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UN Performance Problems UN Management Accountability Struggles Where is the Rule of Law? Inadequate UN Oversight Recent Developments
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Modern,
well-managed internal control systems are recognized worldwide as
essential -- the first operational "line of defense" -- for organizational
accountability, goal achievement, efficient operations, avoidance of waste
and loss, and reliable financial reports. During the 1990-1993 period, the General Assembly repeatedly
urged action to strengthen internal controls, through more stringent
oversight and assurance of compliance, stating that it: "13. Requests
the Secretary-General … (c) To implement stringent
inventory controls on non-expendable property and to report thereon
… [in
1991], (d) To institute without delay
more effective control on the payment of all allowances and benefits to
staff members and to report on measures taken in this regard … [in
1991]; 14. Reaffirms the importance of
strict compliance with financial regulations and rules on the subject of
unliquidated obligations, and requests … a thorough report
… [in
1991];"
"Financial reports
… statements,
… reports of the
Board of Auditors," General
Assembly resolution 45/235 of 21 December 1990.
"I.2. Requests
the Secretary-General to review and develop procedures and norms,
including workload analyses, to justify [the management of all aspects of
staff posts], … and to
report thereon …"
"Questions relating to the
proposed programme budget for the biennium 1992-1993", General Assembly
resolution 46/185 B of 20 December
1991.
"13. Emphasizes the
need to continue to ensure overall efficient and prudent management by the
Secretary-General of all the resources entrusted to the UN by Member
States for the implementation of all its mandates and, in particular,
stresses the need to ensure full accountability and responsibility in the
management and use of these resources; 14.
Notes with concern the lack of cash reserves and the cash flow
problems [of the Organization] …;" "Improving the financial
situation of the United Nations," General Assembly resolution 47/215 of
23 December 1992.
"III.3. Requests the
Secretary-General … 4.(a) To provide
adequate resources and to identify clearly units, at appropriate levels,
for the implementation of all programmes and activities …; 4.(f) To propose improvements in
programme delivery and the termination of activities considered obsolete
or redundant …
; 7.
To ensure … the
rationalization of the working arrangements within each department
… to ensure that
resources are used in the most effective way and that the programme
managers are fully responsible and
accountable;" "Review of the efficiency of
the administrative and financial functioning of the United Nations
…", General
Assembly resolution 47/212 B of 20 May 1993. The UN Board of
Auditors also reported similar findings of very serious management
problems. An article thereon
cited: "Mismanagement, waste, abuse and
in some cases fraud. These
are among the findings by the U.N. Board of Auditors in its examination of
Secretariat operations cited by the United States in a presentation to the
General Assembly's budget-writing Fifth
Committee. The [U.S. representative] stated
that the Secretariat 'has not made significant progress' in addressing
these problems. Referring to the current audit
report [and affirming his status as a U.N. supporter, he] said it led to
the conclusion that "existing mechanisms alone are unable to administer
and safeguard funds entrusted to the
organization.' The Board's report identified
serious deficiencies and abuses in program management, use of staff,
payment of staff allowances and benefits and in procurement and property
management, he said." "Auditors' report blasts U.N. for waste, fraud", Diplomatic
World Bulletin (New York), October 19-26, 1992, p. 1.
Although internal
controls had traditionally been considered simple compliance tools, a
major US accountants' study in 1992 urged all large organizations to
develop an integrated internal control systems framework. It also stressed the need to
continually revise and rethink these systems to promote efficiency and
effectiveness and enhance legal compliance. The study identified five main
internal control components: (a) control environment -- the
foundation which sets the
tone; (b) risk assessment to identify and
assess factors that could
jeopardize achieving objectives; (c) control activities to help
ensure that management objectives
are carried out; (d) information and communication to
keep staff informed and aware
and produce necessary reports and
information; and (e) monitoring to assess the
internal system's performance over
time. [Note:
adapted from the "Executive summary" of the report, Integrated control -- Integrated
framework,
four vols., Committee of Sponsoring Organizations of the Treadway
Commission, September 1992, American Institute of Certified Public
Accountants (AICPA), Publications Division Jersey City, New Jersey,
1992 (available at http://www.coso.org/ under Publications.)
The UN
Secretariat made the various standard responses to these pressures -- assurances, talk of activity
underway, and statements of good intentions. But, as part of the followup
on its management
accountability resolution of 1993, the General Assembly called
again in early 1997 (and again in 1999 and 2001) for decisive action to
strengthen control and monitoring mechanisms, stating that it: "I.3. Regrets the
unsuccessful efforts to develop a management environment and culture in
the Organization that enables staff members to contribute their maximum
potential, effectiveness, and efficiency; … "II.3. …. requests
the Secretary-General to issue specific administrative instructions to
establish clearly the responsibility and accountability of programme
managers for proper use of human resources, as well as sanctions in
accordance with staff rule 112.3 for any financial loss suffered by the
United Nations as a result of gross negligence, including improper
motivation, willful violation of or reckless disregard for the staff
Regulations and Rules and established policies regulating recruitment,
placement and promotion; … 6. Welcomes the intention of
the Secretary-General to streamline administrative procedures and
eliminate duplication, in relation to human resources management, through
delegation of authority to programme managers, and requests him to ensure,
before delegating such authority, that well-designed mechanisms of
accountability, including the necessary internal monitoring and control
procedures, as well as training, are put in place, and to report to the
General Assembly [in 1998]; …" "Human resources management",
General Assembly resolution 51/226 of 25 April 1997.
The
Secretary-General responded in 1998 with a very brief and rather
dismissive report. Observing
that an international auditors' body had developed "best practice"
guidelines for internal control in 1992, he reported that:
"Over the years, the
United Nations has established … internal controls
… most of which
dovetail with the … INTOSAI
guidelines. … However, audits and
inspections indicate that our internal control system shows gaps and
deficiencies and that it requires consistent and continuous improvement
and strengthening. While in
some areas internal controls are slack or inefficient, in others many
detailed … requirements already
in place are stifling initiative and flexibility …
… The
Secretary-General has decided to adopt the Guidelines …
[They] provide
minimum acceptable standards of internal controls. The United Nations funds and
programmes … are at
liberty to adopt a more extensive and specific system of internal
controls, suitable to their areas of activity. …"
"Guidelines for internal
control standards: Report of the Secretary-General", UN document A/52/867
of 8 April 1998, paras. 6-11.
[Note: The report referred
to is Internal Control Standards Committee, "Guidelines for internal
control standards",
International Organization of Supreme Audit Institutions (INTOSAI)
of September 1992. It
is available
at www.intosai.org ]
The
Secretary General recommended in this 1998 report that the General
Assembly join him in the gesture of endorsing the 1992 INTOSAI guidelines.
His report rather carelessly abused the Treadway Commission basic
components cited above for internal controls. Concerning "(a) set the
tone," the UN breezily chose an approach of "endorse, and strengthen if
you choose," and as to "(e) monitor … performance," the UN simply chose
not to mention it at all. The UN report also notably ignored any mention
of excellent supplementary guidance for reporting on effectiveness of
internal control standards which INTOSAI had issued in 1997, a year before
the Secretary-General issued his own report. [Note: The 1997 INTOSAI
implementation guidelines are presented in the report Internal Control
Standards Committee, "Guidance for reporting on the effectiveness of
internal controls: SAI experiences in implementing and evaluating internal
controls", International Organization of Supreme Audit Institutions
(INTOSAI), 1997, at www.intosai.org . Note: for more such casual
systems management, see the quotations in the following subsection on UN
financial management, and the major and costly stumbles with the UN
integrated management
information system (IMIS) from the late 1980s on throughout the
1990s.]
In a report
required by the General Assembly on management irregularities, in March
2000, the Secretary-General reported casually as "measures to improve
internal controls" that " … budgetary and accounting
controls … are being strengthened regularly on the basis of
recommendations by the oversight bodies; … [he] will take steps to ensure
publication of the Guidelines as widely as possible, including on the
United Nations Intranet …" "Follow-up report on
management irregularities causing financial losses to the Organization:
Report of the Secretary-General ",
UN document A/54/793 of 13 March 2000, para. 21.
A
further report in August 2000 on overall "Accountability and
responsibility" failed to highlight internal controls at all. IO Watch believes that the
Secretary-General's attitude
-- merely endorsing
general standards and "sending them around", without any efforts to firmly
apply them and follow-up on a continuing basis, as outlined by the
excellent 1992 COSO and INTOSAI standards cited above -- is a very serious
failure of his acknowledged and very real fiduciary responsibility to
safeguard the resources that Member States provide. [Note: the report cited is "Accountability and
responsibility: Report of the Secretary-General ", UN document A/55/270 of 3
August 2000.]
In recent years,
establishing and maintaining strong internal control systems and guidance
have become very serious regulatory matters for large multinational
corporations: “[In September], shortly before
Japan ordered Citigroup to close its private banking unit there for, among
other things, … money laundering, Charles Prince [the chief executive]
commissioned an independent examination … … fired …three prominent senior
executives … then, at a [Tokyo] news conference, took responsibility for
the failings … It was an unusually public mea
culpa by a … financial giant … typically [given to] … closed-door
solutions. The hurdles confronting any big
organization that seeks to redirect …its culture can be formidable.
[A professor] said chief
executives often underestimated employee
skepticism. ‘The real measure of the success
in changing a culture is the kind of conversations employees have around
the water cooler,’ he said.
Like all major corporations.
[Citigroup] is racing to meet a [yearend] … deadline requiring it to
declare in its annual report that its internal financial controls are in
place and effective. …
[under] the Sarbanes-Oxley Act … U.S. standards for financial
disclosure and control. Prince still has plenty of time to
correct any deficiencies. But
the fact that the bank may still be grappling with its internal control
system … underscores the steep challenge Prince confronts… to clear
Citigroup’s regulatory hurdles.” “Timothy L. O’Brien and Landon Thomas, Jr., “Chief tackles Citigroup’s culture”, International Herald Tribune, November 9, 2004. [Note: Citigroup is indeed a giant – the world’s biggest bank, employing about 300,000 people, operating in more than 100 countries, and with revenue of $77.4 billion in 2003.] In sharp contrast,
even the brief and casual UN internal controls discussions of yesteryear,
as discussed above, seem now to have disappeared entirely from any
Secretariat reporting.
However, in light of recent UN staff “water-cooler” concerns about
inter alia corruption-fighting and non-accountability in the UN
reported in 2004; the UN Global Compact which seeks to guide corporate
behaviour; and especially the slow and closed-door UN investigation of
massive multi-billion dollar scandals in its oil-for-food programme in
Iraq, it certainly seems time for the UN to start assessing its own
internal control system functioning much more seriously and
publicly. IO Watch believes that the cavalier Secretariat treatment of the critical internal management controls process can be traced back to the Secretary-General's April 1998 assertion, cited above, that "many detailed … requirements already in place are stifling initiative and flexibility". IO Watch also concludes that the Secretariat's strong desire has been to "free the managers", as discussed in detail in the next subsection of this archive, and to continue to avoid subjecting Secretariat managers to actual management accountability, as discussed throughout the rest of this archive. For more discussion of
internal control problems and gaps, see this archive’s subsections under
Recent Developments on Management culture deterioration , Global Compact hypocrisy , and the Iraq oil-for-food programme
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