Published October 29, 2008
Nearly three years after the United Nations launched a highly publicized effort to crack down on fraud and waste, especially in its scandal-torn multi-billion-dollar procurement department, the clean-hands offensive is slowing down. And, its own watchdogs warn, other major areas of the U.N. bureaucracy are suffering from an alarming lack of scrutiny.
Two high-risk areas in particular: the United Nations Environmental Program, where more than $1 billion is being spent to control climate change with almost no auditing oversight; and the United Nations staff pension fund, where large amounts of cash are apparently being kept off the balance sheets, and where fund managers themselves decide what auditors can and cannot investigate.
Those conclusions are contained in a pair of annual reports that have been submitted to the General Assembly by the U.N. watchdogs themselves, known as the Office of Internal Oversight Services (OIOS).
One of the reports covers the operations from July 1, 2007 to July 31, 2008, of the U.N.'s Procurement Task Force (PTF), which was set up in January 2006 to attack procurement corruption. The document also serves as an obituary of sorts for the PTF.
As the report notes, the task force is expected to disappear at the end of this year, strangled by lack of General Assembly funding. The task force will turn over more than 150 unexamined cases, including "several significant" fraud and corruption matters, to regular OIOS investigators, who may or may not be able to handle them.
The more damning document is a report on OIOS activities from June 2007 to June 2008 across the U.N., which is not limited merely to procurement. Its author, OIOS chief Inga-Britt Ahlenius, pointed out a number of U.N. "risk categories" that strongly hint that the scandals of the past could be repeated.
In dense and understated language, Ahlenius highlights an ingrained U.N. culture of managerial laxity, confusion, bureaucratic resistance and, on occasion, spectacular incompetence that if left unaddressed does not bode well for the U.N.'s reputation — or probity — in the future.
Among the highlights:
• Poor data collection across the U.N. system means that in many cases "the determination of a program's relevance and effectiveness is not possible." OIOS noted that no methods had yet been devised to measure results-based performance across 25 percent of the areas mandated by the General Assembly in the years 2006 and 2007, the most recent available.
• Not illogically, OIOS also noted that according to various U.N. surveys, "whether or not results have been achieved matters little to resource allocation and individual performance assessment."
• The U.N. Secretariat's Department of Management, whose very function is to make sure the organization runs well, often makes things worse through its foggy and inconsistent use of the most basic U.N. terminology — which has been in use for 60 years. As the report notes: "Terminologies such as 'Secretariat,' 'Organization' and the 'United Nations,' which were critical to understanding the jurisdiction and scope of administrative issuances, were not always clearly defined or consistently applied by the Department. Consequently, the Department and other actors may not have a clear picture of their respective duties and responsibilities."
• Some of the U.N.'s most important funds and programs lack the auditing staff even remotely to keep track of what those programs are doing and how well or honestly they are doing it. The report notes that the United Nations Environmental Program has one auditor and one assistant to inspect its operations and a number of multilateral agreements under UNEP's purview. The OIOS document estimates that it would take 17 years for the auditor to look over just the high-risk areas already identified in UNEP's work.
• The same applies to the United Nations Human Settlements program, known as UN-Habitat, where OIOS estimates that it would take the solo auditor 11 years to cover the high-risk areas in a $250 million Habitat budget.
• One area of risk that is frequently mentioned is the United Nations Joint Staff Pension Fund, which handles the retirement income for all of the U.N.'s sprawling global operations. The OIOS report notes that the fund violates both U.N. rules and international auditing conventions by giving the pension fund management the right to sign off on the scope and terms of reference of any audit of the money. In other words, those being inspected get to agree on what gets a look-over, and how.
• The report also notes that despite the findings of previous audits, the pension fund is still keeping "excessive" amounts of cash on hand, and off the balance sheet — in effect as slush funds. The uninvested money reduces the pension fund's overall income. Moreover, the pension fund does not have a centralized sign-off on its financial statements, which could "adversely affect the reliability, consistency and integrity of the financial data produced by the Fund." Pension fund managers do not propose to fix the problem until 2010 or 2011 at the earliest.
Making a bad situation even worse, the report notes that the pension fund has inadequate information security policies that make it vulnerable to data theft and information security breaches.
• Perhaps the most bizarre finding of the report is the fact that the U.N. Secretariat's human resources department does not do criminal background checks on employees hired for less than a year. As of January, 2006, this amounted to 13 percent of the U.N.'s 10,985 staff members at New York headquarters and at the other major centers of Geneva, Vienna and Nairobi. The main reason given for the lack of criminal checks: lack of short-term staff to do the job.
To fix the problem, the HR office has only agreed to "perform an analysis to identify the risks of not conducting criminal background checks." But it has balked outright at conducting job history, education credential and job reference checks on prospective short-term staffers — because that would delay the recruitment of additional short-termers.
Even in cases where OIOS watchdogs have uncovered strong evidence of administrative malpractice, the documents show that U.N. top managers have been loath to take action. Ahlenius' report notes that OIOS successfully proved that managers of the U.N.'s Department of Economic and Social Affairs (DESA) had abused a $2.6 million trust fund provided by the Greek government, and recommended that the agency pay restitution to Athens. Then the report adds that "OIOS is still awaiting a comprehensive response" from DESA's top management.
Elsewhere, OIOS investigators report that three U.N. staff members were charged with misconduct in the Greek affair — but does not mention that in the case of at least one senior official, Guido Bertucci, head of the unit that administered the Thessaloniki project, the misconduct charge was filed only after he had retired. Bertucci has vigorously denied any wrongdoing.
Uncovering misconduct like the DESA case was the purview of the Procurement Task Force, which was formed after FOX News disclosed, among other things, that a U.N. procurement officer had been handing on confidential bidding information to U.N. suppliers and funneling money through a secret Caribbean bank account. Those revelations ultimately led to two criminal convictions and a sudden U.N. desire to attack what one auditor called a "culture of impunity" in the U.N.'s $2.6 billion procurement operation.
Since the PTF's inception, a team of 10 to 18 investigators has been kept frantically busy, examining an initial mountain of 437 cases, completing 222 investigations and ultimately identifying 20 significant fraud and corruption schemes involving contracts worth some $630 million.
In the latest annual report PTF says it identified five corruption schemes involving contracts worth some $20 million. These ranged from a $1.8 million scheme by U.N. staffers to steer contracts under a U.N. payroll review project to private firms in which they shared an interest; to a $350,000 husband-and-wife scheme to steer other contracts in their own direction; to the DESA trust fund abuse case.
Much of the PTF report, however, is devoted to the obstacles that were thrown in the investigators' path by vendors who refused to cooperate in providing information on their U.N. activities, allegedly corrupt staffers who complained that non-existent due process rights were violated, and individual suppliers who were able to set up operation as U.N. vendors under a different corporate label, even after their wrongdoing had been uncovered.
The PTF said it had recommended to the U.N's legal affairs office that contracts be amended to demand vendor cooperation, and that U.N. penalties against wrongdoing by suppliers target individuals as well as corporations. As matters stand, the PTF report says, vendors are not yet required even to declare whether U.N. staffers have an interest in their business. (The U.N. is moving to make some of the suggested changes.)
The biggest PTF roadblock is the General Assembly decision to cut off funding for the investigators, which means the unit will be disbanded at the end of the year. Typically, the cutoff was disguised as something else — a demand for further information that requires time beyond the limit when the Procurement Task Force is currently funded.
In her own report, OIOS chief Ahlenius says that she will seek to provide the information next year. In the meantime, she intends to integrate some of the PTF investigators into her regular staff.
But, as Ahlenius puts it, the result will be "serious challenges" for her watchdog organization — which already faces serious challenges in many other areas brought on by the U.N.'s accustomed ways of operating.
George Russell is executive editor of FOX News.