26 May 2006

Budget Committee Briefed on UN Fact-Finding into Allegations of Procurement Irregularities

NEW YORK, 25 May (UN Headquarters) -- The Fifth Committee (Administrative and Budgetary) this morning was briefed on the Organization's fact-finding into allegations of procurement irregularities, including a study commissioned by Deloitte Consulting and its relation to previous internal and external audits, in response to a series of questions raised by delegations earlier this week.

Providing a background for the study, Jayantilal Karia, the Director of the Accounts Division, Office of Programme Planning, Budget and Accounts (OPPBA) and Officer-in-Charge of Procurement Services, noted that, on 15 August 2005, Procurement Service leadership responsibility -- at the Secretary-General's direction -- had been withdrawn from the Assistant Secretary-General, Office of Central Support Services (OCSS) and temporarily placed under the day-to-day responsibility of the Assistant Secretary-General, Controller, Office of Programme Planning, Budget and Accounts.  That had been done in reaction to the arrest by the United States Federal Bureau of Investigation and a guilty plea on 8 August 2005 in United States Federal Court of a senior procurement officer, Alexander Yakolev.

He added that the Secretary-General had, on 2 September 2005, approved a review of the control environment within the Procurement Service, to be conducted by one of the firms already on contract with the United Nations Development Programme (UNDP).  After a competitive process, Deloitte Consulting had been selected on the basis of a panel's recommendation to the Chief Procurement Officer.  Deloitte had begun its review on 4 October 2005 and had completed its work by 30 November 2005.  During the study, which had been submitted to the Secretary-General on 1 December, dozens of procurement professionals had been interviewed, including the Assistant Secretary-General for the OCSS.

The findings of Deloitte's study, he said, included that, given the system control deficiencies within the Procurement Service, procurement staff effectively constituted the only controls in place.  Such significant reliance on people left the United Nations extremely vulnerable to potential fraudulent or corrupt activity and provided the United Nations with limited means to either prevent or detect such actions.  Procurement staff lacked sufficient professional development support and training in procurement processes.  The existence of prior reports that had not uncovered a lack of internal controls, or OIOS findings of potential significant fraud, did not diminish the validity of those later findings, as they had been conducted in the wake of the guilty plea by a senior procurement officer, as well as findings of fraud by the Volcker Commission.

Regarding the eight staff placed on administrative leave to facilitate the ongoing audit and investigation into the Organization's procurement activities, he said the Procurement Task Force had over 500 cases that had been reported to the Office of Internal Oversight Services (OIOS).  No Member State would want the OIOS to rush an investigation and jeopardize the integrity of its findings.  In fact, the Organization was dedicated to a full and fair investigation, and to pursue allegations of corruption in the United Nations.

On another issue he said the Independent Procurement Task Force, under the aegis of the OIOS, was currently investigating more than 500 cases, including whistle-blower complaints, related to procurement and procurement activity.  That was a direct reaction to the arrest by the United States Federal Bureau of Investigation, and guilty plea in United States Federal Court of a senior procurement officer.  In the wake of the "oil-for-food" programme, the only responsible thing to do was to investigate all allegations of wrongdoing and corruption, particularly since an independent investigatory and audit body had found significant indicators of widespread corruption.  "The investigation should be allowed to run its course and should not be subject to public debate", he said.

Regarding the initially planned forensic review, he noted that, in light of irregularities found in the procurement process, it was necessary to conduct a forensic review of past transactions in order to perform due diligence.  While it had been initially planned for an outside contractor, as OIOS was also conducting investigations on numerous procurement cases, it had not been feasible at the time to start the forensic audit.  In the meantime, the Secretariat was conducting diagnostics over procurement data to determine any anomalies for further review.  As there was a large volume of transactions worth hundreds of millions of dollars, a forensic review might still be required.

Responding to comments that the OIOS had been unaware about the delegation of procurement authority by the Management Department to the Department of Peacekeeping Operations when it had prepared its report, he noted that delegation of procurement authority to the Assistant Secretary-General for Peacekeeping Operations/Office of Mission Support had been effective 7 June 2005.  Two months later, on 8 August 2005, a senior procurement officer had pled guilty in United States Federal Court.  As the OIOS Management Audit of Procurement covered the period 2000 to September 2005, two and a half months of procurement activity under delegation to the Department of Peacekeeping Operations Assistant Secretary-General had been examined, as well as 65 months of peacekeeping procurement activity under the direct responsibility of the Assistant Secretary-General for the OCSS.

In 2005, the total value of procurement conducted by the peacekeeping missions was $837.6 million, he said.  Peacekeeping missions had procured a total of some $175 million under the delegated authority.  Of the $175 million, a number of procurement actions from the field were against systems contracts already established by the Headquarters Procurement Service, as well as procured items subject to the Committee on Contracts' approval, which, until the corruption scandal had broken, had reported to the Assistant Secretary-General for the OCSS.  The total value of goods procured under delegated authority to the Department of Peacekeeping Operations amounted to some $125 million out of a total $837.6 million -- about 15 per cent.  As the OIOS audit had covered 2000 to 2005, 95 per cent of all transactions were under the responsibility of the Assistant Secretary-General for the OCSS during the period.

A serious shortage of staff in the Procurement Service had led to critical tasks and operational procedures being overlooked, he said.  Several requests for additional staff had been rejected even before the staffing proposals had been submitted to the General Assembly.  A review of budgetary requests by the Procurement Service to the OPPBA for the last three budgetary proposals showed that for 2006-2007 and for 2005-2006 the Secretary-General's proposals fully reflected requests of the Procurement Service.  As regards 2004-2005 requests, five out of six proposals for new posts had been submitted by the OPPBA, of which the Fifth Committee had supported four.

To the Chairman's remark at the conclusion of the meeting that it had lasted 10 minutes and cost about $2,000, Cuba's representative said that it was probably not necessary to comment on how much money had been specifically spent, as what had been read today was related to yesterday's request for information by representatives of Egypt, Singapore and the United States.

The Committee will meet again at a time to be announced.

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