United Nations:

Funding Arrangement Impede Independence of Internal Auditors

GAO-06-575: Published: Apr 25, 2006. Publicly Released: Apr 27, 2006.

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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.

UN funding arrangements constrain OIOS's ability to operate independently as mandated by the General Assembly and required by international auditing standards that OIOS has adopted. First, while OIOS is funded by a regular budget and 12 other revenue streams, UN financial rules severely limit OIOS's ability to reallocate resources among revenue streams, locations, and operating divisions. Thus, OIOS cannot always direct resources at high-risk areas when they arise. Second, OIOS is dependent on the funds, programs, and other entities it audits for reimbursement for its services. The managers of the programs OIOS intends to examine can deny OIOS permission to perform work or not pay OIOS for services. UN entities could thus avoid OIOS audits or investigations, and high-risk areas can be and have been excluded from examination. OIOS has begun to implement key measures for effective oversight, but some of its practices fall short of applicable international auditing standards. OIOS develops an annual work plan, but the risk management framework on which the work plans are based is not fully implemented. Moreover, OIOS annual reports do not assess risk and control issues facing the UN organization or the consequences if these are not addressed. OIOS officials report that the office does not have adequate resources, but they also do not have a mechanism to determine appropriate staffing levels. Moreover, OIOS has no mandatory training curriculum for staff or systematic procedures for ensuring the reliability of data used for their audits. OIOS also does not require all staff to document their independence. Although two OIOS divisions have recently undergone external reviews, the other two have not undergone such a review within the last 5 years. OIOS monitors and reports on the status of its recommendations and is making efforts to improve follow up on oversight recommendations.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: To provide reasonable assurance of independent, effective oversight in the United Nations, the Secretary of State should 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.

    Agency Affected: Department of State

    Status: Closed - Not Implemented

    Comments: The recommendations in this report were made to the Secretary of State and the Permanent Representative of the United States to the UN to work with other member states to encourage the Secretary-General to take various actions to improve UN internal oversight. State endorsed the report's recommendations and stated that it would work with other UN member states to encourage the Secretary-General to take action on the recommendations. For these recommendations, we reviewed not only State's actions but also the UN's progress in addressing the recommendations before making a final determination on their implementation status. The UN has taken actions to implement this recommendation. According to UN Office of Internal Oversight Services (OIOS) officials, OIOS' risk assessment framework has been implemented, and since 2008 OIOS' work plan has been risk-based. In its Annual Report to the General Assembly covering the period July 2008 to June 2009, OIOS states that "in 2008, it has realized its ambition to deliver risk-based work plans for the Internal Audit and the Inspection and Evaluation Divisions. The adoption of a risk-based approach meets the requirements of the International Standards for the Professional Practice of Internal Auditing." In this report, OIOS also presents a discussion of its risk-assessment framework and acknowledged that its methodology will require further refinement based on experience from its first few years of implementation. In addition, IAAC advised OIOS of the need to continue to refine its risk-based work plan for Internal Audit to account for residual risk. OIOS is taking the necessary actions, which IAAC is closely monitoring.

    Recommendation: To provide reasonable assurance of independent, effective oversight in the United Nations, the Secretary of State should 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 complete the implementation of OIOS's risk management framework to ensure that its annual work plans address those areas that pose the highest risks.

    Agency Affected: Department of State

    Status: Closed - Implemented

    Comments: The recommendations in this report were made to the Secretary of State and the Permanent Representative of the United States to the UN to work with other member states to encourage the Secretary-General to take various actions to improve UN internal oversight. State endorsed the report's recommendations and stated that it would work with other UN member states to encourage the Secretary-General to take action on the recommendations. For these recommendations, we reviewed not only State's actions but also the UN's progress in addressing the recommendations before making a final determination on their implementation status. The UN has taken actions to implement this recommendation. In its annual reports, the UN Office of Internal Oversight Services (OIOS) reports to the General Assembly on the status of any significant risk and control issues in the UN, and potential consequences if risks and control weaknesses are not addressed. For example, in its 2008 annual report, OIOS oversight findings cover seven risk categories (strategy, governance, compliance, financial, operational, human resources, and information). The Office also raises any significant concerns with the Independent Audit Advisory Committee (IAAC). For example, IAAC reported the high number of vacancies in OIOS to the General Assembly in February 2009, raising the concern that the high number of vacant posts, in particular at the senior management levels, would have an adverse effect on the capacity and ability of OIOS to accomplish its program of work. The 2010-2011 OIOS budget submission also stipulated the amount of resources required to address high-risk areas identified through the Office's risk-based work plans. According to OIOS, the General Assembly makes the ultimate determination on the funding level allotted to OIOS to address risk areas.

    Recommendation: To provide reasonable assurance of independent, effective oversight in the United Nations, the Secretary of State should 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 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.

    Agency Affected: Department of State

    Status: Closed - Implemented

    Comments: The recommendations in this report were made to the Secretary of State and the Permanent Representative of the United States to the UN to work with other member states to encourage the Secretary-General to take various actions to improve UN internal oversight. State endorsed the report's recommendations and stated that it would work with other UN member states to encourage the Secretary-General to take action on the recommendations. For these recommendations, we reviewed not only State's actions but also the UN's progress in addressing the recommendations before making a final determination on their implementation status. The UN has taken several actions related to this recommendation, but additional actions are required to fully implement it. According to the UN Office of Internal Oversight Services (OIOS), the Internal Audit Division (IAD) and Inspection and Evaluation Division (IED) determine staff resource requirements through annual work planning exercises. Since 2008, OIOS annual work plans are based on an assessment of the risks facing audited entities. For instance in IAD, audit assignments are identified from the risk registers and IAD endeavors to audit all high and medium risk areas within 4 years of their first inclusion in the risk register. Beginning in June 2009 for posts funded from the Peacekeeping Support Account, and in January 2010 for posts funded from the Regular Budget, IAD determines the number of days required to conduct identified assignments within the desired time frame, and compares it with the actual number of audit days available based on current authorized posts. If there is a shortfall, IAD requests additional posts to enable it to conduct the assignments on the work plan. Similarly, IED develops its work plan through a strategic risk-based planning approach, which is based on Secretariat-wide data on a set of 12 proxy risk indicators, review of key strategic issues identified in upcoming inter-governmental conference and meetings agenda, and systematic, cyclical coverage of the 27 main Secretariat programs. With the goal of attaining coverage of all programs in an 8-year cycle, IED will also make proposals in their budget submission for additional staff resources required to complete their work plan. With regard to its Investigations Division, OIOS said that the resource planning methodology was discussed within the context of the Investigation Division's restructuring. In addition, the General Assembly (GA) approved a pilot structure for the Investigations Division and mandated the Secretary-General to submit the report on restructuring within the context of the 2012-2013 budget. Recognizing that the restructuring of the Investigations Division is ongoing, which requires the GA's approval, and that a workforce planning methodology has not been finalized, this recommendation remains open, acknowledging that implementation is under way but not yet complete.

    Recommendation: To provide reasonable assurance of independent, effective oversight in the United Nations, the Secretary of State should 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 develop a workforce planning methodology to systematically assess and determine appropriate staffing levels for the office.

    Agency Affected: Department of State

    Status: Closed - Not Implemented

    Comments: The recommendations in this report were made to the Secretary of State and the Permanent Representative of the United States to the United Nations (UN) to work with other member states to encourage the Secretary-General to take various actions to improve UN internal oversight. State endorsed the report's recommendations and stated that it would work with other UN member states to encourage the Secretary-General to take action on the recommendations. For these recommendations, we reviewed not only State's actions but also the UN's progress in addressing the recommendations before making a final determination on their implementation status. We previously determined that OIOS has taken steps to address our recommendation for a workforce planning methodology to determine appropriate staffing for two of its three operating divisions - Internal Audit and Inspection and Evaluation. However, more actions were needed and continue to be needed with regard to the Investigations Division to fully implement our recommendation. In August 2010, OIOS had informed us that the Investigations Division's proposed resource planning methodology was being discussed within the context of the Division's planned restructuring. Although the General Assembly endorsed the Division's restructuring proposal in August 2013, key issues with implications on the appropriate staffing level for the Investigations Division remain outstanding. For example, the restructuring does not address regular budget resources to investigate other UN entities that rely primarily on extrabudgetary resources. In addition, the Independent Audit Advisory Committee (IAAC) noted that an external review of the Investigations Division resulted in numerous recommendations, including the need to address high-risk areas within the context of resource constraints. As a result, IAAC recommends (1) an implementation plan to address resource constraints that take into account the implications of a report to the General Assembly on strengthening investigations in the United Nations, (2) a reexamination of OIOS' and the Investigations Division's risk assessment processes to ensure that relevant risks are appropriately addressed in the workplan, and (3) a concerted effort to address the extended delays affecting the Division's completion of investigations.

    Recommendation: To provide reasonable assurance of independent, effective oversight in the United Nations, the Secretary of State should 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 institute a mandatory training curriculum for OIOS professional staff, including auditors and investigators.

    Agency Affected: Department of State

    Status: Closed - Implemented

    Comments: The recommendations in this report were made to the Secretary of State and the Permanent Representative of the United States to the UN to work with other member states to encourage the Secretary-General to take various actions to improve UN internal oversight. State endorsed the report's recommendations and stated that it would work with other UN member states to encourage the Secretary-General to take action on the recommendations. For these recommendations, we reviewed not only State's actions but also the UN's progress in addressing the recommendations before making a final determination on their implementation status. The UN needs to take additional steps to implement this recommendation. According to the UN's Office of Internal Oversight Services (OIOS), in all audit assignments audit teams perform the necessary procedures to satisfy themselves with the reliability of data used to support their opinions. These procedures may include verification with third party and data analysis using source data. In addition, OIOS states that its manuals for audit, evaluation, and investigations address the matter of obtaining, assessing, and analyzing data (or evidence) for oversight findings. While the manuals discuss the importance of data reliability and accuracy, the manuals do not provide sufficient guidance and procedures to OIOS' staff for assessing data reliability.

    Recommendation: To provide reasonable assurance of independent, effective oversight in the United Nations, the Secretary of State should 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 establish guidance and procedures for assessing the reliability of data used in support of significant findings in OIOS reports.

    Agency Affected: Department of State

    Status: Closed - Not Implemented

    Comments: The recommendations in this report were made to the Secretary of State and the Permanent Representative of the United States to the UN to work with other member states to encourage the Secretary-General to take various actions to improve UN internal oversight. State endorsed the report's recommendations and stated that it would work with other UN member states to encourage the Secretary-General to take action on the recommendations. For these recommendations, we reviewed not only State's actions but also the UN's progress in addressing the recommendations before making a final determination on their implementation status. The UN needs to take additional steps to fully implement this recommendation. In response to our recommendation, the UN Office of Internal Oversight Services (OIOS) now requires staff members of the Internal Audit Division and the Investigations Division to file statements of independence/declaration of principles prior to their commencement of each assignment. The Evaluation and Inspection Division does not have this requirement. With regard to financial disclosures, the United Nations requires staff at the director level (D1) and above to file financial disclosures. This includes the heads of each division in OIOS and the Under Secretary-General of OIOS; however, it does not include the auditors, evaluators, inspectors, and investigators who are responsible for performing the oversight work.

    Recommendation: To provide reasonable assurance of independent, effective oversight in the United Nations, the Secretary of State should 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 require all OIOS professional staff to file statements of independence and financial disclosures; institute procedures to adequately review such statements.

    Agency Affected: Department of State

    Status: Closed - Not Implemented

    Comments: The recommendations in this report were made to the Secretary of State and the U.S. Permanent Representative to the United Nations (UN) to work with other member states to encourage the Secretary-General to take various actions to improve UN internal oversight. State endorsed the report's recommendations and stated that it would work with other UN member states to encourage the Secretary-General to take action on the recommendations. For these recommendations, we also reviewed not only State's actions but also the UN's progress in addressing the recommendations before making a final determination on their implementation status. According to the U.S. Mission to the UN (USUN), while this recommendation had not yet been fully implemented, work was in progress as of September 2010. The UN Office of Internal Oversight Services (OIOS) does not have a separate budgetary mechanism and all resource proposals must go through the UN budget office. In addition, the United States and other member states have sought to ensure the funding independence of the office. In addition, as a compensatory control, the UN Independent Audit Advisory Committee (IAAC) reviews OIOS' budget and makes recommendations to the General Assembly(GA). According to USUN, as of September 2010, these objectives had largely been achieved. However, the Secretary-General had not yet submitted a report requested by the GA on the revised funding arrangements for OIOS that would further enhance this outstanding request in its June 2010 support account for peacekeeping operations resolution. OIOS said that it would pursue the matter with the UN Department of Management. According to OIOS, IAAC also made recommendations with regard to the definition of "operational independence." The definition contains the requirement for OIOS to be able to make requests for adequate resources. However, the definition had not yet been approved by the GA.

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