	Background

The UN headquarters buildings are in need of renovation. Funding Arrangements Impede Independence of the UN Internal Auditors

The UN is vulnerable to fraud, waste, abuse, and mismanagement due to a  range of weaknesses in existing oversight practices. International auditing standards also state that  financial regulations and the rules of an international institution should not  restrict an audit organization from fulfilling its mandate. Funding Arrangements Hinder OIOS’s Ability to Respond to Changing Circumstances and to Reallocate Resources to Address High-Risk Areas

UN funding arrangements severely limit OIOS’s ability to respond to  changing circumstances and reallocate its resources among its multiple  funding sources, OIOS locations worldwide, or its operating divisions— Internal Audit Divisions I and II; the Investigations Division; and the  Monitoring, Evaluation, and Consulting Division—to address changing  priorities. Reliance on Other Entities for Funding Could Infringe on OIOS’s Independence

OIOS is dependent on UN funds and programs and other UN entities for  resources, access, and reimbursement for the services it provides. By denying OIOS funding,  UN entities could avoid OIOS audits or investigations, and high-risk areas  could potentially be excluded from timely examination. Since then, OIOS has begun to develop and implement the key  components of effective oversight. OIOS Has Developed Annual Work Plans, but Has Not Fully Implemented a Risk Management Framework

OIOS has adopted a risk management framework to link the office’s  annual work plans to risk-based priorities, but it has not fully implemented  this framework. OIOS Lacks a Mechanism to Determine Appropriate Resource Levels

While OIOS officials have stated that the office does not have adequate  resources, they do not have a mechanism in place to determine appropriate  staffing levels to help justify budget requests, except for peacekeeping  oversight services. The Current UN Procurement Process Contains Numerous Weaknesses

While the UN has yet to finalize its CMP procurement strategy, to the extent  that it relies on current UN processes, implementation of the planned  renovation is vulnerable to the procurement weaknesses that we have  identified. If handled through an independent process,  vendor complaints could alert senior UN officials and UN auditors to the  failure of UN procurement staff to comply with stated procedures. The committee’s chairman and members told us  that the committee does not have the resources to keep up with its  expanding workload. Earlier this year, OIOS reiterated its 2001 recommendation  that the UN reduce the committee’s caseload and restructure the  committee “to allow competent review of the cases.”

		UN Does Not Consistently Implement Its Process for Helping to Ensure That It Conducts Business with Qualified Vendors

The UN does not consistently implement its process for helping to ensure  that it is conducting business with qualified vendors. The UN Has Not Fully Established Ethics Guidance for Procurement Personnel

The UN has been considering the development of specific ethics guidance  for procurement officers for almost a decade, in response to General  Assembly directives dating back to 1998. GAO’s Recommendation to Address Weaknesses in UN Procurement

In our April 2006 report on UN procurement, we recommended that the  Secretary of State and the Permanent Representative of the United States  to the UN work with member states to encourage the UN to establish an  independent bid protest mechanism, address problems facing its principle  contract-review committee, implement a process to help ensure that it  conducts business with qualified vendors, and to take other steps to  improve UN procurement. Effective internal oversight and management of the procurement process  will be necessary for the successful completion of the project. In addition, OIOS’s shortcomings in meeting key components of  international auditing standards could undermine the office’s effectiveness  in carrying out its functions as the UN’s main internal oversight body. While the UN has yet to finalize its CMP procurement strategy, to the extent  that it relies on the current process, we have identified numerous  weaknesses with the existing procurement process that could impact  implementation of the CMP.
Why GAO Did This Study

The UN headquarters buildings are in need of renovation. The Capital Master Plan is an opportunity for the organization to renovate its headquarters buildings and ensure conformity with current safety, fire, and security requirements. Estimated by the UN to cost about $1.6 billion, the renovation will require a substantial management effort by the UN--including the use of effective internal oversight and procurement practices. Based on recently issued work, GAO (1) examined the extent to which UN funding arrangements for its Office of Internal Oversight Services (OIOS) ensure independent oversight and the consistency of OIOS's practices with key international auditing standards and (2) assessed the UN's procurement processes according to key standards for internal controls.

What GAO Found

The effective implementation of the planned UN renovation is vulnerable due to a range of weaknesses in existing internal oversight and procurement practices. In particular, UN funding arrangements adversely affect OIOS's budgetary independence and compromise OIOS's ability to investigate high-risk areas. In addition, while the UN has yet to finalize a specific procurement process for the UN Capital Master Plan, to the extent that it relies on UN procurement processes, it remains vulnerable to the numerous procurement weaknesses that GAO have previously identified. First, UN funding arrangements constrain OIOS's ability to operate independently as mandated by the General Assembly and required by international auditing standards. While OIOS is funded by a regular budget and 12 other revenue streams, UN financial regulations and rules severely limit OIOS's ability to respond to changing circumstances and reallocate resources among revenue streams, locations, and operating divisions. Thus, OIOS cannot always direct resources to high-risk areas that may emerge after its budget is approved. Second, OIOS depends on the resources of the funds, programs, and other entities it audits. The managers of these programs can deny OIOS permission to perform work or not pay OIOS for services. UN entities could thus avoid OIOS audits or investigations, and high-risk areas can be and have been excluded from timely examination. OIOS has begun to implement key measures for effective oversight, but some of its practices fall short of the applicable international auditing standards it has adopted. OIOS develops an annual work plan, but the risk management framework on which the work plans are based is not fully implemented. OIOS officials report the office does not have adequate resources, but they also lack a mechanism to determine appropriate staffing levels. Furthermore, OIOS has no mandatory training curriculum for staff. While the UN has yet to finalize its Capital Master Plan procurement strategy, to the extent that it relies on the current process, implementation of the Capital Master Plan remains vulnerable to numerous procurement weaknesses. For example, the UN has not established an independent process to consider vendor protests that could alert senior UN officials of failures by procurement staff to comply with stated procedures. Also, the chairman of the UN procurement contract review committee has stated that his committee does not have the resources to keep up with its expanding workload. In addition, the UN does not consistently implement its process for helping to ensure that it is conducting business with qualified vendors. GAO also found that the UN has not demonstrated a commitment to improving its professional procurement staff despite long-standing shortcomings and has yet to complete action on specific ethics guidance for procurement officers.