UN Office for Project Services: Management Reforms Proceeding but Effectiveness Not Assessed, and USAID's Oversight of Grants Has Weaknesses
Published: 2009-11-19T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The United Nations (UN) Office for Project Services (UNOPS) provides numerous services for its clients, including procurement and project management. Recent audits and investigations of UNOPS have revealed alleged violations of law, weak internal controls, and financial mismanagement. UNOPS officials misused some of the more than $400 million awarded to UNOPS by the U.S. Agency for International Development (USAID) from 2004 through 2008. GAO was asked to (1) assess the extent to which UNOPS has addressed key concerns about its internal controls, and (2) evaluate USAID's oversight of UNOPS-implemented projects. To address these objectives, GAO reviewed UNOPS and USAID policies and grant documentation.
section_title: What GAO Found
paragraphs: While UNOPS management continues to implement reforms that address key concerns raised by audits and investigations, the effectiveness of some implemented reforms has not been assessed. Management efforts to improve UNOPS include (1) development of UNOPS's project tracking system, Atlas; (2) establishment of an internal oversight office; and (3) establishment of an ethics office. While changes to Atlas have improved UNOPS's financial documentation, UNOPS does not systematically assess data reliability in Atlas. Although UNOPS's internal oversight has been strengthened by the creation of an oversight office, two phases of an investigation of activities in Afghanistan have not begun. UNOPS had no investigative capacity of its own and had to seek out external investigators for which it is still negotiating the scope and cost. In addition, while UNOPS's ethics office complies with most UN requirements, no one has assessed the effectiveness of the office's activities. Finally, UNOPS's Executive Board lacks full access to internal audit reports that could provide greater insights into UNOPS's operations. USAID has not consistently implemented its oversight policies when making grant awards with UNOPS and has been vulnerable to program fraud and abuse. While USAID has policies that require it to perform pre-award assessments of Public International Organizations (PIO), such as UNOPS, USAID could not provide official documentation of these assessments for 7 of its 11 awards made to UNOPS from 2004 through 2008. In the 4 assessments USAID provided, there were no statements acknowledging findings of weak internal controls from UN audits and investigations. In addition, USAID did not negotiate to include audit authority for 9 of these awards that would have allowed USAID access to UNOPS project financial records. We found that an absence of clear guidance, training, and monitoring contributed to these failures. USAID's noncompliance with its policies resulted in limited access to data on UNOPS grants that were associated with findings of possible criminal

section_title: Letter
paragraphs: The United Nations (UN) Office for Project Services (UNOPS) provides  about $1 billion a year in services including procurement and project  management to UN and other international clients. Since 2002, audits and  investigations of UNOPS have revealed alleged violations of law, weak  internal controls, financial mismanagement, and breaches in accounting  and procurement policies. Several projects that UNOPS implemented with  U.S. funds were associated with these adverse findings.
In 2006, UNOPS was near insolvency and the UN Controller placed  restrictions—which lasted for about 2 years—on UN agencies’ use of  UNOPS services. However, UN entities and U.S. agencies continued to use  UNOPS to perform projects in post-conflict nations and other difficult  environments because, according to some clients, UNOPS had the  capacity to move quickly and maintain a presence in difficult operating  environments. The UN Secretary-General appointed new management in  2006 to help restore the financial stability of UNOPS and to make changes  that responded to weaknesses identified by UN auditors. The new  management team stated that strengthening UNOPS’s internal controls  was a major focus. To accomplish this goal, the management team took a  number of steps within its first 3 years at UNOPS, including establishing  an ethics office in 2006 and an internal oversight office in 2007.
From 2004 to 2008, UNOPS spent approximately $430 million  implementing U.S. government grants awarded directly to UNOPS. The  majority of expenditures from these direct awards—about 92 percent— were from the U.S. Agency for International Development (USAID). Of the  USAID grants awarded to UNOPS from 2004 through 2008, 84 percent  were awarded to projects in Afghanistan, where most of the misconduct  identified by audits and investigations occurred. As a member of the  Executive Board, the United States has expressed concern over  weaknesses at UNOPS identified in the UN audit reports. For example, in  2004 a Department of State (State) official at the U.S. Mission to the UN  called for UNOPS management to report on steps it was taking to ensure  sound financial controls, and encouraged member states to do whatever  was necessary to ensure that UN managers implemented the UN audit  recommendations. In addition, in 2008, State officials made public  statements about UNOPS’s internal oversight arrangements and inaccurate  inventory reports.
Given the concerns that have arisen regarding UNOPS’s management and  relationship with UN and U.S. organizations, you asked us to examine  oversight and accountability within UNOPS operations. Specifically, this  report (1) assesses the extent to which UNOPS has addressed key  concerns about its internal controls and (2) evaluates USAID’s oversight of  UNOPS-implemented projects.
To address these objectives, we examined audits and investigations of  UNOPS’s activities, interviewed UNOPS officials, and analyzed documents  relating to initiatives designed to strengthen UNOPS’s internal controls.  We also interviewed UNOPS clients in New York, New York; Washington,  D.C.; and Geneva, Switzerland. We reviewed applicable professional  standards and guidelines for performing audits and investigations,  including the Institute of Internal Auditors’ International Standards for the  Professional Practice of Internal Auditing and the UN Uniform Guidelines  for Investigations. For the purposes of our study, we selected key audit  and investigation standards to examine the extent to which UNOPS has  implemented them. In addition, we prepared and administered a survey to  help us assess the extent to which UNOPS’s implementation of an  electronic project database, Atlas, has strengthened its internal controls.  Finally, we reviewed USAID’s acquisitions policies, collected and reviewed  documentation from the USAID missions that awarded grants to UNOPS  from 2004 through 2008, examined agreements between U.S. agencies and  UNOPS during this time, and interviewed USAID officials in Washington,  D.C. and at USAID missions in Afghanistan, Haiti, Liberia, and Sudan.  Appendix I provides a detailed discussion of our scope and methodology.
We conducted this performance audit from July 2008 to November 2009 in  accordance with generally accepted government auditing standards. Those  standards require that we plan and perform the audit to obtain sufficient,  appropriate evidence to provide a reasonable basis for our findings and  conclusions based on our audit objectives. We believe that the evidence  obtained provides a reasonable basis for our findings and conclusions  based on our audit objectives.
subsections: section_title: Background
subsections: section_title: UNOPS is an Autonomous, Self-Financing UN Entity
paragraphs: UNOPS originated in 1974 as part of the UN Development Program  (UNDP), but has since become an autonomous, self-financing UN entity.  UNDP, which is the UN’s global development agency, established the  office to provide flexible procurement services for multidisciplinary  projects. Effective January 1995, the UN General Assembly established  UNOPS as a “separate and identifiable UN entity” to provide services to  UN organizations and to governmental, intergovernmental, and  nongovernmental entities. At the time UNOPS did not report directly to its  governing body, the Executive Board, but instead reported to it through a  Management Coordination Committee (MCC) chaired by the UNDP  Administrator to provide additional oversight over UNOPS. In September  2008, based on an MCC recommendation, the Executive Board moved to  make UNOPS completely autonomous by removing all ties to UNDP. The  MCC was renamed the Policy Advisory Committee to reflect its change  from being a part of UNOPS’s governance structure to now serving in an  advisory capacity. As a result, UNOPS’s Executive Director now has  independent authority and accountability for the conduct of UNOPS’s  business. See appendix II for a description of UNOPS’s locations.
UNOPS was created to be a self-financing entity and does not receive any  of its annual budget from assessed or voluntary contributions from  member states. All of its resources come as fees-for-service. However,  UNOPS does benefit from UN exemptions and immunities. For example,  UNOPS is exempt from some taxes and custom duties on imports and  exports. According to UNOPS officials, UNOPS and most of its officials  can import and purchase goods duty-free.
section_title: UNOPS Provides Services to a Range of Clients
paragraphs: UNOPS provides services to a range of UN and other clients. These  services include project management, procurement, human resources  management, financial management, and UN common services. See  appendix III for a detailed list of UNOPS services by type. Its clients  include governments, UN agencies, international financial institutions,  intergovernmental organizations, and nongovernmental organizations  (NGO). In addition, UNOPS is responsible for administration of the UN  Global Marketplace Web site, which helps connect UN organizations and  potential vendors and prepares the annual statistical report on the  procurement activities of the UN system.
UNOPS provides many of these services in difficult work environments,  such as post-disaster and peace-building settings, developing countries,  and economies in transition. Some UNOPS clients said they use UNOPS to  implement programs because UNOPS can move quickly and maintain a  presence in difficult environments, such as after natural disasters and in  post-conflict and politically unstable countries. For example, the UN  Children’s Fund used UNOPS as an implementing partner to perform  rehabilitation, refurbishment, and other tsunami-related construction  projects in Indonesia, Maldives, and Sri Lanka when there were no local  contractors on the ground to perform the work. The UN Mine Action  Service also uses UNOPS as its implementer of global demining services  because UNOPS is one of the few organizations with expertise in mine  detection and removal that has a presence in post-conflict and politically  unstable countries.
section_title: From 2004 to 2008 UNOPS Funding Levels Have Increased
paragraphs: In the last 5 years, UNOPS spent about $4 billion delivering services to its  clients, and its annual service delivery expenditures increased from less  than $500 million in 2004 to more than $1 billion in 2008. (See table 1 for  the amount spent on implementation of projects.) During the same time  period, UNOPS’s operational reserve fund fell to as low as $4.4 million in  2005, but was restored to more than $30 million in 2008. UNOPS has also  increased its annual acquisition of new business from $728 million in 2004  to $1.5 billion in 2008.
section_title: Multiple UN Audits Found Widespread Financial Mismanagement and Insufficient Documentation of UNOPS’s Financial Transactions
paragraphs: As shown in table 2, UN audits and investigations from 2002 through 2008  have found significant financial mismanagement at UNOPS and a lack of  financial transaction documentation.
The UN Board of Auditors (BOA) is the only external auditor authorized to  audit UNOPS’s financial statements and reports to member states through  the UN General Assembly.
section_title: UNOPS Management Has Identified Areas for Reform based on Key Concerns about Internal Controls
paragraphs: The UNOPS management team has identified areas for reform to address  previously identified concerns about internal controls. These areas— which include financial documentation, internal oversight, and ethics—are  critical to developing a robust internal controls environment and reducing  vulnerability to waste, fraud, and abuse.
Audits of UNOPS found deficiencies in financial documentation and  reporting, including a lack of required information on UNOPS’s costs and  financial statements and a lack of documentation corroborating project  balances. International internal control standards emphasize that a strong  financial documentation system is essential to effective management.  Without a system in place that can document timely, accurate, and  complete information, management’s capacity to ensure effective internal  audits is limited.
Internal oversight, which includes audits and investigations, provides  management with information about the effectiveness of internal controls,  compliance with rules and regulations, and proposed corrective measures.  Internal audits can be used to track recommendations to ensure that  management addresses these areas. UNOPS has adopted Institute for  Internal Auditors standards, which are internationally recognized best  practices for internal audits. Findings from investigations can be used to  hold an organization or individuals accountable for wrongdoing. UN  Uniform Guidelines for Investigations require, among other things, that  management ensure sufficient resources to perform investigations.
Previous audit reports have highlighted a lack of compliance with rules  and a lack of documentation to support financial transactions at UNOPS,  suggesting that some of the organization’s practices were at risk of ethics  violations. Ethics policies could strengthen the organization’s internal  controls environment by helping to ensure accountability and  transparency within the organization.
section_title: USAID Has Distinct Policies for Awarding Grants with PIOs, including UNOPS
paragraphs: USAID, which provides the large majority of U.S. funding to UNOPS, has  policies for making awards with PIOs that are distinct from its policies for  making contracts, grants, or cooperative agreements with for-profit,  nonprofit, international partners, and other organizations. For grants with  PIOs, USAID primarily relies on policies in its Automated Directives  System (ADS) 308, which outlines a different set of procedures for making  grant awards with PIOs. For example, competition is not required for  grants with PIOs. USAID also follows a simplified grant format, uses a  separate set of pre-award assessment criteria, and generally relies on the  PIO’s own management for oversight— including internal audit and  procurement policies—except when USAID is the sole contributor to the  grant award. According to its PIO policy, USAID uses a list of international  organizations compiled by State and maintained by the Office of Personnel  Management to designate those PIOs that may receive USAID grant funds  (see appendix IV for this list). The 124 international organizations on the  list are separated into six categories:    UN organizations.
Specialized agencies of the UN and related organizations.
International financial institutions.
Inter-American organizations.
Other regional organizations.
Other international organizations.
According to USAID data, from January 2004 to July 2009, USAID issued  approximately $8.1 billion in grants or cooperative agreements to 50  different PIOs. USAID’s data showed that the majority—60 percent—of  USAID’s grants to PIOs had been awarded to UN organizations and  specialized UN agencies.
section_title: UNOPS Reforms Are Proceeding, but the Effectiveness of Some Implemented Reforms Has Not Been Assessed
subsections: section_title: UNOPS Reforms to Its Documentation System, Internal Oversight, and Ethics Are Proceeding
paragraphs: UNOPS has taken actions to implement reforms in areas including its  documentation system; internal oversight, including internal audits and  investigations; and ethics.
The current UNOPS management team has continued to develop Atlas, its  centralized project management system, to address previously identified  deficiencies in UNOPS’s documentation. In 2007, UNOPS established an  internal oversight office, including an internal audit program modeled  after Institute for Internal Auditors standards. As part of its effort to  address previously identified deficiencies through internal oversight,  UNOPS management proposed investigations into allegations of  wrongdoing by UNOPS employees. In addition, the management team  established an ethics office in 2006 according to UN guidance on the roles  of UN ethics offices.
subsections: section_title: Documentation System
paragraphs: The current UNOPS management team has continued to develop Atlas, its  centralized electronic project management system, to address previously  identified deficiencies and thereby ensure that its design reduces the risk  of fraud, waste, and abuse and strengthens internal and financial controls.  Atlas has been in use at UNOPS since 2004 and is designed to  systematically consolidate and track project data worldwide, including  financial transactions.
Prior to Atlas, UNOPS field offices used the Field Administrative Support  Service (FASS). FASS, which is not a common platform, required UNOPS  offices to each maintain their own database for tracking projects.  Headquarters management did not have real-time capability for tracking  project or field office expenditures and, therefore, had limited capacity to  identify either poor performance or other problems with grants or  contracts. According to a UNOPS official, most countries’ data systems  before Atlas were unsatisfactory and were not integrated for centralized  use or oversight. In addition, FASS provided no systematic way to include  electronic documentation for every disbursement made by officials in the  field. Under the new system, project managers enter financial transaction  data and Atlas creates and documents vouchers used to make payments.  Information is now more readily accessible to management in  headquarters and in the field offices.
section_title: Internal Oversight
paragraphs: In July 2007 UNOPS management established the Internal Audit Office.  Before UNOPS established this office, it had only minimal internal audit  capacity. UNDP provided internal audit coverage to UNOPS until the  office was established, but its capacity to audit UNOPS was limited. In  2007, for example, the three staff members performing internal audits for  UNOPS were only able to complete one of the nine planned audits and  management reviews of UNOPS core units and activities before the  establishment of UNOPS’s office in July.
To address previously identified deficiencies, UNOPS management agreed  to fund investigations into allegations of wrongdoing by UNOPS  employees. In 2006 and 2007 UNOPS management agreed to pay for the  UN Office of Internal Oversight Services (OIOS) to investigate UNOPS  activities in Afghanistan, Argentina, and Kenya. In 2007 UNOPS  management requested further investigation of misconduct in  Afghanistan. One investigation in Kenya and the first phase of the  Afghanistan investigation found evidence of alleged criminal activity. In  2009 UNOPS management approved the hiring of its first investigator and,  in September, changed the name of the office from the Internal Audit  Office to the Internal Audit and Investigations Group to reflect its  expanded capacity.
section_title: Ethics
paragraphs: In July 2006 the current UNOPS management team established an ethics  office modeled upon the UN Secretariat Ethics Office and UN guidance.  The UN Secretary-General had made ethics reform a priority in 2005 and  established a Secretariat Ethics Office in January 2006. UNOPS appointed  its Ethics Officer “to advance United Nations reform and as part of its  commitment to the highest standards of ethics, integrity, accountability  and transparency.” Prior to 2006 UNOPS had neither an ethics office nor  an ethics officer, thus no one had responsibility to identify and address  ethics concerns.
section_title: Reforms Have Strengthened Internal Controls, but the Extent of Their Effectiveness Has Not Been Assessed
subsections: section_title: Project Tracking System Has Improved Documentation of Projects, but Weaknesses Remain
paragraphs: While changes to UNOPS’s project tracking system, Atlas, have improved  documentation of projects at UNOPS, the effectiveness of these  improvements is limited by the lack of systematic data reliability  assessments and other system implementation inadequacies. Atlas has  improved the internal controls environment at UNOPS in three primary  ways:    Atlas allows UNOPS management real-time global access to system data.
According to UNOPS officials, this improves management’s capacity to  oversee worldwide operations and track progress toward project  completion by country office or region. As a result, managers have the  opportunity to identify and correct problems, such as poor performance or  fraud, much more quickly than they could under FASS.
Atlas requires some data to be entered for each project, allowing managers  the ability to more systematically measure, track, and compare  performance by project or office. For example, financial data and  procurements for each project must be systematically entered into Atlas.  In addition, the system requires documentation of every purchase order  and allows each one to be checked, either in the field or from  headquarters, against the project’s budget and cash balance. UNOPS  officials said that these additional requirements have made Atlas more  effective at tracking UNOPS’s assets than FASS.
Atlas incorporates some functions that may reduce the risk of fraud. For  example, within months after he was appointed, the Executive Director  stated plans to require UNOPS field offices to document imprest account  transactions in Atlas, because such transactions present a particularly high  risk of fraud. Until they implemented this requirement, headquarters gave  offices cash advances in imprest accounts and replenished the accounts  monthly with only limited documentation of how offices spent the  money. In September 2009, the officials reported that all offices were  tracking imprest transactions in Atlas. Atlas also reduces vulnerability to  fraud by using an electronic signature to verify that more than one person  has been involved in every transaction as a management oversight  measure.
We found that three major weaknesses may limit Atlas’s potential to  address some of UNOPS’s previously identified internal and financial  control problems.
The timeliness, accuracy, and completeness of data in Atlas are  limited, and UNOPS does not systematically assess the reliability  of data in Atlas. Based on our survey of UNOPS’s field offices, more than  a third of the offices reported that the timeliness, accuracy, and  completeness of data in Atlas were limited (see appendix V for more  complete results of our survey). The UNOPS Director of internal oversight  also told us in December 2008 that the accuracy and completeness of data  entry remain a concern. However, UNOPS management does not know the  extent to which data reliability is a problem because UNOPS has not  sought any systematic check on data accuracy. While UNOPS officials  periodically run reports to see if information is consistent, these reports  are run on an ad-hoc basis, particularly when issues arise on a particular  project or office. UNOPS officials said there have not been any UNOPS  management reports on frequency or types of errors discovered in  reviewing data entered into Atlas.
The Atlas system can be difficult to use and frequent turnover  presents a training challenge. Managers from all of the UNOPS field  offices we surveyed identified some conditions that made Atlas difficult to  use (see appendix V). For example, according to 15 of the 17 field  managers who responded to our survey, Atlas produced reports that did  not meet the needs of their offices, which made the system at least  “somewhat difficult” to use. In addition, more than half of the respondents  indicated that the system was slow, data entry took too long, system  connectivity or access was poor, and the system contained technical  glitches. A UNOPS official we interviewed told us that one of Atlas’s  technical glitches was its failure to release funds when expenses are re- evaluated. Another UNOPS official also said that UNOPS faces continued  financial risk because it had not integrated all the necessary management  controls. For example, UN WebBuy—the online procurement tool used by  UNOPS—is not linked to Atlas, so there is no function for electronic  approval of contract award ceilings, which leaves the organization  vulnerable to possible price manipulation. Furthermore, while UNOPS’s  Chief Information Officer told us UNOPS has offered nine training  sessions on using Atlas in 2009 as of October, UNOPS officials said  frequent turnover of staff at UNOPS presents a continuing training  challenge. One official said there was a need to make the training more  tailor-made for shorter-term employees and offer introduction training at  more frequent intervals.
Several recommendations relating to Atlas from UNOPS internal  oversight office have not been fully implemented. Several of the  unresolved high priority audit recommendations from UNOPS’s 2007 and  2008 internal audits relate to deficiencies in the Atlas system. For example,  the Director of internal oversight at UNOPS reported to the UNOPS  Executive Board in 2009 that there is a need to (1) reconcile Atlas records  and bank statements for all ongoing projects, (2) issue a guideline on  budget overrides and a control mechanism to mitigate the risk of  nonauthorized expenditures, and (3) expedite the review and application  of the new version of Atlas where all operational technical concerns are  solved.
section_title: Internal Audits at UNOPS Generally Comply with International Standards, but Phases of a Remaining Investigation of Alleged Wrongdoing Have Not Begun
paragraphs: UNOPS Has Established More Systematic Internal Audits  As of August 2009, we found that UNOPS’s internal audit function  generally complies with key Institute of Internal Auditors (IIA) standards,  as discussed in table 3.
Sufficiency of Resources for UNOPS Investigations Is Unclear  Because Remaining Phases of an Investigation Have Not Begun  While UNOPS management has committed resources to investigations, the  sufficiency of UNOPS’s resources for investigations is unclear because  two phases of the investigation of its operations in Afghanistan have not  yet begun. Although UN Uniform Guidelines for Investigations require  management to ensure sufficient resources for investigations, the  remaining phases of the investigation have not begun because negotiations  between UNOPS and the OIOS over the investigation’s cost and scope  have been slow. In 2007, when UNOPS management proposed the first  phase of the investigation, UNOPS had no investigative capacity of its own  and, thus, had to request and pay other investigators for their services.  UNOPS management told us they selected OIOS because it is commonly  viewed as the principal investigative authority for UN organizations.  UNOPS management officials also said that selecting OIOS over other  alternatives would be less likely to be seen as inappropriately influencing  the investigations. However, as we reported previously, OIOS is not fully  independent in investigating matters for UN funds and programs (and  other UN entities), such as UNOPS. OIOS must negotiate the terms of  work and payment for any investigations it conducts for UN funds,  programs, and other UN entities. OIOS sent UNOPS a proposal for the  second phase of the investigation about 5 months after the case was  transferred to the OIOS Investigations Division from the Procurement  Task Force (PTF), and UNOPS and OIOS management said negotiations  were still ongoing because of disagreements over the proposed scope and  cost of work. UNOPS management officials told us they found OIOS’s  proposed cost too high and the proposed scope too narrow. State officials  and a former PTF investigator said they are concerned that OIOS is not  committed to pursuing the UNOPS investigations. However, OIOS officials  said they were concerned about UNOPS’s willingness to pay, because  UNOPS contested the cost of the first investigation of Afghanistan after it  was completed by the PTF. Therefore, OIOS officials said they would not  agree to the investigation until UNOPS had confirmed a payment schedule.  As a result, the remaining phases of the investigation have not begun about  3 years after the activities in Afghanistan that are the proposed subject of  the investigation occurred. According to investigators who worked on the  first phase of the Afghanistan investigation, lengthy delays increase the  chance that documentation of the activities to be investigated may be lost  or destroyed, thus hindering any eventual investigation and ultimately,  accountability. Because arrangements for the investigation of UNOPS are  not finalized, it is unclear whether UNOPS has met the UN Investigative  Guideline requiring the organization to provide sufficient resources to  perform investigations.
In an effort to develop its own internal investigative capacity, UNOPS  announced the opening of a position to hire a full-time investigator in  August 2009, which has not been filled as of October 2009. UNOPS  management officials told us they would consider contracting with  additional investigators as needed.
section_title: UNOPS Ethics Office Has Met Most UN Requirements but Its Effectiveness Has Not Been Assessed
paragraphs: While we found that UNOPS’s Ethics Office generally complies with most  of the key requirements for UN ethics offices of organizations outside the  UN Secretariat as outlined in a 2007 UN Secretary-General’s bulletin, it has  not met the requirement of annual reporting and has not fully met its own  requirement for ethics training (see table 4). Furthermore, assessments of  the effectiveness of UNOPS’s Ethics Office have not been conducted.
The effectiveness of the UNOPS Ethics Office remains unclear because the  office’s activities have not been assessed. The UNOPS Director of internal  oversight and the Ethics Officer told us that there have been no audits or  assessments of UNOPS’s Ethics Office. Although the Ethics Office was  established in 2006, they said it is too early to assess its effectiveness  because the office has only been independent since February 2009. By  contrast, the UN Secretariat Ethics Office, which was also established in  2006, has been audited or assessed by three entities in the last year.
section_title: UNOPS’s Executive Board Lacks Full Access to Internal Audit Reports that Could Provide Greater Insights into UNOPS’s Operations
paragraphs: While UNOPS’s Executive Board receives information from various  sources about the effectiveness of UNOPS’s financial and programmatic  operations, the board members—including the United States—do not have  full access to internal audit reports, which could increase transparency  and provide further insight into UNOPS’s operations. As a member of the  Executive Board, the United States works with other member states  represented on the Board to ensure oversight and accountability of  UNOPS’s resources. Currently, the Executive Board receives information  on UNOPS’s operations from the BOA’s external audit reports on the  organization’s financial statements and the UNOPS internal oversight  office’s annual report summarizing the office’s findings and activities. For  example, in 2009, UNOPS’s internal oversight office provided the  Executive Board with the annual report for its first full year of operation.  While these existing information sources help the Executive Board  exercise its oversight responsibilities, access to UNOPS’s internal audit  reports is limited. In September 2008, at its annual meetings, UNOPS’s  Executive Board approved a policy that granted member states limited  access to internal audit reports completed after their decision entered into  effect. Member states are not given copies of the reports, but are able to  read them at the UNOPS internal oversight office after officially requesting  access. However, the United States and other member states may still be  denied access to any UNOPS internal audit reports that were completed  before September 2008, covering the time frame when the negative  findings were identified. By contrast, since December 2004, OIOS has  provided members with full access to internal audit reports upon request.
section_title: USAID Has Not Consistently Implemented Its Oversight Policies When Making Grant Awards with UNOPS and Has Been Vulnerable to Program Fraud and Abuse
paragraphs: While USAID’s general policies for making grants with PIOs require USAID  to evaluate grantees and to include provisions in some cases under which  the grantee agrees to give USAID access to oversight information, USAID  has not consistently implemented these policies when making grant  awards with UNOPS. From 2004 through 2008, USAID did not meet its  criteria for assessing UNOPS’s eligibility as a grantee before awarding  each grant. Furthermore, in those assessments it did perform, USAID did  not acknowledge adverse findings from a series of UN investigations and  public UN audit reports. In addition, in the majority of these awards  USAID did not negotiate to include a provision where UNOPS would agree  to allow USAID access to UNOPS’s expenditure records and documents.  We found that some of these omissions can be attributed to USAID’s lack  of clear guidance, training, and monitoring of its required audit provisions.  USAID’s failure to adhere to its policies limited its oversight of grants that  were subsequently associated with alleged findings of criminal actions and  mismanaged funds.
subsections: section_title: USAID’s Policies Require USAID to Evaluate Grantees Before Making an Award and to Include Provisions Allowing Access to Oversight Information When Applicable
paragraphs: USAID has policies that require it to evaluate PIOs before making an  award and to include provisions to obtain access to information needed to  oversee grant expenditures when USAID is the sole contributor to the  award. According to the Domestic Working Group on Grant  Accountability—a collection of federal, state, and local audit organizations  tasked by the U.S. Comptroller General to suggest ways to improve grant  accountability—pre-award assessments can provide the government with  confidence that the grantee has the required financial systems to allow  sufficient oversight. These assessments should ensure that an applicant  has adequate financial systems and they should enable government  agencies to decide whether to award the grant and if oversight conditions  should be added. For grants with NGOs, USAID uses criteria for  assessing grantees outlined by the Office of Management and Budget’s  (OMB) Circular A-110. According to the Circular, these criteria can also  apply to PIOs. In addition, USAID requires that the missions perform pre- award assessments, as well as additional assessments whenever a  modification significantly increases the amount of the original grant. The  assessments are to ensure that (1) the grantee’s program is an effective  and efficient way to achieve a USAID objective, (2) the grantee’s program  and objectives are compatible with USAID, (3) there are no reasons to  consider the grantee not responsible, and (4) the grant is made for a  specific program of interest to USAID.
In addition, under USAID policies, the application of certain audit  provisions with PIOs depends on its contribution to the award relative to  other donors—whether USAID is the sole or largest contributor.  According to a 1988 USAID policy, when USAID is the sole contributor in a  grant to a PIO, USAID shall include a provision in the grant requiring that  the grantee provide all records and documents that support program  expenditures to USAID or to the U.S. Comptroller General. USAID policy  further states that if USAID is the largest contributor to a project it can,  with the concurrence of State, seek to negotiate to apply increased audit  authority to protect U.S. interests. Moreover, according to policy, when  USAID is not the sole contributor to a UN award, USAID can apply the UN  grant provision and the grant will be audited with established UN  procedures. Appendix VI contains these USAID policies.
section_title: USAID’s Process for Awarding Grants to UNOPS Did Not Include Required Steps for Evaluating the Responsibility of Grantees or Include Findings from Multiple UN Reports
subsections: section_title: USAID Did Not Consistently Assess UNOPS’s Responsibility as a Grantee
paragraphs: During the years that the UN issued negative findings on UNOPS, USAID  did not consistently perform pre-award assessments to justify selecting  UNOPS as a responsible grantee. While USAID could apply the OMB  Circular A-110 to perform eligibility assessments as it does for NGOs, it  does not use this guidance to perform similar assessments for PIOs.  According to USAID officials, USAID does not perform the same type of  assessments that it performs for other grantees or contractors, although  one USAID official said that addressing this lack of assessment is currently  one of their top priorities. To the extent that USAID does perform  assessments of PIOs, the assessments occur at the mission level before the  grant is awarded and whenever a modification significantly increases the  amount of the original grant. The assessments are to be recorded in  memos and documented with the grant award. According to USAID Office  of Acquisition and Assistance (OAA) officials, this requirement is the only  policy that requires eligibility screening activities of PIOs.
However, USAID missions did not have official documentation of pre- award assessments for more than half of its grants with UNOPS in the last  5 years or for the majority of modifications that increased grant budgets.  USAID could not provide official documentation of assessments for 7 of  the 11 grants it made to UNOPS from 2004 through 2008 (see app. VII).
USAID also lacked assessment documentation for the majority of  modifications to UNOPS grant programs that increased the budget of the  grant award. According to USAID OAA officials, procurement staff should  document assessment criteria in a memo whenever a modification  increases the budget or introduces new work to the program. However,  USAID did not have records of assessments for 11 out of 14 modifications  that increased UNOPS’s grant budgets from 2004 through 2008. We  previously reported that documentation is necessary to ensure that third  parties can fully understand and review the actions that have occurred  during the project period. For example, until 2006, the Afghanistan  Mission had no documented assessments for modifications to the largest  USAID-funded UNOPS project in Afghanistan—Rehabilitation of  Secondary Roads—even though these modifications increased the scope  and budget of the program by more than ten times its original amount. In  2006 the Afghanistan Deputy Mission Director reported in an official  memo that there was no information in the grant files justifying these  modifications and thus he had to rely on limited information, including  anecdotal inputs, to justify additional increases to the program.
USAID OAA officials acknowledged that some of the memos documenting  pre-award assessments from 2004 through 2008 could be missing. USAID  officials told us that finding these memos from field offices was a difficult  task, because the memos may be stored in the field and are not available  from a centralized location. In addition, one USAID official said that  institutional knowledge of grants is difficult to maintain at hardship posts  where staff generally have only 1-year rotations.
section_title: USAID Did Not Acknowledge Information from UN Audits and Investigations of UNOPS while Continuing to Award Grants to UNOPS
paragraphs: None of USAID’s four official pre-award assessments of UNOPS from 2004  through 2008 acknowledged adverse findings from publicly available UN  audits and investigations.  As we noted earlier in this report, from 2002  through 2008, OIOS, the BOA, the UNDP Office of Audit and Performance  Review, and the UNOPS Internal Audit Office all issued negative findings  on UNOPS’s internal controls, financial monitoring, and lack of  transparency. Furthermore, in 2004 and 2007, the BOA was unable to make  a judgment about UNOPS’s financial statements due to UNOPS’s lack of  sound financial controls and its unreliable financial accounting data. In  2008, the BOA expressed an unqualified audit opinion of UNOPS’s  financial statements, although the report also expressed the need for  improvements in financial controls, asset management, and project  monitoring. However, USAID headquarters officials said they did not have  knowledge of UN findings from the 2004 BOA report and several Mission  officials had no knowledge of any UN findings, despite criticisms of  UNOPS management by State. From 2004 through 2008, USAID awarded  11 grants with multiple modifications that increased the grant budgets, all  of which were required instances for USAID to reassess UNOPS as a  responsible grantee. During this time USAID obligated $478.3 million to  UNOPS. Figure 1 juxtaposes the timing of USAID’s grant awards and  modifications with the issuance dates of these UN reports.
section_title: USAID Grants Have Lacked Certain Required Audit Provisions and Were Associated With Findings of Criminal Actions and Mismanaged Funds
subsections: section_title: USAID Did Not Consistently Include Audit Provisions Allowing Direct Access to UNOPS Grant Expenditure Documentation
paragraphs: USAID did not consistently include the audit provision that would have  allowed it access to documentation of how UNOPS spent funds from  grants awarded to UNOPS during the last 5 years. Under USAID policy, for  awards where USAID was the sole contributor, the audit provision was  required. Where USAID was not the sole contributor, the inclusion of the  audit provision was not required, but USAID could have negotiated for its  inclusion. USAID only included the sole contributor audit provision in 2 of  its 11 awards. (See table 5.)
For five of the awards, neither UNOPS nor USAID recorded additional  contributors to the award—making USAID unequivocally the sole  contributor—but USAID failed to include the sole contributor audit  provision in those awards. USAID mission officials said there was no  explanation in USAID’s documentation to indicate why contracting  officials did not apply the sole contributor audit provision when USAID  was the sole contributor. In addition, for four of the awards, USAID had  the discretion to negotiate for the same provision and did not exercise  such discretion.
According to UNOPS data, USAID has been the only outside contributor to  all 11 of its grants with UNOPS during the last 5 years, but these data did  not include any in-kind contributions made to the award. In at least three  awards, UNOPS made small, in-kind contributions to the award—for  example, they provided staff to perform landscaping services and  administrative support. USAID also listed a nonfederal donor contributing  to another award. UNOPS senior officials said they were unaware of the  contributions UNOPS made to the three USAID grants. They said that  these contributions were “strange” because UNOPS’s mandate is to  provide implementation services, not to be a donor. They told us that  these in-kind contributions might have been made to avoid USAID’s  regulations.
Consistent with these statements, USAID gave us a 2005 e-mail exchange  where a UNOPS official asked that the proposed grant use a UN provision  as an alternative to the sole contributor provision. When asked, the  USAID contracting officer in charge of the grant mentioned what actions  could be taken in order for the sole contributor audit authority not to be  required, such as contributions to the grants from another entity. As a  result, UNOPS then contributed to the grant’s budget, and USAID did not  include the sole contributor audit provision within the grant award.
USAID policy does not define sole contributor for the purposes of grants  to PIOs. As a result we were unable to determine whether the four  remaining awards would be considered sole contributor awards requiring,  unless waived, the inclusion of the sole contributor audit provision.  Nevertheless, as the largest contributor, USAID could have elected to  negotiate for the application of selected procurement and audit policies  with UNOPS to protect U.S. interests. USAID applied the UN grants  provision to these four awards.
section_title: USAID Lacks Clear Guidance, Training, and Monitoring of Its Required Audit Provisions with UNOPS and Other PIOs
paragraphs: USAID has not provided clear guidance to ensure its audit provisions are  correctly implemented. We found that contracting officers have not been  consistent in their use of the sole contributor audit provision because  there is no clear definition of what constitutes a sole contributor in USAID  policy. USAID OAA officials said this lack of definitional clarity might  weaken contracting officers’ abilities to include the provision when  negotiating to include audit access with UN officials. For example, USAID  has not defined the amount of contribution, the type of contribution, or  the type of contributor necessary to establish USAID as the sole  contributor. In addition, USAID provides no guidance to ensure that the  contracting officers drafting the grant award know whether USAID is the  sole contributor to the grant, because contracting officers do not  participate in country donor meetings. USAID officials acknowledged that  the absence of definitions and the absence of clear guidance for  implementing the sole contributor audit authority have been weaknesses  in their PIO policies.
USAID has also not provided contracting officers with specific training on  how to apply the provisions in its grants with PIOs. For example,  contracting officers at three missions that awarded grants to UNOPS said  they received no training on awarding grants to PIOs, and the most recent  assistance management workbook for contracting officers did not include  any guidance on when to use the different PIO audit provisions.
Finally, USAID does not monitor whether the PIO audit provisions are  implemented as required, in part because it has not developed or  documented an approach to such monitoring. According to internal  control standards for the federal government, management should provide  ongoing monitoring of grant implementation performance. However,  USAID OAA officials were not aware that in five of the seven grants with  UNOPS for which USAID was unequivocally the sole contributor, the  contracting officers had used the incorrect audit provision, in part because  they had not monitored the provisions in these awards. While USAID’s  Mission Compliance Checklist includes monitoring criteria to confirm  other provisions specific to PIOs, it does not include a requirement to  monitor whether the mission used the appropriate audit provision.  USAID officials acknowledged that monitoring appropriate oversight  provisions may not be a standard part of their monitoring protocol.  According to USAID officials, missions do not document how and when  the sole contributor audit provision is used in grant awards. The missions  never check to determine if the provisions are correctly implemented, and  the contracting officer’s choice of audit provision in the original grant  award is not reviewed unless there are major changes to the award’s  financial contributors. Furthermore, while USAID’s policy indicates that  the sole contributor audit provision can be waived, the policy does not  include criteria for requesting a waiver. USAID OAA officials said they  have never seen a request to deviate from the sole contributor provision.
section_title: USAID’s Failure to Adhere to its Policies Severely Limited Its Access to Information about UNOPS Grants Associated with Findings of Alleged Criminal Actions and Mismanaged Funds
paragraphs: USAID’s failure to adhere to its policies severely limited its ability to  require expenditure documentation from grants that were associated with  findings of alleged criminal actions and mismanaged funds. From 2004  through 2008 USAID obligated $450 million in awards to UNOPS that did  not include the sole contributor audit provision to provide access to  UNOPS’s expenditure documents. In 2008, the PTF found instances of  fraud, embezzlement, conversion of public funds, conflict of interest, and  severe mismanagement of USAID-funded UNOPS projects in Afghanistan,  including the $365.8 million Rehabilitation of Secondary Roads project.  According to the allegations in the investigation, a UNOPS official diverted  reconstruction funds for personal use, including hundreds of thousands of  dollars in USAID funds for rent, a home renovation, and other luxury  items. In addition, the investigation found that the UNOPS official  repeatedly violated rules and regulations by severely misappropriating  project funds and by engaging in fraudulent and unlawful acts. The  USAID Office of Inspector General also reported in 2008 that UNOPS did  not complete projects as claimed and that projects had defects and  warranty issues, as well as numerous design errors, neglected repairs, and  uninstalled equipment and materials—all of which were billed as  complete. UNOPS was also missing key documentation for expenditures  and bills of quantity.
USAID had limited access to expenditure records and documents during  these grant awards and during subsequent investigations because it did  not include the sole contributor provision in its awards with UNOPS. As a  result, USAID officials have not been able to require UNOPS to provide  information to substantiate how it spent U.S. grant funds. USAID officials  said that certain UNOPS officials were unwilling to furnish requested  documents during the grant, and UNOPS would not respond to requests  for meetings and documentation after the grant. For example, a lead  USAID investigator asked for bills of quantity for UNOPS projects that  were underperforming to see if USAID had overpaid for those projects and  to quantify how much money USAID had lost. Although the investigator  sought meetings with the head of UNOPS in Afghanistan and the Acting  Country Director of UNDP, the officials never responded to his requests  for meetings and never provided the requested documentation. The  investigator said that such problems will likely continue to occur with UN  entities if USAID does not have a way to compel the UN to cooperate.  However, some UNOPS officials have subsequently cooperated with  requests for grant information made by the USAID Inspector General and  other USAID OAA officials.
While USAID took actions related to UNOPS projects in Afghanistan based  on the severity of the findings in the investigation reports, it took more  than a year to reconcile the accounts, and USAID is still working to  substantiate some claims from UNOPS. In July 2008 the Afghanistan  Mission decreased UNOPS’s scope of work, deobligated unexpended  balances from expired awards, and issued bills for collection for  outstanding amounts that had been advanced to UNOPS. According to  the Afghanistan Mission, UNOPS has since refunded the amounts  requested in the bills for collection—including accrued interest and  additional funds—and has also provided documentation for funds that had  been incorrectly entered as expenditures for another international donor  in the payment management system instead of expenditures belonging to  USAID. However, the Afghanistan Mission is still working with UNOPS to  substantiate claims for reimbursement that are being made for the  Secondary Roads project that was terminated in December 2007. The  UNOPS letter of credit was suspended in January 2008, requiring UNOPS  to provide supporting documentation for approval before any additional  funds were released. UNOPS has since requested $16 million from USAID  for costs incurred before USAID canceled the program, and while USAID  Mission officials have already reimbursed UNOPS $1.2 million, they are  still reviewing and clarifying UNOPS’s documentation to determine  additional amounts of repayment.
section_title: Conclusions
paragraphs: The current UNOPS management team has made significant progress in  improving UNOPS’s financial position and in making changes to its  systems that are designed to address the deficiencies highlighted in  numerous UN oversight organizations’ audits and investigations. However,  problems with data reliability in UNOPS’s project management system,  lengthy negotiations slowing its investigations, and limited ethics reporting  are evidence that UNOPS management’s reform efforts have not yet fully  addressed UNOPS’s internal control weaknesses. By fully implementing  remaining reforms and assessing the overall effectiveness of the reform  effort, UNOPS can provide the Executive Board assurance that the  problems have been addressed.
USAID’s policies are designed to provide USAID assurance that its project  implementers are capable of responsibly managing U.S. funds. However,  USAID’s pre-award assessments of UNOPS did not include the numerous  negative findings in UN audit reports that would have alerted USAID to the  risks involved when using UNOPS as an implementing partner. If these  assessments had shown UNOPS’s risks, including its deficiencies in  internal controls and inaccurate expenditure reporting, USAID may have  recognized the importance of applying its required oversight authority to  its grant awards. Instead, USAID’s inconsistent implementation of its audit  policies made its programs vulnerable to fraud, waste, and abuse. USAID  forfeited access to information that may have revealed mismanagement of  USAID funds years before costly post-project investigations did.
section_title: Recommendations for Executive Action
paragraphs: We recommend that the Secretary of State work with other member states  to take the following 2 actions:   1.  support UNOPS’s continued management reforms as it addresses the  areas of vulnerability that UN auditors have identified and  2.  encourage UNOPS management to assess the effectiveness of the  rt.
For adequate accountability of grants made with Public International  Organizations (PIO), we make 4 recommendations to the USAID  Administrator to ensure that USAID  1.  develop and document its approach for assessing the eligibility of  Public International Organizations deemed responsible for use by  USAID, 2.  define the terms and definitions in its existing guidance on PIO audit  provisions permitting USAID access to financial records and  documents, 3.  ensure that cognizant contracting  staff are sufficiently trained on the  use of the PIO audit provisions, and 4.  establish an approach t o monitor whether the PIO audit provisions are  implemented as required.
section_title: Agency Comments and Our Evaluation
paragraphs: We requested and received written comments on a draft of this rep from State, USAID, and UNOPS. These comments are reprinted in  appendixes VIII through X, along with our responses to specific points.  ted  UNOPS also submitted technical comments that we have incorpora into this report, as appropriate. In commenting on the draft, Stat endorsed the main findings and conclusions of the draft report.  Specifically, State concurred with the recommendation that it support  d  UNOPS in its continued efforts to improve management practices an committed to continue to encourage and monitor assessment of the  impact of the reform effort. State noted that our assessment of UNOPS’s  progress is both accurate and balanced. State also noted that reforms in  Executive Board access to internal audit reports is particularly important  to fostering integrity, ethical conduct, and transparency. USAID concurr with our recommendations and proposed an agency plan to implement  each recommendation and a target completion date. USAID agreed that it  ed  needs to adopt improved procedures, stronger guidance, training, and  monitoring related to the use of Public International Organizations (PIO)  audit provisions. For each recommendation, USAID set an implementation target date of either May or June of 2010. UNOPS provided comments on  some of our findings and acknowledged the need for assessment of long- term impact of its reforms, but stated that the most recent extern al audit  and improved f improvement.  inancial position are indicators that demonstrate  As agreed with your offices, unless you publicly announce the contents o this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Executive Director UNOPS, the Acting Administrator at the U.S. Agency for International  Development, the Secretary of State, the U.S. Permanent Representativ the United Nations, and other interested congressional committees. In  addition, the report will be available at no charge on the GAO Web site at  http://www.gao.gov.
If you or your staffs have any questions about this report, please contact  me at (202) 512-9601 or melitot@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made major contributions to this report are  listed in appendix XI.
section_title: Appendix I: Scope and Methodology
paragraphs: To assess the extent to which United Nations (UN) Office of Project  Services (UNOPS) has addressed key concerns about its internal controls,  we reviewed key UN and UNOPS reports and documents outlining  changes UNOPS management made to the organization and its operations  from 2006 to 2009. We obtained and reviewed official reports from  UNOPS’s Executive Board and the UN General Assembly, UN Secretary- General bulletins, and UNOPS operational directives. We interviewed  senior officials from UNOPS in New York, New York; Copenhagen,  Denmark; and Geneva, Switzerland; and other UN officials in New York.  Specifically, we met with officials from  the UN Children’s Fund, the UN Development Program (UNDP), the UN Population Fund, the Advisory Committee on Administrative and Budgetary Questions, the UN Mine Action Service, the Office of Internal Oversight Services, and the Board of Auditors (BOA).
We also met with clients of UNOPS in Geneva—the Global Fund to Fight  AIDS, Tuberculosis, and Malaria; and the Enhanced Integrated  Framework—and Washington, D.C.—the U.S. Agency for International  Development and the Departments of State, Defense, and Agriculture. We  also discussed UNOPS reforms with Department of State (State) officials  in Washington, D.C. and New York City.
We selected reforms in the areas of documentation, internal oversight, and  ethics to track in more detail. We determined that these were key areas of  reform through our review of UNOPS’s annual reports to its Executive  Board and UNOPS’s Accountability Framework and in our discussions  with UNOPS officials. We focused on reform efforts undertaken by the  current management team since it was appointed in 2006. To assess the  extent to which the Atlas project tracking system has improved the  organization’s financial documentation, we administered a survey—with a  response rate of 100 percent—to the managers of UNOPS’s 5 regional  offices and 12 operations centers. We sent a draft of the survey to UNOPS  management, who required that we cut almost half of the proposed  questions in the survey, including questions we felt were important in  assessing Atlas’s capacity to capture data and document transactions that  could strengthen internal and financial controls. To determine how many  survey respondents reported data reliability limitations in Atlas, we  counted all respondents who answered that data were to no extent, to a  little extent, to some extent, or to a moderate extent timely, accurate, or  complete. To evaluate UNOPS’s reforms in internal oversight, we  compared UNOPS’s internal audit program to Institute for Internal  Auditors’ International Standards for the Professional Practice of Internal  Auditing and UNOPS’s investigative program to the UN Uniform  Guidelines for Investigations. We evaluated UNOPS’s ethics program  against the requirements for UN Ethics Offices established by UN  Secretary-General’s Bulletins ST/SGB/2007/11 and ST/SGB/2005/22 and  against its own ethics policies.
To evaluate USAID’s oversight of UNOPS-implemented projects, we  reviewed information from both headquarters and the USAID missions. At  headquarters, we reviewed USAID’s policies for awarding, monitoring, and  obtaining results from grants, including USAID’s policies in the Automated  Directives System, USAID’s Acquisition Regulations, the Office of  Management and Budget’s Circular A-110, and the Federal Acquisition  Regulations. We also reviewed reports on USAID’s Office of Acquisition  and Assistance, including prior reports from GAO and USAID’s Inspector  General. We reviewed program information from USAID’s missions,  including pre-award assessment memos, grant agreements, and  modification memos. We compared USAID’s grant-related activities from  2004 through 2008 with the criteria in GAO’s Standards for Internal  Control in the Federal Government. These standards, issued pursuant to  the requirements of the Federal Managers’ Financial Integrity Act of 1982,  provide the overall framework for establishing and maintaining internal  control in the federal government. We identified whether USAID was the  sole, largest, or smallest contributor to its grants with UNOPS from 2004  through 2008 by reviewing the grant awards for additional donors and  comparing this data with information from UNOPS officials. We then  reviewed the Audit and Records provisions that were used in the grants.  We created a comprehensive spreadsheet to compare the levels of USAID  contributions with the Audit and Records provisions used. To determine  whether USAID had documented pre-award assessments of UNOPS, we  requested pre-award memorandum in accordance with USAID’s policies  for 11 awards and for any modifications to those awards made with  UNOPS from 2004 through 2008. We reviewed all available memos that the  USAID missions maintained, but for some grants the missions did not have  documentation of these memos in their files. To determine if USAID had  included findings from UN reports when completing the pre-award  assessments, we reviewed audits and investigations from the BOA and the  UNDP Office of Audit and Performance Review, which we compared to  findings in USAID’s pre-award assessments of UNOPS. We also reviewed  investigations from the Procurement Task Force on UNOPS programs in  Kenya and Afghanistan, and from the USAID Inspector General on UNOPS  programs in Afghanistan.
We used data provided by USAID from its database sources to determine  the amount of funding USAID obligated to Public International  Organizations (PIO), including UNOPS, from 2004 to July 2009. However,  USAID was unable to provide accurate counts of its obligation  information. For example, USAID provided us a list of its PIO grants from  its Electronic Procurement Information Collection System, New  Management System, and Global Acquisition and Assistance System  databases, but this information contained numerous inconsistencies. We  made numerous attempts to resolve inconsistencies in the information  USAID provided over the course of our review, which caused us to  question its accuracy. As a result, we used UNOPS expenditure data from  its U.S. grant awards to identify the total amount of USAID funding  UNOPS has spent in the last 5 years. We used this data to supplement the  obligation information provided by USAID.
In addition to our review of documents and grant files described above, we  interviewed key staff at USAID headquarters in Washington, D.C., and  USAID missions in Afghanistan, Haiti, Liberia, and Sudan and about how  they conducted and documented grant-related activities since 2004.
We conducted this performance audit from July 2008 to November 2009 in  accordance with generally accepted government auditing standards. Those  standards require that we plan and perform the audit to obtain sufficient,  appropriate evidence to provide a reasonable basis for our findings and  conclusions based on our audit objectives. We believe that the evidence  obtained provides a reasonable basis for our findings and conclusions  based on our audit objectives.
section_title: Appendix II: UNOPS’s Locations Worldwide
paragraphs: United Nations Office of Project Services (UNOPS) operates from offices  located worldwide, including headquarters, regional offices, operations  centers, and project centers. UNOPS’s five regional offices are located in  New York, New York; Bangkok, Thailand; Copenhagen, Denmark;  Johannesburg, South Africa; and Panama City, Panama. In 2006, UNOPS  moved its headquarters from New York to Copenhagen. UNOPS also has  12 operations centers and 10 project centers throughout the world. Figure  2 shows UNOPS’s primary office locations worldwide. From these  locations UNOPS oversees activities in more than 50 countries.
section_title: Appendix III: Types of Services Provided by UNOPS
paragraphs: As shown in table 6, United Nations Office for Project Services (UNOPS)  services may be grouped according to the types of services it provides,  although project management may encompass many different types of  UNOPS services.
section_title: Appendix IV: Designated International Organizations by the Department of State
paragraphs: The U.S. Agency for International Development (USAID) uses a list of  international organizations approved for detail and transfer of federal  employees to designate Public International Organizations (PIO) that may  receive assistance agreements. This list is composed of 124 organizations  that the Department of State has designated as an international  organization, as shown in table 7.
According to USAID data, USAID awarded grants or cooperative  agreements to 50 different PIOs from January 2004 to July 2009 at a total  estimated cost of approximately $8.1 billion. The majority of the awards  were to United Nations (UN) entities. The largest amount of money was  budgeted for World Food Program grants, at about $1.9 billion, and for UN  Children’s Fund grants, at about $1 billion.
section_title: Appendix V: Results of GAO’s Survey of UNOPS Field Office Managers
paragraphs: We sent a survey to the managers of 17 United Nations Office of Project  Service (UNOPS) field offices—its 5 regional offices and 12 operations  centers. All 17 managers responded to the survey. Questions focused on  UNOPS’s project management system, Atlas. See tables 8 and 9 below for a  compilation of all the responses to survey questions referred to in this  report.
section_title: Appendix VI: USAID Oversight Policies for Grants with Public International Organizations
paragraphs: According to U.S. Agency for International Development’s (USAID)  policies outlined in its Automated Directive System (ADS) 308, USAID is  required to apply specific pre-award assessment policies when making  grants with Public International Organizations (PIO). In addition, the ADS  308 Mandatory Standard Provisions outline standard provisions that  USAID, when applicable, is required to use. According to this policy, when  a standard provision is determined to be applicable in accordance with the  applicability statement, the use of such standard provision is mandatory  unless a deviation has been approved.
section_title: Appendix VII: USAID’s Documented Pre- Award Assessments of UNOPS
paragraphs: According to policy directives, the U.S. Agency for International  Development’s (USAID) agreement officers, who are responsible for  signing grants to Public International Organizations (PIO), must complete  pre-award assessments documented in a memo from the requesting office  that justify using the PIO as a grantee for the program. In addition, USAID  officials told us that this assessment should also be specifically completed  before a modification that significantly increases the budget of the original  award. We reviewed available information from USAID missions for all 11  of USAID’s awards with UNOPS from 2004 through 2008 to determine  which awards and modifications documented these assessments (see  figure 3).
section_title: Appendix VIII: Comments from the Department of State
section_title: Appendix IX: Comments from the U.S. Agency for International Development
section_title: Appendix X: Comments from the UN Office for Project Services
subsections: section_title: GAO Comments
paragraphs: 1.  Regarding investigations, UNOPS noted that only one of six  investigations performed by OIOS is incomplete. Because investigators  recommended the remaining two phases of the Afghanistan  investigation after they found alleged criminal activity and  mismanagement of funds in the first phase of the investigation, we  maintain that timely investigation of these activities is essential for  UNOPS to demonstrate that it has provided sufficient resources for  investigations. Furthermore, the remaining phases include plans to  investigate broader management responsibility for the inappropriate  activities identified in the first phase. 2.  UNOPS stated that systematic assessment of Atlas takes place on an  ongoing basis. However, according to some UNOPS officials we spo with, assessment of data reliability was not conducted in a systema manner. Moreover, based on our survey findings, data reliability  remains an ongoin g problem.  3.  Regarding ethics training, UNOPS reported that it has complied with,  or exceeded UN requirements. We modified our report to note th UNOPS’s policy exceeds UN requirements, but maintain that UNOPS is  not fully meeting its own requirement to provide ethics training for all  its personnel. Additionally, we reported that a technical glitch in the  system has kept UNOPS management and Ethics Officer from verifyin who has completed the course.  4.  UNOPS said that our report does not explain the “single audit  principle” as it relates to external audits of UN entities. The United  States supports the “single audit principle” and we note that GAO has  successfully completed a body of work reviewing UN entities in which  we successfully gained the voluntary cooperation of UN entities to  perform our work. We had similar cooperation from UNOPS and had  access to sufficient information to complete  this review.
section_title: Appendix XI: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the person named above, Phillip Thomas (Assistant  Director), Jeffrey Baldwin-Bott, Erin Carson, Debbie Chung, Leah DeWolf,  Etana Finkler, and McKenzie Lawyer Davies made key contributions to  this report. Joel Grossman, Jackson Hufnagle, Grace Lui, and Jena  Sinkfield also provided technical assistance.
section_title: Related GAO Products
paragraphs: United Nations: Renovation Still Scheduled for Completion in 2013, but  Risks to Its Schedule and Cost Remain. GAO-09-870R. Washington, D.C.:  July 30, 2009.
United Nations Peacekeeping: Challenges Obtaining Needed Resources  Could Limit Further Large Deployments and Should Be Addressed in  U.S. Reports to Congress. GAO-09-142. Washington, D.C.: December 18,  2008.
United Nations Peacekeeping: Lines of Authority for Field Procurement  Remain Unclear, but Reforms Have Addressed Some Issues.  GAO-08-1094. Washington, D.C.: September 18, 2008.
Afghanistan Reconstruction: Progress Made in Constructing Roads, but  Assessments for Determining Impact and a Sustainable Maintenance  Program Are Needed. GAO-08-689. Washington, D.C.: July 8, 2008.
United Nations: Renovation Schedule Accelerated after Delays, but Risks  Remain in Key Areas. GAO-08-513R. Washington, D.C.: April 9, 2008.
United Nations: Management Reforms and Operational Issues.  GAO-08-246T. Washington, D.C.: January 24, 2008.
United Nations: Progress on Management Reform Efforts Has Varied.  GAO-08-84. Washington, D.C.: November 14, 2007.
United Nations Organizations: Oversight and Accountability Could Be  Strengthened by Further Instituting International Best Practices.  GAO-07-597. Washington, D.C.: June 18, 2007.
Peacekeeping: Observations on Costs, Strengths, and Limitations of U.S.  and UN Operations. GAO-07-998T. Washington, D.C.: June 13, 2007.
Update on the United Nations Capital Master Plan. GAO-07-414R.  Washington, D.C.: February 15, 2007.
United Nations: Renovation Planning Follows Industry Practices, but  Procurement and Oversight Could Present Challenges. GAO-07-31.  Washington, D.C.: November 16, 2006.
United Nations: Management Reforms Progressing Slowly with Many  Awaiting General Assembly Review. GAO-07-14. Washington, D.C.:  October 5, 2006.
United Nations: Additional Efforts Needed to Increase U.S. Employment  at UN Agencies. GAO-06-988. Washington, D.C.: September 6, 2006.
United Nations: Weaknesses in Internal Oversight and Procurement  Could Affect the Effective Implementation of the Planned Renovation.  GAO-06-877T. Washington, D.C.: June 20, 2006.
United Nations: Oil for Food Program Provides Lessons for Future  Sanctions and Ongoing Reform. GAO-06-711T. Washington, D.C.: May 2,  2006.
United Nations: Internal Oversight and Procurement Controls and  Processes Need Strengthening. GAO-06-710T. Washington, D.C.: April 27,  2006.
United Nations: Funding Arrangements Impede Independence of  Internal Auditors. GAO-06-575. Washington, D.C.: April 25, 2006.
United Nations: Lessons Learned from Oil for Food Program Indicate  the Need to Strengthen UN Internal Controls and Oversight. GAO-06-330.  Washington, D.C.: April 25, 2006.
United Nations: Procurement Internal Controls Are Weak. GAO-06-577.  Washington, D.C.: April 25, 2006.
United Nations: Peacekeeping: Cost Comparison of Actual UN and  Hypothetical U.S. Operations in Haiti, GAO-06-331. Washington, D.C.:  February 21, 2006.
United Nations: Preliminary Observations on Internal Oversight and  Procurement Practices. GAO-06-226T. Washington, D.C.: October 31, 2005.
United Nations: Sustained Oversight Is Needed for Reforms to Achieve  Lasting Results. GAO-05-392T. Washington, D.C.: March 2, 2005.
United Nations: Observations on the Management and Oversight of the  Oil for Food Program. GAO-04-730T. Washington, D.C.: April 28, 2004.
United Nations: Observations on the Oil for Food Program.  GAO-04-651T. Washington, D.C.: April 7, 2004.
United Nations: Reforms Progressing, but Comprehensive Assessments  Needed to Measure Impact. GAO-04-339. Washington, D.C.: February 13,  2004.
United Nations: Early Renovation Planning Reasonable, but Additional  Management Controls and Oversight Will Be Needed. GAO-03-566.  Washington, D.C.: May 30, 2003.
United Nations: Targeted Strategies Could Help Boost U.S.  Representation. GAO-01-839. Washington, D.C.: July 27, 2001.
United Nations: Planning for Headquarters Renovation Is Reasonable;  United States Needs to Decide whether to Support Work. GAO-01-788.  Washington, D.C.: June 15, 2001.
United Nations: Reform Initiatives Have Strengthened Operations, but  Overall Objectives Have Not Yet Been Achieved. GAO/NSIAD-00-150.  Washington, D.C.: May 10, 2000.