Rome, 7 - 12 May 2001
2000 Annual Activity Report of the Office of the Inspector-General
Attached for the information of the Members of the Finance Committee is the 2000 Annual Activity Report of the Office of the Inspector-General.
2 Matters of Special Importance
3 Audit Operations
a) Headquarters Activities
b) Decentralized Activities
c) Special Management Assignments
4 Tender Panel Operations
5 Management Activities
Attachment A - Internal Audit Reports
(i) Headquarters Activities, and Special Management Assignments
(ii) Decentralized Activities
Attachment B - Structure of the Office
(i) Organization Chart
(ii) Staffing Table
The annual activity report was created several years ago to consolidate the quarterly reports provided to the Director-General on the work of the Office of the Inspector-General. It follows the same format and presents a convenient summary of the major issues addressed by the Office in the year in question. It also comments on the actions taken by the Organization in response to observations and recommendations, and provides an indication of the nature and extent of the matters handled by the Office in the previous year.
This is the fifth such report to be made available to members of the Finance Committee. In keeping with this practice, as outlined in the Charter of the Office of the Inspector-General, it will be distributed for information purposes prior to the Committee's next session in May 2001. Last year's report generated considerable discussion in the Committee and a number of suggestions were made for consideration in future. These have been taken into account in the current report, notably on the degree of acceptance and implementation of audit recommendations by management, and other matters reflecting the conditions set out in the Charter. Again this year, all audit reports released in the year have been identified in the attachments to this report.
This section highlights a variety of important matters dealt with by the Office in the year 2000. It also provides, wherever possible, a summary of the measures taken by various levels of management in responding to the issues identified.
The Charter was completed towards the end of 1999 and was disseminated widely throughout the Organization early in the year 2000. It can now be accessed through the Intranet. The Charter was introduced through the medium of a Director-General's Bulletin which drew particular attention to two specific issues contained in Section III of the Charter. The impact of these particular issues are commented upon in the following two paragraphs.
The Charter, and particularly the Director-General's Bulletin, highlighted the right of the Office of the Inspector-General to full, free, and prompt access to all accounts, records, property, personnel, operations and functions within the Organization, as well as the right to communicate directly with all levels of staff and management. This clarification has proven to be most helpful, on more than one occasion, in enabling the Office to carry out its responsibilities expeditiously.
The Director-General also drew attention to the right of staff to communicate with the Inspector-General in full assurance of confidentiality and without fear of reprisal. This is sometimes referred to as the "whistleblower clause". In the past year very few approaches made to the Inspector-General could be considered as having resulted directly from the application of this provision. The more customary channels available to staff still seemed to be the preferred routes of communication i.e. through the normal chain of command, through the Personnel Division or directly to the Office of the Director-General.
The Assistant Director-General/Directeur de Cabinet has been assigned responsibility for the implementation of audit recommendations. He accomplishes this task by informing individual programme managers of the Director-General's instructions with regard to implementation, by setting specific dates for information on action taken and by conducting subsequent follow up when necessary. This is an extremely powerful "audit resolution" tool, and coupled with the normal follow up by this Office, has proven to be highly effective.
The Charter of the Office also provides an opportunity for the Inspector-General, at his discretion, to submit any specific report to the Finance Committee. No such action was deemed necessary in the year under review.
With resident internal auditors located in four regional offices (Accra, Bangkok, Cairo and Santiago) the audit coverage in regional and sub-regional offices is of a more or less continuous nature. The focus is primarily on the effectiveness of the internal control systems, which encompasses not only administrative and financial controls, but embraces the concepts of value for money in the pursuit of FAO's objectives in the regions.
In the past year, many of the problems identified have been in accounting and reporting areas, lack of adequate documentation, need for intensified staff training, procurement practices, and certain aspects of personnel management and general administration. The immediate response to audit recommendations has varied from region to region and there has been considerable improvement over previous years. This has been most apparent when headquarters' intervention has been required, and the promulgation of the Charter for the Office has also helped considerably.
In general, we are now satisfied with the degree of response to audit recommendations and to their implementation.
The audit strategy for the review of FAO Representations is based on a risk analysis incorporating management's assessment, our review of local audit reports, depth of programme, incumbency of the representative, and other factors. The specific reviews are comprehensive and deal with relations with local government and other partners in development, programme activities, and management, administrative and accounting matters.
During the year 2000 our reviews have identified shortcomings in security matters, adapting to the new accounting systems, certain aspects of control over vehicles, organization and staffing issues, and the proper adherence to internal controls. We are pleased to report that by and large management at the local level has been responsive to our recommendations, and that management at headquarters has been aggressive in their responsibility for follow up.
It is normally in conjunction with audit missions to FAORs that reviews are conducted of specific projects - and these are frequently directed towards Technical Cooperation Projects or other projects under the Special Programme for Food Security. Larger, more complex projects, are treated as special audits and the work reflects this distinction. Our observations on the most important of these projects are identified separately on a case-by-case basis in the following sections of this report.
We collaborated in negotiations concerning the audit arrangements for the World Bank funded Farm Reconstruction Project in Kosovo. This resulted in the Finance Committee approving an audit of the project's accounts to be undertaken by FAO's External Auditor. I have been advised that the first such mission was conducted in Rome towards the end of 2000 and a field mission has been planned for early 2001.
We also conducted an audit of the Emergency Coordination Unit for Agricultural Relief Operations in Kosovo. In summary, we found that the unit had established good relations with all the local authorities, and that the staffing was adequate. However, we identified several areas for improvement in documentation and procedures for procurement, inventory and budgetary management and control. We are pleased to report that corrective action was initiated during the course of our review.
Immediately following this audit we were asked to provide further assistance in the continuing monitoring, control and administration of this project. In this respect we seconded an auditor to the division concerned for a period of six months (which has since been extended for an additional month).
The Office released one report on performance measurement and has two others in process; organization and staffing, and internal control. As a result of our follow-up reviews of prior reports, we are pleased to report that senior management has recognized and initiated corrective action in such areas as program planing and evaluation, international and national staffing, international and local procurement, and cash management and control.
The increase in size and complexity of this program has made the audit risk greater, and the audit strategy changed significantly in the year 2000 and will continue into 2001. The frequency and scope of our audits from the regional office in Cairo have intensified and these efforts are being supplemented with the addition of a resident audit position based in Baghdad.
As a follow on to our 1999 review of TeleFood bank accounts and to complete our first review of the TeleFood cycle, we performed an audit of TeleFood operations. We were pleased to note that in accordance with the spirit of TeleFood expressed in Conference Resolution 3/97 establishing TeleFood, no project servicing costs were charged to TeleFood micro-projects. We recommended improvements in the administration and accounting system for TeleFood micro-projects and sponsorship funds, and can report that they are being taken into account in the planning for TeleFood 2001.
We also reviewed the management of the major event in Cairo. The show was considered to be highly successful in raising public awareness of food related issues, and generated more than $500,000. We identified a number of areas for improvement in overall management and internal control which will be taken into account in the planning of future events of this nature.
Over the years there has been some confusion and a lack of consistency as to what constitutes fraud and presumptive fraud in the United Nations audit community. At the meeting of Heads of Internal Audit Services held in Rome in the past year it was decided to seek clarification, and indeed a working definition, from the UN Panel of External Auditors. It is the External Auditors who are required by the basic texts to bring to the attention of the Finance Committee such cases. The External Auditor normally requests this information from the Organization itself. Notwithstanding the absence of a clear definition, the Organization provided available details to the External Auditor.
In this respect, I can report that at the end of the current year, four of the cases reported to the External Auditor can be considered closed; recoveries have been obtained and, where applicable disciplinary measures taken. In another case, police investigation has confirmed that cheque forgery was involved and the practicality of criminal prosecution is currently under consideration. The other case is being pursued through arbitration.
In the review of the conversion of accounting data from FINSYS to Oracle, we concluded that the transfers to the trial balance were correct in all material respects. However, we made a number of recommendations to improve the quality of the accounting data, the documentation of the conversion, the chart of accounts, and the methodology of reporting transaction data to WFP. These recommendations have been addressed to our satisfaction. Before this work began, the External Auditor informed us of his intention to place reliance on our work in forming his opinion on the biennial financial statements. Accordingly, we kept him informed of progress throughout the review.
In August 2000 the World Health Organization issued a report prepared by an independent committee of experts entitled "Tobacco Company Strategies to Undermine Tobacco Control Activities at the World Health Organization". The report stated that the tobacco industry had strategies to influence the work of FAO among other entities. We carried out an investigation into the matters raised in the report. We concluded that tobacco companies had indeed attempted to influence the work of FAO but these attempts were largely unsuccessful due to a combination of existing controls and foresighted action by FAO. We made recommendations to improve transparency, avoid conflicts of interest, and to enhance in-house awareness that inappropriate industry influence may exist. We are pleased to report that the recommendations were taken seriously by senior management and implementation action is already under way.
We have amended our work plan to include provision for a comprehensive audit of the World Food Summit: Five years later. This will encompass a review and internal audit opinion on the financial report to be prepared by management. The audit strategy will follow the same approach as that employed for the World Food Summit in 1996.
The 31st meeting of Representatives of Internal Audit Services of the United Nations and Multilateral Financial Institutions was held in 2000 in Rome. This was followed by the Second Conference of Investigators of UN Organizations and Multilateral Financial Institutions. This gave the opportunity for the Senior Auditors to join the Inspector-General at the meetings and participate in the exchange of views and experiences of internal auditors and investigators from the UN system. The Office arranged a highly successful on-site seminar in Rome on Auditing the Automated Business Environment conducted by an internationally recognised expert in the area. It was attended by several staff members from the Administration and Finance Department as well as WFP, IFAD and IAEA. The Inspector-General was a member of an international "peer review" team that was put together to report on the activities of the Internal Audit Office of the European Investment Bank. Also in terms of outreach the Inspector-General had regular monthly meetings with his counterparts from WFP and IFAD, and maintained close contact with the heads of audit and investigation in other UN agencies and international institutions.
The audit activities of the Office are planned, organized, managed, and reported upon by programme element. The planning is devised on a top-down basis taking into account the Strategic Framework, the Medium Term Plan, the Programme of Work and Budget, discussions in the Conference, Council and the Programme and Finance Committees as well as policy statements and initiatives of the Director-General. The plan is subsequently developed in more detail within the Office on a bottom-up basis and presented to the Director-General for his review and concurrence. Notwithstanding the foregoing, it is a flexible plan. Changes can be (and often are) made on the basis of changing circumstances, either on the request of senior management or by the Inspector-General himself.
Audit activities are mainly represented by specific audit reports. However, the contribution of the Office of the Inspector-General to the overall process of management control in the Organization goes considerably beyond the presentation of formal reports. These activities are outlined in the following brief summary of the nature and extent of the work carried out in the course of the year, and Attachment A identifies the specific reports released in 2000.
a) Headquarters Activities
The Headquarters Group houses much of the Office's expertise in financial, accounting and treasury functions, and it is the focal point for office technology, information systems, and other aspects of electronic data processing. However, the main responsibility is to conduct comprehensive audits at Headquarters and provide advice to all levels of management on matters falling within its competence. This group also conducts a number of audits for WFP in accordance with a negotiated biennial agreement.
Specific audits were conducted and reports released on eleven areas throughout the year as noted in Attachment A to this report. In addition, considerable attention was devoted to Oracle related issues, TeleFood funding and accounting, and a variety of other matters assigned by the Inspector-General.
b) Decentralized Activities
This group has prime responsibility for audits, special reviews, inspections and investigations at offices away from headquarters, and in many related activities operated from headquarters. This includes not only the Regional, Sub-Regional and Liaison offices, but also the FAO Representations and specific projects in the field. The group is also a major source of expertise on decentralization and regionalization issues, and the work associated with the use of local audit firms. It is the prime focal point for the auditors in the four major regional offices, who not only perform the whole range of audits in their regions, but also provide advice on management and administrative issues such as staff establishment, recruitment and selection as well as organization, internal control and other matters that arise from time to time.
This group is also an important part of the briefing and orientation programme provided to newly appointed FAORs. It also contributes to the evaluation of their performance while in service and monitors the handover procedures on the termination of their assignments.
In the year 2000, this group produced a total of 39 specific reports: 13 related to various aspects of Regional and Sub-Regional Offices, 12 on FAO Representations and 14 reports on specific projects. A complete list of these reports is contained in Attachment A.
c) Special Management Assignments
This group handles practically all the requests for enquiries, inspections, special audits and investigations originating in the Office of the Director-General, from other members of senior management, or on occasion from individual staff members. These activities, particularly the special investigations, do not always result in formal audit reports, but more often are concluded by informal briefings or confidential memoranda. This group houses the Office's legal expertise and is also involved with matters relating to procurement, (notably the review of requests for waivers from the competitive process and Tender Panel Operations), communications, travel, health insurance and employee benefits. It also represents the Office of the Director-General on the FAO Appeals Committee. Under the recent realignment of responsibilities within the office, this group will also be taking on many of the internal administrative matters previously carried out by the Principal Auditor for Decentalized Activities.
This group also reviews and comments on the monthly expenditures in the immediate Office of the Director-General and the related expenses carried in departmental budgets.
Four specific audit reports were produced in the course of the year as identified in Attachment A.
The procurement of equipment, supplies, and services is governed by the principles and procedures set out in the FAO Manual. This assigns to the Office of the Inspector-General responsibility for receiving, opening, recording and retaining under secure conditions, all bids in response to tender invitations. This ensures the independence, objectivity, security and transparency of the tendering process.
In the past year, the "Tender Panel" met on 121 occasions and dealt with 348 tenders. For these tenders 4,870 firms were invited to submit bids and 1,845 were received. In all respects the level of operations compared with previous years has increased considerably indicating more frequent and wider "testing of the market" for procurement activities.
The Office is represented on a number of important "standing committees" in the Organization: the Programme Policy and Advisory Board, the Information Management Technology Committee (and its sub-committees), the WAICENT Committee, the Procurement Committee, the Advisory Committee on Medical Coverage, the Committee on Investments and its Advisory Committee, the Oracle Implementation Steering Committee, the Joint Committee on Food Services and the Board of the Credit Union. The Office also participates in ad hoc internal review groups, task forces, evaluation panels and so forth. In addition, we follow closely the deliberations of the Programme and Finance Committees, Council and the Conference and meet from time to time with senior officials and representatives of Member Nations, the External Auditor, the JIU and colleagues from oversight functions in other UN and international organizations.
On the staffing side, the Office recently underwent an important realignment of responsibilities giving recognition to the need for strong investigative capacity and a sharper focus on headquarters audits. These changes are graphically depicted in Attachment B to this report. With two remaining vacancies in the professional category, we are now practically at full strength with a well balanced team of highly qualified and experienced staff both at the professional and general service levels. However, again in the year 2000 we were hampered by staff vacancies and secondments to other divisions in FAO, but were able to compensate with the use of the various partnership programmes, short-term consultancies, and work realignments as appropriate. Details on the staffing situation as well as some summary demographic information, is contained in Attachment B to this report.
Training and development continues to be an important aspect of AUD's management activities. This comprises three elements: professional audit training; language training; and training in the use of office technology. On the professional side, we organized a highly successful "on-site" seminar on Auditing the Automated Business Environment (led by an internationally recognized expert in this field). Several sister organizations participated on a cost-sharing basis. We have made good use of the facilities available within FAO for language training and for our office technology training needs. One auditor is enrolled in a distant learning programme with a U.K. university, and we also participate in other senior management training programmes arranged through the Personnel Division. This commitment to training and development will continue in the year 2001.
The Office maintained the practice of having regular theme-oriented staff meetings where FAO experts address the audit staff on current developments in their areas of expertise, and where audit and administrative (including budget monitoring) matters are discussed.
The update of the Audit Manual has been completed and is in the final printing stage. Advance copies have been requested and provided to several other international organizations.
In closing, the Office would once again like to express its appreciation to senior management, and indeed to staff at all levels for the positive responses, cooperation and assistance received in carrying out its various assignments throughout the year.
ATTACHMENT A (i)
List of Reports Issued in 2000
Special Management Assignments
ATTACHMENT A (ii)
List of Reports Issued in 2000
a) Relating to Regional, Sub-Regional and FAO Representation Offices
b) Relating to Specific Projects
ATTACHMENT B (i)
|V. Brooke ................. G-3
K. Travers (80% G-4) G-3
|C. Bricknell ................... G-6
M.T. Baiani (Registry) ... G-4
SPECIAL MANAGEMENT ASSIGNMENTS
A. Lo Faso ...... D-1
J. CortÚs ........... P-4
|L. Elliott ............. P-5
R. Tiwari ............. P-3
|Vacant ..................... P-5
Ogino (RAP)........... P-4
|1/ Mr Rispoli is on secondment to TC|
ATTACHMENT B (ii)
|Professional Audit Posts||15|
|1 Principal Auditor||D1||1|
|2 Senior Auditors||P5||1||1|
|4 Regional Auditors*||P4||2||1||1|
|Para-professional Audit Posts||3|
|1 Audit Assistant||G6||1|
|1 Audit Clerk||G5||1|
|1 Audit Clerk||G4||1|
|Secretarial Support for Audit||2|
|1 Bilingual Typist (80%)||G3||1|
|Other Support Staff||2|
|1 Director's Secretary||G6||1|
|1 Records clerk||G4||
The following countries are represented in the above: