United States Government Accountability Office

GAO Testimony

Before the Subcommittee on Federal 

Financial Management, Government 

Information, and International Security 

UNITED NATIONS For Release on Delivery 

Expected at 2:30 p.m. EDT

Tuesday, June 20, 2006

Weaknesses in Internal 

Oversight and 

Procurement Could Affect 

the Effective 

Implementation of the 

Planned Renovation 

Statement of Thomas Melito, Director 

International Affairs and Trade 

GAO-06-877T 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

June 2006

UNITED NATIONS

Weaknesses in Internal Oversight and 

Procurement Could Affect the Effective 

Implementation of the Planned 

Renovation 

Highlights of GAO-06-877T, a testimony 

before the Subcommittee on Federal 

Financial Management, Government 

Information, and International Security, 

United States Senate 

The UN headquarters buildings are 

in need of renovation. The Capital 

Master Plan is an opportunity for

the organization to renovate its

headquarters buildings and ensure

conformity with current safety, fire, 

and security requirements. 

Estimated by the UN to cost about 

$1.6 billion, the renovation will 

require a substantial management 

effort by the UN—including the use 

of effective internal oversight and 

procurement practices. 

Based on recently issued work,

GAO (1) examined the extent to

which UN funding arrangements

for its Office of Internal Oversight 

Services (OIOS) ensure

independent oversight and the

consistency of OIOS’s practices 

with key international auditing 

standards and (2) assessed the 

UN’s procurement processes 

according to key standards for

internal controls.

What GAO Recommends

In prior reports, GAO 

recommended 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 processes. State and 

OIOS generally agreed with GAO’s

overall findings and

recommendations. The UN did not 

provide us with written comments 

on procurement. 

The effective implementation of the planned UN renovation is vulnerable 

due to a range of weaknesses in existing internal oversight and procurement 

practices. In particular, UN funding arrangements adversely affect OIOS’s 

budgetary independence and compromise OIOS’s ability to investigate highrisk areas. In addition, while the UN has yet to finalize a specific

procurement process for the UN Capital Master Plan, to the extent that it 

relies on UN procurement processes, it remains vulnerable to the numerous 

procurement weaknesses that GAO have previously identified. 

First, UN funding arrangements constrain OIOS’s ability to operate 

independently as mandated by the General Assembly and required by 

international auditing standards. While OIOS is funded by a regular budget 

and 12 other 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. 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. 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. 

While the UN has yet to finalize its Capital Master Plan procurement 

strategy, to the extent that it relies on the current process, implementation 

of the Capital Master Plan remains vulnerable to numerous procurement 

weaknesses. For example, the UN has not established an independent 

process to consider vendor protests that could alert senior UN officials of 

failures by procurement staff to comply with stated procedures. Also, the 

chairman of the UN procurement contract review committee has stated that 

his committee does not have the resources to keep up with its expanding 

workload. In addition, the UN does not consistently implement its process 

for helping to ensure that it is conducting business with qualified vendors. 

GAO also found that the UN has not demonstrated a commitment to 

improving its professional procurement staff despite long-standing 

shortcomings and has yet to complete action on specific ethics guidance for 

procurement officers. www.gao.gov/cgi-bin/getrpt?GAO-06-877T.

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-06-877T 

Chairman Coburn, Ranking Member Carper, and Members of the 

Subcommittee:

I am pleased to be here today to discuss the United Nations’ (UN) internal 

oversight unit and procurement process in the context of the UN Capital 

Master Plan (CMP). The planned renovation project represents a unique 

endeavor on the part of the UN—the first comprehensive renovation of the 

UN headquarters since the completion of its initial construction in 1952. 

Currently estimated by the UN to cost about $1.6 billion, the renovation will 

require a substantial management effort by the UN—including the use of 

effective internal oversight and procurement practices.

Several scandals, including those involving the UN’s Oil for Food Program 

and procurement service, have spurred calls for UN management reform. 

In our review of the Oil for Food Program,1

 we found that management 

problems allowed the former Iraqi regime to manipulate the program and 

circumvent sanctions to obtain illicit payments ranging from $7.4 billion to 

$12.8 billion.2

 The UN’s Office of Internal Oversight Services (OIOS) 

audited some aspects of the Oil for Food program and identified hundreds 

of weaknesses and irregularities. However, OIOS lacked the resources and 

independence needed to provide full and effective oversight of this large, 

costly, and complex UN effort. In addition, experts have called on the UN 

to correct serious weaknesses in its procurement process for more than a 

decade, including the lack of an independent process for considering 

vendor protests and ensuring selection of qualified venders. However, 

recent audits and investigations have uncovered evidence of corruption 

and mismanagement in the UN’s procurement activities. 

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

management practices, in particular to strengthen internal oversight and 

accountability; help ensure ethical conduct; and review budgetary, 

financial, and human resources policies. Even though UN member states 

support management reforms, there is considerable disagreement within 

the General Assembly over the process and implementation of the reforms, 

which thus far have been slow and uneven. 

1

GAO, United Nations: Lessons Learned from the Oil for Food Program Indicate the Need 

to Strengthen UN Internal Controls and Oversight Activities, GAO-06-330 (Washington, 

D.C.: Apr. 25, 2006).

2

The ranges given represent estimates developed by GAO, the Independent Inquiry 

Committee, and the Iraq Survey Group for 1997 through about early 2003.
Page 2 GAO-06-877T 

Completing the CMP will require the UN to implement effective internal 

oversight and procurement practices. Accordingly, my statement is based 

on two reports that we released on these topics in April 2006.3

 First, I will 

focus on the need to strengthen OIOS’s budgetary independence and its full 

implementation of key components for effective oversight. Second, I will 

also focus on our assessment of the UN’s procurement processes according 

to key standards for internal controls.

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 Effective implementation of the CMP is vulnerable due to a range of 

weaknesses in existing internal oversight and procurement practices. In 

particular, current funding arrangements adversely affect OIOS’s budgetary 

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

addition, while the UN has yet to finalize a specific procurement strategy 

for the renovation project, to the extent that it relies on current UN 

processes, implementation of the planned renovation is vulnerable to the 

procurement weaknesses that we have identified. 

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 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 

3

GAO, United Nations: Funding Arrangements Impede Independence of Internal 

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

Procurement Internal Controls Are Weak, GAO-06-577 (Washington, D.C.: Apr. 25, 2006).
Page 3 GAO-06-877T 

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. In some instances, high-risk 

areas have been 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. In our April 2006 report concerning OIOS,4

 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. Both the Department of State 

and OIOS generally agreed with our findings and recommendation.

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. In reviewing the CMP, OIOS reported in August 2005 that it 

obtained extrabudgetary funds from the CMP for one auditor on a shortterm basis, but that the level of funding was not sufficient to provide the 

oversight coverage intended by the General Assembly.5

 In addition, OIOS 

does 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 could undermine its effectiveness in 

4

GAO, United Nations: Funding Arrangements Impede Independence of Internal 

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

5

United Nations General Assembly, Report of the Office of Internal Oversight Services on 

the Capital Master Plan for the period from August 2004 to July 2005 A/60/288 (New 

York, N.Y.: Aug. 22, 2005).
Page 4 GAO-06-877T 

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. In 

our April 2006 report on OIOS, we also recommended that the Secretary of 

State and the Permanent Representative of the United States to the UN 

work with member states to support OIOS’s efforts to more closely adhere 

to international auditing standards. Both the Department of State and OIOS 

generally agreed with our findings and recommendation.

While the UN has yet to finalize its CMP procurement strategy, to the extent 

that it relies on the current process, implementation of the planned 

renovation is vulnerable to the procurement weaknesses that we have 

identified. For example, it has not established an independent process to 

consider vendor protests that could alert senior UN officials of failures by 

procurement staff to comply with stated procedures. Also, the Chairman of 

a key UN procurement contract review committee has stated that his 

committee does not have the resources to keep up with its expanding 

workload. In addition, the UN does not consistently implement its process 

for helping to ensure that it is conducting business with qualified vendors, 

has not demonstrated a commitment to improving its professional 

procurement staff despite long-standing shortcomings, and has yet to 

complete action on specific ethics guidance for procurement officers. We 

also found that the UN has yet to incorporate guidance for construction 

procurement into its procurement manual. In our April 2006 report on UN 

procurement,6

 we recommended that the Secretary of State and the 

Permanent Representative of the United States to the UN work with 

member states to encourage the UN to establish an independent bid protest 

mechanism, address problems facing its principle contract-review 

committee, implement a process to help ensure that it conducts business 

with qualified vendors, and to take other steps to improve UN 

procurement. The Department of State welcomed our report and 

recommendations. However, the UN did not provide us with written 

comments. 

Background The UN headquarters buildings are in need of renovation. The original UN 

headquarters complex, located in New York City and constructed between 

1949 and 1952, no longer conforms to current safety, fire and building codes 

6

GAO, United Nations: Procurement Internal Controls Are Weak, GAO-06-577 (Washington, 

D.C.: Apr. 25, 2006). 
Page 5 GAO-06-877T 

and does not meet UN technology or security requirements. Over the last 

50 years there have been no major renovations or upgrades to the buildings 

or their systems. For example, the UN headquarters complex lacks fire 

sprinklers, has a deteriorating window structure, and is vulnerable to 

catastrophic electrical failures. In September 2005, the headquarters 

complex was shut down and the staff sent home because a main breaker 

for electrical power to the top floors of the Secretariat building failed, 

causing it to fuse to the electrical panel. This failure could have resulted in 

a major fire. 

As host country, the United States financed construction of the original 

complex by providing the UN with a no-interest loan. The rest of the 

complex was built between 1960 and 1982 and funded through the UN’s 

regular budget or private donations. In December 2002, the General 

Assembly endorsed the CMP to renovate the UN headquarters complex and 

approved funds to further develop the conceptual designs and cost 

estimate. In May 2003, we reported that the resulting renovation planning 

was reasonable, but that additional management controls and oversight 

were needed. Since our last report, the UN has completed design 

development of the renovation. In April 2006, the UN appropriated $23.5 

million to finance the renovation’s preconstruction phase and committed 

$77 million to finance the construction of temporary conference space and 

supplementary office space rental (swing space). However, the General 

Assembly has not yet decided whether to approve implementation of the 

CMP.

In a February 2003 resolution, the General Assembly stressed the 

importance of oversight in implementing the CMP and requested that all 

relevant oversight bodies, such as OIOS, initiate immediate oversight 

activities.7

 In our 2003 report on the CMP,8 we noted that OIOS assigned 

one staff member to begin researching the CMP on a part-time basis. OIOS 

officials also stated that they had requested funding for OIOS to hire 

contractors to help evaluate the CMP, project management plan, and

7

United Nations General Assembly, Resolution Adopted by the General Assembly, 

A/RES/57/292 (New York, N.Y.: Feb. 13, 2003).

8

GAO, United Nations: Early Renovation Planning Reasonable, but Additional 

Management Controls and Oversight Will Be Needed, GAO-03-566 (Washington, D.C.: May 

30, 2003).
Page 6 GAO-06-877T 

security upgrades. In July 2005, OIOS reported that it had two auditors 

reviewing the CMP.9

OIOS’s authority spans all UN activities under the Secretary-General. 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 Secretariat10 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. Our work on the Oil for Food program demonstrates the 

weakness inherent in OIOS’s reliance on extrabudgetary resources. OIOS 

audited some aspects of the Oil for Food program and identified hundreds 

of weaknesses and irregularities, but it lacked the resources and 

independence needed to provide full and effective oversight of this large, 

costly, and complex UN effort. As the program was implemented, the Oil 

for Food program was further weakened by inadequate attention to 

internal controls, including establishing clear responsibility and authority 

and identifying and addressing program risks.

In addition to oversight, an effective procurement process is one of the 

keys to success for any large scale construction project. For more than a 

decade, experts have called on the UN to correct serious weaknesses in its 

procurement process. In addition, the UN procurement process has been 

under increasing stress in recent years as procurement spending has more 

than tripled to keep pace with a rapidly growing peacekeeping program. 

The UN Department of Management, through its 70-person UN 

Procurement Service, is ultimately responsible for developing UN 

procurement policies. 

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

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

9

United Nations General Assembly, Report of the Office of Internal Oversight Services on 

the Capital Master Plan for the Period from August 2004 to July 2005 A/60/288 (New 

York, N.Y.: Aug. 22, 2003).

10The 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 7 GAO-06-877T 

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

conduct UN-related work only in response to specific requests from 

committees with jurisdiction over UN matters. 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.

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 state 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. In our April 2006 report concerning 

OIOS, 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. Both the Department of State 

and OIOS generally agreed with our findings and recommendation.

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 should 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,11 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 

11IIA 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-06-877T 

financial regulations and the rules of an international institution should not 

restrict an audit organization from fulfilling its mandate. 

Funding Arrangements 

Hinder OIOS’s Ability to 

Respond to Changing 

Circumstances and to 

Reallocate Resources to 

Address High-Risk Areas

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

changing circumstances and reallocate its resources among its multiple 

funding sources, OIOS locations worldwide, or its operating 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 positions12 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.

Since 1996, an increasing share of OIOSís total budget is comprised of 

extrabudgetary resources. OIOSís regular budget and extrabudgetary 

resources increased in nominal terms from $21.6 million in fiscal biennium 

1996-1997 to $85.3 million in fiscal biennium 2006-2007. Over that period, 

OIOSís extrabudgetary funding increased in nominal terms, from about 

$6.5 million in fiscal biennium 1996-1997 to about $53.7 million in fiscal 

biennium 2006-2007. The majority of OIOS’s staff (about 69 percent) is 

funded with extrabudgetary resources, which increased due to 

extrabudgetary resources for audits and investigations of peacekeeping 

operations, including issues related to sexual exploitation and abuse.

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, 

12Throughout 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 9 GAO-06-877T 

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

could potentially be excluded from timely examination.13 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. Moreover, in some cases, fund and program 

managers have disputed fees charged by OIOS for investigative services 

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 investigative services 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. 

GAO’s Recommendation on 

OIOS Independence

In our April 2006 report concerning OIOS, 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. In commenting on the official draft of that report, OIOS and the 

Department of State (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 findings 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.

13Because the General Assembly has not approved funding for implementation of the CMP, 

there has been no decision on the level of OIOS funding for the CMP.
Page 10 GAO-06-877T 

OIOS Has Not Fully 

Met Key Elements of 

International Auditing 

Standards

OIOS formally adopted the Institute for Internal Auditors’ (IIA) 

international standards for the professional practice of internal auditing in 

2002. Since then, 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 could 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. In our April 2006 report on OIOS, we also recommended that the 

Secretary of State and the Permanent Representative of the United States 

to the UN work with member states to support OIOS’s efforts to more 

closely adhere to international auditing standards.

OIOS Has Developed 

Annual Work Plans, but Has 

Not Fully Implemented a 

Risk Management 

Framework

OIOS has adopted a risk management framework14 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 for prioritizing the allocation of resources to those areas that have 

the greatest exposure to fraud, waste, and abuse. OIOS’s risk management 

framework includes plans for organization-wide 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 client-level risk assessments, as of April 2006, out 

of 25 entities that comprise major elements of its “oversight universe,” only 

three risk assessments had 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 

14OIOS 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. 

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.

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.
Page 11 GAO-06-877T 

2008, at least 50 percent of their work is based on a systematic risk 

assessment. 

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. For the CMP, OIOS reported that it had extrabudgetary 

funds from the CMP for one auditor on a short-term basis, but that the level 

of funding was not sufficient to provide the oversight coverage intended by 

the General Assembly.15 To provide additional oversight coverage, OIOS

15United Nations General Assembly, Report of the Office of Internal Oversight Services on 

the Capital Master Plan for the Period from August 2004 to July 2005 A/60/288 (New 

York, N.Y.: Aug. 22, 2005).

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 12 GAO-06-877T 

assigned an additional auditor exclusively to the CMP, using funds from its 

regular budget.16

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. 

Although OIOS provides these professional development opportunities, it 

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 

office wide database to systematically track all training taken by their staff.

GAO’s Recommendation on 

OIOS Meeting Key Elements 

of International Auditing 

Standards

In our April 2006 report on OIOS, we also recommended that the Secretary 

of State and the Permanent Representative of the United States to the UN 

work with member states to support OIOS’s efforts to more closely adhere 

to international auditing standards. In commenting on the official draft of 

that report, 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.

16Because the General Assembly has not approved funding for implementation of the CMP, 

there has been no decision on the level of funding OIOS would receive for oversight of the 

CMP during the implementation phase.

IIA Standard for

Proficiency – continuing 

professional development

Internal auditors should enhance their 

knowledge, skills, and other competencies 

through continuing professional 

development

Source: IIA.
Page 13 GAO-06-877T 

The Current UN 

Procurement Process 

Contains Numerous 

Weaknesses

While the UN has yet to finalize its CMP procurement strategy, to the extent 

that it relies on current UN processes, implementation of the planned 

renovation is vulnerable to the procurement weaknesses that we have 

identified. We have identified problems affecting the UN’s bid protest 

process, headquarters contract review committee, vender rosters, 

procurement workforce, ethics guidance for procurement personnel, and 

procurement manual. In our April 2006 report on UN procurement, we 

recommended that the Secretary of State and the Permanent 

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

encourage the UN to establish an independent bid protest mechanism, 

address problems facing its principal contract-review committee, 

implement a process to help ensure that it conducts business with qualified 

vendors, and to take other steps to improve UN procurement. 

 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.17 Such 

a process would 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. 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. The General Assembly endorsed the principle of 

independent bid protests in 1994 when it recommended for adoption by 

member states a model procurement law drafted by the UN Commission on 

International Trade Law.18 Several nations, including the United States, 

provide vendors with an independent process to handle complaints.19

The UN’s lack of an independent bid protest process limits the 

transparency of its procurement process by not providing a means for a 

vendor to protest the outcome of a contract decision to an independent 

17United Nations, High Level Expert Group Procurement Study Report (New York, 

December 1994).

18See GA Res. 49/54, UN Doc. A/Res/49/54; UN Commission on International Trade Law 

(UNCITRAL), Model Law on Procurement of Goods, Construction, and Services (1994), ch. 

6.

19In the United States, vendors may protest to the involved agencies, the U.S. Court of 

Federal Claims, or GAO. GAO receives more than 1,100 such protests annually.
Page 14 GAO-06-877T 

official or office. At present, the UN Procurement Service directs its 

vendors to file protests to the Procurement Service chief and then to his or 

her immediate supervisor. If handled through an independent process, 

vendor complaints could alert senior UN officials and UN auditors to the 

failure of UN procurement staff to comply with stated procedures. As a 

result of recent findings of impropriety involving the Procurement Service, 

the United Nations hired a consultant to evaluate the internal controls of its 

procurement operations. One of the consultant’s conclusions was that the 

UN needs to establish an independent bid protest process for suspected 

wrongdoing that would include an independent third-party evaluation as 

well as arbitration, due process, and formal resolution for all reports.

The Headquarters Contract 

Review Committee’s 

Workload Is Increasing 

Faster Than Its Resources

While UN procurement has increased sharply in recent years, the size of 

the UN‘s Headquarters Committee on Contracts and its support staff has 

remained relatively stable. The committee’s chairman and members told us 

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 2003.20 The committee members 

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

the complexity of many new contracts and increased scrutiny of proposals 

in response to recent UN procurement scandals. 

The committee is charged with evaluating proposed contracts worth more 

than $200,000 and advising the Department of Management as to whether 

the contracts are in accordance with UN Financial Regulations and Rules 

and other UN policies. However, concerns regarding the committee’s 

structure and workload have led UN auditors to conclude that the 

committee cannot properly review contract proposals. It may thus 

recommend contracts for approval that are inappropriate and have not met 

UN regulations. Earlier this year, OIOS reiterated its 2001 recommendation 

that the UN reduce the committee’s caseload and restructure the 

committee “to allow competent review of the cases.” 

20In 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 15 GAO-06-877T 

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. OIOS later 

concluded that as of 2005 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.

The UN Has Not 

Demonstrated a 

Commitment to Improving 

Its Professional 

Procurement Workforce 

The UN has not demonstrated a commitment to improving its professional 

procurement staff through training, establishment of 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. 

Recent studies indicate that Procurement Service 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 

procurement staff to obtain continuous training, resulting in inconsistent 

levels of training across the procurement workforce. 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. Doing so could encourage staff to 

undertake progressive training and work experiences. 
Page 16 GAO-06-877T 

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 toward 

adopting it. Such guidance would include a declaration of ethics 

responsibilities for procurement staff and a code of conduct for vendors. 

The UN Has Not Included 

Guidance on Construction 

Procurement in its 

Procurement Manual

The UN has yet to include guidance for construction procurement into its 

procurement manual. 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 and executing CMP procurement. Moreover, the UN has not 

updated its procurement manual since January 2004 to reflect current UN 

procurement policy. As a result, procurement staff may not be aware of 

changes to procurement procedures that the UN has adopted over the past 

2 years. 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.

GAO’s Recommendation to 

Address Weaknesses in UN 

Procurement

In our April 2006 report on UN procurement,21 we recommended that the 

Secretary of State and the Permanent Representative of the United States 

to the UN work with member states to encourage the UN to establish an 

independent bid protest mechanism, address problems facing its principle 

contract-review committee, implement a process to help ensure that it 

conducts business with qualified vendors, and to take other steps to 

improve UN procurement. In commenting on the official draft of this 

report, the Department of State stated that it welcomed our report and 

endorsed its recommendations. The UN did not provide us with written 

comments.

Objectives, Scope, and 

Methodology

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

reports, manuals, and program documents, as well as the international 

auditing standards of the IIA and the International Organization of Supreme 

21GAO, United Nations: Procurement Internal Controls Are Weak, GAO-06-577

(Washington, D.C.: Apr. 25, 2006). 
Page 17 GAO-06-877T 

Auditing Institutions. 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 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.22 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 

Department of Management’s Procurement Service, the Department of 

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

and conducted structured interviews with the principal procurement 

officers at each of 19 UN field missions. 

Concluding 

Observations

If implemented, the CMP will be a large and unique endeavor for the UN. 

Effective internal oversight and management of the procurement process 

will be necessary for the successful completion of the project. However, 

weaknesses in internal oversight and procurement could impact 

implementation of the CMP. Recent UN scandals, particularly in the Oil for 

Food program, demonstrate the need for significant reforms in these areas.

22GAO, Internal Control: Standards for Internal Control in the Federal Government, 

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

Organizations of the Treadway Commission, Internal Control—Integrated Framework 

(September 1992).
Page 18 GAO-06-877T 

Although OIOS has a mandate establishing it as an independent oversight 

entity and to conduct oversight of the CMP, 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 could 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 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.

While the UN has yet to finalize its CMP procurement strategy, to the extent 

that it relies on the current process, we have identified numerous 

weaknesses with the existing procurement process that could impact 

implementation of the CMP. Long-standing weaknesses in the UN’s 

procurement office have left UN procurement funds highly vulnerable to 

fraud, waste, and abuse. Many of these weaknesses have been identified 

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.

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 me at 

(202) 512-9601 or melitot@gao.gov. Other major contributors to this 

testimony were Phyllis Anderson and Maria Edelstein, Assistant Directors; 

Joy Labez, Pierre Toureille, Valérie L. Nowak, Jeffrey Baldwin-Bott, 

Michaela Brown, Joseph Carney, Debbie J. Chung, Kristy Kennedy, Clarette 

Kim, J.J. Marzullo, and Barbara Shields. 

(320445)
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