RESTRICTED  
  
WT/BFA/W/5 99 
 
5 September  2022 
(22-6448) Page: 1/13 
Committee on Budget, Finance and Administration  Original: French  
 
 
REPORT OF THE INDEPENDENT EXTERNAL AUDITOR ON FOLLOW -UP TO THE 
RECOMMENDATIONS  OF THE EXTERNAL AUDITOR S 
The Report of the Independent External Auditor on the follow -up to the recommendation s of the 
External Auditor s is attached.  
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TABLE  OF CONTENTS  
 
 
 
I. GENERAL OBSERVATIONS  ................................ ................................ ............................  5 
1.1. Follow -up procedures  ................................ ................................ ...........................  5 
1.2. Implementation of recommendations  ................................ ................................ .. 5 
II. FOLLOW -UP TO RECOMMENDATIONS  ................................ ................................ ...........  6 
2.1. Financial audit recommendations  ................................ ................................ .........  6 
2.2. Recommendations associated with performance audits  ................................ ....... 9 
III. CONCLUSION  ................................ ................................ ................................ ..............  11 
 
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5  
I. GENERAL OBSERVATIONS  
1.1.   Follow -up procedures  
1. This document on follow -up to the recommendations of the External Auditors is drawn up in 
accordance with the terms and conditions of the mandate entrusted to the Cour des comptes  (French 
National Audit Office) by the General Council, set out in the letter  of commitment dated 
24 November  2020, signed jointly by the French National Audit Office and the World  Trade Organization 
(WTO).  
2. It includes information on the status, as of the date of submission of the Audit Reports on the WTO's 
2021 Accounts and Pensi on Plan, of all recommendations made by successive external auditors that 
were not implemented by the date of the previous follow -up report. It covers all recommendations made 
in both the financial audit reports (WTO and Pension Plan) and the performance a udit reports.  
3. Since 2020, the External Auditor has assigned one of the following implementation priority levels 
to each of its recommendations as an integral part thereof:  
• 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 
management , brought to the attention of senior management.  
4. Only priority 1 and 2 recommendations are included in the annual follow -up report submitted to 
the governing bodies. Depending on their qualitative importance, priority 3 recommendations may either 
be includ ed for information in the audit reports submitted to the governing bodies or sent only to senior 
management in a management letter. All recommendations are nevertheless subject to follow -up every 
year.  
1.2.   Implementation of recommendations  
5. The External Auditor endeavours, in strict accordance with the principles set out in the international 
auditing standards of the International Organisation of Supreme Audit Institutions (INTOSAI), to make 
recommendations, the implementation of which is likely to improve significantly the handling of issues 
to which they relate, the recommended implementation schedule of which takes into account both the 
risks associated with the shortcomings identified and, where applicable, the legal or organizational 
constrai nts on the divisions responsible for their operational application, and the implementation and 
the follow -up of which can be clearly measured, quantitatively or qualitatively.  
6. Since the External Auditor reports only to the governing bodies, the recommendat ions it makes are 
primarily intended for them; said recommendations are within the scope of the governing bodies' 
oversight and high -level steering function in managing the Organization.  WT/BFA/W/599  
 
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6 7. It is therefore important for these recommendations to be endorsed b y the governing 
bodies so that they constitute clear guidelines and road maps for implementation by the 
Organization's Secretariat.  Should the Secretariat object strongly to the implementation of a 
recommendation, it is the Secretariat's responsibility to satisfy the Committee on Budget, Finance and 
Administration (CBFA) that its objection is well -founded. Ultimately, unless a recommendation is 
explicitly rejected by the governing bodies, which always have the ultimate decision -making power in 
this regard, the External Auditor considers that the explicit , unreserved approval of a report is 
tantamount to a directive for the Secretariat to implement the recommendations contained therein.  
8. The status of the recommendations depends on the extent to which they ha ve been implemented:  
- closed: the recommendation was fully implemented under the same conditions as it was made 
and taking into account the intended objective;  
- ongoing: implementation has started in the recommended direction, but work remains to be 
done;  
- open: implementation has not started (for whatever reason);  
- lapsed: an old recommendation that has not been implemented, whose implementation would 
prove unsuitable to the new management conditions, may be discarded or be superseded by a 
new recom mendation that better meets the reference quality criteria mentioned below.  
 
II. FOLLOW -UP TO RECOMMENDATIONS  
2.1.  Financial audit recommendations  
9. The review of the status of financial audit recommendations shows that, besides one  lapsed 
recommendation that was un likely to ever be implemented (the accounting treatment for the 
reimbursement of taxes paid by staff subject to United States income tax), out of 12  outstanding 
recommendations, eight have been fully implemented to date (75%). Of the rest, three 
recommenda tions were ongoing, and two remained open.  
10. The External Auditor had recommended strict application of the main provisions of paragraphs  127 
and 128 of IPSAS1 1, by providing in the explanatory notes information relevant to an understanding of 
the financial statements and to ensuring that the governing bodies and users have complete information, 
combining factual explanations and figures. While the External Aud itor noted progress in the 
establishment of the financial statements as at 31 December 2021, additional information is still needed, 
in particular with respect to notes 8 and 9 on tangible and intangible assets, specifically for calculating 
the value of th e right to use the Centre  William  Rappard or other facilities made available by the Canton 
of Geneva, and for fixed costs relating to the Workday software.  
 
1 International Public Sector Accounting Standards . WT/BFA/W/599  
 
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7 11. The External Auditor had recommended finalizing the Internal Control Framework for the WTO 
Secretari at by supplementing it with operational elements to ensure its control and efficiency, and by 
establishing an appropriate system for the annual evaluation to support  the letter on internal control 
produced by senior management. Before leaving his post in September  2021, the previous head of the 
Office of Internal Oversight submitted an internal control framework for consideration and approval by 
the Director -General's Office. Several  months later, this framework has still not been approved. Given 
the prior ity assigned to this recommendation, the implementation of which forms the basis 
for the quality, reliability and performance of both the operations and the financial 
management of the WTO, the External Auditor strongly reiterates its recommendation.   
12. A business continuity plan aimed at ensuring the operational readiness of the procedures and 
actions of the operational divisions in the event of a crisis directly or indirectly affecting information 
technology (IT) resources has not been implemented. The Orga nization, having considered that a much 
wider business continuity management system is necessary, has decided to outsource the development 
of such a system to companies with extensive and relevant experience. The terms of reference to engage 
an external su pplier were drafted in December 2021. The External Auditor was not informed of the start 
of any contracts for the development of the system. Given that IT systems and networks are central to 
the continuity of the Organization's operations, the risks associ ated with the breakdown of these systems 
are among the most critical. The decision to address the problem more widely is less apposite 
as it will only mean that it takes longer to respond to this specific recommendation.   
13. The recommendation to formalize th e change management procedure for Oracle EBS integrated 
management software, to restrict authorized access to the development and production environment, 
and, in the event that this segregation of duties is found to be unachievable for operational reasons,  to 
carry out a hierarchical review of ex-post validation of changes at least on a quarterly basis, remains 
open pending the operational tests scheduled for November 2022.  
14. The External Auditor recommends full accounting of the receivables that the WTO clai ms for the 
reimbursements it makes to staff members subject to income tax in the United States. The WTO decided 
not to implement this recommendation and pursued, in the context of the financial statements as at 
31 December 2021, the accounting method used to date, which meant  the difference between the tax 
reimbursements made to staff and the amounts paid by the Government of the United States for that 
purpose was recognized as an expense. To the extent that this accounting and financial approach 
appears t o put an end to the ambiguity surrounding this issue for several years and ultimately meets 
with the approval of Member  States, the External Auditor is allowing its recommendation to lapse.  
Table 1: Summary of the implementation of recommendations (financ ial audits)  
 
Issue  Implemented  Ongoing  Open  
Lapsed  Total Year/ 
comment 
No. 
        Include the risk of disability 
at work in the risk register 
and adopt appropriate 
measures to manage the 
consequences thereof  x      3.3.1/2018  
(60) 
Apply actuarial methods to 
establish the disability risk 
provision  x      3.3.1/2019  
(79) 
Risk of disability at work – 
optimize insurance coverage  x      3.3.1/2019  
(80) WT/BFA/W/599  
 
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8 Issue  Implemented  Ongoing  Open  
Lapsed  Total Year/ 
comment 
No. 
Strictly apply IPSAS 1, 
para. 21, by presenting a 
comparison of budget and 
actual amounts  in the 
financial statements  x      1.1/2020  
(1) 
Strictly apply the provisions 
of IPSAS  1, paras. 127 and 
128, by setting out in the 
notes information relevant 
to an understanding of the 
financial statements   x     1.1/2020  
(2) 
Present in the financial 
statements detailed 
reconciliation of elements of 
budget performance with 
cash flow  x      1.1/2020  
(3) 
Finalize the Internal Control 
Framework of the WTO 
Secretariat   x     3.1/2020  
(4) 
Implement a business 
continuity plan to ensure the 
operational readiness of the 
procedures and actions of 
the operational divisions in 
the event of a crisis affecting 
IT resources   x     3.2/2020  
(5) 
Establish a formal 
segregation of duties matrix 
for the Oracle EBS 
integrated management 
software package  x      3.2/2020  
(6) 
Formalize the change 
management procedure for 
the Oracle EBS integrated 
management software 
package. Restrict authorized 
access to the development 
and production 
environment. Carry out a 
hierarchical review of 
ex-post validation of 
changes    x    3.2/2020  
(7) WT/BFA/W/599  
 
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9 Issue  Implemented  Ongoing  Open  
Lapsed  Total Year/ 
comment 
No. 
Adopt an actuarial model for 
assessing the provisioning of 
future compensation costs 
for staff recognized as 
disabled by the Organization  x      4.2/2020  
(8) 
Formalize the validation of 
data, assumptions used and 
methodology selected by the 
actuary to evaluate the 
Pension Plan and health 
insurance commitments and 
conduct sensitivity analyses  x      4.2/2020  
(9) 
Full accounting of the 
receivables that the WTO 
claims for the 
reimbursements it makes to 
staff members subject to 
income tax in the United 
States      x  4.4/2020  
(10) 
Total  8 3 1  1 13  
2.2.  Recommendations associated with performance audits  
15. Of the 11 recommendations resulting from successive financial performance audits since 2018, two 
(18%) may be considered as implemented, eight remain ongoing and one has lapsed.  
16. In the second half of 2022, the human resources (HR) process description and responsibilities of 
key process owners are expected to be finalized, and a uniform and appropriate format for personnel 
files will be prescribed with the implementation of phases 2 and 3 of the new Human Resources 
Information System (HRIS).  
17. The recommendat ion to evaluate and review the rules concerning home leave to avoid systemic 
weaknesses which leave the Organization vulnerable to fraud has been "ongoing for three years". None 
of the explanations given , including the most recent statements by the Chair o f the Joint Advisory 
Committee (JAC), justify the delays in implementing this long -standing recommendation 
(2018).   
18. The External Auditor recommended that the Organization enter into an agreement with the WTO 
Pension Plan for the financial compensation of early retirement cases. As the agreement has been 
drafted but has not yet been signed, the recommendation is still on going. If the failure to sign it is 
indicative of considerable reluctance to conclude the agreement (which was already "in the 
process of being signed" in 2021), the Secretariat should provide explanations to the 
governing bodies.  Should this not be the ca se, the Secretariat should analyse the causes of 
bureaucratic inefficiencies that are detrimental to the interests of the Pension Plan and address them 
without delay, as the recommendation dates back to 2019.  WT/BFA/W/599  
 
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10 19. The Secretariat considers that the recommendat ion on the rationalization of trust funds is 
implemented, a working group having issued document WT/BFA/W/551 on coherence in the 
establishment and management of WTO trust funds. This document is intended to pave the way for 
Secretariat's revamped approach  to trust fund management. However, the External Auditor's 
recommendation cannot be considered as implemented until the new approach to trust fund 
management is defined and put into action. The issue will be included in the ongoing performance audit 
in 202 2 on "the governance and management of trust funds".  
20. The recommendation to adopt a standardized, harmonized and transparent procedure for trust 
funds in respect of all procurement activities with higher amounts was rejected by the Organization 
following i ts analysis demonstrating that only about 2% of the trust funds' expenditures relate to the 
procurement of goods and services that would be undertaken through the WTO Procurement Section. 
Most of the trust funds' expenditures pertain to the implementation of projects and programmes through 
grants and other agreement modalities with entities or parties in the field.  
21. The External Auditor had issued three recommendations as part of its performance audit on the 
WTO's management of the COVID -19 health crisis an d its consequences. These recommendations are 
being implemented, with the Secretariat studying ways to respond to these recommendations.  
Table 2: Summary of the implementation of recommendations (performance audits)  
 
Issue  Implemented  Ongoing  Open Lapsed  Total Year/ 
comment 
No. 
       Finalize the description of HR 
processes and the responsibilities 
of process owners   x [*]    4.1/2018  
(62) 
Document all HR processes in the 
form of instructions  x [*]     4.1/2018  
(63) 
Prescribe a uniform and 
appropriate format for personnel 
files with limited access rights   x [*]    4.1/2018  
(64) 
Review staff rules to align the 
applicable reference period for 
leave with the calendar year, 
control the accumulation of leave 
entitlements carried forward and 
set out formal rules for granting 
advances on leave entitlements  x     4.1/2018  
(72) 
Evaluate and review the 
regulations concerning home leave 
to avoid systemic weaknesses, 
which leave the Organization 
vulnerable to fraud   x    4.1/2018  
(73) 
Enter into an agreement with the 
Pension Plan on the compensation 
conditions for early retirement   x    4.1/2019  
(84) WT/BFA/W/599  
 
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11 Issue  Implemented  Ongoing  Open Lapsed  Total Year/ 
comment 
No. 
       Rationalize trust funds by closing 
those that are inactive, merging 
those with similar activities or the 
same donors, and use this 
opportunity to harmonize 
management procedures   x    4.2/2019  
(91) 
(Trust funds) Adopt a 
standardized, harmonized and 
transparent procedure for all 
procurement activities with higher 
amounts     x  4.2/2019  
(93) 
Submit a proposal to the 
Ministerial Conference whereby, in 
the event of a major, unexpected 
and prolonged crisis, the Director -
General be given the requisite 
special powers to manage the 
Secretariat in a flexible and 
proactive manner   x    4.1/2020  
(1) 
Finalize a set of regulations to 
provide a framework for 
teleworking when major crisis 
situations make it necessary   x    4.4/2020  
(2) 
Formalize the monitoring of the 
Organization's performance 
through quantified means and 
performance indicators   x    5.2/2020  
(3) 
Total 2 8 0 1 11  
 
[*] Part of the HRIS project.  
 
III. CONCLUSION  
22. Implementation of the External Auditor's recommendations may be considered satisfactory in view 
of the constraints on an international organization when significant changes in terms of practices, 
procedures and tools must be envisaged. Barring a very small  number of cases where there are 
differences of opinion in the assessment of the implementation status, the Secretariat has adopted a 
proactive approach to the recommendations.  
23. The administrative burden of processing the dossiers should not, however, be u sed as a 
pretext by the Secretariat to delay implementation of the recommended actions, implicitly 
concealing an underlying reluctance vis-à-vis the substance and objectives of the 
recommendation issued by the External Auditor and endorsed by the governing  bodies.  
24. The External Auditor thanks the teams in the Administration and General Services Division for their 
assistance and willingness to document the follow -up to the recommendations.  
End of follow -up report.  
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