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U.N. Development Agencies Accumulate Billions -- and Keep Spending a Secret

At least two major United Nations development agencies, described as having accumulated some $3.2 billion in cash in 2009, refused to divulge exactly what they spent their program money on, according to a confidential draft report prepared in the summer for the government of Norway and examined by Fox News.

According to the consultants who prepared the two-volume draft study on behalf of the Norwegian development agency known as NORAD, the refusal meant that the agencies, the United Nations Population Fund (UNFPA) and UNICEF, failed “grossly” to live up to the “credo of adherence to transparency” that both agencies claim to follow in their work.

A third agency, the United Nations High Commission on Refugees, was not cited for “gross” failure, but also refused to provide spending details, “particularly recent staff costs.”

The two-volume draft study, was prepared for Norway, one of the U.N.’s biggest donors, in June by the private consulting firm IDC, and aimed to “contribute to the understanding of financing flows and current financial planning and budgeting processes,” at five selected U.N. agencies, including “how are resources allocated” and “where does the money go.”

Fox News examined the first volume last summer and reported that four of the five U.N. agencies examined by IDC had a much bigger total of at least $12.2 billion in unspent cash by the end of 2009. The first volume of the study warned that the multi-billion-dollar bulge might “result in a situation where donors may not fund the U.N. system as much as before, until these reserves are utilized and brought down to an appropriate level.”

Aside from UNFPA and the United Nations Children’s Fund (UNICEF), the U.N. agencies cited in the first volume of the draft report for their cash stockpiles included the United Nations Development Program (UNDP) and the World Food Program (WFP). The fifth agency, UNHCR, apparently did not have such a cash stockpile.

All of the agencies refused to comment to Fox News on the specifics of the document at that time, citing the fact that it was in draft form. Nonetheless, they vigorously denied having unspent free cash in their treasuries, saying that the funds were specifically earmarked for the future years of programs that had already been approved.

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This time, UNICEF and UNFPA declined comment on questions from Fox News regarding the assertions made in the second volume of the study, as did UNDP.

In the case of UNFPA, a spokesman said that the agency would be “in a position to give an informed response as soon as we have seen and studied the report.” UNICEF said that a response to a draft report would be “inappropriate,” because, “in the process of drafting, inaccuracies and misunderstandings are identified and the report is sharpened. When the report is finalized and issued, UNICEF may comment if appropriate.” UNDP responded using identical language to that of UNICEF.

The other two agencies mentioned in both the first and second volumes of the study had not responded to questions based on Volume II before this story was published.

 

Just when the final version of the draft report will be released is not yet clear. The Norwegian government website in the spring said the study would appear in May. Then it changed to August, then October. It is now slated to appear “at the end of the year,” according to a Norwegian government adviser.

The same adviser contradicted UNFPA’s spokesperson by declaring that “a draft of the report was sent out for formal comments from the stakeholders including the U.N. entities. We have received comments that relate to possible factual errors, interpretations, judgments/differences of opinion and our consultants are currently processing the same.”

That the report has sparked a lively internal discussion over its conclusions and observations is not too surprising, as the Volume I report revealed by Fox News last summer declared that in addition to risking a donor backlash, the buildup of cash in the big U.N. aid agencies “implies that substantial donor funding is not being used for development purposes,” a notion that all the U.N. agencies vigorously dispute.

Volume II of the study, entitled “Activity-based Financial Flows in U.N. System: A Study of Select U.N. Organizations, focuses on what it calls “case studies” to buttress the first volume of general observations. And it discloses another major problem: according to the report, several of the agencies are apparently unwilling, or in some cases, unable, to account for what happened to some of the money that they know they spent. Examples:

--at UNFPA, the consultants said, about $200 million a year was handed over to various governments and non-government organizations in ways that did not let UNFPA auditors examine the accounts. The result: governments that gave money to UNFPA “have little knowledge regarding the ultimate destiny” of that money, which amounted, the report says, to about 30 percent of the total annual UNFPA programming money disbursed in this fashion.

--UNFPA headquarters “has not shared with the consultants,” the report says, the details of its spending by “economic classification,” meaning broken into wages and salaries, travel, the hiring of consultants, etc.

According to the document, “this means that information that is absolutely essential, not only for this study, but also for a future evaluation of UNFPA activities, is not documented in this report. In this respect, UNFPA fails grossly in living up to its credo of adherence to transparency to which it officially committed.”

--at UNICEF, the U.N.’s global child welfare agency, the report notes, “officially available information about expenditures remains very limited and fragmented, making it difficult to track use of funds from headquarters down to the ultimate beneficiaries on the ground.” The level of detail in UNICEF’s biennial support budget—the money it spends on its own overhead—is “significantly less today than it was five years ago,” the report notes.

--as a result of the unspent funds piling up in its accounts, UNICEF has gained “significant interest income” –the report notes $109 million was earned this way in 2008. UNICEF rules, the report says, allow the agency to allocate the money where it wants, regardless of the project fund that generated the cash.

--UNICEF strategic plans “only serve as guidelines” for its 126 country offices around the world, where the “de facto decisions” are made about how budgets are spent. The headquarters plans are long on targets, and short on priorities and on details about costs, meaning, the report says, that UNICEF’s strategic plan for its operations “is not a plan in the conventional meaning of a document that states the resources necessary to achieve stated targets.”

“From this perspective,” the report asserts, “UNICEF planning at headquarters level does not seem to be a very meaningful exercise.”

--as with UNFPA, the consultants were unable to obtain from UNICEF a breakdown of actual expenditures by category for its program spending at the country level, which, the report notes “account for the overwhelming share of UNICEF expenditures.” The consultants added the same accusation of “gross failure” that they leveled at UNFPA.

At UNDP, the U.N.’s flagship development agency, the vagueness of its strategic planning documents, which often do not include either baselines or program targets, mean it is “quite hard to measure whether satisfactory progress is being achieved.” The same applies to its action plans.

As it happens, UNDP also had the biggest pile of unspent cash among the agencies surveyed: about $5 billion at the end of 2009. Moreover, the consultants noted, “UNDP also had trust funds that had minimal or no expenditure for one or two bienniums [2 to 4 years], indicating slow disbursement of funds.” The agency’s treasury, the study said, invested large amounts of the unspent money in bonds..

Meantime, the study noted, UNDP staffing grew by 29 percent during the second half of the 21st Century’s first decade—but personnel costs went up by 80 percent.

At the U.N.’s refugee agency, UNHCR, officials were closemouthed about “details regarding the objective of expenditures,” especially staff costs, the consultants said. One reason, perhaps, is that UNHCR delegates “most of its program activities” to so-called “implementing partners,” such as non-governmental organizations that do the actual field work. The trend, the study notes, is accelerating.

The U.N. agency that earned the most praise in the draft report is the World Food Program. Its performance was deemed “impressive,” as were its cost controls. WFP was also lauded for having the most transparent accounting system, and for meeting an increased share of the needs it assessed among its hungry clientele.

What happens when U.N. agencies consciously try to work more closely together? The Norwegian consultants examined only one country, Viet Nam, where that is happening, as part of a pilot program called One U.N. What they say they found was not exactly encouraging. The study quotes an anonymous U.N. official as saying “the way we operate is problematic,” and adding “we cannot say we have cut costs.”

The study notes that the U.N. is “repositioning itself” both in Viet Nam and around the world “to focus on policy advice and advocacy” rather than delivering goods and services. On the one hand, donors like the idea, because it cuts back on the solicitation of money.

On the other hand, the draft report notes, once the U.N. gets more deeply into an advisory role, “how can we attribute future development outcomes”—the relief the U.N. says it is providing—“to the U.N.’s advisory inputs?”

The study has no answer, except to note that “despite years of efforts, methodologies to assess development outcomes are still in their infancy.”

George Russell is executive editor of Fox News and can be found on Twitter@GeorgeRussell.

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