Outsiders Have Access to U.N. Development Program's Financial Management System

By George Russell

The United Nations Development Program, already mired in controversy for its dealings with North Korea, now faces another scandal involving the people who spend its $5.2 billion annual budget — and shut down its computerized financial management system yesterday when confronted by FOX News about their activities.

The new scandal involves UNDP’s headquarters financial unit, where checks are signed and purchase orders are approved for its sprawling operations world-wide.

Since the last week of June, FOX News has learned, investigators from the United Nations’ watchdogOffice of Internal Oversight Services, or OIOS, have been probing the financial unit for evidence of hiring irregularities and violations of UNDP financial rules.

And already there are some themes similar to the six-month battle over UNDP operations in North Korea: evidence of unauthorized personnel working in sensitive positions that — according to its own regulations — should only be held by UNDP staff; payments with puzzling authorizations that total nearly $2 million; service providers whose employees may violate important UNDP rules and regulations.

FOX News has also learned from UNDP insiders that critical files may have disappeared out of reach of investigators.

This was coupled with dramatic, sudden, and secretive shut-downs of UNDP’s computers in the wake of FOX News email queries Tuesday about the situation.

Indeed, something like a covert scramble began within UNDP on Tuesday in the wake of the arrival of the FOX News questions.

At first, a UNDP press spokesman declared that there had been a delay in receiving the questions, directed to the top echelon of UNDP officials, due to a computer shutdown.

But by that time FOX News had already received telephone confirmation of receipt of the emails from the office of UNDP administrator Kemal Dervis, the organization’s CEO. Those emails included copies of the questions sent to the three top UNDP officials under Dervis.

Just two hours later, however, at 3:37 p.m. on Tuesday, UNDP employees told FOX News that there was a sudden shutdown of UNDP’s computerized financial management system —which coincided with an emergency senior staff meeting that took place in the 21st floor office of UNDP’s No. 2 official, Ad Melkert. (Melkert himself was traveling outside the country; the meeting was chaired by Melkert’s chief of staff, Tegegnework Gettu.)

FOX News was unable to learn what took place in the emergency meeting, or how long it lasted. But at 6:22 p.m., much — but not all — of UNDP’s computer systems came back on line.

With one significant exception. The portions of UNDP’s proprietary financial software system that deal with personnel assignments, personnel records, and access to financial tasks, remained blocked to almost everyone who normally uses those parts of the system, until at least 2 a.m.

The sudden cloak of secrecy was significant, because the new internal investigation centers precisely on the central financial bureau at the heart of UNDP where that financial software is used — a bureau that is directly under the supervision of the agency’s top-most officials.
It is known as the UNDP’s Office of Finance and Administration (OFA), which is headed by UNDP’s No. 4 official, Comptroller Darshak Shah, a 10-year UNDP veteran. OFA, with 84 employees, is responsible for managing the cash flow of the entire UNDP — an organization with more than 8,000 employees whose budget grew from $4 billion to $5 billion between 2000 and 2004, and is expected to grow by another 40% by 2015.

Whatever money UNDP has flows out of OFA to its operations in 190 countries world wide — and to a network of suppliers who provide everything from consultants to foodstuffs to train locomotives for development projects around the world.

Financial controls at OFA are supposedly tight — under UNDP rules, only full-time staff members are supposed to have access to the UNDP’s proprietary financial accounting and disbursement system, known as ATLAS. But that is the rule that is now being violated.

All of which deepens the drama now surrounding UNDP and its relationship with a job placement agency known as Professional Financial Temporaries, Inc.—or PRO-FIT, as it calls itself on its website,www.accountancyatprofit.com.

According to UNDP payment records obtained by FOX News, PRO-FIT has received more than $1.9 million in payments from UNDP since January 2005 alone. Those payments cover the salaries, benefits and other expenses — plus, of course, profit — for PRO-FIT for a variety of employees who are working at UNDP in the Office of Finance and Administration. Those employees’ salaries are not paid by UNDP, but by PRO-FIT itself, which also hires and fires the personnel.

The full number of PRO-FIT employees in the department is not known, though some UNDP insiders place it as high as 31 — or more than a third of the staff. Most are in lower-level clerical or accountancy jobs, but at least several perform functions such as financial disbursement which are supposedly performed only by regular U.N. staffers.

At least seven of the 31 outsiders have log-ins that allow them to operate within the agency’s ATLAS financial system as the equivalent of regular UNDP personnel, in violation of UNDP regulations.

FOX News has obtained ATLAS user IDs for the PRO-FIT employees that confirm their presence in the financial software system, and their roles, which include the ability to approve certain types of financial transactions and move financial deposits within the UNDP’s worldwide system. Along with the IDs, FOX News has obtained copies of PRO-FIT hourly time-sheets filled out by OFA workers and transmitted to PRO-FIT’s Manhattan fax number.

Moreover, FOX News has obtained OFA data recording scores of UNDP payments to PRO-FIT since January 2005. Significantly, none of the payments hit the threshold of $100,000 that is a benchmark for oversight by higher levels of UNDP management. But in a significant number of cases, the monthly totals for the payments easily exceed the $100,000 threshold. And the totals for 2005, 2006, and so far in 2007 all exceed that mark handily.

(Among the items paid there is a particularly unusual one: an invoice numbered 00040679, and dated April 26, 2006. It notes “placement fees” totaling $12,715 for an individual named Fatima Ba — a name almost identical to that of Administrator Dervis personal assistant, Fatimata Ba. Questioned by FOX News about her possible relationship with PRO-FIT, Fatimata Ba would only say that she “did not know” if such a relationship existed, and referred FOX News to the UNDP press office.)

PRO-FIT founder and president Alvin Galland declined to answer any questions from Fox News. (An associate who answered PRO-FIT’s telephone said that Galland “was about to go on vacation.”)

There is an even deeper mystery involving PRO-FIT — how it came to provide such sensitive, and possibly forbidden, services to UNDP that insiders say stretch back more than a decade, without any competitive rebidding of the contract for those services. (PRO-FIT itself, according to its website, was founded in 1996.)

Under UNDP regulations, all competitive contracts must be put up for rebidding every 36 months, but according to UNDP insiders, there are no records of the rebidding of the PRO-FIT contract within at least the past 48 months.

Moreover, insider sources have told FOX News that there is no sign at all of a PRO-FIT contract in UNDP’s legal files dating back for the past four years.

There is at least one piece of evidence that the PRO-FIT relationship stretches back beyond 2004. It’s date of registration in the ATLAS system is January 1, 1901; UNDP insiders explain that ATLAS was created in 2004 and any contracts preceding that time were given the same 1/1/1901 date.

Who authorized the deal with PRO-FIT, and who has been aware of it since that time?

Spending on the order of UNDP’s payments to PRO-FIT usually requires approval at the highest levels of the organization. For purchases of more than $100,000, only UNDP officials with the rank of Director and Assistant Secretary General and above are allowed to grant approval, with the required agreement of a special contract approval committee, known as the Advisory Committee on Procurement, or ACP.

Major purchases are also supposed to be open automatically for competitive bidding, with a rare number of exceptions.

There are at least some theoretical possibilities that the PRO-FIT contract escapes some of the regular UNDP rules. Some UNDP contracts, for example, are considered long-term, and exempt from the rebidding rule. But an examination by FOX News of records of the UNDP’s long term contracts, which are kept on the agency’s internal website, does not include the PRO-FIT deal among them. (FOX News obtained a duplicate image of the website at the time of examination in the event of subsequent tampering.)

UNDP financial rules also allow considerable authority to the organization’s Chief Procurement Officer to create contracts at his or her own discretion, without competitive bidding, so long as the reason is recorded in writing. But that discretion does not extend to granting outsiders access to the UNDP financial control system, ATLAS, which is expressly forbidden under UNDP rules.

UNDP’s Chief Procurement Officer is Akiko Yuge, the agency’s Deputy Assistant Administrator, and No. 3 official. FOX News queries to Yuge regarding the use of any discretionary authority in regard to PRO-FIT have so far gone unanswered.

Similar email questions were put by FOX News to Darshak Shah, head of OFA, along with questions about his awareness of outsiders having access to his office’s most sensitive financial record system. Shah acknowledged receipt of the questions, but said only that “UNDP will revert back to you soon.”

Additional questions sent to Ad Melkert and Kemal Dervis received no reply, beyond an advisory that Melkert was traveling until July 11.

But even without competitive bidding, UNDP purchases must observe safeguards. Any contract of $100,000 or more that is approved without bidding in a unit such as the Office of Financial Administration requires the specific approval of the Chief Procurement Officer — in this case, Deputy Associate Administrator Yuge — and it also requires review and endorsement by the Advisory Committee on Procurement, which Yuge chairs.

Questions to Yuge about whether the procurement committee was ever involved in reviewing PRO-FIT’s contract went unanswered.

The fact that outsiders have privileged access to UNDP’s sacrosanct financial software is not merely a breach of its most important financial rules. It raises the possibility that outsiders whose presence is known to UNDP’s senior management can enter, alter and delete data from the ATLAS record system — precisely the circumstance that the staffers-only access to ATLAS is intended to prevent.

That possibility is particularly sensitive at a time when UNDP has been locked in a bitter dispute with the U.S. government over the transfer of hard currency to the dictatorial government of Kim Jong Il, and, according to the U.S. mission to the United Nations transfers of sums totaling millions to North Korean entities that have a relationship to the country’s illicit nuclear weapons program.

Some of the U.S. accusations have been based on data obtained from the UNDP’s proprietary financial systems, samples of which were revealed to UNDP officials in closed door sessions. UNDP officials have in turn leaked stories claiming that the U.S. data samples differ from entries in those systems, with the clear implication that the U.S. information has been altered or otherwise falsified. The presence of outsiders with privileged and theoretically forbidden access to ATLAS, however, raises the possibility that UNDP itself could be altering data.

The sudden shutdown of UNDP computer access in the areas involving personnel records, duties and ATLAS access IDs further underlines that possibility.

If so, the issues surrounding UNDP may no longer involve just the violation of vital rules and procedures. In light of the investigations underway into the Office of Finance and Management, the issues may include obstruction of the United Nations’ own system of justice.

UPDATE

After publication of FOX News’ story, various U.N. officials have responded to some of the questions posed to them concerning OFA and PRO-FIT. Among other things, the officials state that OFA currently has 117 employees, of whom 101 are staff and 16 contracted workers. Of the 16, 10 are said to be employees of PRO-FIT, while "the other six come from three other external companies."

According to U.N. Chief Procurement Officer Akiko Yuge, the contract for PRO-FIT was approved after a "competitive bidding process" in 1998. The contract was approved under an arrangement known as a Reimbursable Loan Agreement, which allows UNDP to pay outside companies for the services of temporary employees, and does not, Yuge says, require further competitive bidding. "UNDP believes that to date it has received value for money from PRO-FIT," she added.

Even so, Yuge said, OFA has already changed its ways. After deciding "some time ago" to undertake a "new competitive process" for the kind of services PRO-FIT offers, she said, "the bidding process took place three months ago and is currently under review."

FOX News has examined the UNDP procurement Web site where competitive bidding exercises are announced and posted. There is no record on the site of any posting for the services offered by PRO-FIT during the time period Yuge mentions.

Yuge’s claim about the date of UNDP’s relationship with PRO-FIT is contradicted to some degree by answers provided to FOX News by OFA head Darshak Shah. He declared that "PRO-FIT has provided services to UNDP since the mid 1990s." He did agree with Yuge that the deal was finalized under a Reimbursable Loan Agreement, or RLA, "under the authority delegated in accordance with UNDP financial regulations and rules."

FOX News has obtained a copy of the UNDP circular that initially announced the introduction of RLAs. Issued by the UNDP Office of Human Resources, it is dated July 27, 1999 — long after both officials say it was used in the case of PRO-FIT.

Both UNDP officials claim that outside employees at OFA — including those from PRO-FIT — are not forbidden access to the ATLAS financial management system, but are restricted only to data-entry functions.

"PRO-FIT employees in OFA have not been delegated certification and approval functions in ATLAS," Shah asserted.

But UNDP guidelines for hiring short-term help and contractors, which FOX News has examined, explicitly cite ATLAS "access" as a form of "approving or signing authority" that must not be granted to the employee. The same guidelines cover employees under RLAs.

Moreover, UNDP documents, computer log-ins and other information in FOX News’ possession confirm that PRO-FIT employees perform financial approval and other tasks that are supposedly done only by UNDP staffers, as previously reported.

Alvin Galland, the president of PRO-FIT, who initially declined to speak to FOX News, also responded by telephone after the originally story was published. According to Galland, his firm has had a "relationship with UNDP for 13 or 14 years," which would date it to the early 1990s. "We do have contracts, they were competitive, and they were bid," he declared. "I have had nothing but fully professional relations with UNDP."

Galland declined, however, to discuss any specific details of his relationship of his contractual relations with UNDP, suggesting that any such information should come from the international agency.

George Russell is Executive Editor of FOX News.