Concerns Aired about Palestine Refugee Agency’s Budget Deficit, Human Resources Management, as Fifth Committee Examines Board of Auditors’ Reports

While welcoming the overall financial soundness of the United Nations, delegates at the Fifth Committee (Administrative and Budgetary) meeting today expressed concern about the moderate pace of carrying out recommendations by the Organization’s main auditing body, hiring practices and the finances of the United Nations agency serving Palestine refugees.

Committee members welcomed the Board of Auditors’ findings that most of the Organization’s nearly two dozen examined entities were financially sound and had received unqualified audit opinions for 2017.

Yet they remained concerned that though the rate of implementation for the Board’s recommendations was moving ahead, it was not fully satisfactory. Egypt’s delegate, speaking for the Group of 77 developing countries and China, said the 2017 implementation rate of 49 per cent, though up compared to the previous three years, still fell short of the 65 per cent achieved in the 2008 2009 biennium.

Turning to the finances of the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA), the Group was very concerned that the relief Agency was facing a deficit of $446 million in 2018, including $49 million dating back to 2017. The Group noted the Board’s recommendations and emphasized that austerity measures are not the only path to help the Agency deliver on its mandates.

In laying out the Board’s recommendations, Ms. Parama Sen, Director of External Audit (India), and Chair of the Audit Operations Committee of the Board of Auditors, said the increased deficit in UNRWA stems from $400 million in suspended contributions from a major donor in 2017 and 2018. The situation threatens the Agency’s ability to deliver its core mandate to Palestine refugees. As a short term solution, the Agency has requested advance payment from its donors to finance core operations for 2018 and launched an internal campaign task force to mobilize resources.

Ms. Sen introduced all of the Board’s financial reports and audited financial statements for the year ended 31 December 2017.

The European Union’s delegate praised the Board’s work as it helped the United Nations system operate in a sounder, more transparent, and cost effective manner.

The United States delegate, pleased that all examined United Nations entities received unqualified audit opinions from the Board in accordance with the International Public Sector Accounting Standards (IPSAS), particularly noted the Board’s recommendations on workforce management, combatting fraud and corruption, the management of implementing partners, and the delegation of authority for such key administrative tasks as human resources management and procurement.

The speaker for India, also pointing to personnel management issues, expressed hope that the shortlisting of unavailable or unsuitable candidates in the selection of consultants will be immediately addressed.

Zambia’s representative said the increase in long term employee benefit liabilities have the potential to negatively affect the regular budget if they remain underfunded. Moreover, the Secretariat’s anti fraud and anti corruption framework has yet to be operationalized in some parts of the Organization, including in the Procurement Division.

Pedro Guazo, Acting Deputy Controller and Director of the Accounts Division of the Department of Management’s Office of Programme Planning, Budget and Accounts, introduced the Secretary General’s reports on the implementation of the Board’s recommendations. Babou Sene, Vice Chairman of the Advisory Committee on Administrative and Budgetary Questions (ACABQ), introducing its related reports, noted that even though the overall implementation rate has improved somewhat, they remain well below previous rates of implementation.

The Fifth Committee will meet again at 10 a.m., on Tuesday, 23 October to discuss the financial situation of the United Nations.

Board of Auditors’ Reports and Audited Financial Statements

PARAMA SEN, Director of External Audit (India)and Chair of the Audit Operations Committee, Board of Auditors, introduced the Board’s financial reports and audited financial statements for the year ended 31 December 2017 contained in documents A/73/5(Vol.I), A/73/5(Vol.III) A/73/5(Vol.IV); A/73/5/Add.1), (A/73/5/Add.1/Corr.1 A/73/5/Add.2), A/73/5/Add.3, A/73/5/Add.4, A/73/5/Add.5, A/73/5/Add.6, A/73/5/Add.7, A/73/5/Add.8, A/73/5/Add.9, A/73/5/Add.10, A/73/5/Add.11, A/73/5/Add.12, A/73/5/Add.14 ,A/73/5/Add.15). She also introduced the Concise summary of the principal findings and conclusions contained in the reports of the Board of Auditors for the annual financial period 2017, as transmitted in the Note of the Secretary General, contained in documents A/73/209 and A/73/209/Corr.1.

Ms. Sen said the concise summary report covers the common themes and major issues identified in the Board’s report, addressed to the General Assembly, on 19 entities: United Nations Volume I, the International Trade Centre (ITC), United Nations Capital Development Funds (UNCDF), United Nations Development Programme (UNDP), United Nations Environment Programme (UNEP), United Nations Population Fund (UNFPA), United Nations Human Settlements Programme (UN Habitat), United Nations Children’s Fund (UNICEF), United Nations Institute for Training and Research (UNITAR), Office of the United Nations High Commissioner for Refugees (UNHCR), United Nations Office on Drugs and Crime (UNODC), United Nations Office for Project Services (UNOPS), United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA), United Nations University (UNU), United Nations Entity for Gender Equality and the Empowerment of Women (UN Women), International Criminal Tribunal for the Former Yugoslavia and the International Residual Mechanism for Criminal Tribunals. The concise summary also covers the United Nations peacekeeping operations and United Nations Joint Staff Pension Fund.

[The audit of the United Nations, as reported in Volume I, included an examination of financial transactions and operations at Headquarters in New York, the offices at Geneva, Vienna and Nairobi and other entities, including country offices, missions and projects. The Board has also reported separately on the implementation of the information and communications technology strategy, Umoja, the Capital Master Plan and the Strategic Heritage Plan.]

All of these entities received unqualified audit opinions, she said. The Former Yugoslavia Tribunal received an emphasis of matter, meant to draw attention to the fact that it had ceased to be an ongoing concern on 31 December 2017 upon completion of its mandate. Thirteen entities � United Nations Volume I, United Nations Peacekeeping Operations, ITC, UNDP, UNEP, UNFPA, UNICEF, UNITAR, UNHCR, UNODC, UNOPS, UN-Women and the Former Yugoslavia Tribunal � closed the financial year with a surplus. Five entities � UNCDF, UN-Habitat, UNRWA, UNU and the Residual Mechanism � recorded a deficit. Net assets of seven entities � United Nations Volume I, UNCDF, UNDP, UNU, UN Habitat, UNRWA and the Residual Mechanism � declined while the net assets of 11 entities � United Nations peacekeeping operations, ITC, UNEP, UNFPA, UNICEF, UNITAR, UNHCR, UNOCD, UNOPS, UN Women and the Former Yugoslavia Tribunal � increased when compared with the previous years. The financial position of all the entities remained strong with comfortable solvency and liquidity.

She said employee benefit liabilities were among the 17 entities’ major liabilities and comprised more than a quarter of their total liabilities, ranging from as high as 97 per cent of the total for UNCDF and more than 75 per cent at six entities: United Nations Volume I, UNFPA, UNITAR, UNRWA, UNHCR and the Residual Mechanism. Seven entities � United Nations Volume I, United Nations peacekeeping operations, UNEP, UN Habitat, UNRWA, the Former Yugoslavia Tribunal and the Residual Mechanism had no funding arrangements for employee benefit liabilities. The Board has been pointing out that it is important that entities have a funding plan for these liabilities. Noting that the United Nations is exposed to a wide range of international and external fraud risks, she said only 11 entities; all entities, expect the Residual Mechanism, had given their staff fraud awareness training.

In every audit report, the Board makes recommendations to address the deficiencies noticed to help improved the functioning of the entities audited, she said. The overall rate of implementation of outstanding recommendations had increased marginally from 45 per cent in 2016 to 49 per cent in 2017. At the entity level, the rate of implementation of the outstanding recommendations ranged from 17 per cent to 84 per cent.

She then laid out a series of important findings from the various reports. Turning to the United Nations Volume I, she noted the incomplete record maintenance and a lack of physical verification of heritage assets. The present system of heritage assets management is vulnerable to inherent risks. Noting that the Procurement Division manages more than $3 billion in expenditures each year, the Board recommends that the Administration develop a process to strengthen oversight and create a compliance mechanism regarding the delegation of procurement authority. It can use the results to review the delegation and if necessary, adapt or withdraw the delegation.

Turning to managing the risk of fraud, the Board noted that the enterprise risk assessment had not percolated down fully to all levels and only 12 departments and 14 missions have carried out risk assessments and prepared draft risk registers, she said. At the corporate level, progress scorecards on the implementation of risk response and risk treatment plans have not been prepared after November 2016. There is no mechanism to assess and monitor the anti fraud and anti corruption framework.

She noted the Board’s findings on specific entities. For example, it noted that the ITC has awarded contracts on a single bid in 42 per cent of test checked cases for consultants and that hiring managers did not follow a competitive selection process for hiring consultants. There are recurring deficiencies in programme and project management at UNDP and room for improvement at Headquarters and in the field offices in risk management processes at UNFPA. UNRWA continues to face financial difficulties to achieve its mandate of servicing Palestine refugees due to $400 million in suspended contributions from a major donor in 2017 and 2018. As a short term solution, the Agency has requested advance payment from its donors to finance core operations for 2018 and launched internal campaign task force to mobilize resources.

PEDRO GUAZO, Acting Deputy Controller and Director, Accounts Division, Office of Programme Planning, Budget and Accounts, Department of Management, introduced the reports of the Secretary General on implementation of the recommendations of the Board of Auditors contained in its reports on the United Nations, the Capital Master Plan and on the United Nations funds and programmes for the year ended 31 December 2017 (documents A/73/353 and A/73/353/Add.1). He said that, broadly speaking, the Secretary General and the executive heads of the other United Nations entities concurred with most of the Board’s recommendations and made every effort to ensure their implementation. With regard to Volume I of the Board’s reports, and on its report on the Capital Master Plan, he said the Administration accepted all of the recommendations.

As concerns Volume I, he noted that out of the 263 recommendations relating to the previous six financial periods, 138 (53 per cent) were fully implemented, 84 (32 per cent) are under implementation, 12 (4 per cent) have not been implemented and 29 (11 per cent) have either been closed by the Board or overtaken by events. He added, with regards to prioritization, that all accepted recommendations will be implemented in a timely manner, with the Board’s main recommendations being given higher priority. The Administration remains committed to the timely and thorough implementation of the Board’s recommendations, he stated.

BABOU SENE, Vice Chairman of the Advisory Committee on Administrative and Budgetary Questions (ACABQ), introducing its related report (document A/73/430), said it welcomes the fact that all entities have again received unqualified audit opinions. While the overall implementation rate of recommendations has improved somewhat, they remain well below the rates of a few years ago. In that regard, the Advisory Committee welcomes all joint efforts by the Board and the entities to improve the rate of implementation. Turning to the overall financial situation, the Advisory Committee notes that, as of 31 December 2017, the financial position of the audited entities had remained sound. It encourages the Board of Auditors to include, in its future audit reports, comparative data on the various financial ratios, as well as related analysis. Entities should also ensure balanced reserve levels, he said, recommending as well that the General Assembly request the Secretary General to facilitate the development of reasonable benchmarks for minimum and maximum reserve levels.

He went on to highlight the Advisory Committee’s concerns that the introduction of a statement of internal control in the Organization continues to be delayed. It will follow up on that matter in the context of related topics, such as the accountability system of the United Nations. Lastly, he drew attention to the Organization’s heritage assets, including works of art, monuments and historical buildings, saying the Advisory Committee concurs with the Board of Auditors on the need for a comprehensive internal control system. It recommended that the General Assembly ask the Secretary General to take steps in that regard.

MOHAMED FOUAD (Egypt), speaking on behalf of the Group of 77 developing countries and China, took note of the fact that, of the 18 audited entities, 13 closed the 2017 financial year with surpluses, while the remaining five recorded deficits. Despite those deficits, all entities except the International Residual Mechanism for Criminal Tribunals had generally high solvency and liquidity ratios. Overall, the Organization had sufficient current assets to cover its current liabilities and while the 1:1 ratio is an ideal target for all entities, the actual ratios and therefore their trends depend in large part on decisions adopted and the business models of each entity. [The number of audited entities is 18, not 19, because the United Nations Joint Staff Pension Fund follows International Accounting Standard 26 for the reporting framework, and the International Public Sector Accounting Standards (IPSAS) for accounting treatments.]

He said the Group takes note with serious concern the financial situation of UNRWA, which has a projected overall 2018 deficit of $446 million, including $49 million dating back to 2017. The Group notes the Board of Auditors’ recommendations and emphasizes that austerity measures are not the only path for that Agency to deliver on its mandates. Turning to the status of the implementation of the Board’s recommendations, he said the 2017 implementation rate of 49 per cent, although an increase compared to the previous three years, still fell short of the 65 per cent realized in the 2008 2009 biennium. All entities must take appropriate measures to ensure that recommendations are implemented as a matter of priority and in a timely manner, with proper accountability arrangements for delays. Different United Nations entities and the Secretariat need to work towards the closure of old audit recommendations, he said.

TAULANT ZEQIRI, European Union, praised the Board’s work, saying it helps drive the United Nations system to operate in a sounder, most transparent and cost effective way that enables the Secretariat to carry out its mandates more effectively and efficiently. Welcoming the Board’s findings and recommendations, he said the rate of implementation, while progressing, is still not fully satisfactory. He therefore encouraged the Secretary General to ensure full and timely implementation.

CAROLYN STRAINIC (United States) said her delegation is pleased that all examined United Nations entities received unqualified audit opinions from the Board in accordance with IPSAS. She noted in particular the Board’s recommendations on workforce management, combatting fraud and corruption, management of implementing partners, and delegation of authority for such key administrative tasks as human resources management and procurement. The United States urges the Secretary General to continue to improve implementation of the Board’s recommendations, thus enabling the Organization to significantly improve mandate implementation and service delivery for some of the world’s most vulnerable populations.

MAHESH KUMAR (India) welcomed the fact that the Board had issued unqualified audit opinions and noted that the Organization’s overall financial position as of 31 December 2017 was sound, with sufficient funds to discharge its liabilities. However, there remains very large sums of outstanding assessments, which the Organization’s leadership has highlighted in regular briefings and communications to Member States. As of 30 September 2017, outstanding assessments totalled $3.65 billion, he said, and the situation has not improved this year. Healthy cash reserves are a direct function of assessments paid on time by Member States. Hopefully that aspect will be examined and commented upon by the Board of Auditors in its future reports. He went on to hope that concerns about human resources management, such as the shortlisting of unavailable or unsuitable candidates in the selection of consultants, will be immediately addressed.

LAZAROUS KAPAMBWE (Zambia) welcomed the fact that the Organization’s financial health remains sound, with current assets sufficient to cover current liabilities at a ratio of 3.388 compared to 3.41 in 2017. However, there are some areas of concern, he said, pointing first to an increase in long term employee benefit liabilities to $4.94 million in 2017 compared with $4.23 million in 2016. These liabilities have the potential to negatively affect the regular budget if they remain underfunded. Also, the Secretariat’s anti fraud and anti corruption framework has yet to be operationalized in some parts of the Organization, including in the Procurement Division. He went on to call for strengthened efforts to implement the Board’s recommendations.

Source: United Nation