Testimony 

Before the Committee on International 

Relations, Subcommittee on Oversight and 

Investigations, House of Representatives

United States Government Accountability Office

GAO

For Release on Delivery 

Expected at 10:30 a.m. EST 

Wednesday, March 2, 2005 UNITED NATIONS 

Sustained Oversight Is 

Needed for Reforms to 

Achieve Lasting Results 

Statement of Joseph A. Christoff, Director 

International Affairs and Trade 

GAO-05-392T 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

www.gao.gov/cgi-bin/getrpt?GAO-05-392T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Joseph 

Christoff at (202) 512-8979 or 

christoffj@gao.gov. 

Highlights of GAO-05-392T, a testimony 

before the Committee on International 

Relations, Subcommittee on Oversight 

and Investigations, House of 

Representatives 

March 2, 2005

UNITED NATIONS

Sustained Oversight Is Needed for 

Reforms to Achieve Lasting Results 

The United Nations needs sustained oversight at all levels of the organization

to achieve lasting results on its reform agenda. We reported in 2004 that the 

Secretariat had made progress in implementing 51 percent of the Secretary 

General’s 1997 and 2002 management reform initiatives. However, we found 

that more than one-quarter of the completed reforms only consisted of 

developing plans or establishing new offices—the first steps in achieving 

longer term reform goals. In addition, the Secretariat had not periodically 

conducted comprehensive assessments of the status and impact of its 

reforms. Accordingly, the Secretariat had not been able to determine what 

progress had been made or where future improvements were needed. 

At the program level, management reviews that compare actual performance 

to expected results are critical elements of effective oversight and 

accountability. The United Nations has completed the initial phase of 

implementing reforms in a key area—performance-based budgeting. It 

adopted a budget that reflects a result-based budgeting format, including 

specific program costs, objectives, expected results, and performance 

indicators to measure results. However, the United Nations has yet to 

implement the next critical step in performance-based budgeting—a system 

to monitor and evaluate program impact or results. Program reviews that 

compare actual performance to expected outcomes are important for 

accounting for resources and achieving effective results. 

A strong internal audit function provides additional oversight and 

accountability through independent assessments of U.N. activities, as 

demonstrated by audits of the U.N Oil for Food program. U.N. internal 

auditors found recurring management weaknesses in 58 audits it conducted 

over 5 years. However, constraints on their scope and authority prevented 

the auditors from examining and reporting widely on problems in the Oil for 

Food program. U.N. oversight bodies did not obtain timely reporting on 

serious management problems and were unable to take corrective actions 

when needed. These constraints limited the internal audit unit’s 

effectiveness as an oversight tool. GAO plans to conduct more detailed work 

on the role of the internal auditors in upcoming engagements. 

The U.N. regular budget for the 

2004-2005 biennium exceeded $3 

billion for the first time. In light of 

the organization’s increasing 

demands, the U.N. Secretary 

General and member states have 

called on the Secretariat to better 

define priorities and eliminate 

outdated activities. In response, the 

Secretary General launched major 

reform initiatives in 1997 and 2002, 

and we reported on the status of 

these efforts in February 2004. 

Audits and investigations of the 

U.N. Oil for Food program have 

also brought attention to recurring 

management weaknesses. As the 

largest financial contributor to the 

United Nations, the United States 

has a strong interest in the 

completion of the Secretary 

General’s reforms. 

GAO provides observations on 

areas for U.N. reform based on our 

2004 report and our continuing 

review of the Oil for Food program, 

including our analysis of internal 

audit reports and other documents. 
Page 1 GAO-05-392T 

Mr. Chairman and Members of the Subcommittee: 

I am pleased to be here today to discuss our review of the United Nations’ 

(U.N.) reform efforts. 

The U.N. regular budget for the 2004-2005 biennium exceeded $3 billion 

for the first time. In light of increasing demands, the U.N. Secretary 

General and member states called on the Secretariat to better define 

priorities and eliminate outdated activities. The Secretary General 

responded with major reform initiatives in 1997 and 2002. Investigations of 

the U.N. Oil for Food program have also brought attention to recurring 

management weaknesses. As its largest financial contributor, the United 

States has a strong interest in the completion of U.N. reforms. 

Today, I will provide observations on U.N. reform efforts based on our 

2004 report and our continuing review of the Oil for Food program, 

including our analysis of internal audit reports and other documents. 

To address these objectives, we reviewed our February 2004 report on 

progress in implementing reforms and updated information where 

possible. 1

 We also drew upon information from our previous reports of 

the Oil for Food program, including our analysis of internal audit reports 

and other documents. 

In accordance with generally accepted government auditing standards, we 

conducted our work on the status of U.N. reforms from June 2003 through 

January 2004, updated information in February 2005, and conducted work 

on the Oil for Food program from January through February 2005. 

The United Nations needs sustained oversight at all levels of the 

organization to make progress in its reform agenda and achieve lasting 

results. The Secretary General launched two major reform initiatives in 

1997 and 2002 to address key efficiency, management, and accountability 

challenges facing the organization. We reported in February 2004 that the 

United Nations had carried out some of its initiatives, with 51 percent of 

all reforms in place. The 1997 agenda consisted of initiatives that the 

Secretary General could implement on his own authority and those that 

 1

GAO, United Nations: Reforms Progressing but Comprehensive Assessments Needed to 

Measure Impact, GAO-04-339 (Washington, D.C.: Feb.13, 2004). 

Summary 
Page 2 GAO-05-392T 

required member states’ approval. The implementation of reforms under 

the Secretary General’s authority advanced more quickly than those under 

the authority of member states. We found that 70 percent of reform 

initiatives under the Secretary General’s authority were in place, 

compared with 44 percent of the initiatives requiring member state 

approval. However, we found that more than one-quarter of the completed 

reforms only consisted of developing plans or establishing new offices—

the first steps in achieving longer term reform goals. In addition, the 

Secretariat had not periodically conducted comprehensive assessments of 

the status and impact of its reforms. Without such assessments, the 

Secretariat could not determine the progress made or where future 

improvements were needed. 

At the program level, management reviews that compare actual 

performance to expected outcomes are critical elements of effective 

oversight and accountability. The United Nations has completed the initial 

phase of implementing reforms in a key area—performance-based 

budgeting. It adopted a budget that reflects a result-based budgeting 

format, including specific program costs, objectives, expected results, and 

performance indicators to measure results. For the first time, the 2004-

2005 budget included specific performance targets and baseline data for 

many performance indicators that can help measure performance over 

time and allow program managers to compare actual achievements to 

expected results. However, the United Nations has yet to implement the 

next critical step in performance-based budgeting—a system to monitor 

and evaluate program impact or results. Program reviews that compare 

actual performance to expected outcomes are important for accounting 

for resources and achieving effective results. 

A strong internal audit function provides additional oversight and 

accountability through independent assessments of U.N. activities, as 

demonstrated by audits of the U.N Oil for Food program. This office 

provided detailed oversight of many aspects of the Oil for Food program, 

and its 58 reports point to the need for continued U.N. attention to 

management reforms. Our review of the audit reports of the Oil for Food 

program identified 702 findings and 667 recommendations across 

numerous programs and sectors. The internal auditors found recurring 

problems in procurement, financial and asset management, personnel and 

staffing, project planning and coordination, security, and information 

technology. However, constraints on the internal auditors’ scope and 

authority prevented the auditors from examining and reporting widely on 

problems in the Oil for Food program. U.N. oversight bodies did not obtain 

timely reporting on serious management problems and were unable to 
Page 3 GAO-05-392T 

take corrective actions when needed. These constraints limited the 

internal audit unit’s effectiveness as an oversight tool. GAO plans to 

conduct more detailed work on the role of the internal auditors in 

upcoming engagements. 

In July 1997, the Secretary General proposed a broad reform program to 

focus the United Nations on achieving results as it carried out its 

mandates. These reforms included restructuring U.N. leadership and 

operations, developing a human capital system based on results, and 

introducing a performance-based programming and budgeting process. 

Although the Secretary General does not have direct authority over 

specialized agencies and many funds and programs, changes at the 

Secretariat were intended to serve as a model for reforms throughout the 

U.N. system. The Secretary General launched a second round of reforms in 

2002 that expanded on the 1997 initiatives and reflected new areas of 

focus, such as public information activities and the human rights program. 

The overall goal was to align U.N. activities with the priorities defined by 

the Millennium Declaration and the new security environment.2

The 1997 and 2002 initiatives followed several efforts to reform the United 

Nations that began soon after its creation in 1945. Despite periodic cycles 

of reform, U.N. member states have continued to have concerns about 

inefficient operations; problems of fragmentation, duplication, and poor 

coordination; and the proliferation of mandates. These calls have also 

highlighted the need for more accountable leadership and improvement in 

key management practices. As the largest financial contributor to the 

United Nations, the United States has a strong interest in the completion 

of these reforms and has played a significant role in promoting financial, 

administrative, and programmatic changes. The State Department and the 

U.S. Permanent Mission to the United Nations continue to promote further 

reforms and report on the status of major reform initiatives to the U.S. 

Congress. 

The call for reforms has also grown as a result of problems identified in 

the United Nations’ management of the Oil for Food program. Last year we 

reported that the former Iraqi government obtained $10.1 billion through 

 2

In 2000, the General Assembly adopted the Millennium Declaration, which contains a set 

of priorities and specific time frames for meeting development goals. The Millennium 

Declaration and the Secretary General’s Road Map toward Implementation of the U.N. 

Millennium Declaration provide the overall priorities for all U.N. activities. 

Background 
Page 4 GAO-05-392T 

oil smuggling and illicit commissions and surcharges on commodity and 

oil contracts.3

 The Iraq Survey Group, responsible for investigating Iraq’s 

activities in developing weapons of mass destruction, estimated illicit 

revenues at $10.9 billion and found similar irregularities in contract 

overpricing and surcharges. In April 2004, the Secretary General 

established the U.N. Independent Inquiry Committee (IIC) to investigate 

allegations of mismanagement and misconduct within the Oil for Food 

program. In February 2005, the IIC issued an interim report on the initial 

procurement of U.N. contractors, recipients of oil allocations, internal 

audit structure and activities, and management of administrative 

expenses.4

 The Committee offered numerous recommendations for 

improving the United Nations’ internal audit function. 

Sustained oversight at all levels of the organization is needed for the 

United Nations to advance its reform agenda and achieve lasting results. 

The United Nations had completed 51 percent of its 1997 and 2002 reform 

initiatives. However, it has not periodically conducted comprehensive 

assessments to determine the status and impact of the reforms. 

Consequently, the Secretariat could not determine if it was meeting the 

Secretary General’s overall reform goals. 

The Secretary General launched two major reform initiatives, in 1997 and 

2002, to address the United Nation’s core management challenges—poor 

leadership of the Secretariat, duplication among its many offices and 

programs, and the lack of accountability for staff performance. In 

assessing the status of these reforms, we found that the United Nations 

had made some progress in implementing these initiatives, putting in place 

51 percent of all reforms. We found that 60 percent of the 88 reform 

initiatives in the 1997 agenda and 38 percent of the 66 reforms in the 2002 

agenda were in place.5

 3

GAO, United Nations: Observations on the Management and Oversight of the Oil for 

Food Program, GAO-04-730T (Washington, D.C.: Apr. 28, 2004). 

4

Independent Inquiry Committee into the United Nations Oil-for-Food Programme, Interim 

Report (New York: Feb. 3, 2005). 

5

These numbers differ from the figures in the U.N. reform plans because many of the 

Secretary General’s reform action items had several components that we identified and 

counted as separate initiatives. 

Sustained Oversight Is 

Needed for Lasting 

Results 

Reforms under the 

Secretary General’s 

Authority Advanced More 

Quickly 
Page 5 GAO-05-392T 

The 1997 agenda consisted of initiatives that the Secretary General could 

implement on his own authority and those that required member states’ 

approval. The implementation of reforms under the Secretary General’s 

authority advanced more quickly than those under the authority of 

member states. We found that 70 percent of reform initiatives under the 

Secretary General’s authority were in place, compared with 44 percent of 

the initiatives requiring member state approval.6

 Delays in acquiring 

member state approval are due, in part, to the longer time needed for the 

General Assembly to reach agreement from the majority. 

In addition, many reform efforts comprise only the first step in achieving 

longer-term goals. More than one-quarter of the Secretary General’s 

completed reforms in both the 1997 and 2002 agendas consisted of 

developing a written plan or establishing a new office. Although the 

establishment of a new office or department—such as the office to 

manage the U.N.’s interrelated programs to combat crime, drugs, and 

terrorism—can be counted as a completed reform, it is the office’s 

performance in meeting its objectives that will determine its impact and 

the extent to which it contributes to the Secretary General’s overall reform 

goals. 

We also reported that the Secretariat had not conducted systematic, 

comprehensive assessments of the status and impact of the Secretary 

General’s 1997 and 2002 reform initiatives. Without such assessments, the 

Secretariat was not able to determine what progress had been made and 

where further improvements were needed. Individual departments and 

offices within the Secretariat tracked reforms that related to their specific 

area of work. OIOS also monitored and evaluated the impact of selected 

reforms but was not responsible for overseeing the implementation of the 

overall reform agendas. In addition, the Deputy Secretary General, who is 

responsible for overseeing the overall reform process, neither 

systematically assessed departments’ performance in implementing 

reforms nor held managers directly accountable. The office of the Deputy 

Secretary General had only one full-time professional staff member 

dedicated to reform issues. In 1998 and 2003, the Secretary General issued 

status reports on the 1997 and 2002 reforms, respectively. These reports 

 6

The 2002 reform plan did not differentiate between initiatives that the Secretary General 

could implement on his own authority and those that required member states’ approval. 

Periodic Assessments Are 

Not Conducted So Impact 

of Reforms Is Unclear 
Page 6 GAO-05-392T 

did not cover all of the initiatives in the respective reform plans or include 

comprehensive assessments of the reforms. 

In February 2005, we contacted the Office of the Deputy Secretary General 

to determine recent actions it has taken to report on the status and impact 

of the Secretary General’s reform initiatives. An official stated that the 

office has conducted an internal assessment but has not released this 

document to member states. The Secretary General announced his 

intention to submit additional reform proposals to improve the 

organization’s transparency and accountability before a September 2005 

summit of world leaders. 

Holding staff accountable for implementing these reforms and measuring 

their impact is difficult without regular, comprehensive reports on the 

overall status and impact of reform initiatives. Adopting key practices in 

management, oversight, and accountability for reforms, such as systematic 

monitoring and evaluation, could facilitate the achievement of the 

Secretary General’s overall reform goals. 

At the program level, management reviews that compare actual 

performance to expected outcomes are critical elements of effective 

oversight and accountability. The United Nations has completed the initial 

phase of implementing reforms in a key area—performance-based 

budgeting. It adopted a budget that reflects a result-based budgeting 

format, including specific program costs, objectives, expected results, and 

performance indicators to measure results. However, it has yet to develop 

a system to regularly monitor and evaluate program results to shift 

resources to more effective programs. Program reviews that compare 

actual performance to expected outcomes are important to account for 

resources and achieve effective results. 

We reported in February 2004 report that the United Nations had begun to 

adopt a performance-based budgeting system. A performance-based 

budgeting framework includes three key elements: (1) a budget that 

reflects a budgeting structure based on results, linking budgeted activities 

to performance expectations; (2) a system to regularly monitor and 

evaluate the impact of programs; and (3) procedures to shift resources to 

meet program objectives. In December 2000, the Secretariat implemented 

the first key element of a performance-based budgeting framework by 

adopting a budget that reflects a results-based budgeting format, including 

specific program costs, objectives, expected results, and performance 

Performance-Based 

Budgeting Had Begun 

but Lacked 

Monitoring and 

Evaluation 

Secretariat Has First 

Element of PerformanceBased Budgeting in Place 
Page 7 GAO-05-392T 

indicators to measure the results.7 For the first time, the 2004-2005 budget 

included specific performance targets and baseline data for many 

performance indicators that can help measure performance over time and 

allow program managers to compare actual achievements to expected 

results. However, oversight committees have reported that some programs 

still lacked clear and concise expected outcomes and performance 

indicators. 8

Further, although the United Nations had developed measures for 

assessing program progress, many of these measures represent tasks and 

outputs rather than outcomes. For example, in 2003, a key objective of the 

peacekeeping operation in East Timor was to increase the capacity of the 

national police force to provide internal security. The indicator for 

measuring results was the number of police trained—a goal of 2,830 police 

by 2004. We reported, however, that the number of police trained did not 

reflect the quality of their training or whether they improved security in 

East Timor. 

The Secretariat had not systematically monitored and evaluated program 

impact or results—the second element of performance budgeting.9

 In 2002, 

the Office of Internal Oversight Services (OIOS) found that nearly half of 

U.N. program managers did not comply with U.N. regulations to regularly 

monitor and evaluate program performance. Program managers were not 

held accountable for meeting program objectives because U.N. regulations 

prevented linking program effectiveness and impact with program 

managers’ performance. OIOS did not provide statistics on the number or 

percentage of program managers complying with U.N. regulations 

regarding monitoring and evaluation activities in its most recent report on 

 7

We have previously reported that linking funding to specific performance goals is a critical 

first step in supporting the transition to a more results-oriented and accountable 

organization. See GAO, Managing for Results: Agency Progress in Linking Performance 

Plans with Budget and Financial Statements, GAO-02-236 (Washington, D.C.: Jan. 2002). 

8

For the purposes of this testimony, U.N. oversight committees refer to the Committee for 

Program and Coordination, which reviews the U.N. planning and budgeting documents and 

the work planned under each program, and the Advisory Committee on Administrative and 

Budgetary Questions. These committees report to the Fifth Committee, which is the 

General Assembly committee responsible for financial oversight of the Secretariat. 

9

U.N. regulations require that programs should be regularly monitored and evaluated to 

determine their relevance, effectiveness, and impact in relation to their objectives. See 

Regulations and Rules Governing Program Planning, the Program Aspects of the Budget, 

the Monitoring of Implementation and the Methods of Evaluation (New York: United 

Nations, Apr. 19, 2000). 

A Monitoring and Evaluation 

System Had Not Been 

Developed 
Page 8 GAO-05-392T 

the Secretariat’s evaluation efforts.10 However, OIOS reported that 

program managers did not develop comprehensive monitoring and 

evaluation plans in 12 out of 20 programs surveyed, and management 

review of evaluations was inconsistent among programs. 

OIOS also reported that, overall, evaluation findings were not used to 

improve program performance. In some cases, such as with the Office of 

the High Commissioner for Human Rights, monitoring and evaluation 

responsibilities were assigned to low-level staff with minimal oversight 

from program managers. Further, for the majority of programs, no 

resources had been assessed or allocated for monitoring and evaluation 

activities. As a result, it is unlikely that the Secretariat will meet its goal of 

implementing a full performance-based budgeting system by 2006. 

The final component of performance budgeting—procedures to review 

evaluation results, eliminate obsolete programs, and shift resources to 

other programs—was not in place. The Advisory Committee on 

Administrative and Budgetary Questions reported in 2003 that it did not 

receive systematic information from the Secretariat on program impact 

and effectiveness to determine whether a program was meeting its 

expected results. In 2004, the Committee for Program and Coordination 

recommended that the Secretariat improve its monitoring and evaluation 

system to measure impact and report on results. In December 2003, the 

General Assembly approved the elimination of 912 of more than 50,000 

outputs in the 2004-2005 program budget based on the Secretariat’s review 

of program activities. However, in 2003, the Advisory Committee on 

Administrative and Budgetary Questions and the Committee for Program 

and Coordination reported that many sections in the budget still lacked 

justifications for continuing certain outputs. The committees 

recommended that program managers in the Secretariat identify obsolete 

outputs in U.N. budgets in compliance with U.N. regulations so resources 

could be moved to new priority areas. 

Our February 2004 report contained recommendations to promote full 

implementation and accountability of the Secretary General’s overall 

actions. Specifically, we recommended that the United States work with 

other member states to encourage the Secretary General to (1) report 

 10Strengthening the Role of Evaluation Findings in Programme Design, Delivery, and 

Policy Directives: Report of the Office of Internal Audit Services, A/59/79 (New York: May 

5, 2004). 
Page 9 GAO-05-392T 

regularly on the status and impact of the 1997 and 2002 reforms and other 

reform that may follow, (2) differentiate between short- and long-term 

goals and establish time frames for completion, and (3) conduct 

assessments of the financial and personnel implications needed to 

implement the reforms. 

In addition to a systematic monitoring and evaluation system, a strong 

internal audit and evaluation function can provide the independent 

assessments needed to help ensure oversight and accountability. OIOS 

provides this service through audits, evaluations, inspections, and 

investigations of U.N. funds and programs. This office provided detailed 

oversight of many aspects of the Oil for Food program, and its 58 reports 

point to the need for continued U.N. attention to management reforms. 

Specifically, reports by the internal auditors and the Independent Inquiry 

Commission revealed lax oversight of Oil for Food program contracts that 

resulted in repeated violations of procurement rules and weaknesses in 

contract management. In addition, constraints on the internal auditors’ 

scope and authority prevented the auditors from examining and reporting 

more widely on some critical areas of the Oil for Food program. U.N. 

oversight bodies did not obtain timely reporting on serious management 

problems and were unable to take corrective actions when needed. These 

constraints limited the internal audit unit’s effectiveness as an oversight 

tool. 

Our review of the OIOS audit reports of the Oil for Food program released 

in January 2005 identified 702 findings and 667 recommendations across 

numerous programs and sectors. 11 OIOS found recurring problems in 

procurement, financial and asset management, personnel and staffing, 

project planning and coordination, security, and information technology. 

The findings in these audits, which were conducted from 1999 to 2004, 

suggested a lack of oversight and accountability by the offices and entities 

audited. In particular, we identified 219 findings and 212 recommendations 

related to procurement and contract management deficiencies. 

In February 2005, the IIC also reported that the initial procurement of 

three major Oil for Food contracts awarded in 1996 did not meet 

 11GAO, United Nations: Oil for Food Program Audits, GAO-05-346T (Washington, D.C.: 

Feb. 15, 2005). 

U.N. Oil for Food 

Program 

Lack of Oversight Allowed 

Procurement Violations 

and Poor Contract 

Management 
Page 10 GAO-05-392T 

reasonable standards of fairness and transparency. The IIC reported that it 

will make recommendations concerning greater institutional transparency 

and accountability in a later report. OIOS also conducted audits of three 

key contracts for inspecting commodities coming into Iraq and for 

independent experts to monitor Iraq’s oil exports. OIOS’ findings in the 

management of two of these contracts supplemented the IIC’s information 

on the bidding and awarding process. The IIC found that the initial 

selection process did not conform to competitive bidding rules, while 

OIOS found lax oversight by the U.N. Office of the Iraq Program (OIP) 

over contractor performance. 

The IIC reviewed three major contracts awarded in 1996 to determine if 

their selections were free from improper influence and were conducted in 

accordance with U.N. regulations. These contracts were awarded to 

Lloyd’s Register Inspection Ltd. to inspect humanitarian goods coming 

into Iraq, Saybolt Eastern Hemisphere BV to inspect oil exported from 

Iraq, and Banque National de Paris to maintain revenues from Iraqi oil 

sales. 

In its February 2005 report, the IIC found that the United Nations initiated 

expedited competitive bidding processes for both the humanitarian goods 

and oil inspection contracts. The IIC concluded that, during the bid 

process, the U.N. Iraq Steering Committee and the Chief of the Sanctions 

Branch prejudiced and preempted the competitive process by rejecting the 

lowest qualified bidder in favor of an award to Lloyd’s Register. The IIC 

found that the regular bidding process was tainted when the branch chief 

provided a diplomat from the United Kingdom with insider information on 

the bid amount that Lloyd’s Register needed to win the contract. 

Similarly, the IIC found that a U.N. procurement officer allowed Saybolt to 

amend its bid to become the lowest bidder. The IIC characterized the 

bidding process for this contract as neither fair nor transparent. 

The IIC also found irregularities in the award of a contract to Banque 

National de Paris. The decision did not conform to the U.N. requirement to 

award contracts to the lowest acceptable bidder, and no official justified 

the rejection of the lowest acceptable bidder in writing, as required by 

U.N. regulations. 

OIOS conducted audits of the Lloyd’s Register and Saybolt contracts as 

well as the contract to Cotecna Inspection SA, the company that 

succeeded Lloyd’s Register for the inspection of humanitarian goods. 

IIC Found Lack of Compliance 

with Procurement Regulations 

OIOS Found Weaknesses in 

Procurement and Contract 

Oversight 
Page 11 GAO-05-392T 

In a July 1999 audit of the Lloyd’s Register contract, OIOS found 

contractor overcharges, unverified invoices, violations of procurement 

regulations, and limited U.N. oversight. For example, while the contract 

allowed the United Nations to inspect and test all contractor services, the 

auditors found that OIP had received, certified, and approved the 

contractor’s invoices without on-site verification or inspection reports. In 

responding to the auditors findings, OIP rejected the call for on-site 

inspections and stated that any dissatisfaction with the contractor’s 

services should come from the suppliers or their home countries. 

A July 2002 audit of Saybolt’s operation found similar problems, including 

inadequate documentation for contractor charges and payments made for 

equipment already included in the contractor’s daily staff cost structure. 

As with the Lloyd’s Register contract, OIOS found that OIP officials 

charged with monitoring the Saybolt contract had made no inspection 

visits to Iraq but had certified the contractor’s satisfactory compliance 

with the contract and approved extensions to the contract. 

In an April 2003 report, OIOS cited concerns about amendments and 

extensions to Cotecna’s original $4.9 million contract. Specifically, OIOS 

found that OIP increased Cotecna’s contract by $356,000 4 days after the 

contract was signed. The amendment included additional costs for 

communication equipment and operations that OIOS asserted were 

included in the original contract. In addition, OIOS found that the contract 

equaled the offer of the second lowest bidder through amendments and 

extensions during the contract’s first year. Accordingly, OIOS concluded 

that, one year after the start of the contract, the reason for awarding the 

contract to Cotecna—on the grounds that it was the lowest bidder—was 

no longer valid. 

In addition to the three inspection contracts, OIOS reported procurement 

weaknesses in other areas of the Oil for Food program. For example, in 

November 2002, OIOS reported that almost $38 million in procurement of 

equipment for the U.N.-Habitat program was not based on a needs 

assessment. As a result, 51 generators went unused from September 2000 

to March 2002, and 12 generators meant for project-related activities were 

converted to office use. OIOS further reported that 11 purchase orders 

totaling almost $14 million showed no documentary evidence supporting 

the requisitions. 
Page 12 GAO-05-392T 

In 1994, the General Assembly established OIOS to conduct audits, 

evaluations, inspections, and investigations of U.N. programs and funds. 

Its mandate reflects many characteristics of U.S. inspector general offices 

in purpose, authority, and budget. For example, OIOS staff have access to 

all U.N. records, documents, or other material assets necessary to fulfill 

their responsibilities. 

We reported in 1997 that OIOS was in a position to be operationally 

independent, had overcome certain start-up problems, and had developed 

policies and procedures for much of its work. We could not test whether 

OIOS exercised its authority and implemented its procedures in an 

independent manner because OIOS did not provide us with access to 

certain audit and investigation reports and its working papers. However, 

we concluded that OIOS could do more to help ensure that the 

information it presents, the conclusions it reaches, and the 

recommendations it makes can be relied upon as fair, accurate, and 

balanced. The IIC also made a number of recommendations in January 

2005 to help provide OIOS’ audit division with the mandate, structure, and 

support it needs to operate effectively. 

The IIC found a need for greater reporting and budgetary independence 

for OIOS and its internal audit division. This division has two funding 

sources: (1) the U.N. regular budget, which covers normal, recurring audit 

activities; and (2) extra-budgetary funds allocated outside the U.N. regular 

budget, which cover audits of special non-recurring funds and programs, 

such as the Oil for Food program. OIOS’ internal audit division received 

extra-budgetary funds directly from the Oil for Food program managers it 

audited. It assigned 2 to 6 auditors to cover the program. The IIC found 

that this level of staffing was low compared to OIOS’ oversight of 

peacekeeping operations and to levels recommended by the U.N. Board of 

Auditors. 

The IIC found that the practice of allowing executive directors of funds 

and programs the right to approve the budgets and staffing of internal 

audit activities can lead to critical and high risk areas being excluded from 

internal audit examination and review by oversight bodies. For example: 

• Since its inception, OIOS has generally submitted its audit reports only to 

the head of the audited agency. However, in August 2000 OIOS tried to 

widen its report distribution by sending its Oil for Food reports to the 

Security Council. However, the OIP director opposed this proposal, stating 

that it would compromise the division of responsibility between internal 

and external audit. The Deputy Secretary General also denied the request, 

Effectiveness of Internal 

Oversight Was Limited by 

Budgeting and Reporting 

Constraints 
Page 13 GAO-05-392T 

and OIOS subsequently abandoned any efforts to report directly to the 

Security Council. 

• OIOS did not examine OIP’s oversight of the contracts for humanitarian 

goods in central and southern Iraq that accounted for almost $40 billion in 

Oil for Food proceeds. OIP was responsible for examining these contracts 

for price and value at its New York headquarters. The Iraqi government’s 

ability to negotiate contracts directly with commodity suppliers was an 

important factor in enabling Iraq to levy illegal commissions. OIOS 

believed that these contracts were outside its purview because the 

Security Council’s sanctions committee was responsible for their approval. 

However, OIP management also steered OIOS toward program activities in 

Iraq rather than headquarters functions where OIP reviewed the 

humanitarian contracts. 

• In May 2002, OIP’s executive director did not approve the auditors’ request 

to conduct a risk assessment of OIP’s Program Management Division, 

citing financial reasons. We reported last year that it was unclear how 

certain entities involved in the Oil for Food program, including OIP, 

exercised their oversight responsibilities over humanitarian contracts and 

sanctions compliance by member states.12 Such an assessment might have 

clarified OIP’s oversight role and the actions it was taking to carry out its 

management responsibilities. 

• In 2002, the U.N. Compensation Commission challenged OIOS’ audit 

authority.13 In its legal opinion, the U.N. Office of Legal Affairs noted that 

the audit authority extended to computing the amounts of compensation 

but did not extend to reviewing those aspects of the panels’ work that 

constitute a legal process. However, OIOS disputed the legal opinion, 

noting that its mandate was to review and appraise the use of U.N. 

financial resources. OIOS believed that the opinion would effectively 

restrict any meaningful audit of the claims process. OIOS identified more 

than $500 million in potential overpayments by the Commission. However, 

as a result of the legal opinion, the Commission did not respond to many 

OIOS observations and recommendations, considering them beyond the 

scope of an audit. 

 12GAO-04-730T. 

13The U.N. Compensation Commission was established in 1991 to process claims and 

provide compensation for losses resulting from Iraq’s invasion and occupation of Kuwait. 
Page 14 GAO-05-392T 

Constraints on the internal auditors’ scope and authority prevented the 

auditors from examining and reporting more widely on problem areas in 

the Oil for Food program. These limitations hampered the auditors’ 

coverage of the Oil for Food program and its effectiveness as an oversight 

tool. U.N. oversight bodies did not obtain timely reporting on serious 

management problems and were unable to take corrective actions when 

needed. However, in December 2004, the General Assembly required OIOS 

to include in its annual and semi-annual reports titles and brief summaries 

of all OIOS reports issued during the reporting period and to provide 

member states with access to original versions of OIOS reports upon 

request. The IIC also recommended that OIOS and its internal audit 

division directly report to a non-executive board and that budgets and 

staffing levels for all audit activities be submitted to the General Assembly 

and endorsed by an independent board. 

The Secretary General’s announcement that he intends to offer a U.N. 

reform agenda in September 2005 offers the United Nations an opportunity 

to take a more strategic approach to management reform. A systematic 

review of the status of the 154 reforms begun in 1997 and 2002 and 

information from the Oil for Food program would allow the Secretary 

General to develop a comprehensive, prioritized agenda for continued 

U.N. reform. We also encourage continued attention to our February 2004 

recommendation that the United States work with other member states to 

encourage the Secretary General to report regularly on the status of 

reform efforts, prioritize short- and long-term goals, and establish time 

frames to complete reforms. 

Mr. Chairman, this concludes my prepared statement. I will be happy to 

answer any questions you or the other Subcommittee members may have. 

For further information, please contact Joseph A. Christoff on (202) 512-

8979. Individuals making key contributions to this testimony and the 

reports on which it was based are Phyllis Anderson, Leland Cogliani, Lynn 

Cothern, Katie Hartsburg, Jeremy Latimer, Tetsuo Miyabara, Michael 

Rohrback, and Audrey Solis. 

Conclusion 

Contact and Staff 

Acknowledgments 

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