8 November 2002


Press Release

Fifty-seventh General Assembly

Fifth Committee

23rd Meeting (AM)



The loss of $5.5 billion in the United Nations Pension Fund’s assets raised not only concerns but questions, the representative of the United States told the Fifth Committee (Administrative and Budgetary) as it continued its consideration this morning of the United Nations common system, the United Nations pension system, and the activities of the Office of Internal Oversight Services (OIOS).

The report on the investments of the Fund should be more analytical, giving a more complete picture of major activities and main developments, he said.  He would also like to know if any legal action had been taken on behalf of the Fund against any major company, given the losses suffered as a result of holdings in such corporations as Enron, WorldCom and Tyco.

The representative of Thailand encouraged the Investment Management Service to consider placing more investment in developing countries and regions.  His country hoped to welcome investments from the Fund in the near future, as its authorities were actively examining ways to provide tax exemptions to the Fund. 

Regarding the United Nations common system, the representatives of Canada and Denmark questioned a differentiated real increase of the salary scale to restore the overall margin mid-point of 115, and requested further clarification before taking a final decision.  The United States delegation was not prepared to accept any increase of the margin beyond 110, and questioned the appropriateness of doing so given the current state of the world economy.

Japan’s representative, turning to the reports of the OIOS, said his delegation was concerned, among other matters, with the follow-up on investigations into allegations of sexual exploitation in West Africa, fee-splitting issues in the International Criminal Tribunals and updated information regarding the International Research and Training Institute for the Advancement of Women (INSTRAW).

Other delegates highlighted instances of improved management and more effective internal controls, whilst also pointing to several instances suggesting that the United Nations culture of accountability was not yet fully in place. 

Also addressing the Committee were the representatives of South Africa, Iraq, Morocco and Botswana.  Rosemarie Waters, President of the Coordinating

Committee for International Staff Unions and Associations of the United Nations, Janice Albert, General Secretary of the Federation of International Civil Servants Associations, and Dileep Nair, Under-Secretary-General for Internal Oversight Services, also spoke.

The Committee will meet again on Monday 11 November, at 3 p.m., to conclude its consideration of the United Nations common system and the United Nations pension system, and to take up items related to the programme budget for



The Fifth Committee (Administrative and Budgetary) met this morning to continue its consideration of the United Nations common system, the United Nations pension system, and the administration of justice at the United Nations.  For further details, see press release GA/AB/3535 of 6 November.


LIZ NAKIAN (United States) said her delegation understood that the United Nations must be able to attract skilled men and women, from all Member States.  While she supported the Commission’s efforts to correct imbalances in the salary scale, however, she could not support the recommendation to raise the margin to the 115 mid-point.  She believed that the Commission's rationale for doing so was not fully justified.  It was her delegation’s firm belief that it was acceptable to bring the margin to 110, the lower end of the range.  Her delegation was not prepared to accept any increase of the margin beyond that, and questioned the appropriateness of doing so given the current state of the world economy. Furthermore, the proposed increase came at a time when United Nations expenditures were already $300 million over budget.

She also questioned the rationale behind the ICSC’s recommendation to increase hazard pay for local staff to 30 per cent of the mid-point of the local salary scale, which reflected a 50 per cent increase in the benefit.  She was concerned that this would destroy the equitable relationship between the benefit provided to professional and local staff, and also felt that there had been no indication that the conditions of service of staff at high-risk duty stations had deteriorated:  thus, there was no reason for such an increase.

On the issue of broad-banding, she continued, her delegation encouraged the ICSC to continue its study of the question.  However,she questioned whether broad-banding and the related link to pay-for-performance could succeed in a multicultural environment such as the United Nations because of the difficulties in perceiving equality.  Staff members were likely to question subjective decisions by managers that differentiated performance levels, which in the end led to pay rewards.  Her delegation was also concerned that broad-banding could lead to additional costs and abuses of the system.  Sound controls must, therefore, be formulated to prevent this.

Lastly, her delegation sought further clarification as to why senior management service had been determined to be a critical component in moving forward major organizational reforms aimed at strengthening the international civil service.  She questioned why the current system was unable to strengthen managerial and leadership capacity or encourage diversity at senior levels.  Should a senior management service eventually be introduced, her delegation would expect that it would not constitute a new category of staff or advisory body, and that it would not require a special pay and benefits package.  Her delegation would expect a consistent and specific set of criteria throughout the common system for justifying a post’s designation in this senior management service, and would question the inclusion of P-5 posts in the category.

THURE CHRISTIANSEN (Denmark), speaking on behalf of the European Union and associated States, said the staff of the United Nations was its most valuable asset, and the Organization’s common system remained the key instrument in ensuring that the United Nations continued to attract the people most qualified to carry out the difficult tasks entrusted to them.  The conditions of service at the United Nations must, therefore, remain competitive, with clear prospects of advancement for those who displayed the ability and skills to progress.  A clearer definition was needed of what those competencies were, and a performance appraisal system should be implemented system-wide.  The Union supported the primacy of the International Civil Service Commission (ICSC) in modernizing the common system to reflect the changing needs of the United Nations and its staff.  However, the Commission itself should remain open to change, and he eagerly looked forward to receiving details of the membership of the committee formed to review the ICSC.

The European Union, he said, agreed with the recommendation of the ICSC, contained in paragraph 141 a and b, to adjust the maximum admissible levels for expenditures covered under the education grant and the maximum education grant in the countries or currency areas specified.  Furthermore, the Union approved of the recommendation in paragraph 141 c to revise the flat rates for boarding and the additional amounts for reimbursement of boarding costs.  As for the recommendation regarding a differentiated real increase of the salary scale to restore the overall margin to the desirable, but not obligatory, mid-point of 115, the Union would like to seek some further clarification before taking a final decision.  It would be helpful if the ICSC could clarify the situation regarding the pay increase of the comparator, which had prompted the reduction in the margin.  Another issue that needed to be clarified was the timing of the proposed salary increase. 

JERRY KRAMER (Canada), also speaking on behalf of Australia and New Zealand (CANZ), said that the reform of the common system of pay and benefits was one of the most important issues before the ICSC, and he was glad that the Commission had finally embarked on its modernization.  The improvement of human resources management was key to the effectiveness of the United Nations.  The Organization needed a streamlined, more dynamic system, which would strengthen the impartiality of the international civil service, permit greater flexibility to reward staff on the basis of merit and performance, and be responsive to the changing nature of work.  The issues were complex, interlinked and involved many stakeholders. 

He said that the revision of the job classification system, the piloting of broad banding of pay linked to performance and the introduction of a senior management service were all ideas that the CANZ countries could support in principle.  The ability to deploy staff more flexibly than in the current structure could meet the needs of the system's organizations and provide enriched professional opportunities for staff.  The success of reform hinged on fair human resource management and the high quality of the performance appraisal system.  As no decisions were required of Member States at this point, he encouraged the ICSC to continue its work and initiate its pilot testing.  However, he was concerned at the long time frame for that process, and wondered if it could be accelerated.

Turning to the remuneration margin, he said that the ICSC had made a strong effort to apply the methodology for calculating that margin in the way intended.  He did not think that consideration of the proposals before the Committee was a proper context for amending the methodology.  That said, he would not deny that United Nations system compensation arrangements would be the envy of public employees in a number of Member States where inflation adjustments were not necessarily automatic and any increases at all were often linked only to performance or productivity gains.  Despite the efforts of the Commission, more information was needed before a final decision on the matter could be taken.  One issue of concern was the need to clarify the assumptions made about prospective increases for the United States federal civil service.  He was also unclear as to whether the post adjustment -- which he believed was due to be announced soon -- had been factored into the mix, and how that increase would affect the margin. 

The CANZ countries understood the reasoning underlying the proposal for differentiated rather than across-the-board increases, he continued, given that the higher grades confronted a large gap in the margin, while the lower grades were at or above the mid-point of the range.  Within that framework, what was the technical basis for any increase at the lower grades?  The need for a full understanding of the issues and options was particularly important in view of the financial situation of the United Nations.  Member States could not be insensitive to the financial implications of decisions on compensation for staff for the system as a whole.  That had a direct bearing on the capacity of Member States to finance the programmes undertaken by the United Nations. 

ROSEMARIE WATERS, President of the Coordinating Committee for International Staff Unions and Associations of the United Nations (CCISUA), said that the Committee had noted on numerous occasions the lack of competitivity of the international civil service, which had caused the loss of talented and devoted staff.  Staff representatives could not overemphasize the importance of recommendations for a differentiated real increase of the base/floor scale to address the low level of margin and to restore the overall level to the desirable mid-point of 115.  The CCISUA had also continually advocated expanding the roster of comparators to include other international organizations, since research had revealed that the current comparator was challenged to recruit the most qualified staff due to inadequate compensation.

For some time, she continued, there had been concern about the need to improve managerial capacity in the organizations.  Therefore, the establishment of the senior management service, as the ICSC had stated, had merit in building leadership and management capacity in support of major organizational reform.  The CCISUA had voiced concerns that this not become an elite group, however.  There would be a need for careful crafting of the common set of core competencies to be utilized for recruitment, selection, development and performance management.

The CCISUA fully supported mobility for staff, provided the process was monitored and managed in a responsible manner.  Staff well-being and work/life issues should also be important factors in establishing mobility and career development programmes.

On the issue of staff security, the CCISUA was appreciative of the efforts of Member States, organizations and the Office of the United Nations Security Coordinator to continually enhance the security of staff in duty stations and field missions around the world, she said.  The system of minimum operating security standards and the steps taken towards ensuring appropriate enforcement of air safety standards had also been major achievements in the critical area of service in the field.  She added that the recommendation to increase hazard pay for locally recruited staff was most welcome, and a signal of recognition of staff who served in the most difficult areas of the world.

JANICE ALBERT, General Secretary of the Federation of International Civil Servants Associations (FICSA), said that the current job classification system was outdated, and she looked forward to the development of a new master standard.  Generalized job descriptions should not lead to a lowering of standards, and while broad-banding and pay for performance would have appeal for some staff, FICSA was concerned about the impact that this could have on pay equity, the cornerstone of the common system.  FICSA believed that managers were unprepared to carry out those additional responsibilities at the present time, and believed that much of the success of those reforms depended upon improvements in management.

On the question of mobility, FICSA agreed that it needed to be examined in the context of the varying missions and mandates of the organizations.  Mobility policies could facilitate the sharing of knowledge across the system and could enhance careers.  However, the factors that inhibited mobility required further examination.

FICSA supported the new salary scales for General Service staff in Geneva, London and Vienna, she said.  It was aware of the difficulties with the current methodology, particularly in securing cooperation of local employers in the survey process.  On professional salaries, FICSA was pleased that the ICSC had recommended that the margin be restored to 115, and that a new scale be implemented in March 2003.  That action would be highly appreciated by staff who had watched the margin fall to levels below the mid-point for most of the 1990s. The investment in staff would send a positive signal, particularly at a time when the organizations were facing new challenges.

MANASVI SRISODAPOL (Thailand) said that as a country seeking to attract more foreign direct investments into its region, Thailand was particularly interested in how the United Nations Joint Staff Pension Fund was managing its assets.  He noted with satisfaction that the actuarial valuation had yielded positive results for three consecutive years, and agreed that the trend should be firmly established before any attempts were made to change the present contribution rate.

He went on to say that there was another reason why the rate of contribution should remain unchanged for the time being.  The Fund relied on two major sources of income:  one from employing organizations and employees and the other from investment income.  In the last two and a half years, revenue generated from investments had dwindled considerably, due to negative performance by equities.  The Secretary-General’s report before the Committee stated that the market value of the Fund’s assets had decreased by some 16.4 per cent.  Between March and September, the Fund’s assets had fluctuated between $20.8 and $19.9 billion.  That pointed to the volatility and high risks inherent in the securities markets.  Therefore he supported the Fund’s policy of diversifying its investments to developing countries.

As of 30 June 2002, direct and indirect investments in developing countries amounted to $1.3 billion, an increase of 17.3 per cent from two years earlier.  However, in two years, the proportion of investments in Asia and the Pacific had dropped from 15.2 to 10.2 per cent.  There had also been a decrease in the proportion of the Fund invested in emerging markets, while investments in North America, Europe and regional institutions had seen an increase in the same period.  Such a trend was disheartening to the Asia and Pacific region, particularly at a time when countries of the region were beginning to achieve a strong comeback from the financial crisis of 1997.  His delegation would like to encourage the Investment Management Service to consider investing more in developing countries.  Thailand hoped to welcome investments from the Fund in the near future, as the country’s authorities were actively examining ways to provide tax exemptions to the Fund.

THOMAS A. REPASCH (United States) said it was important to maintain a balance between ensuring the financial health of the Fund and meeting the needs of its beneficiaries.  He noted with concern that the total value of the Fund’s assets had declined by some $4.3 billion from March 2000 to March 2002.  Just the other day, Mr. Oumi [Director of the Investment Management Service] had informed the Committee that the Fund had suffered further losses of $1.2 billion since March this year, making for a total loss of $5.5 billion.  That clearly demonstrated the volatility of the assets of the Fund, which the Assembly should bear in mind when considering any changes to pension benefits.

The decline in the Fund’s assets raised not only concerns but questions, he said.  More detailed information was needed regarding investment decisions.  The Secretary-General’s report to the Board on the Fund’s investments should be more analytical, giving a more complete picture of major activities and main developments that transpired during any given reporting period.  Given the losses suffered as a result of holdings in such companies as Enron, WorldCom and Tyco, he wanted to know how investments were monitored and managed.  He would also like to know of any legal action taken on behalf of the Fund against any major company where the Fund had lost important assets as a result of illegal actions by those companies.

Since the Fund’s monthly expenditure on pension benefits was greater than the monthly income received from contributions, the Assembly must recognize that the Fund was becoming more and more dependent upon the income generated from investments to meet its statutory obligations to its participants.  Therefore, it was imperative to remain focused on long-term investment objectives.  As for the Fund’s actuarial situation, while the current valuation was the third one to show positive results, there was, nevertheless, a clear downward trend in the actuarial surpluses.  The Pension Board should continue to closely monitor the evolution of the actuarial valuation.

Turning to the proposals concerning the Fund’s benefit provisions, he supported in principle the recommendations contained in paragraph 157 (a), (b), and (c) of the Board’s report regarding cost-of-living adjustments and elimination of the limitations on the right to restoration for existing and future participants.  He also agreed with the recommendation in paragraph 158 to eliminate the 1.5 percentage point reduction in the first adjustment of the Consumer Price Index due to existing and future beneficiaries, on the understanding that its implementation would be subject to a surplus in the next actuarial valuation. 

Given the downward trend in the Fund’s actuarial surplus, he would prefer that those recommendations be implemented following an upward trend in the next actuarial valuation.  Additional resources of $179,200, which had been requested to cover administrative costs, would have to be decided following a decision on the recommendations contained in paragraph 157, since some of those additional costs were linked to implementation of those recommendations.

As for internal audit coverage of the Fund, his delegation firmly believed that the OIOS should continue to provide internal audit coverage of the Fund, he said.  However, in future the OIOS should work more closely with the Pension Fund secretariat in defining the scope and complexity of the proposed audits.  He also noted the ongoing discussions between the Fund’s former participants from the former Soviet Union and the Government of the Russian Federation, and trusted that a satisfactory solution would eventually be concluded.  He understood the plight of those former participants, and urged an early conclusion to the negotiations.  Regarding the composition of the Pension Board, he added that the Assembly should once again resume the responsibility of electing members and alternate members to the Board, rather than simply electing nine representatives.

Mr. CHRISTIANSEN (Denmark), speaking on behalf of the European Union and associated States, said the European Union welcomed and endorsed the annual report of the Office of Internal Oversight Services (OIOS) and noted the wide range of activities of the Office with regard to audits, investigations, evaluations and compliance monitoring.  The Union noted with interest the statistics provided on the rate of implementation of recommendations, and the identification of almost $56 million in potential cost savings and recoveries.

During the past year, he recalled, 2,357 recommendations had been issued, of which some 30 per cent were considered critical to the Organization.  The European Union fully supported the strategic objectives:  qualified staff, a culture of continuous improvement, and improved client relations.  The Union welcomed the intent to progressively sharpen the focus on areas of greatest risk to the Organization.  Scarce oversight resources and limited staff were the main factors for rationalizing investigative services and identifying priority issues.  The European Union encouraged the Office to take up the challenge by such steps as focusing constructively on critical recommendations and following up on implementation of recommendations.

KAREN LOCK (South Africa) was especially concerned with the increases in the number of OIOS recommendations from 574 in the 2000/2001 review to 733 in the 2001/2002 review.  Those figures were too high, and her delegation appealed to the relevant OIOS clients to implement the recommendations without delay and ensure that the necessary steps were taken to prevent their occurrence in future.  She attached great importance to the oversight activities and recommendations of the OIOS that related to peacekeeping operations, humanitarian and related activities, and development initiatives in Africa and the developing world.  She requested the OIOS to take every measure to ensure that the perpetrators of human rights abuses were brought to justice.

Turning to peacekeeping operations, she said she was disturbed by several of the OIOS findings that pointed towards instances of inadequate supervision and record-keeping of mission equipment, poor controls over accounts and non-compliance with procurement guidelines.  Whilst her delegation had great understanding of the difficulties faced by peacekeeping personnel, it held the view that remedial action should be taken to ensure that those incidents did not hinder the effective deployment and functioning of peacekeeping operations.

Her delegation noted that the merger of oversight functions had contributed to the quality of OIOS investigations into possible discrimination in the United Nations.  No form of discrimination should be tolerated with the United Nations and people must remain vigilant on that score.  Her delegation trusted that the Secretary-General would receive the necessary support in the development of a policy on discrimination, and was confident that the three-pronged approach initiated by the OIOS would further strengthen and continue to add value to its oversight services.

Mr. REPASCH (United States) said that based on the latest OIOS’ report, it appeared that none of the United Nations oversight bodies was in danger of losing its job.  While the summary contained many heartening instances of improved management and more effective internal controls, there was page after page of examples to document the fact that the United Nations culture of accountability was not yet fully in place.

He was pleased to read that the implementation rate of OIOS recommendations, especially the critical ones, remained high, and that they had produced significant savings and recoveries for the regular and peacekeeping budgets.  It was critical that the OIOS kept the issue of mission subsistence allowances under review in order to ensure that they were reasonable and fully justified.  Future budgets should fully reflect the impact of those important changes.

Turning to the “sensitive and very important” investigations into reports of sexual misconduct in Bosnia and Herzegovina and West Africa, he said that his Government condemned such behaviour in the strongest possible terms and welcomed the United Nations zero tolerance policy for all United Nations personnel.  For those reasons, he was concerned to learn that senior managers at the United Nations Mission in Bosnia and Herzegovina (UNMIBH) had not followed up on key OIOS recommendations.  Regarding activities affecting refugees in West Africa, he would comment further when the full report was issued.

It had been surprising to read that significant amounts of the Office of the  United Nations High Commissioner for Refugees (UNHCR) funds were being absorbed by taxation and thus lost for intended humanitarian purposes.  It was important to prevent millions more in valuable aid from being siphoned off for other purposes, in many cases in violation of United Nations conventions.  Since there had been much recent publicity about corporate laxity and poor governance, he would also like to know what had been done to protect the investments of the Joint Staff Pension Fund.

The pursuit of accountability in the Secretariat had been an important concern of his delegation for several years, he said.  Consequently, his attention had been drawn to the case in the United Nations Interim Administration in Kosovo (UNMIK) in which a senior mission official had not complied with United Nations procurement rules.  In fact, the OIOS had found that the lease he approved had been written by the business that was awarded the lease.  Why had the Department of Peacekeeping Operations not accepted the OIOS recommendation to take appropriate action against that official?

Regarding organizational issues in relation to the OIOS, he added that while the Office had blossomed, it was wise for its leadership to continue seeking ways to become more responsive and effective.  He welcomed Under Secretary-General Nair’s commitment to continuous improvement.  A recent Board of Auditors recommendation based on its own review of OIOS operations provided excellent guidance in that regard.  He would like to see a greater investment in information technology audit capability, and believed that the OIOS needed to position itself to provide independent oversight of the Capital Master Plan.  The Office should also continue to look closely at its structure to eliminate redundancy in the audit, inspection and evaluation functions.

SABAH AHMED (Iraq) said the OIOS report revealed serious mismanagement and financial abuse by staff members and organizations working under the United Nations flag, including the Iraq Programme, the compensation commission, UNMIBH and UNMIK.  That testified to insufficient oversight in the field and follow-up at Headquarters.

Regarding the Office of the Iraq Programme, he said United Nations agencies were carrying out activities in the country’s northern provinces on behalf of the Iraqi Government.  Having been excluded from oversight of those activities, the Government did not even receive copies of agreements signed by the United Nations agencies there.  That encouraged irregularities, including unjustified expenditures of some $1 million of the funds.   Also, equipment had been bought at prices which exceeded their real cost by some 60 per cent.  The Government had also been excluded from negotiating with bank candidates to Iraqi accounts.  Iraq was considered the third party, although the money involved belonged to Iraq, and the programmes were intended to benefit the Iraqi people.

It was regrettable that the report also pointed to over-expenditures in the compensation commission, he said.  Working together was the best guarantee of protecting public funds, whether they belonged to Iraq or the United Nations.  Cooperation was also important for combating irregularities, including trafficking in refugees and women and girls, which had been committed by United Nations personnel.  He stressed the need for follow-up on the implementation of OIOS recommendations by various United Nations offices to ensure their better performance.  His delegation wished to see more transparency in financial and contractual dealings on behalf of the Iraqi Government, and called for serious investigation into the incidents referred to in the report.

SHINICHI YAMANAKA (Japan) said it was important for Member States that United Nations resources were used in the most efficient manner, and his delegation expected that all recommendations would be implemented as soon as possible.  The annual report of the OIOS had highlighted many important issues, he continued.  His delegation was concerned, among other things, with the follow-up on investigations into allegations of sexual exploitation in West Africa, a follow-up on the fee-splitting issues in the Rwanda and The Hague Tribunals, and updated information regarding the International Research and Training Institute for the Advancement of Women (INSTRAW).

AICHA AFIFI (Morocco) said her delegation would be grateful if light could be shed on why programme managers had not implemented OIOS recommendations.  Furthermore, what were the corrective measures taken by the Organization to punish the perpetrators?  The OIOS had 179 staff, she continued, and her delegation would like to know whether the staff in the Office were Secretariat personnel or whether the Office called on outside consultants.

COLLEN VIXEN KELAPILE (Botswana) supported the oversight activities of the OIOS, the Joint Inspection Unit (JIU) and the Board of Auditors, and emphasized the importance of coordinating those activities.  A recent report of the JIU raised important points in that regard.  In particular, the report concluded that effectiveness of oversight depended not only on its quality and scope, but also on the implementation of follow-up actions in response to findings.  Fully supporting that statement, he said that consolidated reporting by oversight bodies was one area which could be explored in that respect, since many recommendations by those entities agreed and overlapped.

Responding to comments and questions from the floor, Under-Secretary-General for Internal Oversight Services DILEEP NAIR said that the OIOS staff were under tremendous pressure to put out reports, and their reward was in kind words received from delegations.  Regarding follow up to the OIOS reports, he said that the report on the investigation of sexual exploitation in West Africa had been released, but not yet introduced to the Fifth Committee.  He would be pleased to

introduce it later in the session.  As for the issue of fee-splitting in the Tribunals, the OIOS had been monitoring the follow-up.  Most of the recommendations were being implemented, and the matter was being kept under review.

Turning to INSTRAW, he said that the report on the Institute was now before the Third Committee.  With that body’s comments, the report would be presented to the Fifth Committee.  Responding to a question on what prevented programme managers from following up, he said that while the question should have been directed at programme managers themselves, sometimes it was difficult for them to implement recommendations because changes in systems and procedures needed to be introduced.  The rate of implementation was growing, however, and he would continue to report to the Fifth Committee on the matter.

Common issues were regularly discussed among the oversight bodies, he continued, and he did not object to consolidated reporting.  When making recommendations, the OIOS always looked to the proposals by the JIU to make sure that follow-up was done collectively.  In some cases, however, it was up to the body making recommendations to follow up on them.  The situation in UNMIBH and UNMIK was still under discussion with the Department of Peacekeeping Operations, and he would provide additional information in informal consultations.

Organization of Work

Many speakers highlighted the need to accommodate delegates during Ramadan, whilst still being able to complete the session by 6 December.  The Committee then decided that morning meetings would begin henceforth at 9:30 a.m. and end at

12:30 p.m., and that afternoon meetings would end at 4:30 p.m.  That ad hoc arrangement would be implemented as of Monday, 11 November, until the end of Ramadan.

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For information media. Not an official record.