Report Details Deficiencies in U.N. Procurement Department

UNITED NATIONS – A six-week study of the United Nations procurement department has concluded that its management safeguards and procedures are ineffective, its oversight is weak and its response to problems lacks "urgency."

Furthermore, ethics and integrity training is "not sufficiently supported by management, and is not a conspicuous element of the [department's] culture," according to a report released Tuesday by the U.S.-based firm Deloitte Consulting.

The report concludes that U.N. procurement employees themselves are the only control on the department and that "significant reliance on people leaves the U.N. extremely vulnerable to potential fraudulent or corrupt activity and [with] limited means to either prevent or detect such actions."

Click here to read the report.

Getting a handle on scandals plaguing the U.N.'s $1.4 billion procurement department has become a top priority for Secretary General Kofi Annan.

During the past few months, several procurement officials have been arrested, corrupt bank accounts seized, and there has been a trail of evidence pointing to hundreds of millions of dollars worth of contracts that may have been improperly awarded.

Now the United Nations has discovered that it is no accident.

The Deloitte report suggests that for decades, the way the department has operated has contributed to the spread of corruption.

The report notes:

— the procurement department’s procedures and management systems are outdated and uncoordinated;

— employees lack professional development support and training in their job skills, as well as in "ethics and integrity";

— the staff "do not appear to have a clear and reasonably consistent understanding of the current procurement policies and procedures";

— the department has no working "fraud or anomaly detection tools or reports";

— there are limited rewards for high performance employees or penalties for those who do poorly;

— management authority is tied to job-grade rather than ability;

— auditors are short of money, resources and authority.

"There does not appear to be a single, recognized and well understood Code of Conduct governing ethics and integrity expectations and requirements for [department] employees," the report states.

U.N. hiring does not take into account such "risk factors" as whether staffers have past or current employment with government entities or suppliers, or whether they have personal financial interests or relationships with the owners or management of U.N. bidders or suppliers.

Nor is there any hard-line requirement for staffers to report observed or suspected wrongdoing, or safeguards for suppliers that complain of improper procedures.

The Deloitte study recommends a sweeping array of reforms, ranging from new technology to new professional and ethical training, as well as "clear lines of management authority, responsibility and accountability."

The report, however, does not cover further investigation and preventative steps to ensure that corruption will not happen again.

The study is part of an effort by the U.N.'s new undersecretary general for management, Christopher Burnham, to bring openness and efficiency to the U.N. bureaucracy. Burnham, a Wall Street investment banker and former Connecticut state treasurer, held the top financial job at the State Department before arriving at the United Nations.

FOX News broke the story in the summer about Alexander Yakovlev, the top U.N. procurement official, who had a hand in Iraq's Oil-for-Food program. It was discovered that Yakovlev had a secret bank account in the Caribbean and a son who worked at a company that did business with the procurement department.

Within weeks of the report, Yakovlev was indicted and pleaded guilty; investigators revealed he had stashed nearly $1 million in the Caribbean bank account from bribes and payoffs. Later, a top U.N. budget official, Vladimir Kuznetsov, was charged with laundering money he got from Yakovlev. Kuznetsov pleaded not guilty.

Federal investigators are also delving into the company, IHC Services, that helped firms land U.N. business through the procurement department and passed on secret bidding information to at least one company. The United Nations has since suspended IHC and another international firm from soliciting business with the world body.

FOX News' Eric Shawn contributed to this report.