oversight coverage, identify
opportunities to avoid unnecessary duplication of efforts, or leverage
the resources of the UN oversight community. This is of particular
concern given the limited resources of some of these entities. (See
app. V for a summary of the resources of selected UN oversight
entities.)
Several Forums Provide Venues for Information Exchange among UN
Oversight Entities:
Several forums to coordinate efforts have been established, and OIOS
participates in these venues (see fig. 6). However, despite calls for
coordination, the existing forums that are meant to foster coordination
do not optimize opportunities for collaboration to achieve these
purposes. Rather, these forums provide opportunities to share
information and best practices on oversight approaches and
methodologies. Specifically, in the annual tripartite oversight
coordination meetings that began in November 1997, representatives of
OIOS, the Board of Auditors, and the Joint Inspection Unit convene to
exchange information and minimize duplication. In addition, since 1969,
an interagency organization of internal auditors--the Representatives
of Internal Audit Services (RIAS) of the United Nations Organizations
and Multilateral Financial Institutions--has met annually to share best
practices on audit approaches and methodologies. Similarly, a
counterpart organization organized in 1998 for investigators--the
Conference of Investigators of International Institutions and Bilateral
Organizations--meets annually to exchange ideas, foster best practices,
and encourage cooperation among the investigative offices of the
participating organizations. Also, the UN Evaluation Group--a forum for
the discussion of evaluation issues within the UN system--aims to
simplify and harmonize evaluation reporting practices; OIOS noted that
the UN Evaluation Group has developed norms and standards for
evaluation in the UN system, as well as core competencies for UN
evaluators.
Figure 6: Key Forums to Facilitate Coordination among UN Oversight
Entities:
[See PDF for image]
Source: GAO based on UN data.
[End of figure]
Joint Efforts to Collaborate and Share Annual Work Plans and Reports
Are Limited:
While it is not a common practice, UN officials stated that some UN
oversight entities made efforts to collaborate. A prime example of this
took place during the recent UN tsunami relief efforts. In an April
2005 report to the Secretary-General, OIOS investigators issued an
assessment of the risks and opportunities for corruption and waste
associated with weak coordination, rushed procurement and recruitment
decisions, and the size of the funding. According to OIOS, the
assessment was the result of collaborative efforts between OIOS and the
investigative offices of the UN Children's Fund, UN Development
Program, UN High Commissioner for Refugees, and the World Food Program;
as well as the Anti-Fraud Office of the European Commission, the Asian
Development Bank, and the World Bank.
The Joint Inspection Unit, the Board of Auditors, and OIOS do share
annual work plans--tools that could help identify gaps in oversight
coverage and avoid unnecessary duplication. Also, in December 1999, the
General Assembly passed a resolution that required OIOS to provide
copies of all reports to the Joint Inspection Unit and the Board of
Auditors; it also requested that reports be made available within 1
month of being finalized and emphasized the need for comments as
appropriate.[Footnote 41] However, the practice of sharing work plans
and the requirement to share reports do not apply to the internal
oversight entities of the separately administered UN funds, programs,
and specialized agencies; these entities represent a significant part
of UN activities and report to their own respective governing bodies.
In September 2005, the IIC report on the management of the UN Oil for
Food program stated that the UN's disjointed and sometimes-overlapping
approach to oversight left a number of contentious issues about the
program unresolved. According to IIC, UN oversight agencies resisted
sharing their audit reports, which could have facilitated coordination.
OIOS officials told us that UN oversight agencies have subsequently
begun to share lessons learned from the Oil for Food experience and
have made a concerted effort to apply these lessons to the UN's tsunami
relief efforts.
U.S. Prioritizes Efforts to Strengthen UN Internal Oversight, but
Influence Is Limited by a Key Vacancy at the U.S. Mission to the UN:
The United States has made it a priority to advance UN reforms to
strengthen internal oversight. As part of U.S. efforts to reform UN
management, the U.S. Mission has adopted a multi-faceted approach to
creating a culture of transparency, accountability, and efficiency.
Among other things, the U.S. strategy for UN reform includes measures
to strengthen the independence of the OIOS, enhance internal oversight
of peacekeeping missions, outsource internal oversight at small UN
agencies to OIOS, reinforce the Secretary-General's duty to waive
immunity, and avoid even the appearance of conflict of interest.
The United States played a major role in influencing the General
Assembly to pass a resolution allowing all member states access to OIOS
audit reports, upon request, according to OIOS and U.S. Mission
officials.[Footnote 42] The U.S. Mission to the UN in New York, which
has a UN Management and Reform unit, regularly participates in
deliberations of the Fifth Committee and other bodies to promote
efforts to strengthen UN oversight. In January 2006, for example, the
U.S. Ambassador to the UN spoke to the press about the need for
oversight reform in the wake of the recent procurement scandals.
Another senior official released a statement to the General Assembly in
late December 2005 regarding the need to limit spending until progress
is made toward implementing reforms agreed to during the September 2005
World Summit. Also, the representative of the U.S. Mission to UN
Organizations in Geneva co-chairs the Geneva Group Focal Group on
Oversight that is completing an overview of internal oversight in the
UN agencies, and plans to issue its report in fall 2006.[Footnote 43]
Staffing at the U.S. Mission to the UN in New York may have limited
U.S. influence in encouraging and formulating proposals for UN
oversight reform. The position of U.S. Representative for UN Management
and Reform was vacant from February 2005 until it was filled in late
March 2006. According to State officials, statements from ambassador-
level representatives in UN bodies have more impact and influence than
statements from other U.S. representatives. This key vacancy represents
a missed opportunity for the United States in the formation of the UN
Management Reform agenda agreed upon at the World Summit in 2005. As a
result, officials said, the U.S. Mission had limited capacity to
influence reform.
Conclusion:
Although OIOS has a mandate establishing it as an independent oversight
entity--and OIOS does possess many characteristics consistent with
independence--the office does not have the budgetary independence it
requires to carry out its responsibilities effectively. Over the years,
UN funding arrangements for OIOS have eroded the office's ability to
conduct independent oversight. The office's ability to conduct audits
and respond to changing priorities based on developing risks have been
impeded, raising serious questions about its independence. To perform
effective oversight, OIOS must have budgetary independence, but it must
also fully implement the management processes and auditing practices
that would help it best exercise that independence. Notwithstanding
funding impediments to OIOS's budgetary independence, OIOS officials
cannot make most effective use of the office's resources and
independent authority to choose its work because they have not fully
implemented a risk management framework that provides reasonable
assurance that the most critical work is given highest priority.
Moreover, OIOS's shortcomings in meeting key components of
international auditing standards undermine the office's effectiveness
in carrying out its functions as the UN's main internal oversight body.
Further, the lack of coordination between UN oversight bodies hinders a
comprehensive approach to oversight, which could minimize duplication
and leverage the use of available resources. Effective oversight
demands budgetary independence, sufficient resources, adherence to
professional auditing standards, and coordination. OIOS is now at a
critical point, particularly given the initiatives to strengthen UN
oversight launched as a result of the World Summit in fall 2005. In
moving forward, the degree to which the UN and OIOS embraces
international auditing standards and practices will indicate the
institution's commitment to addressing the monumental management and
oversight tasks that lie ahead. The failure to address these long-
standing concerns would diminish the efficacy and impact of other
management reforms to strengthen oversight at the UN.
Recommendations for Executive Action:
To provide reasonable assurance of independent, effective oversight in
the United Nations, we recommend that the Secretary of State and the
Permanent Representative of the United States to the United Nations
work with member states to support budgetary independence for OIOS and
OIOS's efforts to more closely adhere to international auditing
standards, including measures to:
* ensure reliable funding arrangements for OIOS that do not undermine
the independence of OIOS and provide it with sufficient resources that
it can effectively reallocate and deploy as may be necessary to meet
high-risk areas as they arise;
* complete the implementation of OIOS's risk management framework to
ensure that its annual work plans address those areas that pose the
highest risks;
* report to the General Assembly on the status of significant risks and
control issues facing the UN organization, the resources necessary to
address these issues, and the consequences to the organization if any
risks and control weaknesses are not addressed;
* develop a workforce planning methodology to systematically assess and
determine appropriate staffing levels for the office;
* institute a mandatory training curriculum for OIOS professional
staff, including auditors and investigators;
* establish guidance and procedures for assessing the reliability of
data used in support of significant findings in OIOS reports; and:
* require all OIOS professional staff to file statements of
independence and financial disclosures; institute procedures to
adequately review such statements.
Agency Comments and Our Evaluation:
OIOS and State provided written comments on a draft of this report,
which are reproduced in appendixes VI and VII, respectively. OIOS and
State agreed with our overall conclusions and recommendations. OIOS
stated that observations made in the report were consistent with OIOS's
internal assessments and external peer reviews. State fully agreed with
our finding that UN member states need to ensure that OIOS has
budgetary independence. However, State does not believe that multiple
funding sources have impeded OIOS's budgetary flexibility. We found
that current UN financial regulations and rules are very restrictive,
severely limiting the ability to reallocate funds across revenue
streams to emerging or high-priority areas when they arise. OIOS and
State also reviewed a draft of this report for technical accuracy. We
incorporated their technical comments and updates throughout the
report, as appropriate.
As agreed with your office, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 30 days
after the date of this report. We are sending copies of this report to
interested members of Congress, the Secretary of State, and the U.S.
Permanent Representative to the United Nations. We will also make
copies available to others upon request. In addition, this report will
be available at no charge on the GAO Web site at [Hyperlink, http://www.gao.gov].
If you or your staff have any questions about this report, please
contact me at (202) 512-9601 or melitot@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. GAO staff who made major contributions to
this report are listed in appendix VIII.
Signed By:
Thomas Melito:
Director, International Affairs and Trade:
[End of section]
Appendix I: Scope and Methodology:
Our objectives were to review (1) the extent to which United Nations
(UN) funding arrangements for the Office of Internal Oversight Services
(OIOS) ensure independent oversight, (2) the consistency of OIOS
practices with key international auditing standards, (3) coordination
among UN oversight entities to ensure a comprehensive approach to
oversight, and (4) U.S. government efforts to advance UN reforms to
strengthen internal oversight. In addition, as requested, we are
providing information on the budget and staff resources of selected UN
oversight entities.
To examine the extent to which UN funding arrangements ensure
independent oversight, we reviewed relevant UN and OIOS reports,
manuals, and numerous program documents. We met with senior Department
of State (State) officials in Washington, D.C., and senior officials
with the U.S. Missions to the UN in New York, Vienna, and Geneva. At
these locations, we also met with UN and OIOS management officials and
staff. To assess the reliability of UN and OIOS funding and staffing
data, we reviewed the office's budget reports for fiscal bienniums 1996-
1997 to 2006-2007 and discussed the data with relevant officials. We
determined that the funding and staffing data were sufficiently
reliable for the purposes of this report.
To assess OIOS's consistency with key international auditing standards,
we reviewed relevant internationally accepted standards for oversight
such as those issued by the Institute for Internal Auditors (IIA) and
the International Organization of Supreme Auditing Institutions
(INTOSAI). The IIA standards apply to internal audit activities--not to
investigations, monitoring, evaluation, and inspection activities.
However, we applied these standards OIOS-wide, as appropriate, in the
absence of international standards for non-audit oversight activities.
We examined documentation for the office's strategic planning and
annual work plans; risk management framework; quality assurance;
recommendations tracking; and ethics practices to assess the extent to
which OIOS's practices in these areas were consistent with IIA
standards, which OIOS has adopted. Because we had limited access to
certain key documentation, OIOS officials agreed to "walk us through"
their annual plans and external peer review reports. We met with OIOS
management officials and staff in each of the office's divisions,
including the executive office; the Internal Audit Divisions I and II
in New York and Geneva; the Investigations Division in New York and
Vienna; and the Monitoring, Evaluation, and Consulting Division in New
York. We discussed OIOS's process for monitoring and reporting on its
recommendations with relevant officials. In most instances, OIOS
officials informed us that the data they track to report on the status
of their recommendations are reliable. The officials added that they
would like to perform more testing of the recommendations that have
been implemented, but lack the resources to do so. We obtained the
recommendations database from OIOS and performed basic reliability
checks. We determined the data were sufficiently reliable for the
purposes of this report.
To review coordination among UN oversight entities, we reviewed UN
documents and reports relating to the mandates, resources, and
activities of the oversight entities of selected UN funds and programs,
specialized agencies, and other UN entities. We met with
representatives of several of these entities, including the
International Atomic Energy Agency; International Labor Organization;
International Telecommunication Union; UN Children's Fund; UN
Development Program; UN Educational, Scientific, and Cultural
Organization; UN High Commissioner for Refugees; UN Industrial
Development Organization; UN Training Institute; World Health
Organization; World Intellectual Property Organization; and the World
Meteorological Organization. We also met with the UN external auditors-
the Board of Auditors in New York, and the Joint Inspection Unit in
Geneva.
To review U.S. government efforts to advance UN reforms to strengthen
internal oversight, we reviewed State mission program plans, position
statements, and various program documents. We also met with senior
State officials in Washington, D.C., and senior officials with the U.S.
Missions to the UN in New York, Geneva, and Vienna. In addition, we met
with several representatives of the Geneva Group to obtain information
on their efforts to strengthen oversight in the UN system and their
views on UN reforms.
For information on the budget and staff resources of selected UN
oversight entities, we used fiscal biennium 2004-2005 data for several
entities that participated in a survey conducted by the Joint
Inspection Unit, which provided us with an advance copy of the report
completed in February 2006.[Footnote 44] We determined the data to be
sufficiently reliable for purposes of this report.
[End of section]
Appendix II: OIOS Oversight Authority:
The UN organization and OIOS's oversight authority over selected UN
entities is presented in figure 7. The diagram shows (1) those entities
over which OIOS has oversight authority that do not have their own
oversight units, such as departments and offices within the UN
Secretariat; (2) funds and programs, such as the UN Children's Fund and
the UN Development Program, that fall under OIOS's oversight authority
but may use OIOS services only upon request because they have their own
oversight units; and (3) the International Atomic Energy Agency and the
specialized agencies, such as the International Labor Organization and
the World Health Organization, some of which have their own oversight
units and do not fall under OIOS's oversight authority.
Figure 7: UN Organizations and OIOS's Oversight Authority Over Selected
Entities:
[See PDF for image]
Source: GAO based on UN data.
[A] Includes only selected UN organizations, not a complete listing.
[End of figure]
[End of section]
Appendix III: OIOS Organizational Structure:
Based on the General Assembly approved 2006-2007 biennium budget, OIOS
has a total of 293 funded staff positions in its executive office and
operating divisions comprised of:
* the Office of the Under Secretary-General and the Executive Office,
which has 16 staff positions (about 5 percent);
* Internal Audit Division I located in New York, which has 103 staff
positions (about 35 percent);
* Internal Audit Division II in Geneva and several overseas locations,
which has 40 staff positions (about 14 percent);
* Investigations Division in New York, Vienna, and several overseas
locations, which has 113 staff positions (about 39 percent); and:
* the Monitoring, Evaluation, and Consulting Division, which has 21
staff positions (about 7 percent).
As shown in figure 8, the majority of these staff positions are funded
through extrabudgetary resources. As the General Assembly recently
authorized, some extrabudgetary staff positions are for General
Temporary Assistance, which provides OIOS with the flexibility to use
funding to hire contractors as it deems necessary.
Figure 8: OIOS Organizational Structure and Number of Staff Positions
by Division, Fiscal Biennium 2006-2007:
[See PDF for image]
Source: GAO based on OIOS data.
Note: The information shown reflects the number of staff positions as
of January 31, 2006, including 39 General Temporary Assistance
positions that the General Assembly approved for OIOS for fiscal
biennium 2006-2007.
[End of figure]
OIOS is located in numerous locations throughout the world. Figure 9
shows the number of staff positions at headquarters in New York and the
field offices in Geneva, Vienna, Nairobi, and Addis Ababa, as well as
duty stations for peacekeeping missions and tribunals.
Figure 9: OIOS Presence Worldwide as of January 31, 2006:
[See PDF for image]
Source: GAO based on OIOS data; Cartesia MapArt(map)
[A] Audit staff positions in Addis Ababa, Afghanistan, Kuwait, and
Sudan are not currently authorized and included in OIOS's account.
[B] ICTY is the International Criminal Tribunal for the former
Yugoslavia.
[C] ICTR is the International Criminal Tribunal for Rwanda.
[End of figure]
[End of section]
Appendix IV: Process for Developing OIOS Budget:
The process for developing the OIOS's regular budget is complex,
involving several entities and multiple steps that begin about 16
months before the budget for a biennium goes into effect. Figure 10
illustrates the process involved in developing OIOS's regular budget
for one biennium. OIOS divisions submit their regular and
extrabudgetary proposals first to the executive office of OIOS, which
may revise the requests either in line with OIOS priorities or pursuant
to instructions from the UN Secretariat's Office of Program Planning,
Budget, and Accounts (OPPBA). As shown in figure 10, the OIOS budget
proposal is reviewed by the OPPBA, the Advisory Committee on
Administrative and Budgetary Questions (ACABQ), and the Fifth Committee
before it is approved by the General Assembly. As a comparison, the
Board of Auditors submits its budget requests directly to the ACABQ;
the Joint Inspection Unit submits its draft budget through the Chief
Executives Board (CEB) to all participating organizations for comments,
which are consolidated by the CEB before the budget proposal is
submitted to the ACABQ.
The budget office reviews OIOS's budget request to ensure that it
conforms to the Secretary-General's established budget outline. The
budget outline is the Secretary-General's preliminary estimate of UN
Secretariat resource needs for the biennium, and it specifies OIOS's
share of the total budget. For example, the budget outline for the 2006-
2007 biennium was prepared in October 2004, and OIOS's preliminary
estimate was $23.2 million--the same amount as its 2004-2005
appropriation.[Footnote 45] OIOS can negotiate any suggested changes to
its budget proposal with the budget office. If OIOS does not agree with
the modification to its budget, the Under Secretary-General of OIOS has
the authority to discuss the office's concerns directly with the
Secretary-General.[Footnote 46]
Figure 10: Process for the Preparation, Approval, and Execution of OIOS
Regular Budget[A]:
[See PDF for image]
Source: GAO based on data provided and validated by OIOS and OPPBA.
[A] The budget process for trust funds and special accounts is the same
as that of the regular budget process. However, the budget cycle for
peacekeeping operation's support account operates on a July to June
fiscal year, and the budget is prepared annually. The Peacekeeping
Finance Division provides budget instructions in September of each
year. OIOS submits its budget to the controller in November. The
Peacekeeping Finance Division provides comments to OIOS's proposed
budget in December; subsequently, they meet in January to discuss the
budget. ACABQ reviews the proposed budget in March, and the General
Assembly reviews and approves the budget around May or June of each
year.
[End of figure]
[End of section]
Appendix V: Resources of Selected UN Oversight Entities:
Some of the UN funds and programs falling under the authority of the
Secretary-General have established their own internal oversight
offices. Similarly, specialized agencies that do not fall within the
authority of the Secretary-General and the International Atomic Energy
Agency (IAEA) also have their own internal oversight offices that
report to their respective executive heads and governing bodies. The
capacities of these internal oversight offices and the services they
provide vary. While some internal oversight offices are staffed to
provide a full range of audit, investigation, inspection, and
evaluation services, others have fewer staff and may augment their
capabilities by engaging OIOS or outside consultants when necessary.
In February 2006, the Joint Inspection Unit completed a report that,
among other things, assessed the capacity of existing UN oversight
entities to deal with major risks that may arise in the UN
system.[Footnote 47] In doing so, the Joint Inspection Unit developed a
suggested range of resources based on the size of the resources managed
by each of the UN organizations and their respective internal oversight
budgets. For example, as shown in figure 11, the UN was below the
suggested range--while its internal oversight budget was $58.8 million
in the 2004-2005 biennium, the total resources it managed amounted to
more than $12.2 billion. Its oversight budget was, therefore, 0.48
percent of the organization's total resources, which is slightly lower
than the suggested range of 0.50 to 0.70 percent for organizations with
resources of $800 million or more.
Based on the suggested ranges, the Joint Inspection Unit report showed
that:
* 2 of the 18 organizations surveyed (the UN Industrial Development
Organization and the Food and Agriculture Organization) have internal
oversight resources that exceeded the suggested range;
* 3 organizations (the UN Population Fund; the UN Educational,
Scientific, and Cultural Organization; and the International Labor
Organization) were within the suggested range;
* 10 organizations fell below the suggested range; and:
* the remaining 3 organizations did not have a suggested range because
of their smaller budgets.
Figure 11: Budget Comparison of Selected UN Oversight Entities,
Biennium 2004-2005:
[See PDF for image]
Source: GAO analysis based on Joint Inspection Unit data.
[A] For organizations with total resources of $250 million or less, the
Joint Inspection Unit suggested in-sourcing internal oversight services
because there is not enough of a resource base to justify an internal
oversight unit.
[End of figure]
Figure 12 provides information on the total budget and staff resources
of selected UN organizations for the fiscal biennium 2004-2005 and the
number of internal oversight professional staff on board.
Figure 12: Total Budget and Staff Resources of Selected UN
Organizations and Number of Internal Oversight Professional Staff:
[See PDF for image]
Source: GAO analysis based on Joint Inspection Unit data.
[A] UN data includes 16 monitoring, evaluation, and consulting
professional staff.
[B] Breakdown of UNHCR data does not include six professional
inspectors and one ethics and diversity officer.
[C] IAEA's five professional evaluation staff includes two management
services staff.
[D] UPU's professional staff position is part-time at 80 percent.
[End of figure]
[End of section]
Appendix VI: Comments from the Office of Internal Oversight Services:
UNITED NATIONS:
NATIONS UNIES:
Inga-Britt Ahlenius:
Under-Secretary-General for Internal Oversight Services:
Ref: OUSG 06-384:
Mr. David Walker:
Comptroller General:
General Accounting Office:
441 G Street, Room 7100:
Washington, DC 20548:
12 April 2006:
Dear Mr. Walker
Thank you for forwarding me a draft copy of the report of the GAO
review of my Office, the Office of Internal Oversight Services (OIOS).
I found it interesting and noted that several observations made in the
report are consistent with issues raised in OIOS's self-assessment and
in recent peer reviews.
I welcome, in particular, the GAO's observations and recommendations
relating to funding arrangements for OIOS. This is an issue of great
concern to me and I was pleased with the decision taken by the General
Assembly at the 2005 World Summit to request a comprehensive
independent review of OIOS with a view to strengthening the Office. The
terms of reference for the review call specifically for an evaluation
of the independence of the Office with respect to funding and budgetary
control. I am also expecting the review to address the issue of
multiple sources of OIOS' funding and eliminate the restriction this
arrangement has on the flexibility to redeploy resources to correspond
with the risk to the United Nations.
OIOS has, over the past two years, made progress towards a risk-based
approach to planning work, particularly in our auditing function. The
observations made by the GAO reflect the current state of efforts and
the GAO's assessment of what needs to be done is consistent with the
objectives of OIOS' strategy. OIOS will follow the best practice in
governance to ensure that there is clarity regarding management's
responsibility for risk assessment and for the United Nations' systems
of internal controls and the role of independent oversight in
evaluating how this responsibility is discharged.The development of
comprehensive risk profiles for all United Nations programmes will be
conducted in collaboration with United Nations programme managers. This
process will take time, resources and full commitment from all
stakeholders. I would like to stress that, only a change of the present
multiple source funding will allow us to realize a complete risk-based
audit process.
I appreciate the GAO's observations regarding staff training and
professional development. Maintaining and acquiring skills and
knowledge is fundamental for OIOS' success in delivering its mandate.
In the process of developing a strategic plan and budget for OIOS I
will give particular attention to the requirements for instituting a
professional development programme.
Please accept my appreciation for the GAO's work and I look forward to
receiving the final report.
Signed By:
Inga-Britt Ahlenius:
Under-Secretary-General for Internal Oversight Services:
[End of section]
Appendix VII: Comments from the Department of State:
United States Department of State:
Assistant Secretary and Chief Financial Officer:
Washington, D. C. 20520:
APR 12 2006:
Ms. Jacquelyn Williams-Bridgers:
Managing Director:
International Affairs and Trade:
Government Accountability Office:
441 G Street, N. W.:
Washington, D.C. 20548-0001:
Dear Ms. Williams-Bridgers:
We appreciate the opportunity to review your draft report, "UNITED
NATIONS: Funding Arrangements Impede Independence of Internal
Auditors," GAO Job Code 320346.
The enclosed Department of State comments are provided for
incorporation with this letter as an appendix to the final report.
If you have any questions concerning this response, please contact Matt
Glockner, Program Analyst, Bureau of International Organization
Affairs, at (202) 647-6413.
Sincerely,
Signed By:
Bradford R. Higgins:
cc: GAO - Jeffrey Baldwin-Bott:
IO - Kristen Silverberg:
State/OIG - Mark Duda:
Department of State Comments on GAO Draft Report:
United Nations: Funding Arrangements Impeded Independence of Internal
Auditors (GAO-06-575, GAO Code 320346):
Thank you for the opportunity to comment on your draft report entitled
United Nations: Funding Arrangements Impeded Independence of Internal
Auditors. The Department of State has been a strong supporter of the
Office of Internal Oversight Services (OIOS) since its creation and
welcomes the GAO report on UN oversight. The report provides timely
information on several aspects of OIOS's authority and operations. This
is the second GAO review of OIOS, and it provides a fuller
understanding of how oversight is conducted in the UN. While the
previous GAO report (GAO/NSIAD-98-9) did not address the issue of
budgetary independence, we appreciate that the current report's focus
on budgetary independence corresponds with the U.S. government's
ongoing initiatives and efforts to address the issue of operational
independence for OIOS.
The Department of State endorses the main findings of the GAO report.
We fully agree that UN member states need to ensure that OIOS has
budgetary independence. We believe that OIOS's inability to submit its
budget request separately from the Secretary-General's budget is an
impediment to its independence. Therefore, the U.S. has pressed for an
independent budget for OIOS both during the 10-year review of OIOS's
mandate (see GA resolution 59/272) and during the 2005 World Summit
(see GA resolution 60/1). We will continue to work with other nations
to build a constituency for this essential measure.
The Department of State disagrees with GAO's finding that funding
arrangements hinder OIOS's flexibility to reallocate resources to
address high-risk areas. The report provides little evidence to support
the conclusion that multiple funding sources have cast a cloud over
OIOS's ability to carry out its work independently and effectively. The
overwhelming majority of funding for OIOS comes from two sources: the
UN Regular Budget and UN Peacekeeping Budgets. Within these two large
sources of funding, we believe there is sufficient flexibility to move
resources in response to changing needs and evolving risks.
The GAO makes several recommendations relating to OIOS's risk
assessment plan. The GAO notes that OIOS has yet to complete
implementation of its risk assessment plan. The GAO also recommends
that OIOS report to the General Assembly on the status of significant
risks and control issues. We concur fully with these recommendations.
The Department of State also notes that GAO recommends that OIOS should
develop a workforce planning methodology. We believe that full
implementation of the risk assessment will enable OIOS to determine its
real resource requirements and align its budget request accordingly.
Furthermore, we believe that the Independent Audit Advisory Committee,
once operational, will address these issues and are pressing UN members
to adopt a mandate for the committee.
The Department of State acknowledges that OIOS needs to improve staff
training and proficiency. We agree with the GAO recommendation that
OIOS should institute a mandatory training curriculum for its
professional staff and will urge OIOS to ensure that its professional
development program complies with international standards.
We also concur with GAO that OIOS needs to establish guidelines for
assessing the reliability of data used to support its findings. Such
tests are also necessary to assess the risks faced by OIOS's clients.
Therefore, we will urge OIOS to update its manuals to comply with
appropriate international standards.
Finally, we note the recommendation that OIOS require all professional
staff to file statements of independence and financial disclosure. The
Department of State believes that this recommendation is essential to
ensuring OIOS's credibility as an objective and independent oversight
body. We have repeatedly called upon the UN to require financial
disclosures for all OIOS staff, as well as for staff with fiduciary
responsibilities. Although we are not aware of any specific cases of
impairments to the independence of OIOS staff, we believe that
requiring statements of independence will boost perceptions of
objectivity and credibility.
As the GAO report illustrates, OIOS is important to ensuring the
credibility and reputation of the UN. Reform of oversight is part of
the U.S. government's effort to overhaul the management of the UN. The
report accurately recognizes that such reforms will require the U.S. to
work with other UN member states to build support. The U.S. has
established several partnerships with other like-minded UN members, and
we look forward to continuing to work with these nations with the goal
of strengthening OIOS. We also expect that many of GAO's
recommendations will be addressed either by the UN's independent
evaluation of internal oversight or by the Independent Audit Advisory
Committee, which we anticipate to be operational later this year.
The following are our comments on State's letter dated April 11, 2006.
GAO Comments:
1. We maintain that UN funding arrangements hinder OIOS's flexibility
to reallocate resources. Our conclusion focuses on the impediments to
redirecting resources to high-risk areas between multiple funding
sources and does not necessarily advocate a single source of funding;
rather, we recommend measures to ensure reliable and sufficient funding
so OIOS can reallocate as necessary. Although the regular budget and
peacekeeping funding sources make up the majority of OIOS's budget,
there are still 11 other extrabudgetary funding sources where there is
limited flexibility to redeploy resources to high-risk areas. One of
the lessons learned from the Oil for Food Program was that OIOS did not
receive sufficient budgetary funding for work that it proposed for the
program, which prevented OIOS from examining problems.[Footnote 48]
When the Office of the Iraq Program denied OIOS's proposal for
additional investigators to perform work it deemed necessary,
redeploying resources to the Oil for Food Program was not a viable
option given the restrictions that UN financial regulations and rules
place on the movement of resources between funding sources.
[End of section]
Appendix VIII: GAO Contact and Staff Acknowledgments:
GAO Contact:
Thomas Melito, Director, (202) 512-9601:
Acknowledgments:
In addition to the person named above, Phyllis Anderson, Assistant
Director; Joy Labez; Jeffrey Baldwin-Bott; Barbara Shields; Lynn
Cothern; and Etana Finkler made key contributions to this report. Jaime
Allentuck, Marcia Buchanan, Martin De Alteriis, Mark Dowling, Jackson
Hufnagle, and James Michels also provided technical support.
[End of section]
Related GAO Products:
United Nations: Procurement Internal Controls Are Weak, GAO-06-577.
(Washington, D.C., Apr. 25, 2006).
United Nations: Lessons from Oil for Food Program Indicate Need to
Strengthen Internal Controls and Oversight, GAO-06-330. (Washington,
D.C.: Apr. 25, 2006).
United Nations: Preliminary Observations on Internal Oversight and
Procurement Practices, GAO-06-226T. (Washington, D.C.: Oct. 31, 2005).
United Nations: Sustained Oversight Is Needed for Reforms to Achieve
Lasting Results, GAO-05-392T. (Washington, D.C.: Mar. 2, 2005).
United Nations: Oil for Food Program Audits, GAO-05-346T. (Washington,
D.C.: Feb. 15, 2005).
United Nations: Reforms Progressing, but Comprehensive Assessments
Needed to Measure Impact, GAO-04-339. (Washington, D.C.: Feb. 13, 2004).
United Nations: Status of Internal Oversight Services, GAO/NSIAD-98-9.
(Washington, D.C.: Nov. 19, 1997).
(320346):
FOOTNOTES
[1] This includes funding for the UN Secretariat, funds and programs,
and peacekeeping operations.
[2] In 1996, the UN and Iraq established the Oil for Food program to
address Iraq's humanitarian situation after sanctions were imposed in
1990. In April 2004, the UN established the IIC to investigate the
administration and management of the UN Oil for Food program. See
Independent Inquiry Committee into the United Nations Oil-for-Food
Program, Interim Report (New York, N.Y.: Feb. 3, 2005), and The
Management of the Oil-for-Food Program (New York, N.Y.: Sept. 7, 2005).
[3] For related work on OIOS's oversight of UN activities, see GAO,
United Nations: Preliminary Observations on Internal Oversight and
Procurement Practices, GAO-06-226T (Washington, D.C.: Oct. 31, 2005).
See also United Nations: Procurement Internal Controls Are Weak, GAO-
06-577 (Washington, D.C., Apr. 25, 2006) and United Nations: Lessons
from Oil for Food Program Indicate Need to Strengthen Internal Controls
and Oversight, GAO-06-330 (Washington, D.C.: Apr. 25, 2006).
[4] UN funds and programs include, for example, the UN Children's Fund
and UN Development Program, which have executive boards and executive
heads but are under the authority of the UN Secretary-General.
Specialized agencies, such as the Food and Agriculture Organization,
have their own governing bodies and executive heads and are not under
the authority of the Secretary-General.
[5] See G. A. Res. 59/272, U.N. GAOR, 59th Sess., U.N. Doc. A/RES/59/
272 (2005).
[6] The Board of Auditors is presently composed of high-level
representatives from the national audit offices of France, the
Philippines, and South Africa.
[7] UN Secretariat, funds and programs, and specialized agencies are
participating organizations. According to Joint Inspection Unit
inspectors, the legislative bodies of all these UN entities, except for
the International Atomic Energy Agency, have designated the Joint
Inspection Unit as a subsidiary organ. While the agency is a
participating organization, its legislative body has not designated the
Joint Inspection Unit as a subsidiary organ.
[8] Although the Joint Inspection Unit's statute provides it with a
mandate to conduct investigations, it does not currently have the
capacity to carry out this mandate, according to senior officials in
the unit.
[9] For example, the national audit office of the United Kingdom
currently serves as external auditor for the World Meteorological
Organization; Germany serves for the International Atomic Energy
Agency; and France for the UN High Commissioner for Refugees.
[10] The current Under Secretary-General for Internal Oversight
Services was appointed in July 2005.
[11] Prior to 1993, the major internal oversight functions of the
Secretariat were carried out by units within the Department of
Administration and Management. These units were consolidated in August
1993 to form the Office for Inspections and Investigations under an
Assistant Secretary-General. An independent investigation function has
existed in the UN only since 1994, when it was established within OIOS.
[12] The Secretariat carries out the day-to-day work of the UN
Organization, such as administering peacekeeping operations, mediating
international disputes, surveying economic and social trends and
problems, and preparing studies on human rights and sustainable
development.
[13] Extrabudgetary resources cited include those estimated as
available during the period for the programs specified in the program
budget. These resources--derived from sources other than the regular
budget--are mainly voluntary contributions and include related program
support, such as central administrative structures. According to an
official with the Office of Program Planning, Budget, and Accounts, the
$5.6 billion figure provided includes the support account for
peacekeeping, but does not include the majority of peacekeeping
resources, which relate specifically to mission activities.
[14] G. A. Res. 48/218B, U.N. GAOR, 48TH Sess., U.N. Doc. A/RES/48/218
B (1994).
[15] Establishment of the Office of Internal Oversight Services:
Secretary-General's Bulletin, U.N. Doc. ST/SGB/273, at para. 4.
[16] IIA is recognized as the internal audit profession's leader in
certification, education, research, and technological guidance.
Developed and maintained by the IIA, The Code of Ethics and Standards
is mandatory guidance considered to be essential to the professional
practice of internal auditing. The International Standards for the
Professional Practice of Internal Auditing provides guidance for the
conduct of internal auditing at both the organizational and individual
auditor levels.
[17] International Organization of Supreme Audit Institutions
(INTOSAI), Principles for Best Audit Arrangements for International
Institutions (Oct. 2004).
[18] The 12 funding sources are peacekeeping support account, funds and
programs reimbursement account, technical operations program support
costs, substantive trust funds program support costs, UN Joint Staff
Pension Fund, International Tribunal for the former Yugoslavia,
International Criminal Tribunal for Rwanda, Capital Master Plan 2,
Office for the Coordination of Humanitarian Affairs program support
costs, UN High Commissioner for Refugees, International Trade Center,
and UN Drug Control Program.
[19] For the 2006-2007 biennium, the Under Secretary-General of OIOS
requested funds to support an additional 39 regular-budget staff
positions for the following areas: 27 staff positions for the
Investigations Division, of which 24 are slated for Vienna; 10 staff
positions for the Internal Audit Division, of which 8 are slated for
New York; and 2 staff positions for the Office of the Under Secretary-
General. In addition, the Under Secretary-General has stated that the
need for resources for a properly staffed and structured OIOS will go
far beyond these newly approved staff positions.
[20] Throughout this report, we use the term "staff position" to refer
to what the UN calls a "post." For budgeting purposes, the UN defines a
post as a budgetary entity at a specific level, in a specific work
unit, for a specific purpose.
[21] The Fifth Committee (or the Administrative and Budgetary
Committee) is the General Assembly's main committee for administration
and budgetary matters and is comprised of all member states.
[22] Independent Inquiry Committee into the United Nations Oil-for-Food
Program, The Management of the United Nations Oil-for-Food Program (New
York, N.Y.: Sept. 7, 2005).
[23] ACABQ advises the General Assembly on the budget submitted by the
Secretary-General, is authorized to examine the administrative budgets
of the specialized agencies, and reports to the General Assembly on the
auditors' reports on the accounts of the UN and of the specialized
agencies.
[24] OIOS defines risk management as the systematic approach to
identifying, assessing, and acting on the probability that an event or
action may adversely affect the organization. Risk management entails
identifying and assessing past problems, current challenges, and
overarching trends that could threaten the organization's activities,
assets, and reputation.
[25] The Monitoring, Evaluation, and Consulting Division does not
currently perform systematic risk assessments. Because all of the
evaluation unit's work is mandated by the General Assembly, a division
official said that they do not need to set risk-based priorities. The
official stated that the division managers discuss potential risk areas
informally and present a list of such areas to the General Assembly
from which to request OIOS evaluations.
[26] According to OIOS officials, OIOS plans to work jointly with each
client to identify and rank areas where the client is potentially
vulnerable to fraud, waste, or abuse. This process is called client-
level risk assessment.
[27] Officials from the Investigations Division said they give incoming
cases a risk score and prioritize their work by ranking the scores.
Because we did not have access to the division's internal documents,
however, we could not independently assess how effectively the division
has implemented its risk assessments.
[28] Data were not available for the remaining divisions in New York
and Vienna.
[29] D-1 level and above are senior-level positions such as those of a
division head or policy making positions equivalent to the Assistant
Secretary-General and Under Secretary-General levels.
[30] OIOS supported the creation of a UN Ethics Office, which was
established in January 2006 to process financial disclosures, among
other things. OIOS has no enforcement authority over ethics violations.
[31] Although the Investigations Division does not follow a specific
set of international standards, a division official stated that OIOS
investigators must adhere to the Uniform Guidelines for Investigations
adopted at the Fourth Conference of International Investigators in
Brussels in 2003.
[32] In March 2002, OIOS formally adopted the IIA standards, which
according to an OIOS official, went into effect in January 2002. To
attest its compliance with IIA standards, OIOS must complete an
external review by a qualified, independent reviewer by January 2007,
the 5-year point. Internal Audit Division officials in New York said
that they plan to finalize the quality assessment required by IIA by
the end of December 2006.
[33] The European Anti-Fraud Office, based in Brussels, is an
organization whose stated purpose is to protect the interests of the
European Union and to fight fraud, corruption, misconduct, and any
other irregular activity within European institutions.
[34] The European Anti-Fraud Office sampled 40 closed cases from 1999-
2004, representative of subject areas and geographic regions.
[35] From July 2001 to June 2005, OIOS issued 8,344 recommendations, of
which 2,773 were "critical." About 74 percent of the total critical
recommendations have been implemented. This total does not include
about 1,800 recommendations that were withdrawn. According to OIOS,
recommendations may be withdrawn for a variety of reasons. For example,
(1) the client may give valid arguments as to why the recommendation
cannot be implemented, e.g., the investment outweighs the benefit; (2)
after further follow-up with the client it was determined that there
was a factual error or misunderstanding by OIOS; and (3) the client or
the situation leading to the recommendation no longer exists, for
example, in the case of a peacekeeping mission closure.
[36] G. A. Res. 59/272, U.N. GAOR, 59TH Sess., U.N. Doc. A/RES/59/272,
at para. 10 (2005).
[37] Oversight Committee: Secretary-General's Bulletin, U.N. Doc. ST/
SGB/2005/18, at para. 1.1.
[38] Establishment of the Office of Internal Oversight Services:
Secretary-General's Bulletin, U.N. Doc. ST/SGB/273, at para. 5.
[39] G. A. Res. 59/272, U.N. GAOR, 59TH Sess., U.N. Doc. A/RES/59/272,
at para. 12 (2005).
[40] Joint Inspection Unit, Oversight Lacunae in the United Nations
System, JIU/REP/2006/2.
[41] OIOS officials stated that the internal audit divisions provide
all final audit reports to the Board of Auditors when they are
forwarded to management; final audit reports are not routinely
forwarded to the Joint Inspection Unit, although reports are provided
upon request. Investigation reports are not routinely provided.
According to these officials, some evaluation and inspection reports
are shared with the Joint Inspection Unit but rarely with the Board of
Auditors.
[42] G. A. Res. 59/272, U.N. GAOR, 59TH Sess., U.N. Doc. A/RES/59/272,
at para. 1(c) (2005).
[43] The focal group, which includes representatives from 14 counties,
is part of the Geneva Group. Formed in 1964, the Geneva Group comprises
major financial contributors whose goal is to influence management
improvement in UN specialized agencies.
[44] Joint Inspection Unit, Oversight Lacunae in the United Nations
System, JIU/REP/2006/2. As of March 2006, JIU had sent the report for
official editing and printing.
[45] The General Assembly requests that the Secretary-General submit an
outline of the program budget for the upcoming biennium. The budget
outline was established in 1986 and has become an important element of
the budget process. One of the main purposes was to help the member
states achieve consensus sought on the overall level of the UN budget,
in advance, in view of the financial constraints imposed on the UN. See
G. A. Res. 41/213, U.N. GAOR, 41st Sess., U.N. Doc. A/RES/41/213
(1986).
[46] OIOS officials informed us that appeals have been made to the
Secretary-General in the past.
[47] See JIU/REP/2006/2.
[48] See GAO-06-330.
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