UN Office for Project Services:

Management Reforms Proceeding but Effectiveness Not Assessed, and USAID's Oversight of Grants Has Weaknesses

GAO-10-168: Published: Nov 19, 2009. Publicly Released: Dec 17, 2009.

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The United Nations (UN) Office for Project Services (UNOPS) provides numerous services for its clients, including procurement and project management. Recent audits and investigations of UNOPS have revealed alleged violations of law, weak internal controls, and financial mismanagement. UNOPS officials misused some of the more than $400 million awarded to UNOPS by the U.S. Agency for International Development (USAID) from 2004 through 2008. GAO was asked to (1) assess the extent to which UNOPS has addressed key concerns about its internal controls, and (2) evaluate USAID's oversight of UNOPS-implemented projects. To address these objectives, GAO reviewed UNOPS and USAID policies and grant documentation.

While UNOPS management continues to implement reforms that address key concerns raised by audits and investigations, the effectiveness of some implemented reforms has not been assessed. Management efforts to improve UNOPS include (1) development of UNOPS's project tracking system, Atlas; (2) establishment of an internal oversight office; and (3) establishment of an ethics office. While changes to Atlas have improved UNOPS's financial documentation, UNOPS does not systematically assess data reliability in Atlas. Although UNOPS's internal oversight has been strengthened by the creation of an oversight office, two phases of an investigation of activities in Afghanistan have not begun. UNOPS had no investigative capacity of its own and had to seek out external investigators for which it is still negotiating the scope and cost. In addition, while UNOPS's ethics office complies with most UN requirements, no one has assessed the effectiveness of the office's activities. Finally, UNOPS's Executive Board lacks full access to internal audit reports that could provide greater insights into UNOPS's operations. USAID has not consistently implemented its oversight policies when making grant awards with UNOPS and has been vulnerable to program fraud and abuse. While USAID has policies that require it to perform pre-award assessments of Public International Organizations (PIO), such as UNOPS, USAID could not provide official documentation of these assessments for 7 of its 11 awards made to UNOPS from 2004 through 2008. In the 4 assessments USAID provided, there were no statements acknowledging findings of weak internal controls from UN audits and investigations. In addition, USAID did not negotiate to include audit authority for 9 of these awards that would have allowed USAID access to UNOPS project financial records. We found that an absence of clear guidance, training, and monitoring contributed to these failures. USAID's noncompliance with its policies resulted in limited access to data on UNOPS grants that were associated with findings of possible criminal

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: State endorsed the report's findings and conclusions. In response to the GAO recommendation, State officials provided documentation of several efforts the Department has undertaken in conjunction with other member states to encourage improvements to the organizational weaknesses identified by UN auditors such as financial management, transparency, and effectiveness. For example, State and other member states influenced and supported UNOPS' management in taking the following actions: UNOPS (1) adopted full implementation of International Public Sector Accounting Standards in 2012, (2) began to make full internal audit reports available on its public website beginning in December 2012, (3) brought its ethics policy in line with best practices in 2014 by increasing the statute of limitations for whistleblowers reporting retaliation from 60 days to six months, and (4) transferred a vacant internal auditor post to the investigations unit in order to enhance the unit's ability to respond to staff complaints.

    Recommendation: The Secretary of State should work with other member states to support UNOPS's continued management reforms as it addresses the areas of vulnerability that UN auditors have identified.

    Agency Affected: Department of State

  2. Status: Closed - Implemented

    Comments: State endorsed the report's findings and conclusions. In response to the GAO recommendation, State has worked with other like-minded member states to consistently request that UNOPS provide updates on the impact of its reform agenda through its annual reports to the Executive Board.

    Recommendation: The Secretary of State should work with other member states to encourage UNOPS management to assess the effectiveness of the reform effort.

    Agency Affected: Department of State

  3. Status: Closed - Implemented

    Comments: USAID concurred with the recommendation. In response, USAID revised its policy manual chapter on Awards to Public International Organizations (ADS Chapter 308). The revision includes a section establishing its approach for assessing the eligibility of PIOs deemed responsible for use by USAID.

    Recommendation: For adequate accountability of grants made with PIO, the USAID Administrator should ensure that USAID develops and documents its approach for assessing the eligibility of PIO deemed responsible for use by USAID.

    Agency Affected: United States Agency for International Development

  4. Status: Closed - Implemented

    Comments: USAID concurred with the recommendation. In response, USAID revised its policy manual chapter on Awards to Public International Organizations (ADS Chapter 308). The revision includes a section defining the terms and conditions clarifying what financial records and documents USAID has access to when making awards to PIOs.

    Recommendation: For adequate accountability of grants made with PIO, the USAID Administrator should ensure that USAID defines the terms and definitions in its existing guidance on PIO audit provisions permitting USAID access to financial records and documents.

    Agency Affected: United States Agency for International Development

  5. Status: Closed - Implemented

    Comments: USAID concurred with the recommendation. USAID officials held training in May 2010 to explain to cognizant staff the audit provision-related findings and recommendations of GAO?s report. The staff were also trained on USAID's proposed changes to policy and procedures to address the weaknesses identified by GAO.

    Recommendation: For adequate accountability of grants made with PIO, the USAID Administrator should ensure that cognizant contracting staff are sufficiently tained on the use of the PIO audit provisions.

    Agency Affected: United States Agency for International Development

  6. Status: Closed - Implemented

    Comments: USAID concurred with the recommendation. In response to the GAO recommendation, USAID revised its policy manual chapter on Awards to Public International Organizations (ADS Chapter 308). The revision includes a section establishing its approach for assessing the eligibility of PIOs deemed responsible for use by USAID. The section includes roles and responsibilities for documenting how audit provisions are implemented.

    Recommendation: For adequate accountability of grants made with PIO, the USAID Administrator should establish an approach to monitor whether PIO audit provisions are implemented as required.

    Agency Affected: United States Agency for International Development

 

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