GA/AB/3635
21 October 2004
Assessment Scale, Board of Auditors Reports on UN Funds, Programmes Taken Up in Budget Committee
(Issued on 20 October 2004.)
NEW YORK, 18 October (UN Headquarters) -- As the Fifth Committee (Administrative and Budgetary) took up the scale, under which Member States’ contributions to the budget of the United Nations are calculated, it was told that Member States should adhere to the rules they set for themselves, honouring their obligation under the Charter to pay all contributions on time, in full and without conditions.
While recognizing that, in some cases, grave circumstances could prevent timely payments, the representative of the Netherlands, on behalf of the European Union and associated States, encouraged countries to present multi-year payment plans as a practical demonstration of their commitment to honour their obligations and reduce their arrears over time. Those plans should be a necessary condition that had to be met, before granting future waivers under Article 19, he stressed.
[According to Article 19, should a MemberState fall behind in the payment of its dues by an amount equal to its assessments for the two most recent years, it will lose its right to vote in the General Assembly, unless the Assembly decides that non-payment is a consequence of factors beyond its control.]
The representative of Brazil, speaking on behalf of the Rio Group, however, stressed that multi-year payment plans should remain voluntary and that they should not be included in considering exemptions under Article 19. As for the measures to encourage payment of arrears, the Group reiterated that they should not be punitive in nature.
Ugo Sessi, Chairman of the Committee on Contributions, who introduced that body’s report, said that, in its resolutions 57/4 B and 58/1, the Assembly had endorsed the conclusions of the Committee on Contributions on multi-year plans. In particular, the Committee had agreed that Member States should be encouraged to submit plans; recognized that not all Member States might be in a position to submit plans; and recommended that plans should remain voluntary and should not be linked to other measures. For those States that were in a position to submit a plan, its submission and the status of implementation should be taken into account as one factor in considering requests for exemption under Article 19.
In considering requests for exemption this year, the Committee had been guided by its earlier conclusions and recommendations. In its report, the Committee had encouraged all Member States requesting exemption to consider submitting a multi-year payment plan, when possible. In a number of specific cases, the Committee on Contributions had either noted the intention of a State to submit a plan, or encouraged it to consider doing so. In no case, however, had the submission of a plan been linked to exemption under Article 19.
Introducing 17 reports of the Board of Auditors on the funds and programmes of the United Nations and a concise summary that summarized the auditors’ principal findings, Shauket Fakie, Auditor-General of South Africa and Chairman of the Board, highlighted the progress in implementing recommendations of the Board. For the previous biennium, 171 (46 per cent) of the 371 recommendations had been fully implemented and 177 (47 per cent) were in progress. Only 28 (7 per cent) had not been implemented by May 2004. He also pointed out that there had been a significant increase in the number of the Board’s recommendations from 212 approximately four years ago, to 376 two years ago. In general, the administration had reacted positively by endeavouring to implement the recommendations.
The speakers on this agenda item, however, expressed concern over the failure to implement the Board’s recommendations from previous years, especially those from biennium 1998-1999. The representative of the Netherlands, on behalf of the European Union, wondered how much money could have been saved if recommendations were implemented on time, and would ask for detailed explanations why some programme managers had taken five years or more to follow up. A mandatory time frame for implementation, with clear accountability for management, could be the way forward.
The Union also noted that the audit opinions on the United Nations Development Programme (UNDP), United Nations Population Fund (UNFPA), and United Nations International Drug Control Programme (UNDCP) were unqualified, but with clear concerns. All three organizations seemed to have taken little heed of earlier recommendations of the Board. They did not understand why those organizations, which had had qualified opinions only four years ago and were also negatively mentioned two years ago, still did not have their accounts in proper order. One example of the consequences could be found in the case of the UNDP, where one of the field offices implemented a different enterprise resource planning (ERP) system than the rest of the organization, at a cost of $1.5 million.
The delegate of the United States echoed those concerns, adding that the inability of the auditors to give an opinion on the United Nations Office for Project Services (UNOPS), which had faced severe financial problems, was another critical matter. While noting the ACABQ’s intent to take a closer look at that issue when it reviewed the next budget proposal from UNOPS early next year, the United States would like to know what steps the UNOPS leadership was taking now to ensure sound financial controls and reliable financial accounting data.
Also this morning, the Committee adopted its programme of work for the current week, intending to return to the remainder of the session as missing documentation came out.
The Committee will continue today’s debate, as well as its agenda item on the pattern of conferences, at 10 a.m. Tuesday, 19 October.
Background
The Fifth Committee (Administrative and Budgetary) this morning was expected to take up the scale under which Member States’ contributions to the budget of the United Nations are calculated, and consider reports of the Organization’s Board of Auditors.
Board of Auditors’ Reports
The Committee had before it of a series of reports and audited financial statements by the Board of Auditors (documents A/59/5, Vols. I, III and IV, and Adds. 1-12), which cover the activities of the whole United Nations system.
By his note contained in document A/59/162, the Secretary-General transmits a concise summary of principal findings, conclusions and recommendations by the Board of Auditors for the General Assembly at its fifty-ninth session, addressing major deficiencies in programme and financial management within the Organization, cases of inappropriate or fraudulent use of resources and measures taken in that regard. The document also includes comments on previous recommendations of the Board that have not been fully implemented, as well as modified audit opinions, presentation of financial statements, end-of-service benefits, operational reserves, unliquidated obligations, programme management and other issues.
Among the Board’s main findings were that $453 million in arrears in assessed contributions for the General Fund remained unpaid as at 31 December 2003, which was 81 per cent more than the arrears of $251 million recorded as at 31 December 2001. The Board also noted that there was a difference of $22.43 million between the accounting books of the United Nations Headquarters and the United Nations Development Programme on “other accounts payable” representing “payables to funding source”. The Board reiterates previous recommendations that have not yet been implemented, inviting the Administration to assign specific responsibility for these and to establish an achievable time frame for completion.
Owing to a lack of a comprehensive anti-fraud plan, a large part of the United Nations system of offices, funds, and programmes had little or no effective framework policy or mandates in this area -- and five political missions had exhibited numerous deficiencies in asset management and control. The Board suggested that the Administration implement a comprehensive and well-communicated corruption and fraud prevention plan; establish a corruption and fraud prevention committee; conduct ethics, corruption, and fraud-awareness training sessions and workshops, develop appropriate resolution mechanisms for reported and detected allegations of corruption and fraud; and review the investigation processes at Offices away from Headquarters.
In response to a request by the General Assembly in its resolution 58/270, the Board examined, in consultation with the Secretary-General, the recosting methodology adopted by the United Nations in the preparation of programme budgets and found it to be generally acceptable. Recosting is the revision to budget estimates on the basis of adjustments to costing parameters, such as currency fluctuations, inflation, changes in staff costs, and vacancies.
The Board had a series of recommendations regarding the United Nations’ information and communication technologies (ICT) policies. The Administration should seek further coordination among various ICT boards or steering committees to ensure that comprehensive and consistent policies are finalized and promulgated across the Organization. The Board also suggested that the Administration finalize, and share with its funds and programmes, the planned common format for ICT strategy documents. The United Nations should also adopt and implement a uniform methodology for determining the total cost of ICT with a view to improving the decision-making process on issues such as outsourcing and cost recovery, review the management of computerized data and information, and establish, as planned, a formal portfolio of information technology assets in line with best ICT industry practices.
Noting that the programme budget for the biennium 2002-2003 was the first comprehensive results-based budget, which would likely take several years to be used consistently, the Board suggested that the Administration consider using the capability of both the Integrated Management Information System and the Integrated Monitoring and Documentation Information System to link, where appropriate, the financial and technical aspects of the programmes and to provide timely information on the use of resources in achieving the desired results. The Administration should further explore enhancements in the results-based budget methodology.
Having issued unqualified opinions on the financial statements of 12 of 16 audited organizations of the United Nations system for the biennium ended 31 December 2003, the Board has flagged specific matters of concern for the United Nations Development Programme (UNDP), the United Nations Population Fund (UNFPA) and the United Nations International Drug Control Programme.
In the case of the UNFPA, the Board of Auditors modified its audit opinion, indicating that inter-agency balances of the UNFPA with United Nations agencies implementing UNFPA-funded projects may not be accurate. Differences in balances between the UNFPA and various United Nations agencies were long outstanding and could not be readily explained. Regarding the UNDP, it is stated that it was owed some $22.43 million by the Organization. The Board was unable to examine the reconciling reports for the amount owed to the UNDP, because the records were not available at United Nations Headquarters.
In the case of the UNDP, the UNFPA and the United Nations Office for Project Services (UNOPS), the Board drew attention to the fact that it was unable to obtain assurance to verify the validity, accuracy and completeness of non-expendable equipment, amounting to $149.3 million for the UNDP, $57.5 million for the UNFPA and $10 million for UNOPS. The Board also noted weaknesses in the control of non-expendable equipment at the United Nations, United Nations Children’s Fund (UNICEF), the Office of the United Nations High Commissioner for Refugees (UNHCR), the United Nations Environment Programme (UNEP), the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA), UNOPS and the United Nations Human Settlements Programme (UN-HABITAT). The aggregated value of the non-expendable equipment of the United Nations and its funds and programmes amounted to approximately $1.1 billion as at 31 December 2003.
The Board was unable to express an opinion on the financial statements of UNOPS for the biennium 2002-2003, since it was unable to obtain adequate assurance on the imprest account balances, inter-office vouchers clearing accounts, inter-fund balances and non-expendable equipment. The auditors were also unable to confirm that the value of separation cost was valid, accurate and complete.
Given the UNOPS financial position at the end of 2003 and its possible failure to meet financial targets for 2004, the Board also emphasized its concern that the organization might not be able to fund in full any future deficit from its operational reserve.
Also before the Committee was a report of the Board of Auditors on the capital master plan (document A/59/161), for the biennium ending 31 December 2003, which found that delays in the initiation of the design development and construction documentation phases may result in an estimated 3.5 per cent increase in design fees and a rise in administrative and operating expenses of approximately $2.6 million per year. The capital master plan fund encompasses all expenditures relating to the major refurbishment of the United Nations Headquarters complex in New York.
The Administration agreed with the three major recommendations made by the Board -- namely, that the Administration should minimize administrative and management costs; comply strictly with United Nations regulations and rules on procurement and contracting; and address all causes of delay in the initiation of the design and documentation phases. However, the Administration noted that the effect of internal delays during those phases would have little to no effect on the overall project cost, as the critical schedule date, based on the availability of the swing-space building (to be located at the corner of First Avenue and 42nd Street), had been moved to January 2008. The Administration was of the view that that design activity for the capital master plan should not be completed significantly in advance of the bidding.
The Committee also had before it a first report on the implementation of the recommendations of the Board for the period ended on 31 December 2003 (document A/59/318), which contains information on action taken or to be taken in that regard. Some of the main issues addressed in the document include: the recosting methodology; reconciliation of the differences in payables due to fund sources; and the mechanism for end-of-service and post-retirement benefits liabilities. Also contained in the report is a review of trust-fund management and treasury operations; development and promulgation of consistent and uniform policies on ICT; hiring and remuneration of consultants; implementation of an assets management system; and the corruption and fraud prevention plan.
According to the document, in most cases, the Administration has concurred with the recommendations of the Board, and the implementation, therefore, proceeds, “as and where appropriate”.
The Advisory Committee on Administrative and Budgetary Questions (ACABQ), in a related report (document A/59/400), welcomes the audit approach of common themes across United Nations entities, while noting that not all recommendations apply equally to all entities. Further examination of cross-cutting issues may result in continued streamlining of the reports of the Board, facilitating their consideration by the Assembly.
Making some recommendations on the presentation of Board of Auditors reports and the focus of audit activities, the ACABQ stresses the need for full and timely implementation of the recommendations of the Board and other oversight bodies. The Advisory Committee recommends that the United Nations and its funds and programmes take concrete steps to make significant progress in implementing the recommendations of their oversight bodies and, as necessary, indicate to their governing bodies the constraints that hamper full implementation of the recommendations.
However, the ACABQ further notes that a statistical approach may not be sufficient to monitor the follow-up of the implementation of oversight bodies in many instances. There is still a need to develop a strong culture of accountability within the United Nations system. Efficient management of the United Nations and its funds and programmes requires that the implementation of the Board’s recommendations become an integral part of the work plans, activities and processes of the organizational units. It is also important to develop tools to measure the impact of the recommendations. The administrations should continue to introduce and strengthen effective monitoring tools and assign responsibility at the highest level for implementation and follow-up of the Board’s recommendations.
The Board of Auditors is encouraged to continue its coordination and collaboration with other oversight bodies, including the Office of Internal Oversight Services, internal audit services of the United Nations funds and programmes and the Joint Inspection Unit.
Turning to the Board’s particular recommendations, the ACABQ states that the Secretariat should take more proactive measures in the consolidation and closure of inactive trust funds. Member States should be advised on a regular basis, and prior to the closing of the account for the biennium, of the status of unutilized balances that may no longer be required. A cut-off period could be established for returning unutilized balances to donors or for channelling balances to finance other activities as agreed with donors. The Advisory Committee also agrees with the Board’s recommendations regarding the ICT strategy.
Regarding results-based budgeting, the ACABQ concurs with the view that “raw” comparisons of various figures do not provide meaningful information and that what is needed is further efforts to refine the results-based budget methodology, in particular performance indicators and measurements of expected accomplishments, to enable a linkage, where appropriate, of the financial and technical aspects of the programmes.
On UNOPS, the Advisory Committee takes note of the progress report of the Executive Director on the activities submitted to the second regular session in 2004 of the organization’s Executive Board. In his report, the Executive Director outlines the initiatives that will be taken to comply with the recommendations of the Board. The UNOPS will present an action plan, including an update on progress in its implementation, at the January 2005 session of the Executive Board. The Advisory Committee intends to revert to these issues in the context of its review of the biennial budget of UNOPS for the biennium 2006-2007.
Among other comments of the Advisory Committee are those on the need to ensure timely submission of travel claims; follow up on outstanding claims; develop a culture of accountability; comply with the Staff Rules and Regulations of the United Nations and established procedures for hiring, remunerating and evaluating the performance of consultants; consistently implement staff rotation and appraisal policies; and strictly adhere to individual organizations’ financial rules and review their procedures in order to ensure compliance with the accounting standards of the United Nations.
Scale of Assessments
The main document on this issue is an annual report by the Committee on Contributions (document A/59/11), which follows that body’s sixty-fourth session, which was held last June. The document addresses such issues as methodology for the preparation of future scales of assessment; measures to encourage timely payment of assessed contributions; and the application of Article 19 of the Charter.
Continuing its consideration of measures to encourage timely, full and unconditional payment of assessed contributions, the Committee on Contributions took up such incentives as multi-year payment plans, imposition of indexation of or interest on arrears, and the proposal to credit surplus balances only to Member States that are current with their financial obligations to the Organization. The Committee on Contributions reaffirmed its earlier conclusion that it might be prudent to fix the deadline for timely payment from the date of issuance of the assessments, rather than from the date of their receipt, and to extend the deadline from 30 to 35 days.
On the question of interest on or indexation of arrears in the event that the General Assembly decided to impose them, the Committee on Contributions agreed that its prior recommendation that interest should only be applied to arrears arising after the adoption of such a decision by the Assembly should also apply to any possible similar measures, as well. Under another recommendation, the Assembly would encourage Member States with outstanding contributions and credits to authorize the Secretariat to apply such credits to the amounts outstanding, so as to reduce their debt.
Following its latest review of scale-related issues during its fifty-eighth session, the Assembly, in its resolution 58/1 B, requested the Committee on Contributions to continue to review the methodology of future scales of assessments based on the principle that the expenses of the Organization shall be apportioned broadly according to capacity to pay. While noting that the changes in methodology, which were introduced in 2000, had led to substantial increases in the rate of assessment of some Member States, the Assembly also reaffirmed its earlier decision that the methodology would remain fixed until 2006.
When it adopted a revised scale in 2000, the Assembly, by the terms of resolution 55/5 B, based Member States’ assessments on each country’s gross national income, which is converted to United States dollars after adjustments for external debt and low per capita income. There are also minimum and maximum rates -- so-called “floor” and “ceiling” -- of assessment. A maximum rate of 0.01 per cent is applied to the least developed countries (LDCs). One of the main features of the revised scale was a reduction of the ceiling from 25 to 22 per cent. The new ceiling was then applied to the Organization’s main contributor -- the United States -- and the points arising as a result of the change were distributed pro rata among other States, except for those affected by the floor (0.001 per cent) and the least developed countries ceiling.
This year, the Committee on Contributions began consideration of the results of the current methodology and possible changes or refinements for future scales. Following its first exchange of ideas on various elements of the methodology, the Committee on Contributions decided to review most of them at its next session in order to reach agreement on its preliminary conclusions in that regard for the preparation of the scale of assessments for 2007-2009, to assist the Assembly during its deliberations at its sixtieth session. To be further considered during the Committee’s next session, on the basis of additional information from the Statistics Division, are possible systematic criteria for deciding when market exchange rates (MERs) should be replaced with price-adjusted rates of exchange (PAREs) or other conversion rates.
Having considered “the pattern of major scale-to-scale changes” in Member States’ rates of assessments, the Committee concluded that changes in scale methodology were a significant factor in many countries’ cases. However, the Committee reiterated its earlier statement that, while the scale methodology should not be so rigid as to fail to accommodate future changes in economic and technical circumstances, part of the Committee’s mandate was to promote stability in the scale methodology. It was agreed that any proposals for changes in the scale methodology should be seen in this light.
The Committee also reaffirmed its earlier conclusions concerning ad hoc adjustments of rates of assessment. Two recent cases when that was done -- Afghanistan and Argentina -- had been distinct in nature. One had been an ad hoc correction, stemming from problems with the data used in preparing the scale, and the other reflected substantive decline in capacity to pay since the adoption of the scale. The exceptional and extraordinary nature of such cases made it inevitable that they should be considered on a case-by-case basis. The Committee, therefore, felt that it would not be feasible to elaborate more specific standard criteria for possible future cases.
The Secretary-General’s report on multi-year payment plans (document A/59/67) recalls that this tool to reduce Member States’ arrears was endorsed in resolution 57/4 B and reaffirmed in resolution 58/1 B. The document provides information on payment plans/schedules submitted by Georgia, Niger, Republic of Moldova, Sao Tome and Principe and Tajikistan and on the status of implementation of those plans at 31 December 2003.
Organization of Work
At the opening of the meeting, as the Committee considered its programme of work for the remaining part of the session, Chairman of the Committee, DON MACKAY, (New Zealand) said that, while the documentation situation had somewhat improved, the programme had been “somewhat of a moving target”. It was also important to remember that the Committee was running against some “immovable targets” as far as peacekeeping budgets were concerned.
A representative of Qatar (on behalf of the “Group of 77” developing countries and China) expressed his preference for adopting the programme of work for just one week and correcting extended plans as time went along, taking into consideration the issuance of documents.
Australia agreed with the Group of 77 and China and expressed hope that after the initial week, it would be possible to make longer-term plans. He also addressed the allocation of meetings in the coming weeks.
The Committee then adopted its programme of work for the current week, on the understanding that the Bureau would make necessary adjustments, as required.
Introduction of Documents
SHAUKET FAKIE, South Africa’s Auditor-General and Chairman of the Board of Auditors, introduced 17 Board reports on the funds and programmes of the United Nations and a concise summary of the auditors’ principal findings. In view of the importance of timely availability of audit reports to the Fifth Committee, he was disappointed that delegations had again not been able to obtain all the documents, with sufficient lead time, as planned. The Board had, as usual, provided all of its reports in advance of the July slot submission dates. It had also added a new step of editing some reports prior to their transmission.
Many recent reforms in the audit and accounting fields had been initiated to promote auditor independence, prevent conflict of interest and enhance good governance and accountability, he continued. There was a direct connection to the work of the Board and its excellent interaction with the Fifth Committee and the ACABQ. The Board also supported coordination with other oversight bodies.
The concise summary report mentioned the progress made by the United Nations and its funds and programmes in implementing recommendations of the Board, he said. For the previous biennium, 171 (46 per cent) of the 371 recommendations had been fully implemented and 177 (47 per cent) were in progress. Only 28 (7 per cent) had not been implemented by May 2004. The Board would continue to monitor the actions in that regard. Such an implementation rate was partly due to the significant increase in the number of recommendations, from 212 approximately four years ago to 376 two years ago. Also, the nature of some recommendations required more time for full implementation. In general, the Administration had reacted positively by endeavouring to implement the recommendations.
The Board had “modified” its audit report on the financial statements of four organizations (UNOPS, the UNDP, the UNFPA and the UNDCP). “Modified reports” fell into two categories: those that affected auditors’ opinion on the financial statements and those that did not. In the case of UNOPS, the modified report did affect the financial statements. In the case of the UNDP, the UNFPA and the UNDCP, the matters addressed did not affect the opinion on financial statements, but the Board had emphasized certain concerns.
Addressing specific subjects singled out in the report, he mentioned that programme expenditure in 2002-2003 had amounted to more than $9 billion for the UNDP, UNFA, the UNHCR, UNICEF and the UNODC alone. In general, improvements had been made that led to better monitoring and control of programme expenditure, including efforts to simplify and harmonize inconsistent transfer modalities. Some matters of concern had been highlighted, however, in individual organizations’ reports regarding outstanding advances and cash assistance provided to implementing partners, terms of reference for project auditors, follow-up action of project auditors’ findings at country offices and the quantification of qualified audit opinions expressed by project auditors.
The Board also noted instances where projects were operationally closed, but remained open in financial terms for long periods of time. For example, at the UNDP, some 668 projects with programme expenditure totalling $1.3 billion were operationally completed on or before 31 December 2002. Those projects were, however, not financially completed within the prescribed period of 12 months. At UN-HABITAT, 50 completed projects valued at almost $22 million had been operationally completed for more than 12 months, but had not been financially completed as at 31 December 2003. A related issue was that 63 trust funds with combined reserves and fund balances of $54 million at 31 December 2003, did not show any expenditure for 2002-2003, except for transactions pertaining to the investment and related accounts. Inter-agency transactions remained an area that needed improved efficiency.
The United Nations and several of its funds and programmes managed significant investments, he continued. The return on investments was generally comparable with benchmarks, for instance at the United Nations Joint Staff Pension Fund (which managed some $26 billion), or UNRWA ($141 million). For the UNDP, which had approximately $2.5 billion of funds under its management, the return on investments was above the short-term benchmarks selected. In the case of UNICEF (which managed up to $1 billion), the Board was pleased to note that its previous recommendations had been implemented, but there were problems with guidelines and management. The United Nations Office at Geneva managed an investment portfolio of $375 million as at 31 December 2003 without an investment policy or committee. At the UNDP, the last internal audit on Treasury had been performed in 1985. At the Pension Fund, the former director of the Investment Management Service had not provided a proper audit trail for real-estate investments, which he managed by himself. Furthermore, the purchase of a $180-million office building in New York had not been conducted in a consistent manner.
Regarding ICT, he said that a comprehensive Organization-wide initiative should be undertaken to coordinate efforts on a related strategy and developments. The UNDP, in partnership with the UNFPA and UNOPS, had migrated its data processing last January to a new enterprise resource planning (ERP) system called “Atlas”. By May, those organizations did not have an independently validated comprehensive internal control framework for that system that would adequately mitigate its control risk.
JESSIE ROSE MABUTAS, Office of the Under-Secretary-General, Department of Management, introduced the report of the Secretary-General on the implementation of the auditors’ recommendations (document A/59/318 and Add. 1), saying that the Administration, in cooperation with the Board, was making every effort to improve and expedite reporting on progress made. In accordance with recommendations made by the Board, and accepted by the Assembly in resolution 58/249, several reports in that regard would be consolidated into the Board progress report. The administration had taken note of the ACABQ comments that reports should be streamlined to prevent duplication. The focus will be on providing full and complete information to the Board for inclusion in its reports. A broader review of the reporting process would also take place.
Introducing the report of the ACABQ, contained in document A/59/400, Vice-Chairman RAJAT SAHA (India) noted that there was still a need for further efforts to develop a strong culture of accountability within the United Nations and its funds and programmes. Efficient management of the United Nations required that implementation of the Board’s recommendations become an integral part of the work plans and processes of the organizational units concerned. Among the issues addressed by the ACABQ were the need to better monitor trust funds, the need to refine the methodology of results-based budgeting, and the need for reform in ICT policy.
Statements
MARK ZELLENRATH (Netherlands), speaking on behalf of the European Union and associated States, voiced dismay over the fact that, of the 20 reports before the Committee, totalling more than 2,000 pages, many arrived too late to give them the full attention they deserved. Noting that it was difficult to digest that amount of information in the short time given, he asked the Secretariat to consider the need of Member States to be able to carefully study those reports.
The concise report was an essential tool to identify common issues and deficiencies in the management of the United Nations system, and it provided a clear overview of the most important recommendations of the Board. While pleased to note the progress in the implementation of some of those recommendations, the Union urged the Secretary-General and the executive heads of funds and programmes to take action to address those issues that remained unresolved, especially those from biennium 1998-1999. He wondered how much money could have been saved if the recommendations were implemented on time, and would ask for detailed explanations on why some programme managers had taken five years or more to follow up. A mandatory time frame for implementation, with clear accountability for management, could be the way forward.
He would especially like to see follow-up with regard to the recommendations concerning governance principles and best practices. It was regrettable that no action had been taken to act upon the request in resolution A/57/278, where the Secretary-General and the executive heads of the funds and programmes were asked to examine governance, principles, and accountability throughout the United Nations system and to make proposals thereon. He would like to see a report on that important matter in the near future.
Linking the issues of good governance and effective internal oversight, he reiterated the Union’s commitment to improving and strengthening both the Joint Inspection Unit and the Office of Internal Oversight Services (OIOS). However, attention should also be directed toward creating an accountability culture within the Organization. Internal reform efforts, such as the use of the ERP system, were marred by serious problems with implementation, most notably poor procedures for internal control.
It was worrying that there appeared to be no system-wide coherence in the adaptation of ICT strategies, and the Union fully concurred with the Board’s view that commonality under the United Nations system called for greater inter-agency cooperation. He agreed with the Board’s recommendation that a comprehensive, United Nations-wide review on coordination of ICT efforts should take place.
Serious attention should be given also to the matter of unfunded end-of-service liabilities, which exceeded $3 billion at the beginning of this year. Other important items concerned the prevention of internal corruption and fraud, the management of non-expendable equipment, and procurement.
On the individual reports, he noted that the audit opinions on the UNDP, the UNFPA, and the UNDCP were unqualified, but with clear concerns. All three organizations seemed to have taken little heed of earlier recommendations of the Board. He did not understand why those organizations, which had qualified opinions only four years ago and were also negatively mentioned two years ago, still did not have their accounts in proper order. One example of the consequences could be found in the case of the UNDP, where one of the field offices implemented a different ERP system than the rest of the organization, at a cost of $1.5 million.
Also of great concern to the Union was the Board’s report on UNOPS, and the fact that the Board was unable to express an opinion on the financial statements of the Office. While noting measures taken by UNOPS to rectify the critical situation, the European Union would like an assessment of the Board, the controller, the ACABQ, and the executive director of UNOPS as to whether those steps were sufficient.
He asked for clarification as to whether, if the General Assembly noted with concern the Board’s report and fully endorsed its recommendations, would that form a sufficient basis for a renewed audit within the current session? And would that enable the Board to form an opinion on the UNOPS financial statements for the biennium ended 31 December 2003.
TOM REPASCH (United States) emphasized that it was essential that the Board’s lengthy and informative reports reached the hands of users in sufficient time to analyse and comprehend their findings. It was difficult for delegates to conduct proper consultations with their capitals when those reports were issued a bare week or two ago. That now-chronic problem called for innovative, out-of-the-box thinking from the Fifth Committee, and suggestions from the Board itself would also be welcome. Overall, the United States generally supported the conclusions made by the auditors, as well as the ACABQ and believed the Committee should approve the reports.
While some improvements had been made, Member States must address the fact that only 46 per cent of the recommendations made in the previous biennium had been fully implemented, leading to continuing financial and management deficiencies. Noting the continued reluctance to examine critically the utility of trust funds that appeared lapse -- with combined reserves and fund balances of $54.1 million as of 31 December 2003 -- the United States would like to hear more from the Secretariat on its plans to address the issue.
There also seemed to be a chronic problem in the presentation and disclosure of financial statements by United Nations organizations, and he asked for more information about what measures were being taken to rectify and harmonize those practices. Of particular concern was the matter of accounting for non-expendable equipment. As stated in the Board’s report, the auditors were unable to obtain adequate assurance to verify the accuracy of the value disclosed at $149.3 million for the UNDP, $57.5 million for the UNFPA, $2.4 million for UN-HABITAT, and $10 million for UNOPS, due to a breakdown in controls and unavailability of supporting evidence. His delegation concurred with the ACABQ opinion that the lack of an amortization policy in most organizations may have contributed to that long-standing problem of lack of controls for non-expendable equipment.
His delegation was concerned about the Board’s review of the OIOS, which found inadequate staff training, insufficient audit capability in ICT, and unwarranted delays in issuing reports. The United States insisted that the OIOS should address those issues expeditiously to get its house in order. His delegation asked whether the Board examined other aspects of the implementation of OIOS’s mandate, including whether the Office’s reports were submitted to the General Assembly unaltered by the Secretary-General, as resolution 48/218 B required.
The United States was also concerned that poor financial management practices had exposed the Organization to unnecessary risks, noting, for example, the complete lack of an investment policy for more than $375 million managed by the United Nations Office in Geneva. His delegation agreed with the Board’s recommendation that the Organization should promptly implement needed guidelines and procedures, and asked who had been held accountable for the serious breach of management in Geneva.
The inability of the auditors to give an opinion on UNOPS, which had faced severe financial problems, was another critical matter. While noting the ACABQ’s intent to take a closer look at that issue when it reviewed the next budget proposal from UNOPS early next year, the United States would like to know what steps the UNOPS leadership was taking now to ensure sound financial controls and reliable financial accounting data.
Another issue, which seemed to defy correction year after year, was the use of consultants, experts, and temporary assistance. Carelessness often led to substandard work and a waste of resources. Organizations must fully comply with applicable rules and the Board’s recommendations. The United States would revert to the issue when organizations presented their budgets to the Fifth Committee next year.
The United States also raised a number of specific questions regarding improper reporting procedures, management lapses, and high travel costs. Among the concerns highlighted was the fact that the UNHCR had not begun to address the General Assembly’s request to examine its governance structures, principles, and accountability. Given the recent publicity about alleged wrongdoing at that large and important organization, it was critical for Member States to know how UNHCR held individuals at all levels when they misbehaved or acted contrary to established rules.
Introduction of Scale of Assessments Reports
The report of the Committee on Contributions was introduced by its Chairman, UGO SESSI, who described the contents of the document. Regarding the multi-year payment plans, he said that, in its resolutions 57/4B and 58/1, the Assembly had endorsed the conclusions and recommendations of the Committee on Contributions in that regard. In particular, the Committee had agreed that Member States should be encouraged to submit plans; recognized that not all Member States might be in a position to submit plans; recommended that plans should remain voluntary and should not be linked to other measures; and that for those States that were in a position to submit a plan, its submission and the status of implementation should be taken into account as one factor in considering requests for exemption under Article 19.
In considering requests for exemption this year, the Committee had been guided by its earlier conclusions and recommendations, he continued. In paragraph 38 of its report, the Committee had encouraged all Member States requesting exemption to consider submitting a multi-year payment plan, when possible. In a number of specific cases, the Committee had either noted the intention of a State to submit a plan, or encouraged it to consider doing so. In no case, however, had the Committee linked the submission of a plan to the question of exemption under Article 19. He was fully convinced that the report before the Committee was fully consistent with the earlier conclusions and recommendations just mentioned.
Regarding collection of contributions, he said that, at the conclusion of the session of the Committee on Contributions, 16 Member States fell under the provisions of Article 19, although nine had been granted exemptions until 30 June 2004. Since then, three Member States -- Benin, Cape Verde and Mauritania -- had paid the amounts necessary to restore their vote in the Assembly. In its resolution 59/1 of 11 October, the Assembly had decided that the Central African Republic, Comoros, Georgia, Guinea-Bissau, Iraq, Liberia, Niger, Republic of Moldova, Sao Tome and Principe, Somalia and Tajikistan would be permitted to vote until 30 June 2005. Accordingly, two Member States -- Chad and Malawi -- currently came under Article 19 and had no vote in the Assembly.
Assistant Secretary-General for Programme Planning, Budget and Accounts and United Nations Controller, JEAN-PIERRE HALBWACHS, introduced the report of the Secretary-General on multi-year payment plans (document A.59/67).
Statements on the Scale
Mr. ZELLENRATH (Netherlands), speaking on behalf of the European Union and associated States, said that the financial health of the United Nations system depended on proper management of resources and the provision of predictable financial contributions by Member States. Much of the Fifth Committee’s time was concerned with the former, much less with the latter. Nonetheless, the manner in which Member States honoured their financial obligations was crucial to the ability of the United Nations to achieve its goals. Member States should adhere to the rules they set for themselves, including honouring their obligation under the Charter to pay all contributions on time, in full and without conditions.
Continuing, he recognized that, in some cases, grave circumstances could prevent that. Nevertheless, he would expect that, as a practical demonstration of their commitment, in spite of the circumstances, to honour their obligations and reduce their arrears over time, all those Member States should make an effort to present multi-year payment plans to the Committee on Contributions and keep to them. Those plans should be a necessary condition that had to be met, before granting future waivers under Article 19.
The review of the current scale methodology was not due until the sixty-fifth and sixty-sixth sessions of the Committee on Contributions, he said. The elements of the methodology were, therefore, not up for discussion during the current session of the Fifth Committee. Having considered the Committee on Contributions report (document A/59/11) and the Secretary-General’s report on multi-year payment plans (document A/59/67), he could endorse the observations and recommendations contained in both.
CAIO RENAULT (Brazil), speaking on behalf of the Rio Group, said the Committee on Contributions should take into account the negative impact of the 2000 methodology, in particular on developing countries. Since 2000, members of the Rio Group had sustained the largest increment in assessed contributions. In that connection, he requested a careful review of the situation of those countries that had experienced substantial increases in their contributions -- in some cases, over 30 per cent -- and proposals for rectifying those distortions in the future methodology. The new method of calculation should also include relief measures for the countries’ burden of external debt.
Turning to multi-year payment plans, he stressed that they were and should remain voluntary, and that their submission was not subject to consideration of the situation of a Member States, or to cases of exemption under Article 19. As for the measures to encourage payment of arrears, the Group reiterated resolution 57/4 C, in which the Assembly had stated the need for such measures to have a positive impact in helping Member States that faced difficult circumstances to fulfil their obligations towards the Organization. Those measures should not be punitive in nature, and the Group encouraged the Committee on Contributions to continue to work in a positive manner. He welcomed the recommendations contained in paragraph 32 of the report.
CIHAN TERZI (Turkey) aligned his delegation with the statement made by the European Union. In order for the United Nations to meet its many goals, which were decided by the Member States, these States needed to provide a stable cash flow to the Organization. His delegation noted that there could be some revision in the criteria used to determine exchange rates. He added that transparency, objectivity, and justification constituted the backbone of good governance, and that the United Nations required a good database to enable it to make a careful study of the problems that arose with payments. As the current methodology of calculating the scale was fixed through 2006, there was little point in going into the details now. But, one element that could be discussed in the future was the data used in scale calculation. Multi-year payment plans were useful for Member States to meet their obligations to the United Nations.
Other Items
YASSER ELNAGGAR (Egypt) said the problems of parking at the United Nations garage, an issue that had been raised in a number of sessions by a number of delegates, were not only ongoing, but getting worse by the day. There was a need to ensure the ability of delegations to enter the building more swiftly and systematically. He requested members of the Secretariat, including available security personnel, to come before the Committee to explain how the flawed system could be improved.
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