UN procurement spending has more than tripled since 1997,  peaking at $1.6 billion in 2005. 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. The General Assembly  mandate creating OIOS calls for it to be operationally independent. Funding Arrangements Hinder OIOS’s Flexibility to Respond to Changing Circumstances and Reallocate Resources to Address High-Risk Areas

In addition to funding from the UN regular budget, OIOS receives  extrabudgetary funding from 12 different revenue streams. 1). 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. Effective oversight  demands reasonable adherence to professional auditing standards. 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 Not Reporting on Status of Overall Risk and Control Issues Facing the UN

Although OIOS’s annual reports contain references to risks facing OIOS  and the UN organization, the reports do not provide an overall assessment  of the status of these risks or the consequence to the organization if the  risks are not addressed. For instance, in February 2005, the Independent  Inquiry Committee reported that many of the Oil for Food program’s  deficiencies, identified through OIOS audits, were not described in the  OIOS annual reports submitted to the General Assembly. 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 Control Environment Over UN Procurement Is Weak

UN funds are unnecessarily vulnerable to fraud, waste, abuse, and  mismanagement because of weaknesses in the UN’s control environment  for procurement. Specifically, the UN lacks an effective organizational  structure for managing procurement, has not demonstrated a commitment  to improving its professional procurement workforce, and has failed to  adopt specific ethics guidance for procurement officials. The UN Has Weaknesses in Key Procurement Processes

We found weaknesses in key UN procurement processes or control  activities. The UN Has Not Established an Independent Bid Protest Process

The UN has not established an independent process to consider vendor  protests, despite the 1994 recommendation of a high-level panel of  international procurement experts that it do so as soon as possible. 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. Long-standing weaknesses in the UN’s internal controls over procurement  have left UN procurement funds highly vulnerable to fraud, waste, abuse,  and mismanagement. Recommendations

We recommend that the Secretary of State and the Permanent  Representative of the United States to the UN work with member states to:  support budgetary independence for OIOS, and support OIOS’s efforts  to more closely adhere to international auditing standards; and   encourage the UN to establish clear lines of authority, enhance training,  adopt ethics guidance, address problems facing its principal contract- review committee, establish an independent bid protest mechanism, and  implement other steps to improve UN procurement priorities.
Why GAO Did This Study

The United States has strongly advocated that the United Nations (UN) reform its management practices to mitigate various program and financial risks. The findings of the Independent Inquiry Committee into the Oil for Food Program have renewed concerns about UN oversight, and the 2005 UN World Summit proposed actions to improve the UN's Office of Internal Oversight Services (OIOS). Furthermore, over the past decade, as UN procurement more than tripled to $1.6 billion in response to expanding UN peacekeeping operations, experts have called on the UN to correct procurement process deficiencies. We examined (1) whether UN funding arrangements for OIOS ensure independent oversight; (2) the consistency of OIOS's practices with key auditing standards; and (3) the control environment and processes for procurement.

What GAO Found

The UN is vulnerable to fraud, waste, abuse, and mismanagement due to a range of weaknesses in existing management and oversight practices. In particular, current funding arrangements adversely affect OIOS's budgetary independence and compromise its ability to investigate high-risk areas. Also, weaknesses in the control environment and UN procurement processes leave UN funds vulnerable to fraud, waste, and abuse. UN funding arrangements constrain OIOS's ability to operate independently as mandated by the General Assembly and required by international auditing standards OIOS has adopted. First, while OIOS is funded by a regular budget and 12 other revenue streams, UN financial 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. Moreover, OIOS annual reports do not assess risk and control issues facing the UN organization, or the consequences if these are not addressed. 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. UN funds are vulnerable to fraud, waste, abuse, and mismanagement because of weaknesses in the UN's control environment for procurement, as well as in key procurement processes. The UN lacks an effective organizational structure for managing procurement, has not demonstrated a commitment to improving its procurement workforce, and has not adopted specific ethics guidance. While the UN Department of Management is responsible for UN procurement, field procurement staff are supervised by the UN Department of Peacekeeping Operations, which lacks the expertise and capacity to manage field procurement. Also, the UN has not established procurement training requirements or a career path, and has yet to adopt new ethics guidance for procurement staff, despite long-standing General Assembly mandates. In addition, the UN has not established an independent process to consider vendor protests despite a 1994 recommendation by a high-level panel to do so as soon as possible. Further, the UN does not consistently implement its process for helping to ensure it conducts business with qualified vendors.