Finance Committee

LONG FORM REPORT

External Auditor’s Recommendation

Priority

External Auditor’s Suggested Timetable

Action taken, status and time-frame for implementation

External Auditor’s Comments

FINANCIAL MATTERS

Financial position of the Organization

I recommend that the Organization should continue and where possible, intensify existing efforts in collection of outstanding assessments of the Member Nations with the Governments of the Member Nations for payment of arrears of assessment and timely payment of current assessments.

Fundamental

2004-2005

Current efforts have been intensified by means of:

i) additional follow-up letters sent to Member Nations at the highest level as well as regular efforts at the working level,

ii) quarterly statements of accounts sent to Members,

iii) more frequent contacts with Permanent Representations in Rome, and

iv) quarterly reports sent to Regional Offices and Subregional Offices for assistance in collections.

Status: In course of implementation

Expected completion: On-going

Despite the steps taken, the position of outstanding assessments has not improved. During the year 2004, the Organization was forced to borrow from the line of credit from a bank.

Post trial balance adjustments

I recommend that the Organization should assess the possibilities of reducing post trial balance adjustments and, in the event of these adjustments becoming unavoidable, ensure that such adjustments are supported with a formal sign-off procedure.

Significant

Before closure of 2004-2005 accounts

The Organization is striving to reduce post trial balance adjustments to the minimum necessary and has taken steps to ensure that such adjustments are accompanied by a formal sign off.

Status: In course of implementation

Expected completion: On-going

The matter will be examined during audit of financial statements of 2004-2005.

Cash and bank deposits

I recommend that the Organization should continue their efforts in bank reconciliation and settle the old unreconciled items in a time bound manner.

Merits Attention

Before closure of 2004-2005 accounts

Reconciliation of bank accounts is an on-going process. Specific efforts are being made to resolve old outstanding items.

Status: In course of implementation

Expected completion: On-going

The matter will be examined during audit of financial statements of 2004-2005.

Accounts receivable and payable

I recommend that the Organization should take time bound steps to urgently adjust outstanding travel advances paid to consultants. Particular attention needs to be paid to the consultants, contracts with whom have expired.

Significant

Before closure of 2004-2005 accounts

A comprehensive plan of action is in place calling for the introduction of monthly statements of accounts to consultants and the regular recovery of past due amounts. The plan also calls for a thorough clean up exercise of the Oracle prepayment account (General Ledger account 2800) as a prerequisite before the monthly statements are introduced. The clean-up exercise (covering all categories of outstanding amounts) is well underway and progress is reported on a monthly basis.

Status: In course of implementation

Expected completion date: July 2005

Progress has been noticed. However, many of the old items are still outstanding. Since this is an ongoing process, further progress will be watched in regular audits.

I recommend that the Organization should work out a cost effective mechanism to monitor the clearing accounts under Accounts Receivable and Payable and adjust the outstanding items.

Merits Attention

Before closure of 2004-2005 accounts

Considerable effort has been given to monitoring and adjusting clearing accounts in 2004. Many of the clearing accounts are required because the existing applications are not fully integrated. The Field Accounting replacement project and the HRMS Payroll project provide the Organization with the opportunity to further integrate these applications and to review the accounting modules so as to limit the number of clearing accounts required.

Status: In course of implementation

Expected completion: End of 2006

The matter will be examined during audit of financial statements of 2004-2005.

Corporate accounting manual

I recommend that the Organization should finalize the corporate accounting manual on priority as significant changes have taken place in the accounting systems and procedures due to introduction of new automated systems for many processes.

Merits Attention

2004-2005

All financial and accounting related procedures, administrative rules and regulations which, when taken together, will constitute a comprehensive corporate accounting manual, are currently under review. Manual Sections will be revised to only include material which is of a higher level policy and rule nature. Procedures and related documentation will be prepared for all business units and the FAO Intranet is already used to communicate authoritative policy and procedure documentation to user groups.

Work is already underway on this exercise and is expected to continue throughout 2005-06 with individual sections of the work being published as they are completed during the period.

Status: In course of implementation

Expected completion - End of 2006

No comment, as the implementation is not yet over.

BUDGETARY PROCESS OF REGULAR PROGRAMME OF WORK

Strategic focus in budgetary process

I recommend that the Organization should develop and disseminate clearer criteria for identifying contributions of Programme Entities to Strategic Objectives and for measurement of the extent of such contribution. I also recommend that a suitable mechanism should be established to identify the shifts in linkages between the Programme Entities and Strategic Objectives.

Merits Attention

2004-2005

Instructions for the preparation of proposals for the MTP 2006-2011 gave updated guidance for identifying and measuring linkages and contributions of Programme Entities to Strategic Objectives. It is confirmed that PBE can now facilitate review of cases through PIRES where linkages are modified between preparation of MTP and the Programme of Work and Budget.

Status: Implemented

Verified.

Implementation of results-based budgeting

I recommend that the Organization should seek further guidance from the Governing Bodies on the ways and means of synchronizing the different resource assumptions in the preparations of Medium Term Plan and Summary Programme of Work and Budget to strengthen the Results Based Budgeting process.

Significant

2004-2005

During discussion of the MTP 2006-11, the concerned Governing Bodies have reiterated that resource projections in the Plan were purely indicative. They could not agree on any firm budget level for preparation of the SPWB and PWB 2006-07 and in fact invited the preparation of various scenarios. Nevertheless, the MTP proposals were framed in the first instance within a zero real growth (ZRG) approach topped by selective additional resources constituting the main real growth (RG) scenario advocated by the Secretariat. This will facilitate the preparation of scenarios for the SPWB 2006-07 from the ZRG base.

Status: In course of implementation

Expected completion – Ongoing task

Verified.

Unprogrammed resources

I recommend that the Organization should improve the effectiveness of the Medium Term Plan as a planning tool by reducing, as far as possible, the extent of unprogrammed resources for the last biennium.

Significant

2004-2005

The issue of unprogrammed resources was addressed in the MTP 2006-11 (CL 127/7 paragraphs 159-165) where three options were proposed. The Programme and Finance Committees confirmed the current procedure for handling unprogrammed resources. The Programme Committee stressed in this connection the importance of auto-evaluations and welcomed the efforts in the Secretariat to make this a credible tool. The Committee observed that the term “programme reserve” was probably more accurate than “unprogrammed resources” since the corresponding resources were effectively held in reserve under the attendant programme to which the entity/ies belonged. The Programme Committee is due to assess experience with the first batch of auto-evaluations at its Session planned for May 2005.

Status: Recommendation has been addressed

Verified.

Formulation of indicators

I recommend that the Organization should establish a road map to accomplish the task of formulating consistent, realistic and verifiable target values for each indicator at the level of Major Outputs for all Programme Entities. Formulation of such indicators would require enhanced skills of staff in the technical departments and the Office of Programme, Budget and Evaluation should play a catalytic role in this regard.

Merits Attention

2004-2005

Progressive improvement of the formulation of indicators at the level of Major Outputs is under way and this will be taken into account in the next MTP formulation exercise. Future training initiatives in programme formulation will seek to address this problem on a continuing basis.

Status: In course of implementation

Expected completion – Ongoing task

Verified.

Programme implementation and budget monitoring

While the budget monitoring is generally satisfactory, I recommend that technical departments should include the estimated date of completion of biennial outputs and the expected percentage of their achievements in the Annual Work Plans to facilitate more effective monitoring of physical progress.

Merits Attention

2004-2005

This has been addressed in the enhanced Workplanning module of PIRES which was put in operation in January 2005.

Status: Implemented

Verified.

Computerization of budgetary process (PIRES)

I recommend that efforts should be intensified to implement all the modules within the planned dates. I also recommend that periodical feedback should continue to be taken from the user community to determine their training requirements.

Merits Attention

2004-2005

The implementation of planned additions and enhancements to PIRES is proceeding, thanks to resources stemming from arrears payments. The system development efforts will be completed by the end of 2005, according to a workplan agreed with the Inter-departmental Working Group (IDWG) on PIRES, which advises the PIRES team on the functional needs of users.

Status: In course of implementation

Expected completion – End of 2005

Verified.

Budgetary resources by region

I recommend that to improve the quality and reliability of the figures of the Programme Resources by regions, the Organization should ensure that all departments follow uniform methodology as laid down by the Office of Programme, Budget and Evaluation.

Merits Attention

2004-2005

It is confirmed that a clear methodology and uniform procedure for assessing geographical distribution of resources will be used for preparation of the PWB 2006-2007.

Status: In course of implementation

Expected completion – mid-2005

Will be examined after implementation in PWB 2006-2007.

TECHNICAL CO-OPERATION PROGRAMME

Disbursement of TCP appropriations

I recommend that in view of the persistent low disbursement in the past resulting in huge carried over appropriations, the Organization should take steps to increase disbursement substantially. I also recommend that the delivery in individual projects should be closely monitored in the Headquarters.

Fundamental

2004-2005

The External Auditor’s analysis was based on the TCP delivery situation up to June 2003 and therefore included the period following the introduction of Oracle financials and related software (1999-2000) and the decentralization of operational and budget holder responsibilities (2000-2002), both of which events slowed down the TCP deliveries. At the time the external audit started, the Organization had already taken deliberate management actions to accelerate TCP delivery. However, the results of these efforts could only be fully appreciated after the External Auditor concluded its work. The delivery performance of TCP funded cooperation in 2003 reached the unprecedented level of US$ 65.5 million, a performance level that has been exceeded in 2004.

Close monitoring of implementation is now reality. The Field Programme Management Information System (FPMIS) has become a powerful and effective system for monitoring the TCP pipeline and project implementation, initiating follow-up action to address implementation delays and for reporting to management.

Status: On-going task

Substantial improvements have been noticed in TCP disbursements.

Accounting of TCP expenditure: Return flow

I recommend that the Organization should bring the actual practice of the “return flow” process including the latest changes of this process to the notice of the Governing Bodies. I further recommend that the accounting and reporting procedures of the “return flow” process should be reviewed and codified. The monitoring mechanisms should be reoriented to adhere to these procedures.

Fundamental

May 2005

The Organization is in the process of reviewing the procedures related to and codifying the “return-flow” as suggested by the External Auditor. In the first half of 2005 a procedure reflecting the practice and approaches so far followed will be finalized.

Status: Implementation in progress

Expected completion: 2005

No comment as the recommendation is yet to be implemented.

Approval of TCP projects

I recommend that the Organization should sustain the improvements obtained to date and introduce further measures to reduce the time taken for approving the non-emergency and emergency projects.

Merits Attention

2004-2005

Taking into account the absorption capacities of the various FAO units involved and the continuous flow of requests for TCP assistance from member countries, the average sustainable approvals level per semester could be defined to be around 25% of the resources available in a biennium. Exceptional approval performance in 2003 and 2004 by far exceeded this level and required action to adapt the monthly approvals in line with available resources.

Status: On-going task - implementation in progress

Confirmed.

I recommend that sustained measures should be taken to improve incountry project appraisal to reduce the number of cancelled projects. The Organization also should disseminate information about Technical Cooperation Programme criteria among the governments of the Member Nations to enable better formulation of TCP projects.

Merits Attention

2004-2005

The TCP Guidelines, clearly indicating the criteria and procedures for TCP assistance, are available to both FAORs and Governments. However, it is acknowledged that there is scope for improving the in-country screening of project requests. Additional guidance will be provided, e.g. in the form of “Frequently Asked Questions (FAQ)” in the FPMIS and the FAORs will be requested to provide national counterpart institutions with the TCP Guidelines or to refer them to the FAO website. The possibility of developing multimedia training tools and of establishing pools of reliable, well performing national consultants to support the formulation of sound project proposals are also currently being explored. However, it should be noted that the TCP is currently under review and that action on this may better be based on the revised TCP criteria, guidelines and related procedures.

Status: Options under consideration

Expected completion: On-going task

No comment at this stage as the organization is considering various options.

Implementation of TCP projects

Europe region

I recommend that the Organization should take concrete steps to reduce delay in project implementation in Europe region by strengthening the capacity of the National Project Coordinators. It should identify the common factors for delay and take action to ameliorate them.

Significant

2004-2005

The situation whereby the Organization has to rely on the capacity of UNDP and National Counterparts for implementation of TCP projects is specific to the European Region. However, the Organization agrees with the External Auditor’s proposal of having standard, detailed guidelines and training for national counterparts in particular considering the increasing use of national execution modalities.

Where appropriate, training of national counterparts could be introduced into the project design. Furthermore, the Organization is discussing ways of ensuring that UNDP officers are better familiarized with the implementation modalities of TCP. In the meantime, frequent telephone briefings for new NPCs have been introduced by REU.

The Operations Component of the web-based Field Programme Manual has been published early 2004. The possibility of making it available to National Project Coordinators will be explored and specific procedures will thus not be required.

Furthermore, the Organization is developing some Guidelines for National Project Coordinators of TCP projects which are expected to become available in the first half of 2005 (a draft has been prepared). These guidelines outline the duties of the coordinators, and also include monitoring tools for project implementation.

The issue of operational cash advances to NPCs (non staff-members) has been solved by changing the general provisions for TCP projects.

Status: Options under consideration

Expected completion: On-going task

No comment is required at this stage as the organization is considering various options.

Emergency projects

I recommend that procurement procedures should be improved to ensure that inputs like seeds and fertilizers are available for the emergency projects at the time when these are needed.

Significant

Immediate

Training of the operational officers in procurement procedures and rules has already started and is expected to improve the situation. Moreover, following the roll-out of the WAN connectivity, procedural information on the FAO Intranet is more easily accessible to FAORs.

The Organization is further exploring ways of increasing speed and flexibility in procurement of inputs for emergency projects and is investigating the opportunity to procure larger amounts of inputs on a case-by-case basis depending on the urgency of the situation. A data base on goods supplied under emergency projects is being created to better identify the specifications of the main inputs in advance.
Status: On-going task - implementation in progress

Confirmed.

I also recommend that lessons learnt and ways to meet the critical risks in various emergency projects should be documented from time to time for use by various concerned agencies and for strengthening institutional memory.

Merits Attention

2004-2005

Although not in format of formal papers, the analysis of lessons learnt and their contributions to overcome the major and more frequent risks is an ongoing process. Guidelines for operations of emergency projects are provided to all TCEO staff (in the field and at headquarters). A more formal document should be prepared for use by various actors and for institutional memory.

Status: On-going task - implementation in progress

No comment at this stage as a more formal document has been assured.

Field units

I recommend that the Organization should take concrete steps to substantially enhance capacity in project management in all aspects by the field units. The administrative support and operational guidance to be provided by the Regional Offices and Headquarters to the field offices being a key aspect of decentralized operations should be monitored closely to avoid slip up in project implementations.

Significant

2004-2005

As mentioned above (cf disbursement and monitoring of TCP projects), close monitoring of implementation has become a reality. The Field Programme Management Information System (FPMIS) has become a powerful and effective system for the TCP process.In addition, the following three-pronged approach has been adopted to enhance the administrative and operational support capacity in the decentralized offices and in the FAOR offices: (i) staff development and training (ii) oversight and support missions to the selected country offices, as well as missions by AUD, and (iii) preparation and issuance of guidelines in the area of office and budget management, procurement, personnel management, strengthening the administrative function and financial discipline, standardization and introduction of simplified electronic procedures. This recommendation is ongoing, yet its implementation is hampered by budget cuts under Major Programme 3.4.

Status: Implemented

The efforts mentioned are confirmed.

I also recommend that the Organization should take all possible steps- in particular train the staff- to optimize the benefit of Information Technology resources available in the Regional and Country offices.

Merits Attention

2004-2005

Non-fungible staff development resources have been provided to the FAORs to ensure that need based development and training plans are developed and implemented. IT is indeed one of the key areas of staff training. In addition, modules are being developed under COIN to simplify and automate the work flows for the FAO country offices. This recommendation is ongoing, yet its implementation is hampered by budget cuts under Major Programme 3.4.

Status: Implemented

Verified.

Operational and financial closure of projects

I recommend that the Organization should closely monitor the closure of projects and develop suitable reports for this purpose.

Merits Attention

2004-2005

During the last three years, a major effort has been made to speed up project closure with the introduction of an electronic form and a dedicated e-mail account, reducing time to a minimum. Automatic “trigger” messages have been introduced in FPMIS to prompt budget holders of the need to close projects. In addition, a new category of projects called “Activities Completed” has been created in FPMIS to accommodate those projects which are no longer “Operationally Active” but whose condition in terms of equipment inventory and terminal reporting do not allow them to be closed.

Status: On-going task - implementation in progress

Verified.

Technical support services costs

I recommend that the review of the Technical Support Service claim system be completed as a priority and that the resulting modified procedures be implemented as early as possible.

Merits Attention

2004-2005

A review of the Technical Support Service claim system for TCP projects has taken place and resulted in a radical simplification of the procedures, implemented with effect from 7 February 2005 (ref. FPC 2005/01).

Status: Implemented (for TCP projects)

Verified.

Programme evaluation

I recommend that the Organization should ensure effective use of evaluation findings in management of Technical Cooperation Programme projects in a time bound manner.

Merits Attention

2004-2005

The Organization agrees with the recommendation and will formulate a methodology for ensuring that feedback on evaluation findings and key lessons is available to project formulators and budget holders. This is pending review of the TCP requested by the Programme Committee, which may also have some impact on the matter.

Status: Options under consideration

Expected completion: End 2005

No comment is required at this stage as options are under consideration.

Budgetary and performance reporting

I recommend that the Organization should enhance the reporting in the Annual Report on Budgetary Performance and Programme Implementation Report to facilitate review and monitoring of the Technical Cooperation Programme by the Governing Bodies.

Merits Attention

2004-2005

Enhanced reporting on TCP was incorporated in the ARBP 2003 (CL 127/14 Annex I) and PIR 2002-03 (C 2005/8 paras 214 and 600-616).

Status: Implemented

Verified.

PROCUREMENT FUNCTIONS BY AFSP IN HEADQUARTERS

Delays in procurement

I recommend that the Procurement Service (AFSP) should develop a formal procedure to review timeliness in supply of commodities where seasonality is involved to ensure that delivery is made by the date by which the supply is required. The inter departmental working group which is proposed to be set up should look into this aspect in particular.

Significant

Immediate

It is planned that the role of the Inter Departmental Working Group (IDWG) be carried out by the Procurement Committee (PC) and that the first meeting of the IDWG/PC will be called during March 2005. The matter noted in the recommendation is part of the proposed tasks of the Working Group.

Status: In course of implementation

Expected completion – September 2005

No comment at this stage as the matter is under implementation.

Inspection of goods

I recommend that the Organization should document the practice of distribution of goods to final beneficiaries after receipt of inspection reports and should review other inspection practices urgently. Any revision should be implemented in a time-bound manner.

Significant

2004-2005

The Organization is in the process of developing a written policy on the inspection of goods.

Status: In course of implementation

Expected completion – October 2005

No comment at this stage as the matter is under implementation.

Penalty clause

I recommend that the Organization should standardize provisions of penalty and maintain in the purchasing files the calculations and authorization details. Exceptions in specific situations should have the approval of a designated authority and supported by recorded reasons.

Significant

2004-2005

The standard penalty for purchase orders is 2.5% per full week of delay up to a maximum of 10%. In extraordinary cases, this may be increased. Purchasing Officers have been instructed to maintain records of decisions regarding imposition or not of penalties. The Organization is in the process of developing a written policy on this issue.

Status: In course of implementation

Expected completion – November 2005

No comment at this stage as the matter is under implementation.

Record keeping

Proper maintenance of procurement records being of critical importance, I recommend that the Organization should formalize and implement, on priority, procedures relating to maintenance of procurement records.

Fundamental

2004-2005

Resources not yet available under the PWB. However, the regrouping of the AFSP and AFSD registries should bring some improvements

Status: Subject to the availability of resources

No comments.

Internal reporting

I recommend that suitable internal reporting arrangements should be implemented for effective monitoring of progress of purchase cases. Information Technology support to procurement service should be enhanced on a priority basis to improve monitoring.

Merits Attention

2004-2005

A proposal has been prepared and it has been presented for the approval of Senior Management.

Status: In course of implementation

No comment at this stage as the matter is under implementation.

Procurement committee

I recommend that purchase cases with less than three bids meeting specifications of the tender should be submitted to the Procurement Committee, in accordance with the financial limits set out in the Manual.

Merits Attention

2004-2005

It is planned that the role of the Inter Departmental Working Group (IDWG) be carried out by the Procurement Committee (PC) and that the first meeting of the IDWG/PC will be called during March 2005. The matter noted in the recommendation is part of the proposed tasks of the Working Group.

Status: In course of implementation

Expected completion – August 2005

No comment at this stage as the matter is under implementation.

Rotation of personnel in AFSP

I recommend that the Organization should consider the feasibility of developing technical expertise within the procurement division and rotation of personnel in the division as a potential tool to further enhance internal control.

Merits Attention

2004-2005

It is planned that the role of the Inter Departmental Working Group (IDWG) be carried out by the Procurement Committee (PC) and that the first meeting of the IDWG/PC will be called during March 2005. The matter noted in the recommendation is part of the proposed tasks of the Working Group.

Status: In course of implementation

Expected completion – December 2005

No comment at this stage as the matter is under implementation.

Procurement of urea under Oil for Food Programme

I recommend that the risk assessment in procurement functions should be completed in a time bound manner and the review of the provisions of the Manual and the levels of delegation of authority should be finalized and implemented at the earliest.

Fundamental

Immediate

It is planned that the role of the Inter Departmental Working Group (IDWG) be carried out by the Procurement Committee (PC) and that the first meeting of the IDWG/PC will be called during March 2005. The matter noted in the recommendation is part of the proposed tasks of the Working Group.

Status: In course of implementation

Expected completion – December 2005

No comment at this stage as the matter is under implementation.

AUDIT OF DECENTRALIZED UNITS

I recommend that the Organization should take concrete steps to improve the project and programme management capacity of the FAO country offices. The utilization of the training budget by FAO Representations should be closely monitored.

Significant

2004-2005

A non-fungible budget allotment for staff development has been provided to the FAORs who are encouraged to prepare need based staff development plans. The utilization of the training budget is periodically monitored by the Organization to ensure that these funds are fully utilized. It should be noted that with constant monitoring and oversight by OCD, the utilization of the training budget in the FAO Representations has improved from 42% in 2001 to more than 75% in 2004.

Status: In course of implementation

Expected completion: On-going task

Verified.

Local procurement

I recommend that the Organization should closely monitor compliance with the rules of the Organization regarding procurement procedures by Regional offices and FAO Representations.

Merits Attention

2004-2005

Comprehensive guidelines on procurement have been issued in December 2003. These have been made available to the decentralized offices on-line in COIN. AUD missions and the support missions to the country offices particularly look into compliance with the procurement procedures.

Status: Implemented

Confirmed.

Personnel management

I recommend that the intended revision of the Food and Agriculture Organization’s Manual be carried out as early as possible so that issues relating to longer-term employment of locally recruited professionals can be clear to all concerned.

Merits Attention

2004-2005

The relevant Section of the FAO Administrative Manual (Manual Section 375) has been revised to take into account the issues and reflect the recommendations made by the External Auditor on this subject. The publication of the revised Manual Section is presently pending the outcome of a review conducted in the last quarter of 2004 on the use of non-staff resources and the modalities of related contractual arrangements, which could have an impact on the provisions contained in the aforementioned Manual Section. The report emanating from this review will be submitted to the Human Resources Committee and a corporate decision is envisaged by Senior Management on this matter during the first quarter of 2005. Subsequent to this decision, the revised Manual Section 375 will be issued.

Status: In course of implementation

Expected completion – mid-2005

No comment at this stage as the recommendation is in course of implementation.

Local audit scheme for FAORs

I recommend a standard check list for review of the local audit report in Headquarters should be developed. The impact of the local audit scheme on the internal controls of the country offices should be evaluated periodically.

Merits Attention

2004-2005

The Organization has introduced a check list for the review of local audit reports at Headquarters. In addition, recent changes to the standard local audit contract require the auditors to review the state of internal controls in operation at country and project offices. The review of the audit reports is the basis for the Organization’s annual evaluation of the local audit scheme.

Status: Implemented

Verified.

ACTION TAKEN IN RESPONSE TO PREVIOUS REPORTS

FINANCIAL MATTERS

Applicable Rules and Regulations for Employment of Retirees

The existing guidelines and practices for the re-employment of former staff members who have been separated should be consolidated into a comprehensive policy, which should address, in particular, the following issues: minimum time lapse between termination and re-employment, maximum time of employment, nature of the assignment, financial and other conditions of employment.As far as the first point is concerned, I consider the UN standard rule of three years minimum to be a good practice. It should be duly recalled in all termination agreements. The Director-General could, of course, always grant a waiver to this rule on the basis of detailed justifications. The maximum time of employment could be based on the one for retirees (six months).Once defined, the rules governing re-employment of separated staff should be incorporated into the FAO Manual under Section 300

Significant

Early in 2003

A review was conducted on the conditions governing the employment of retirees within the Organization. During the course of this review, several issues were examined and further identified, relating both to the policy, applicable rules and administrative processes. Specifically, the review conducted identified the following areas and issues as meriting close consideration, notably the delegation of authority for the extension of contracts of retirees beyond the established limitation of assignment duration, the appropriate length of employment of retirees, the procedures for recruitment (including the assessment of the nature of assignments) and the level of remuneration. The findings of the review are being developed in a HR management policy framework that will be submitted to the Human Resources Committee by mid-2005.

Status: In course of implementation

Expected completion – December 2005

No comment as the matter is under implementation.

REVIEW OF THE ORGANIZATION’S INTERNAL CONTROLS

Organization of the Overall Function of Oversight at the FAO

Applicable Rules and Regulations

I recommend that the Financial Rules, which constitute Section 202 of the FAO Manual, and Section 108 that relates to the AF Department be updated as soon as possible in order, notably, to give a comprehensive view of the oversight functions within the Organization.

Merits attention

Before the end of 2002

A draft of the functional statement of Finance Division (Manual Section 108) has been prepared and is presently being reviewed. It is noted that the revised statement is being formulated at the service level rather than at the individual group level as in the past. The review should be completed during 2005 and the statement will then be published.

A revised draft of Manual Section 202 to reflect a formal update of the terminology used is under review. The review and update are being completed within the context of a complete review of financial policy and procedural material. The work will continue throughout 2005.

Status: In course of implementation

Expected completion - End of 2005

No comment as the matter is under implementation.

Performance of Audit Work

I recommend the following:
Dramatic improvements should be made to the audit manual to turn it into a useful tool for the auditors. Priority should be given to include sections on risk assessment, statistical sampling and materiality. The section dedicated to Headquarters should be expanded to cover the information system, treasury functions and investments, procurement and human resources audits

Significant

By mid-2003

The audit manual has been updated and is in the collation and printing stages.

Status: Substantively completed

Expected completion: May 2005

Verified.

FOLLOW UP REVIEW OF THE TREASURY MANAGEMENT

Banking Arrangements

I recommend prompt action to implement the third tier of the strategy in order to further streamline the number of retail banking relationships and reduce the cost of banking.

Significant

Before the end of 2003

An action plan to consolidate regional banking arrangements is being drawn up covering the steps to be taken including the negotiations for the services to be provided by the banking channels concerned. This plan will be submitted for the endorsement of Senior Management. However, the implementation of this recommendation is subject to the availability of adequate resources.

Status: Dependent upon availability of funding

No comment

FOLLOW UP REVIEW OF THE AFF REORGANISATION AND STAFFING

Staffing review

I recommend that on the basis of the final report of the consulting firm, a detailed action plan on how to address the unresolved issues faced by the AFF division be prepared and that its implementation be closely monitored through the regular issuance of progress reports.

Significant

Detailed plan of action before the end of 2002

While this recommendation was taken on board within the planning exercise for the 2004/2005 biennium budget, five AFF posts were subsequently abolished in the Adjusted PWB 2004-2005. Continuing budgetary pressures within the Organization may now lead to yet further cuts in the resources available to Finance Division in 2006-2007 with reductions in the number of posts to a level that will be even further below the level identified by the consulting firm as the minimum required in AFF.

Status: Dependent upon availability of funding

The matter relating to abolition of five AFF posts has been considered by the Finance Committee separately.

HUMAN RESOURCES MANAGEMENT

Use of Other Human Resources

Regarding the use of other human resources, I recommended that the conditions of services and contracts be standardized and that a control and monitoring system over the corporate use of external collaborators be put in place [paragraph 119 of my 1998-99 report]. At the time of writing this report, my staff was informed that the envisaged new contractual arrangement called “Personal Services Agreement”, which would replace four previous types of contracts, and would be implemented in October 2002.

Not indicated

Not indicated

In addition to the consolidation in the Personal Services Agreement (PSA) of four previous forms of contractual arrangements used for the employment non-staff resources, a review conducted in the last quarter of 2004 on the use of non-staff resources and the modalities of related contractual arrangements has recommended further the standardization of the assignment duration of such contractual arrangements and the establishment of a monitoring mechanism to oversee their corporate application. The report emanating from this review will be submitted to the Human Resources Committee and a corporate decision is envisaged by Senior Management on this matter during the first quarter of 2005. The publication of the revised contractual document for PSAs is presently pending the outcome of the Senior Management’s deliberations and decision on this subject. Subsequent to this decision, the revised Manual Section 319 will be issued.

Status: In course of implementation

Expected completion – mid-2005

No comment at this stage as the matter is under implementation.