United States Government Accountability Office

GAO Testimony 

Before the Committee on International 

Relations, House of Representatives

UNITED NATIONS 

Internal Oversight and 

Procurement Controls and 

Processes Need 

Strengthening 

Statement of David M. Walker, 

Comptroller General of the United States 

For Release on Delivery

Expected at 1:00 p.m. EDT

Thursday, April 27, 2006

 

GAO-06-701T 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

April 2006

UNITED NATIONS

Internal Oversight and Procurement 

Controls and Processes Need 

Strengthening 

Highlights of GAO-06-701T, a testimony 

before the Committee on International 

Relations, House of Representatives 

The United States has strongly

advocated that the United Nations 

(UN) reform its management 

practices to mitigate various 

program and financial risks. The 

findings of the Independent Inquiry 

Committee into the Oil for Food

Program have renewed concerns 

about UN oversight, and the 2005

UN World Summit proposed 

actions to improve the UN’s Office

of Internal Oversight Services 

(OIOS). Furthermore, over the 

past decade, as UN procurement 

more than tripled to $1.6 billion in 

response to expanding UN 

peacekeeping operations, experts 

have called on the UN to correct

procurement process deficiencies. 

We examined (1) whether UN

funding arrangements for OIOS

ensure independent oversight; (2) 

the consistency of OIOS’s practices

with key auditing standards; and 

(3) the control environment and 

processes for procurement.

What GAO Recommends

GAO recommends that the

Secretary of State and the 

Permanent Representative of the 

United States to the UN work with

member states to support: (1) 

budgetary independence for OIOS; 

(2) measures for OIOS to more 

closely adhere to international

standards; and (3) improvements to

UN procurement internal controls 

and processes. State and OIOS

generally agreed with our overall 

findings and recommendations. 

The UN did not provide us with 

written comments on procurement. 

The UN is vulnerable to fraud, waste, abuse, and mismanagement due to a 

range of weaknesses in existing management and oversight practices. In 

particular, current funding arrangements adversely affect OIOS’s budgetary 

independence and compromise its ability to investigate high-risk areas. Also,

weaknesses in the control environment and UN procurement processes 

leave UN funds vulnerable to fraud, waste, and abuse. 

UN funding arrangements constrain OIOS’s ability to operate independently 

as mandated by the General Assembly and required by international auditing 

standards OIOS has adopted. First, while OIOS is funded by a regular budget 

and 12 other revenue streams, UN financial rules severely limit OIOS’s ability 

to respond to changing circumstances and reallocate resources among 

revenue streams, locations, and operating divisions. Thus, OIOS cannot 

always direct resources to high-risk areas that may emerge after its budget is 

approved. Second, OIOS depends on the resources of the funds, programs, 

and other entities it audits. The managers of these programs can deny OIOS 

permission to perform work or not pay OIOS for services. UN entities could 

thus avoid OIOS audits or investigations, and high-risk areas can be and have 

been excluded from timely examination. 

OIOS has begun to implement key measures for effective oversight, but 

some of its practices fall short of the applicable international auditing 

standards it has adopted. OIOS develops an annual work plan, but the risk 

management framework on which the work plans are based is not fully 

implemented. Moreover, OIOS annual reports do not assess risk and control 

issues facing the UN organization, or the consequences if these are not 

addressed. OIOS officials report the office does not have adequate 

resources, but they also lack a mechanism to determine appropriate staffing 

levels. Furthermore, OIOS has no mandatory training curriculum for staff. 

UN funds are vulnerable to fraud, waste, abuse, and mismanagement 

because of weaknesses in the UN’s control environment for procurement, as

well as in key procurement processes. The UN lacks an effective 

organizational structure for managing procurement, has not demonstrated a 

commitment to improving its procurement workforce, and has not adopted 

specific ethics guidance. While the UN Department of Management is 

responsible for UN procurement, field procurement staff are supervised by 

the UN Department of Peacekeeping Operations, which lacks the expertise 

and capacity to manage field procurement. Also, the UN has not established 

procurement training requirements or a career path, and has yet to adopt 

new ethics guidance for procurement staff, despite long-standing General 

Assembly mandates. In addition, the UN has not established an independent 

process to consider vendor protests despite a 1994 recommendation by a 

high-level panel to do so as soon as possible. Further, the UN does not 

consistently implement its process for helping to ensure it conducts business 

with qualified vendors. 

www.gao.gov/cgi-bin/getrpt?GAO-06-701T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Thomas Melito 

at (202) 512-9601 or melitot@gao.gov. 
Page 1 GAO-06-701T 

Chairman Hyde, Ranking Member Lantos, and Members of the Committee:

I appreciate the opportunity to be here today to discuss United Nations 

(UN) reforms in the context of improving UN internal oversight and 

strengthening internal controls and processes over its procurement system. 

During my tenure as Comptroller General, we have identified the 21st

Century challenges that constitute many of the major concerns facing the 

U.S. government, and which illustrate the need for transformation to help 

ensure that our government functions in the most economical, efficient, 

and effective manner possible. Likewise, the UN faces a range of significant 

challenges in reforming its management practices and mitigating various 

program and financial risks by fully implementing internationally 

recognized standards and norms. As the largest financial contributor to the 

UN, with assessed and voluntary contributions totaling more than $1.6 

billion in 2006,1 the United States has strongly advocated for the reform of 

UN management practices. Specifically, the United States strongly 

supported the 1994 creation of an internal oversight office to help ensure 

the efficient and effective use of UN resources. 

Concerns about the financial independence and sufficiency of resources of 

the internal oversight unit at the UN have been long-standing. Additionally, 

for more than a decade, experts have called on the UN to correct serious 

deficiencies in its procurement process; however, recent audits and 

investigations have uncovered evidence of corruption and mismanagement 

in the UN’s procurement activities. In 2005, the UN purchased more than 

$1.6 billion in goods and services—primarily to support a peacekeeping 

program that has more than quadrupled in size since 1999, and which may 

increase further in the future. Thus, it is vital that demonstrated 

deficiencies in procurement are addressed in a timely and effective 

manner. 

In 2005, UN member states approved an agenda to reform many of the UN’s 

management practices, in particular by helping to ensure ethical conduct; 

strengthening internal oversight and accountability; reviewing budgetary, 

financial, and human resources policies; and reviewing UN mandates. Even 

though UN member states support management reforms, there is 

considerable disagreement within the General Assembly over the process 

1

This includes funding for the UN Secretariat, various funds and programs, and 

peacekeeping operations.
Page 2 GAO-06-701T 

and implementation of the reforms, which thus far has been slow and 

uneven. 

Because the UN is a multilateral institution, our oversight authority does 

not directly extend to the UN, but instead extends through the United 

States’ membership in the organization. In recognition of this factor, we do 

UN related work only in response to specific requests from committees 

with jurisdiction over UN matters, including your own. Congressional 

interest in this area has been high in recent years, and many of our ongoing 

or recently completed requests are both bicameral and bipartisan in nature.

My statement is based on two reports that we are releasing today.2 I will 

focus on the need to strengthen the UN Office of Internal Oversight 

Services (OIOS) in terms of its budgetary independence and its full 

implementation of key components of effective oversight. I will also focus 

on the need to address weaknesses in two of the key elements of internal 

controls affecting UN procurement—specifically those concerning the 

overall control environment and several control activities,3

 which are those 

procedures intended to provide reasonable assurance that staff are 

complying with management directives.

The work for these reports and this testimony was conducted in 

accordance with generally accepted government auditing standards 

between April 2005 and March 2006. 

Summary The UN is vulnerable to fraud, waste, abuse, and mismanagement due to a 

range of weaknesses in existing management and oversight practices. In 

particular, current funding arrangements adversely affect OIOS’s budgetary 

independence and compromise its ability to investigate high-risk areas. 

Also, weaknesses in the control environment and UN procurement 

processes leave UN funds vulnerable to fraud, waste, and abuse.

2

GAO, United Nations: Funding Arrangements Impede Independence of Internal 

Auditors, GAO-06-575 (Washington, D.C.: April 25, 2006); GAO, United Nations: 

Procurement Internal Controls Are Weak, GAO-06-577 (Washington, D.C.: April 25, 2006). 

3

To assess internal controls in the UN procurement process, we used the Committee of 

Sponsoring Organizations of the Treadway Commission’s Internal Control—Integrated 

Framework (September 1992), a framework that is widely accepted in the international 

audit community. The five elements of internal controls are: the control environment, 

control activities, risk assessment, information and communications, and monitoring.
Page 3 GAO-06-701T 

UN funding arrangements constrain OIOS’s ability to operate 

independently as mandated by the General Assembly and required by the 

international auditing standards that OIOS has adopted. According to these 

standards, an institution’s financial regulations should not restrict an audit 

organization from fulfilling its mandate, and the audit organization should 

have appropriate and sufficient resources to achieve its mandate. First, 

while OIOS is funded by the UN’s regular budget and 12 other 

extrabudgetary revenue streams, UN financial regulations and rules 

severely limit OIOS’s ability to respond to changing circumstances and 

reallocate resources among revenue streams, locations, and operating 

divisions. As a result, OIOS cannot always deploy the resources necessary 

to address high-risk areas that may emerge after its budget is approved. 

Second, OIOS is dependent on UN funds and programs (and other UN 

entities) for resources as compensation for the services it provides. OIOS 

must obtain permission to perform audits or investigations from the 

managers of funds and programs, and negotiate the terms of work and 

payment for those services with them. Moreover, the heads of these entities 

have the right to deny funding for the oversight work OIOS proposes. By 

denying OIOS funding, UN entities could avoid, and have avoided, OIOS 

audits; high-risk areas could therefore be excluded from timely 

examination. For example, the practice of allowing the heads of programs 

the right to deny funding of internal audit activities prevented OIOS from 

examining high-risk areas in the UN Oil for Food program, where billions of 

dollars were subsequently found to have been misused. 

Although OIOS has developed and begun to implement key components of 

effective oversight, some of OIOS’s audit practices fall short of meeting the 

international auditing standards it has adopted. Specifically, while OIOS 

develops an annual work plan, it has not fully implemented a risk 

management framework to provide reasonable assurance that its annual 

work plans are based on a systematic assessment of risks. As a result, OIOS 

may not be allocating resources to areas in the UN with the highest 

exposure to fraud, waste, and abuse. Moreover, OIOS’s annual reports do 

not provide an overall assessment of risk exposures and control issues 

facing the UN organization as a whole, or the consequences to the 

organization if the risks are not addressed. In terms of resource 

management, OIOS officials report that the office does not have adequate 

resources; however, they do not have a mechanism in place to determine 

appropriate staffing levels and help justify budget requests. Furthermore, 

OIOS has no mandatory training curriculum for staff to develop and 

maintain their expertise. OIOS’s shortcomings in meeting key components 

of international auditing standards can serve to undermine the office’s 
Page 4 GAO-06-701T 

effectiveness in carrying out its functions as the UN’s main internal 

oversight body. Effective oversight demands reasonable budgetary 

independence, sufficient resources, and adherence to professional auditing 

standards.

We found that UN procurement resources are unnecessarily vulnerable to 

mismanagement, fraud, waste, and abuse because of weaknesses affecting 

the control environment for UN procurement. First, the UN has not 

established a single organizational entity or mechanism capable of 

effectively and comprehensively managing procurement. Second, the UN 

has not demonstrated a commitment to improving the professionalism of 

its procurement staff in the form of training, a career development path, or 

other key human capital practices critical to attracting, developing, and 

retaining a qualified professional workforce. Third, the UN has failed to 

adopt a full range of new ethics guidance for procurement officials despite 

directives from the General Assembly in 1998 and 2005. 

We also found weaknesses in key procurement processes that are intended 

to provide reasonable assurance that management’s procurement 

directives are followed. We found that, although UN procurement has 

increased sharply in recent years, the size of the UN’s principal contractreview committee and its support staff remained relatively stable. 

Committee members stated that they do not have resources to keep pace 

with the current workload. In addition, the UN has not established an 

independent process to consider vendor protests despite a 1994 

recommendation by a high-level panel of international procurement 

experts to do so as soon as possible. Also, the UN has not updated its 

procurement manual since 2004 to reflect current UN procurement policy. 

Further, the UN does not consistently implement its process for helping to 

ensure that it is conducting business with qualified vendors. 

In our reports, we recommended that the Secretary of State and the 

Permanent Representative of the United States to the UN work with 

member states to:

• support budgetary independence for OIOS and support OIOS’s efforts to 

more closely adhere to international auditing standards; and 

• encourage the UN to establish clear lines of authority, enhance training, 

adopt ethics guidance, address problems facing its principal contractreview committee, establish an independent bid protest mechanism, and 

implement other steps to improve UN procurement.
Page 5 GAO-06-701T 

Background OIOS was created in 1994 to assist the Secretary-General in fulfilling 

internal oversight responsibilities over UN resources and staff. The stated 

mission of OIOS is “to provide internal oversight for the United Nations 

that adds value to the organization through independent, professional, and 

timely internal audit, monitoring, inspection, evaluation, management 

consulting, and investigation activities and to be an agent of change that 

promotes responsible administration of resources, a culture of 

accountability and transparency, and improved program performance.” 

OIOS is headed by an Under Secretary-General who is appointed by the 

Secretary-General—with the concurrence of the General Assembly—for a 

5-year fixed term with no possibility of renewal.4

 The Under SecretaryGeneral may be removed by the Secretary-General only for cause and with 

the General Assembly’s approval. OIOS’s authority spans all UN activities 

under the Secretary-General.5

 To carry out its responsibilities, OIOS is 

organized into four operating divisions: (1) Internal Audit Division I (New 

York); (2) Internal Audit Division II (Geneva); (3) Monitoring, Evaluation, 

and Consulting Division; and (4) Investigations Division. OIOS derives its 

funding from (1) regular budget resources, which are funds from assessed 

contributions from member states that cover normal, recurrent activities 

such as the core functions of the UN Secretariat;6

 and (2) extrabudgetary 

resources, which come from the budgets for UN peacekeeping missions 

financed through assessments from member states, voluntary 

contributions from member states for a variety of specific projects and 

activities, and budgets for the voluntarily financed UN funds and programs. 

4

The current Under Secretary-General for Internal Oversight Services was appointed in July 

2005.

5

These include the UN Secretariat in New York, Geneva, Nairobi, and Vienna; the five 

regional commissions for Africa, Asia and the Pacific, West Asia, Europe, and Latin America 

and the Caribbean; peacekeeping missions and humanitarian operations in various parts of 

the world; and numerous UN funds and programs, such as the UN Environment Program, 

UN Human Settlements Program (UN-HABITAT), and the Office of the UN High 

Commissioner for Refugees. OIOS’s authority does not extend to UN specialized agencies 

such as the Food and Agriculture Organization, International Labor Organization, or World 

Health Organization.

6

The Secretariat carries out the day-to-day work of the UN Organization such as 

administering peacekeeping operations, mediating international disputes, surveying 

economic and social trends and problems, and preparing studies on human rights and 

sustainable development. 
Page 6 GAO-06-701T 

Management of the UN’s rapidly growing spending on procurement 

involves several UN entities. The Department of Management controls the 

UN’s procurement authority, and its 70-person UN Procurement Service 

develops UN procurement policies and procures items for UN 

headquarters. While the Procurement Service procures certain items for 

peacekeeping, about one-third of all UN procurement spending is managed 

by about 270 staff at the Department of Peacekeeping Operations’ 19 

widely dispersed field missions. These missions may not award contracts 

worth more than $200,000 without the approval of the Department of 

Management (based on advice from the Headquarters Committee on 

Contracts). UN procurement spending has more than tripled since 1997, 

peaking at $1.6 billion in 2005. Major items procured include air 

transportation services, freight forwarding and delivery services, motor 

vehicles and transportation equipment, and chemical and petroleum 

products. The sharp increase in UN procurement was due in part to a fivefold increase in the number of military personnel in peacekeeping 

missions.7

 Peacekeeping expenditures have more than quadrupled since 

1999, from $840 million to about $3.8 billion in 2005. Peacekeeping 

procurement accounted for 85 percent of all UN procurement in 2004. 

In September 2005, the UN World Summit issued an “outcome document,” 

which addressed several management reform initiatives, including reforms 

for: ensuring ethical conduct; strengthening internal oversight and 

accountability; reviewing budgetary, financial, and human resources 

policies; and reviewing mandates. While the outcome document was 

endorsed by all UN member countries, there is considerable disagreement 

within the General Assembly over the process and implementation of the 

reforms. In December 2005, UN member states agreed to a $950 million 

spending cap on the UN’s biennium budget for 2006-2007, pending progress 

on management reforms. These funds are likely to be spent by the middle 

of 2006, at which time the General Assembly will review progress on 

implementing reforms and decide whether to lift the cap and allow for 

further spending. 

7

The number of military peacekeepers increased from about 14,000 in 1999 to about 73,000 

as of February 2006. 
Page 7 GAO-06-701T 

Funding Arrangements 

Impede Independence 

of the UN Internal 

Auditors

The UN is vulnerable to fraud, waste, abuse, and mismanagement due to a 

range of weaknesses in existing oversight practices. The General Assembly 

mandate creating OIOS calls for it to be operationally independent. In 

addition, international auditing standards note that an internal oversight 

activity should have sufficient resources to effectively achieve its mandate. 

In practice, however, OIOS’s independence is impaired by constraints that 

UN funding arrangements impose.

UN Mandate and 

International Auditing 

Standards Require 

Independence

In passing the resolution that established OIOS in August 1994, the General 

Assembly stated that the office shall exercise operational independence 

and that the Secretary-General, when preparing the budget proposal for 

OIOS, should take into account the independence of the office. The UN 

mandate for OIOS was followed by a Secretary-General’s bulletin in 

September 1994 stating that OIOS discharge its responsibilities without any 

hindrance or need for prior clearance. In addition, the Institute of Internal 

Auditors’ (IIA) standards for the professional practice of auditing,8

 which 

OIOS and its counterparts in other UN organizations formally adopted in 

2002, state that audit resources should be appropriate, sufficient, and 

effectively deployed. These standards also state that an internal audit 

activity should be free from interference and that internal auditors should 

avoid conflicts of interest. International auditing standards also state that 

financial regulations and the rules of an international institution should not 

restrict an audit organization from fulfilling its mandate. 

8

IIA is recognized as the internal audit profession’s leader in certification, education, 

research, and technological guidance. Developed and maintained by the IIA, The Code of 

Ethics and Standards is mandatory guidance considered to be essential to the professional 

practice of internal auditing. The International Standards for the Professional Practice of 

Internal Auditing provides guidance for the conduct of internal auditing at both the 

organizational and individual auditor levels.
Page 8 GAO-06-701T 

Funding Arrangements 

Hinder OIOS’s Flexibility to 

Respond to Changing 

Circumstances and 

Reallocate Resources to 

Address High-Risk Areas

In addition to funding from the UN regular budget, OIOS receives 

extrabudgetary funding from 12 different revenue streams.9

 Although the 

UN’s regular budget and extrabudgetary funding percentages over the years 

have remained relatively stable, an increasing share of OIOS’s budget is 

comprised of extrabudgetary resources (see fig. 1). OIOS’s extrabudgetary 

funding has steadily increased over the past decade, from 30 percent in 

fiscal biennium 1996-1997 to 63 percent in fiscal biennium 2006-2007 (in 

nominal terms). The majority of OIOS’s staff (about 69 percent) is funded 

with extrabudgetary resources. The growth in the office’s budget is 

primarily due to extrabudgetary resources for audits and investigations of 

peacekeeping operations, including issues related to sexual exploitation 

and abuse. 

9

The 12 funding sources are peacekeeping support account, funds and programs 

reimbursement account, technical operations program support costs, substantive trust 

funds program support costs, UN Joint Staff Pension Fund, International Criminal Tribunal 

for the former Yugoslavia, International Criminal Tribunal for Rwanda, Capital Master Plan 

2, Office for the Coordination of Humanitarian Affairs program support costs, UN High 

Commissioner for Refugees, International Trade Center, and UN Drug Control Program. 
Page 9 GAO-06-701T 

Figure 1: Trends in UN and OIOS Regular Budget and Extrabudgetary Resources, Fiscal Bienniums 1996-1997 to 2006-2007 

UN funding arrangements severely limit OIOS’s flexibility to respond to 

changing circumstances and reallocate its resources among its multiple 

funding sources, OIOS locations worldwide, or among its operating 

Source: GAO analysis based on UN and OIOS data.

Regular

Extrabudgetary

UN

budget

OIOS

budget

1996-1997 1998-1999 2000-2001 2002-2003 2004-2005 2006-2007

$21.6

Total (in millions)

30%

70%

$28

36% 64%

$32.4

58% 42%

$40.1

52% 48%

$53.6

44% 56% 63%

$85.3

37%

$7,114.2

Total (in millions)

37% 63%

$6,138.5

41% 59%

$6,464.0

39% 61%

$7,286.3

60% 40%

$9,054.4

60% 60% 40%

$9,430.0

40%

OIOS

staff 

positions

1996-1997 1998-1999 2000-2001 2002-2003 2004-2005 2006-2007

Staff positions

81

43

82

50

87

68

91

76

91

164

91

202

0

50

100

150

200

200
Page 10 GAO-06-701T 

divisions—Internal Audit Divisions I and II; the Investigations Division; and 

the Monitoring, Evaluation, and Consulting Division—to address changing 

priorities. In addition, the movement of staff positions10 or funds between 

regular and extrabudgetary resources is not allowed. For example, one 

section in the Internal Audit Division may have exhausted its regular 

budget travel funds, while another section in the same division may have 

travel funds available that are financed by extrabudgetary peacekeeping 

resources. However, OIOS would breach UN financial regulations and rules 

if it moved resources between the two budgets. According to OIOS 

officials, for the last 5 years, OIOS has consistently found it necessary to 

address very critical cases on an urgent basis. A recent example is the 

investigations of sexual exploitation and abuse in the Republic of Congo 

and other peacekeeping operations that identified serious cases of 

misconduct and the need for increased prevention and detection of such 

cases. However, the ability to redeploy resources quickly when such 

situations arise has been impeded by restrictions on the use of staff 

positions. 

Reliance on Other Entities 

for Funding Could Infringe 

on OIOS’s Independence

OIOS is dependent on UN funds and programs and other UN entities for 

resources, access, and reimbursement for the services it provides. These 

relationships present a conflict of interest because OIOS has oversight 

authority over these entities, yet it must obtain their permission to examine 

their operations and receive payment for its services. OIOS negotiates the 

terms of work and payment for services with the manager of the program it 

intends to examine, and heads of these entities have the right to deny 

funding for oversight work proposed by OIOS. By denying OIOS funding, 

UN entities could avoid OIOS audits or investigations, and high-risk areas 

could potentially be excluded from timely examination. For example, the 

practice of allowing the heads of programs the right to deny funding to 

internal audit activities prevented OIOS from examining high-risk areas in 

the UN Oil for Food program, where billions of dollars were subsequently 

found to have been misused. In some cases, the managers of UN funds and 

programs have disputed the fees OIOS has charged after investigative 

services were rendered. For example, 40 percent of the $2 million billed by 

OIOS after it completed its work is currently in dispute, and since 2001, less 

than half of the entities have paid OIOS in full for the investigative services 

10Throughout this testimony, we use the term “staff position” to refer to what the UN calls a 

“post.” For budgeting purposes, the UN defines a post as a budgetary entity at a specific 

level, in a specific work unit, for a specific purpose. 
Page 11 GAO-06-701T 

it has provided. According to OIOS officials, the office has no authority to 

enforce payment for services rendered, and there is no appeal process, no 

supporting administrative structure, and no adverse impact on an agency 

that does not pay or pays only a portion of the bill. 

OIOS Has Not Fully 

Met Key Elements of 

International Auditing 

Standards

OIOS formally adopted the IIA international standards for the professional 

practice of internal auditing in 2002. Since that time, OIOS has begun to 

develop and implement the key components of effective oversight. 

However, the office has yet to fully implement them. Moreover, 

shortcomings in meeting key components of international auditing 

standards can serve to undermine the office’s effectiveness in carrying out 

its functions as the UN’s main internal oversight body. Effective oversight 

demands reasonable adherence to professional auditing standards. 

OIOS Has Developed 

Annual Work Plans, but Has 

Not Fully Implemented a 

Risk Management 

Framework

OIOS has adopted a risk management framework11 to link the office’s 

annual work plans to risk-based priorities, but it has not fully implemented 

this framework. OIOS began implementing a risk management framework 

in 2001 to enable the office to prioritize the allocation of resources to 

oversee those areas that have the greatest exposure to fraud, waste, and 

abuse. OIOS’s risk management framework includes plans for organizationwide risk assessments to categorize and prioritize risks facing the 

organization; it also includes client-level risk assessments to identify and 

prioritize risk areas facing each entity for which OIOS has oversight 

authority. Although OIOS’s framework includes plans to perform clientlevel risk assessments, as of April 2006, out of 25 entities that comprise 

major elements of its “oversight universe,” only three risk assessments 

have been completed. As a result, OIOS officials cannot currently provide 

reasonable assurance that the entities they choose to examine are those 

that pose the highest risk, nor that their audit coverage of a client focuses 

on the areas of risk facing that client. OIOS officials told us they plan to 

assign risk areas more consistently to audits proposed in their annual work 

plan during the planning phase so that, by 2008, at least 50 percent of their 

work is based on a systematic risk assessment. 

IIA Standards for

Managing the internal audit 

activity – planning

• Establish risk-based plans to determine 

the priorities of the internal audit activity, 

consistent with the organization’s goals

• Plan of engagements should be based 

on a risk assessment undertaken at 

least annually

Source: IIA.

11OIOS defines risk management as the systematic approach to identifying, assessing, and 

acting on the probability that an event or action may adversely affect the organization. 
Page 12 GAO-06-701T 

OIOS Not Reporting on 

Status of Overall Risk and 

Control Issues Facing the 

UN 

Although OIOS’s annual reports contain references to risks facing OIOS 

and the UN organization, the reports do not provide an overall assessment 

of the status of these risks or the consequence to the organization if the 

risks are not addressed. For instance, in February 2005, the Independent 

Inquiry Committee reported that many of the Oil for Food program’s 

deficiencies, identified through OIOS audits, were not described in the 

OIOS annual reports submitted to the General Assembly. A senior OIOS 

official told us that the office does not have an annual report to assess risks 

and controls and that such an assessment does not belong in OIOS’s annual 

report in its current form, which focuses largely on the activities of OIOS. 

The official agreed that OIOS should communicate to senior management 

on areas where the office has not been able to examine significant risk and 

control issues, but that the General Assembly would have to determine the 

appropriate vehicle for such a new reporting requirement. 

OIOS Lacks a Mechanism to 

Determine Appropriate 

Resource Levels

While OIOS officials have stated that the office does not have adequate 

resources, they do not have a mechanism in place to determine appropriate 

staffing levels to help justify budget requests, except for peacekeeping 

oversight services. For peacekeeping audit services, OIOS does have a 

metric—endorsed by the General Assembly—that provides one 

professional auditor for every $100 million in the annual peacekeeping 

budget. Although OIOS has succeeded in justifying increases for 

peacekeeping oversight services consistent with the large increase in the 

peacekeeping budget since 1994, it has been difficult to support staff 

increases in oversight areas that lack a comparable metric, according to 

OIOS officials.

IIA Standard for

Managing the internal audit 

activity – reporting to senior 

management

Reporting should include significant 

risk exposures and control issues, 

corporate governance issues, and other 

matters needed or requested by senior 

management

Source: IIA.

IIA Standard for

Managing the internal audit 

activity – resource management

Ensure that internal audit resources are 

appropriate, sufficient, and effectively 

deployed to achieve the approved plan

Source: IIA.
Page 13 GAO-06-701T 

OIOS Offers Training 

Opportunities, but Does Not 

Require or Systematically 

Track Continuing 

Professional Development 

OIOS staff have opportunities for training and other professional 

development, but OIOS does not formally require or systematically track 

staff training to provide reasonable assurance that all staff are maintaining 

and acquiring professional skills. UN personnel records show that OIOS 

staff took a total of more than 400 training courses offered by the Office of 

Human Resources Management in 2005. Further, an OIOS official said that, 

since 2004, OIOS has subscribed to IIA’s online training service that offers 

more than 100 courses applicable to auditors. 

Despite these professional development opportunities, OIOS does not 

formally require staff training, nor does it systematically track training to 

provide reasonable assurance that all staff are maintaining and acquiring 

professional skills. OIOS policy manuals list no minimum training 

requirement. OIOS officials said that, although they gather some 

information on their use of training funds for their annual training report to 

the UN Office of Human Resources Management, they do not maintain an 

officewide database to systematically track all training their staff has 

taken. 

The Control 

Environment Over UN 

Procurement Is Weak

UN funds are unnecessarily vulnerable to fraud, waste, abuse, and 

mismanagement because of weaknesses in the UN’s control environment 

for procurement. Specifically, the UN lacks an effective organizational 

structure for managing procurement, has not demonstrated a commitment 

to improving its professional procurement workforce, and has failed to 

adopt specific ethics guidance for procurement officials. 

The UN Lacks an Effective 

Organizational Structure for 

Managing Procurement

The UN has not established a single organizational entity or mechanism 

capable of comprehensively managing procurement. As a result, it is 

unclear which department is accountable for addressing problems in the 

UN’s field procurement process. While the Department of Management is 

ultimately responsible for all UN procurement, neither it nor the UN 

Procurement Service has the organizational authority to supervise 

peacekeeping field procurement staff to provide reasonable assurance that 

they comply with UN regulations. Procurement field staff, including the 

chief procurement officers, instead report to the Peacekeeping Department 

at headquarters through each mission’s chief administrative officer. 

Although the Department of Management has delegated authority for field 

procurement of goods and services to the Peacekeeping Department, we 

found that the Peacekeeping Department lacks the expertise, procedures, 

IIA Standard for

Proficiency – continuing

professional development

Internal auditors should enhance their 

knowledge, skills, and other competencies 

through continuing professional 

development

Source: IIA.
Page 14 GAO-06-701T 

and capabilities needed to provide reasonable assurance that its field 

procurement staff are complying with UN regulations. 

The UN Lacks a Plan to 

Improve its Professional 

Procurement Workforce

The UN has not demonstrated a commitment to improving its professional 

procurement staff in the form of training, a career development path, and 

other key human capital practices critical to attracting, developing, and 

retaining a qualified professional workforce. Due to significant control 

weaknesses in the UN’s procurement process, the UN has relied 

disproportionately on the actions of its staff to safeguard its resources. 

Given this reliance on staff and their substantial fiduciary responsibilities, 

management’s commitment to maintaining a competent, ethical 

procurement workforce is a particularly critical element of the UN’s 

internal control environment. 

Recent studies indicate that Procurement Service staff and peacekeeping 

procurement staff lack knowledge of UN procurement policies. Moreover, 

most procurement staff lack professional certifications attesting to their 

procurement education, training, and experience. The UN has not 

established requirements for headquarters and peacekeeping staff to obtain 

continuous training, resulting in inconsistent levels of training across the 

procurement workforce. More than half of the procurement chiefs told us 

that they had received no procurement training over the last year and that 

their training opportunities and resources are inadequate. All of them said 

that their staff would benefit from additional training. Furthermore, UN 

officials acknowledged that the UN has not committed sufficient resources 

to a comprehensive training and certification program for its procurement 

staff. In addition, the UN has not established a career path for professional 

advancement for procurement staff, which could encourage staff to 

undertake progressive training and work experiences. 

The UN Has Not Fully 

Established Ethics 

Guidance for Procurement 

Personnel

The UN has been considering the development of specific ethics guidance 

for procurement officers for almost a decade, in response to General 

Assembly directives dating back to 1998. While the Procurement Service 

has drafted such guidance, the UN has made only limited progress towards 

adopting it. Such guidance would include a declaration of ethics 

responsibilities for procurement staff and a code of conduct for vendors. 
Page 15 GAO-06-701T 

The UN Has 

Weaknesses in Key 

Procurement 

Processes

We found weaknesses in key UN procurement processes or control 

activities. These activities consist of processes that are intended to provide 

reasonable assurance that management’s directives are followed and 

include reviews of high-dollar-value contracts, bid protest procedures, and 

vendor rosters. 

Headquarters Committee on 

Contracts Lacks Needed 

Resources

The Chairman and members of the Headquarters Committee on Contracts 

stated that the committee does not have the resources to keep up with its 

expanding workload. The number of contracts reviewed by the committee 

has increased by almost 60 percent since 2003.12 The committee members 

stated that the committee’s increasing workload was the result of the 

growth of UN peacekeeping operations, the complexity of many new 

contracts, and increased scrutiny of proposals in response to recent UN 

procurement scandals. Concerns regarding the committee’s structure and 

workload have led OIOS to conclude that the committee cannot properly 

review contract proposals. Without an effective contract review process, 

the UN cannot provide reasonable assurance that high-value contracts are 

undertaken in accordance with UN rules and regulations. The committee 

has requested that its support staff be increased from four to seven, and its 

chairman has stated that raising the threshold for committee review would 

reduce its workload. 

The UN Has Not Established 

an Independent Bid Protest 

Process

The UN has not established an independent process to consider vendor 

protests, despite the 1994 recommendation of a high-level panel of 

international procurement experts that it do so as soon as possible. An 

independent bid protest process is a widely endorsed control mechanism 

that permits vendors to file complaints with an office or official who is 

independent of the procurement process. Establishment of such a process 

could provide reasonable assurance that vendors are treated fairly when 

bidding and would also help alert senior UN management to situations 

involving questions about UN compliance. In 1994, the UN General 

Assembly recognized the advantages of an independent bid protest 

12In 2005, the committee reviewed 881 contracts valued at $3 billion (including long-term 

contracts), while in 2003 it reviewed 558 contracts valued at about $2.3 billion. 
Page 16 GAO-06-701T 

process. Several nations, including the United States, provide vendors with 

an independent process to handle complaints.13

The UN Has Not Updated its 

Procurement Manual Since 

2004

The UN has not updated its procurement manual since January 2004 to 

reflect current UN procurement policy. As a result, UN procurement staff 

may not be aware of changes to UN procurement procedures that have 

been adopted over the past 2 years. Also missing from the procurement 

manual is a section regarding procurement for construction. In June 2005, a 

UN consultant recommended that the UN develop separate guidelines in 

the manual for the planning and execution of construction projects. These 

guidelines could be useful in planning the UN’s future renovation of its 

headquarters building. A Procurement Service official who helped revise 

the manual in 2004 stated that the Procurement Service has been unable to 

allocate resources needed to update the manual since that time. 

UN Does Not Consistently 

Implement Its Process for 

Helping to Ensure That It 

Conducts Business with 

Qualified Vendors

The UN does not consistently implement its process for helping to ensure 

that it is conducting business with qualified vendors. As a result, the UN 

may be vulnerable to favoring certain vendors or dealing with unqualified 

vendors. The UN has long had difficulties in maintaining effective rosters of 

qualified vendors. In 1994, a high-level group of international procurement 

experts concluded that the UN’s vendor roster was outdated, inaccurate, 

and inconsistent across all locations. In 2003, an OIOS report found that the 

Procurement Service’s roster contained questionable vendors. In 2005, 

OIOS concluded that the roster was not fully reliable for identifying 

qualified vendors that could bid on contracts. While the Procurement 

Service became a partner in an interagency procurement vendor roster in 

2004 to address these concerns, OIOS has found that many vendors that 

have applied through the interagency procurement vendor roster have not 

submitted additional documents requested by the Procurement Service to 

become accredited vendors. In addition, most Peacekeeping Department 

field procurement officials with whom we spoke stated that they prefer to 

use their own locally developed rosters instead of the interagency vendor 

roster. Some field mission procurement staff also stated that they were 

unable to comply with Procurement Service regulations for their vendor 

rosters due to the lack of reliable vendor information in underdeveloped 

13In the United States, vendors may protest to the involved agencies, the U.S. Court of 

Federal Claims, or GAO. We receive more than 1,100 such protests annually.
Page 17 GAO-06-701T 

countries. OIOS reported in 2006 that peacekeeping operations were 

vulnerable to substantial abuse in procurement because of inadequate or 

irregular registration of vendors, insufficient control over vendor 

qualifications, and dependence on a limited number of vendors. 

Objectives, Scope, and 

Methodology

To conduct our study of UN oversight, we reviewed relevant UN and OIOS 

reports, manuals, and numerous program documents, as well as 

international auditing standards such as those of the IIA and the

International Organization of Supreme Auditing Institutions (INTOSAI). 

The IIA standards apply to internal audit activities—not to investigations, 

monitoring, evaluation, and inspection activities. However, we applied 

these standards OIOS-wide, as appropriate, in the absence of international 

standards for non-audit oversight activities. We met with senior 

Department of State (State) officials in Washington, D.C., and senior 

officials with the U.S. Missions to the UN in New York, Vienna, and Geneva. 

At these locations, we also met with the UN Office of Internal Oversight 

Services management officials and staff; representatives of Secretariat 

departments and offices, as well as the UN funds, programs, and 

specialized agencies; and the UN external auditors—the Board of Auditors 

(in New York) and the Joint Inspection Unit (in Geneva). We reviewed 

relevant OIOS program documents, manuals, and reports. To assess the 

reliability of OIOS’s funding and staffing data, we reviewed the office’s 

budget documents and discussed the data with relevant officials. We 

determined the data were sufficiently reliable for the purposes of this 

testimony. 

To assess internal controls in the UN procurement process, we used an 

internal control framework that is widely accepted in the international 

audit community and has been adopted by leading accountability 

organizations.14 We assessed the UN’s control environment for 

procurement, as well as its control activities, risk assessment process, 

procurement information processes, and monitoring systems. In doing so, 

we reviewed documents and information prepared by OIOS, the UN Board 

of Auditors, the UN Joint Inspection Unit, two consulting firms, the UN 

Department of Management’s Procurement Service, the UN Department of 

Peacekeeping Operations, and State. We interviewed UN and State officials 

14GAO, Internal Control: Standards for Internal Control in the Federal Government, 

GAO/AIMD-00-21.3.1 (Washington, D.C.: Nov. 1999); Committee of Sponsoring Organizations 

of the Treadway Commission, Internal Control—Integrated Framework (Sept. 1992).
Page 18 GAO-06-701T 

and conducted structured interviews with the principal procurement 

officers at each of 19 UN field missions. 

Concluding 

Observations

Although OIOS has a mandate establishing it as an independent oversight 

entity—and OIOS does possess many characteristics consistent with 

independence—the office does not have the budgetary independence it 

requires to carry out its responsibilities effectively. In addition, OIOS’s 

shortcomings in meeting key components of international auditing 

standards can serve to undermine the office’s effectiveness in carrying out 

its functions as the UN’s main internal oversight body. Effective oversight 

demands reasonable budgetary independence, sufficient resources, and 

adherence to professional auditing standards. OIOS is now at a critical 

point, particularly given the initiatives to strengthen UN oversight launched 

as a result of the UN World Summit in the fall of 2005. In moving forward, 

the degree to which the UN and OIOS embrace international auditing 

standards and practices will demonstrate their commitment to addressing 

the monumental management and oversight tasks that lie ahead. Failure to 

address these long-standing concerns would diminish the efficacy and 

impact of other management reforms to strengthen oversight at the UN.

Long-standing weaknesses in the UN’s internal controls over procurement 

have left UN procurement funds highly vulnerable to fraud, waste, abuse, 

and mismanagement. Many of these weaknesses have been known and 

documented by outside experts and the UN’s own auditors for more than a 

decade. Sustained leadership at the UN will be needed to correct these 

weaknesses and establish a procurement system capable of fully 

supporting the UN’s expanding needs. 

Recommendations We recommend that the Secretary of State and the Permanent 

Representative of the United States to the UN work with member states to:

• support budgetary independence for OIOS, and support OIOS’s efforts 

to more closely adhere to international auditing standards; and 

• encourage the UN to establish clear lines of authority, enhance training, 

adopt ethics guidance, address problems facing its principal contractreview committee, establish an independent bid protest mechanism, and 

implement other steps to improve UN procurement priorities.
Page 19 GAO-06-701T 

Agency Comments and 

Our Evaluation

In commenting on the official draft of our report on UN internal oversight, 

OIOS and State agreed with our overall conclusions and recommendations. 

OIOS stated that observations made in our report were consistent with 

OIOS’s internal assessments and external peer reviews. State fully agreed 

with GAO’s finding that UN member states need to ensure that OIOS has 

budgetary independence. However, State does not believe that multiple 

funding sources have impeded OIOS’s budgetary flexibility. We found that 

current UN financial regulations and rules are very restrictive, severely 

limiting OIOS’s ability to respond to changing circumstances and to 

reallocate funds to emerging or high priority areas when they arise.

In commenting on the official draft of our report on UN Procurement, the 

Department of State stated that it welcomed our report and endorsed its 

recommendations. The UN did not provide us with written comments.

This concludes my testimony. I would be pleased to take your questions.

Contact and 

Acknowledgments

Should you have any questions about this testimony, please contact 

Director Thomas Melito, (202) 512-9601 or melitot@gao.gov. Other major 

contributors to this testimony were Phyllis Anderson, Assistant Director; 

Joy Labez, Pierre Toureille, Jeffrey Baldwin-Bott, Joseph Carney, Kristy 

Kennedy, Clarette Kim, and Barbara Shields. 

(320432)
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