Report on UN procurement calls for better systems

Report on UN procurement calls for better safeguard and oversight systems

Unless addressed soon, serious oversight and safeguard deficiencies leave the United Nations Procurement System (UNPS) open to fraud, according to a new independent assessment carried out on Secretary-General Kofi Annan’s initiative in the wake of the Iraq Oil-for-Food scandal.

The report by Deloitte Consulting LLP, a 150-year-old global accounting and consulting firm, found that UNPS employees effectively constitute the controls that are in place. “Such a significant reliance on people leaves the UN extremely vulnerable to potential fraudulent or corrupt activity, and limits the Organization’s means to either prevent or detect such actions,” it concludes.

The assessment also found weaknesses in ethics and integrity training, which were not supported by management, along with a “lack of urgency in response to adverse audit findings, and unclear lines of authority and accountability.”

The report recommends remedies for each of the adverse conditions existing in procurement, including updated procedures and guidelines, improved professional development of management and staff, an enhanced ethics programme, and a reconsideration of staff rotation policies.

The Secretary-General ordered the procurement appraisal in April after irregularities were uncovered by both the UN’s own oversight office and the independent panel investigating the Iraq Oil-for-Food programme. At that point, Mr. Annan placed the procurement division under the direct authority of UN Controller Warren Sach.

The third Interim Report of the Independent Inquiry Committee (IIC), headed by former US Federal Reserve Chairman Paul Volcker, accused former procurement officer Alexander Yakovlev of soliciting kickbacks. The Secretary-General waived Mr. Yakovlev’s immunity, while the UN’s Office of Internal Oversight Services (OIOS) worked with the United States Attorney’s office to help its investigation of the former procurement official, who was arrested.

Introducing the report at a UN Headquarters press conference this afternoon, Christopher Burnham, the Under-Secretary-General for Management, stressed the comprehensiveness and clarity of the findings, and their significance in relation to reform measures being implemented by Mr. Annan.

Asked about a previous study produced by UNPS itself, Mr. Burnham replied bluntly: “I’m dismissing [that] report.” The new study, he added, clearly shows a “significant lack of managerial oversight in the past.”

At the same time, he emphasized that the new report did not seek to pinpoint incidents of fraud, abuse or incompetence. That will have to await the results of “forensic audits,” or investigative reports due in June 2006.

The UN management chief also stressed that the seriousness of the Deloitte report underscores the importance of reform proposals that Mr. Annan has pushed on his own authority or presented to the General Assembly in cases when its approval is required.

In an Op-Ed appearing in today’s Wall Street Journal, Mr. Burnham elaborated on this point, underscoring the importance of the Secretary-General’s initiatives concerning financial disclosure, whistle-blower protection, the implementation of International Public Sector Accounting Standards, a UN ethics office, and an Independent Audit Advisory Committee.

“The global taxpayer should rest assured that the UN is undergoing significant change in accountability, transparency and ethical conduct,” he wrote.

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