United Nations: Procurement Internal Controls Are Weak
GAO-06-577
Published: Apr 25, 2006. Publicly Released: Apr 27, 2006.
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Highlights
For more than a decade, experts have called on the United Nations (UN) Secretariat to correct serious deficiencies in its procurement process. Recent evidence of corruption and mismanagement in procurement suggests that millions of dollars contributed to the UN by the United States and other member states are at risk of fraud, waste and abuse. During the last decade, UN procurement has more than tripled to more than $1.6 billion in 2005, largely due to expanding UN peacekeeping operations. More than a third of that amount is procured by UN peacekeeping field missions. To review the UN's internal controls over procurement, GAO assessed key control elements, including (1) the overall control environment and (2) specific control activities aimed at providing reasonable assurance that staff are complying with directives.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of State | The Secretary of State should work with other member states to encourage the Secretary-General to establish clear and effective lines of authority and responsibility between headquarters and the field for UN procurement. |
Closed – Not Implemented
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 procurement operations. 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. State has subsequently raised the issue of UN procurement in reports to Congress and in statements before the UN's budget committee, discussing the need for further progress in implementing procurement reforms. Given the nature of this recommendation, we took the additional step of reviewing not only State's actions but also the UN's progress in addressing the recommendations before making a final determination on their implementation status. With respect to this recommendation, we reported in 2008 (UNITED NATIONS PEACEKEEPING: Lines of Authority for Field Procurement Remain Unclear, but Reforms Have Addressed Some Issues, GAO-08-1094) that the UN was in the process of restructuring its organization for managing peacekeeping operations but had not decided whether the Department of Management or the newly created Department of Field Support (DFS) would have full authority for field procurement. We further reported that the authority and responsibility for peacekeeping procurement was divided and remained unclear. In his 2007 peacekeeping restructuring proposal, the Secretary-General considered the delegation of authority and resources for field procurement to DFS fundamental to the rationale for the reorganization and would simplify the line of authority and accountability for procurement. We reported, however, that the General Assembly deferred its decision on whether to approve the transfer the authority for field procurement, pending the submission of a report by the Secretary-General. The General Assembly originally requested that this report be issued in time for its fall 2007 session, but the Secretariat delayed in issuing the requested report until August 2009. In the 2009 report, the Secretary-General proposed two main measures to improve the governance structure for field procurement: 1) a co-location of Procurement Division and Field Support staff and short-term staff exchanges between headquarters and field missions, and 2) the creation of a regional procurement office based in Entebbe Uganda, which would outpost Department of Management staff to support field procurement operations in that region. Responding to the proposal, the Advisory Committee on Budgetary Questions (ACABQ) reported that the regional procurement office idea should be more fully elaborated to explain what specific problems it would solve and how it would improve the functioning of the procurement system. The regional procurement office proposal has not yet been approved by the General Assembly. The actions taken thus far by the UN have not yet addressed the fundamental problems of establishing clear and effective lines of authority and responsibility between headquarters and the field for procurement.
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| Department of State | The Secretary of State should work with other member states to encourage the Secretary-General to enhance the professionalism of the UN procurement workforce by establishing a comprehensive procurement training program and a formal career path. |
Closed – Implemented
In an April 2006 report (United Nations: Procurement Internal Controls Are Weak, GAO-06-577), GAO recommended that the Secretary of State and the Permanent Representative of the United States to the UN work with other member states to encourage the Secretary-General to enhance the professionalism of the UN procurement workforce by establishing a comprehensive procurement training program and a formal career path. The report noted that the UN had not established requirements for headquarters and peacekeeping staff to obtain continuous training, resulting in inconsistent levels of training across the procurement workforce. The report also cited studies indicating procurement staff lack knowledge of UN procurement policies. In an April 2006 letter, State commented that it endorsed the GAO report's recommendations and that it would work with other UN Member States to encourage the Secretary-General to follow through on the recommendations in the report. In a report to Congress on U.S. participation in the United Nations for 2008, State reported that Member States took important first steps by providing additional resources for procurement staff training. The Secretary-General reported in 2009 that it had introduced continuous training for procurement staff and the professionalization of the procurement function. The UN's Procurement Division also reported that it had established a mandatory training requirement on the fundamentals of procurement and that a needs assessment was conducted on the status of training requirements. The Procurement Division also has contracted for a comprehensive online training system for procurement staff, which will form part of the certification program.
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| Department of State | The Secretary of State should work with other member states to encourage the Secretary-General to provide the Headquarters Committee on Contracts with an adequate structure and manageable workload for contract review needs. |
Closed – Implemented
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 procurement operations. 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. State has subsequently raised the issue of UN procurement in reports to Congress and in statements before the UN's budget committee, discussing the need for further progress in implementing procurement reforms. We are also taking the additional step of reviewing not only State's actions but also the UN's progress in addressing the recommendations before making a final determination on their implementation status. Following the issuance of this recommendation, the UN increased the financial threshold for review of procurement cases by the Headquarters Committee on Contracts from $200,000 to $500,000. The UN reported that the increase in this threshold for review of contracts has led to faster processing of minor, non-strategic procurement cases. A senior UN official also told us in 2006 that raising the $200,000 threshold would reduce the committee's workload. The chairman of the committee also reported to us in 2008 that the committee's staff increased to 9.5 positions (from 4 reported in the 2006 GAO report) and increased its scheduled meetings from once to twice per week. These actions have improved the committee's structure and workload for reviewing procurement contracts.
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| Department of State | The Secretary of State should work with other member states to encourage the Secretary-General to establish an independent bid protest process for UN vendors. |
Closed – Implemented
GAO recommended that the Secretary of State and the Permanent Representative of the United States to the UN work with other member states to encourage the Secretary-General to establish an independent bid protest process for UN vendors. The report noted that the lack of an independent bid protest process limits the transparency of the UN procurement process, and that such a process would provide reasonable assurance that vendors are treated fairly when bidding and would help alert senior UN management to situations involving questions about UN compliance. In an April 2006 letter, State commented that it endorsed the GAO report's recommendations and that it would work with other UN Member States to encourage the Secretary-General to follow through on the recommendations in the report. In a report to Congress on U.S. participation in the United Nations for 2008, State reported that Member States called for full implementation of an independent bid protest system at the United Nations. The Secretary-General reported in 2009 that it launched a pilot project for a system to challenge procurement awards. Under this system, when a contract award is challenged by an unsuccessful bidder, an independent award review board will review a vendor's challenge to the award. In implementing this system, the UN's Procurement Division posts guidance to vendors on its Web site for filing challenges to the award review board.
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| Department of State | The Secretary of State should work with other member states to encourage the Secretary-General to take action to keep the UN procurement manual complete and updated on a timely basis and complete the ethics guidance. |
Closed – Implemented
The report noted that the UN had not updated its procurement manual since 2004 to reflect current UN procurement policy, with the result that UN procurement staff may not be aware of recent changes to procurement procedures. The GAO report further noted that the UN had failed to adopt the full range of ethics guidance for procurement officials despite repeated directives from the General Assembly to do so. In an April 2006 letter, State commented that it endorsed the GAO report's recommendations and that it would work with other UN member states to encourage the Secretary-General to follow through on the recommendations in the report. In a 2008 meeting of the UN's administrative and budgetary committee, a State official made a statement to the committee on areas where progress had been achieved on UN procurement issues and areas where further action was needed. This official stated that many of the goals for improving the integrity of the procurement process--such as ethics training for headquarters and field staff, revision of the policy on financial disclosure, and revision of the Procurement Manual--were on track to be met that year. Regarding the Procurement Manual, the Secretary-General further reported in 2009 that the UN's Procurement Division had begun an initiative to streamline and simplify the manual, including an interactive tool for improving its navigation and use. The Procurement Division's web site includes a link to the updated Manual, revised in March 2010. Regarding ethics, in 2009 the Secretary-General reported on updates made to ethics guidance, including his proposal for clarifying a formal definition of conflict of interest, a mechanism for staff to declare a potential conflict of interest, and provisions for expanding the policy on zero tolerance on accepting gifts to include all UN staff involved in procurement.
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| Department of State | The Secretary of State should work with other member states to encourage the Secretary-General to develop a consistent process for providing reasonable assurance that the UN is conducting business with only qualified vendors. |
Closed – Implemented
GAO recommended that the Secretary of State and the Permanent Representative of the United States to the UN work with other member states to encourage the Secretary-General to develop a consistent process for providing reasonable assurance that the UN is conducting business with only qualified vendors. The report noted that the UN has long had difficulties in maintaining effective rosters of qualified vendors, and that the UN may be vulnerable to favoring certain vendors or dealing with unqualified vendors. In an April 2006 letter, State commented that it endorsed the GAO report's recommendations, and that it would work with other UN Member States to encourage the Secretary-General to follow through on the recommendations in the report. In a report to Congress on U.S. participation in the United Nations for 2008, State reported that the United States has been working with other Member States and the UN Secretariat to improve the vendor registration process so that violators of the UN supplier code of conduct are disqualified from bidding. The Secretary-General reported that a Senior Vendor Review Committee was established in June 2009 with the purpose of making recommendations on sanctions of allegations of fraud, corruption or unethical behavior on the part of vendors registered with the Secretariat. In addition, the UN Procurement Division worked to centralize its vendor registration database and revise criteria for vendors to register on the Global Marketplace database. The Procurement Division's Web site includes guidance and policies on the vendor registration process.
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| Department of State | The Secretary of State should work with other member states to encourage the Secretary-General to develop a strategic risk assessment process that provides reasonable assurance of systematic and comprehensive examination of headquarters and field procurement. |
Closed – Not Implemented
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 procurement operations. 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. State has subsequently raised the issue of UN procurement in reports to Congress and in statements before the UN's budget committee, discussing the need for further progress in implementing procurement reforms. We are taking the additional step of reviewing not only State's actions but also the UN's progress in addressing the recommendations before making a final determination on their implementation status. Following up on this recommendation in 2008 and 2010, we met with UN officials from different departments and locations who stated that the UN has not developed a strategic risk assessment process for procurement. For example, 15 of 20 chief procurement officers from field missions told us that they had not received guidance or requirements from UN headquarters for conducting risk assessments of procurement activities. Senior headquarters also told us that there were no new developments in establishing a strategic risk assessment process covering headquarters and field procurement. In recent years the UN has studied and developed a concept for an enterprise risk management framework as part of its overall internal control mechanism but has not yet submitted a proposal to the General Assembly.
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| Department of State | The Secretary of State should work with other member states to encourage the Secretary-General to standardize and strengthen monitoring of procurement activities by procurement managers, including actions aimed at helping to ensure that oversight agencies' recommendations are implemented and that officials are held accountable for their actions. |
Closed – Implemented
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 procurement operations. 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. State has subsequently raised the issue of UN procurement in reports to Congress and in statements before the UN's budget committee, discussing the need for further progress in implementing procurement reforms. For these recommendations, we are taking the additional step of reviewing 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. The Procurement Division established a Planning, Compliance and Monitoring Section in 2007, with the primary responsibilities of monitoring compliance with procurement policies and procedures and tracking the implementation of recommendations from oversight bodies. The Procurement Division reported an improved timeliness in responding to oversight recommendations and reported on the status in implementing these recommendations in its annual report on procurement activities. For example, the Division reported that it responded to 86 recommendations in 2007, with 38 implemented and 45 in progress.Further, the Procurement Division has also implemented a management review program, which facilitates peer-to-peer review of missions? procurement actions in conjunction with recommendations of the Division. Regarding accountability, the Secretary-General reported that the delegation of procurement authority has been used as a primary instrument to address personal accountability issues in conducting procurement actions. Regular reviews of delegation of authority are carried out for procurement staff. In addition, the Secretary-General established a new policy for subcontractors, clarifying that contractors are to be held responsible for the actions and performance of subcontractors.
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| Department of State | The Secretary of State should report to the Congress annually regarding UN progress in reforming its procurement process, with particular attention to the status of UN progress in addressing the above recommendations. |
Closed – Implemented
GAO recommended that the Secretary of State report to the Congress annually regarding UN progress in reforming its procurement process, with particular attention on the UN's progress in addressing other needed reforms and improvements that our report identified, such as developing a comprehensive procurement training program and establishing an independent bid protest process for UN vendors. In an April 2006 letter, State commented that it welcomed the GAO report, endorsed its recommendations, and would work with other member states to encourage the Secretary-General to follow through on the recommendations contained in the report. Beginning with its report to Congress on United States Participation in the United Nations for the year 2007 (published in 2009), State added a separate report section on procurement within the chapter on Reform of the UN System. In this section, State discussed and assessed the UN's progress in advancing procurement reforms and indicated areas where further improvements are needed.
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Ethical conductFraudInternal controlsInternational organizationsPeacekeepingPolicy evaluationProcurement evaluationProcurement policyProcurement practicesProgram managementRisk assessment