United Nations

SC/8645
23 February 2006

Peacekeeping Procurement Audit Found Mismanagement, Risk of Financial Loss, Security Council Told in Briefing by Chief of Staff

Mark Malloch Brown Says Management Has "Zero Tolerance" Policy for Fraudulent Behaviour, 8 Staff Suspended while Investigation Continues

NEW YORK, 22 February (UN Headquarters) -- Mark Malloch Brown, Secretary-General Kofi Annan's Chief of Staff, told the Security Council today that, after an internal audit uncovered evidence of mismanagement and the risk of "serious financial loss" in United Nations peacekeeping procurement, senior management officials at the world body had adopted a policy of "zero tolerance" for fraudulent behaviour or gross negligence, and had suspended eight staff members, with pay, while the investigation continued.

"That means zero complacency when serious allegations of impropriety arise, and zero impunity for those found guilty of misdeeds," Mr. Malloch Brown said, as he briefed the Council on actions under way to crack down on waste, fraud and other potential abuse, and the steps the Secretariat was taking on a recent Office of Internal Oversight Services (OIOS) audit of peacekeeping procurement.

He said that the OIOS report had highlighted that the United Nations system was exposed to serious risk of financial loss, as internal controls were inadequate, management supervision and strategic guidance had, at times, been lacking and management had not done enough to exercise due diligence and establish a high level of ethical behaviour and accountability.

The OIOS also believed that there was evidence of financial loss having occurred through overbudgeting or inflation of requirements, while controls to ensure the Organization received value for money in its procurement activities was lacking, he continued.  There were also some indications of serious potential irregularities, including collusion or conflict of interest with vendors, as evidenced by inappropriate communications between United Nations officials, a national Government and vendor representatives. "This is very alarming and merits urgent investigation," he said.

In response to the findings, as a precautionary measure to protect the Organization, Mr. Malloch Brown, at the request of the Departments of Management and Peacekeeping, had placed eight staff members on special leave with full pay, while the issues raised by the audit were looked into more fully.  The special leave was an administrative, not a disciplinary, measure and did not presume any wrongdoing by the staff effected.

Turning to the specific implications of that for peacekeeping procurement, he said he would start by puncturing the myth that had started to take hold, in the media and elsewhere, that the OIOS audit had uncovered evidence of nearly $300 million in fraud.  Actually, what the audit documented was the likelihood of fraud in some narrow instances and significant potential waste.

Specifically, OIOS had concluded, among other things, that justification in support of $110 million worth of expenditures was insufficient or lacking, that procurement of contracts totalling some $61 million had bypassed financial regulations and rules and established procurement procedures, and that financial exposure as a result of inadequate management of performance bond could be as high as $36 million.  While that was clearly a cause of significant concern, he needed to repeat the caveat that the Secretariat, based on the Department of Peacekeeping Operations' reservations, did not accept all of the above.

To address the broader underlying weaknesses that had been identified in procurement, he said the Department of Management was currently undertaking a comprehensive review of procurement rules, regulations and policies, focused on updating procurement procedures, including the need for greater transparency and accountability, implementing an internal control framework, which included risk management, and a framework to provide a comprehensive prevention and diagnostic controls environment.

All this came against the backdrop of an unprecedented surge in United Nations peacekeeping activities, he said, noting that the value of United Nations global procurement, 85 per cent of which represented peacekeeping, had grown from around $400 million to over $1.6 billion last year.  That figure was expected to top $2 billion this year.

United Nations peace operations were an indispensable tool in promoting peace and stability, he said.  The vast majority of the Organization's people were honest, hard-working and committed to implementing the Council's mandates faithfully, often at the cost of great personal sacrifice and risk to life.  "The challenge now is to work together to build a system that permits them to do their jobs as effectively as possible, while management and Member States have the information, tools and resources to ensure proper accountability and oversight", he said.

Following Mr. Malloch Brown's briefing, the representative of Japan said he was very disturbed at the OIOS report of, a not insignificant, incidence of fraud and mismanagement.  It indicated that, for the period 2000-2004, the aggregated procurement value for peacekeeping operations was estimated at $3.7 billion -- no small amount.  His delegation was struck by the remarks pointing to the grievous lack of internal controls and non-adherence to the existing controls.  He was also alarmed by the reported lack of enforcement of accountability by management in handling such a large amount of resources that had been provided to the Organization by Member States.

Peacekeeping was a flagship operation of the United Nations in the area of peace and security, he said.  It was truly regrettable that the good image of the blue helmets engaged around the globe should have to be tarnished by some of the unfortunate allegations.  In countries, good governance must ensure that taxpayers' money was spent, not only wisely, but also with accountability and adherence to rules and regulations.  The same should hold true for intergovernmental bodies, including the United Nations.

Slovakia's representative said there were many new challenges stemming from the increase in peacekeeping requirements, which was why management in that area must be strong, competent and accountable. The findings of OIOS were symptomatic of a larger problem and yet, another proof of the urgent need to proceed even more vigorously with the complex reform process, he said.

It was crucial that all the allegations be properly investigated and the recommendations strictly implemented.  To that end, he welcomed the establishment of the OIOS Procurement Fraud Task Force to conduct the investigations.  It was also imperative to enhance the internal control mechanisms and update the existing financial rules and regulations and procurement procedures. He trusted that the Secretary-General would expeditiously take all necessary measures to clarify the alleged wrongdoings and hold those found responsible fully accountable.

The representative of the United States, which holds the Council's rotating presidency for the month and had requested today's meeting, urged the Council to keep in mind that the issues of waste, fraud and abuse in peacekeeping procurement were not simply about dollar figures.  Corruption and mismanagement could greatly hinder the ability of a particular mission to carry out its mandate effectively.  In short, the Council's discussion today was about saving lives, not only the civilians the Organization was trying to protect, but the soldiers and civilians of the countries participating in peacekeeping.

Without accountable, cost-effective, efficient and transparent procurement practices, the Organization would not have its essential goods and services, billions of dollars of contributions might be ill spent or not properly accounted for, and the safety of United Nations peacekeeping operations would be jeopardized, he said.  Calling for a "wholesale change" in the culture of how many agencies and entities within the United Nations system operated, he stressed that the issue of procurement fraud and waste directly affected United States tax dollars, as the United States was the Organization's largest contributor -- 22 per cent of the regular budget and 27 per cent of peacekeeping costs.  That meant that the United States paid one quarter of every case of waste, fraud and abuse.

While reaffirming the importance of today's debate, the representative of South Africa, speaking on behalf of the "Group of 77" developing countries and China, said that the Security Council was not the forum for discussing matters that fell within the purview of the General Assembly.  The Charter clearly set out the roles and responsibilities of the Organization's principal organs, as had relevant Assembly resolutions.

And, today's Council meeting came at a time when the rest of the United Nations membership was actively engaged in a process, led by the Secretary-General and the President of the General Assembly, to reform and strengthen the Organization.  The fundamental principal that underpinned that collective effort was that the United Nations was an intergovernmental body, where the voice of each and every Member State must be heard and respected, irrespective of contributions made to the budget.  He said that the fact that there may be a difference in the level of monetary contribution did not imply any difference in the decision-making role of Member States in the United Nations.

Malaysia's representative, speaking on behalf of the Non-Aligned Movement, agreed that the Council was not the forum to discuss questions relating to peacekeeping procurement.  In fact, the developing countries had introduced the proposal in the General Assembly, requesting the Secretary-General to conduct a comprehensive management audit of risk areas in the management of peacekeeping operations.  The outcome of the audit was yet to be introduced in the Assembly.  It was inappropriate, therefore, for the Council to discuss issues of oversight and management.

It was even more inappropriate, he added, to base the discussion on a report that was mandated by the Assembly.  All were aware of the consequences of the Security Council involving itself in the management of United Nations programmes.  The Volcker report, and its searing criticism of the Council's role in overseeing the Iraq "oil-for-food" programme, was all too fresh in the memory of the Organization's wider membership.

Wrapping up the debate, Mr. Malloch Brown said the Secretary-General had been happy to have him, as Chief of Staff, brief the Council, but had warned that he was extremely concerned that the debate might become a showdown between the Council and the General Assembly over respective roles.  No one wanted that, when every member of the Organization now had to work together to push through critical reforms, such as the creation of the Human Rights Council and further management reforms, he said.

Also speaking today were the representatives of France, China, Russian Federation, Argentina, Peru, Congo, Denmark, Greece, Ghana, Qatar, United Republic of Tanzania, United Kingdom, Singapore, Austria (on behalf of the European Union) and Sierra Leone (on behalf of the African Group).

The meeting began at 10:03 a.m. and ended at 12:40 p.m.

Background

The Security Council met this morning to consider United Nations peacekeeping operations, in particular procurement practices.

In that regard, the Council's President received a letter from the Permanent Representative of Malaysia, in his capacity as Chairman of the Coordinating Bureau of the Non-aligned Movement, dated 15 February (document S/2006/111), transmitting a copy of his letter dated 14 February to the President of the General Assembly.

That letter conveyed to the Assembly President the principled position of the Non-Aligned Movement concerning the relationship among the principal organs of the United Nations, the encroachment by the Council on the functions and powers of the Assembly, and the exercise by the Council of norm-setting and establishment of definitions, which fall within the purview of the Assembly.  In that connection, the Chairman conveyed to the Council President the request of the Non-Aligned Movement that their principled position on those issues be fully taken into consideration by the Council in the context of its work.

Briefing by Secretary-General's Chef de Cabinet

MARK MALLOCH BROWN, Chef de Cabinet, Executive Office of the Secretary-General, said he was pleased to brief the Council, on behalf of the Secretary-General, on steps the Secretariat was taking on the recent Office of Internal Oversight Services (OIOS) audit on peacekeeping procurement, and the actions the Secretariat was taking to crack down on waste, fraud and other potential abuse.  It was, indeed, an unusual session, both in subject matter and for him as briefer.  The Secretary-General had felt that, given his Chef de Cabinet's role in working closely on his behalf with the OIOS, the Department of Management and the Department of Peacekeeping Operations, that official would be the most appropriate person to update the Council on such important issues.  He had also been prepared to brief the Fifth Committee later this week, given the General Assembly's lead role in these matters.

Peacekeeping related procurement had been the fastest growing segment of United Nations Secretariat operations, he said.  The value of United Nations global procurement, 85 per cent of which represented peacekeeping, had grown from around $400 million to over $1.6 billion last year, and was expected to reach over $2 billion this year.  In the past four years alone, the Council had mandated the establishment of six new peacekeeping missions, including complex missions in Liberia, Côte d'Ivoire, Burundi, Haiti and the Sudan, as well as authorizing significant changes and growth in five missions' mandates and creating eight new special political missions.

The surge in that activity had produced a 70 per cent increase in the number of military personnel deployed in peacekeeping missions, the vast majority of which relied on the United Nations for nearly all logistic support, he said.  Civilian staff had grown by 30 per cent over the same period and now comprised more than twice as many people as in the Secretariat in New York.  Supporting them required thousands of contracts every year.  In that context, the Secretariat had welcomed the Assembly's request to the OIOS to conduct an independent review of peacekeeping procurement as one part of the overall management audit of the Department of Peacekeeping Operations. The main objectives of the audit were to review Department practices and to identify risks and exposures to fraud.  The review had also assessed the overall economy and efficiency of the operational areas reviewed, in the current case, procurement.  The United Nations Missions in the Sudan and the Democratic Republic of the Congo had been used as case studies.  The audit made numerous findings and OIOS had made a presentation to interested Member States already.

The bottom line of the report was threefold, he said.  First, the Organization was exposed to serious risk of financial loss, as internal controls were inadequate, management supervision and strategic guidance had, at times, been lacking and management had not done enough to exercise due diligence and establish a high level of ethical behaviour and accountability, despite numerous irregularities reported in previous reports.  OIOS also believed that there was evidence of financial loss having occurred through overbudgeting or inflation of requirements, while controls to ensure the Organization received value for money in its procurement activities was lacking.  There were also some indications of serious potential irregularities, including collusion or conflict of interest with vendors, as evidenced by inappropriate communications between United Nations officials, a national Government and vendor representatives.  That was very alarming and merited urgent investigation.

He noted that a majority of the 32 OIOS audit recommendations for addressing the findings had been accepted by the Departments of Management and Peacekeeping.  The remainder were the subject of ongoing discussion between OIOS and management, and there was strong disagreement between OIOS and the Department of Peacekeeping Operations about the methodology and quality of some parts of the report, which needed to be resolved.  Further, having worked in the field earlier in his United Nations career, he was concerned that some of the findings related to judgement by a procurement system and procedures that were out of step with field realties and itself needed reform.

Responding to the findings, as a precautionary measure to protect the Organization, he, at the request of the Departments of Management and Peacekeeping, had placed eight staff on special leave with full pay, while the issues raised by the audit were looked into more fully.  The special leave was an administrative, not a disciplinary, measure and did not presume any wrongdoing by the staff affected.  The Secretariat was looking carefully into the situation of the eight staff.  For some, the investigatory arm of OIOS was undertaking an accelerated review within a broader investigation of other allegations of possible procurement-related wrongdoing by staff.  OIOS had formed a 16-person special task force to handle the cases quickly.

In addition to the OIOS investigation, a more comprehensive, multi-year forensic audit by external experts, commissioned by the Department of Management and the Department of Peacekeeping Operations, was now being undertaken and the United Nations, also at the Secretary-General's instruction, was fully cooperating with concerned national law enforcement bodies in their own investigations.  He hoped the investigations would be quickly concluded.  Swift action would be taken against any United Nations staff members found to have acted inappropriately, including, if necessary, the waiving of immunities by the Secretary-General.  One company had also been suspended from the United Nations list of approved vendors.  He shared the concern that the eight colleagues had been damaged by what had happened, particularly through the leaking of a draft audit report.  But, he asked members to contemplate the alternative.  The Volcker panel had made it clear that a complacent, business as usual approach in the face of critical audit findings was a major breakdown of management that must be corrected.  If wrongdoing was found, staff members would be charged and then given full rights of due process within the United Nations justice system.

Turning to the specific implications of that for peacekeeping procurement, he said he would start by puncturing the myth that had started to take hold, in the media and elsewhere, that the OIOS audit had uncovered evidence of nearly $300 million in fraud.  Actually, what the audit documented was the likelihood of fraud in some narrow instances and significant potential waste.  Specifically, OIOS had concluded, among other things, that justification in support of $110 million worth of expenditures was insufficient or lacking, that procurement of contracts totalling some $61 million had bypassed financial regulations and rules and established procurement procedures, and that financial exposure as a result of inadequate management of performance bond could be as high as $36 million.  While that was clearly a cause of significant concern, he needed to repeat the caveat that the Secretariat, based on the Department of Peacekeeping Operations' reservations, did not accept all of the above.

He added that it was, nevertheless, clear to management that it urgently needed to take corrective action and put in place a reform strategy that addressed three distinct sources of risk.  First, significant risk arose from reliance on a regulatory framework ill-suited to exigencies of the field.  Second, the Organization faced additional risk from the demanding, unpredictable and sometimes dangerous operating environment typical of the field.  Third, the Organization faced risk in the human resources dimension.  The Secretariat had a cadre of seasoned, hard-working managers and procurement officers in the missions, but not enough of them.  Indeed, some 50 per cent of peacekeeping procurement field positions were currently unfilled, largely because potential employees with suitable skill profiles were not willing to serve in the demanding environment of the field under current conditions of service.  The Secretariat had undertaken significant peacekeeping related reforms in recent years. Resulting innovations had made it possible to meet rapid deployment timelines, hitherto thought impossible.  But, policy with relation to human resources and revamping operational procedures had lagged, with disturbing consequences.

To address the broader underlying weaknesses that had been identified in procurement, the Department of Management was currently undertaking a comprehensive review of procurement rules, regulations and policies, focused on updating procedures, including the need for greater transparency and accountability, implementing an internal control framework, which included risk management, and a framework to provide a comprehensive prevention and diagnostic controls environment.  Early elements of the strategy were already being implemented, and the Secretary-General would touch on them more in detail in his report on Secretariat reform, to be presented to the General Assembly next week.

The whole process sharply underlined the need for a stronger OIOS, both in terms of audit and investigation, he said.  In carrying out the audit, one could see the very real capacity constraints it too faced, not least in performing appropriate follow-up and related investigations given the scale, scoop and complexity of today's United Nations operations.  At the end of the day, however, it was not simply a question about better rules or stronger systems.  It was about the men and women the Council sent into active war zones to do what no one else could or would do.  As with its approach to dealing with sexual exploitation and abuse, the Secretariat had adopted a policy of zero tolerance for fraudulent behaviour or gross negligence.  That meant zero complacency when serious allegations of impropriety arose, and zero impunity for those found guilty of misdeeds.

Despite the challenges he had outlined, United Nations peace operations were an indispensable tool in promoting peace and stability, he concluded.  The vast majority of the Organization's people were honest, hard-working and committed to implementing the Council's mandates faithfully, often at the cost of great personal sacrifice and risk to life.  The challenge now was to work together to build a system that permitted them to do their jobs as effectively as possible, while management and Member States had the information, tools and resources to ensure proper accountability and oversight.

Statements

JEAN-MARC DE LA SABLIÈRE (France) said today's meeting gave the Council an opportunity to hold a necessary debate on the actual conditions under which peacekeeping operations unfolded.  The maintenance of international peace and security was at the very heart of the work of the United Nations.  Peacekeeping needs in recent years had sparked an amazing increase in procurement, and the Secretariat simply did not have the capacity to deal with the huge amounts of resources and material being generated.  Still, it was important not to lose sight of the invaluable work that peacekeepers were doing on the ground.  The United Nations should be proud of what it was doing in the field, he said, praising the work being done in all the Organization's peace missions.

While it was clear that the General Assembly had a role to play in a discussion of this matter -- and should continue its own talks and negotiations on reforming the United Nations management structures and OIOS -- the Council, which was charged with the maintenance of international peace and security, could not remain aloof from the material conditions of peacekeeping operations.  The Council must make sure that peace operations had the resources that they needed, and that those resources were put to the best and most appropriate use.  Some of the loss figures that had been reported were alarming, even though it was clear that there had been a few mix-ups in the overall reporting process.  Still, cases of fraud or mismanagement needed to be dealt with in a clear and effective manner.  He had been assured by the forthright way Mr. Malloch Brown had assured the Council that such issues would be addressed by the Secretariat.

He said he had hoped the report would be more clearly written and that it would provide more information on the difficulties of mission planning and programming.  He asked for more clarification on the issue of controls on bidding rules at the local level.  He also called for increased and more effective monitoring overall, and urged the Secretariat to address the Organization's management and procurement deficiencies in a comprehensive manner.  But, nevertheless, there was always the question of whether the Organization had the human and financial resources to make the necessary changes in the area of procurement.

He said that the inquiries and investigations into those delicate matters must be allowed to continue, but it was necessary to understand that certain difficulties would be encountered.  The situation was really no different from a country trying to clean its own management structures and there was no need to be harsher on the United Nations than one would be on ones own country.

WANG GUANGYA (China) recalled the huge increase in peacekeeping activities that had characterized the work of the United Nations over the past decade or so.  Indeed, the ever increasing new mandates had driven up the financial requirements of peacekeeping.  In light of the report just provided by the Secretariat, it was clear that this had resulted in some serious problems and China hoped the Secretariat would look closely at such matters, particularly regarding fraud, or misuse or mismanagement of funds.  It should also intensify oversight, in order to forestall future occurrences.

He added that relevant investigations were still ongoing and he hoped that the Secretariat would give a more detailed report, once those investigations were completed.  While the Council was charged with dealing with all matters related to the maintenance of peace and security, matters related to the use of peacekeeping funds and procurement management should be discussed by the Assembly.  Such a clear delineation of duties would facilitate future oversight and reinforce the roles of the main bodies of the United Nations.

ANDREY DENISOV (Russian Federation) said matters regarding improving the planning of peacekeeping operations and their management should be the focus of the Council's attention.  It was important to ensure that a solution was found that was fully in accordance with the scope of United Nations peacekeeping operations.  Procurement activities must be transparent, swift and flexible.  The OIOS report contained a broad collection of recommendations regarding key issues on procurement in the United Nations, including on how to improve the quality of planning procurement, ensuring clear interaction between the Department of Peacekeeping Operations and procurement, the practice of decision making in awarding of contracts and not allowing any conflict of interest.

In principle, the recommendations in the report were in line with improving, to the maximum extent possible, the United Nations procurement practices, he said.  They requited careful analysis, however.  Noting that the Secretary-General would be submitting to the Assembly, a comprehensive report on the matter, he said he hoped that report would include specific proposals on further improving peacekeeping procurement activities.  It was important that today's meeting provide further impetus for the future work in the United Nations in improving the effectiveness of procurement and the adoption of measures to prevent financial violations in the planning and equipping of peacekeeping operations.

KENZO OSHIMA (Japan) said he was very disturbed at the report of, a not insignificant, incidence of fraud and mismanagement with regard to procurement, especially in relation to peacekeeping operations.  The OIOS report indicated that, for the period 2000-2004, the aggregated procurement value for peacekeeping operations was estimated at $3.7 billion -- no small amount.  His delegation was struck by the remarks pointing to the grievous lack of internal controls and non-adherence to the existing controls.  He was also alarmed by the reported lack of enforcement of accountability by management in handling such a large amount of resources that had been provided to the Organization by Member States.

Peacekeeping was a flagship operation of the United Nations in the area of peace and security, he said.  It was truly regrettable that the good image of the blue helmets engaged around the globe should have to be tarnished by some of the unfortunate allegations.  In countries, good governance must ensure that taxpayers' money was spent, not only wisely, but also with accountability and adherence to rules and regulations.  The same should hold true for intergovernmental bodies, including the United Nations.  Member States, whatever the size of their contributions to the Organization's budget, were obliged to ask the Secretary-General and his staff to ensure that the resources entrusted to the United Nations were well spent and any failings immediately and energetically addressed.

He, therefore, asked that the Secretary-General continue the thorough and rigours investigation into the alleged wrongdoing in the procurement office in the Department of Peacekeeping Operations, as well as in other procurement related offices, in order to arrive, as soon as possible, at a full accounting of the facts, including the identification of those who should be held accountable.  Unless immediate and convincing measures were taken to redress the problem, his Government, which currently contributed some 20 per cent of the peacekeeping budget, would find it difficult to maintain domestic support for underwriting peacekeeping operations.

He said the issue before the Council clearly fell under its purview, as the organ was responsible for the creation of the mandates of United Nations peacekeeping operations and for their overall oversight.  At the same time, the issues of management, budget and procurement in their specific details had generally been the prerogative of the Assembly, as the chief deliberate and representative organ of the United Nations.  That also applied to peacekeeping operations.  Member States would, in due course, conduct a review of the current procurement system in the General Assembly, which had the responsibility of overseeing the administrative and financial aspects of peacekeeping operations, including a comprehensive review of the relevant policies, practices, rules and regulations.  There was, therefore, some complementarity between the Assembly and the Council in handling the issue.  In light of the seriousness of the alleged wrongdoing, both needed to work with a sense of urgency, by complementing each other and ensuring coherence in the overall approach to the matter.

CESAR MAYORAL (Argentina) said the United Nations must do everything in its power to have an efficient system that admits no failure or error, leading to misuse of resources.  In that regard, the Assembly had a primary and essential role in control and accountability.  The last report on the procurement system of peacekeeping operations had been initiated by an Assembly request.  He was concerned to learn, through that report, that the controls in place had proved to be inadequate and that some prices paid had been neither competitive nor economically sound.  Implementation of the OIOS recommendations was very important, in order to avoid future repetition.

He said that, last year, the Assembly had created an Ethics Office.  He expected that Office to be a professional body of highly competent international officers, with high ethical standards, able to act efficiently, not only to detect irregularities, but mainly to prevent them.  One way to ensure transparency and best price was competition and diversification in the markets of origin of products purchased.  He was, therefore, concerned to see that, traditionally, Latin America was not an important supplier for the United Nations and urged the Secretariat to address that inequity.  He added that it was important that public discussions on the issues be continued in the Assembly.  Moreover, transparency should not only be the objective standard in procurement, but throughout the system.

OSWALDO DE RIVERO (Peru) said his delegation was pleased that the Council was discussing matters relevant to peacekeeping, procurement and management, which were all critical to the overall work of the United Nations.  It was clearly within the purview of the Council to monitor the management of peacekeeping operations, and particularly how the relevant resources earmarked for those operations were used.  That was without detriment to the fact that the Assembly had the main duty to consider the matter.

He shared the views of others who had expressed concern about reported mismanagement in the area of peacekeeping.  He feared that a failure to act on such matters, particularly in cases of fraud and corruption, could lead to a culture of abuse.  He called for swift and comprehensive investigation into such allegations.  He also urged the Department of Peacekeeping Operations to design proper coordination strategies to ensure that the military staff of United Nations missions operated better and more in synch with local government structures.  "We do not need to have mismanagement and corruption that would interfere with our response to crimes against humanity or other grave situations," he said, calling for structures to be quickly put in place to address the issues raised today by the Secretariat.

BASILE IKOUEBE (Congo) said that Mr. Malloch Brown had addressed many of his concerns, but he was, nevertheless, frustrated that he had learned about the contents of the report through the outside press.  And, while he knew that Mr. Malloch Brown was not responsible for that, the Secretariat did have a role to play in the dissemination of information to Member States.

Still, Mr. Malloch Brown had alleviated many of his concerns, and even though this had been a preliminary report, it was clear that the Secretariat was more than willing to tackle these matters, particularly related to fraud and mismanagement, in a head-on manner.  It was necessary to examine all the initiatives, and plans sparked by the report should be seen in the light of overall management reform.  He added that it would be best if the Fifth Committee (Administrative and Budgetary) followed up today's meeting with its own review of the report.

He stressed that he was from Africa, the continent that hosted the most United Nations peace missions.  That attested to how important today's discussion was for him and other Africans.  But, it was an equally important discussion for the courageous peacekeepers and mission staff -- who were really the face of the Organization in the field -- who deserved more than to be characterized as "fraudulent" or "abusive" in any way.  The matters raised today needed to be dealt with swiftly and comprehensively.

PETER BURIAN (Slovakia) said his country remained a dedicated supporter of peacekeeping, which constituted a core function of the Organization.  It was precisely because of that commitment that it could not turn a blind eye to any flaws in peacekeeping management, be they intentional or accidental.  The OIOS audit of procurement revealed evidence of waste leading to financial losses that could not be ignored.  With the costs of peacekeeping operations and special political missions currently exceeding $5 billion annually, it was necessary to ensure that each and every dollar was spent effectively and exclusively for the purposes mandated by the Council.  There were many new challenges stemming from the increase in peacekeeping requirements, which was why Slovakia expected management to be strong, competent and accountable.

The findings of OIOS were symptomatic of a larger problem and yet another proof of the urgent need to proceed even more vigorously with the complex reform process, he said.  It was crucial that all allegations be properly investigated and the recommendations strictly implemented.  In that regard, he welcomed the establishment of the OIOS Procurement Fraud Task Force to conduct the investigations.  It was also imperative to enhance the internal control mechanisms and update the existing financial rules and regulations and procurement procedures.

He trusted that the Secretary-General would expeditiously take all necessary measures to clarify the alleged wrongdoings and hold those responsible for them fully accountable.  He supported the steps already taken by the Departments of Management and Peacekeeping Operations.  Slovakia was eagerly awaiting the results of the investigations, as well as the update on the implementation of the OIOS recommendations.  Every effort must be made to re-establish the credibility of, and general trust in, the United Nations.

ELLEN MARGRETHE LØJ (Denmark) said she attached great importance to strengthening United Nations administration.  It was with concern that she had read the OIOS report.  It was important that staff acted under the highest standards of integrity.  Member States must ensure sufficient staff capacity to deal with the full range of procurement contracts, in order not to jeopardize the efficiency of peacekeeping operations.  Senior management must pay attention and place special emphasis on high-risk areas.  They must also ensure that ethical guidelines for procurement staff were well known in the Organization.  She welcomed the streamlining of procurement practices in the Department of Peacekeeping Operations.  The volume of United Nations procurement had increased in recent years, making it even more important to ensure high standards.

While noting the management problems outlined in the report, she said she also understood that there was strong disagreement between OIOS and the Department of Peacekeeping Operations on the report's methodology.  Denmark also welcomed the assurances that the Secretary-General would deal with the issue promptly.  She also hoped that the Fifth Committee would address the issue specifically and in the broader context.  That should also include consideration of proposals for changes in the financial rules and regulations for procurement, to ensure the implementation of the regulatory framework on the ground.  The findings necessitated swift action.  They also required action by the Secretariat to prevent the occurrence of fraud and mismanagement, in order to consolidate the delivery of services, and avoid duplication and waste of resources.

ALEXANDRA PAPADOPOULOU (Greece) said that mismanagement and fraudulent activities revealed in any system required prompt and serious action.  The same was true for the United Nations.  All allegations that had been revealed by the OIOS enquiry must be investigated, and all those found guilty must be held accountable.  Greece was, nevertheless, aware that the process was ongoing and would stress that the principle of due process must be followed.  Greece also considered it valuable and useful that the Council be informed of the response provided by the Secretariat to the information that had been provided in the OIOS report.

On overall United Nations reform, she said that some positive steps had been taken in the area of management reform, but those efforts should be followed up with further action and vigilant oversight.  She also said that the important work being done at the field level should not be overlooked.  Those people, working in often dangerous circumstances, deserved the Organization's respect, and their efforts must be adequately supported and actively encouraged.

NANA EFFAH-APENTENG (Ghana) considered the issue of procurement reform of the United Nations of cardinal importance, since transparency and accountability were critical to the integrity of the Organization as a whole.  While he welcomed the interim report and expected the Assembly to vigorously follow up with adequate measures to address the management and procurement loopholes that had been identified, he regretted the speed with which, what was only an interim report, had found its was into the media, even before the Assembly, which had kick-started the entire exercise, had had a chance to review it.  Some Member States, including his own, had been naturally dismayed to read the details of the embargoed report more than two weeks ago, when Member States had not seen, nor been provided with, the report.

Obviously, such leaks had been aimed at misleading the public and casting doubt on the overall work of the United Nations, he said, stressing that, while there was a need for a whistleblower policy to enhance transparency and accountability in the Organization, in this case, the leaks to the press had been "hasty, unwarranted and equally unethical on the part of those who were responsible".  On the substance of the report, he said the need for efficient and effective use of United Nations resources, especially those earmarked for peacekeeping, could not be overstated.  Such operations were invariably costly, and it was in everyone's interest to ensure that waste through fraud and embezzlement was avoided.

And, while he recognized the right of the Council to consider some aspects of peacekeeping operations, he said that procurement was essentially a management issue, which fell under the remit of the Assembly's Fifth Committee (Administrative and Budgetary).  Therefore, in the appropriate forum, Ghana would present a more detailed statement on some of the issues and recommendations in the report.  Still, he said that, while many laudable procurement and management reform efforts had been launched over the past decade, much remained to be done.  The interim audit report revealed several shortcomings in the procurement of items for United Nations peacekeeping operations, as well as lack of proper care and attention by officials responsible for designing and implementing internal controls.

The report had also documented substantial evidence of abuse in procurement, which had led to financial losses and inaccuracies in planning assumptions, he said, stressing that it was imperative that immediate steps were taken to rectify those anomalies.  He was also concerned that the report had highlighted a perennial problem in peacekeeping procurement: increases in procurement from developing countries, which were still largely limited to host countries of the Organizations' peacekeeping operations and their neighbours.  And, while he recognized the important contribution of that activity towards the development of the economies of host and neighbouring countries that had been burdened by conflict, he stressed that greater diversity was required in the area.  He called for further information on whether procurement officers were ensuring equitable geographical representation by vendors.

NASSIR ABDULAZIZ AL-NASSER (Qatar) stressed the need for specific mandates and proper planning for peacekeeping operations.  He also emphasized the need for accountability.  Qatar was deeply concerned with the allegations of mismanagement and fraud in the Secretariat.  In that regard, the Department of Peacekeeping Operations' practices needed to be reviewed, to determine whether there had been cases of procurement fraud.  Those held accountable must be given due process.  He looked forward to the report that would be submitted to the General Assembly.  Regarding the issue of sexual exploitation and abuse, he agreed fully that such behaviour could not be accepted.

AUGUSTINE P. MAHIGA (United Republic of Tanzania) said the Council's interest in the peacekeeping operations procurement practices had created some disquiet among the wider membership of the Organization, both in substance and the manner in which it should be handled, an outcome he regretted deeply.  All the relevant organs had shared interest in, and concern over, the integrity and credibility of the procurement practices.  There was, therefore, room for balance and latitude for cooperation among all the principal organs.  Much of the United Nations fruitful and constructive activities did not appear in the headline news.  There was, however, extensive coverage where the Organization had, or was perceived as having, failed.  The OIOS report should be seen in that context.

He said the OIOS report revealed gross mismanagement and fraud.  It was, however, noteworthy that the report had been initiated by the Assembly.  It was, therefore, fair that the organ that mandated the report should experience a sense of dispossession when it was not the first in line to pronounce itself on it.  Consideration of the issue by the Council and the Assembly should be complementary.

The report had been issued at a time when major reforms were being undertaken, he said.  The Assembly had already started to adopt measures in response to some queries raised.  In his report on management reform, to be issued at the end of the month, the Secretary-General would propose to the Assembly further measures to improve the procurement system.  In that regard, his country, in collaboration with other members of the "Group of 77" developing countries and China, would pursue management reform issues, in order to enhance the effectiveness and efficiency of the Organization.

ADAM THOMSON (United Kingdom) said the briefing had helped the debate come back to ground.  He agreed that the Council sent United Nations peacekeepers to do what others could, or would, not do.  Peacekeeping was an indispensable function of the United Nations.  There had been a rapid growth in peacekeeping in recent years, including in procurement.  Despite the problems discussed today, the Council could, and should, have confidence in United Nations peacekeeping.  An issue of confidence was being discussed.  Procurement concerns were a serious matter.  Like the issue of sexual exploitation and abuse, procurement or fraud could erode confidence and, therefore, the effectiveness of United Nations peacekeeping.  The briefing and the report suggested, among other things, lack of adequate internal controls and senior management oversight, questionable delegation of authority and potential waste.  His Government's policy towards United Nations procurement included enhanced transparency, accountability and ethical behaviour for staff.  For confidence in United Nations peacekeeping to remain as strong as it needed to be, the effectiveness of United Nations peacekeeping procurement must be addressed.

He welcomed General Assembly action to put in motion the OIOS review.  He also welcomed the planned briefing to the Fifth Committee later this week, as there could be no substitute for systematic action by the General Assembly on the management and resources for running peacekeeping.  He also welcomed today's open inclusive exchange, as the Council was responsible for the mandates that sent United Nations peacekeepers into harms way.  The Council needed to understand the challenges and shortcomings of peacekeeping in the field, in order to do its job of delivering effective mandates.   He supported the zero tolerance policy for procurement, mismanagement and fraud, and the Secretariat's commitment to due process, as well as the Secretariat's commitment to reform the financial rules and regulations.  He expected the recommendations to build, where applicable, on the many reforms already effected in United Nations procurement procedures in recent years.

There had been reform, even if insufficient, he said.  It was incumbent on all to respond constructively to the recommendations arising from the investigation, which was ongoing.  Elements to consider included a better working relationship between the Department of Peacekeeping Operations and the Procurement Division.  Ethical guidelines needed to be promulgated for staff involved in procurement activities, and a single, viable information technology system, capable of dealing with all United Nations procurement activities, was also needed.  It was incumbent on the General Assembly and the Security Council to reflect on lessons learned in designing future mandates.

JOHN BOLTON (United States) urged the Council to keep in mind that, first and foremost, the issues of waste, fraud and abuse in peacekeeping procurement were not simply about dollar figures.  Corruption and mismanagement could greatly hinder the ability of a particular mission to carry out its mandate effectively.  In short, the Council's discussion today was about saving lives, not only the civilians the Organization was trying to protect, but the soldiers and civilians of the countries participating in peacekeeping.  Without accountable, cost-effective, efficient and transparent United Nations procurement practices, the Organization would not have its essential goods and services, billions of dollars of contributions might be ill spent or not properly accounted for, and the safety of United Nations peacekeeping operations would be jeopardized.

The commitment of the United States to peacekeeping was firm, and was evidenced by its support and advocacy in the Security Council for clear mandates and missions.  The Council should be equally committed.  Precisely because of that commitment, it had the responsibility to look at the flaws in how peacekeeping was managed, so that problems could be rectified and stronger, more effective operations could be built.  Calling the challenges "immense", he said the report marked a critical first step.  It reflected what he believed was increasingly felt by many -- the need for a fundamental shift in the United Nations operating culture.

He said that, while reading the OIOS report, he had been struck by how similar it was to the report issued by the panel headed by Paul Volcker to investigate mismanagement in the Iraq "oil-for-food" programme.  Indeed, the OIOS findings reinforced the view that the United Nations suffered from a "culture of inaction".  The report cited "substantial evidence" of abuse in procurement for peacekeeping operations, and noted a lack of internal controls and, importantly, that there was a likelihood that the problems would continue.

He reiterated the need for a shift in the Department of Peacekeeping Operations' operating culture and concurred with the OIOS report's emphasis on the need for United Nations staff be chosen in line with what the Charter's described as "the highest standards of efficiency, competence and integrity".  That was particularly relevant in an era when the Peacekeeping Department was requesting funding for new positions to be filled.  He said that it was important that all interested parties work together, to ensure that these issues were adequately addressed and that what OIOS described as the practice of "business as usual" could be avoided.

Calling again for a "wholesale change" in the culture of how many agencies and entities within the United Nations system operate, he said the problem of procurement fraud and waste directly affected United States tax dollars, as the United States was the Organization's largest contributor -- 22 per cent of the regular budget and 27 per cent of peacekeeping costs.  That meant that the United States paid 1/4 of every case of waste, fraud and abuse.

"This is unacceptable, if we are to heed the charge given to us by our leaders, 150 of whom signed the Outcome Document last September", he said.  With the proliferation of peacekeeping missions, and a new one set to begin in Darfur in the coming months, the stakes were too high to sweep the problems addressed by the OIOS report under the rug. The impact, not only on the integrity of the United Nations itself, but on the lives of people in the missions and those the Organization was trying to assists, were compelling reasons to use this opportunity to take "firm and decisive action".

DUMISANI S. KUMALO (South Africa), speaking on behalf of the "Group of 77" developing countries and China, said that the Security Council was not the forum for discussing matters that fell within the purview of the General Assembly.  The Charter clearly sets out the roles and responsibilities of the Organization's principal organs, as had relevant Assembly resolutions.  The Assembly was the United Nations chief deliberative, policy-making and representative body.  Like the Non-Aligned Movement, the Group of 77 would reiterate its concern over the encroachment by the Security Council on the functions and powers of the General Assembly and the Economic and Social Council.

His delegation saw the Security Council infringing on issues that traditionally fell outside its competence, and assuming for itself norm-setting powers that were within the Assembly's purview.  And, today's Council meeting came at a time when the rest of the United Nations membership was actively engaged in a process, led by the Secretary-General and the President of the General Assembly, to reform and strengthen the Organization.

The fundamental principal that underpinned that collective effort was that the United Nations was an intergovernmental body, where the voice of each and every Member State must be heard and respected, irrespective of contributions made to the Organization's budget.  He said that the fact that there may be a difference in the level of monetary contribution did not imply any difference in the decision-making role of Member States in the United Nations.

Procurement policies and practices fell under the purview of the General Assembly and were discussed on a regular basis, he continued, noting that the Assembly had always considered the reports of the oversight bodies on procurement and the audited financial statements of peacekeeping operations.  Further, the report being discussed today by the Council had been requested by members of the Group of 77 and China, which expected the document to be formally introduced to, and considered by, the Assembly. "Therefore, the insinuation that, somehow, developing countries might be tolerant of corruption, mismanagement and fraud is wrong," he said.

The Group expected the Secretary-General to take immediate action in cases of corruption or any other wrongdoing, and believed that staff should be held accountable, irrespective of nationality or seniority.  He expressed the desire that any disciplinary action adhere to basic principles of justice and fairness, as well as due process.  "We are aware that, when the Security Council has assumed for itself the oversight function of a programme, such as the oil-for-food programme -- which was created, managed and overseen by the Council -- the experience has not been satisfactory," he said, noting that it had been the Assembly which had instituted additional safeguards, such as the newly-created Ethics Office, the whistle-blower programme, and which had strengthened OIOS, following the erroneous perception of widespread corruption and mismanagement at the United Nations.

VANU GOPALA MENON (Singapore) said no one at the Assembly's fifty-ninth session could have imagined what was in store when it asked OIOS to conduct a management audit of the Department of Peacekeeping Operations.  More than a year later, the 45-page OIOS report had become the Organization's "muse", inspiring it to place, without charge, eight of its staff on leave.  The draft had also been leaked, inspiring journalists to write about the story and print the name of those staff members.  A senior United Nations official was also inspired to bypass the General Assembly, call a press conference and speak of corruption in the United Nations.  Member States and one group of States then questioned that official's motives, and asked about due process and equal treatment.  Two members of the United States Congress were then inspired to misinterpret the motives of that group.  Now the General Assembly and the Council were inspired to deal with the issue and define the limits of their respective mandates.

Despite the tensions, he believed the episode would be good, if it motivated members to look seriously at reform and the sanctity of the reform process.  It was not about making single countries happy, nor about providing a platform for people to grandstand and show off.  It was about making the United Nations work for its entire membership.  The conclusions of the OIOS report were dire.  Indeed, numbers as high as $300 million, overall, had been cited.  The scale of that, assuming it was true, demanded a quick and thorough investigation.  At the same time, however, the investigations required probity and unquestioned fairness.  Noting that a Singapore national was among the eight staff placed on administrative leave, he asked whether due process had been followed.  The staff member had been placed on administrative leave in mid-January, without being given copies of the draft report.  "How does one defend oneself without knowing the charges?" he asked.

Further, he added, the OIOS report dealt primarily with alleged wrongdoing in procurement activities in peacekeeping operations.  While he understood that the operations were under the Department of Peacekeeping Operations' management, yet the highest ranking officer placed on administrative leave was the Assistant Secretary-General for Management.  It seemed incongruous to him that his counterpart from the Peacekeeping Department, upon whom delegated authority was vested, had not been treated in the same way.

While he supported scrutiny into the Departments of Management and Peacekeeping Operations based on the OIOS report, that was not the only report in town, he said.  The Volcker Commission had also come up with a voluminous report, on a larger topic.  Perhaps some of the zeal to reform should be apportioned to look into how billions of dollars seemed to have been mismanaged in the oil-for-food programme, an issue of which the Council was aware.  Some peculiar decisions had led to a fair amount of damage being done, to both individuals and the relationship between the Secretariat and Member States.  To move forward, he could only ask that the investigations be carried out thoroughly and as quickly as possible.

Mr. BOLTON (United States), speaking in his national capacity, asked Mr. Malloch Brown to confirm that he had requested the press conference by the senior United Nations official.

GERHARD PFANZELTER (Austria), speaking on behalf of the European Union, said that, with its impartiality and professionalism, the United Nations was often the only hope for war-torn countries.  A recent study by the Rand Corporation on nation-building efforts -- the most complex among the Organization's field operations -- had shown the remarkable success rate of United Nations peacekeeping in that, "most challenging" area.  At present, the European Union was "by far" the largest financial contributor to United Nations peacekeeping, providing roughly 38.5 per cent of the peacekeeping budget.  It was, therefore, deeply concerned about recent allegations of fraud and mismanagement in procurement.  Those found guilty must be held accountable, with respect for due process.

He said stronger internal controls and improved oversight must be put in place, and the highest ethical standards applied.  All departments involved in the procurement process must ensure that senior managers are seized of the need to oversee the process, ensure compliance with relevant rules and regulations, and be accountable -- and be seen to be accountable -- for their actions.  At the same time, one must not forget that it was often under the most difficult circumstances and under enormous time-pressure that the United Nations was called upon to set up a peacekeeping operation.  Without delay, troops had to be deployed, equipment procured and the necessary infrastructure put in place.

Since 1948, 2,248 United Nations peacekeepers had lost their lives in the line of duty, he said.  Day by day, United Nations peacekeepers all over the world were providing essential services to Member States and their populations.  "It is our collective duty to ensure that sound management is practiced at the UN, including in the field of peacekeeping.  It is also our collective duty, as responsible Member States of the United Nations, to ensure that the overall picture of commitment, success and hard work on the part of UN peacekeepers -- who were mandated with their difficult tasks by the members of the Security Council -- is made known to the world."

JOE ROBERT PEMAGBI (Sierra Leone), speaking on behalf of the African Group, noting that the United Nations was at the height of a process of historic reform, said the Group was totally committed to pursuing the objectives of the reform.  In that regard, the Group appreciated any effort to make the Organization more efficient and capable of delivering its objectives.  It was with that view that the African Group was resolved to support measures to correct weaknesses in the management of the peacekeeping operations, particularly in procurement.

A debate on that matter, however, fell within the domain of the General Assembly, which, according to the United Nations Charter, was the Organization's deliberative, policy-making and representative organ, he added.  The General Assembly was, in fact, actively seized of the subject, and was expecting reports from the Secretary-General.  The Group, therefore, viewed today's debate as an encroachment on the Assembly's authority, particularly at a time of efforts to strengthen and revitalize it.

HAMIDON ALI (Malaysia), speaking on behalf of the Non-Aligned Movement, stressed that the Council was not the forum to discuss questions relating to peacekeeping procurement, as it was a matter that fell within the functions and powers of the Assembly.  The Assembly was the United Nations chief oversight body and oversight of procurement, including for peacekeeping operations, was its prerogative.  In fact, the developing countries had introduced the proposal, requesting the Secretary-General to conduct a comprehensive management audit of risk areas in the management of peacekeeping operations, in order to identify possible instances of fraud and abuse of authority.  The outcome of the audit, which was contained in the draft report of the OIOS, was yet to be introduced in the Assembly.  It was inappropriate, therefore, for the Council to discuss issues of oversight and management.

It was even more inappropriate, he added, to base the discussion on a report that was mandated by the Assembly.  All were aware of the consequences of the Security Council involving itself in the management of United Nations programmes.  The Volcker report, and its searing criticism of the role played by the Council, was all too fresh.  While mindful of the multifaceted character of the mandates of peacekeeping operations sanctioned by the Council, Article 24 of the Charter did not necessarily provide the Council with the competence to address issues which fell within the functions and powers of the Assembly and the Economic and Social Council.  In that regard, he cautioned against the danger of the Council's encroachment on issues which clearly fell within the functions and powers of the Assembly.

He also underscored the need for full respect for the functions and powers of the principal organs, in particular the Assembly, to maintain the balance among them within their respective functions and powers, in accordance with the Charter, as well as the need for Member States to stop any attempt to shift issues under the agenda of the Assembly or the Economic and Social Council, to the Security Council.  The Movement remained particularly concerned over the exercise of norm-setting and establishing definitions by the Council in areas beyond its mandate and competence.  He supported the ongoing efforts under the leadership of the Assembly President to strengthen its central role and authority.  The Non-Aligned Movement had called on the Assembly President to institute necessary measures to uphold the primacy of, and full respect for, the Charter and the Assembly.  The President of the Council should do likewise.  Close cooperation among the principal organs of the United Nations was indispensable, in order to ensure that the Organization was capable of meeting the myriad of challenges facing it.

Wrapping up the Council's debate, Mr. MALLOCH BROWN said he had been struck by the seriousness called for in dealing with issues of mismanagement and corruption, as well as the difficulty of dealing with evolving management issues in a political forum, such as the Council.  Words mattered, he said, as they could unintentionally imply guilt during an ongoing investigation, and they could also exaggerate, or even understate, the seriousness of certain matters.

Having been asked by the Council President to confirm whether he had asked an official to brief the press on the OIOS findings, Mr. Malloch Brown confirmed that he, indeed, had requested such a briefing, because the report had already been leaked in the press, and it had been doing severe damage to the Organization and to the individual who had been named in the document.  He said that the official had not been asked to lay out the specific recommendations and findings in the report, but because that information had been leaked, it had been very difficult to keep that press conference separate from the report.

He said the Secretary-General had been happy to have him, as Chief of Staff, brief the Council, but had warned that he was extremely concerned that the debate might become a showdown between the Council and the General Assembly over respective roles.  No one wanted that, when every member of the Organization now had to work together to push through critical reforms, such as the creation of the Human Rights Council and further management reforms.

He concurred with those Council members who had expressed concern about the field conditions, under which peacekeepers, mission staff and their families worked and lived.  Conditions of service must be improved, if the United Nations wanted a stable, motivated workforce that could prevent such problems as those highlighted in the OIOS report.  Other issues that needed to be addressed in that area were training and retooling, along with the critical need to put in place new information technology systems and services.  He warned the Council not to expect the recommendations in the management reform, expected to be issued next week, to be "easy on the pocket".  If everyone wanted to see the reforms they had asked for, it would not come cheap, but it would be well worth the investment.

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