Established in 1994 to serve as the UN’s main oversight body, OIOS operated with a budget of $63.9 million in fiscal biennium 2004-2005 and employs a workforce of 256 staff in 20 locations around the world. OIOS was established to assist the Secretary-General in fulfilling internal oversight responsibilities over UN resources and staff. The stated mission of OIOS is “to provide internal oversight for the United Nations that adds value to the organization through independent, professional, and timely internal audit, monitoring, inspection, evaluation, management consulting, and investigation activities and to be an agent of change that promotes responsible administration of resources, a culture of accountability and transparency, and improved program performance.” The office is headed by an Under Secretary-General who is appointed by the Secretary-General for a 5-year fixed term with no possibility of renewal. The Under Secretary-General may be removed by the Secretary-General only for cause and with General Assembly approval. OIOS’s authority spans all UN activities under the Secretary-General, namely the UN Secretariat in New York, Geneva, Nairobi, and Vienna; the five regional commissions for Africa, Asia and the Pacific, West Asia, Europe, and Latin America and the Caribbean; peacekeeping missions and humanitarian operations in various parts of the world; and numerous UN funds and programs, such as the United Nations Environment Program (UNEP), United Nations Human Settlements Program (UN-HABITAT), and the Office of the United Nations High Commissioner for Refugees (UNHCR). The UN Procurement Service is located within the UN Secretariat’s Department of Management, at the UN headquarters in New York City. As of August 2005, the Procurement Service had a staff of 71 personnel that included 21 procurement officers, 5 associate procurement officers, and 24 procurement assistants. The Procurement Service manages procurement for the UN Secretariat headquarters and procures air services and items costing more than $200,000 for the Secretariat’s peacekeeping and other field missions. While it also provides procurement guidance and support to UN personnel who procure goods and services in the Secretariat’s peacekeeping and other field missions, it does not directly supervise them. Overall Secretariat procurement spending tripled between 1994 and 2004 as the number of UN peacekeepers in the field increased. Past reviews of the UN’s procurement system have identified problems in each of the six commonly identified characteristics that define an effective procurement system. In 1999, we found that the United Nations had yet to fully address these problems. The United Nations has retained a consulting firm to assess the Procurement Service’s financial and internal controls, following the decision of a former procurement official to plead guilty to federal charges involving his receipt of funds from firms seeking UN contracts. The Procurement Service is currently under interim management. The ability of OIOS to carry out independent, effective oversight is impeded by the UN’s budgeting processes for the regular budget and funds from the assessed peacekeeping budget and voluntary contributions from funds and programs subject to OIOS’s oversight, which are known as extrabudgetary resources. The Secretariat’s budget office—over which OIOS has oversight authority—exercises control over OIOS’s regular budget, which may result in potential conflicts of interest. UN budgeting processes make it difficult for OIOS to shift resources among OIOS locations or divisions to meet changing priorities. In addition, OIOS lacks control over extrabudgetary resources from UN funds and programs. OIOS negotiates its terms of work and payment for services with the manager of the program it intends to examine. However, if the entity does not agree to an OIOS examination or does not provide requested funding for OIOS to perform its work, OIOS cannot adequately perform its oversight responsibilities. These regular budget and extrabudgetary processes have impeded OIOS in its ability to complete some of its identified oversight priorities and raise serious questions about OIOS’s independence. OIOS’s ability to carry out independent, effective oversight is hindered by the UN’s budgeting processes for its regular budget. A General Assembly resolution in the creation of OIOS stated that the new internal oversight body shall exercise operational independence and that the Secretary- General, when preparing the budget proposal for OIOS, should take into account the independence of the office. OIOS receives its funding from two sources, the UN’s regular budget and funds from the assessed peacekeeping budget and voluntary contributions from funds and programs subject to OIOS’s oversight—known as extrabudgetary resources. UN rules and regulations preclude the movement of funds between the regular budget and extrabudgetary resources. From 1996-1997 through 2004-2005, the number of staff funded by the regular budget has been relatively flat while the number funded by extrabudgetary resources has increased steadily. During that same period, OIOS’s regular budget increased from about $15 million to about $24 million; its extrabudgetary resources grew from about $7 million to about $40 million. OIOS officials stated that the increase in extrabudgetary resources has been largely due to growth in oversight for UN peacekeeping (see fig. 1). The Secretariat’s budget office—over which OIOS has oversight authority—exercises control over OIOS’s regular budget, which infringes on the office’s independence. In developing the biennium budget, the Under Secretary-General of OIOS sends its biennial budget request to the Secretariat’s budget office for review. While OIOS can negotiate with the budget office on suggested changes to its budget proposal, it has limited recourse regarding the budget office’s decisions. This process limits OIOS’s ability to independently request from the General Assembly the resources it has determined it needs to provide effective oversight and also poses a conflict of interest. UN budgeting processes make it difficult for OIOS to reallocate its regular budget resources among OIOS locations worldwide or among its three divisions—internal audit; investigations; and monitoring, evaluation, and consulting services—to meet changing priorities. For example, OIOS officials requested a reallocation of 11 investigative posts from New York to Vienna to save travel funds and be closer to the entities that they investigate. This change was approved only after repeated requests by OIOS over a number of years. In addition, although OIOS officials stated that they routinely identify high-risk and high-priority audits and investigations after the biennial budget has been determined, it is difficult to mobilize the resources required to carry out the work. OIOS officials have stated that the office is under resourced, but they do not have a mechanism in place to determine appropriate staffing levels or to justify budget requests, except for peacekeeping oversight services. Officials provided us with several examples of work funded through the regular budget that they were unable to undertake due to resource constraints. For example, although the Board of Auditors recommended on several occasions that OIOS develop the capacity to perform more information technology audits, OIOS officials said that they lack the financial and human resources to do so. We found that OIOS does not have a mechanism in place to determine its overall staffing requirements, which would help justify requests for additional resources. On the other hand, for peacekeeping audit services, OIOS has a metric—endorsed by the General Assembly—that provides one professional auditor per $100 million 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. OIOS lacks control over the extrabudgetary resources funded by UN funds and programs. OIOS’s reliance on extrabudgetary resources has been steadily increasing over the years—from 30 percent in fiscal biennium 1996-1997 to 62 percent in the last fiscal biennium, 2004-2005 (see fig. 1). According to OIOS officials, the growth in the office’s budget is primarily due to extrabudgetary resources for audits and investigations of peacekeeping. OIOS is dependent on UN funds and programs and other UN entities for resources, access, and reimbursement for the services it provides. Heads of these entities have the right to approve or deny funding for oversight work proposed by OIOS. By denying OIOS funding, UN entities could avoid OIOS audits, and high-risk areas could potentially be excluded from adequate examination. For example, we have previously testified that the UN Office of the Iraq Program refused to fund an OIOS risk assessment of its program management division. UN funds and programs limit OIOS’s ability to independently set its work priorities in that they exercise the power to decide and negotiate whether to fund OIOS oversight activities and at what level. OIOS officials stated that because of OIOS’s budgetary structure, some high-priority work has not been undertaken. For example, according to a senior OIOS official, the office has not been able to adequately oversee the extrabudgetary activities of many entities, particularly those based in Geneva. In addition, the office also has not been able to oversee the UN Framework Convention on Climate Change or the UN Convention to Combat Desertification. OIOS reports that if funding is not forthcoming, OIOS may have no choice but to discontinue auditing certain extrabudgetary activities as of January 2006. In addition, in some cases, the fund and program managers have disputed the fees OIOS charges for its services.