department of internal oversight services - unrwa annual...subcom, november 2012 dios annual report...

subcom, november 2012

dios annual report 2011 – september 2012

department of internal oversight services

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Table of contents

List of abbreviations 2

Executive summary 3

1. Introduction 4

2. The department of internal oversight services 4

2.1 Mission and strategic priorities 4

2.2 Resources 5

2.2.1 Human resources 5

2.2.2 Financial resources 6

2.3 Outputs and achievements 6

2.3.1 Departmental level 6

2.3.2 Assurance and advisory services (AAS) 7

2.3.3 Evaluation 8

2.3.4 Investigation 10

2.3.5 Ethics 13

3. Management follow-up on recommendation 15

3.1 Implementation of AAS recommendations 15

3.2 Implementation of evaluation recommendation 16

4. The advisory committee on internal oversight 16

5. External oversight 16

5.1 United nations board of auditors (UNBoA0 16

5.2 United nations office of internal oversight 17

5.3 Joint inspection unit (JIU) 17

6. Oversight trends 18

6.1 Lessons learned 18

6.2 High risk areas 19

6.3 Integrity trends 20

Annex1: Audit and inspection reports released in 2011 for which audits and inspections were done in 2010

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Annex2: Audit and inspection reports released in 2011 and 2012 for which audits and inspections were done in 2011

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List of abbreviations AAS Assurance and Advisory Services ACIO Advisory Committee on Internal Oversight BC Business Continuity CMS Case Management System CIA Certified Internal Auditor DIOS Department of Internal Oversight Services DR Disaster Recovery EC European Commission ERP Enterprise Resource Planning FAQ Frequently Asked Questions IIA Institute of Internal Auditors JIU Joint Inspection Unit JPO Junior Professional Officer MDG-F Millennium Development Goal Fund NMU Northern Management Unit OD Organisational Development OIOS (United Nations) Office of Internal Oversight Services P Professional (international staff category) PaR Protection against Retaliation PC Prohibited Conduct PRM (US Department of State’s) Bureau of Population, Refugees and Migration ROI Return on Investment SEA Sexual Exploitation and Abuse SMART Specific, Measurable, Available at an acceptable cost, Relevant, Time-Bound

(indicators) UN United Nations UNBoA United Nations Board of Auditors UNEG United Nations Evaluation Group UNRWA United Nations Relief and Works Agency for Palestine Refugees in the Near East US United States VTC Vocational Training Centre




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Executive summary

The Department of Internal Oversight Services (DIOS) is striving towards strengthening accountability, transparency, integrity and learning within UNRWA. In 2011, DIOS has made progress regarding its two strategic priorities of developing internal capacities and synergies, and strengthening external relations of and organizational arrangements regarding the Department. The most important achievement in this regard was the development and implementation of a Strategic Plan which lays out the requirements regarding the roles, objectives and methodology of work of the four newly co-located functions, and discusses potential areas for cross-functional synergies.

In implementing the Strategic Plan, DIOS moved from a compliance-based to a risk-based audit approach and reformed its audit processes to achieve stronger alignment with the standards of the Institute of Internal Auditors (IIA). Follow-up systems were developed for audit, as well as evaluation recommendations. DIOS also made progress in the management of information, for example by establishing a case management database for the Ethics Office or the creation of an audit data repository. The most significant development regarding data management, however, was the implementation of an Agency-level Case Management System (CMS), which assists in the monitoring of investigations and allows the identification of high-risk allegations. The mandate for the Ethics Office was fully established through the Commissioner-General’s promulgation of an Organizational Directive for the Office. DIOS’s staff capacity was also strengthened through the recruitment of specialized staff for neutrality related audits and investigations. Although measures to further develop the professional auditing skills of existing staff capacity gaps existed throughout the year. This was compounded trough vacancies at senior internal auditor level.

In 2011, DIOS issued a total of 13 audit, one inspection, two evaluation and nine investigation reports, with an additional 19 investigations and ten audits being at the reporting stage. One of the evaluation reports relate to the Organizational Development Evaluation, which was managed in the form of a joint evaluation by a Steering Committee consisting of UNRWA staff members and donor representatives. The key ethics outputs produced during the year include the development of an ethics e-learning course, the facilitation of 28 workshops to raise staff awareness on UNRWA’s standards of conduct, and the provision of ethics advice in response to 98 requests from staff members. Furthermore, the Ethics Office initiated an Anti-Corruption Project, which is carried out in cooperation with the three other DIOS functions and aims at developing an anti-corruption strategy for the Agency.

The implementation rate of DIOS’s audit, inspection and advisory services recommendations was low, with 27% of the 484 recommendations issued in 2010 and 2011 having been fully implemented as of October 2011. Since then improvements have been noted and the implementation rate was 42% as of end of July 2012. Among the 179 recommendations that had been outstanding for more than 12 months, 73 relate to high risks. The implementation rate of recommendations issued by the United Nations Board of Auditors (UNBoA) was higher than for DIOS recommendations. 77% of the 61 recommendations issued by UNBoA in 2010 in relation to the audit of the 2008-2009 financial statements had been fully implemented by the end of 2011. Of the eleven evaluation recommendations issued by the United Nations Office of Internal Oversight Services (OIOS) which were still outstanding at the beginning of 2011, three remained open at the end of the year. Among the total of 84 recommendations (65 addressed to DIOS) of the Advisory Committee on Internal Oversight (ACIO), which were newly issued in 2011 or still outstanding from 2010, UNRWA implemented 39 (32 for DIOS) during the year.




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In an effort to determine broad oversight trends, DIOS identified generic lessons learned from evaluations, analysed risk significance and pointed out integrity trends. Among the lessons learned for UNRWA were the importance of internal communication, a focus on measurable results, the strategic coordination of reform initiatives, and the timely investment in the modernization of outdated systems. Some of the recurrent underlying causes of audit risk findings include: poor planning; weak staff capacity, inadequate guidance and training; non-compliance with established rules and regulations, and poor management oversight and accountability. The most significant integrity issues identified include corporal punishment in UNRWA’s schools, breach of neutrality and Prohibited Conduct (PC) in the workplace.

1. Introduction

The purpose of the Annual Report of UNRWA’s Department of Internal Oversight Services (DIOS) is to update the Commissioner-General on activities, findings and conclusions of internal and external oversight in 2011. The report is also submitted to the Advisory Committee on Internal Oversight (ACIO) and UNRWA’s Advisory Commission for information and discussion.

The DIOS Annual Report consists of six sections. Following the introduction, the second section provides an overview over DIOS’s resource situation, work activities and findings and conclusions. The third section presents how UNRWA’s managers have acted on DIOS’s recommendations. The fourth section relates to the activities of the ACIO, while the fifth section summarizes external oversight activities that are of relevance to UNRWA. The report concludes with a section highlighting oversight trends.

2. The department of internal oversight services

2.1 Mission and strategic priorities

DIOS’s mission is to provide internal oversight services that add value to and support UNRWA in achieving its mission by strengthening accountability, transparency, integrity and learning within the Agency. DIOS fulfils its internal oversight role through independent and objective assurance (internal audit and inspection) and advisory services, evaluation and investigation.

The Ethics Office is administratively attached to DIOS, although it operates with full impartiality, independence and confidentiality. The objective of the Ethics Office is to assist the Commissioner-General in nurturing a culture of ethics, integrity and accountability, and thereby enhance the trust in and the credibility of UNRWA, both internally and externally.

In the past, DIOS was only responsible for the Assurance and Advisory Services (AAS), as well as the central Investigation Function. In 2010 the Department’s Evaluation Division and the Ethics Office were established. Therefore, the focus of DIOS’s current efforts is the strengthening of the Department through fully establishing the Evaluation Division and further developing the Investigation Division as well as the Ethics Office, while reforming the AAS Division. The strategic priorities in this regard are the following:




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• Development of Internal Capacities and Synergies: This strategic priority relates to the capacity building of the four functions and the strengthening of synergies between them in order to maximize UNRWA’s benefits from internal oversight services.

• Strengthening of External Relations and Organizational Arrangements: This strategic priority relates to the formalization of organizational arrangements related to DIOS within the organization, the systematization of the dissemination of relevant information on internal oversight related matters to concerned stakeholders, outreach to donors, and the maximization of benefits from the guidance provided by the ACIO through a more effective cooperation.

2.2 Resources

2.2.1 Human resources

In 2011, DIOS had 18 staff positions, including 16 professional and two support staff. Of the 16 professional positions, ten are international and six are area staff positions. Four of the international staff positions are of a

temporary nature. Figure 1 shows the staffing structure of the Department.

DIOS’s staff capacity was significantly strengthened in 2011. Throughout the year, three international and two area staff positions were filled. Most importantly, a P4 Senior Investigator and a P4 Senior Auditor were recruited from funds received from the US Department of State’s Bureau of Population, Refugees and Migration (PRM). At the end of the year, only two of the 18 DIOS positions were vacant. In addition to the staff positions, DIOS employed three locally recruited consultants for various periods of time in 2011: an Associate Ethics Officer, an Anti-Corruption Consultant, and an Evaluation Assistant.

Figure 1: DIOS organizational chart




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Despite the strengthening of staff capacity, the human resources available in 2011 were not sufficient for DIOS to effectively carry out its mission. This is in particular true for the Evaluation Division, which has been staffed with one P3-level Evaluation Officer only. For the year 2012, DIOS was granted four new positions: one P5 Chief, Evaluation Division and three senior-level area staff positions to support the evaluation, investigation and ethics functions. The audit capacity was impacted through a Senior Internal Auditor’s long term sick leave and subsequent resignation from UNRWA. Despite good progress in further developing auditing skills further effort is needed in particular in finalizing draft audit reports to the desired level of quality.

2.2.2 Financial resources1

In 2011, the total DIOS budget was US$ 3.275 million, including US$ 2.333 million from the General Fund and US$ 942,000 from various project funds

2.Of this amount, a total of US$ 1.830 million was budgeted for

international staff costs, US$ 293,000 for area staff costs and US$ 1.151 million for non-staff costs. From the non-staff costs, US$ 284,000 were earmarked for UNRWA’s contribution to the United Nations Board of Auditors (UNBoA), leaving US$ 867,000 at DIOS’s disposal.

The allocated General Fund budget was sufficient to cover DIOS’s operations in 2011 because it was supplemented by project funds received from various sources. For 2012, DIOS was allocated an increased General Fund budget of US$ 3.134 million.

2.3 Outputs and achievements

2.3.1 Departmental level

In 2011, DIOS made progress regarding its first strategic priority of developing internal capacities and synergies. The Department issued and implemented a Strategic Plan, which lays out the requirements of the four newly co-located functions regarding their roles, objectives, and methodology of work in order to add value and support UNRWA’s mission. The Strategic Plan also discusses how these functions complement each other and in which areas there is a potential for synergies. An example of a synergy area, in which DIOS moved forward in 2011, is an Anti-Corruption Project to which all DIOS functions contribute under the leadership of the Ethics Office. The project aims at developing a comprehensive anti-corruption strategy for UNRWA, including prevention, detection and response.

In the second strategic priority area of strengthening external relations of and organizational arrangements regarding the Department, DIOS has systematized its regular information update for the ACIO by issuing Status Reports in addition to the mandatory Annual Report. For the purpose of providing staff members with access to relevant information, such as evaluation reports or the process of reporting misconduct, DIOS has created an

1 All budget figures are rounded to the nearest thousand. 2 The project funds included US$ 248,000 from the PRM project (see section 2.2.1), US$ 278,000 from Organizational Development funds, US$ 381,000 from the Nahr el Bared Project to cover the costs of a P4 Senior Auditor and a Grade 17 Auditor Construction Management, US$145,000 as an “in-kind donation” or Junior Professional Officer (JPO) funded by the Government of the Netherlands, and US$ 35,000 from various projects to cover outsourced audits.




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intranet page. Through outreach to donors DIOS was able to obtain funding from the PRM for a project that focuses on strengthening neutrality-related audits and investigations in the Agency.

2.3.2 Assurance and advisory services (AAS)

The activities of the AAS Division include internal audits, inspections and advisory services. The AAS Division is the oldest and most established, as well as with ten permanent and three temporary staff positions also the largest Division of DIOS. The following sections describe the key AAS outputs produced by the Division in 2011 and the achievements made with regard to reforming its approach to service delivery.

Internal audits, inspections and advisory services

In the nine month period following development of the strategic plan in March 2011, DIOS released a total of 13 internal audit and one inspection report, which followed a new risk-based audit format introduced in January 2011. In addition, a further ten internal audit and inspection assignments were planned and fieldwork was completed. Only the fieldwork of the planned Audit on Maintenance of Agency Premises was carried over to 2012. Annex 1 shows all audit and inspection reports issued in 2011 for which the fieldwork was completed in 2010 and Annex 2 shows all the reports issued in 2011 and 2012 until the end of September for which the audit work was completed in 2011.

Development of the function

Given the baseline of ‘does not conform’ in December 2010, significant development work was conducted during 2011 in order to move the AAS Division closer to achieving the highest rating of ‘generally conforms’ to the standards of the Institute of Internal Auditors (IIA). These development activities spanned the entirety of the audit lifecycle.

One of the most fundamental changes was the development of an inaugural UNRWA audit universe: an inventory of all auditable areas in governance, programme delivery, and mission support; and a risk-based methodology to planning the selection of audits and inspections. Risk-based principles were also introduced throughout the entirety of each stage of an audit assignment, from initial engagement planning to fieldwork and reporting.

Another significant milestone was the introduction of a recommendation follow-up system involving the review of all AAS issued reports after 1 January 2010, and the substantiation of management action taken to implement audit and inspection recommendations.

In order to develop audit capacity, guidance, support and training was provided to staff in risk-based auditing, as well as in the development of audit tools and templates, instructions, and process flowcharts. A working paper




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peer review process was also introduced. All AAS staff was supported through the development of an AAS professional learning practice with group IIA membership and support for completion of the IIA Certified Internal Auditor (CIA) accreditation programme. Despite these efforts there were delays in issuing several audits mainly due to larger than expected efforts required to finalizing draft audit reports to the desired level of quality. The Audit Division’s timeliness of reporting was also affected by capacity gaps in the Senior Internal Auditor staffing level in 2011.

Progress was also made in the management of information through the establishment of a document retention practice, clearing and organisation of the AAS document storerooms, creation of an audit data repository, and an initial assessment of potential alternative automated audit systems.

2.3.3 Evaluation

UNRWA is aiming at developing an evaluation system consisting of a centralized evaluation function in DIOS and decentralized evaluation functions in field offices and headquarters departments in order to foster a learning culture in the Agency. DIOS’s Evaluation Division was established in 2010 and currently consists of one staff member at P3-level only, who has been supported by a locally recruited consultant since November 2011. As summarized in the following sections, the focus of work of the Division in 2011 was on demonstrating good evaluation practice and laying the foundation stone for the establishment of the future evaluation architecture.

Evaluations

DIOS issued two evaluation reports in 2011: an Organizational Development Evaluation and a Fleet Management Review.

Table 1 provides a short summary of selected key findings and recommendations of these two reports.

Table 1: Summary of Key Evaluation Findings and Recommendations

Organizational Development (OD) Evaluation

• The report concluded that OD strengthened UNRWA’s capacity to serve Palestine refugees as the Agency reformed critical business processes and systems and many staff have become more engaged in their work; however, OD’s effectiveness was limited by a lack of an explicit focus on measurable results, a lack of a communication strategy, as well as a delay in the implementation of the Post Classification and Compensation Management System. • Among others, the report recommended that UNRWA create a permanent internal communications function, expand the Executive Office, strengthen strategic planning and development, base future reform initiatives on measurable results regarding the efficiency of service delivery, conduct a cost-benefit survey of business process improvements, and develop a talent management system to promote more area staff into senior management positions.




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Fleet Management Review

• The review established that UNRWA’s fleet is not over-established to support the Agency’s operations, and that the cost of providing transportation is escalating both in response to the demand for additional services and as a result of the lack of investment in measures that keep UNRWA’s fleet management up-to-date with modern standards. • Among others, the report recommended that UNRWA invest in a computer-based fleet management information system, outsource maintenance work to external maintenance contractors in some fields while investing further in the workshops of other field offices, revise its transport policy, fleet replacement policy, vehicle allocation policy, and driver assessment policy, and reconsider an Agency-wide application of the Carlog system currently trialled in West Bank.

In addition to the two evaluations commissioned by DIOS, a total of 28 evaluations and evaluative studies were commissioned or carried out by decentralized evaluation functions in field offices and headquarters departments. 23 of these were discretionary evaluations, while five were mandatory. One of the evaluations, the mid-term evaluation of a Millennium Development Goal Fund Joint Programme

3, was managed in the form of a joint

evaluation by UNRWA West Bank Field Office and the Spanish Government.

Field offices were more active in commissioning evaluations than headquarters departments with more than two thirds of the decentralized evaluations commissioned by field offices. With eleven issued reports, Lebanon Field Office conducted the highest number of evaluations.

The programmatic focus of decentralized evaluations was on education and health with seven reports issued on each of the two areas. The other evaluation areas were gender (5), relief and social services (3), microfinance (2), job creation (2) and support services (2).

In addition to the centralized and decentralized evaluations commissioned or conducted by UNRWA, the Agency’s donors commissioned seven evaluations in 2011. These include five project evaluations and two Agency-level evaluations.


In 2011, good evaluation practice was demonstrated by professionally managing the OD Evaluation mentioned above, which was of high priority to the Agency. Under the leadership of DIOS the evaluation was managed in the form of a joint evaluation by a Steering Committee consisting of UNRWA staff members and donor representatives in order to ensure the credibility of evaluation findings and recommendations for internal and external stakeholders.

3 The MDG-F Joint Programme was entitled Gender Equality and Women’s Empowerment in the Occupied Palestinian Territory.




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The credibility of DIOS’s Evaluation Division was also strengthened by its acceptance as a member of the United Nations Evaluation Group (UNEG) at UNEG’s Annual General Meeting in March 2011. UNRWA’s membership in UNEG is important for improving the visibility of the Agency’s evaluation function in the UN system and for ensuring that evaluation in the Agency follows UN best practice.

As a first step in the establishment of an evaluation architecture and system for UNRWA, DIOS hired a senior evaluation specialist consultant to provide strategic guidance for the evaluation function based on an assessment of UNRWA’s specific context and his expertise on international best practices in evaluation. The consultancy has helped to increase the visibility of and interest in evaluation in the Agency.

With the purpose of enhancing the usage of evaluation findings, DIOS has designed a system for systematic follow-up on evaluation recommendations. The system will be launched in 2012 for following up on the first two evaluation reports that DIOS issued in 2011.

Finally, the newly established evaluation section of DIOS’s intranet page contains a database for evaluation reports and other relevant documents in order to facilitate the dissemination to UNRWA staff. The OD Evaluation report is also published on UNRWA’s internet page for transparency purposes.

2.3.4 Investigation

UNRWA’s investigation function is decentralized with DIOS being responsible for conducting investigations of the most serious cases of misconduct, while additional investigations are carried out by UNRWA staff members in other headquarters departments and field offices. The DIOS Investigation Division was created as a specialized Division separate from AAS

4 in 2009 with the establishment of a P5 Chief, Investigation Division position. In 2011,

an additional P4 Senior Investigator (Neutrality) was recruited to strengthen neutrality-related investigations. As elaborated below, the focus of work in 2011 was on further developing the Agency-wide investigation function in addition to conducting investigations.

Investigations

In 2011, a total of 233 cases of alleged misconduct were reported in UNRWA Headquarters and Jordan, Lebanon and Gaza Field Offices. It is currently not possible to provide statistics for cases reported in Syria and West Bank Field Offices.

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Table 2 provides summary statistics about the different categories of misconduct allegations reported. As shown, the most significant areas of alleged misconduct include corporal punishment (59 allegations), failure to comply

4 Investigation had already been a DIOS responsibility in the past but had been carried out by staff whose main expertise was related to internal auditing. 5 The figure of 233 relates to cases that were entered into the newly established Case Management System (CMS). The offices, which are currently using the CMS, include Headquarters, Gaza, Jordan and Lebanon Field Offices. The CMS will be rolled out in Syria and West Bank Field Office in 2012. The section below on the development of the Investigation Function contains further information regarding the CMS.




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with professional standards (28 allegations) and non-sexual harassment (27 allegations). It is currently not possible to automatically generate statistics on the number of allegations of misconduct, which were actually substantiated.

Table 2: Misconduct allegations by category and status

Category Closed6 Open Total

Abuse of Power 4 3 7 Assault (Physical) 5 4 9 Breach of Neutrality 5 5 1

0 Conflict of Interest 0 7 7 Corporal Punishment 4

7 12

59

Entitlement Fraud 1 2 3 Failure to Comply with Professional Standards 2

4 4 2

8 Financial Irregularity 1 2 3 General Fraud 1 4 5 Harassment (Not Sexual) 1

3 14

27

Medical Insurance Fraud 1 1 2 Mismanagement 1 0 1 Procurement Irregularities 1 2 3 Recruitment Irregularities 5 3 8 Retaliation 2 2 4 Sexual Exploitation and Abuse (SEA) 4 4 8 Sexual Harassment 4 1 5 Theft 2 7 9 Willful Damage of Agency Property 0 1 1 Other 2

0 14

35

Total 141 92 233

DIOS’s Investigation Division took up 35 investigations of serious cases of misconduct in 2011. At the end of the year, nine of these cases had been closed, 19 were at the reporting stage and seven were still under investigation. 25 of the 35 cases relate to the industrial action taken by the Area Staff Union in West Bank Field Office in 2010.

A more significant number of investigations were field- or department-led investigations carried out by UNRWA staff members who are not professional investigators. On request, DIOS provided advice and technical support to specific investigations.

6 If a case is closed, it can be that the matter was Declined because it does not relate to an allegation of misconduct by Agency personnel; or Recorded for Information because there was insufficient information on which to base an investigation; or Suspended due to the relatively minor nature of the allegation and a lack of resources to pursue an investigation; or addressed by a Management Intervention because the allegation was a matter best dealt with through management intervention or the existing performance management framework; or subjected to an Investigation, preliminary assessment, preliminary investigation or a fact finding exercise.




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Figure 2 provides an overview over the status of field-led investigations in those fields, in which this data is available.

Figure 2: Status of Field-led Investigations

0

10

20

30

40

50

60

70

80

No. of Cases

Gaza Jordan Lebanon

Field Office

Open/Under Investigation

Closed


Since the majority of investigations in UNRWA are conducted by non-professional investigators, DIOS’s Investigation Division aims at targeting its limited capacity in order to better support the Agency in managing and improving the quality of investigative activity. In 2011, the main achievement in this regard was the implementation of a Case Management System (CMS) in UNRWA headquarters, as well as three of the five field offices.

7 The CMS is a tool that assists in the monitoring of investigations and facilitates information exchange

between DIOS and field offices and headquarters departments. It offers trend analysis and tracking of the status of investigations and the implementation rate of recommendations. The CMS allows DIOS to identify high-risk allegations and offer appropriate specialist advice.

In 2011, the Investigation Division, in close cooperation with the Ethics Office, has also continued to raise staff awareness on ethical standards and expected behaviour, as well as mechanisms for reporting alleged cases of misconduct. In addition to contributing to seminars and conferences, a Frequently Asked Questions (FAQ) section was developed for the DIOS intranet page.

7 See footnote 6.




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2.3.5 Ethics

The Ethics Office was established in 2010 and is currently staffed with a P5 Chief, Ethics Office, a Grade 11 Administrative Assistant A and two locally recruited consultants - an Associate Ethics Officer and an Anti-Corruption Consultant. The Ethics Office provides services to management and individual staff members in six areas: standard setting and policy support; training, education and outreach; advice and guidance; conflict of interest prevention (through financial and other potential conflict of interest disclosure); Protection against Retaliation (PaR); and prevention of and response to Sexual Exploitation and Abuse (SEA) of beneficiaries and Prohibited Conduct (PC) in the workplace. The sections below describe key outputs achieved in these areas in addition to achievements with regard to the further development of the function.

Key Ethics Outputs

In 2011, the Ethics Office received a total of 223 requests for its services, which represents a steep increase in comparison to previous years (4 requests in 2008, 17 requests in 2009, and 82 requests in 2010).

Figure 3 provides a breakdown of requests by category.

Figure 3: Ethics requests

Coherence (Across UN

System)

13%

Ethics Advice

45%General

Information/Other

16%

Office Alerted

4%

Standard Setting &

Policy Support

4%

Training

18%

The principal focus of the Ethics Office during 2011 was on the development of training and outreach to make sure staff have a basic understanding of the Agency's standards of conduct and are empowered to make ethical




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decisions and raise integrity concerns. An ethics e-learning course was developed in order to reach the Agency’s entire workforce. The English version of the course is finalized with the Arabic version to follow in the first quarter of 2012. In addition to the work on the e-learning course, the Ethics Office has facilitated and/or supported a total of 28 workshops for 763 staff members Agency-wide to raise staff awareness of UNRWA’s standards of conduct.

In the area of standard setting and policy support, the Ethics Office initiated a project to develop a comprehensive anti-corruption strategy for UNRWA, including prevention, detection and response. The project is carried out in cooperation with the other DIOS functions and is expected to be completed in mid-2012.

The Ethics Office is increasingly consulted by management and staff on a broad range of concerns related to ethics, integrity and accountability. During 2011, 98 ethics advice requests were received.

Figure 4 provides a breakdown of these by category.

In addition to the SEA/PC related advice requests, ten formal SEA allegations8 and 39 PC allegations were

reported during 2011. The Ethics Office remains concerned that the actual number of cases may be significantly higher and the annual meeting of SEA/PC focal points agreed on measures to improve the related complaints mechanisms. Many of those seeking advice were raising concerns related to retaliation and during the year four formal PaR requests were received, one of which was substantiated.

Figure 4: Ethics Advice Requests

Gifts & Awards, 2

Outside Activities, 4

Other Conflict of Interest, 1

Use of UN Assets, 1

SEA/PC/PaR, 35

Financial/Outside Interest

Disclosure, 17

Employment, 11

Other, 27

Finally, the Ethics Office provided support to the annual United Nations Financial Disclosure Programme for international staff, which is managed by the UN Ethics Office, and administered an UNRWA-specific programme

8 These include eight allegations reported through the CMS plus two from the field offices, in which the CMS has not yet been rolled out.




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for area staff. Under these two programmes, 68 international staff members and 279 area staff members, who are in positions of authority or who hold specific positions which entail financial decision making authority, were required to disclose personal financial investments and/or outside activities and interests.


In 2011, developmental activities served the main purpose of fully establishing the Ethics Office. A new Organizational Directive No. 30, containing the terms of reference of the Ethics Office, was promulgated by the Commissioner-General on 11 April 2011.

In order to record and monitor requests for ethics advice and other services, the Ethics Office introduced a case management database. The database was initially developed by the UN Ethics Office and adapted to accommodate UNRWA's specific requirements.

3. Management follow-up on recommendations

3.1 Implementation of AAS recommendations

A systematic process was introduced in January 2011 to follow up on the status of action taken by the auditee to implement all AAS recommendations.

9 The process includes validation of the stated management action through

a review of supporting documentation. It is expected that useful control, governance and risk management trend and comparison analysis will be possible over time with this new system and the new risk-based audit approach. .

Table 3 shows that as of October 2011, 27% of all 484 recommendations that were issued in 2010 and 2011 had been fully implemented and 18% partially implemented, while 55% had not yet been implemented. The implementation rate for 2010 recommendations was 41%, while it was 3% for 2011 recommendations. Both implementation rates are considered low.

Table 3: Implementation status of recommendations by type

Type Fully implemented

Partially implemented

Not implemented

Total

Internal Audits

10

105 79 252 436 (90%)

Inspections 4 4 13 21 (4%)

Advisory Services

21 5 1 27 (6%)

Total 130 (27%)

88 (18%)

266 (55%)

484 (100%)

9 A cut-off date was selected of all reports released from 1 January 2010. 10 The internal audits include audits conducted in-house by DIOS and also audits outsourced to third parties.




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As of October 2011, a total of 179 audit recommendations had been outstanding for more than 12 months from the date of release of the audit report. Of these, 73 were high risk recommendations. 50 of the high risk recommendations were ‘not implemented’ at all, including 18 recommendations from the Audit of Procurement of Medial Supplies, 16 from the Audit of Contracts of Temporary (Fabricated) Houses at Nahr el-Bared Camp; eight from the audit of Promotion Management (P Level staff); and five recommendations from the Audit of the Finance Management System.

As of 31 July 2012, 42 per cent of all 484 recommendations that were issued in 2010 had been fully implemented and 15 per cent partially implemented, while 43 per cent had not yet been implemented. The implementation rate for 2010 recommendations was 60 percent; while it was 41 per cent as of 31 October 2011. The implementation rate for 2011 recommendations was 13 per cent, while it was 3 per cent as of 31 October 2011.

3.2 Implementation of evaluation recommendations

Since DIOS issued its first two evaluation reports only towards the end of 2011, it is not possible at this stage to provide an update on the implementation of evaluation recommendations. A system for systematic follow-up on recommendations was designed and will be launched in 2012.

4. The advisory committee on internal oversight

The role of the ACIO is to provide independent advice to UNRWA’s Commissioner-General on matters related to financial management and reporting, external audit matters, risk management, the systems of internal controls and accountability, and the ‘oversight function’. The ACIO consists of three UNRWA-internal and three UNRWA-external members. DIOS provides administrative and secretarial support to the Committee.

In 2011 the ACIO held two meetings, in which it made 40 recommendations (including 28 directly addressed to DIOS). An additional number of 44 recommendations (37 for DIOS) were made in 2010 and still open at the beginning of 2011. Of the total number of 84 recommendations dating from 2010 and 2011 (65 for DIOS), 39 were fully implemented by the end of 2011 (32 for DIOS). The 45 recommendations (33 for DIOS) that are still open include 21 recommendations (15 for DIOS) that were only made in November 2011.

5. External oversight

5.1 United Nations Board of Auditors (UNBoA)

The UNBoA conducted the last external audit of UNRWA’s financial statements for the biennium ending 2008-2009, releasing their report in July 2010. A total of 61 recommendations were included in the report. During the UNBoA interim visit in September/October 2011, it was found that 47 (77%) of these recommendations had been fully implemented, 2 (3%) recommendations were overtaken by events, 7 (12%) recommendations were under




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implementation, and 5 (8%) recommendations were implemented though were still to be verified by the UNBoA.11

These positive statistics are also reflective of DIOS, which has fully implemented seven of nine recommendations with the remaining two to be verified as implemented in the upcoming UNBoA visit.

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5.2 United nations office of internal oversight services (OIOS)

In 2011, the OIOS issued two reports of UN system-wide assessments to the General Assembly: a study on the role of evaluation and the application of evaluation findings,

13 and a review of the public information function

14 in

the UN Secretariat. These reports did not contain any recommendations addressed to UNRWA.

From earlier evaluation reports, there were still eleven evaluation recommendations outstanding at the beginning of 2011. Of these, UNRWA was able to close three during the year. OIOS dropped five recommendations, mainly for reasons of reclassification of criticality. The remaining three recommendations (or elements of these), which are still in progress of implementation, were issued in 2010 and relate to the requirement of establishing a comprehensive accountability framework, an evaluation policy and guidelines for lesson learning in the Agency.

5.3 Joint inspection unit (JIU)

In 2011, the JIU issued five UN system-wide assessments which were of relevance to UNRWA. These include reviews of the medical service

15, transparency in the selection and appointment of senior managers

16, south-

south and triangular cooperation17

, accountability frameworks18

, and business continuity19

in the UN system. In these reports, the JIU made eleven recommendations for action by UNRWA in addition to five recommendations addressed to UNRWA’s “legislative organ”

20.

The findings of the JIU indicate that the Agency performs well compared to other UN organizations with regard to its accountability framework. Among other organizations UNRWA is favourably mentioned for having in place a whistle-blower protection policy and a complaint mechanism for vendors to challenge procurement decisions, as well as for the usage of 360-degree performance assessments as a tool for senior managers to obtain feedback on their managerial strengths and weaknesses. Moreover, UNRWA’s practice of recognizing outstanding performance (with both monetary and non-monetary rewards and awards) and related guidelines in the Agency’s human resource policy framework are highlighted as good practice. However, the JIU found that UNRWA’s investigation function is under-resourced compared with other UN organizations.

11 These statistics were compiled by UNRWA’s Finance Department. As the owner of the Agency’s financial statements, the Finance Department is responsible for monitoring the implementation status of the recommendations raised by the external auditors. 12 The next UNBoA visit is scheduled for 18 March 2012. 13

OIOS, Strengthening the role of evaluation and the application of evaluation findings on programme design, delivery and policy directives (A/66/71), March 2011. This is the eleventh report in a series of studies that are submitted biennially. 14 OIOS, Review of the organizational framework of the public information function of the Secretariat (A/66/180), July 2011. 15 JIU, Review of the Medical Service in the United Nations System (JIU/Rep/2011/1), Geneva 2011. 16 JIU, Transparency in the Selection and Appointment of Senior Managers in the United Nations Secretariat (JIU/Rep/2011/2), Geneva 2011. 17 JIU, South-South and Triangular Cooperation in the United Nations System (JIU/Rep/2011/3), Geneva 2011. 18 JIU, Accountability Frameworks in the United Nations System (JIU/Rep/2011/5), Geneva 2011. 19 JIU, Business Continuity in the United Nations System (JIU/Rep/2011/6), Geneva 2011. 20 UNRWA’s governing body is the UN General Assembly.




18

Furthermore, JIU findings suggest that UNRWA does not perform well in the areas of business continuity and medical services. Based on a self-assessment, UNRWA’s business continuity was classified as “limited”

21

(maturity level four of five) with all other organizations ranking higher. As for medical services, JIU noted that UNRWA is among the organizations which do not have an occupational safety and health policy in place and do not keep staff members’ medical records in an electronic format. Furthermore, UNRWA headquarters duty stations offer the lowest number of medical services and programmes of all headquarters duty stations.

6. Oversight trends

6.1 Lessons learned

The following generic lessons can be identified based on the findings of Agency-level evaluative activities in UNRWA in 2011:

• Internal communication requires more attention. While UNRWA has made progress with regard to strengthening public information, internal communication requires a stronger focus. This relates to the importance of establishing and maintaining an internal communications function and developing communication strategies to accompany reforms.

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• A stronger focus on measurable results is required. All planning documents, including reform strategies, should clearly state the objectives of the initiative and the expected results in relation to effectiveness or efficiency of service delivery. Progress towards achieving these results should be objectively measurable.

23

• Timing and strategic coordination of reform initiatives is crucial. This is in order to avoid that one reform initiative hinders the implementation of another equally important reform initiative.

24

• A lack of timely investment in modernization may result in higher costs for maintaining outdated systems.

25 Investment decisions, similar to reform initiatives, should be made based on a cost-benefit analysis.

26

21 The classification of “limited” is described as “low recognition of BC [business continuity] and DR [disaster recovery] plans. Minimal action. Limited support by management, no funding. Only general backup plans, little training or information, silos of information. Vulnerable.” 22 The OD Evaluation found that the effectiveness of OD was negatively impacted by the lack of a communications strategy and urged the implementation of the Post Classification and Compensation Management System, the new Performance Management System, and the Enterprise Resource Planning (ERP) initiative to be accompanied by a communications strategy. It also recommended the establishment of an internal communications function. 23 The OD Evaluation found that OD did not have an explicit focus on measurable results and neither became UNRWA more results-oriented because of OD. It recommends that all future reform initiatives should be linked to expected measurable results in relation to effectiveness and efficiency. 24 The EC Annual Review highlights the potential danger that Field-led reform initiatives represent for Agency-level reforms. Similarly, the OD Evaluation argues that the ERP initiative should have been carried out simultaneously with OD since this reform will now be more difficult as a result of OD’s impact. 25 The Fleet Management Review found that “[t]he cost of providing this transport resource is escalating (…) as a result of failing to invest in measures that keep UNRWA’s fleet management up-to-date with modern standards”. 26 The OD Evaluation recommends that UNRWA do a cost-benefit survey on OD business process improvements in order to create new dynamics that enable the organization to shift towards thinking in terms of return on investment (ROI).




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6.2 High risk areas

Table 4 summarises the frequency of high risk observations identified by DIOS during 2011 in internal audits and inspections, as compared to the frequency of medium and low risk observations. A high risk observation is defined as any risk that may have a critical effect on the achievement of objectives. For these high risks, management should give immediate attention to addressing the recommendations.

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Table 4: Distribution of risks by criticality

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Audit universe category High risks Medium risks Low risks Total

Governance 5 14 5 24 (8%)

Programme Services 88 101 9 198 (64%)

Mission Support 30 49 9 88 (28%)

Total 123 (40%) 164 (53%) 23 (7%) 310 (100%)

In 2011 the frequency of observations between the three audit universe categories is more a reflection of the audit topics selected, and not so much of any oversight trends. Previous to 2011, DIOS had no defined audit universe, and generally conducted audits of mission support areas (such as finance, procurement, and recruitment) and some programme service areas. The majority of the reports released in 2011 related to these two areas. Only in 2011 were specific audits of the cross-cutting governance area introduced.

However, the distribution of high, medium and low observations is an indicator of the general control environment in UNRWA. As shown, 40% of all observations were rated as high risk, while about 53% rated as medium risk. The same analysis in future years will provide more meaningful trend results. It can be expected that the proportion of high risk observations will decline over time with an improvement in the internal controls, governance and risk management processes in UNRWA as a result of management’s implementation of internal audit and inspection recommendations, and other DIOS oversight initiatives.

For those audits released and/or where fieldwork was conducted in 2011, key risk areas for the Agency included: recruitment (both area and international staff); project management (regular and emergency), construction management; contract management; and food and cash assistance. Some of the recurrent underlying causes of audit risk findings include: poor planning; weak staff capacity, inadequate guidance and training; non-compliance with established rules and regulations, and poor management oversight and accountability.

27 Further details regarding a sample of the key and high risks are included in section 2.3.2. 28 The statistics are based on the results of the audits and inspections for which field work was completed and a draft report prepared and/or released in 2011.




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6.3 Integrity trends

Corporal punishment, breach of neutrality and prohibited conduct in the workplace represent some of the more serious integrity breaches reported through the new CMS. UNRWA operates 710 schools and training centres, enrolling approximately 490,000 pupils. Double shifting and other resource constraints represent major challenges, including related to maintaining discipline.

Although the Agency has a strict zero tolerance policy on the subject, a number of teachers continue to resort to physical and other forms of prohibited punishment in an attempt to enforce discipline. 59 allegations of corporal punishment were reported during 2011, significantly more than in previous years. Although this is worrying it could also indicate that the policy on corporal punishment, including the duty to report each incident, is becoming better known across the Agency, as also confirmed through various workshops with educational and other staff conducted during the year.

The requirement for UNRWA personnel to maintain strict neutrality represents another key challenge, especially for the Agency's area staff. Reminding staff members of their obligations in this respect is an important component of UNRWA's ethics education programme and specially earmarked donor support has recently enabled the Agency to strengthen both its audit and investigation capacity in this domain. A number of neutrality-related allegations were investigated during the year and led to imposition of disciplinary measures. Awareness of neutrality requirements has significantly increased during the year, although this remains a sensitive and complex issue for many staff members, requiring the need for continued outreach and training.

A third issue that has demanded significant attention from both the Investigation Division and the Ethics Office relates to PC and PaR. Both formal allegations and requests for advice pertaining to PC and PaR, as well as staff outreach, indicates that the prevalence of this kind of misconduct is not insignificant, potentially resulting in loss of productivity, low morale, illness, resignations, as well as pressure on investigative capacity, the Administration of Justice System and other mechanisms to address grievances. In relation to these forms of workplace misconduct, the Agency also has zero tolerance policies in place. However, the requirements that it places on conduct of managers and other staff seem less understood than the policies related to corporal punishment and neutrality, underscoring the need for additional training and awareness raising in these domains.

The largest number of misconduct allegations reported to DIOS during the reporting periods of 2010 and 2011 originated from Jordan Field Office. Both the Ethics Office and the Investigation Division are working with the Field to further raise staff awareness of the standards of conduct, including the aforementioned policies, and to develop investigation capacity to respond to allegations.

One final concern expressed by many managers and other staff members relates to delays in response to misconduct allegations as well as inconsistencies in management response. This concern highlights the needs to strengthen investigative capacity and to further develop a coherent and predictable approach to staff discipline.




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Annex 1: Audit and inspection reports released in 2011 for which audits and inspections were done in 2010

# Audits and inspections Overall report risk rating Number of risks

observations

High Medium Low Total

1 Recruitment of Area Staff at Syria Field Office. Partially Satisfactory 7 5 1 13 2 Northern Management Unit (NMU) Tendering and Awarding of

Contracts. Unsatisfactory 8 11 19

3 External Relations Department. Partially Satisfactory 2 6 1 9 4 NMU Infrastructure Activity Contracts. Partially Satisfactory 7 6 2 15 5 Financial Statement Components. Partially Satisfactory 3 11 1 15 6 Daily Paid Management, Lebanon Field Office (LFO). Partially Satisfactory 5 7 12 7 Project Management, Syria Field Office (SFO). Unsatisfactory 8 6 2 16 8 Warehouse Goods in Jordan, Syria and Lebanon. Unsatisfactory 7 5 1 13 9 Organisational Development (OD) Programme (Outsourced -

Talal Abu Ghazaleh). Satisfactory

1 8 2 11 10

International Staff Association (ISA), 2005 to 2009. Unsatisfactory 12 6 0 18




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Annex 2: Audit and inspection reports released in 2011 and 2012 for which audits and inspections were done in 2011

# Audits and inspections Overall report risk rating Number of risks

observations

High Medium Low Total

1 Contract Neutrality. Partially Satisfactory 8 11 0 19 2 Microfinance Department, 2010 (Outsourced - Deloitte).

29 Outsourced Audit 28 5 1 34

3 European Commission (EC) Funded Food and Cash Distribution Programme in West Bank and Gaza (EC – DCI – Food/2009/209 – 319) (outsourced – KPMG).

Satisfactory

7 3 10 4 EC Funded Food and Cash Distribution Programme in West

Bank and Gaza (EC – DCI – Food/2009/209 – 373) (outsourced – KPMG).

Satisfactory

4 7 5 16 5 Siblin Vocational Training Centre (VTC). Partially satisfactory 2 14 5 21 6 PRM Reporting. Partially Satisfactory 5 2 4 11 7 Cash Imprest Funds at Area Offices (Jordan, Gaza, Lebanon). Inspection 3 6 0 9 8 Cash Imprest Funds at VTCs (Jordan, Gaza, Lebanon). Inspection 5 6 0 11 9 Drugs at Health Clinics and Central Pharmacies. Inspection 6 6 0 12

29 The outsourced audit of MMD did not include the provision of an expression of opinion on the financial statements.

department of internal oversight services - unrwa annual...subcom, november 2012 dios annual report...

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