Rebeca Grynspan: UNDP Report on the implementation of the recommendations of the UN Board of Auditors, 2010-2011
United Nations Under-Secretary-General
and Associate Administrator, United Nations Development Programme
Item 9: UNDP Report on the implementation of the recommendations
of the UN Board of Auditors, 2010-2011 (DP/2013/8)
Executive Board of UNDP and UNFPA
First Regular Session, 30th January 2013, New York
Mr. President, Distinguished Members of the Executive Board, Ladies and Gentlemen,
I am pleased to introduce the Report of UNDP on the implementation of the recommendations of the UN Board of Auditors, 2010-2011, contained in document DP/2013/8.
In addition to the main paper, the details and status of all 33 audit recommendations issued by the Board of Auditors for the biennium 2010-2011 are available on the website of the Executive Board Secretariat in a new format as requested by the Executive Board.
The full audit report of the Board of Auditors (including the audited financial statements of UNDP) is publicly accessible on UNDP website. The next audit report and the IPSAS compliant audited financial statements for the year 2012 are expected to be issued by the Board of Auditors around July 2013.
I would like to take this opportunity to welcome Ms. Anjana Das, Executive Secretary, United Nations Board of Auditors & Panel of External Auditors, and also our new UN Board of Auditors represented by Mr. Fransis Kitauli, Director, External Audit, National Audit Office of Tanzania, who is here to respond to specific questions that Members of the Board may have.
I would also like to take this opportunity to thank our former auditors, the Auditor-General Office of South Africa, although they are not present on the podium.
I am pleased to learn that Members of the Executive Board already had a fruitful informal consultation on the present report on 18 January 2013 so I shall limit my remarks to brief updates on the following:
- UNDP’s current implementation status of the International Public Sector Accounting Standard (IPSAS);
- Key progress made by UNDP in addressing the top 10 audit related management priorities for the biennium 2010-2011 and the key management plans to address the revised set of now Top 9 audit-related management priorities for the 2012-2013 biennium; and
- Summary of progress made in addressing the 33 recommendations of the Board of Auditors for the biennium 2010-2011, and the status of previous years’ recommendations since last update to the Board in February 2012 (DP/2012/4).
Successful roll out of IPSAS on 1 January 2012
I am pleased to report that pursuant to Executive Board decision 2009/15, UNDP adopted IPSAS on 1 January 2012. The management made significant efforts and progress in preparing the organization, stakeholders, staff, Atlas (ERP), data and finalization of IPSAS-related policies in consultation with the Board of Auditors and the Audit Advisory Committee. UNDP has also established a Global Shared Services Centre in Malaysia to support IPSAS-related functions. This centre is now fully functional, providing assistance to country offices in processing complex transactions in the IPSAS regime, including the recording of revenue from contribution agreements and asset management-related transactions.
However, UNDP management is cognizant that it is important to monitor IPSAS-related activities. Management is also fully aware of the fact that IPSAS standards continuously evolve, resulting in the need for periodic updates to IPSAS policies, procedures, processes and systems, accompanied by some cost implications.
UNDP management also recognizes that the financial year 2012 is the first year since the adoption of International Public Sector Accounting Standards (IPSAS) and the audit is being performed by a new set of external auditors (National Audit Office of Tanzania). UNDP management will ensure that the gains derived from key management initiatives begun in previous years are protected and underlying systemic issues are fully addressed. The objective of management is to strive for an unqualified audit opinion on IPSAS-compliant financial statements. Management is also in the process of developing an IPSAS benefits realization plan.
We will be conducting a briefing for the Board members regarding the impact of IPSAS on new financial statements and new donor report.
Let me now turn to a short summary of progress made in addressing Top 10 audit priorities in 2010-2011 and the key management plans to address the revised set of now Top 9 audit-related management priorities for the 2012-2013 biennium.
For the benefit of newly appointed Members of the Board, let me reiterate that UNDP is committed, inter alia, by continuing a risk-informed and accountability-based approach to address audit issues. UNDP Executive Group led by the Administrator and the Organizational Performance Group led by me conduct six-monthly reviews on audit issues raised by UNDP Office of Audit and Investigations (OAI), UN Board of Auditors and Audit Advisory Committee.
UNDP has continued the practice of setting top audit-related management priorities for every biennium. The purpose of this practice is to identify internal and external significant recurring or emerging audit risks and the inherent causes for the recurring audit observations. This allows management, on a priority basis, to ensure that adequate mitigating controls are put in place to keep any residual risks at acceptable levels. In this regard, management performs annual reviews of progress in consultation with the Board of Auditors and UNDP Office of Audit and Investigations (OAI) and this has resulted in the revised top nine audit-related management priorities for the biennium 2012-2013. The revised top nine audit-related management priority list reflects progress made and positive gains noted by the Board of Auditors, OAI and the Audit Advisory Committee from the original top 15 list (for the 2006-2007 biennium), the top 11 list (for the 2008-2009 biennium), and the top 10 list (for the 2010-2011 biennium).
This strategic and systemic approach to managing audit priorities have contributed to UNDP receiving an unqualified or “clean” audit opinion by the Board of Auditors for three consecutive biennia and the Administrator, I and our team are committed to protecting gains made so far. We will build on results achieved in the past and more so as we are now measured against higher standards of transparency and accountability with the adoption of IPSAS.
Overall, there has been encouraging progress made on all the top 10 audit-related management priorities for 2010-2011, though progress on various details within each audit priority has been uneven.
In the case of one audit priority (Balance sheet clean up – Atlas and pre-Atlas balances), significantly good progress has been noted as the review of these balances and resulting adjustments have been substantially completed, and the remaining necessary internal processes and adjustments will be finalized during the 2012 closure. As a result, this audit priority is not included in 2012-2013 audit-related management priorities. However, this will continue to be monitored closely to ensure against regression and the reappearance of significant audit risks. Outstanding differences with UNOPS were not included in the top 10 audit priorities because of its unique nature. This is being resolved through a separate process. On 29 November 2012, UNDP and UNOPS finalised the Terms of Reference establishing a mechanism for resolving these differences. Each agency has appointed an expert to represent them. The two appointed experts will appoint a third expert in consultation with the agencies and a preliminary meeting will be held thereafter with the Panel of Experts and UNDP and UNOPS to confirm the logistics of the process relating to the mechanism.
In the case of seven audit priorities – i) National implementation modality (NIM) audit follow up and harmonized approach to cash transfers (HACT) monitoring/support; ii) Atlas user security and internal controls; iii) Leave records and recruitment management; iv) Asset management; v) Management of high-risk programme portfolios; vi) IPSAS implementation readiness; and vii) Long outstanding audit recommendations – reasonable improvements have been noted but more work remains.
For two audit priorities i.e. i) Programme/project design, monitoring and evaluation, and ii) Procurement management at country offices, it has been ascertained that not all remedial actions have been fully implemented yet and hence the effectiveness of these interventions has yet to be fully established.
The detailed explanation of progress made so far and management plans to address remaining audit risks is contained in the Executive Board paper (DP/2013/8), therefore, I will focus my remarks to the two areas where more work is required i.e. (a) Enhancing the quality of programme/ project design, monitoring and evaluation; and (b) Strengthening internal capacity and oversight in procurement management in UNDP offices.
In the area of Programme and project design, monitoring and evaluation, UNDP believes that strengthening UNDP capacity and performance in managing for development results is a long term process requiring ongoing management attention. A comprehensive review of the results reporting framework and indicators was conducted as part of a mid-term review exercise. The development and institutional results frameworks were proposed to and approved by the Executive Board and in place for 2012-2013, with the introduction of additional indicators to capture UNDP substantive contributions to development and a new category of indicators to measure development effectiveness. The results oriented annual report (ROAR) reporting facilities have been redesigned to capture new results.
Training has been provided to country offices on results-based management. In addition, results-based management has been integrated in capacity development and programme/project management training. An on-boarding and orientation tool for new and reassigned personnel, which describes how results should align with corporate priorities, has been recently launched.
Under the agenda for organizational change (AOC), the Country Office Business Model Task Force has been set up to develop new country office business models to address three interlinked key challenges: improving operational efficiency, strengthening critical functions, and enhancing change agility of country offices. One objective of this exercise is to prepare a system to strengthen capacities of UNDP country offices for planning, oversight, monitoring and evaluation. As part of this exercise, select country offices are being assisted in systematically strengthening programme quality through better results planning, monitoring and evaluation. Ultimately, the proposed exercise will constitute the basis for revisions to UNDP result based management (RBM) practices in preparation for the next UNDP strategic plan. Field work in one selected country office has already been conducted, results and corporate lessons have been drawn, and currently work is in progress for defining new corporate minimum standards for monitoring and evaluation.
In addition, as part of one UNDG-level initiative, discussions are underway to find ways to improve monitoring and evaluation and RBM practices at the United Nations country team level, in cooperation with another United Nations organization. The Organizational Performance Group has approved the Country Office Support Initiative to improve results based management of programmes, which aims to achieve the best possible standards in RBM by the start of the next strategic plan in January 2014.
In the area of Procurement management at country offices, there has been important progress made in various aspects in line with the UNDP procurement roadmap. In this context, increased delegation of procurement authority to country offices based on a procurement capacity assessment (PCA) has been introduced. A new micro-purchasing policy and individual consultant policy have been released in order to shorten procurement processes. The Advisory Committee on Procurement on-line system has been enhanced as well. A management tracking and reporting tool has been developed in the Procurement Dashboard to proactively provide analysis and reports for various aspects of procurement by each country office or business unit, bureau and UNDP globally. A UNDP suspension/vendor eligibility policy, aligned with the United Nations interagency model policy framework of vendor sanction, has been released. Vendor protest procedures have also been released and the vendor protest tracking system has been launched.
Although management is continuing to build on the progress made in implementing the key interventions under the UNDP procurement roadmap within the framework of the agenda for organizational change, it is aware that more improvement is needed. Under the agenda, UNDP, through the on-going Country Office Business Models Initiative, continues to pursue efficiencies and ensure compliance in the case of international procurement, by clustering procurement activities where possible, and in the case of local procurement, by providing further reinforcement regionally or from headquarters to compensate for capacity gaps in country offices. In the area of procurement capacity, UNDP has put in place a formal system of procurement professionalization programmes with different levels of certification. These programmes are accredited by the United Kingdom-based Chartered Institute of Purchasing and Supply.
Implementation status of recommendations of the Board of Auditors
As at the end of January 2013, 100% of the audit recommendations (i.e. 2 recommendations) targeted for completion by Q4, 2012 has been implemented. In addition, 3 more recommendations have been implemented before their respective target dates. The management will make every effort to ensure that the remaining outstanding recommendations will be implemented by the respective target completion dates.
UNDP has also implemented the majority (i.e. 79 recommendations out of the total of 89) of the previous years’ recommendations. 3 recommendations have been withdrawn by the Board of Auditors, 2 recommendations depend on third party action, and 5 recommendations have been incorporated in 2010-2011 recommendations as measures are being taken to address these recommendations.
In conclusion, let me reiterate that the Administrator, I and our team are fully committed to protecting gains made so far and will continue to addressing recurring audit issues and underlying capacity concerns as we continue to strive to meet higher standards of organizational excellence now that we operate under IPSAS. I would like to thank the Executive Board for your continuing interest and guidance on audit and oversight matters. I and my colleagues are ready to respond to any questions or comments from Members of the Executive Board.