The Association of Certified Fraud Examiners is a group of some 32,000 people worldwide, nearly half of whom are fully Certified Fraud Examiners. They work in accounting, consulting, internal audit, law enforcement, security/loss prevention, audit and the legal profession, and have an extensive network of learning events and training courses annually to enable ACFE members to collaborate and enhance their professional investigative skills.
                                  The ACFE website is at www.acfe.com 
                                                                                                   

Fraud is growing everywhere because of limited emphasis on deterrence. A 2003 global survey of corporations found economic crime significant in every industry and region (significant in 51 percent of African entities, 41 percent in North America, 39 percent in Asia and the Pacific, and growing to 34 percent in Western Europe and 37 in Eastern Europe. 

"Fraud speaks thousands of languages", White Paper, ACFE, March/April 2004, p. 46.

Fraudulent behavior is, unfortunately, human nature and its root causes can never really be removed.  What is important is deterrence -- that is, modifying behavior through the perception of negative sanctions.  In broad outline:

(1)   internal controls are important, but not sufficient;

(2)  employees who perceive that they will be caught if they engage in occupational fraud and abuse are less likely to commit it;

(3) employee awareness and education is critical, since the fraud-educated workforce is the best ally in fighting fraud;

(4) fraud needs to be brought "out of the closet", by raising fraud and abuse issues in a non-accusatory manner in all audit work to make people continually aware of the consequences of engaging in illegal acts;

(5) employee reporting is essential, since experience seems to indicate that most fraud is known, and that employee reporting to hotlines (if it is clear that it will be protected and not punished)  uncovers more fraud and abuse than all other methods of fraud detection combined;

(6) corporate sentencing guidelines, and equivalent actions in governments, and a firm emphasis on "due diligence" duties, are increasingly decisive in strengthening and deterring fraud and abuse; and

(7) a formal ethics policy and code are needed to facilitate proper conduct enforcement, but they must be driven by strong leadership and personal example from senior officials, not by a list of punitive statements.  

Wells, Joseph T, Occupational fraud and abuse, Obsidian, US, 1997, esp. pp. 516-546.

[Note: Major ACFE reports of 1996, 2002, and 2004, and an updated and extensive report in 2002 by multiple oversight groups on Management Antifraud Programs and Controls as a "road map" of proactive steps to prevent and deter fraud, are available at www.cfenet.com/home.asp 

A detailed  "Fraud prevention checkup" is also available at

www.CFEnet.com/services/FrdPrevCheckUp.asp  .

In 2004 the ACFE published a two-part series by Martin T. Biegelman,  "Designing a robust fraud prevention programme: Ounce of prevention does equal pound of cure", White Paper, ACFE, January-February 2004, pp. 30-33, and March-April 2004, pp.  23-24, 45-46.]

IO Watch concludes that the UN, despite a decade of "investigative" activity by the OIOS, has performed poorly against this basic "robust" fraud prevention strategy or in fact against any other, as discussed in detail in earlier subsections of this archive:

(1)  basic internal controls are rather vague and "iffy" and OIOS has better things to do;

(2) UN Member States and the public can read some "fraud-catching" stories from OIOS each year, but no systematic reporting on fraud efforts, results, and sanctions;

(3) There has been no internal fraud education effort  --  the emphasis instead has been put on an "integrity initiative";

(4) fraud has been kept firmly "in the closet" with no emphasis or discussion of organization-wide activities;

(5) Employee reporting is mistrusted, often discarded by an understaffed investigations unit, and whistleblowers are rare indeed;

(6) almost no one, and certainly not managers, are ever sent to court or prison, thanks to UN diplomatic immunity from national laws;

(7)  the UN "code of conduct" is a "phone-book" of punitive rules, and senior management leadership to seriously fight fraud is almost non-existent. 

The "Thornburgh report" of 1993 identified fraud and abuse as grave UN problems which only a forceful new inspector-general could take care of. However, Karl Pashke, the first incumbent, quickly disparaged whistleblowers, said that fraud was "not the main concern" of OIOS, and emphasized many times the OIOS "partnership" with managers rather than diligent oversight (as has his successor, Dileep Nair), including and even encouraging them to make amateurish "investigations" in their units on their own. 

The OIOS investigations unit started slowly, has always been understaffed, rejects most reports made to it, and has done very poor annual reporting on its overall and fraud investigations, patterns, and results.  Instead, it has made UN anti-corruption efforts a mysterious, expert "cult process" with a few "crime-busting stories" each year provided by a "black box" unit in which only they know what is really going on.  

Why have things gone so wrong? Six underlying factors appear to have been pivotal:

?                     appointing two diplomats, rather than top-quality audit professionals, to lead the OIOS;

?                     Member states' failure to properly use and  "oversee the overseer";

?                     OIOS' almost total failure to investigate managerial misconduct and abuse of authority;

?                     Secretariat inability to promptly and fairly prosecute and apply sanctions (some staff get caught, but managers, especially senior ones, seem never to be touched);

?                     reliance on a diplomatic culture (the "old boy" club") instead of a strong figure dedicated to independent investigation, accountability, and sanctions where necessary, no matter who is involved;

?                     most importantly, Secretary-General Annan's declaration of "victory" in installing accountability system "building blocks" in 2000, without ever demonstrating their application, and --  instead -- freeing managers drastically from prior organizational controls and monitoring.

In 2004 two very serious negative results of this superficial UN "fraud-fighting" effort emerged.  First, a multi-billion dollar scandal in the UN-administered Iraq oil-for-food programme reflects quite negatively on the Secretariat, the OIOS, and the Security Council, and clearly weakens UN operational credibility.

Second, the June 2004 "integrity survey" of UN staff found them to be much more concerned with accountability shortcomings in a weak management culture than with integrity matters, as reflected in mistrust of the "old boy" senior leadership, fear of retaliation for reporting mismanagement, and perceptions of a distinct lack of UN response to corruption reports.

See, under Other Major Problems ,  the subsections on Iraq oil-for-food programme  and  Management culture deterioration  :  for the survey, see

Warren Hoge, "Report criticizes the way UN fights corruption", International Herald Tribune, June 16, 2004,

Claudia Rosett, "The problem with the Secretariat", The Wall Street Journal, June 16, 2004.                                             

and  the actual survey document is

"United Nations organizational integrity survey", Final Report, prepared by Deloitte Consulting LLP, June 2004.

[Can the more than 6,000 staff worldwide who responded to this survey be wrong about this anti-integrity  bias of the UN leadership?      

It is also interesting to note, in comparing this 2004 survey with one done in 1995 that things have indeed gone downhill -- staff in both surveys sought better management, but in 2004, after a decade of "reform",  they are much more concerned with senior management accountability issues and processes.]

Based on its analysis in this archive, IO Watch believes that there are eleven important elements which underscore the urgent need for, and can be critical to the success of, a strong UN fraud prevention programme for the future

FIRST, and most importantly, the UN is not aggressively addressing and preventing waste and abuse. Based on an extensive study and experience, the ACFE estimated in 2002 that fraud costs organizations up to 6 percent of their revenues each year: for the UN, spending from $6 to $10 billion, this implies potential cost savings of up to $360 million to $600 million dollars per year (the UN should indeed be near to the maximum level of 6 percent, given the high-risk nature of its global emergency operations in distant field locations and its lack of internal controls and accountability.

Report to the nation on occupational fraud and abuse,  ACFE,  2002, see 
www.cfenet.com/home.asp

                                      .

The OIOS reports proudly that it has exposed waste and fraud of $306 million since 1995, and has recovered and saved $157 million of that.  In that period, however,  it cost about $153 million to operate the OIOS at $17 million per year.  This indicates net OIOS cost recoveries and savings of a total of only $4 million over nine years.   This is poor for what should be an essential money-saving organizational function, and a mere drop in the ocean against the potential levels of  $360 to $600 million of UN funds lost each year to fraud as estimated above.  This also does not include the billions of dollars of humanitarian aid that failed to reach Iraqis under the UN-administered Oil-for-Food programme.

           At  www.un.org/Depts/oios/achievements

Why is it this way?  Because OIOS has chosen not to fight corruption, but instead to serve management, "improve" management processes, and pursue integrity -- which was NOT the key new task given it at its creation in 1994.  As of September 2003, OIOS had 35 investigator posts (each responsible for covering $170 to $285 million of the aforementioned $6 to $10 billion of total UN expenditures.)  IO Watch believes that a serious anti-fraud campaign to stop this hemorrhaging of Member State funds entrusted to the UN must begin by at least doubling OIOS professional investigations staff, or more (and ensuring that they are highly-trained and experienced people), either through shifting internal audit posts or from new sources of funds, whether budgeted or extrabudgetary.

                "Report of the OIOS", UN document A/58/364,  2003, p. 59.

SECOND, and almost as serious, is the gross gap in OIOS enforcement and oversight efforts, and subsequent Administration sanctions, that should systematically root out misconduct, mismanagement, waste, and abuse in the UN (which is primarily committed by managers, who have the power and the resources to most easily engage in these improprieties.) The tough UN rule, for instance, that "Any form of discrimination or harassment … or abuse … at the workplace … is prohibited" is meaningless in practice.  There seems to be no record of significant OIOS action ever on these matters (except for Mr. Paschke's failed "friends and lovers" effort of the mid-1990s.)  The JAB and UNAT in the "internal justice" system also blissfully ignore almost all these issues, and the new Ombudsman is one small, weak, and unproven new office purportedly "supporting" some 40,000 UN staff.

UN Staff Rule 101.2, Specific instances of prohibited conduct, part (d).

In April 1996, the OIOS issued an encouraging and important Information Circular to all UN staff on its investigation work. It identified four categories of activities that staff could report to the OIOS:

"Misconduct …

Activities that would constitute a failure to maintain the highest standards of integrity include, for example …

(a) Any wilful and unwarranted disregard of … [UN legislative mandates or … [rules] and any failure to exercise proper care that is either intended to result in personal benefit or misappropriation of … [UN] resources;

(b) Any act, for example any type of false certification … [of benefit claims], which demonstrates a failure to maintain the highest standards of integrity required by the [UN] Charter … as well as any [misleading statement] resulting in the misappropriation of … [UN] resources. 

Unsatisfactory performance

… [staff performance in accordance with [the UN Charter's call for] 'the highest standards of efficiency [and] competence", including the following:

(a) Mismanagement, includes, for example,

(i) Any unreasonable failure of a staff member to perform [efficiently and competently]… all assigned tasks, duties and management responsibilities; …

(b) Waste of resources includes, for example

(i) Any unreasonable failure of a staff member to ensure that [UN] resources are used … solely, efficiently, and effectively for [UN purposes or for its benefit;

(ii) Any unreasonable act or failure to act which, as a direct result of a failure to exercise due care, causes loss to the organization;

(c) Abuse of authority includes for example, any discharge of management responsibilities and any act or failure to act, which is not motivated by the interests or purposes of the UN." 

"Terms of reference for investigations by the [OIOS]: Mismanagement, misconduct, waste of resources and abuse of authority", ST/IC/1996/29 of 25 April 1996,   paras. 6-7.                                                            

This guidance might seem lengthy, but it is all quite specific about improper behaviour. However, ever since 1996, this circular has led to a fundamental betrayal of staff reporting problems, and a full protection for UN managers.  Many of the above items may be small-scale and not "high crimes", but bad UN managers routinely practice many or all of them, crippling their programmes and destroying staff morale. 

When UN staff report these problems, OIOS investigators  brush them aside as low-priority "personnel" matters in the midst of a flood of staff reports of wrongdoing. The net result is a tremendous gap in UN enforcement, and any sanctions for corrupt behaviour, which most definitely includes "evasion of accountability, and the abuse of authority."  These matters seem to be the primary categories of the hundreds of reports to the OIOS confidential hotline which are "filed" in the wastebasket or, worse, sent to Personnel, where they can cause much trouble for the staff member who reported them.

[The expanded corruption definition is from

William L. Richter, Frances Burke, and Jameson W. Doig, eds., Combating corruption, Encouraging ethics: A sourcebook for public service ethics, American Society for Public Administration, Washington, DC, 1990, Preface.]

An ACFE journal article in 2004 stated that professional fraud hotlines (manned by live, trained interviewers, and available outside working hours, when most people want to call)  can cut fraud losses by 50 percent, and that the most common method of fraud detection is in fact that which comes from employees, customers, and anonymous sources. 

The OIOS hotline does not operate in this way (or achieve such results), because it ignores the key mismanagement, misconduct and abuse issues that UN staff attempt to report.)  The solution?  The UN urgently needs a professional hotline service to fight fraud, protect staff rights, and deal firmly and reliably with misconduct and abuse of authority. The ACFE article elucidates this situation with its list of concerns reported to the ACFE professional hotline service during most of 2003: 

"Top ten concerns reported to Ethics line [i.e., confidentially by telephone]

?         Theft:   22 percent

?         Discrimination:   16.1 percent

?         Wage discrepancies:   13 percent

?         Sexual harassment:   5.8 percent

?         Customer relations:   5.7 percent

?         Employee relations:   5.0 percent

?         Workplace violence:  4.9 percent

?         Fraud:   4.8 percent

?         Safety concerns:   4.7 percent

?         Falsification of records:  4.4 percent."

Tony Malone, "Best practices for ethics hotlines", The White Paper, ACFE, January/February 2004, pp. 39-41.                                               

The entire contents of this IO Watch archive on UN management accountability, buttressed by the opinions of the 6,000 UN staff who responded to the UN "integrity survey" of June 2004, point to one fundamental conclusion:

The UN Secretariat's senior leaders and its OIOS can never achieve an accountable UN, and meet the integrity standards of the UN Charter,  until they firmly abandon their complacent "boys will be boys" attitudes about incompetent and abusive UN managers, and respond to conscientious staff reports with serious inquiries and proper sanctions (instead of ignoring or suppressing them, as at present.) 

THIRD, the only bright spot in UN corruption-fighting -- because it is the only truly independent and professional unit -- was and is the UN Board of (external) Auditors, and the system-side Panel of External Auditors of the UN system.  The General Assembly regularly debates and follows up on the external auditors' work, and has emphasized its "fraud fighting" efforts in some strong resolutions, especially in 1997.  And while the rest of the UN, and especially the OIOS, plays with some investigation "stories" in its annual reports, the Auditors, in contrast, issued a simple, straight-forward, and excellent guide on "Fraud awareness" to all UN agencies and their senior officials almost a decade ago, in 1996.

"Financial reports and audited financial statements, and reports of the Board of Auditors," General Assembly resolution 51/225 of 16 May 1997, and

"Fraud awareness", Audit Guide 204, United Nations, adopted by the Panel of External Auditors of the United Nations, the specialized agencies and the IAEA, December 1996.                                                                             

The auditors' strength is that they are all professionals, almost all on shorter-term assignments from their national audit services.  Moreover, they are united through The International Organization of Supreme Audit Institutions (INTOSAI), a long-established professional group with members who are employees of national audit groups in over 170 countries. INTOSAI provides extensive programmes and cooperative activities. INTOSAI members know the UN system and each other very well: a changing group of national auditors provide external auditors for all the UN system organizations, in accord with the best professional practices. Recent INTOSAI professional efforts as a group have analysed key factors in the audit of international institutions, and such key issues as human resources management.

"International Organization of Supreme Audit Institutions" (INTOSAI), at

  www.intosai.org   , "INTOSAI  -  An overview."

[Note: The Panel's current members are South Africa (Chairman), Canada,  the United Kingdom, Switzerland, France, the Phillipines, and India., and its website is at  www.unsystem.org/auditors/external.htm  ]

The auditors' main weakness is that they are only part-time and underutilized, with more emphasis going to the process whereby diplomats can pick up high-pay, low-work, prestigious jobs as the head of the OIOS and as JIU Inspectors.  IO Watch thinks that the external auditors must play a central and expanded role in creating professional, independent, and effective oversight in the UN system , as discussed further in the following subsection on External experts oversight review .

FOURTH, (and as somewhat of a midpoint pause), this entire archive and the above quotes demonstrate that the UN urgently needs to undertake a serious, comprehensive, and robust fraud prevention programme.  The pressure for stronger oversight led to creation of the OIOS in 1994, but its actual priorities have been elsewhere.  As this suggests, and as the sad past and muddled current role of OHRM indicate as well, these internal units are not trustworthy agents of monitoring and oversight.  With proper and strong leadership, and adequate and highly-professional investigative staffing, however, the OIOS could become an important cornerstone of UN fraud prevention work to develop an active, credible, public, and systematic anti-fraud programme, by reducing the "services" nature of its work in favor of a much stronger accountability-assurance and fraud-prevention emphasis.

                Real fraud-fighting is indeed still terra incognita in the UN, but it goes way back elsewhere, as shown by the elements identified in an article a quarter of a century ago in the United States.  It is finally time for the UN to get on board, not with more rhetoric and independent inquiries into new operational failures like the Iraq Oil-for-Food programme, but with a strong investigations section in the OIOS, concentrating on the following very reasonable approach:

"Fifteen [US] Federal departments have received a legislative mandate to detect and prevent fraud, waste, abuse, and mismanagement in their programs and operations … in the Inspector General Act of 1978. …

…  now auditors are charged with developing an entire mind set where fraud and abuse are paramount considerations in even their routine operations. …

The … fraud prevention and detection program consists of three concurrent initiatives …

First … an awareness effort … to inform [people] of the mission of the [IG Office]; and to highlight typical fraud situations …

[Second] … audits consider the possibility of fraud in any … areas to be reviewed … [and] special emphasis audits … look for control [and other] weaknesses  …

[Third] … special studies and vulnerability assessments … which are proactive and preventive …  and a [systematic] plan …

A very good source … [for detecting fraud] is to cultivate a supportive attitude by the entire work force.  Special requests and referrals from dedicated and informed employees greatly enhance the likelihood of detection.  This, or course, requires an active public relations effort and a demonstrated record of timely, responsive, and quality service on the part of the [IG Office.]"

Ronald Keefer, "'Luck' in fraud prevention," The Bureaucrat (USA), Fall 1981, pp. 46-49.                                   

FIFTH, it is a well-known management principle that for any organization to change an entrenched culture, senior executives must very publicly take the lead to implement a determined long-range programme. The UN, however, has downplayed fraud and accountability issues and actions for the past decade. 

Yet recent decisive events, such as the UN staff doubts about accountability expressed in the integrity survey of June 2004, the security mismanagement in the Baghdad headquarters bombing of 2003, and the Iraq oil-for-food scandal (which will not leave the headlines for a few years to come, another sign of the UN-versus-Enron comparison that IO Watch has made) all indicate that the UN cannot ignore a serious fraud prevention campaign any longer. 

As "the chief administrative officer of the Organization" (under Article 97 of the UN Charter), however unglamorous and that role may be relative to world diplomacy, Secretary-General Annan must finally demonstrate that the 21st century UN can demonstrate (in the best Global Compact spirit, and as its new tenth principle requires) that it is accountable and does fight corruption systematically and firmly. He is guided in this task, as his predecessor Mr. Butros Butros-Ghali stated in one of his 1992 (pre-OIOS) reports to the General Assembly, by some basic (but stubbornly ignored) UN operating principles: <