RESTRICTED  
  
WT/BFA/W/598  
 
5 September  2022 
(22-6449) Page: 1/21 
Committee on Budget, Finance and Administration  Original: French  
 
REPORT OF THE INDEPENDENT EXTERNAL AUDITOR ON THE AUDIT OF THE  
FINANCIAL STATEMENTS OF THE WORLD TRADE ORGANIZATION  
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2021  
The report of the independent External Auditor on the audit of the financial statements of the WTO 
for 2021 is attached.  
 
 
 
  WT/BFA/W/598  
 
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  WT/BFA/W/598  
 
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EXTERNAL AUDIT OF  
THE WORLD TRADE ORGANIZATION  
 
AUDIT REPORT  
 FINANCIAL STATEMENTS OF  
THE WORLD TRADE ORGANIZATION  
FOR THE FINANCIAL YEAR ENDED 
31 DECEMBER  2021  
 
 
 
 
 
 
 
 
 
 
 
 
REFERENCE OF THE COUR DES COMPTES: OMC - 2022 -2 
 
 
 
FRENCH NATIONAL AUDIT OFFICE REFERENCE CoE 2021 -2 
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BLANK PAGE  WT/BFA/W/598  
 
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TABLE OF CONTENTS  
 
 
I.  OBJECTIVES AND SCOPE OF THE AUDIT  ................................ ................................ ...... 5 
II.  RECOMMENDATIONS  ................................ ................................ ................................ .. 6 
III.  OBSERVATIONS AND RECOMMENDATIONS  ................................ ...............................  8 
1.  Corrections to the accounts  ................................ ................................ ...................  8 
2.  Presentation of the financial statements and compliance with accounting standards  ...... 9 
3. Analytical review of financial statements for the financial  year 2021  ............................  10 
4.  Audit observations  ................................ ................................ ..............................  11 
4.1.  Inventory  of fixed assets  ................................ ................................ ..............  11 
4.2.  Voluntary contributions refundable to donors  ................................ ...................  11 
4.3.  Outstanding debt related to the Eleventh Ministerial Conference  .........................  12 
4.4.  Related party disclosure  ................................ ................................ ...............  13 
4.5.  Pension commitments, after -service health insurance and disability plan  .............  15 
4.6.  Enterprise management systems  ................................ ................................ ... 18 
IV.  ACKNOWLEDGEMENTS  ................................ ................................ .............................  18 
ANNEX:  UNACCOUNTED AUDIT ADJUSTMENTS (IN THOUSANDS OF SWISS FRANCS)  ... 19 
 
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5  
I. OBJECTIVES AND SCOPE OF THE AUDIT  
1. Pursuant to the terms of our undertaking and our notification letter dated 18 April 2022, a team 
of seven auditors carried out the final audit of the financial statements of the World Trade 
Organization for the financial year ended 31 December 2021 from 2 to 20 May 2022.  
2. A team of seven auditors had previously carried out an interim audit from 8 to 
19 November  2021, the main focus of which was:  
- an internal control review, prior to the audit of the financial statements for the financial 
year 2021;  
- an analysis of the environment of the financial and accounting management information 
system; 
- a review of the overall balance for the period from 1 January to 30 September 2021.  
3. The audit of the financial statements was carried out in accordance with the provisions of the 
Organization's Financial Regulations (Regulations 44 to 46), the Interna tional Standards on Auditing 
(ISAs) and the International Standards of Supreme Audit Institutions (ISSAIs) on financial audit.  
4. The purpose of the audit was to determine, with reasonable assurance, whether the financial 
statements fairly present, in all mat erial respects, the WTO's financial position as at 
31 December  2021 and the results of transactions recorded during the financial year, in accordance 
with the available financial reporting framework, in this case the International Public Sector 
Accounting Standards (IPSAS).  
5. The financial statements for the financial year ended 31 December 2021 were sent to the 
External Auditor on 26 April 2022. During the audit process, the Secretariat wished to substantially 
amend these financial statements and, consequently, with the agreement of the External Auditor, 
produced the amended financial statements dated 1 July 2022, which were subject to further 
verification.  
6. Each observation and recommendation was discussed with the relevant officials. Senior 
managem ent received the External Auditor's interim report on 8 July 2022 and its comments (factual 
and/or formal) and written replies have, where appropriate, been taken into account in this report.  
7. In accordance with Regulation 46 of the Financial Regulations an d the terms of our engagement 
letter, a separate report is issued to follow up on the previous recommendations made by the 
External Auditor.   
8. The External Auditor issued an unqualified opinion  on the financial statements for the financial 
year ended 31 Dec ember 2021.  
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6  
II. RECOMMENDATIONS  
9. The recommendations made are assigned a priority level, decided by the External Auditor, which 
is an integral part of the recommendation.  
● Priority 1 : fundamental point requiring special attention  of the governing bodies and prompt 
action by senior management;   
 
● Priority 2 : point that must be implemented, but may be postponed depending on the 
circumstances;  
 
● Priority 3 : point concerning the improvement of controls, financial reporting or 
manage ment, brought to the attention of senior management.  
 
Only priority 1 and 2 recommendations will be included in the annual follow -up report 
submitted to the governing bodies. All recommendations are nevertheless subject to 
follow -up during the review of th e accounts for the following financial year.  
 
# Priority  Recommendations  
1 2 The External Auditor recommends evaluating the control procedures and valuation 
methods for current fixed assets, reviewing those that need to be made more 
effective or compliant, and, at a minimum, carrying out a complete inventory of 
fixed assets by the time the Organization presents its accounts for 2022.  
2 1 The External Auditor recommends taking note of the irrecoverable nature of the 
debt of the Government of Argentina related to the organization of the Eleventh 
Ministerial Conference and writing it off in full.  
3 1 The External Auditor recommends establishing a procedure to identify, beyond the  
current short list, the Organization's related par ties and formalizing the 
submission by key management personnel (within the meaning of IPSAS 20) of a 
regularly updated declaration of interest statement and an annual declaration of 
the transactions between the Organization and such personnel (or their cl ose 
family members).  
4 1 The External Auditor recommends exploring the possibility, for the implementation 
of administrative measures associated with penalizing late payments by Member 
States, of consolidating the mandatory contribution debts with any oth er debts 
held by the Organization as a result of specific agreements concluded with the 
States concerned.  
5 1 The External Auditor recommends valuing the Pension Plan liabilities in a prudent 
and consistent manner by using a discount rate that refers to market yields at the 
end of the reporting period on high -quality Swiss corporate bonds, rather than to 
the average interest rate for the last 12  months on 10 -year Swiss Confederation 
bonds, a method that minimizes the value of long -term liabiliti es without 
justification and does not appear to be in line with IPSAS 39.  
6 1 The External Auditor recommends using a single discount rate for the actuarial 
valuation of all long -term employee benefits.  WT/BFA/W/598  
 
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7 # Priority  Recommendations  
7 2 The External Auditor recommends establishing a special account for the 
after-service health insurance scheme, endowing it gradually, using the funds 
currently put into the "special reserve account" and extraordinary contributions, 
with assets capable of covering its long -term liabilities .  
8 2 The External Auditor recommends defining and implementing, by the end of the 
2022 financial year, procedures for managing user accounts, as an essential 
element and for ensuring continuity of Workday project management.  
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8 III. OBSERVATIONS AND RECOMMENDATIONS  
1. Corrections to the accounts  
10. As part of the audit of the 2021 financial statements, the External Auditor identified a number 
of anomalies that led the Organization to modify the financial statements for the financial year  2021 
that it had pr epared.  
11. The General Council, at its meeting of 22 and 23 November 2021, approved the 
recommendation of the Committee on Budget, Finance and Administration to allocate CHF  9.8 million 
of the 2020 budget surplus to offset Members' 2022 contributions. This de cision by the General 
Council had not been  reflected in the initial version of the Organization's financial statements 
submitted for audit, even though it had been taken in 2021. At the request of the External Auditor, 
the WTO recorded a debt of CHF 9.8 mi llion to Members and increased the accumulated deficit 
recorded in its equity by the same amount.  
12. Liabilities for staff benefits and the Pension Plan are subject to an actuarial valuation in 
accordance with the International Public Sector Accounting Standa rds (IPSAS) and principles. This 
valuation, carried out by an independent expert, leads the Organization to record in its accounts the 
corresponding liabilities as well as the impact of their changes in income and equity. An error in the 
accounting transcr ipt of the data provided by the actuary had led the WTO to record an actuarial 
gain in equity overvalued by CHF 557,000 and a deficit for the period overvalued by the same 
amount. At the request of the External Auditor, the Organization made the necessary corrections in 
order to correctly record the actuarial valuation data provided by the independent expert in the 
financial statements.  
13. Lastly, an error in calculating the provision for relocation allowance had led the Organization to 
record a provision over valued by CHF 112,000. At the request of the External Auditor, the WTO 
made the necessary correction, which decreased the provision by CHF 112,000 and the deficit for 
the period by the same amount.  
14. Furthermore, as part of the audit of the Pension Plan, se veral anomalies were corrected in the 
final financial statements for the year ended 31 December 2021, leading to an increase of 
CHF 923,476 in the investments and resulting revenues.  These corrections have increased the value 
of the Pension Plan assets, as  well as the value of the Organization's equity, by the same amount. 
These adjustments relating to the Pension Plan have also been recorded in the WTO's  accounts.  
15. All the corrections made by the Organization to the accounts for the financial year ended 
31 December 2021 have lowered the deficit for the period by CHF 669,000 and decreased the WTO's 
equity by CHF 8.208 million.  
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9 2. Presentation of the financial statements and compliance with accounting 
standards  
16. In the previous audit, the External Audit or recalled that once the Organization had officially 
adopted the IPSAS accounting framework, all IPSAS standards must be applied accurately and any 
divergence from any of these standards must be explained in the notes to the financial statements 
(Regulati on 32 of the Financial Regulations). In order to guarantee the sincerity and 
understandability of the financial statements, these notes must also justify the divergence, in 
accordance with the provisions of the Conceptual Framework for IPSAS relating to th e qualitative 
characteristics of financial reporting.  
17. IPSAS 1 prescribes the manner in which general purpose financial statements should be 
presented to ensure comparability both with the entity's financial statements of previous periods 
and with the fina ncial statements of other similar public entities.  
18. One of the basic principles of IPSAS 1 is that general purpose financial statements must not 
only have intrinsic qualities that make them useful for decision -making by their users, but, above 
all, and for  this purpose, they must be understandable and complete. Paragraph 127 of this standard 
specifies that the notes to financial statements, which are an integral part thereof and are also 
subject to the audit, shall provide additional information relevant an d useful to an understanding of 
the data presented in the financial statements submitted for the approval of the governing bodies 
(statement of financial position, statement of financial performance, statement of changes in net 
assets/equity or cash flow s tatement, budget implementation report, etc.). Furthermore, according 
to paragraph 128 of IPSAS 1, these notes shall also, as far as practicable, be presented in a 
systematic manner in relation to each item on the face of the financial statements.  
19. The Exte rnal Auditor had previously noted that the financial statements submitted did not 
provide the details necessary to properly understand certain items and recommended that, starting 
with the accounts produced for the financial year 2021, the policy provision s of paragraphs 127 and 
128 of IPSAS 1 be strictly applied by setting out in the notes the details relevant to an understanding 
of the financial statements and to ensuring that the governing bodies and users have complete 
information, combining factual exp lanations and figures.  
20. While the External Auditor noted progress in the preparation of the financial statements as at 
31 December 2021, additional information is still required to apply the provisions of paragraphs  127 
and 128 of IPSAS 1, particularly in r elation to notes 8 and 9 on tangible and intangible assets, and, 
more specifically, on the valuation of the right to use the Centre  William  Rappard or other facilities 
made available by the Canton of Geneva, and on the fixed costs relating to the Workday s oftware.  
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10 3. Analytical review of financial statements for the financial year 2021  
21. The Organization's revenues for 2021 amount to CHF 211.8 million, down CHF 6.3 million from 
2020. While mandatory contributions remain unchanged at CHF 195.5 million ("zero no minal 
growth"), voluntary contributions to trust funds1 decreased from CHF 15.8 million in 2020 to 
CHF 13.7 million in 2021. This decrease, already noted previously (voluntary contributions to trust 
funds amounted to CHF 22 million in 2019), in a context of stable contributions (CHF  21 million in 
2019, CHF 20.9 million in 2020 and CHF 19.9 million in 2021), is a result of the COVID -19 pandemic, 
which has curtailed the WTO's activities. Other revenues fell significantly from CHF  5.9 million in 
2020 to CHF 1 .6 million in 2021, as a result of, inter alia , the redistribution of the International Trade 
Centre (ITC) surpluses, which were higher in 2020 than in 2021 (CHF  0.6 million received in 2021 
and CHF 1.8 million in 2020) and the revival of the disability pr ovision of CHF 1.5 million.  
22. Staff costs (excluding pension and after -service health insurance) increased by CHF  6.6 million 
to CHF 136.8 million, up 5% from 2020. This increase was mainly due to a decrease in the number 
of vacancies in 2021. Temporary assi stance costs also rose by CHF  3.7 million to CHF 28 million in 
2021, due to the twin increase in translation and interpreting costs (+CHF 2.3 million as a result of 
the expenses incurred for the Ministerial Conference initially scheduled for December 2021)  and 
consultancy fees (including +CHF  1.1 million for Interprefy, McKinsey and Workday services).  
23. Travel and mission expenses decreased by CHF 1.5 million in 2021 to CHF 1 million, following 
a significant fall of CHF 11.9 million in 2020. These changes are the result of the COVID -19 pandemic, 
with travel remaining exceptional at this time.  
24. Thus, the decrease of CHF 6.3 million in the Organization's revenues, combined with the 
increase of CHF 4.7 million in expenses, has led to a deficit of CHF 48 .2 million in 2021, up 
CHF 11 million from  2020.  
25. The Organization's assets increased by CHF 109.6 million in 2021 to CHF 1,075,900,000 as at 
31 December 2021. This increase was mainly due to the value of the Pension Plan assets, which  rose 
significantly (+ CHF 74.6 million) as a result of the performance of equity markets in 2021. 
Furthermore,  cash flow also increased from CHF 41 million to CHF 186.9 million as a result of, 
inter alia, an increase  of CHF 21.5 million in contributions received in advance (including 
CHF 5.3 million from Hong Kong, CHF  4.8 million from India, CHF 4.6 million from Singapore, 
CHF 2.4 million from Australia and CHF 2.3 million from Thailand) and an increase of CHF  5.5 million 
in voluntary contributions refundable to don ors. This increase is a result of the COVID -19 pandemic, 
which has curtailed the WTO's activities, while contributions have remained stable since 2019.  
  
 
1 Recorded as expenses incurred during the year under IPSAS 23.  WT/BFA/W/598  
 
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11 26. The CHF 98.1 million increase in the Organization's liabilities is due to the growth of 
CHF 58.5 million in Pension Plan liabilities, the rise in contributions received in advance 
(CHF 21.5 million) and voluntary contributions refundable to donors (CHF 5.5 million), as well as to 
the recognition of a debt of CHF 9.8 million relating to the portion of the 2 020 budget surplus to be 
redistributed to Members to offset their 2022 contributions2. 
27. The Organization's equity was negative, standing at CHF 823.7 million as at 31  December  2021, 
but had improved by CHF 11.3 million in relation to the previous year. Thi s improvement was mainly 
the result of an actuarial gain of CHF 69.3 million relating to the Pension Plan, offset by the deficit 
of CHF 48.2 million for the period and the portion of the 2020 budget surplus, amounting to 
CHF 9.8 million, to be transferred to Members to offset their 2022  contributions.  
28. The financial report attached to the financial statements, submitted to the External Auditor, 
does not call for any particular observation at this stage.  
4. Audit observations  
4.1. Inventory  of fixed assets  
29. Tangible assets amounted to CHF 114.2 million net at 31  December 2021.  
30. Rule 10.3 of the Financial Rules provides that physical inventories shall be taken of all supplies, 
equipment or other property of the WTO, or entrusted to the charge of the WTO, at such interva ls 
as may be deemed necessary by the Deputy Director -General in charge of Finance to ensure 
adequate control over such property.  
31. The External Auditor notes that the most recent general physical inventory of fixed assets was 
carried out in 2018. No inventor y decisions, whether categorical or sequential, have been taken 
since then; only partial inventories have been carried out. In view of the time that has elapsed since 
then, it is not possible at present to guarantee that all fixed assets recorded in the accounts did 
actually exist and were controlled by the WTO at the close of the financial year. Moreover, there is 
no assurance that the valuation methods used for these assets are r elevant and in conformity with 
the applicable accounting standards.  
Recommendation No. 1 The External Auditor recommends evaluating the control 
procedures and valuation methods for current fixed assets, reviewing those that need 
to be made more effective or compliant, and, at a minimum, carrying out a complete 
inventory of fixed assets by the time the Organization presents its accounts for 2022.  
4.2. Voluntary contributions refundable to donors  
32. Unless otherwise specified in the legal documents establishing the relevant trust funds, unused 
voluntary contributions shall be reimbursed to donors. These unused contributions amounted to 
CHF 19.9 million in 2021 and took the funds available to CHF  41.2 million as at 31  December 2021.  
  
 
2 Surplus transfer due to Members . WT/BFA/W/598  
 
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12 33. The Organization  prepares individual financial reports for each fund, which were validated by 
the Financial Controller on 31 December 2021, but does not produce a consolidated report of these 
funds. The aggregate balance of these funds is nevertheless presented in the fin ancial statements 
submitted for audit.  
34. The External Auditor notes that producing such a report would allow for more reliable accounting 
of voluntary contributions refundable to donors by adding a final step of validation, while at the 
same time facilitatin g certification.  
4.3. Outstanding debt related to the Eleventh Ministerial Conference  
35. The cost -sharing arrangements relating to the organization of the biennial Ministerial 
Conference is set out in a mechanism established in 19993, based mainly on an annual allocation 
under the WTO's regular budget of CHF 600,0004 (i.e. CHF 1.2 million per Conference) to the 
operational fund, pursuant to a decision by Member States. For each Ministerial Conference, an 
agreement between the host country and the Organiz ation formalizes the division of responsibility 
for security, logistics and cost -sharing.  
36. Argentina hosted the Eleventh Ministerial Conference (MC11) from 11 to 13 December 2017 in 
Buenos Aires, for a total cost of CHF 1,691,000. In accordance with Article  6 of the agreement5 
concluded between Argentina and the WTO on 6 February 2017 for the organization of this 
Conference, CHF  1.2 million was covered by the operational fund. For the rest, Article 6 of the 
agreement specified that any costs exceeding this amount, which was financed by all WTO Member 
States through the Organization's regular budget, were to be borne by the host country.  
37. In March 2018, there was an outstanding balance of CHF 491,000 to be covered by the 
Government of Argentina. A partial pay ment of CHF 59,000 was received by the Organization in 
January 2019. The  Government of Argentina also paid a hotel bill for CHF 202,000, reducing its debt 
to the WTO to CHF 209,000.  
38. The settlement of this debt has been the subject of several reminders and  proposals for payment 
rescheduling, none of which have been followed up.  
39. Historically, financial relations between the WTO and the Government of Argentina have been 
characterized by trust (Argentina had a negative contributions' balance of CHF  1.4 million  as at 
31 December 2021, but there is no administrative penalty in place under the current rules). 
However, this begs the question about the recoverable nature of the debt to the Organization, not 
because of the debtor's solvency, but due to its repeated r efusal to honour its commitment as per 
the agreement of 6  February 2017.  
40. For the sincerity of the accounts presented to the governing bodies, it would be unreasonable 
to defer indefinitely a debt whose likelihood of being repaid is close to nil, or even to  make provision 
for writing down the debt, an operation that would have the same effect on the performance account 
while maintaining the fiction of a possible better fortune clause. As things stand, the External Auditor 
considers that the factual circumsta nces must lead to the conclusion that this is a bad debt and that 
it should therefore be written off completely in the WTO's accounts.  
  
 
3 WT/BFA/44 . 
4 Since 2005, this amount has been renewed every year.  
5 2017-02-06_WTO -Argentina_Agreement_Host Country_MC11.  WT/BFA/W/598  
 
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13 41. This case highlights the more systemic issue of the handling of non -payment of States' 
contractual obligations unrelate d to the payment of mandatory contributions. It begs reflection on 
how the consolidated  debts of Member States are taken into account in the application of regulatory 
administrative penalties in case of arrears. It also shows the need for the financing agr eements for 
Ministerial Conferences concluded with host countries to be modified to guarantee enforcement of 
the agreements in terms of honouring the parties' mutual commitments.  
 
Recommendation No. 2 The External Auditor recommends t aking note of the 
irrecoverable nature of the debt of the Government of Argentina related to the 
organization of the Eleventh Ministerial Conference and writing it off in full.  
4.4. Related party disclosure  
42. As part of their activities, organizations maintain relationships with " related parties", which may 
be natural or legal persons, whether legally autonomous or not. A person (or a close family member 
of that person) shall be considered to be a related party of the organization if he or she has control, 
joint control or signific ant influence over the organization's operations, or if he or she is a member 
of its key management personnel.  
43. Related party relationships can influence how the organization interacts and cooperates with 
other entities, and might expose the organization to  risks, or provide opportunities that would not 
have existed in the absence of the relationship. Lastly, related parties may enter into transactions 
that unrelated parties would not enter into or may agree to transactions on different terms and 
conditions than those that would normally be available to unrelated parties.  
44. In light of the above, IPSAS 20 requires the disclosure of information on the identification of 
related parties, of the existence of related party relationships, and of information about tra nsactions 
between the organization and its related parties. The purpose of this standard is to inform the 
governing bodies of the organization, all interested stakeholders and in particular the public, for 
which these financial statements and reports are i ntended, of situations of cross -influence from 
external parties, or even in extreme cases, situations of proven or potential conflicts of interest.  
45. Key management personnel hold positions of responsibility within an organization. They are 
responsible for the strategic direction and operational management of an organization, and are 
entrusted with significant authority. Their responsibilities may enable them to influence the benefits 
of office that flow to them or their related parties. In addition, IPSAS 2 0 requires certain disclosures 
to be made about the remuneration of key management personnel and close members of their 
family, loans made to them and the consideration provided to them. The disclosures required by this 
standard will ensure that appropriat e minimum levels of transparency are applied to the 
remuneration of key management personnel and close members of their family.  
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14 46. According to this standard, key management personnel are all directors or members of the 
governing body of the organization an d any other person who has the authority and responsibility 
for planning, directing and controlling the activities of the organization. Key management personnel 
also include key advisers to members of the governing body. However, non -executive directors, w ho 
do not have the capacity to influence the decisions of the organization in an enforceable manner , 
are not related parties.  
47. In note 21 of the financial statements, the WTO provides information on related party 
transactions and states that, in its assess ment, the key management personnel are 
the Director -General and the four Deputy Directors -General.  
48. With regard to the WTO Pension Plan, which accounts for more than two -thirds of the 
WTO's  assets, a Management Board composed of a chairperson and eight tit ular members, including 
WTO staff members, oversees its operations. Despite the significant contribution of this Plan's assets 
to the Organization's accounts, and the operational management decisions taken by this Board, none 
of its members are currently c onsidered as a potential related party.  
49. In strict application of the accountability standard regarding related party identification and 
disclosures, the External Auditor considers that the list of potential related parties with effective 
control over the f inancial or operating decisions of the WTO, either through their own authority or 
delegated authority, should be expanded to include:  
- Directors of divisions to whom executive authority is delegated for conducting the 
WTO's  operations;  
- Key advisors (se e IPSAS 20, paragraph 4(b)(ii)) to these Directors, even if they have no 
executive authority, including the Chief of Staff to the Director -General and any key 
advisors to the Deputy Directors -General. As the qualifier used in the standard is 
qualitative, i t is up to the Organization to determine, in the spirit of the standard, which 
advisors have a particular pre -eminence.  
- Members of the Management Board of the Pension Plan who are WTO staff members.  
50. In order to be able to disclose the requisite information on key management personnel and 
their close family members (i.e. the remuneration, loans and consideration provided to them), the 
Organization must be aware of all the transactions that may exist between the WTO and its key 
management personnel  and their close family members. Obtaining these details is crucial to ensuring 
that the information is complete and thus useful.  
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15 51. The External Auditor notes that the Organization has not taken any action aimed at identifying 
related party transactions. A good practice generally adopted by public entities and many 
international organizations consists of requiring that key management p ersonnel submit an 
individual declaration of interest statement and an annual declaration of the transactions between 
themselves (or their close family members) and the Organization.  
Recommendation No. 3 The External Auditor recommends establishing a proc edure to 
identify, beyond the current short list, the WTO's related parties, and formalizing the 
submission by key management personnel (within the meaning of IPSAS 20) of a 
regularly updated declaration of interest statement and an annual declaration of t he 
transactions between the Organization and such personnel (or their close family 
members).  
 
Recommendation No. 4 The External Auditor recommends exploring the possibility, for 
the implementation of administrative measures associated with penalizing late 
payments by Member States, of consolidating the mandatory contribution debts with 
any other debts held by the Organization as a result of specific agreements concluded 
with the States concerned.  
4.5. Pension commitments, after -service health insurance and disab ility plan  
52. Liabilities relating to pension commitments, after -service health insurance (ASHI) and the 
disability plan amounted to CHF 1,437,700,000 , CHF 293,700,000 and CHF 11,700,000 respectively, 
as at 31  December 2021.  
53. An IPSAS -compliant actuarial valua tion of the WTO Pension Plan and ASHI was conducted on 
31 December 2021 by Ernst & Young. Two methods for determining the discount rate are proposed 
by the consulting actuary.  
54. The first method proposed by the consulting firm aims to determine the discount  rate by 
referring to market yields at the end of the reporting period on high -quality Swiss corporate bonds. 
It resulted in a discount rate of 0.30% as at 31 December 2021 (compared with 0.15% at 
31 December 2020).  
55. A second method is being implemented at the request of the WTO. It was suggested by the 
Organization's actuary during the 2015 actuarial valuation, with a view to reducing in the long term 
the fluctuation of actuarial gains and losses that had been recorded since the introduction of IPSAS 
at the  Organization in 2012. It sets the discount rate by referring to the technical interest rate of 
Swiss pension funds as determined by the Swiss Chamber of Pension Fund Experts. This method 
leads to the use of a maximum discount rate6 of 1.87% as at 31 December 2021 (compared with 
1.68% as at 31  December  2020). As in previous years, the Organization retained the maximum 
discount rate determined by the second method.  
  
 
6 The Swiss Chamber of Pension Fund Experts determines a maximum discount rate of 1.87% 
(corresponding to the average interest rate f or the last 12 months on 10 -year Confederation bonds in CHF), 
plus a supplement of 2.5% and minus a deduction for longer life expectancy (at least 0.3 points).  WT/BFA/W/598  
 
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16 56. However, this approach is not in line with the principles and recomm endations set out in 
paragraphs 85 to 88 of IPSAS 39 (Employee benefits), because, according to these principles, the 
rate used to discount post -employment benefit obligations must reflect the time value of money. 
The currency and term of the financial ins trument selected to reflect the time value of money must 
be consistent with the currency and the estimated term of the post -employment benefit obligations.  
57. In this case, the 10 -year maturity of the Confederation bonds used to calculate the discount 
rate i s less than the estimated term of the post -employment benefit obligations. Moreover, the 
discount rate is calculated based on the average  interest rate over the last 12 months, while 
paragraph 88 of IPSAS 39 specifies that reference should be made to marke t yields at the end of 
the reporting period.  
58. The WTO's decision to use the second approach is questionable as it led to a reduction in pension 
liabilities of CHF 545 million as at 31 December 2021. As the assets of the Pension Plan were 
evaluated at their market value as at 31 December 2021 and not at the average value for the last 
12 months, the set of accounts submitted to the governing bodies do not meet the requirements of 
prudence, consistency and comparability that guarantee useful information for sta keholders.  
Recommendation No. 5 The External Auditor recommends valuing the Pension Plan 
liabilities in a prudent and consistent manner by using a discount rate that refers to 
market yields at the end of the reporting period on high -quality Swiss corporate  bonds, 
rather than to the average interest rate for the last 12  months on 10 -year Swiss 
Confederation bonds, a method that minimizes the value of long -term liabilities without 
justification and does not appear to be in line with IPSAS 39.  
59. Furthermore, the  IPSAS -compliant actuarial valuation of future compensation costs for staff 
members with disabilities to be covered by the Organization (WTO disability plan) was carried out 
by the same external consultant on 31 December 2021. The approach used to determin e the discount 
rate refers to market yields at the end of the reporting period on high -quality Swiss corporate bonds 
and not to the technical interest rate of Swiss pension funds as determined by the Swiss  Chamber 
of Pension Fund Experts.  
60. Also, the Organiz ation applies different discount rates for liabilities with a similar estimated 
term.  
Recommendation No. 6 The External Auditor recommends using a single discount rate 
for the actuarial valuation of all long -term employee benefits.  
  WT/BFA/W/598  
 
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17 61. The Organization's ASH I liabilities are not currently covered by any assets unlike the Pension 
Plan, for which a financial asset has been set up to cover, at least partially, retirement liabilities.  
62. The adoption of IPSAS standards, which required the identification of the long -term liabilities in 
the Organization's accounts, led the Committee on Budget, Finance and Administration (CBFA) to 
establish a working group in 2014, with a view to considering the sustainability of the Medical Plan 
and, in parti cular, the ASHI liabilities. This group studied several models for financing the Plan but, 
after three years of work, it had not been able to reach a consensus in favour of one of them. 
However, none of these financing models involved the establishment of a fund with sufficient assets 
to reasonably and sustainably meet long -term health insurance obligations. The only idea received 
positively involved "setting aside" any budgetary surplus from the health plan into a "special reserve 
fund". However, the group  recommended that the CBFA continue its efforts aimed at reaching a 
consensus on a more efficient and more sustainable financing solution.  
63. As a result, the CBFA decided in November 2017 (WT/BFA/168) to establish a "WTO Medical 
Plan (WTOMP)" Special Reserv e Account (SRA) and to adopt the guidelines proposed by the working 
group (WT/BFA/W/431, Annex V). The guidelines provide that the CBFA has the full authority to take 
decisions about the SRA and that the monies in the SRA shall only be used to finance ASHI  costs, 
subject to the approval of the CBFA.  
64. The balance of the WTOMP SRA was CHF  8,117,000 as at 31 December 2021 (see note 17 of 
the financial statements), broken down into an accumulated amount of CHF 6,520,000 resulting 
from savings under the medical p lan budget line, and CHF 1,597,000 from an additional source of 
funding in the form of the ASHI levy on staff salaries.  
65. By failing to establish a special account for the Medical Plan (as was done for the Pension Plan) 
and by maintaining the "pay -as-you-go" financing system through annual contributions by Member 
States to a specific budget line, the Organization maintains a certain obscurity with regard to the 
sources of its financial performance and their sustainability.  
66. Comparing the current level of the SRA against the long -term obligations estimated at 
CHF 290 million as at 31  December 2021 shows that the SRA gives a false sense of security to 
Member States and remains simply an unrealistic half measure that is unable to meet the long -term 
obligations of  the Medical Plan.  
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18 67. While the External Auditor is aware of the difficulty experienced by Member States in reaching 
a consensus on the matter of sustainable financing of medical insurance, it can only recommend 
addressing the long -term issue of health insu rance through the establishment of a special account 
with specific assets to ensure coverage, to a reasonable  extent, of the Plan's obligations. Even though 
these assets would initially remain insufficient to ensure an overall long -term equilibrium, this 
account (paid into on an ad hoc  basis using the funds allocated to the current SRA) would 
demonstrate the will ingness of Member States to seriously address the financing issue. This would 
also allow for gradual progress towards a near equilibrium through successive ad hoc  contributions 
as permitted by the budgetary situation.  
Recommendation No. 7. The External Au ditor recommends establishing a special 
account for the after -service health insurance scheme, endowing it gradually using the 
funds currently put into the "special reserve account" and extraordinary contributions, 
with assets capable of covering its long -term liabilities.  
4.6. Enterprise management systems  
68. The Workday tool was introduced in 2021 for human resources and payroll teams. The project 
milestones have been correctly documented and the tool is now used daily by the entire Organization 
(HRD and staff).  
69. The tool must be further developed by defining and applying the procedures governing the 
management of user accounts.  
70. Good practice requires that the creation and deletion of, and changes to, user accounts, as well 
as rights granted to user accounts, be governed by procedures defining the processes. A separation 
of functions matrix also needs to be defined to ensure good knowledge of user rights and reduce the 
risk of undue extended access to the application.  
Recommendation No. 8 The External Auditor recommends defining and implementing, 
by the end of the financial year 2022, procedures for managing user accounts, as an 
essential element and for ensuring continuity of the Workday project management . 
 
 
IV. ACKNOWLEDGEMENTS  
71. The External Auditor e xtends its sincere thanks to all the WTO teams for making themselves 
available and for the quality of the information provided during the audit.  
 
 
 
End of audit observations.  
  WT/BFA/W/598  
 
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19 ANNEX: UNACCOUNTED AUDIT ADJUSTMENTS (IN THOUSANDS OF SWISS FRANCS)  
 
Adjustments  Impact on the statement of financial position  Impact on the 
statement of 
financial 
performance  Current 
assets  Non- 
current 
assets  Current 
debt Non- 
current  
debt Net 
position  
Cancellation of 
the debt of the 
Government of 
Argentina  209    209 209 
Totals  209    209 209 
 
Source :  Work of the External Auditor . 
 
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