FC 108/10

Finance Committee

Hundred and eighth Session

Rome, 27 September – 1 October 2004

FAO Audit Committee (Internal) Annual Report to the Director-General for 2003

Table of Contents


As the Finance Committee was informed at its 102nd Session, an Audit Committee was established in April 2003. The Director-General has the pleasure to provide attached, for the information of the Finance Committee, the 2003 Annual Report of the Audit Committee. The Director-General wishes to express his appreciation for the work undertaken by the Audit Committtee and for the advice provided.


FAO Audit Committee (Internal)
Annual Report to the Director-General for 2003

I. Introduction and Background

1. This is the first annual report of the Audit Committee following its establishment in April 2003. This report provides an overview of the Committee’s activities, the important issues that have arisen and the actions taken by AUD and other stakeholders involved in the audit processes.

2. Following a recommendation of the former External Auditor and in accordance with FAO’s commitment to the 100th Session of the Finance Committee, the Director-General established the FAO Audit Committee (Internal) in April 2003. Its composition and terms of reference are set out in DGB No. 2003/6 Rev. 1 of 2 April 2003.

3. The Committee’s composition is as follows:

Internal Members:
Mr. D. Harcharik, Chairman
Mr. K. Mehboob, Permanent Member
Mr. G. Pucci, Permanent Member
Ms. L. Fresco, Rotating Member appointed for two years
Ms. A. Lo Faso, Secretary
External Members:
Mr. P. Maertens1, Head Internal Audit, European Investment Bank
Mr. B. Kass2, former Director of Internal Audit, WFP and Senior Consultant

4. The Committee operates as an advisory panel to the Director-General and to the Office of the Inspector-General with the aim of providing guidance and assistance. The Committee focused on the following aspects:

II. Committee’s Modus Operandi

5. The Committee met three times during 2003. The main aspects considered at each meeting were as follows:

      1. the Inspector-General’s reports on the activities of AUD,
      2. AUD’s plan of work,
      3. the status of implementation of internal and external audit recommendations,
      4. the summary and status of implementation of the Committee’s decisions and recommendations, and
      5. the status of the Committee’s discharge of its functions and responsibilities.

6. A summary record was prepared for each of the three meetings and cleared with Committee members.

7. The External Auditor was invited to the November 2003 meeting of the Committee but could not attend. He will be invited to the April 2004 meeting.

8. The varied skills, experience and active involvement of Committee members ensured stimulating and constructive discussions that have resulted in positive contributions to the overall effectiveness of the audit and inspection processes and functions. This was also helped by AUD’s willingness, transparency and cooperation in providing all necessary information to the Committee.

III. Specific Observations of the Audit Committee on the Activities of the Office of the Inspector-General


9. During 2003, the Committee made substantial progress in relation to the objectives and responsibilities outlined in its Terms of Reference and concludes that:

      1. the Office of the Inspector General has sufficient independence to ensure objective audits and studies to management;
      2. AUD’s internal planning process ensures that all significant risks facing FAO are duly considered for effective audit coverage of its activities;
      3. suspected mis-management, irregularities and fraud are promptly investigated and reported upon;
      4. AUD conducts its work in accordance with its Charter and adheres to appropriate Internal Audit Standards;
      5. the resources of AUD are adequate, but certain vacancies need to be filled;
      6. there should be increased attention to the implementation of recommendations for the biennium 2004-05;
      7. AUD has duly addressed the main issues on the internal audit function raised by the former External Auditor in his report to the Finance Committee for the biennium 2000-01.


10. In discharging its functions and responsibilities, the Committee made contributions to the following aspects:

      1. Increasing awareness of AUD and its contribution within FAO by stimulating managers’ involvement and commitment to the audit process. In this regard, among others, the following important issues were brought up at the Senior Management Meeting : a) the timeliness of auditees’ response to draft internal audit reports and b) prompt implementation of audit recommendations.
      2. Strengthening FAO’s operations by ensuring action on some critical AUD observations, e.g. a) measures to reduce the risk of fraud in decentralized offices, b) actions to establish a proactive business contingency plan; c) help to divisions to better comply with requirements for Letters of Agreement.
      3. Supporting AUD’s plan to put in place a more systematic way for tracking recommendations, including use of inter-active software to facilitate monitoring, follow up and implementation of its recommendations and promoting improved efficiency within AUD by speeding up the audit process from planning to reporting.
      4. Assisting the Organization in strengthening audit and inspection strategies by a) providing consultation on the 2003 portion of the audit plan for the 2002-03 biennium, including AUD’s activities and role with regard to the Oil-for-Food Programme and the Security Council Resolutions relating to Iraq and b) providing direction on the risk analysis and the resulting audit plan for the biennium 2004-05.
      5. Supporting, reviewing and monitoring the implementation of the observations of the former External Auditor to strengthen AUD. This became a standard item on the Committee’s agenda.

IV. Work Programme of the FAO Audit Committee for 2004

11. The Committee plans to meet at least three times in 2004 and will discharge its functions and responsibilities in line with its Terms of Reference outlined in DGB No. 2003/6 Rev. 1. In particular, focus will continue on improving the monitoring of implementation of audit recommendations, the timeliness of managers’ response and commitment in this regard, and the duration of the audit process from planning to reporting. In addition, among others, the Committee plans to review a number of individual audit reports in order to advise AUD on potential relevant improvements and will continue to provide guidance to AUD on a variety of issues, including the review of governance aspects included in AUD’s plan.


1 Appointed for a two-year term, renewable for an additional two years.

2 Appointed for a two-year term, renewable for an additional two years.