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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 OIOSís 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 OIOSís 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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