WORLD TRADE  
ORGANIZATION  WT/BFA/W/173 
3 July 2008 
 (08-3199) 
Committee on Budget, Finance and Administration  
  
 
EXTERNAL AUDITORS'  COMMENTS IN THEIR 
REPORT ON THE ACCOUNTS FOR 2006 
 
 In meetings of the CBFA in November 2007, Members of the Committee recommended 
approval to the General Council of the WTO account s for 2006 and the report of the external auditor 
thereon (WT/BFA/101, paragraph 6). At the request of Members of the Committee, the points raised 
by the External Auditors in that report are incl uded in the following pages, which will be included, 
along with points raised in earlier audit reports, in  the report of the 2007 accounts, which will be the 
last from the Austrian Court of Audit before the mandate for the new External Auditor, the French 
Cours des Comptes  takes effect as from the audit of the 2008 accounts. WT/BFA/W/173 
Page 2  
 
  A. T
RAINING PROGRAMMES  
Audit Comments  
 1. The information received from the Logistics Un it revealed that for 2006 the prepaid amount 
of flight tickets, which have not been used, am ounted to CHF 537,709.50.  However, in 2006 one 
third of the purchase value of the unused  flight tickets was not recoverable.  
2. In addition the External Auditor noted that neither the receivable nor the irrecoverable 
amounts relating to unused air tickets are disclosed in the current accounting system.  
3. The External Auditor recommends: 
• to recognize flight tickets of no-show particip ants as receivable against the travel agency 
which originally provided the tickets; 
• to disclose the difference between the amounts paid for the ticket and the amounts 
reimbursed as irrecoverable receivables that should be written off. 
Status
 
 
4. The Secretariat is in the process of establishing a procedure to disclose the cost of un-used air 
tickets.  A draft proposal was shared with the auditors  at the time of their January 2008 visit.  A final 
decision on what specific procedures to adopt is pending a final review. 
5. At the time of finalization of this report, add itional reimbursements have been received.  The 
difference between expenditure and reimbursements for 2006 has been reduced from CHF 237,539.95 
to CHF 187,512.35, representing 3.0 per cent of  overall airfare costs under the 2006 DDA Global 
Trust Fund.  
B. PROCUREMENT  
Audit comments  
 6. The External Auditor recommended in a previ ous report that actions should be taken to 
comply with the requirements mentioned in WTO Financial Regulation 45 in Chapter X 'Internal 
Control'
1 including the establishment of a "Procurement and Supplier Selection Policy" as well as 
signature authorities (value related) for external co mmitments taking into consideration the value of 
the total commitment and the life-span of the acquisition.  
7. The External Auditor noted that progress was achieved in administering the procurement 
process.  However, the establishment of a sound  "Procurement and Supplier Selection Policy" 
addressing the above raised issues has not yet been tackled. 
Status  
 8. On the basis of a vacancy announcement open to in ternal and external candidates, a new Head 
of the Procurement Unit has been chosen and will ta ke up her duties shortly.  As a specialist in the 
field of procurement, one of her immediate tasks will indeed be to put the service on a more 
                                                     
 
1 "The Director-General shall establish rules for the procurement of equipment, supplies and other 
requirements, including rules governing the invitation of tenders."  WT/BFA/W/173 
 Page 3 
 
 
  professional basis, which clearly will include the more formal recording of existing policies and 
completing them when necessary. 
C. OVERTIME  
Audit comments  
9. The review of the External Auditor revealed that: 
• No conditions regarding the compensation of  overtime have been formally established 
by the Director General as stipulated in the WTO Staff Rules (Rule 106.6a); 
• WTO does not have an electronic time recording system which would permit the 
monitoring of working hours done by staff members; 
• the prior request by the supervisor to the st aff member to perform overtime is not always 
complied with. 
10. The External Auditor recommends that the WTO: 
• Comply with the provision in the WTO St aff Rules and establish conditions for the 
compensation of overtime; 
• consider implementing rules that overtime should be compensated by time off and only 
on an exceptional basis through payments; 
• consider the implementation of an electronic time recording system; 
• establish a standard claim template for the recording of overtime (if possible IT 
supported). 
11. In addition, the External Auditor recommends th at, in those areas where overtime is done on a 
regular basis: 
• The pattern of the overtime worked should be monitored and a shift-work principle 
implemented where appropriate. 
12. Additional staff should be hired or the possibilit y of outsourcing to third parties considered 
where appropriate. 
Status  
13. In terms of procedure, all requests for overtime must be approved by the director before the 
overtime is worked. This procedure has been reinforced in instructions to directors. 
14. The Joint Advisory Committee (JAC) was asked to consider a proposal with regard to 
changing the rules on overtime.  The proposal was prompted by concern in the CBFA over the costs 
associated with overtime. 
15. The JAC noted that 85 per cent of total over time costs in 2004-2006 was generated by only 
two divisions:  Administration (AGSD) and Language Services (LSDD).  It was felt that overtime in 
Language Services was the result of a level of services demanded by Members, and, as such, the 
control of the Secretariat was very limited. WT/BFA/W/173 
Page 4  
 
  16. Where improvements can effectively be made is in the area of overtime for drivers, which 
accounted for almost 20 per cent of total costs in 2006.  The JAC recommended that drivers should be 
asked to work overtime only in truly exceptional circumstances
 and that staff and management needs 
for transportation services outside normal working hour s, with the exception of the Director-General 
essentially for security reasons, should be met by reimbursing taxi fares on demand.  This 
recommendation was approved by the Director-Gener al at end February 2008.  There is now a 
standard template for the recording of overtime, and consideration will be given to an electronic 
system for recording overtime. 
D. IPSAS 
Audit Comments  
17. The External Auditor recommends that an implementation plan for IPSAS should be 
established tackling inter alia  the following items: 
• Project team and resource requirements. 
• Time frame for implementation. 
• Analysis of impacted divisions. 
• Impact and requirements on IT-system. 
• External consultancy and traini ng of relevant staff members. 
 18. The External Auditor recommends that the i ssue of implementation of IPSAS should be 
addressed to the General Council as well as to the Committee on Budget, Finance and Administration. 
Status
 
19. Draft terms of reference for the IPSAS proj ect team have been submitted to Senior 
Management. 
E. US TAX 
Audit Comments  
20. The External Auditor reiterates the reco mmendations that the WTO Secretariat: 
• May verify the reason for the increase of receivables relating to US tax as well as their 
recoverability; 
 
• review the administrative process of handling the US tax claims, taking also into 
consideration the training of a back-up person as well as the possibility of outsourcing this process to a third party;  and 
 
• continue its efforts to renegotiate the Ta x Reimbursement Agreement with a view to 
obtaining reimbursement of taxes calculated acco rding to the last income method in line 
with the ILOAT decision. 
 Status
 
21. See Annex 1 - Letter to US Ambassador:  21 August 2007 
• The reason for the increase in receivables over the past years has two principal reasons:  
(i) the number of cases and (ii) the total salaries of the individuals concerned.  The  WT/BFA/W/173 
 Page 5 
 
 
  number of individuals concerned grew from 21 in 2004 to 23 in 2006.  The total salaries 
of the individuals concerned grew from USD 3.4 million in 2004 to USD 4.1 million in 2006.  Higher total salaries results in higher taxes which fall under the Tax Reimbursement Agreement. 
 
• The Secretariat has also contracted with a fi duciary to provide back-up assistance in the 
processing of tax claims. 
 F. C
ANCUN MINISTERIAL CONFERENCE  
Audit comments  
22. The External Auditor recommended to continue the efforts to receive reimbursement of the 
outstanding amount of CHF 344,618. 
Status  
• Letter to Mexican Ambassador 5 February 2007. 
• Interim response 6 March 2007. 
• Letter with explanatory message sent to Mexican Ambassador 4 April 2007. 
• Letter to Mexican Mission January 2008. 
• Mexico has the intention of liquidating the Cancun-Ministerial arrears in 2008. 
 G. WTO
 PENSION PLAN 
Audit comments  
23. The External Auditor would like to suggest to take into consideration a segregation of duty 
between the functions of Director of Administra tion and General Services Division and the Secretary 
of the WTOPP to avoid a potential conflict of interest. 
Status  
24. The WTOPP Management Board has given due c onsideration to this suggestion and will 
continue to do so in the context of its review of the funding position of the Plan which is being carried 
out in 2008. 
H. WTO  PUBLICATIONS UNIT 
Audit Comments  
25. The External Auditor appreciated the initiatives taken and acknowledged that certain progress 
was achieved.  However, there is still room for im provement with respect to the inventory process. 
Status  
26. No specific action is required. 
27. The Finance Department has made several reco mmendations to further improve the inventory 
process following the 2007 inventory experience. WT/BFA/W/173 
Page 6  
 
  I. O
UTSTANDING CONTRIBUTIONS FROM FORMER YUGOSLAVIA  
Audit comments  
28. The External Auditor noted that no further pr ogress regarding this issue was achieved.  
Although the External Auditor is aware of the political  relevance of this issue, it is recommended that 
in the course of the introduction of IPSAS, this i ssue should be re-considered under fair value aspects 
(see IPSAS 23). 
Status  
29. At the United Nations, where Former Yugoslavi a has outstanding contributions amounting to 
USD 8 million, the issue has been continuously deferre d for future consideration, idem at the last 
General Assembly on 19 September 2007, see Annex 2-Note in the file of Former Yugoslavia. 
J. PROCUREMENT RULES  
Audit comments  
30. The review of the procurement rules revealed an inconsistency between the "Administrative 
Manual for Budgetary and Financia l Control Matters" and the Financial Rules of the World Trade 
Organization regarding the amount for wh ich a competitive bidding is required. 
Status  
31. The Financial Rules and Regulations including th e Procurement Rules have been revised on 
28 March 2007. 
K. INTERNAL OVERSIGHT  
Audit comments  
32. The need for an internal oversight function was highlighted by the External Auditor in various 
reports. 
Status  
33. The Director-General's Budget Proposals for the biennium 2006-2007 included 2 new posts 
(internal auditor and support position)  for the year 2007.  The Internal Auditor has taken up her duties 
on 17 March 2008. 
L. CENTRAL ARCHIVE AND IT DATABASE  
Audit comments  
34. The External Auditor identified the need for a central archiv ing system and IT-database for 
the storage and recording of WTO contracts. 
Status  
35. A central archiving system and IT database ha ve been established for all WTO contracts.  
There is a safe for the safekeeping of the original s.  There is also a MS Access database organising 
and storing the details and PDF imag es of all contracts. This is al ways an on-going moving target as  WT/BFA/W/173 
 Page 7 
 
 
  new contracts are initiated on a regular basis.  The archivist will be meeting with the new Head of 
Procurement when she takes up her duties to conti nue to work on the paper flow from that unit. 
M. AFTER SERVICE HEALTH BENEFITS  
Audit comments  
36. The External Auditor noted that the liabilities pertaining to the premiums for medical and 
dental insurance for retirees had not been recognize d in the financial statements, but only been paid 
and expressed as an ongoing charge to the regular budget. 
Status  
37. An actuary has been engaged to determine th e accrued liability regarding the post-retirement 
health insurance benefit. The report has been r eceived and will be examined in the near future. 
 
__________