United Nations: Weaknesses in Internal Oversight and Procurement Could Affect the Effective Implementation of the Planned Renovation
Published: 2006-06-20T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: 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.
section_title: What GAO Found
paragraphs: 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 high-risk 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.

section_title: Letter
paragraphs: 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, 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. 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.
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. 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.
subsections: section_title: Background
paragraphs: 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  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. In our 2003 report on the CMP, 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 security upgrades. In July 2005, OIOS reported that it had two auditors  reviewing the CMP.
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 Secretariat 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  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.
section_title: Funding Arrangements Impede Independence of the UN Internal Auditors
paragraphs: 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.
subsections: section_title: UN Mandate and International Auditing Standards Require Independence
paragraphs: 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, which  OIOS and its counterparts in other UN organizations formally adopted in  2002, state that audit resources should be appropriate, sufficient, and  effectively deployed. These standards also state that an internal audit  activity should be free from interference and that internal auditors should  avoid conflicts of interest. International auditing standards also state that  financial regulations and the rules of an international institution should not  restrict an audit organization from fulfilling its mandate.
section_title: Funding Arrangements Hinder OIOS’s Ability to Respond to Changing Circumstances and to Reallocate Resources to Address High-Risk Areas
paragraphs: 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 positions 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.
section_title: Reliance on Other Entities for Funding Could Infringe on OIOS’s Independence
paragraphs: OIOS is dependent on UN funds and programs and other UN entities for  resources, access, and reimbursement for the services it provides. These  relationships present a conflict of interest because OIOS has oversight  authority over these entities, yet it must obtain their permission to examine  their operations and receive payment for its services. OIOS negotiates the  terms of work and payment for services with the manager of the program it  intends to examine, and heads of these entities have the right to deny  funding for oversight work proposed by OIOS. By denying OIOS funding,  UN entities could avoid OIOS audits or investigations, and high-risk areas  could potentially be excluded from timely examination. For example, the  practice of allowing the heads of programs the right to deny funding to  internal audit activities prevented OIOS from examining high-risk areas in  the UN Oil for Food program, where billions of dollars were subsequently  found to have been misused. 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.
section_title: GAO’s Recommendation on OIOS Independence
paragraphs: 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.
section_title: OIOS Has Not Fully Met Key Elements of International Auditing Standards
paragraphs: 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.
subsections: section_title: OIOS Has Developed Annual Work Plans, but Has Not Fully Implemented a Risk Management Framework
paragraphs: OIOS has adopted a risk management framework 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  2008, at least 50 percent of their work is based on a systematic risk  assessment.
section_title: OIOS Not Reporting on Status of Overall Risk and Control Issues Facing the UN
paragraphs: 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.
section_title: OIOS Lacks a Mechanism to Determine Appropriate Resource Levels
paragraphs: 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. To provide additional oversight coverage, OIOS assigned an additional auditor exclusively to the CMP, using funds from its  regular budget.
section_title: OIOS Offers Training Opportunities, but Does Not Require or Systematically Track Continuing Professional Development
paragraphs: 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.
section_title: GAO’s Recommendation on OIOS Meeting Key Elements of International Auditing Standards
paragraphs: 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.
section_title: The Current UN Procurement Process Contains Numerous Weaknesses
paragraphs: 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.
subsections: section_title: The UN Has Not Established an Independent Bid Protest Process
paragraphs: 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.  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. Several nations, including the United States,  provide vendors with an independent process to handle complaints.
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  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.
section_title: The Headquarters Contract Review Committee’s Workload Is Increasing Faster Than Its Resources
paragraphs: 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. 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.”
section_title: UN Does Not Consistently Implement Its Process for Helping to Ensure That It Conducts Business with Qualified Vendors
paragraphs: 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.
section_title: The UN Has Not Demonstrated a Commitment to Improving Its Professional Procurement Workforce
paragraphs: 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.
section_title: The UN Has Not Fully Established Ethics Guidance for Procurement Personnel
paragraphs: 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.
section_title: The UN Has Not Included Guidance on Construction Procurement in its Procurement Manual
paragraphs: 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.
section_title: GAO’s Recommendation to Address Weaknesses in UN Procurement
paragraphs: 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 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.
section_title: Objectives, Scope, and Methodology
paragraphs: 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  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. 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.
section_title: Concluding Observations
paragraphs: 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.
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.
section_title: Contact and Acknowledgments
paragraphs: 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.
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