United Nations


General Assembly

Distr. GENERAL  

2 October 1995


95-28655 (E)    181095
Fiftieth session
Agenda item 149

Report of the Secretary-General
on the activities of the
Office of Internal Oversight Services

Note by the Secretary-General             

1.  In conformity  with paragraph 5 (e)  (ii) of General Assembly resolution
48/218 B of 29  July 1994, the  Secretary-General transmits herewith to  the
General Assembly  as submitted  the first  annual  report of  the Office  of
Internal Oversight  Services, covering  activities  for the  period from  15
November 1994 to 30 June 1995 (see annex).

2.  Effective  internal oversight is a key element of management efficiency.
Accordingly, the Secretary-General  welcomed the action taken by the General
Assembly  in  its   resolution  48/218   B  to   strengthen  his   executive
responsibility by  establishing the Office  of Internal Oversight  Services.
Building on previous  initiatives by the Secretary-General to reinforce  and
consolidate the  audit, inspection and  investigation services available  to
the Organization, the Office of Internal  Oversight Services was mandated by
the General  Assembly  to assist  the  Secretary-General  in fulfilling  his
internal oversight  responsibilities in respect of  the resources and  staff
of the  Organization, and was charged  with responsibilities  with regard to
monitoring, internal  audit, inspection  and evaluation  and investigations,
exercising   operational   independence   under   the   authority   of   the

3.  In analysing  and summarizing the activities  carried out by  the Office
during  the first  seven and  a  half months  since its  establishment,  the
attached report by the Office of  Internal Oversight Services highlights the
contribution  made and  support provided  by  the  Office to  the management
reform processes under way within the Organization. 

4.   Parallel with  efforts to enhance  the Organization's  capacity in  the
field  of  peace and  security,  and  to  introduce  an improved  conceptual
framework  for pursuing  the Organization's  development mission, management
reform has  constituted a  key priority  of the  Secretary-General over  the
past  four years.  This effort  has been  facilitated  by the  simpler, more
focused  and more integrated  secretariat structures  put in  place in 1993,
and the  reorganization of the Department  of Administration and  Management
introduced early in 1994.  It is being  pursued within the framework of  the
comprehensive  management  plan  developed  by  that  Department,  the  main
elements of which were conveyed in  the General Assembly at  its forty-ninth
session   through   inter   alia   the   Secretary-General's   reports    on
responsibility  and   accountability,  restructuring,  and  human   resource

5.  The  basic purpose of this management  plan, as outlined in the  current
Annual Report  on the  Work of  the Organization,  is to  create a  mission-
driven  and result-oriented  Secretariat, with  specific goals  of  enhanced
performance,  better  productivity  and  increased  cost-effectiveness.  The
foundation   of  the  plan   is  the   new  system   of  accountability  and

responsibility. Its key objectives include:
(a)Better management of  human resources, together with improvement in staff
member capabilities and accomplishments;

(b)Better   management  of   the  Organization's   programme,   through  the
identification of  strategic priorities,  through the  budgetary process  by
which resources  are  allocated  to  achieve those  priorities  and  finally
through  a performance measurement  system by  which programme  managers are
held accountable for achieving the strategic priorities;

(c)Better information with which to manage, and its timely availability;

(d)Better  management  of  technology  and  extension  of  its  availability
throughout the Organization;

(e)Better  management of the  Organization's cost  structure and an enhanced
programme for promoting efficiency and cost effectiveness.

6.   As an  integral part  of the  same effort,  the Secretary-General  will
continue  to  support the  effective  exercise  by  the  Office of  Internal
Oversight Services of  its functions, in full  compliance with the modes  of
operation  established in  General  Assembly resolution  48/218  B.  In that
context,  appropriate, mutually  reinforcing linkages  and feedback  between
the  Office and  the Department  of  Administration  and Management  will be
further encouraged.

7.   The  Secretary-General trusts  that  the  Office of  Internal Oversight
Services will, in the  period ahead, continue to  give high priority to, and
expand its oversight  effort in  respect of peace-keeping, humanitarian  and
related  operations,  where  the  Organization  is  being  faced  with ever-
growing,  unprecedented demands, and  where the  bulk of  resources is being
expended. For peace-keeping operations alone the aggregate annual budget  at
the end of July 1995 was approximately US$  3.6 billion, almost three  times
the total annual expenditure under the regular budget.



Report of the
Office of Internal
Oversight Services
for the period
from 15 November 1994
to 30 June 1995


Preface by the Under-Secretary-General for Internal Oversight Services


General management of the Office of Internal Oversight Services
1 - 17
1 - 9

B.Implementation of recommendations and reporting procedures
10 - 13
C.Establishing priorities
14 - 17
Cost  savings  and  recoveries  resulting  from  actions  of  the  Office of
Internal Oversight Services, 15 November 1994-30 June 1995


Priority areas for oversight
18 - 52
18 - 43
1.Capacity to learn from experience
  2.Readiness to act
3.Allocation of  responsibilities between  the Department of  Administration
and Management and the Department of Peacekeeping Operations
20 - 21
4.Field Administration and Logistics Division
22 - 24
5.International contractual personnel
25 - 29
6.United Nations Logistics Base at Brindisi
7.Overall results of audits of missions
31 - 33
8.Problems specific to individual missions
34 - 43
B.Humanitarian and related activities
44 - 50
1.Office of the United Nations High Commissioner for Refugees
44 - 46
2.Humanitarian aspects of peace-keeping
3.Centre for Human Rights
48 - 50
51 - 52

Summary of major activities by oversight function
53 - 99

A.Audit and management consulting
53 - 82
1.General observations
53 - 62
2.Significant findings and recommendations
63 - 82
83 - 92
95 - 99

Oversight activities for the period from 1 August to 14 November 1994

by the Under-Secretary-General for Internal Oversight Services
  This  is the  first  summary  report on  the activities  of the  Office of
Internal Oversight  Services  (OIOS) which  I  have  the honour  to  submit,
through  the  Secretary-General,  to the  General  Assembly.  It covers  the
period between  15 November 1994,  the date when I came  aboard, and 30 June
1995. This cut-off date was chosen so  that future annual reports of OIOS to
the General  Assembly will cover the  12 months between 1  July and 30  June
and  so reach the  Assembly at  the beginning of its  session. The report of
the Office  of  Inspections  and Investigations,  the predecessor  to  OIOS,
covered  the  period up  to 31  July 1994;  for  the sake  of continuity  in
reporting to the Assembly, the appendix  records oversight activity for  the
period from 1 August to 14 November 1994.

  OIOS is  a new  office and  consequently I  wish to introduce  this report
with some personal observations while my  perceptions are relatively  fresh.
For almost 50 years,  internal oversight was, at best, underdeveloped in the
United  Nations and  it  was undoubtedly  understaffed.  Internal  auditing,
programme  evaluation, and  monitoring played  a  marginal  role as  part of
administration  and  management,  lacking  independence and  authority.  The
inspection  function did not exist within the  Secretariat. An investigation
unit did not exist.  I believe that some of the deficiencies and  weaknesses
which an  increasingly  critical public  nowadays  seems  to detect  in  the
United Nations  have something to do  with the  traditionally weak oversight
function:  the  bureaucracy  has  grown  without  pruning  for  many  years;
procedures and structures have become too rigid, frustrating creativity  and
individual initiative;  overlapping and duplication of responsibilities have
not been adequately addressed let alone eliminated.

  There  are  further reasons  why  the  management  reality  of the  United
Nations is less than perfect:

(a)Rules and  regulations are  too complicated  and simply  too numerous  to
serve as clear guidance for  staff. A concerted effort must be made to  weed
out or reformulate  what has become obsolete  or been superseded.  OIOS will
be involved in  such anexercise together  with the Office  of Legal  Affairs
and the Department of Administration and Management;

(b)The  personnel system  is  cumbersome;  the hiring  of new  talent  is as
difficult  as the  termination of  non-performers. The  "buy-out  programme"
that  the  Department of  Administration  and  Management has  initiated and
related measures would enhance rotation and mobility of staff;

(c)Managerial and  administrative  skills are  not well  distributed in  the
Organization. While  there is an impressive  reservoir of  expertise in most
substantive fields  of work,  the Organization  does not  have a  sufficient
number  of  well-trained  and  experienced  administrators  to  staff  chief
administrative officer  positions in,  for example,  peace-keeping missions.
The  Office of  Human Resources  Management  is  launching a  major training
programme to raise management awareness.  OIOS strongly endorses this effort
and recommends  that it  be extended  to include  all levels  of management,
from top to bottom;

(d)There  is a lack  of horizontal communication in  the United Nations. The
different departments do  not know enough  about each other's work  and this
creates  the danger  of  unintentional overlapping  and  preoccupation  with
"turf". OIOS will continue to emphasize the  need for more transparency  and

(e)Vertical communication  also needs to be improved. If staff at all levels
is expected to participate in the  management of the Organization,  dialogue
has  to  be intensified.  OIOS  joins  others  in attempting  to  bring this
important change in corporate culture about;

(f)By  the same token, efforts must  be made to  do away with the widespread
tendency  of  staff, even  in  key  positions,  to  shun responsibility  and
accountability.   OIOS  backs   measures   taken  by   the   Department   of
Administration  and Management to  achieve this  goaland will  focus its own
recommendations to management accordingly;

(g)Institutional memory in the United Nations  needs improvement and in some
key areas  to be  created from scratch. Learning  from the past is  in large
part  conditioned by  proper documentation.  Unlike some  well-run  national
Governments, there  is no  central approach  in the  United  Nations to  the
recording  of  actions and  the  maintenance  and  indexing  of files.  When
employees leave, their  experience and  factual knowledge often leaves  with
them. The oversight work of OIOS will also address this issue;

(h)The geographic spread . New York,  Geneva, Nairobi, Vienna, plus regional
commissions . reflects the world-wide mandate of the United  Nations, but is
also  the  cause  of  fragmentation  and  communication  problems. The  duty
stations away  from  Headquarters clearly  lead a  life of  their own.  OIOS
recommends a  sound mixture  of delegation  of authority  and the  necessary

  While it  is easy  to list these  shortcomings .  the international  media
have harped on  some of them for years  and turned them into United  Nations
cliches . they are  not likely to be overcome  by any quick-fix remedies for
several  reasons.  First of  all,  no  organization  of  this size  responds
willingly and  expeditiously to  reform efforts.  To change  fundamentally a
corporate culture that has grown for almost 50 years would be difficult  and
time-consuming  even  in  private  business;  it  is  much  more  so  in  an
international  organization  that  is  staffed by  people  from  around  160
different countries who bring with them  quite diverse perceptions of public
service. Secondly, the United Nations finds  itself in a difficult situation
at   present,  facing   huge   new  challenges   and   shrinking   resources
simultaneously. The Organization  has to adjust to a dramatic  environmental
change and  is at  the same time expected  to change itself. While  the need
for this  internal structural reform is  widely acknowledged,  the energy to
bring it  about is  in short supply.  And how can  it be otherwise  when the
Organization finds itself constantly under the threat of bankruptcy  because
of ever-growing  membership contribution arrears  and acute cash  shortages.
Thirdly,  discussions about reforms  tend to  turn into  political issues in
the legislative bodies. It is a  fact that among the 185 Member States there

are many divergent perceptions  about what the United  Nations is and should
be. This  results  frequently in  guidance,  mandates  and requests  to  the
United Nations Secretariat that are, from  an administrative point of  view,
less than clear and unambiguous.

  Bearing in  mind this  environment, and  that organizational and  cultural
change cannot be achieved overnight,  I believe for the work  of OIOS to  be
meaningful for the United Nations, it has to be systematic and thorough  and
should not aim at spectacular, short-lived actions. OIOS has  to provide the
United  Nations with  a steady, continuous oversight  coverage that promotes
effective and efficient  programme management and prevents future  problems;
we also have to find and report on  current problems regarding waste, fraud,
abuse and mismanagement. Since our resources  are limited, I will  make sure
that we  use them intelligently,  giving priority to  those areas  of United
Nations work that are particularly risk-prone in these respects.

  OIOS  has begun to meet  with success in  embracing its  new set of tasks.
Almost every day I  receive indications that we  are having an  impact, that
our deterrent as well  as our proactive roles  are being recognized. Some of
these  signals are particularly  encouraging because  they give  rise to the
hope that OIOS can  be more preventive than  detective; others tell  me that
there is a lot  of fear and  apprehension about this new office,  misgivings
as well as misunderstandings.  Many United Nations managers  are not used to
and seem to  be quite reluctant  to accept  criticism, particularly when  it
comes  to applying  accountability  criteria  rather than  settling for  the
promise that some specific  problem won't recur. This feature of the  United
Nations culture must be  changed if we are  ever to develop  staff awareness
and  acceptance  of   responsibility  and  accountability.  United   Nations
managers must stop being defensive  and enter into a  critical dialogue with
OIOS.  In  order  to    make  oversight  effective,  we  offer  ourselves as
partners, not adversaries.

  United  Nations  managers  should also  adopt  a  positive and  supportive
attitude   towards  internal  control.   They  should   be  aware  that  the
establishment and maintenance of an effective  internal control system is  a
managerial responsibility  which cannot  be left only  to an  organization's
oversight  services. OIOS  feels that  the  adoption of  a set  of  internal
control standards  by the United Nations  would raise  managers' support for
adequate  internal controls  and would  provide  a  benchmark to  assess the
systems  in place. OIOS will  play its role  in identifying specific control
objectives for different categories of operations.

  Occasionally,  OIOS findings  and recommendations  are challenged  on  the
grounds that  OIOS may not have  the technical expertise to appreciate fully
the complexity of a problem. I view such  reaction as understandable, but in
most  instances as  not  justified.  By  and  large  the expertise  that  is
relevant to our work is that of oversight activitiessuch as audit. The  work
of OIOS  is certainly not beyond reproach, but in the short time I have been
in  office  I  have  been  impressed   by  the  professional  solidity   and
reliability  of the  staff under  my direction.  When specialized  technical
expertise  beyond that  available  in  OIOS  is needed  it  has been  proved
obtainable through short-term arrangements.

  As  far as my own role is  concerned, I see myself first  and foremost, of
course,  as responsible  for  managing day-to-day  operations  and  securing
interaction  between  the  four  oversight  units  so that  they  work  in a
complementary way and their integration under  the auspices of OIOS will not
result in  duplication but  enhance the  effectiveness of  oversight. But  I
also view  my role as  being an agent  for positive  change; after  all, the
recommendations  in  the  OIOS reports  are  merely  vehicles for  promoting
change and need  the support of  senior management to ensure  compliance. In
saying this, I am fully aware  of the fine line that  I have to walk between
cultivating a  friendly, trustful  working relationship  with my  colleagues
and  preserving  my  objectivity  and  operational  independence.  Since  my
mandate directs  me to be critical  rather than to  praise, my partners  may
sometimes feel disappointed that my comments  do not adequately reflect  the

ways  in which they  are actually  striving to improve  things. Perhaps then
this report is a good opportunity  to state that those presently responsible
for management in the Secretariat are making a  valiant effort to better the
administrative performance of this Organization and deserve  all the support
they  can  get.  The  same is  true  for  the  Department  of  Peace-keeping
Operations and  the Department of Humanitarian Affairs, two departments that
are struggling to cope with enormous tasks and inadequate human resources.

  Coming back to my  own set of  tasks, I have found it necessary  to become
heavily and  personally involved  in some of  the major surveys  and studies
that OIOS  produces, and  in some  of the  problems it  faces in  monitoring
compliance  and offering management advice. I have  already paid inspectoral
visits  to other  major  duty  stations (Geneva,  Vienna),  a  peace-keeping
mission (the  United Nations  Protection Force  (UNPROFOR)), and a  regional
commission (the Economic Commission for Africa  (ECA)). I have submitted  my
observations  from  such trips  to  the  Secretary-General  and to  relevant
department heads and have found them to be quite receptive.

  Let me conclude  with a little  personal success story.  Already before  I
came to  New York to  start my  new job,  it came  to my  attention that  an
ongoing  United Nations  practice was  to telex  important  Security Council
decisions to  all member Governments at  the cost  of approximately $100,000
per year. Obviously, most member Governments  would also receive these texts
through their New York  missions. So I instructed  the OIOS auditors to look
into this  matter  and because  of  OIOS  intervention the  three  pertinent
departments  worked  together  to  design  a  much  more  economical  way of
disseminating the Council decisions.

  The  United Nations has a  lot to offer  to the  world community, but much
remains to be done to  make the Organization fit for its present and  future
challenges. OIOS will do its share towards achieving this goal.

(Signed)Karl Th. Paschke
for Internal Oversight

New York, 31 July 1995

Report of the Secretary-General on the activities
of the Office of Internal Oversight Services

A/50/459A/50/459  I
  General management of the Office of Internal Oversight  Services

A.  Background

1.    The  General  Assembly,  in  resolution  48/218  B  of  29  July  1994
establishing  the Office  of  Internal Oversight  Services  (OIOS),  clearly
expressed its  intention to  enhance oversight functions  within the  United
Nations,  in view  of the increased  importance, cost and  complexity of the
Organization's    activities,   through   intensified   evaluation,   audit,
investigation  and compliance monitoring.   The  Assembly also  stressed the
proactive and advisory role of the new office,  and the expectation that  it
would  give  assistance and  provide  methodological  support  to  programme
managers   in   the   effective   discharge   of   their   responsibilities.
Furthermore,  OIOS  was  expected  to  monitor  closely  the  compliance  of

managers  with its recommendations  and to  transmit reports  about its work
that  provide  insight  into  the effective  utilization  and  management of
resources, through  the Secretary-General  to the  Assembly.   On 24  August
1994 by  its decision 48/323,  the Assembly approved  the nomination of  Mr.
Karl  Th.  Paschke   as  Under-Secretary-General   for  Internal   Oversight
Services.  He assumed his duties on 15 November 1994.

2.   The starting dilemma for OIOS was that it  was supposed to deliver more
and  provide something  new,  better and  more effective,  but  that  it was
requested to do so  within existing resources.  In fact, the only additional
funds  OIOS  had  to  deliver  more,  and  something  new,  within  existing
resources.made available to the  new office were those  needed to upgrade an
Assistant Secretary-General  to an  UnderSecretary-General post.   In  early
December  1994,  the  new  Under-Secretary-General  went  before  the  Fifth
Committee  and  the  Advisory  Committee  on  Administrative  and  Budgetary
Questions, described  his  philosophy,  the  plans and  the  aspirations  he
brought  to  OIOS  and  stated  that he  could  not  measurably enhance  the
internal control  mechanisms in the United  Nations without more  resources.
In particular, he pointed  to the need  to intensify the audit coverage  and
shorten  the audit cycle within  the Organization and to  strengthen the new
investigation  function  which,  at  its   current  level  of  staffing  and
professional experience,  was unable  to provide  this important  additional
element to oversight.

3.  The legislative  bodies reacted favourably  and OIOS, which had a  total
of  102 posts,  was granted  5 additional  Professional and  3 more  General
Service posts  against the revised budget  estimates for  1995, bringing the
total  number of posts  to 110,  including extrabudgetary  posts. Beyond the
ensuing  moderate improvement  in its  staffing situation,  OIOS  understood
this decision  as a significant and  encouraging endorsement  of its efforts
to make internal oversight an effective, credible  and independent component
of the management structure of the United Nations.

4.  In the  meantime, OIOS has  defined its staffing requirements for  1996-
1997, found  them mostly supported by  the Department  of Administration and
Management and  defended its budget proposals  in the  Advisory Committee on
Administrative  and  Budgetary Questions.    In  these proposals,  OIOS  was
mindful of the difficult overall financial  situation of the United  Nations
and the intention  of the Secretary-General to present a lean budget without
any significant increases, also taking  into account that a new office needs
some time  to gain full adequate strength  and that there is a limit to what
it can intelligently  absorb at  the very start of  its operation.  So,  the
OIOS submission  for the next  biennium can only  be characterized as  quite
moderate  and  responsible.   It  has  to be  underlined,  though, that  for
internal oversight  to be a meaningful  component of  the management culture
of the  United Nations, OIOS staff will have to be  further increased in the
following years. However, the highest priority  in the personnel area during
the reporting  period was  given to further  improvement of  the quality  of
OIOS staff performance.   It is obvious  that the level of those  activities
of the Organization that  are high in  risk and cost will climb  rather than
shrink in  the future.  A more  intensive audit  coverage is  called for  in
areas  likepeace-keeping,  procurement, programmes/projects,  and electronic
data processing.   Management  audit and  consultancy  activities also  will
have to be further strengthened.

5.  A number of procedural measures were taken to put OIOS on the map.   The
different functions of  the four units  were clearly  spelled out and  their
interaction and cooperation secured.  In  keeping with General Assembly OIOS
has been put on  the map.resolution 48/218 B, procedures were developed  and
communicated  to the Organization  with regard to the  reports that OIOS was
to submit to the Secretary-General for  transmittal to the General Assembly.
In the same  context, a system was created  that will allow OIOS to  monitor
closely  the  implementation  of  its  recommendations  by  the  responsible
managers.  The shortage of staff of the initial  phase of OIOS also prompted
the  Under-SecretaryGeneral  to  make  a plea  for  temporary  assistance to
Member States,  which was  favourably received by  some and resulted  in the

secondment of professionals from the Republic  of Korea, the Netherlands and
Germany, the latter country also pledging  financial means for the temporary
hiring of a Professional from a third world country. 

6.   To secure operational independence for the Office in personnel matters,
OIOS established  an  appointment and  promotion  panel  of its  own,  which
advises the UnderSecretary-General on questions and decisions pertaining  to
the selection and career development of OIOS staff.

7.  In accordance  with paragraph 5 (c)  (ii) of General Assembly resolution
48/218  B,  the  scope of  the audit  activity  within the  Organization was
widened  to include management  audits, reviews  and surveys  to improve the
structure of  the Organization; its capacity  to oversee  the growing impact
of  electronic data  processing on  United  Nations management  was  equally

8.  The new Investigation Unit  still has to be equipped  with a set of work
procedures,  a manual, etc., to  provide a reliable  frame of reference both
to  its  employees and  United Nations  employees  in  general, so  that due
process  is  guaranteed,  confidentiality  of  sources  is assured  and  the
methodology of the investigating activity understood by all concerned.

9.   Paragraph  11  of  General Assembly  resolution 48/218  B  provides one
further  challenge  to  OIOS.    The  office  is  requested  to  develop  an
understanding with  the "United  Nations operational  funds and  programmes"
(such as  the  United  Nations  Development  Programme  (UNDP),  the  United
Nations Children's Fund (UNICEF), the UnitedNations Population Fund  (UNFPA)
and the World Food  Programme (WFP) about  its relationship with them.   The
wording of  the resolution  suggests  that  its text  also pertains  to  the
internal oversight  functions  of such  funds  and  programmes and  aims  at
bringing  about  common standards  for  internal  oversight  throughout  the
United Nations family. As  a first step towards this goal, OIOS has  started
a survey  of the organizations  in question in  order to  take stock  of the
oversight  functions in place.   On  the basis of such  a synopsis, specific
issues of harmonization, coordination, cooperation, exchange of  experiences
and  work  results  will  be  identified  and  discussed  with  the relevant
executive  boards.  A  report will  be submitted to the  General Assembly at
its fiftieth session.

B.Implementation of recommendations and reporting procedures

10.   Pursuant to  paragraph 5  (c) (v)  a. of  General Assembly  resolution
48/218  B, the Secretary-General  has developed procedures for the follow-up
of  audits,  inspections  and  investigations  undertaken  by OIOS.    These
procedures have been  specified by the Under-Secretary-General for  Internal
Oversight Services and communicated to all  heads of departments and offices
under the  authority of  the Secretary-General  for the  information of  all
programme managers.  The  procedures spell out what  action has to  be taken
at  what time on  the part of the  programme manager and on  the part of the
oversight staff, respectively, covering the period  from completion of field
work  until  the  implementation of  recommendations.    They  also  include
provisions  for the  resolution of  disputes over recommendations  issued by
OIOS.  Furthermore, programme  managers are required to report to OIOS on  a
quarterly basis  on the status of  implementation until  a recommendation is
reported as fully implemented.

11.   OIOS has  developed, and is in  the process of refining,  a monitoring
machinery,  using existing electronic  databases, which,  however, had to be
adapted to the new monitoring  requirements as mandated by  the General OIOS
closely   monitors   implementation   of  recommendations.Assembly   in  its
resolution  48/218  B.   This  machinery enables  OIOS  to  monitor,  at the
working and  at the front  office level, the  status of each  recommendation
issued.  At the  same time, OIOS intends to  continue its effort to make its

recommendations  easier to  implement.   OIOS  will  alsocontinue  providing
assistance   to   departments  and   offices   in   effective   and   timely
implementation of its recommendations.

12.   Pursuant to  paragraph 5  (c) (v)  b. of  General Assembly  resolution
48/218  B,   the  Under-SecretaryGeneral  for  Internal  Oversight  Services
submitted his  first semi-annual report on  the status  of implementation of
recommendations  of  OIOS  for  the  period  ending  31  March  1995  to the
Secretary-General.      The   report   established   a   baseline   set   of
recommendations, the implementation of which will be continuously  monitored
and updated  according to the procedures set forth in document ST/SGB/273 of
7  September 1994.   One  of the  major  findings  of the  first semi-annual
report  was  a  fairly  low  response  rate  by  programme  managers to  the
communications issued by OIOS,  which is mainly owing to a poor response  to
audit communications  and an  even lower  level of  implementation of  audit
recommendations by programme  managers.  Furthermore, programme managers  in
general  had  not  yet  internalized  the  quarterly  reporting  requirement
established by document ST/SGB/273, with only one head of  department/office
sending a quarterly report  covering the first  quarter of 1995.  All  heads
of  departments/offices who  had not  complied with  the quarterly reporting
requirement were apprised of  the negative conclusions to be drawn from  the
findings  of the  first semi-annual  report  and  were requested  to improve
their compliance  procedures.  In particular,  they were  informed that non-
compliance  with  OIOS  recommendations  and  procedures would  have  to  be
explicitly recorded in future semi-annual reports.

13.  The second semi-annual report by OIOS  on the status of  implementation
of recommendations  covering the  period ending  30 September  1995 will  be
submitted to  the Secretary-General  in  due  course.   In order  better  to
coordinate  the  different reporting  requirements,  especially  the  annual
report  to  the  General  Assembly  and   the  semi-annual  reports  to  the
Secretary-General, OIOS plans to issue an  interim report to the  Secretary-
General  covering  the last  quarter  of  1995.    Thus, future  semi-annual
reports  will cover the  first and  second half of  each year, respectively.
Paragraph   28  of  document   ST/SGB/273  set   out  eight   categories  of
information,  listed as subparagraphs  (a) to  (h), to  be included  in OIOS
annual reports.  In  terms of these eight subparagraphs, the information  in
the present report is as follows:

(a)and (b)  A description of  significant problems, abuses and deficiencies:
see paragraphs 18-100;

(c)Recommendations not approved by the Secretary-General:   for the one such
case and its disposition, see paragraph 96;

(d)and (e)  Recommendations in previous  reports on which corrective  action
has  not been  completed  or where  management  revised  a  decision from  a
previous  period:   since this  is the  first  annual  report no  such cases

(f)and (g)   Recommendations on  which agreement  could not be  reached with
management or where requested information or  assistance was refused:  there
have  been no  such  situations,  apart  from  the  one  referred  to  under
subparagraph (c) above;

(h)The  value of cost  savings recommended  and amounts recovered:   see box
after paragraph 17.

C.  Establishing priorities

14.   During the period under review OIOS concentrated  its oversight effort
on peace-keeping  operations, humanitarian and  related activities, and  the
general problem  of procurement.   Owing to  the high level  of expenditures

OIOS concentrated  on  peace-keeping  operations, humanitarian  and  related
activities, and procurement.involved  and the visibility of the  activities,
these  are areas where  uneconomical use  of funds,  and management problems
and abuses, could have the most serious effects.

15.  In the  area of peace-keeping operations,  emphasis is being  placed on
the start-up  phase of operations, the  procedures dealing  with the end-of-
mission phase, the safeguarding of assets,  the reliability of financial and
other  information  and compliance  with  existing  rules,  regulations  and
instructions.  Close attention  was given to the division of labour  between
the  Department   of  Peace-keeping   Operations  and   the  Department   of
Administration   and  Management   and   the  functioning   of   the   Field
Administration and  Logistics Division  of the  Department of  Peace-keeping

16.    OIOS  sees  its  role  in  humanitarian  and  related  activities  as
developing recommendations  directed at  better coordination  of efforts  by
the different United Nations agencies providing humanitarian assistance.   A
report  on the implementation  of recommendations in the in-depth evaluation
of the  Office of the United Nations High Commissioner  for Refugees (UNHCR)
will  be reviewed bythe  Committee for  Programme and  Coordination in 1996.
While the  United Nations Relief and  Works Agency for Palestine Refugees in
the  Near East  (UNRWA)  has  its own  audit  unit, OIOS  has  performed  an
investigation of  an allegation  by a  Member State  relating to  UNRWA (see
para. 85 below) and  will continue to provide such oversight services as are
needed.    A  report  on  an  in-depth  evaluation  of  the  Department   of
Humanitarian Affairs is scheduled for review  by the Committee for Programme
and Coordination in  1997.  An OIOS report (E/AC.51/1995/2 and Corr.1, para.
43)  has noted  the "pertinent  observations"  on  coordination issues  in a
Department of Humanitarian         
Affairs  report  on Rwanda.    OIOS will  continue  giving  priority  to the
oversight  of humanitarian and  related activities  in 1995  and during 1996
and will then be  in a better position  to present to  the Secretary-General
and  legislative   bodies  recommendations  to   help  improve  humanitarian

17.   OIOS has begun a  review of all phases  of the procurement process  as
well  as  the   general  organization   of  this  function,  including   the
implementation  of recommendations made  by the  High Level  Expert Group in
December 1994.

Cost savings and recoveries resulting from actions
      of the Office of Internal Oversight Services,
15 November 1994-30 June 1995
(Thousands of United States dollars)

Nature of financial
identified and

realized a

Recovery of overpayment
8 644

1 118Prevention of overpayment
3 516

2 315Actual expenditure reduction
1 069

182Prevention of excessive or unjustified expenditure
3 280

351Realized additional income .

.Recovery of fraudulent amount

16 820

3 981
      a  As of 30 June 1995.
Priority areas for oversight

A.  Peace-keeping

1.Capacity to learn from experience

18.  The  United Nations does not have in place proper  arrangements for the
maintenance of  institutional memory or  policies requiring the  assessments
needed to learn systematically from  recent experience in peace-keeping. The
United Nations lacks proper arrangements to  learn from recent experience in
peace-keeping.Recommendations  in  the  in-depth evaluation  report  on  the
start-up phase  of peace-keeping operations  (E/AC.51/1995/2 and Corr.1)  on
these  issues   dealt  with  end-of-mission  assessments;  exit  interviews,
debriefings  and  mid-mission  assessments;  a  peace-keeping  documentation
centre; archives  and oral histories; and  the allocation of  responsibility
for support functions.

2.  Readiness to act

19.  The efficient conduct of  peace-keeping operations, particularly in the
start-up phase, requires the  United Nations to maintain  a general state of
preparedness.  This involves, for each  substantive component of complex  An
adequate ready capacity to act exists only in the areas of repatriation  and
electoral  assistance.missions   and  for   all  support  functions,   clear
assignment of responsibility as well as  the development and maintenance  of
doctrine,  standard  operating  procedures  and  operationality,   including
stand-by arrangements.   An adequate  ready capacity  to act exists  only in
the areas of repatriation and electoral  assistance.  Recommendations in the
in-depth evaluation report on the start-up phase ofpeace-keeping  operations
(E/AC.51/1995/2 and Corr.1)  on the development of  a ready capacity to  act
were  made  for the  information,  human  rights,  civilian  police and  the
military aspects of operations.  The status of  a ready capacity to act  was
also  reviewed for  support  functions  and  recommendations were  made  on:
planning  guidelines,  planning for  a  ready  capacity  to  act within  the
Secretariat,  a  standard  planning  method  for  the  start-up  phase,  the
analytical  system  for  budgeting  peace-keeping,  security  of  personnel,
standard  operating procedures for  logistics and  personnel, OIOS review of
compliance in logistics and procurement, training  guidelines and a training

3.Allocation  of responsibilities  between the  Department of Administration
and Management and the Department of Peace-keeping Operations

20.  An inspection  was undertaken to develop a better understanding of  the
rationale for  the arrangements made  in the course  of the  last quarter of
1994  and  their  broad  implications.  By  these  arrangements,   functions
pertaining to personnel  administration and recruitment were delegated  from
the   Office  of   Human  Resources   Management   of  the   Department   of
Administration  and Management  to the  Field Administration  and  Logistics
Division of  the Department of Peace-keeping  Operations.  At the same time,
certain  responsibilities  in  the  area   of  budgeting  and  finance  were
transferred from the Department  of Peace-keeping Operations  to the  Office
for  Programme   Planning,  Budget  and  Accounts   of  the  Department   of
Administration and Management.

21.  Conclusions and recommendations of the inspection were as follows:

(a)The  inspection  team  was  of  the   opinion  that  the  allocation   of
responsibilities between  the  Field Administration  and Logistics  Division
and  the  Peace-keeping Financing  Division  was  warranted,  clarified  the
allocation  of  responsibilities  within   theDepartment  of   Peace-keeping
Operations  and the Office  of Programme  Planning, Budget  and Accounts and
specified the  reassignment of  the related  resources/staff on which  there
was no prior clear agreement between the two departments;

The  allocation of  responsibilities between  the Field  Administration  and
Logistics Division and the Peacekeeping Financing Division was warranted.
(b)In  order to  maximize the  benefit  from  available resources,  the team
recommended that the Peace-keeping Financing Division  should:  speed up the
filling  of its vacant posts;  institute the practice of  sending the budget
officers  to their  related field  missions  for  improved knowledge  of the
mission requirement;  and maintain  ongoing dialogue  and coordination  with
the Field Administration and Logistics Division;

(c)On the question of the delegation of authority  from the Office of  Human
Resources  Management to  the Department  of Peace-keeping  Operations,  the
team  viewed  it  as  a  step   for  improved  management  of  peace-keeping
operations, as  it  stemmed from  the  principle  that those  most  directly
responsible  for the  work programme  were to  be provided  with the maximum
operational  authority to  accomplish their  work.    However, the  team had
concerns over the ability of the  Department of Peace-keeping Operations  in
the  immediate future  to  discharge effectively  the  resulting  additional
responsibilities.  Therefore, it  recommended  that the  situation  be  kept
under close scrutiny during  the initial six months  period by all concerned
in both departments, particularly the Office of Human Resources Management;

(d)It  also  recommended  that  during  that  period,  the  Office  of Human
Resources Management  should provide  guidance to  the Personnel  Management
and Support  Service of the Field  Administration and  Logistics Division in
building up  its  capacity particularly  in  the  area of  staffing  policy,
determination  of  skill  profiles,  training  and  the  administration   of
entitlements and other benefits.

4.Field Administration and Logistics Division

22.   The OIOS  inspection review of the  Field Administration and Logistics
Division identified the following significant problems:

(a)The Field Administration and Logistics Division  does not function in  an
environment  that:     (i)  facilitates  operational  efficiency;  (ii)   is
conducive  to  effective internal  controls;  or  (iii)  promotes  effective
resource management.    Although part  of this  is clearly  internal to  the

Division, part is also  a result of  external factors that have  constrained
operational capacity;

(b)With  regard  to  personnel, the  findings  suggest  that  the Division's
complement  of  staff  is  inappropriate  in  mix  and,  in  some  respects,
insufficient   in  numbers.   They  also   suggest  that   some   functional
responsibilities are  not entirely  clear, and  that certain  organizational
linkages have clouded accountability and impeded efficiency;

(c)Finally,  from  a financial  point  of  view, the  team  found  that  the
Organization:    (i)  faces  potential  risk   in  the  form  of  unrecorded
liabilities; (ii) is potentially wasting  considerable sums of  money owing,
inter  alia, to  the  lack  of  adequate  asset  controls; and  (iii)  faces
potential  risk in  terms  of  third-party liability  because  of  uncertain
insurance coverage  in cases where troops are deployed/rotated under letters
of assist.

23.  The inspection concluded:

(a)The  Field  Administration  and  Logistics  Division  is  not  adequately
fulfilling its mandate.  The ad hoc style of administering field  operations
which  has  prevailed  should be  replaced  by a  more  proactive The  Field
Administration  and Logistics  Division needs  a more  proactive  management
approach  with   coherent,  workable   policies  and   procedures.management
approach   with   coherent,  workable   policies  and   procedures,  thereby
increasing the  capacity  to respond  more  predictably  and efficiently  in
support of peace-keeping operations;

(b)There  were three areas where  the inadequacy of  staff resources poses a
serious  risk to  the Organization:  the  Claims Administration  Unit within
Finance Management and Support  Service; asset management  and control;  and
the Staffing Unit within Personnel Management and Support Service; 

(c)Notwithstanding any  strengthening made possible  through Support Account
resources, any further requests for additional  resources should be  subject
to: (i)  the management of the  Field Administration  and Logistics Division
adequately addressing the  organizational and managerial concerns raised  in
the OIOS report; and  (ii) a satisfactory review of the methodology used  to
calculate the  Support Account resources in  an effort  accurately to relate
the needs of support operations to resource requirements;

(d)Finally,  the  findings  of  the  report   suggest  that  there  may   be
considerable merit  to reviewing the  operational support requirements  from
the field  perspective.   The results  of such  a field  based review  would
undoubtedly assist in completing the picture regarding the issues  affecting
the efficiency of peace-keeping operations.

24.  In the light of the  findings of the review, recommendations  were made
to  and accepted by the management of the Field Administration and Logistics
Division.   It should  be noted that  in general, the  Department of  Peace-
keeping Operations  has been  very responsive  to and  appreciative of  OIOS
findings and recommendations,  but frequently cites its difficult  personnel
situation as the major obstacle to swift compliance.

5.International contractual personnel

25.   The  personnel pilot  project of the  United Nations  Protection Force
(UNPROFOR)  began  in  November  1992  as  an  expeditious  way  of  meeting
UNPROFOR's immediate personnel  requirements.  Under this project,  UNPROFOR
entered into contracts  with a number of  companies to provide  the services
of international contractual  personnel. Designated as international service
agencies,  these   companies  responded   to  requests   from  UNPROFOR   by
identifying  and proposing  suitable  candidates,  and employing  successful

candidates as their own personnel while  they provide services to  UNPROFOR.
UNPROFOR, in turn,  reimburses the  international service agencies based  on
monthly  invoices  in  respect  of  the  direct  costs  of  the  contractual
personnel  (salary, insurance, recruitment  fee,travel and mission incentive
payment) and a management fee that is based on these costs.

26.  The international  contractual personnel audit  disclosed that controls
over the  deployment  of  international  Controls  over  the  deployment  of
international contractual personnel were not as stringent as those  normally
exercised over  the deployment of  United Nations staff  members.contractual
personnel  were  not as  stringent  as  those  normally  exercised over  the
deployment  of  United  Nations  staff  members.    Although   international
contractual  personnel  were  supposed to  be  recruited  for  technical and
trades  and  crafts-related  functions,  a  substantial  number  have   been
employed to  perform  administrative core  functions that  should have  been
assigned to United Nations staff members.   Further, a considerable  portion
of the services rendered by international  contractual personnel could  have
been  obtained through  service contracts.  Moreover, the  audit found  that
some international  contractual personnel  were employed  in positions  that
could  have been filled  by locally  recruited staff  at significantly lower

27.  Established procurement procedures were  not followed in the  tendering
exercise  for this project,  and the  relevant contracts  between the United
Nations and the international  service agencies providing such personnel did
not adequately protect  the interests of  the Organization.  Weaknesses were
also  noted in  the accuracy  and  completeness  of information  provided in
support of the international service agencies'  billings, and in the  checks
carried out  by UNPROFOR  prior to  authorization of  invoices for  payment.
UNPROFOR paid for  insurance in excess of what was  needed.  As a result  of
the  audit,  an amount  of  more than  $200,000  was  recovered  and another
$300,000 is  pending recovery.  Inadequate  financial checks were  performed
on  the  international  service  agencies,  which  in  some  cases  lacked a
previous performance  history and  had limited  assets.   A thorough  credit
review would  have disqualified  them from  doing business  with the  United
Nations unless  a performance bond or  additional financial guarantees  were

28.    The  pilot  project  represented  a  significant  departure  from the
traditional methods of deploying  personnel to peace-keeping  missions.   In
the  opinion  of  OIOS, however,  the  Field  Administration  and  Logistics
Division  did  not  provide  sufficient  policy guidance  and  oversight  of
theproject during the course  of its initial development and implementation.
The lack of appropriate involvement  early on in the project on the part  of
the  Department  of  Peace-keeping  Operations  and  the  Office  of   Human
Resources Management  and the Office of  Legal Affairs  defeated the control
element of  checks and  balance and,  consequently, a  number  of legal  and
personnel  issues requiring  policy  clarification became  apparent  as  the
pilot project evolved.

29.   A detailed report on  the audit of this  project and actions taken  by
the Department of Peace-keeping  The approach of  the UNPROFOR international
contractual personnel  pilot project  is a  workable  alternative method  of
supporting other  peace-keeping operations.Operations in  response to it  is
contained in document A/49/914.   In spite of  the findings noted above, the
audit  concluded  (A/49/914,  annex,  para.  35)  that  the  UNPROFOR  pilot
project's approach was  a workable  alternative method  of supporting  other
peace-keeping  operations,  where  circumstances   clearly  warranted   that
approach.  Those circumstances might include,  for example, cases where  the
local  labour   market  was  limited   or  where  the  prevailing  political
conditions required the use of international  personnel.  However, the scope
of such a programme should  be closely monitored to  ensure that contractual
personnel were deployed only in those  situations where staffing needs could
not  be  filled  through  the  existing  United  Nations  staff  recruitment
mechanisms, or by contracting for the services required.

6.United Nations Logistics Base at Brindisi

30.  In  the beginning of June 1995,  auditors completed the first phase  of
the review of  operations of the United  Nations Logistics Base at Brindisi,
Italy.  The review  by the Audit and  Management Consulting Division of OIOS
disclosed  that the Base  was a viable  means of  meeting the Organization's
need  for   a  central  storage  facility   to  support  its   peace-keeping
operations.  Huge stocks of materials,  equipment and supplies were received
from closed  missions  (e.g. the  United  Nations  Operation in  Somalia  II
(UNOSOM  II) and the  United Nations  Operation in Mozambique  (ONUMOZ)).  A
considerable  volume  of stocks  had  been  sent  out to  new  and expanding
missions such as the United Nations Mission in Haiti (UNMIH) and the  United
Nations Angola Verification Mission III(UNAVEM III).   A limited capacity to
refurbish  used vehicles  and equipment  was already in  place.   During the
course  of  the review,  auditors  noted  some  inadequacies  and issues  of
importance to the management:  (a) the lack of an authorized budget for  the
United  Nations Logistics Base;  (b) the  need to establish a  clear line of
authority;  (c)  the  necessity  to expedite  the  receiving  and inspection
process  in  respect of  stocks  received  from  UNOSOM  II; (d)  inadequate
inventory  procedures;  (e)  the lack  of  proper  management  of activities
relating to  shipments between  the United  Nations Logistics  Base and  the
missions and  between  the missions  themselves; (f)  deficient packing  and
storage  procedures  at  certain  missions;  and  (g)  the  lack  of  formal
guidelines relating to  direct procurement by peace-keeping missions  vis-a-
vis  the available  stock at  the United Nations  Logistics Base.   Findings
were  communicated to the Department of Peace-keeping Operations and towards
the end of 1995 the Audit and Management Consulting Division will follow  up
the implementation of its recommendations.  A report  on  this audit will be
submitted to the General Assembly at its fiftieth session.

7.Overall results of audits of missions

31.    During the  reporting period,  audits of  the following  major peace-
keeping and maintaining operations were  conducted: UNOSOM II, UNPROFOR, the
United  Nations Mission  for  the Referendum  in  Western  Sahara (MINURSO),
UNAVEM II,  ONUMOZ,  the United  Nations  Observer  Mission in  El  Salvador
(ONUSAL), the United Nations Observer Mission  in South Africa (UNOMSA), the
United  Nations  Assistance  Mission  for  Rwanda  (UNAMIR)  and the  United
Nations Observer  Mission in  Liberia (UNOMIL).   Some  of these  operations
(e.g.,  UNOSOM  II and  UNPROFOR)  were  audited  twice.  In addition,  OIOS
resident auditors stationed in UNPROFOR, UNMIH,  UNOSOM II and in UNAVEM III
provided continuous audit coverage of these operations.

32.   These audits  of peace-keeping  operations showed  cases of  excessive
compensatory time  off by military observers,  civilian police and  military
staff   officers,   overpayment  of   mission   subsistence   allowance   to
international staff and delay  in their recovery,  instances of unauthorized
use  of aircraft  for non-official  purposes, expenditures  incurred  either
without  proper  allotments  or  exceeding  allotments,  lack  of  budgetary
controls,  excessive and  unjustified  claims for  some  transport  charges,
inadequate control over cheque  operations, lack of control  over the use of
vehicles    and   communication    facilities,inefficient   utilization   of
accommodation  facilities, lack  of  clear  policy  on  PX  operations,  and
unauthorized  major  commitments  without  review  by  the  Local  and   the
Headquarters  Committees on Contracts.  There was also a case noted relating
to shortage in the  delivery of fuel  that resulted  in a loss of  $540,000.
With regard to accounting and record-keeping,  the reliability and integrity
of accounting records were found highly questionable.   For example, cash on
hand in  different currencies revealed credit  balances in  the total amount
of  $10,603,691 and credit  balances in  three different  bank accounts were
noted totalling  $7,100,106 although  there is  no credit line  with any  of

these banks.

33.   The Audit  and Management  Consulting Division  recommended changes in
compensatory time off policies for military and civilian police in order  to
prevent  abuse.   The Department  of Peace-keeping  Operations should  issue
additional guidelines  in order  to ensure that the  Organization's aircraft
are primarily  used  for official  purposes,  and  for rest  and  recreation
purposes only  under  clearly defined  restrictions.    Control over  cheque
operations and property should be improved; effective budgetary control  and
efficient  utilization of property should be ensured; major contracts should
be reviewed  by the Local and  Headquarters Committees on Contracts prior to
entering any commitments. 

8.Problems specific to individual missions


34.   Two audits of UNPROFOR,  the international  contractual personnel (see
paras.  25-29  above)  and  the  review  of  the  civilian  component,  were
conducted at the request of the  General Assembly (resolution 49/228, paras.
7 and 8).   In the management audit of  the civilian component  of UNPROFOR,
carried out in April-May 1995, the  Audit and Management Consulting Division
noted The  management audit of the  civilian component  of UNPROFOR revealed
unnecessary,  excessive and  extravagant expenditures.unnecessary, excessive
and extravagant expenditures.  These included  the purchase of uniforms  for
civilian personnel  deemed unnecessary, snow scooters  that were  not put to
use and therefore have remained idle,  luxurious heavy buses, and  excessive
drinking  water supplies.   More  than  1,400  generators were  purchased in
excess  of  actualneeds,  many of  which were  still  found intact  in their
shipping crates and had remained there for further inspection and testing. 


35.   A resident audit team  was posted to Mogadishu during  the period from
June  1994 to  May  1995 to  provide continuous  audit  coverage  of UNOSOM.
During  this  time, the  resident  audit  staff  reviewed  all major  UNOSOM
activities, including procurement, transport, building management  services,
communications and finance and accounts.   All major contracts were audited,
including   contracts  for  food  rations  and  potable  water,  fuel,  road
transportation,  freight forwarding, firefighting, construction, engineering
consultancy,  hotel  accommodations  and  sanitation/waste removal.    These
audits  disclosed  serious   internal  control  deficiencies  resulting   in
significant monetary losses to the Organization.
36.  An  audit of the  UNOSOM II  fuel distribution  contract revealed  that
$369,000  was  paid  to  the  contractor  for  services  not  rendered.   An
excessive number  of delivery trips  during the  period from  April to  July
1994  resulted in  additional overpayments  totalling $540,000.   The  audit
also  found  that,  although  not  stipulated  in  the  contract,  UNOSOM II
provided six tanker trucks valued at $312,000 for the contractor's use.   At
the same  time UNOSOM II had  to hire trucks to  meet its own  requirements.
Two of  the trucks were subsequently  stolen from  the contractor. Moreover,
UNOSOM  II paid  the  contractor for  the  UNOSOM II  management  agreed  to
recover $909,000  of overpayments made to  the contractor  as recommended by
the Audit  and Management Consulting  Division.operation and maintenance  of
fuel  bladders at  rates  that were  higher than  the  rates quoted  in  the
original tender. This resulted in a further loss  of $100,000 to UNOSOM  II.
The management of UNOSOM II agreed to recover $909,000  of overpayments made
to the  contractor as  recommended by  the Audit  and Management  Consulting

37.   An audit of the UNOSOM II food rations  contract disclosed a number of
deficiencies in contract administration that resulted in significant  losses
to the Organization.  UNOSOM II transferred food  rations worth $1.5 million
to the contractor in  December 1993, but  failed to recover the costs  until
it  was  pointed  out  by the  residentauditor  in  August  1994.    It  was
determined  that during  the  period from  January to  June 1994,  UNOSOM II
procured potable water from the  open market at a cost  of $0.25 per  UNOSOM
II  transferred  food  rations  worth  $1.5  million  to  the  contractor in
December 1993, but failed  to recover these costs  until it was  pointed out
by the  resident auditor in August  1994.litre rather  than purchasing water
from the food rations  contractor at the contract price of $0.10 per  litre.
This resulted in additional  costs to UNOSOM II of approximately $1 million.
Management  agreed  with  the recommendation  of  the  Audit  and Management
Consulting Division to stop purchasing water  from the open market,  thereby
saving $160,000 per month.  The audit also found that UNOSOM  II allowed the
rations contractor  to use  United Nations-owned  and leased  containers and
refrigerators, even though the contract specified  that such containers were
to be  provided by the  contractor.  This  resulted in  a loss of  more than
$90,000  to UNOSOM  II. Further,  no records  were  maintained by  UNOSOM II
regarding  the  numbers  of  containers  and  refrigerators  loaned  to  the
contractor.  It was therefore recommended that UNOSOM II recover all  United
Nations   containers  from  the  contractor.    The   Audit  and  Management
Consulting Division's audit of outstanding claims relating to this  contract
raised  a number  of  other  audit  issues  and  final settlement  with  the
contractor is pending arbitration.

38.   The audit  of expenditures  for firefighting  services disclosed  that
UNOSOM II incurred unnecessary training charges  and paid $105,000 more than
it should  have for the  transportation of  firefighting equipment.   It was
recommended  that  UNOSOM II  investigate  the  transportation  charges  and
recover any overpayment in  excess of commercial freight costs.  A review of
invoices  for road  transportation of  UNOSOM  II containers  revealed  that
invoices totalling  $40,600 were fraudulent.   Based upon  further review of
the  invoices by  UNOSOM II,  downward  adjustments  were made  amounting to
$95,000. Similarly,  the audit of the  contract for construction  of an 800-
man  camp  resulted   in  the  Audit  and  Management  Consulting   Division
recommending  a  downward  cost  adjustment  of  $122,700.    Based  on this
recommendation, the contractor was paid $831,605 against $954,366 claimed.

39.  The  General Assembly, in  paragraph 1  of its resolution 49/229  of 23
December 1994, requested the Secretary-General to  give a written report  to
the General Assembly  no later than  31 January 1995 on the  progress of the
investigation   undertaken   by   OIOS   and   action  thereon   todetermine
responsibility for the theft  of $3.9 million from UNOSOM II and to  recover
the  missing funds, as  well as  disciplinary measures taken  in that regard
and controls put in  place to avoid  the recurrence of similar incidents  in
future.   The report  (A/49/843) covered  in detail  the immediate  measures
taken, the findings of the  investigation and corrective actions recommended
by OIOS  and those  taken by  the United  Nations administration.   It  also
covered  the  investigation  by  Scotland  Yard.    The  OIOS  investigation
contained findings on:

(a)The amount of cash that had been allowed to accumulate;

(b)General security conditions at the Embassy Compound;

(c)Security conditions in the administration complex;

(d)Security at the cashier's office;

(e)Examination of the crime scene;

(f)Management accountability.

40.   The  Audit and  Management Consulting  Division recommended corrective
measures to UNOSOM II concerning:

(a)Security of the cashier's office;

(b)Minimizing cash holding;

(c)Improvement of cash management;

(d)Institution of controls on cash handling;

(e)Updating of accounts.

41.   Action by  the United  Nations administration was  recommended in  the
following areas:

(a)Protection of assets in peace-keeping missions;

(b)Disciplinary and related matters;

(c)Implementation   of   the  recommendations   made  by   the  Headquarters
investigation team.

42.  The audit of Mogadishu Port Authority  showed that its operations  were
initiated under  the overall  supervision of  UNOSOM II  without the  proper
administrative  and legal  framework.   This resulted  in non-observance  of
basic  United  Nations  financial  and  administrative  rules.    Since  the
operations of  the Mogadishu Port Authority  were terminated  soon after the
audit was completed, little could be done to correct the deficiencies.   The
Audit and  Management Consulting  Division recommended that  a staff  member
should  be  designated to  recover  the  outstanding  amounts  owing to  the
Mogadishu Port Authority.


43.   An audit of  MINURSO was conducted  to review  implementation of prior
audit recommendations, and to investigate allegations of irregularities  and
mismanagement. Document A/49/937  contains a summary  of the major findings,
recommendations  and  follow-up on  the  prior  audit recommendations.   The
allegations,   made  by   the  former   Deputy  Chairman   of   the  MINURSO
Identification  Commission,   while  primarily   political  in  nature   and
therefore not within  the scope of  an audit, also  concerned management  of
the   process  of   identifying  potential   voters,  the   utilization   of
Identification Commission staff, the content of  the weekly reports, and the
utilization of  resources.   Document  A/49/884  contains  a report  on  the
allegations, the  investigation of which  concluded (A/49/884, annex,  para.

"...  the present Deputy Special  Representative is held in high esteem, and
his negotiating skills,  as well as  his credibility with the  parties, were
generally  well appreciated.   It  appeared to  us that  the complaints were
triggered primarily by frustration as a  result of non-extension of contract
and  personal  animosity. MINURSO  has  faced  regular  audits.   While  the
administrative  performance  of  the Mission  has  not  been  flawless,  the
Mission has  been responsive to the  audit recommendations and has taken, by
and large, prompt follow-up action to correct mistakes.  It should be  noted
that  before his departure,  [the former  Deputy Chairman]  never called the
attention of visiting auditors to any improprieties."

B.Humanitarian and related activities

1.Office of the United Nations High Commissioner for Refugees

44.   During the  reporting period,  UNHCR projects  in Armenia, Bangladesh,
Belize, Benin,  Botswana,  Burundi,  Chad, China,  the Congo,  El  Salvador,
Georgia, Ghana, Guinea, Hungary, India, Iraq,  Kenya, Laos, the Libyan  Arab
Jamahiriya, Namibia, Somalia, Thailand, Togo, Uganda, Venezuela, the  former
Yugoslavia, Zaire and Zambia were audited.

45.   Audits  of  UNHCR  were  generally focused  on  the implementation  of
country  programmes  carried   out  by  non-governmental   organizations  or
government agencies  of the  country concerned  and UNHCR  offices.   Audits
revealed non-compliance  with agreements  with UNHCR,lack  of accountability
for  expenditures, absence of  optimal procurement arrangements, substandard
property  control  and  ineffective  distribution  of  relief  items  to the
refugee  caseloads.    One  significant  cause  for   the  deficiencies  and
shortcomings noted  was that, in many  cases, implementing  agencies did not
have adequate staffing  or infrastructures for meeting UNHCR's  requirements
in financial and operational  terms.  There were  also other reasons such as
difficult  and  rapidly changing  circumstances  in  field  agencies  mainly
preoccupied with  their own  requirements and  objectives, as  well as  poor
management and control on the part of UNHCR.

46.   It  was therefore  recommended  that UNHCR  enhance its  capacity  for
financial  monitoring and  control over  its implementing  partners  so that
instances of non-compliance with the terms  of the subagreements signed with
those partners could be disclosed at  an early stage and their strengthening
or other remedial actions initiated expeditiously.

2.Humanitarian aspects of peace-keeping

47.  On the humanitarian aspects  of peace-keeping, the in-depth  evaluation
report on  the start-up  phase of  peace-keeping operations  (E/AC.51/1995/2
and  Corr.1) contained a  review of,  and recommendations  on, early warning
activities (including the establishment of an  early working focal point  in
the  Executive  Office  of  the  Secretary-General),  the  mobilization   of
international  emergency  response  and  the  coordination  of  humanitarian

3.Centre for Human Rights

48.  The programme  and administrative practices  of the secretariat of  the
Centre for  Human Rights  was reviewed  in the  second half  of  1994.   The
results of  the inspection are  set out in a report  to the General Assembly
(A/49/892). The  inspection dealt  with organizational structure,  programme
of work, programme oversight and administrative and financial control.

49.  The inspection team was of the  opinion that a fundamental  reappraisal
and  restructuring of the  Centre's programme  of work  was urgently needed.
The restructuring  should focus  the programme  on  priority objectives  and
strategies that strengthen its effectiveness and clearly define the  mission
of  the  Centre  in  general  and  the Office  of  the  United  Nations High
Commissioner for Human Rights in particular.  The restructuring was to be
followed by a  reorganization of  the Centre's  secretariat. Both  exercises
were  to be  completed  by  December 1994.  The inspection  team was  of the
opinion that  a fundamental  reappraisal and restructuring  of the  Centre's
programme  of work  was  urgently needed.An  effective  programme  oversight
mechanism  was  to be  established  immediately  within  the  office of  the
Assistant Secretary-General  to provide coordination, coherence and guidance
in  the  formulation of  the  work  programme  and  assistance in  designing
procedures  for monitoring  implementation, assessing  results and reviewing
progress  made.  Other  topics on  which recommendations  were made included
the quality  of servicing  provided to human  rights organs and  bodies, the

administrative  unit,   technical  cooperation   projects,  staff   training
programmes and computerization of the Centre.

50.  The report to the General Assembly  contained a review of compliance as
of 31 March 1995 by the Centre with the recommendations of OIOS.  Compliance
by the Centre  with the recommendations was  further reviewed for the period
ending 30 June 1995.   This review  indicated that little progress had  been
made in terms of the Centre's  proposed multi-phase restructuring  exercise.
In fact, the reaction  to the OIOS  recommendation on  the need to focus  on
priority objectives  and strategies to  strengthen effectiveness and  define
the mission of the  Centre and the Office of the High Commissioner for Human
Rights in  the context  of the  Vienna Declaration  and Programme of  Action
(A/CONF.157/22 (Part  I), chap.  III), continues  to  be slow.   While  some
steps have been taken, mainly in the form  of management-staff dialogue, the
more substantial  part of  the restructuring which  is to  lead towards  the
reorganization of  the Centre's  secretariat  still had  not been  initiated
pending an outside consultant's review.   Tangible improvements were made in
response to  the OIOS recommendations which  pertained to the  strengthening
of   the   Administrative  Unit,   staff   training   programmes   and   the
computerization  of the  Centre,  all of  which had  been  addressed  by the

C.  Procurement

51.  During the period under review there were 224 audit recommendations  in
the area of procurement.  Significant There  are deficiencies in the general
organization  of  the  procurement  function  and   in  all  phases  of  the
procurement process.findings from  these audits include deficiencies in  the
general organization  of the procurement  function and in all  phases of the
procurement process:

(a)General problems in the organization of the procurement function:

  (i)The  Procurement  Manual  was  outdated and  did  not  provide detailed
internal control procedures;

  (ii)    Lack  of  proper  training  and  experience  by  some  procurement

  (iii)Lack of budgetary mechanism to ensure  that sufficient controls exist
and such controls are strictly followed and monitored;

(b)Planning and initiation of contracts:

  (i)Non-establishment of lead times for all  the stages of the  procurement
cycle and inadequate coordination between all parties;

  (ii)Abuse of  emergency purchases  and  the use  of immediate  operational
requirements in the field        missions  resulting from poor or inadequate

(c)Processing of bids and awarding of contracts:

  (i)Lack of fair and competitive bidding;

  (ii)The  United  Nations  vendor roster  was  not  regularly reviewed  and
  (iii)Improper  evaluation of  vendors' proposals  resulting in  the  wrong
choice of contractor;

  (iv)Contractual  obligations  were  entered  without  first  informing the

Advisory Committee on Administrative and Budgetary Questions;

(d)Management and monitoring of contracts:

  (i)Untimely approval of contracts or amendments;

  (ii)Delay  on  the part  of the  contractor  and  failure to  penalize the
vendor for non-fulfilment of contract terms;

  (iii)Payments  for goods  delivered  and services  rendered  made  without
valid or established contracts;

  (iv)Shortcomings in payment procedures.

52.   OIOS concurred  with the  identification of  the main problems  by the
external auditors, and the High-level
Expert  Procurement Group.   The  report on  the in-depth  evaluation of the
start-up  phase  of peace-keeping  operations  contained  recommendations on
standard operating procedures for logistics and  procurement and on an  OIOS
review of compliance with the  consolidated recommendations of the Logistics
Working Group  and the High-level Expert  Procurement Group.  A recent audit
review of  procurement issues  indicates that progress  in implementing  the
recommendations  of  the  High-level Expert  Procurement  Group  and of  the
internal  and  external  auditors  is  slow  and  has  to  be  significantly
accelerated.    An  OIOS  audit  communication  on  this  matter  was  being
finalized at the time of issuance of the present report.
Summary of major activities by oversight function

A.Audit and management consulting

1.  General observations

53.  During its first year within OIOS, the Audit and Management  Consulting
Division  continued  to  conduct  independent  audits  in  conformity   with
generally  accepted auditing  standards  of all  United  Nations  activities
world   wide    for   which   the   Secretary-General   has   administrative
responsibility.   These activities  comprised those  financed from both  the
United Nations regular budget and extrabudgetary  funds.  In accordance with
General Assembly resolutions and the Secretary-General's directives, and  in
line  with  the aforementioned  standards,  the  reviews  of  the Audit  and
Management  Consulting Division encompassed the financial and administrative
as well as the management and programme aspects of those activities.

54.   Most  vacancies in the  Audit and Management  Consulting Division have
been filled.   Women's  representation improved:   four Professional  women,
two P-4s  and two P-2s,  were recruited  internationally during the  past 10
months. However, new  staff still need time  to make adjustments,  and adapt
themselves   to  the  United  Nations  systems  (administrative,  financial,
information,  etc).   It  will therefore  take  some time  before  they  can
contribute effectively to the Division.

55.   During the  reporting period,  the Division  continued to  develop the
scope and  objectives of  management auditing  in the  United  Nations.   It
identified management  problems and  developed detailed  recommendations for
improvements.  It  undertook  management  surveys,  reviewed  organizational
structures  in  order  to  suggest  more  effective  ones  and  looked  into
productivity issues.    The Division  also  rendered  advice to  management,
suggested improvements in  streamlining management structures, in  planning,
monitoring  and budgeting, work processes  and use of human  resources.  The
participation  of  auditors  as  observers  in  the  work  of  Committees on
Contracts  atHeadquarters,  Geneva,  Nairobi  and  peace-keeping  operations

where  there are  resident auditors  provided  an  opportunity to  advise on
procurement.     In   response   to  the   Secretary-General's   policy   on
accountability and  responsibility, the  Division modified  its approach  to
reporting  and now  more  frequently  names  in  internal  and  confidential
reports  the   persons  responsible  for   mismanagement,  waste  or   other
irregularity.   In  cases where  it  was  deemed appropriate,  the  Division
recommended not only recoveries  from but also administrative action against
individuals responsible for damages caused to the United Nations.

56.   During the  reporting period,  the Division/OIOS  hosted and organized
the  Twenty-sixth  Annual  Meeting  of  Representatives  of  Internal  Audit
Services  of the  United Nations  Organizations and  Multilateral  Financial
Institutions, which  was held from 22 to  24 May 1995.  The objective of the
meeting  was to  exchange practical  experience and  develop modalities  for
future cooperation and coordination of audits.   Issues and topics discussed
included  the emerging role  of OIOS, development of  an effective system of
accountability  and  responsibility,  auditing  aspects  in  United  Nations
peace-keeping  missions, procurement  and  inventory policies  and  ways  of
increasing  cooperation among oversight bodies of the United Nations system.
The  Under-Secretary-General   for  Internal  Oversight   Services,  in  his
capacity as  chair of the meeting, delivered a keynote speech on the role of
his recently established office.   Several senior  United Nations  officials
were invited to address the meeting, including the  UnderSecretaries-General
for   Administration    and   Management,   Peace-keeping   Operations   and
Humanitarian Affairs and the Assistant Secretary-General for Conference  and
Support Services, as well  as the Chairman of the Joint Inspection Unit  and
the Acting Director-General of the European Regional Commission.

57.    The  Audit  and  Management   Consulting  Division  opened  65  audit
assignments  between  15 November  1994 and  30  June  1995, broken  down as
 Headquarters section10
Peace-keeping section 12
Field section5
Electronic data processing/management
  audit section 7
European section8
African section8
UNHCR section15


58.    During  the  reporting  period  these audits  resulted  in  165 audit
communications,  which  contained 1,195  recommendations categorized  by the
following objectives:

Compliance with United Nations policies,
  plans, procedures, rules and
  regulations 496
Economic and efficient use of
Protection of assets 188
Adequacy of internal controls 207
Achievement of objectives    63

1 195

59.  These recommendations were given in the following areas:

Programme/project management301
Property management106

Cash management110
Information systems25
Financial accounting/reporting
   including budgeting205
   including consultancy   224

1 195

60.  A review  of audits conducted during  the reporting period  showed that
more  than 50  per  cent  of all  audit findings  reflect weaknesses  in the
internal  control system.  In many  cases,  essential elements  of  internal
control were More than 50 per cent of  all audit findings reflect weaknesses
in the internal control  system.lacking; in other  cases, control techniques
applied  were  inadequate.    OIOS  is  convinced  that  the  Department  of
Administration and Management embraces the notion  of internal control as  a
managerial responsibility that cannotbe left to an Organization's  oversight
services, and that  efforts to improve  the internal control  system or  the
internal control techniques are under way.  For  the record, OIOS wishes  to
point  out  that  the  basic function  of  internal  control is  to  provide
reasonable  assurance  that management's  objectives  are  achieved.    This

(a)  Effectiveness and efficiency of operations;

(b)  Reliability of financial reporting;

(c)  Safeguarding of resources;

(d)Compliance with rules, regulations and management directives.

61.  A supportive  attitude of senior management towards internal control is
therefore required  as a  foundation for  all other  components of  internal
control.   OIOS  is convinced  A  supportive  attitude of  senior management
towards  internal  control  is  required as  a  foundation.that  the  formal
adoption  of  a set  of internal  control standards  for the  United Nations
would confirm  senior managements' support  for internal  controls and their
determination  to establish  an effective  internal control  structure;  the
adoption of such standards should therefore be the first step on  the way to
an adequate  internal control system.   The  United Nations  would not  even
have to invent and elaborate its own standards  but could rely on and  adopt
generally accepted  internal control standards such  as those  issued by the
International Organization of Supreme Audit Institutions, which reflect  the
state of  the art agreed  upon by almost  all States  Members of  the United
Nations and could also satisfy the  needs of an international  organization.
Similar  standards  have  been  developed  by  the  Committee  of Sponsoring
Organizations of the Treadway Commission.

62.   The  internal control  standards to  be adopted  would include general
standards  such   as  requiring  managers   to  monitor  continually   their
operations  and  to  take  prompt,  responsive  action  on  all  findings of
irregular,  uneconomical,  inefficient and  ineffective  operations.   Other
more  detailed  standards   relate  to  documentation,  prompt  and   proper
recordings  of  transactions and  events,  authorization  and  execution  of
transactions and  events, separation of  duties, supervision,  and access to
and  accountability  of  resources  and  records.    These  standards  would
constitute a  benchmark against which existing  control structures could  be
assessed.   The standards would  have to be complemented by specific control
objectives  and control  activities identified  or developed  for  different
United  Nations   departments/agencies  or  different  categories   ofUnited
Nations operations.  OIOS is ready to  assist management in identifying  and
developing  such specific control  objectives and  activities.   At the same
time, OIOS will continue  to play its own role in monitoring and  evaluating
internal  controls  and  in  bringing   deficiencies  to  the  attention  of

management and, where appropriate, of the General Assembly.

2.Significant findings and recommendations

Peace-keeping operations

63.  See paragraphs 18 to 43 above.


64.   During the  reporting period,  OIOS audited  United Nations  technical
cooperation  projects in  China, Ethiopia,  the United Republic  of Tanzania
and South Africa and several major programmes and operations as well as  the
United Nations Access Control System and a major  contractor.  In audits  of
projects  and  programmes,   serious  weaknesses  were  noted  in   internal
controls, as well as mismanagement, poor  project management, lack of proper
planning, irregularities  in procurement, inadequate  planning and the  lack
of monitoring  and supervision  of the  project. In  some  of these  audited
projects,  no  feasibility   studies  or  cost-benefit  analysis  had   been
undertaken prior to their inception.

65.   In the  audit of  the United  Nations Access  Control System  project,
management  deficiencies were  revealed,  including weaknesses  in  internal
controls and the failure of the concerned officials properly  to monitor the
project. The  project's  failure resulted  in  a  significant waste  of  the
United Nations resources amounting to more than $1 million.

66.  Results of audits of 14 technical cooperation projects executed by  the
Department  of  Development  Support  and  Management  Services  and   other
projects revealed  cases where services  were procured without  establishing
contracts;  there was  unsatisfactory  implementation of  the  project;  and
contracts  or  amendments  were  signed  ex  post  facto.    Other  problems
included:    overbudgeting;  failure  to   ensure  satisfactory  contractual
performance;  absence  of  competent  technical  advisers;  and  failure  to
observe United Nations rules, regulations and procedures.

67.    The  Audit  and  Management   Consulting  Division  recommended   the
development  of standard  projectmanagement  guidelines  that would  provide
appropriate  controls  and  ensure  that  projects  were  properly  planned,
managed  and overseen,  and  adequately monitored  and supervised,  and that
their objectives were achieved.  The  guidelines should also include  system
development  projects,  and  cover all  aspects  of  the  system development
process, such as project management, development methodology, system  design
objectives,  system  construction, testing,  implementation,  documentation,
backup and  version control and quality  management.   A project feasibility
study  should precede  every major  project.    The other  remedial measures
recommended  include the need  for a  tighter supervision  and monitoring of
projects as  well as the strict  enforcement of proper segregation of duties
to enhance controls.   There was also a  need to improve budgetary  controls
and,  therefore, procedures would  have to  be established  in that respect,
especially in major projects.

European operations

68.   Major assignments  performed by  the Audit  and Management  Consulting
Division's European Section  included the  United Nations  Office at  Vienna

(administration   and   common   services;    visitors'   services,   postal
administration);  the International  Court of  Justice; the  United  Nations
University Institute for  New Technologies (UNU/INTECH), the United  Nations
Office   at  Geneva  (budgetary  controls,  procurement,  property  control,
visitors' service,  travel); the Economic Commission  for Europe (ECE);  the
International  Tribunal  for the  Prosecution  of  Persons  Responsible  for
Serious  Violations  of International  Humanitarian  Law  Committed  in  the
Territory of the Former Yugoslavia since 1991. 

69.  Audits of corporate contracts  disclosed cases of inadequate  planning;
questionable bases for  price increases  after contracts were awarded;  lack
of independent checks of  extra work orders  and their formal approval;  and
delays Audits  of corporate contracts  disclosed procedures  not leading  to
fair and competitive prices.in the signing  of contracts.  Irregular bidding
processes  and procedures were  disclosed:   bidding was  being conducted by
unauthorized officials contrary to existing Financial Rules; procedures  not
leading  to  fair  and  competitive  prices;  lack  of  proper  screening of
potential vendors;  bids of  proposals obtained  through limited  invitation
from  short-listed vendors;  Committee on  Contract's advice not  sought for
contracts exceeding  $70,000  prior tocommitment;  and extra  work/variation
orders  not properly  approved or  paid without  any amendment  made to  the
contract.    In the  audit  of  short-term  and  consultancy contracts,  the
following findings were disclosed:   an irregular hiring of a United Nations
retiree;  overlapping  of contracts;  excessive  consultants  fees  paid;  a
consultant hired but not selected from  the roster of qualified  candidates;
and consultancy contracts signed prior to approval by the personnel office.

70.    The Audit  and Management  Consulting  Division recommended  adequate
planning  of  major  improvements  be made  through  conduct  of feasibility
studies.    The bidding  process  and  procedures  should  also be  strictly
observed  to ensure that fair  and competitive prices are  obtained, and the
advice  of the  Committee on  Contracts  be  timely and  regularly obtained.
Proper segregation  of duties should be strictly followed.  The Purchase and
Transportation Service  should assume  its  role in  the purchasing  process
under  the clearly  defined scope  of  its  basic functions  and should  not
process  invoices  in  any  stage  nor  even  participate  in  the  contract
administration.   Likewise, substantive  offices should not interfere in any
phase  of  the   bidding  process.  Furthermore,  it  was  recommended  that
appropriate  steps  be   taken  to  strengthen  controls  over   consultancy
contracts, and the requirements under financial  rule 114.1 on the  personal
accountability  to be  applied to  United  Nations officials  whose  actions
resulted in the waste of resources for overlapping contracts.

African operations

71.    The  Audit  and  Management  Consulting  Division's  African  Section
conducted major audits at the Economic  Commission for Africa (ECA), MULPOCS
at Tangiers and Niamey, Mogadishu Port  Authority, the United Nations Centre
for  Human Settlements  (Habitat) (UNCHS),  the United  Nations  Environment
Programme  (UNEP)  (consultancy, cash  management, staff  entitlements, gift
shop,  projects  in  Africa  implemented  by  UNEP  and  the  Department for
Development Support and Management Services.

72.  The audit of  UNCHS revealed that proper control was not maintained  in
hiring outside expertise under reimbursable loan  agreements.  As a  result,
the terms  of reimbursable loan agreements  were less  favourable than those
for  experts  hired  under  special  service agreements.  The  selection  of
candidates did not include  comparison of their proposed fees.  In one case,
a staff member was able  to obtain reimbursable loan agreements amounting to
$98,000 for a  company in which  she had  been a  partnerbefore joining  the
United Nations and  with whose director  she was closely  associated.   UNEP
control  over  operations  of  two  of   its  regional  offices  was   found
inadequate.   In  the audit  of the  Department of  Development and  Support

Management Services, the lack  of a penalty  clause in its subcontracts  was
noted.  The Audit and Management  Consulting Division recommended that UNCHS
should  review  its procedures  to  ensure  competitiveness in  selection of
sources of outside expertise and to strengthen the controls over hiring  the
consultants  under reimbursable  loan agreements.   UNEP  should  strengthen
controls over  operations  of its  regional  offices.   The  Department  for
Development  Support and  Management  Services  was advised  to include  the
penalty clause in its subcontracts.   

Administration of trust funds

73.   The Audit and Management Consulting Division's  reviews of trust funds
revealed certain  deficiencies in the  accountability of the United Nations,
including non-compliance with relevant guidelines, absence of proposals  for
establishment of  trust  fund and  basic  agreements  with donors,  lack  of
substantive reports  and deficiencies in the  preparation of  the cost plans
and allotment control  resulting in  overexpenditure.   In the  case of  the
Taejon International Expo  Trust Fund, for example, remunerations  amounting
to  $82,160 were  paid to  a former  staff  member  who was  appointed under
special service agreement as Commissioner General for  the Exposition, which
exceeded the limit  of $12,000 set by the  General Assembly.  The Audit  and
Management  Consulting Division  recommended  that  management reassess  the
remuneration payments  and take  appropriate actions  in this  regard.   The
Department of  Public Information  was also asked  to close  the Trust  Fund
without delay and to return any unexpended balance to the donor.

Electronic data-processing systems

74.   The use  of information  technology and  systems is  a cornerstone  of
efforts to  improve programme management  and administration throughout  the
Organization.    Releases  1  and  2   of  the  new  Integrated   Management
Information  System (IMIS),  as an  example,  are  now fully  operational at
Headquarters.   As part of continued  monitoring of  this important project,
recommendations were made to increase  training effectiveness and ensure the
delivery of quality software.  In addition,  improvements in data-processing
operations,   contingency   planning,  disaster   recovery,  systemsecurity,
project  management  and organizational  changes  reflected  the  Audit  and
Management Consulting  Division activity.   Recommendations  were made  with
respect  to  payroll  systems  and  processes  as  well  as  improvements to
strengthen  internal   administrative  and   processing  controls.  Finally,
recommendations  with  measurable  cost-saving implications  were  made  for
improving the use of communications technology in the area of telex.


75.    In  the  audit  of  the  payroll  system,  auditors  identified  some
weaknesses and  deficiencies that  were, at  the date of  submission of  the
present report, still  being discussed with the Department of Administration
and Management.  The same  holds true for the audit of the education  grant,
where  some  cases  were identified  as  containing  significant  errors and
immediately corrected by management, while other cases are still contested.

76.  As  a routine assignment  the Audit and Management  Consulting Division
audits cases of  extended sick leave to verify  eligibility of the staff  to
take such leave at  the expense of the  Organization.  Internal  controls in
this area  As  a routine  assignment  the  Audit and  Management  Consulting
Division audits  cases  of  extended sick  leave.should be  strengthened  in
order to  prevent fraud and abuse.  The Division and the Investigations Unit

will  continue  their  efforts  to  ensure  that  steps are  taken  in  this

Joint Staff Pension Fund

77.  The Standing Committee of the United  Nations Joint Staff Pension  Fund
(UNJSPF), as a  first step to institute  its internal audit, recommended  at
its 177th meeting, held  from 10 to 14 July 1995, that a budgetary provision
be made for internal audit for the biennium  1996-1997.  OIOS considers  the
envisioned amount  to be  inadequate in  the light  of the magnitude  of the
operation and the risks involved and will continue a dialogue with the  JSPF
secretariat and the legislative bodies on this question.

Office of the United Nations High Commissioner for Refugees

78.  See paragraphs 44 to 46 above.
 Cash management

79.   In  general,  the control  of  cash should  be  further  strengthened,
including physical security, and cash management  should be improved.   Many
audits  identified such problems  as private cheques (even vendors' cheques)
that were  being encashed  by the cashiers  out of funds  in their  custody,
reconciliations  of  cash  not  being  performed  on  a  regular  basis, old
reconciling  items not being cleared, cash advances  remaining uncleared for
long periods  and improperly credited  cash receipt vouchers.   An audit  of
UNPROFOR showed  weaknesses in controls  concerning cash imprest funds, such
as access to cash  funds was not controlled, cash deliveries to sectors were
not immediately confirmed  and there was a lack  of monitoring by the  Chief
Financial Officer.   Furthermore,  a cash  shortage was  also  noted in  the
Chief Cashier's imprest.

Certifying and approving functions

80.   Serious problems  resulting in  financial losses  to the  Organization
were  attributable in  about 30  per  cent of  cases to  the failure  of the
certifying  and approving officers to execute their functions as prescribed.
Almost  50  per cent  of  the  Audit  and  Management Consulting  Division's
findings referred  to non-compliance  with existing  rules, regulations  and
instructions.  In many cases,  existing Almost 50 per cent of the Audit  and
Management  Consulting Division's  findings referred  to non-compliance with
existing   rules,   regulations   and  instructions.control   measures  were
overridden  by  those  officers.     Some  certifying  officers  lacked  the
knowledge  of pertinent rules,  regulations and administrative instructions.
Payments were approved in many cases  lacking supporting documentation. In a
number   of  cases,  officers   knew  that  certain  expenditures  were  not
legitimate owing  to insufficient funds or  existence of  specific rules and
instructions  prohibiting  such  expenditures.    Unless the  administration
makes special  efforts to  regulate the  performance of  the certifying  and
approving officers, the  Organization will not be  able to secure value  for
the money it spends.

81.   It  is  noteworthy  that as  a  result  of the  Audit  and  Management
Consulting  Division's   audits  of  UNHCR   field  offices  and   programme
activities,  the  High  Commissioner  issued  a  memorandum  promoting   the
principles    of    responsibility    and    accountability    among     the
UNHCRrepresentatives.  She  reiterated that each was personally  responsible

and  accountable  for   compliance  with  rules,  policies  and   procedures
governing financial,  administrative and  programme matters  in their  field
offices,  including effective controls  to prevent  loss or  improper use of
UNHCR's assets,  and  for taking  prompt  and  effective action  where  poor
performance  of  implementing   partners  jeopardized   the  attainment   of
programme objectives.

Savings and recoveries

82.  The potential  cost savings or recoveries  resulting from the Audit and
Management Consulting Division recommendations and corrective action  during
the reporting  The potential cost savings  or recoveries  resulting from the
Audit  and Management  Consulting  Division recommendations  and  corrective
action during the reporting period amounted  to more than $16 million.period
amounted  to more  than $16  million.   The  total  amount already  saved or
recovered  is almost  $4  million.  See the  box  after paragraph  17 for  a
detailed breakdown.


83.   During  the  period  from  15  November  1994 to  30  June  1995,  the
Investigations Unit received 63 complaints and completed 16  investigations.
Brief descriptions of the main investigations follow.

Investigation of the theft of $3.9 million in UNOSOM

84.   On 2  February 1995,  the Secretary-General  submitted to  the General
Assembly a progress report (A/49/843) on  the investigation and action taken
to  determine responsibility  for the theft  of $3.9 million  in UNOSOM (see
paras. 39-41 above).

Investigation of allegations of wrongdoing by an UNRWA staff member

85.  An OIOS  team, including two auditors, conducted an investigation of an
allegation  by a Member  State that  the contractor  for a  pilot irrigation
project had  transferred  atotal amount  of  $110,000  to the  private  bank
accounts  of the  Director of UNRWA's  Project and Development  Office.  The
team found that  the UNRWA  official had: (a)  retained $100,000 of  project
funds  in his  private  bank account,  agreed  to  act  as cashier  for  the
contractor,  and  failed  to   disclose  that  private  arrangement  to  the
Administrator; (b) failed to disclose his  potential personal benefit in the
project; (c) requested payment of the  project's second instalment from  the
donor, knowing  that a  key condition  for that payment,  completion of  the
project's  first phase, had not  been met; and  (d) failed  to ensure that a
proper   accounting  and  reporting   system  was   in  place.     The  OIOS
investigation  concluded that  the  official had  committed  misconduct  and
recommended  disciplinary  action.   OIOS  also  concluded  that  while  the
project  was poorly  monitored there  was no evidence  of wrongdoing  on the
part  of  UNRWA  as  an  agency.   An  UNRWA  Joint  Disciplinary  Committee
recommended  in a  report dated  6 January  1995 that  the staff  member  be
summarily  dismissed for  "serious  misconduct".   This  recommendation  was
immediately implemented by the CommissionerGeneral of UNRWA.

Investigation  of alleged  misappropriation of United Nations  assets at the
Gift Centre

86.  The  investigation focused on the operation  of the Gift Centre  during
the  period from  January  1992 to  June  1994.  It  found that  during  the
biennium  1992-1993 the  Gift Centre's  net income  had decreased  by 57 per
cent compared with  the biennium 1990-1991  and uncovered  several instances
where  the Gift  Centre's procedures  were circumvented  by the  contractual
staff.   This led  OIOS to  question the  competence of  management and  the
adequacy of  supervision  by  the Commercial  Activities Service,  the  Gift
Centre's overseer.  The report included  27 recommendations to the  Service,
the objectives  of which can  be grouped as follows:  (a)  to conduct an in-
depth analysis of the Gift Centre's revenues and  expenses and submission of
the results of  such analysis to  OIOS; (b)  to improve  procedures for  the
preparation of invoices, purchase orders, inspection and receiving  reports;
(c) to comply with the Gift Centre's manual of internal procedures; and  (d)
to  increase   presence  and   visibility  in   the  Gift   Centre  of   the
Administrative  Officer  of  the  Service  so  as  to  monitor  more closely
contractual  staff  performance.     The   Service  agreed  with  the   OIOS
recommendations, but disagreed  over the  size of  the inventory  shrinkage.
Using  different  estimating   procedures,  the  Service   recalculated  the
inventory shrinkage, resulting in a lower  estimate which it claims iswithin
industry norms.   OIOS is  reviewing the procedures  used by  the Service to
calculate its estimate.  The Service  is considering new options  concerning
the  operation of  the Gift  Centre,  including  contracting out  the entire
operation or retaining a labour broker with experience in retailing.

Investigation  of  misappropriation,  fraudulent  encashment  of  travellers

87.   Work continued  on action  begun during the  previous reporting period
concerning  the  misappropriation of  $28,000  in  travellers  cheques by  a
travel assistant in the Administrative Office  of the United Nations Special
Based on evidence gathered  by OIOS, the  United Nations was able to  secure
the conviction  for a criminal  act of  a staff  member and  to effect  full
eventual restitution of  the misappropriated funds.Commission (UNSCOM).   As
a  result of the  cooperation between  OIOS, OLA  and the New  York City law
enforcement  authorities, the  former staff  member was  convicted in  March
1995  of misappropriating $28,000  of United  Nations funds.   Sentencing by
the New York State  Supreme Court is  pending while the former staff  member
completes  her commitment to  make full  restitution to  the United Nations.
Partial restitution of $15,000 was  made on 6 July 1995, with the balance to
be paid by October 1995.

88.  Based on  evidence gathered by  OIOS and  its preparation of the  case,
the   management  of  the   United  Nations  was  able   to  go  beyond  the
administrative  action of  summary dismissal  of the  staff member.   It was
able, with the cooperation of local  law enforcement authorities, to  secure
the  conviction for a  criminal act of a staff  member and to effect through
court  action, for  the  first time,  an eventual  full  restitution  of the
misappropriated funds from the staff member.  This is convincing proof  that
United Nations  management  is now  determined  to  pursue court  action  to
punish  violators and  recover its  assets.   It should  serve as  a  strong
deterrent to future violators.

Investigation of an allegation concerning abuse of authority in ONUSAL

89.  OIOS conducted an investigation into allegations that  a senior manager
in ONUSAL had  abused his authority by: (a)  appointing a staff member  with
whom he  had a close, personal  relationship to a position of Administrative

Officer directly reporting to him; (b)  granting her a special postallowance
based on  a fictitious  job description;  (c) showing  favouritism; and  (d)
contributing to lowering  staff morale in the office.   OIOS found  that the
manager had not violated any established rule.  It further established  that
the Administrative Officer's qualifications and performance on the job  were
good.  None  the less, OIOS  questioned the manager's judgement  for failing
to deal  effectively with a  situation that  was creating the  impression of
favouritism and generating  dissatisfaction within the office.   Eventually,
under pressure  from the  Field Administration and  Logistics Division,  the
manager  transferred  the Administrative  Officer  to  another unit  in  the
Mission.   OIOS recommended  that the  Office of  Human Resources Management
consider  broadening staff  rule 104.10  (c)  to  include close  or intimate
relationships  such  as lovers  and  friends.    This  Staff Rule  currently
provides that  a staff  member who  is related  to another  staff member  as
father, mother, son, daughter, brother, or sister, husband or wife:

"(i)Shall  not  be  assigned  to serve  in  a  post  which  is  superior  or
subordinate in the line of authority to the  staff member to whom he  or she
is related;

"(ii)Shall disqualify himself or herself  from participating in  the process
of reaching an administrative decision affecting the  status or entitlements
of the staff member to whom he or she is related."

The recommended amendment is  to broaden the rule  to include staff  members
with  close  or   intimate  relationships  such   as  lovers   and  friends.
Reflecting present-day  developments in  societies at large,  more and  more
staff  members are engaged  in such  relationships, which  have loyalties as
intense  as familial  ties.   The amendment  will enable  management to deal
with  any  abuse  stemming  from  these  non-familial  relationships.    The
Assistant  SecretaryGeneral for  the Office  of Human  Resources  Management
agreed  to  initiate  the  process  to  amend  staff  rule  104.10  (c)   as

90.    OIOS noted  that  ensuring  standards  of integrity  and  fairness in
appointments,  extensions and  the granting  of special  post allowances  in
peace-keeping  missions had  become more  pressing  as  a result  of greater
delegation  of authority on  these matters by the  Office of Human Resources
Management to the Field Administration and  Logistics Division.  It  further
recommended  that  each  special  mission  exercise  better  monitoring  and
control over the distribution of posts  among its organizational units.  The
Under-Secretary-General  for   Peace-keeping  Operations   agreed  with  the
recommendations in the report, declaring his intention to address a note  to
the chief  administration officers in the  missions to  draw their attention
to  the   issues  raised  in   it.    On   18  May   1995,  new  guidelines,
includingcriteria  and   procedures  for  the   granting  of  special   post
allowances were issued  by the  Field Administration and Logistics  Division
to all missions.   Missions were requested  to establish local special  post
allowance  review  panels to  consider  submissions  made  to  them for  the
granting   of  special   post  allowances   and   to  submit   the   panels'
recommendations  to the  Field  Administration and  Logistics  Division  for
review and approval.


91.  The amount  of $15,000 was recovered from a former staff member who had
misappropriated  traveller's cheques  (see paras.  87  and  88 above).   The
balance of  $13,000  will  be  paid by  October  1995.   These  figures  are
reflected in the box following paragraph 17.

92.   It  is  noteworthy  that some  of  the investigative  work during  the
reporting period  was performed  or supported  by the  Audit and  Management
Consulting  Division   staff,  illustrating   the  increasingly   integrated

approach of all OIOS units to internal oversight services.


93.    In  addition  to  the  inspection  of  the  Field  Administration and
Logistics Division  referred to in paragraphs 22 to 24  above, an inspection
review of  the United Nations Conference  on Trade  and Development (UNCTAD)
was also  conducted.   The  findings and  conclusions of  the inspection  of
UNCTAD have  been submitted  to UNCTAD's  management for  its review.   They
suggest that  the secretariat  of UNCTAD  is overstaffed  and top  heavy and
that the functional  responsibilities of the divisions and their  components
lack clarity, to  the point of clouding  accountability.  They also  suggest
that the organizational structure needs streamlining and consolidation  into
fewer   divisions,   in  order   to   take   full   advantage  of   existing
complementarities.    The  inspection  has  also  identified  shortfalls  in
administrative  services, as  well as  existing weaknesses in  the oversight
mechanisms at  the levels of  formulation, implementation, coordination  and
assessment of programmes, and proposed remedial  action. On the question  of
substance, the inspection addressed  the issue from the point of view of the
structure  of  UNCTAD's  programme  and  its  orientation  within  the   new
international context.


94.   The function of  monitoring of programme performance  has been further
strengthened in order to become a more useful instrument of management.   To
this  effect  a  more  transparent  and  effective  system  of  information-
gathering  for  oversight  purposes  has  been  established,  especially  in
respect of  changes introduced during the  process of  implementation of the
programme budget and the  reasons for these changes.   The reasons  for such
departures  from programmed  commitments  as  reformulations, postponements,
terminations and additional  outputs introduced  by the Secretariat are  now
identified and  included in a  database.  At  the same  time, monitoring and
self-evaluation  will  be viewed  as  an  integral  part  of the  managerial
oversight  responsibility,  which requires  the  generation,  on  a  routine
basis, of  data  and analytical  information on  implementation and  results
achieved, including  the use  of achievement  indicators where  appropriate.
General  guidelines  for the  establishment  of  such  managerial  oversight
functions, including  the development  of performance  indicators are  under
preparation for the guidance of programme  managers.  The implementation  of
these  guidelines  will  be  monitored  regularly  to review  how  programme
managers, throughout the  Organization, collect and assemble information  on
their respective programmes in order to  keep appraised of progress, analyse
performance,  enhance  the economy  and  efficiency  of  implementation  and
establish  adequate management  accountability  systems.   Such  information
will  become  an  integral   part  of  the  biennial  programme  performance
reporting to Member States.


In-depth evaluation of peace-keeping operations: start-up phase

95.   The final  report (E/AC.51/1995/2 and  Corr.1) reviewed  the status of
the  recommendations  made  in  the  1994  progress  report  concerning  the
capacity of  the United  Nations to learn  from its  experience with  peace-
keeping operations,  and  its ready  capacity  to  act for  six  substantive

components  of  complex  missions:    information, electoral,  repatriation,
human rights, civilian police and military.   In addition, the  final report
reviewed overall direction and    
coordination  and  the humanitarian  and  civil  administration  aspects  of
peace-keeping  operations, as  well as  six  support functions:    planning,
financing, staffing,  logistics, procurement and  training (see also  paras.
18 and 19 above).

96.   The  Committee for  Programme  and  Coordination discussed  the  final
report  on the in-depth  evaluation of  the start-up  phase of peace-keeping
operations  at  its  thirty-fifth  session,  and  commended the  report  and
endorsed recommendations 1-3, 6-8 and 13-19.   The Committee considered  the
recommendations  on human  rights  and the  humanitarian  aspects  of peace-
keeping, "needed  to be examined further  by the relevant  intergovernmental
bodies" (A/50/16,  para. 264).   The  two recommendations  on training  were
adopted with  caveats.   On the  information aspects  of peace-keeping,  the
Committee was  informed (para. 261 (d))  that the  Secretary-General was not
in favour  of  the OIOS  recommendation  to  assign responsibility  for  the
information  component to  the Department  of Peacekeeping Operations.   The
Committee  recommended   that  "the  Secretary-General  take  all  necessary
measures to provide adequate support to that area" (para. 266).

In-depth evaluation of the environment programme

97.    The  general  thrust  of  the recommendations  was  to  refocus  UNEP
activities by strengthening its partnership with other organizations  within
and outside of the United  Nations system, with due regard to its role as  a
global environment programme.  The evaluation  team reviewed the whole range
of  UNEP  activities.    The  report  contained  an  overview  of  the  UNEP
organizational  context, but,  because  of limitations  of  space,  provided
analyses of  issues  only where  problems  needed  to be  characterized  and
recommendations made.

98.   Specific recommendations were made  on the catalytic  role of UNEP  in
emerging   environmental   issues;   UNEP   coordination  of   environmental
programmes  within the  United Nations  system; allocation  of  resources to
programmed UNEP  activities; credible  scientific assessments;  coordination
of environmental assessment within UNEP; discontinuation of superseded  UNEP
assessment  services; access  to scientific  data; national  capacities  for
state  of  the  environment  information;  a   common  set  of   indicators;
facilitating the coordination of  international environmental agreements;  a
comprehensive  database  on national  and  international environmental  law;
support  services to  convention secretariats;  resources  for environmental
law and institutions; focus of  UNEP activities on  capacity-building; needs
assessment for  capacity-building; UNEP  role in  environmental training;  a
strategy for  environment information;  UNEP role as  information broker  to
policy makers;  UNEP public information  material; outposting of  programmes
to regional offices; support to major  groups; fund-raising; and OIOS  study
of the effects of recent reorganizations in UNEP.

99.   The Committee  discussed the  evaluation report  (A/50/16, paras. 242-
248)  at its  thirty-fifth session,  expressed appreciation  for the quality
and  comprehensive nature  of the  report,  stated  that it  was in  general
agreement  with   the  main   thrust  of   the  report   and  endorsed   its
recommendations,  subject   to  the   differing  views   expressed  by   the
delegations  during the discussion  and subject  to the  subsequent views of
the Governing Council of  UNEP (para. 246).   The Governing Council of UNEP,
in  decision 18/5,  took  note of  the report  and  the conclusions  of  the
Committee on  it, and requested the  Executive Director  to take appropriate


Oversight activities for the period from 1 August to 14 November 1994

A.  Audit and Management Consulting Division

    1.  AMCD outputs for the period from 1 August to 14 November 1994

Assignments opened

Audit communications with recommendations issued during same period

Recommendations made during same period





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