Funds & programmes/UNRWA – Board of Auditors recommendations – SecGen report (excerpts)

Recommendation

Measures taken and responsible party

1.  Allotments for specific-purpose projects should be issued only after sufficient contributions have been received from donors (para. 8 (a)).

The External Relations Office at headquarters now monitors advance authorizations closely and is constantly in touch with donors regarding unpaid pledges. The appointment of a new Chief for the External Relations Office in the autumn of 1998 and moves to fully staff the External Relations Office are facilitating the exercise. The Comptroller and the Chief, External Relations Office, are responsible for implementation of this recommendation.

2. The statement of assets, liabilities and fund balances should be improved to include the value of land and buildings. Also, the title deeds should be obtained and kept at headquarters to confirm UNRWA ownership of its capital assets (para. 8 (b)).

The Administration informed the Board that the value of fixed assets was clearly reflected in the Agency’s financial statements for the biennium 1998-1999 in the statement of assets, liabilities and reserves and fund balances and in note 8 to the financial statements. The deeds had been received by the Gaza headquarters and were currently on file. In order to bring the Agency’s treatment of fixed assets more in conformity with the United Nations accounting standards, an amendment to financial regulation 10.2 has been proposed. A letter was sent in this connection in November 1999 to the Assistant Secretary-General for Management and Controller. The current treatment applied to fixed assets on a constant basis is to expend fully at the point of purchase. In order to reflect a more complete picture of total fixed assets in the biennial financial statements for 1998-1999, total historical cost with a contra amount has been included. In order to facilitate implementation of the proposed change in the financial regulation as mentioned above, a physical verification exercise for the entire stock of the Agency’s land and buildings inventory has recently been undertaken by the technical office. This is expected to be completed in May 2000. The Comptroller is responsible for implementation of this recommendation.

3. The Administration should provide the Finance Department with the required resources for the Department to function more effectively (para. 8 (c)).

The Administration informed the Board that the Agency had reorganized its Finance Department. The position of the UNRWA Comptroller has been re-established and staffed. Vacancies in the Accounts Division have been filled with qualified personnel. The successful closure of the accounts for the biennium 1998-1999 and the timely preparation of the financial statements relating to the accounts reflect management efforts. A process is under way, following an in-depth review, to procure a new financial management system that will significantly improve the Agency’s ability to present timely and informative financial reports. The new system is expected to become operational during the current biennium. A new payroll system project is also under way and is expected to become operational during the current biennium. As far as procurement and supply are concerned, the Agency has taken the initiative to further upgrade the Reality system from off-line to on-line mode in all fields, effective January 2000. The Director of Administration and Human Resources and the Comptroller are responsible for implementation of this recommendation.

4.  The Agency should review its fund-raising strategies and closely monitor its donor agreements and contract award procedures (para. 8 (d)).

The Commissioner-General continues to discuss with donors the financial requirements of the Agency to enable it to provide services to the Palestine refugee community. Additional support is also being sought from new and traditional donors. Also, contract award procedures are the focal point of current internal audits and were the subject of external review by donor-funded consultants. Recommendations that emerge for the strengthening of internal control procedures and contracting effectiveness will be given thorough attention. The recommendations of the external review were discussed internally and were approved by the Commissioner-General in April 2000. The Chief, External Relations Office, and the Legal Adviser are responsible for implementation of the recommendation.

5. The Project Monitoring Unit should be equipped with the required resources for more efficient monitoring of UNRWA projects (para. 8 (e)).

The Agency has enhanced staffing at the Project Monitoring Unit despite continuing financial shortfalls. Initial efforts are being directed at the issues that are critical to monitoring and reporting on projects in all fields to donors, as required in UNRWA donor agreements. Functional direction to field project monitoring offices has increased with the objective of ensuring improvements in the timeliness and accuracy of field project reporting. A Project Review Board has been established to improve the management of the Agency’s priority project list. A draft project manual was approved by the UNRWA Management Committee in the autumn of 1999 and is now undergoing revision prior to finalization. Among the issues under discussion is the financial reporting format, which requires the agreement of donors. The Internal Audit Office is also conducting audits of project management, which should assist in further defining improvements to the effectiveness of the function. The Chief, External Relations Office, is responsible for implementation of this recommendation.

6. UNRWA should take steps to recover the amounts outstanding from donors and reimburse the General Fund the amount of $11.2 million spent on the Gaza General Hospital project (para. 8 (f)).

The European Union’s scheduled audit of the European Gaza Hospital was completed in June 1999. UNRWA has been discussing the matter with European Union officials in order to obtain more funds to reimburse the General Fund. The responsibility of commissioning the hospital is now with the European Union. An international management team has been contracted to prepare the grounds for the opening of the hospital in July 2000. The Comptroller and the Chief, External Relations Office, are responsible for implementation of this recommendation.

7. UNRWA should ensure that all systems are tested for year-2000 compliance, with sufficient lead time to address any deficiencies (para. 8 (g)).

The Agency tested all its applications for year-2000 compliance. The review process was completed in March 1999, which allowed sufficient time to make necessary changes before the Agency’s internal deadline of September 1999. Consequently, no major hitches were encountered by the Agency during the rollover period. The Director, Administration and Human Resources, is responsible for implementation of this recommendation.

8. For more accurate and transparent financial reporting, UNRWA should disclose information on the changes in reserves and fund balances in its statement II in accordance with the requirements of the United Nations accounting standards (para. 22).

Statement II of the financial statement on the accounts of the Agency for the biennium 1998-1999 was prepared in accordance with the accounting standards.

9. The Administration should comply fully with the established instruction that before projects are accepted, the necessary land permits should be obtained (para. 41).

The Administration explained that it is cognizant of the need to establish clarity as to availability of sites and ownership at the project planning stage and is making every effort to do this. However, problems often arise at a later stage, emanating from issues and aspects beyond the Agency’s control. The projects that were not executed during the previous biennium as a result of disputes over land acquisition were implemented during the biennium 1998-1999. The newly established (early 2000) Project Review Board will apply the criterion that approval of a project requires the documented availability of site. The field directors and the Chief, External Relations Office, are responsible for implementation of this recommendation.

10. UNRWA should refine the procedures for the selection and award of contracts and update the vendors’ register in a timely manner to ensure that only competent contractors are considered for the Agency’s projects. Also, the Administration should closely supervise its contracts to ensure that contractors’ work meets the standard, that cost and time overruns are avoided and that the clause on liquidated damages is strictly enforced (para. 57).

The Agency vigorously applies established contracting procedures. Contractors who qualify for projects but who under-perform are not considered for other projects. Field contract committees are made aware of past contractor performance in the process of evaluating and awarding contracts. The Headquarters Committee on Contracts also reviews contracting processes.

11. A decision should be made by the Provident Fund on investments with the countries that do not grant tax exemption to the Fund. Also, more effective measures should be undertaken to recover the outstanding taxes withheld from the Fund (para. 61).

During the biennium, the Provident Fund secretariat issued directives to its fund managers to minimize the incidence of tax withholding by selling securities prior to the ex-dividend date in countries that fail to provide tax exemptions to the Fund. The Provident Fund secretariat during the biennium was able to secure from the Italian and Spanish authorities tax exemptions for its investments. Other direct tax exemptions are being sought from other Member States that do not provide exemption to the Fund. The Comptroller is responsible for implementation of this recommendation.

12. The internal audit manual should be revised to take account of the changes in the Agency’s operations (para. 63).

The Agency has obtained copies of the audit manual used by the Office of Internal Oversight Services at United Nations Headquarters and by the Board of Auditors for comparison and incorporation of the most relevant and best practices. The revision process was scheduled to be completed by the end of 1998. This was rescheduled, however, to the end of the summer of 1999 because of a slowdown in the exercise as a result of a vacancy created in the Audit Office with the retirement of a senior officer. The Director, Audit and Inspection Department, is responsible for implementation of this recommendation.

13. In order to improve the efficiency of the internal audit staff, UNRWA should make budgetary provision for enhancing the training of its internal audit staff (para. 66).

The Administration has instituted significant changes to strengthen the audit operation. Two new audit positions have been approved. The Audit Office was continuing its discussions with the office of the Auditor-General of Canada about participation in courses. The Agency has sponsored the attendance of one senior auditor at special investigation training courses at the Law Enforcement Academy in the United States. The Comptroller and the Director, Audit and Inspection Department, are responsible for implementation of this recommendation.