United in the fight against fraud

With United Nations secretary-general Kofi Annan facing unprecedented pressure for his resignation over the involvement of his son in the Iraq oil-for-food scandal, the spotlight has again fallen on the finances of the global body he heads.

To say that the UN has a reputation for hard-headed accounts management and all round probity would be stretching the truth. It is a labyrinthine organisation with administrative tentacles crawling into some of the world’s darkest corners.

It is tasked with sorting out the worst messes that humankind cooks up – political, environmental, military – and often has to work on the hoof in violent and unstable conditions. In short, anyone expecting a balance sheet as tidy as Basel city council will inevitably be disappointed.

But that does not stop right-wing American republicans from using every example of financial waste and mismanagement that emerges from the UN as a stick with which to beat the organisation’s reputation. And although this may be motivated by unilateralist paranoia about world government, it does keep the UN on its mettle.

Fortunately, there is an in-house wing of the United Nations tasked with rooting out inefficiency and corruption in its many departments, and that is the Office of Internal Oversight Services (OIOS).

Formed in 1994, it undertakes internal audits, financial investigations, inspections, monitoring, evaluation and consulting services for all UN activities under the secretary-general’s authority. That includes the secretariats in New York, Geneva, Nairobi and Vienna; the five regional economic commissions for Africa, Asia and the Pacific, west Asia, Europe plus Latin America and the Caribbean.

Peacekeeping missions and humanitarian operations worldwide, along with certain activities of UN agencies such as the UN Environment Programme and children’s fund UNICEF, are also included.

But one area the OIOS is not investigating is the now-defunct oil-for-food programme, which is being scrutinised by an independent inquiry committee headed by former chairman of the US Federal Reserve and the current chairman of the International Accounting Standards Committee Foundation, Paul Volcker. He released seven audits this week as part of his investigation. US press reports claim that they raise questions over how the UN managed the programme, and place fresh pressure on the organisation to overhaul its management. The OIOS’s role here is mainly to act as a UN contact point for the committee, but it has supplied logistical and administrative support.

And its establishment does not mean the oversight office has been ineffective. Its recent annual report claimed that it had made 541 recommendations in 2003/04 on improving efficiencies and unmasking corruption, saving the world body US$26 million through 153 audits.

This involved some high profile fraud cases, including one involving an honorary representative of the UN High Commission for Refugees was found organising the buying and re-selling of international driver licences.

Indeed the office has in its 10 years’ life uncovered and blocked many expensive scams. OIOS investigations, for instance, revealed a staffer who reaped $800,000 (£423,000) through fraudulent travel claims; he is now serving a 41-month sentence and has been ordered to pay back the money. This will take time.

The office also uncovered the theft of UN-owned equipment worth more than $400,000 from UN missions in Cambodia and Somalia by a contractor. Most of the equipment was eventually recovered.

Another investigation exposed how a UN Relief and Works Agency official used false refugee registration numbers to submit fraudulent medical claims, totalling $355,000.

Also, in a breathtakingly cynical case, the OIOS led a task force investigating bribery and extortion of Kenyan refugees seeking to be resettled. And an investigation revealed a senior staff member at the UN Conference on Trade and Development had embezzled more than $600,000 from his agency.

Clearly there are bad apples amongst the army of well-meaning do-gooders at the UN, which no doubt helps the fraudsters prosper.

In such an atmosphere it clearly helps to have an office staffed with sceptical and nit-picking auditors. Indeed, the OIOS is tasked with following the Institute of Internal Auditors’ professional standards, to ‘assist the UN by identifying and evaluating significant exposure to risk and contribute to the improvement of risk management and control systems’.

These assessments do not just focus on fraud. Plain old incompetence is also included. One OIOS audit, for instance, found that the cost of developing a UN computerised integrated management information system unnecessarily increased by 169% over seven years. The office tightened accounting practices for the remaining contract period.

Peacekeeping missions have been a priority area. The UN saved $1.7m annually in the 1990s for example, via a recommendation to transfer UN central support functions for the former Yugoslavia from Zagreb to Sarajevo. After an audit in another mission, subsistence allowances were reduced to reflect the low local costs of living, saving $1.3m a year.

Given the breadth of its tasks the office is not lavishly staffed, with 124 professional officers and 56 assistants. It has 27 residential auditor posts for peacekeeping missions and eight special investigators, also for peacekeeping.

The office is, however, well funded, being able to draw on $23.5m in resources in 1994 and, although $11.8m was funded from extrabudgetary sources, the office’s costs are enough to make it politically embarrassing if it fails to perform.

To read the UN’s official reports, go to www.un.org/Depts/oios/report&pub.htm.