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It was agreed that a project should be undertaken to identify possible approaches that would meet the accounting and financial reporting needs of such enterprises.
ISAR has supported and continues to support the International Accounting Standards Board (IASB) as the international standard setter of reference for accounting and reporting standards. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
The International Financial Reporting Standards (IFRS) issued by the IASB, however, have been created largely with the financial reporting needs of listed companies in mind.
Consequently, it has often been difficult to apply them to SMEs, particularly those in developing countries and countries with economies in transition.
For many businesses in these countries, professional help may also be disproportionately expensive. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
The IASB recognizes that the IFRS are less suitable for meeting the needs of users, preparers and owners of SMEs.
To address this deficiency, the IASB issued an exposure draft of an IFRS for SMEs in February 2007.
The IFRS for SMEs have been developed from the full IFRS.
ISAR recognizes that it is likely that the IFRS for SMEs may not be suitable for smaller enterprises; as such, enterprises may not produce general-purpose financial statements. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
In general, their financial statements are not designed to meet the needs of a wide group of users.
To meet the needs of smaller enterprises, sometimes referred to as microenterprises, ISAR has developed a single set of guidelines – Level 3 – which meet the needs of those enterprises that do not produce general-purpose financial SMEGA – Level 3 v statements. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
The Level 3 Guidelines have been developed using a “bottom-up” approach rather than being integrated into the “top-down” approach which characterizes the proposed IFRS for SMEs.
The bottom-up approach starts with a realistic consideration of the needs of users and preparers of the financial statements of smaller enterprises. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
Therefore, in order to meet the financial reporting needs of all enterprises, ISAR is proposing that a three-tiered structure be adopted, as follows: (a) Level 1: This level would apply to listed enterprises whose securities are publicly traded and those in which there is significant public interest. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
These enterprises should be required to apply the IFRS issued by the IASB; (b) Level 2: This level would apply to significant business enterprises that do not issue public securities and in which there is no significant public interest; and (c) Level 3: This level would apply to smaller enterprises that are often owner-managed and have no or few employees.
The approach proposed is simplified accruals-based accounting, closely linked to cash transactions. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
National regulators may permit a derogation for newly formed businesses or new entrants to the formal economy to use cash accounting for a limited time.
How exactly the boundaries between the three levels should be specified is a matter that cannot be dealt with adequately without knowledge of the specific economy in which the enterprises operate. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
The recommendation of ISAR is that there should be a system with at least three levels, but how these levels are defined must be determined by each member State that chooses to apply this approach.
The Accounting and Financial Reporting Guidelines for Small and Medium-sized Enterprises (SMEGA) Level 3 Guidance that ISAR has developed is set out in the material that follows. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
SMEGA – Level 3 vi Acknowledgements This publication was prepared by an UNCTAD team lead by Nazha Bennabbes Taarji-Aschenbrenner, Officer-in- Charge, Enterprise Development Branch.
Yoseph Asmelash coordinated the consultations and finalized the manuscript for printing.
Peter Navarrette provided essential administrative support. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
UNCTAD would like to express its appreciation to experts who contributed to revising the SMEGA Level 3 by providing input during the ad hoc consultative meetings that were held in Geneva in July 2007 and May 2008. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
These are: Giancarlo Attolini, Consiglio Nazionale dei Dottori Commercialisti (CNDC), Italy; Andrew Brathwaite, Institute of Chartered Accountants of Barbados; Piero Di Salvo, Organismo Italiano Contabilita, Italy; Reto Eberle, KPMG, Zurich, Switzerland; Leyre Fuertes, European Federation of Accountants, Belgium; Robin Jarvis, Association of Chartered Certified Accountants, United Kingdom; David Morris, Financial Executives International, United States of America; Vickson Ncube, Eastern, Central and Southern African Federation of Accountants; Wojciech Nowak, University of Ludz, Poland; Jim Osayande Obazee, Nigerian Accounting Standards Board; Mateo Pozzoli, CNDC, Italy; Gerhard Prachner, European Federation of Accountants, Belgium; David Raggay, Institute of Chartered Accountants of Trinidad and Tobago; Stefano Santucci, European Federation of Accountants and Auditors for SMEs, Italy; Syed Asad Ali Shah, Institute of Chartered Accountants of Pakistan; Marco Venuti, Organismo Italiano Contabilita, Italy; John Vincent, Association of Accounting Technicians, United Kingdom; Simon Wray, PricewaterhouseCoopers, Netherlands. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
UNCTAD acknowledges with appreciation the contributions of Richard Martin, Association of Chartered Certified Accountants, United Kingdom.
He served as chair of the two ad hoc consultative meetings and presented reports on these consultations to the twenty-fourth and twenty-fifth sessions of ISAR.
1 Introduction A.
Scope 1.
The SMEGA Level 3 Guidance is designed for financial statements of smaller enterprises that are often owner-managed and have no or few employees. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
Such enterprises should generally follow a simplified accruals-based accounting system that is closely linked to cash transactions.1 The SMEGA Level 3 Guidance is intended to meet the needs of users and preparers of financial statements for these enterprises.
B.
Level 3 accounting framework 2.
The income statement and the balance sheet are based on a simplified accruals accounting approach, closely linked to cash transactions.
This guidance uses the historical cost measurement basis.
3. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
3.
Level 3 financial statements will normally be prepared on the assumption that an enterprise is a going concern and will continue in operation for the foreseeable future.
C. The objectives of Level 3 financial statements 4.
The objective of Level 3 financial statements is to provide information about the reporting enterprise’s financial performance and financial position that will be useful to users in assessing the performance of the enterprise and the stewardship of the enterprise’s management. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
1 National regulators may permit a derogation for newly formed businesses or new entrants to the formal economy to use cash accounting for a limited time.
SMEGA – Level 3 2 D. Users and their needs 5.
Financial statements are designed to reflect user needs. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
The principal users of financial statements of Level 3 enterprises are likely to be: (a) Owners and management: (i) To assess and confirm the performance of the enterprise during the year or period under review (including the levels of income, revenues and costs); (ii) For applying for external financing; (iii) For financial management purposes (e.g. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
deciding what portion of profits to retain); and/or (iv) As a tool for succession planning and management of wealth; (b) Lenders and other creditors: (i) To assess risk in the credit decision; and (ii) To monitor the performance of enterprises that have been given credit; (c) Government: for macroeconomic and microeconomic planning purposes; (d) Taxation authorities: for tax assessment purposes; (e) SME agencies: to assess support requests from enterprises (e.g. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
grant applications, training requests and subsidized business services); (f) Credit agencies: to facilitate the assessment of the advancement of credit from an independent organization that keeps records of the credit status of enterprises.
SMEGA – Level 3 3 E. Qualitative characteristics 6.
Qualitative characteristics are the attributes that make the information provided in financial statements useful to users. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
The four principal characteristics are: (a) Understandability: It is essential that information provided in financial statements be readily understandable by users; (b) Relevance: To be useful, information must be relevant to the decision-making needs of users; (c) Reliability: Information is considered to be reliable when it is free from material error and bias, and can be depended on by users to represent faithfully that which it purports to represent; (d) Comparability: Users must be able to compare the financial statements of an enterprise over time in order to identify trends in the enterprise’s financial position and performance. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
7.
The balance between benefit and cost is a pervasive constraint rather than a qualitative characteristic.
The benefits derived from information should exceed the cost of providing it.
The evaluation of benefits and costs is, however, substantially judgemental.
8.
In practice, trade-offs between qualitative characteristics are often necessary.
Determining the relative importance of the characteristics in different cases is a matter of professional judgement.
F. Elements 9. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
Elements include: (a) Asset: A resource controlled by the enterprise as a result of past events and from which future economic benefits are expected to flow to the enterprise; (b) Liability: A present obligation of the enterprise arising from past events, the settlement of which is expected to SMEGA – Level 3 4 result in an outflow from the enterprise of resources embodying economic benefits; (c) Equity: The residual interest in the assets of the enterprise after all its liabilities have been deducted; (d) Income: Income encompasses both revenue and gains. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
It includes increases in economic benefits during the reporting period in the form of inflows or enhancements of assets, as well as decreases of liabilities that result in increases in equity, other than those relating to contributions from owners; (e) Expenses: Decreases in economic benefits during the reporting period in the form of outflows or depletions of assets or incurrence of liabilities that result in decreases in equity, other than those relating to distributions to owners.
G. Recognition 10. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
G. Recognition 10.
An item that meets the definition of an element should be recognized if (a) it is probable that any future economic benefit associated with the item will flow to or from the enterprise, and (b) the item has a cost or value that can be measured with reliability.
H. Measurement 11.
The measurement basis most commonly adopted in preparing financial statements is historical cost.
I.
Level 3 enterprises and financial management 12. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
Level 3 enterprises and financial management 12.
In the day-to-day running of the enterprise, it is widely recognized that managing cash is critical to the survival of an enterprise and to managing relationships with banks and other providers of finance.
It is recommended that owner–managers keep cash records that will be a source of primary entry for the financial statements.
These records will be an important component in the financial management of Level 3 enterprises.
5 I.
Basic requirements 13. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
5 I.
Basic requirements 13.
The following paragraphs set out the basic guidance for Level 3 enterprises.
14.
The minimum set of primary financial statements includes the following components: (a) A balance sheet; (b) An income statement; and (c) Explanatory notes.
15.
Enterprises may wish to include other statements that are likely to enhance the overall transparency and quality of the information they provide to users; for example, a cash flow statement.
16. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
16.
Financial statements should be prepared on a going-concern basis unless management either intends to liquidate the enterprise or cease trading, or has no realistic alternative but to do so.
17.
An enterprise should prepare its financial statements using simplified accruals-based accounting, closely linked to cash transactions.
18. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
18.
The following information should be prominently displayed: (a) The name of the reporting enterprise; (b) The balance sheet date and the period covered by the income statement; and (c) The presentation currency.
19.
Financial statements should be prepared at least once a year.
20.
Financial statements should include comparative figures for the previous period.
21. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
21.
The enterprise should present current and non-current assets and current and non-current liabilities as separate classifications on the face of the balance sheet.
SMEGA – Level 3 6 22. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
SMEGA – Level 3 6 22.
An asset should be classified as a current asset when it is: (a) Expected to be realized in, or held for sale or consumption in, the normal course of the enterprise’s operating cycle; or (b) Held primarily for trading purposes or for the short term, and is expected to be realized within 12 months of the balance sheet date; or (c) Cash.
23.
All other assets should be classified as non-current assets.
24. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
24.
A liability should be classified as a current liability when it is: (a) Expected to be settled in the normal course of the enterprise’s operating cycle; or (b) Due to be settled within 12 months of the balance sheet date.
25.
All other liabilities should be classified as non-current liabilities.
26.
As a minimum, the face of the balance sheet should include the line items shown in annex I.
27.
An enterprise should disclose the movement of owners’ equity during the reporting period.
28. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
28.
As a minimum, the face of the income statement should include the line items shown in annex II.
A more detailed presentation using the same structure is shown in annex III.
29.
Additional line items, headings and subtotals should, if relevant and material to the enterprise, be presented on the face of the balance sheet or the income statement.
30.
An item of property, plant or equipment should initially be measured at its cost. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
The cost of an item of property, plant or equipment comprises its purchase price, including import duties and non-refundable purchase taxes, and any directly attributable costs of bringing the asset to working condition for its intended SMEGA – Level 3 7 use.
Any trade discounts and rebates are deducted when arriving at the purchase price.
31. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
31.
The depreciable amount (cost less expected proceeds from disposal) of an item of property, plant or equipment should be allocated on a systematic basis over its useful life.
Straight-line depreciation is the simplest method.
32.
If an item of property, plant or equipment becomes impaired, in that it is unlikely to generate cash flows to absorb the carrying amount of the item over its useful life, its carrying value should be reduced to the cash flows to be recovered from the asset. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
Cash flows need not be discounted and could come from either the disposal value of the asset or from its continuing use.
Indicators of impairment would include a significant decline in market values or obsolescence.
33.
Land normally has an unlimited life and, therefore, is not depreciated.
Buildings have a limited life and, therefore, are depreciable assets.
34. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
34.
The financial statements should disclose for each class of property, plant and equipment a reconciliation of the carrying amount at the beginning and end of the period showing: (a) Additions; (b) Disposals; (c) Depreciation; and (d) Other movements.
35.
Lease payments, whether deriving from an operating or finance lease, should be recognized as an expense as they become payable.
If the payments are material, these should be disclosed in the notes to the financial statements.
36. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
36.
The value of the lease should not be shown either as an asset or a liability on the balance sheet.
However, if the total remaining payments on the lease are material, this should be disclosed in the notes to the financial statements.
37.
Inventories should be measured at the lower of cost and net realizable value (the estimated selling price in the ordinary course SMEGA – Level 3 8 of business less the estimated costs of completion and the estimated costs necessary to make the sale).
38. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
38.
The cost of inventories should comprise all costs of purchase and other costs incurred in bringing the inventories to their present location and condition (such as for transport and manufacturing).
39.
The cost of inventories should be assigned by using specific identification of the individual costs of items whenever possible.
Otherwise, the cost of inventories should be assigned by using the first-in first-out (FIFO) or weighted average cost methods.
40. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
40.
Revenue should exclude taxes on goods and services, but should include commissions receivable.
41.
Revenue from the sale of goods should be recognized when the enterprise has transferred to the buyer the significant risks and rewards of ownership of the goods.
42.
Revenue from the rendering of services should be recognized to the extent that the service has been provided.
43. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
43.
Where there is uncertainty as to the receipt of payment for a trade receivable, a reasonable provision should be made against trade receivables.
44.
Any significant gains or losses should be disclosed separately.
45.
The tax shown in the income statement should be the estimated tax due on the profit or loss for the reporting period.
46. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
The explanatory notes to the financial statements should also include; (a) A description of the enterprise’s operations and its principal activities; (b) A reference to the accounting framework under which the financial statements have been prepared; (c) Disclosure of significant accounting policies used; (d) A description of contingencies (possible assets or liabilities whose existence will only be confirmed by the SMEGA – Level 3 9 occurrence or non-occurrence of uncertain future events); and (e) Any other information relevant to understanding the financial statements. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
47.
For material transactions or events not covered by this guidance, reference should be made to the appropriate requirements in the guidance for Level 2 enterprises.
II.
Model financial statements A.
The financial statements 48.
The balance sheet and the income statement are based on a simplified accruals accounting approach.
49. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
49.
In many cases, Level 3 enterprises will not have the in-house resources to prepare these statements and, in these cases, the statements will need to be prepared by an external party.
50.
The formats take into consideration the cost/benefit issues of Level 3 enterprises.
In order to ensure that the statements are useful to owner–managers and other users of financial statements of typical Level 3 enterprises, the costs of preparing the statements need to be weighed against the benefits.
51. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
51.
The objective of the financial statements is to help owner– managers obtain information that can be helpful in developing the business and also to help other users make decisions and monitor the progress of the enterprise.
Therefore, the design of these statements is intended to reflect these users’ needs.
B.
Balance sheet – annex I 52. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
B.
Balance sheet – annex I 52.
The relevance of the headings will to a certain extent depend on the nature of the enterprise, but the main structure and headings should be applicable for most enterprises at this level.
C. Income statement – annexes II and III 53.
The structure of the income statement has been designed primarily to meet the needs of owner–managers. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
It is recognized SMEGA – Level 3 10 that the income statement is used by owner–managers to see whether they have correctly anticipated the level of costs and profit margins in their pricing.
54.
It is assumed that most enterprises at this level will price goods and services on a cost-plus basis.
Thus, the “contribution” reflects the difference between the sales and those costs on which the mark-up is calculated, which are described in the statement as “direct operating costs”.
55. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
55.
Direct operating costs will vary from enterprise to enterprise.
For example, annex III illustrates an income statement for a typical retail business where the mark-up is likely to be made just on purchases.
Other types of enterprises may have different definitions of direct operating costs.
56.
The cost structures of enterprises at this level are likely to be very different from those of large businesses.
The reason for this is that the majority of these enterprises’ costs are likely to be direct. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
In contrast, the majority of the costs of large enterprises are indirect (i.e.
related to overheads).
57.
The headings under “indirect costs” are to reflect the materiality of the costs in relation to the total indirect costs and their importance with regard to disclosure for users in general.
Therefore, there is likely to be some variation between different types of enterprises.
D. Cash flow statements – annex IV 58. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
D. Cash flow statements – annex IV 58.
The primary purpose of a cash flow statement is to provide relevant information about the cash movements of an enterprise in a given period.
Although it is not required under this guidance, a model cash flow statement is provided in annex IV.
SMEGA – Level 3 11 Annex I. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
Model balance sheet XYZ Ltd. balance sheet as of December 20X2 (in currency units, CU) 20X2 20X1 CU CU Assets Non-current assets Property, plant and equipment 190,000 190,000 Current assets Raw materials 18,200 9,100 Finished goods 34,000 21,000 Trade receivables 26,000 34,000 Cash and bank 6,800 11,500 85,000 75,600 Total assets 275,000 265,600 Owners’ equity and liabilities Owners’ equity as of 1 January 132,900 114,700 Earnings for the year 55,600 48,200 Owners’ drawings for the year (45,000) (30,000) Owners’ equity as of 31 December 143,500 132,900 Non-current liabilities Loans 105,500 117,000 Current liabilities Bank borrowings 2,500 12,500 Taxes payable 4,600 2,200 Trade payables 18,900 1,000 Total liabilities 131,500 132,700 Total owners’ equity and liabilities 275,000 265,600 SMEGA – Level 3 12 Annex II. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
Model income statement format XYZ Ltd. income statement for the year ended 31 December 20X2 (in CU) CU Revenue Direct operating costs Contribution Indirect costs Profit before interest and other financing costs Less: Interest and other financing costs Profit after interest and other financing costs Less: Tax Profit after tax SMEGA – Level 3 13 Annex III. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
Model income statement XYZ Ltd. income statement for the year ended 31 December 20X2 (in CU) 20X2 20X1 CU CU Revenue 325,000 283,000 Direct operating costs Opening inventories 21,000 0 Cost of goods produced 205,600 189,000 226,600 189,000 Closing inventories 34,000 21,000 Total direct operating costs 192,600 168,000 Contribution 132,400 115,000 Indirect costs Salaries 39,350 35,700 Depreciation – office equipment 1,500 0 Lease rent 15,600 13,500 Motor vehicle expenses 6,500 5,700 Insurance 1,300 1,100 Telephone 1,700 1,500 Light and heating 1,150 900 Total indirect costs 67,100 58,400 Profit before interest and other financing costs 65,300 56,600 Interest expense 1,300 1,200 Profit after interest and financing costs 64,000 55,400 Tax 8,400 7,200 Profit after tax 55,600 48,200 SMEGA – Level 3 14 Annex IV. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
Model cash flow statement (optional) XYZ Ltd. cash flow statement for the year ended 31 December 20X2 (in CU) 20X2 CU 20X1 CU Profit after tax 55,600 48,200 Adjustments for: Interest expense 1,300 1,200 Tax 8,400 7,200 Depreciation 13,500 12,000 (Increase) decrease finished goods inventory (13,000) (21,000) (Increase) decrease raw materials inventory (9,100) (9,100) (Increase) decrease receivables 8,000 (34, 000) Increase (decrease) trade payables 17,900 1,000 Total adjustments 27,000 (42,700) Cash generated from operations 82,600 5,500 Interest paid (1,300) (1,200) Income taxes paid (6,000) (5,000) Net cash from operating activities 75 300 -700 Cash flow from investing activities Purchase of equipment (13,500) Net cash used in investing activities (13, 500) Cash flows from financing activities Payment to loans and borrowings (21,500) Owners’ drawings (45,000) (30,000) Net cash used in financing activities (66,500) (30,000) Net increase (decrease) in cash and bank (4,700) (30,700) Cash and bank balance on 1 January 11,500 42,200 Cash and bank balance on 31 December 6,800 11,500 | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756513967.pdf | https://digitallibrary.un.org/record/653160/files/diaeed20092_en.pdf |
United Nations Report of the United Nations Board of Auditors on the financial statements of the United Nations Framework Convention on Climate Change for the year ended 31 December 2016 1 Contents Chapter Page I.
Report of the Board of Auditors on the financial statements: Audit opinion 2 II.
Long-Form Report of the Board of Auditors 5 Summary 5 A.
Mandate, scope and methodology 8 B.
Findings and recommendations 9 1.
Follow up of previous recommendations 9 2.
Financial overview and management 9 3. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
Financial overview and management 9 3.
Treatment of the Board´s Report 11 4.
Human resources management 12 5.
Staff payments on separation 14 6. Business Continuity Plan 22 7.
Accessibility for staff members with disabilities 22 8.
Sustainable development goals 23 C. Disclosures by Management 24 D. Acknowledgement 25 Annex: Status of implementation of recommendations up to the year ended 31 December 2015 26 III.
Certification of the financial statements 33 IV. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
Narrative financial report 34 V. Financial statements for the year 2016 37 2 Chapter I Report of the Board of Auditors on the financial statements: Audit Opinion Opinion We have audited the financial statements of the United Nations Framework Convention on Climate Change (UNFCCC) which comprise the statement of financial position (statement I) as at 31 December 2016 and the statement of financial performance (statement II), statement of changes in net assets (statement III), cash flow statement(statement IV) and the statement of comparison of budgets to actual amounts (statement V) for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of UNFCCC as at 31 December 2016, and its financial performance and its cash flows for the year then ended in accordance with International Public Sector Accounting Standards (IPSAS).
Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
Our responsibilities under those standards are described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report.
We are independent of UNFCCC in accordance with the ethical requirements that are relevant to our audit of the financial statements and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
Information other than the Financial Statements and Auditor’s Report Thereon The Executive Secretary is responsible for the other information.
The other information comprises the financial report for the year ended 31 December 2016 included in Chapter IV, but does not include the financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
We have nothing to report in this regard.
‘ Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with IPSAS and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
In preparing the financial statements, management is responsible for assessing UNFCCC’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern 3 and using the going concern basis of accounting unless management either intends to liquidate UNFCCC or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing UNFCCC’s financial reporting process. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatements, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of UNFCCC’s internal control. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on UNFCCC’s ability to continue as a going concern. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion.
Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause UNFCCC to cease to continue as a going concern. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
4 Report on other legal and regulatory requirements Furthermore, in our opinion, the transactions of UNFCCC that have come to our notice or that we have tested as part of our audit have, in all significant respects, been in accordance with the Financial Regulations and Rules of UNFCCC and legislative authority.
In accordance with Article VII of the United Nations Financial Regulations and Rules, we have also issued a long-form report on our audit of UNFCCC. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
Shashi Kant Sharma Comptroller and Auditor General of India Chair of the Board of Auditors Kay Scheller President of the German Federal Court of Auditors (Lead Auditor) Mussa Juma Assad Controller and Auditor General of the United Republic of Tanzania 30 June 2017 5 Chapter II Long-Form Report of the Board of Auditors Summary The United Nations Framework Convention on Climate Change (UNFCCC) is an international environmental treaty that entered into force in 1994. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
The Board of Auditors (Board) audited the financial statements and reviewed the operations of UNFCCC for the year ended 31 December 2016.
The audit was carried out at UNFCCC’s headquarters in Bonn, Germany.
Audit opinion The Board has issued an unqualified audit opinion on the financial statements for the period under review as reflected in chapter I.
Overall conclusion UNFCCC had accumulated surplus and reserves of $122.96 million.
For the third year in a row, UNFCCC showed a deficit. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
The deficit has been reduced from $43.25 million in 2015 to $17.2 million in 2016.
UNFCCC continued its efforts to maintain sound internal control and accountabilities, promote good governance structures as well as to address the concerns raised by the Board in its previous reports.
However, the Board identified some weaknesses in the areas of accrual accounting, human resources and treatment of Audit Report that merit attention. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
Key findings and recommendations The Board’s main findings are as follows: a) Appropriate deferral and accrual of expenses The Board noted that for numerous items amounting to $2.4 million, deferral and accrual of expenditure had not been recognized correctly.
Thus, expenses of the financial year 2015 were understated and expenses of the financial year 2016 were overstated. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
b) Recognition of multi-year voluntary contribution The Board noted that the UNFCCC IPSAS Policy Framework on recognition of multi- year voluntary contribution is neither in line with the IPSAS Framework nor does it reflect the current accounting method of UNFCCC.
c) Treatment of the Board’s report The Board noted differences in the treatment of the Board’s report in comparison to other United Nations entities, although comparable rules apply. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
In particular, the audited financial statements are presented to the Conference of Parties where the Board is not represented.
d) Personnel records 6 The termination date of a contract was changed upon request of the staff member.
This contractual change was not documented in the personnel file.
Only e-mail communication existed which, however, was not filed.
The contractual change had a significant impact on later separation payments. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
The Board found a note on a document in the personnel file with the order to remove the document in case of review.
The document showed that the selected candidate for a managerial position had to undergo training in order to be adequately qualified for the post advertised, while an external candidate who had met the recruitment criteria had been refused. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
e) Compensation in lieu of applying the termination notice period For staff members whose posts were abolished for operational reasons, the applicable notice period in accordance with the Staff Rules and Regulations is at minimum 30 calendar days for fixed-term appointments.
The Board noted that UNFCCC determined a 90-day notice period to the affected staff which exceeded multiple times the minimum notice period. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
As the affected staff members were placed on special leave with full pay during the notice period, the arrangement of UNFCCC led to an amount of the compensation payments equivalent to three times of the payments of a normal notice period as per the Staff Rules and Regulations.
f) Separation payments due to restructuring reasons UNFCCC restructured two programmes and, as a consequence, abolished 66 posts. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
At the beginning of the project, UNFCCC developed a guideline for the implementation of the new structure.
This guideline included several measures to ease the separation of affected staff and to avoid the separation of staff which was still qualified for UNFCCC’s needs.
Among others, affected staff who applied for vacancies posted during the notice period should be treated with priority, with a 14-day period for the selection decision. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
The Board found several cases in which staff members whose contracts had terminated, received the termination and separation grants but were re-employed a short time later.
These cases were not eligible for the priority selection and the 14-day mark had not been applied.
The Board is of the opinion that the rules aim at granting termination indemnities only if a further employment is not considered.
The Board observed that the reviewed cases were not properly documented. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
They bear a risk of fraudulent activities.
g) Repatriation payments The Board found cases where the staff member’s eligibility to the repatriation grant was not backed with sufficient evidence.
In one case, the self-attestation of the staff member did not fulfil the requirements of the relevant provision.
Although UNFCCC confirmed some of the deficiencies, it came to the conclusion that the payment of repatriation grant was still covered by its scope of discretion. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
In the Board’s view the grant was paid without sufficient evidence which is in violation of the relevant provision.
As the quality of the evidence has an impact beyond the specific case, UNFCCC should consult the Office of Legal Affairs.
In another case, a separated staff member applied anew at UNFCCC, stating to live in its home country.
UNFCCC found evidence that the applicant lived at the former duty 7 station. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
This evidence came from records of Umoja and from a declaration of the applicant to the German Ministry of Foreign Affairs.
Subsequently, UNFCCC recruited the former staff member locally but ignored the information of its residence status which had led to paying the repatriation grant at the time of the separation.
The Board holds that control mechanisms to prevent such cases were overridden in the process.
h) Business Continuity Plan The Board noted weaknesses in the existing business continuity plan. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
It was not documented what information and communication technology systems were necessary for the continuation of critical business processes.
There was no procedure in place that would have provided detailed binding instructions for the case of emergency.
Recommendations Based on key findings above, the Board recommends that UNFCCC: (a) Ensure that expenses are duly attributed to the financial year to which they relate. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
(b) Update the internal IPSAS guidance policy on recognition of multi-year contribution agreements in order to have them in line with IPSAS.
(c) Establish a process that enables the presentation of the Boards’ report to those charged with governance.
(d) Complete the personnel files of the sampled cases in accordance with the Board’s observations and ensure that all contractual changes are formally signed and included in the personnel file. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
(e) Revisit its provisions governing termination notice periods and ensure compliance with the standard provisions.
(f) Re-evaluate each of the cases of termination reviewed by the Board; if needed, the Office of Legal Affairs should be consulted.
(g) Clarify the facts raised in the two cases of repatriation grants and, where appropriate, request reimbursement of the repatriation grant. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
(h) Give high priority to developing a comprehensive business continuity / disaster recovery plan and test it regularly.
Key Facts $72.70 million Revenue 8 $89.90 million Expenses $17.20 million Deficit for the year $122.96 million Accumulated Surpluses and Reserves $225.58 million Assets $102.62 million Liabilities $30.2 million Core budget 423 Staff A.
Mandate, scope and methodology 1. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
Mandate, scope and methodology 1.
The United Nations Framework Convention on Climate Change (UNFCCC) is the parent treaty of the 1997 Kyoto Protocol which aims at stabilizing greenhouse gas concentrations in the atmosphere at a level that will prevent dangerous human interference with the climate system.
Currently, the convention has 197 Parties.
The work of UNFCCC is facilitated by its Secretariat located in Bonn, Germany. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
The Secretariat is institutionally linked to the United Nations without being integrated in any programmes and is administered under the United Nations Regulations and Rules.
2.
The Board of Auditors (Board) has audited the financial statements of UNFCCC and reviewed its operations for the year ended 31 December 2016 in accordance with General Assembly resolution 74 (I) of 1946. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
The audit was conducted in conformity with Article VII of the Financial Regulations and Rules of the United Nations and the annex thereto and in accordance with the International Standards on Auditing.
These standards require that the Board comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free from material misstatement.
3. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
3.
The audit was conducted primarily to enable the Board to form an opinion as to whether the financial statements presented fairly the financial position of UNFCCC as at 31 December 2016 and the results of its operations, changes in net assets and cash flows for the year then ended, in accordance with the International Public Sector Accounting Standards (IPSAS). | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
This included an assessment as to whether the expenses recorded in the financial statements had been incurred for the purposes approved by the bodies and whether revenue and expenses had been properly classified and recorded in accordance with the United Nations Regulations and Rules and financial procedures approved by the Conference of Parties (COP) in Decision 15/CP.1. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
The audit included a general review of the financial systems and internal controls and a test examination of the accounting records and other supporting evidence to the extent that the Board considered necessary to form an opinion on the financial statements.
4.
In addition to audit of accounts and financial transactions, the Board carried out reviews of the UNFCCC operations under United Nations financial regulation 7.5. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
This enables the Board to make observations with respect to the efficiency of the financial procedures, the accounting system, internal financial controls and, in general, the administration and management of UNFCCC operations.
The Board also followed up on its previous recommendations.
These matters are addressed in the relevant sections of this report.
5.
The audit was carried out from 28 November to 2 December and from 3 to 13 April 2017. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
The examination of UNFCCC included a review of the internal controls and accounting systems and procedures only to the extent considered necessary for the effective performance of our examination.
The Board has taken up two cross cutting audit themes in 2016: Inclusion of persons with disabilities and the contribution to the Sustainable Development Goals.
9 6. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
9 6.
The findings and observations should not be regarded as representing a comprehensive statement of all the weaknesses which may exist in the financial and management systems at UNFCCC, or as identifying all improvements which could be made to the systems and procedures.
7.
The present report covers matters that, in the opinion of the Board, should be brought to the attention of the COP. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
The Board’s observations and conclusions were discussed with UNFCCC management, whose views have been appropriately reflected in the report.
B.
Findings and recommendations 1.
Follow-up of previous recommendations 8.
The Board noted that out of the total 11 recommendations that remained outstanding up to 31 December 2015, 7 (64 per cent) had been implemented, 3 (27 per cent) were under implementation and 1 (9 per cent) was not implemented. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
The recommendations under implementation related to expediting the settlement of outstanding balance of the accounts in respect of Conference of Parties (COP 16 and COP 17), improved provisioning for the unfunded liabilities in order to mitigate the risk of failure to pay these liabilities and ensuring timely recoveries of the fees and other claims from Designated Operating Agencies. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |
The implementation rate shows an increase compared to the previous year when 40 per cent were fully implemented and 60 per cent were under implementation.
Details of the status of the implementation of the recommendations are presented in the Annex.
9.
One recommendation relating to the certified emission reduction certificates (CER) is not implemented because UNFCCC disagreed with it. | https://docs-lawep.s3.us-east-2.amazonaws.com/1696756531327.pdf | https://www.un.org/en/auditors/board/pdfs/BoA%20Report%20on%20UNFCCC%20FY%202016_Board%20version.pdf |