Pricey Peacekeeping: Ban Gets Blasted for Billion-Dollar Mismanagement

A U.N. report charges Secretary-General Ban Ki-moon's office with repeated failure to police its soaring blue-helmet budget — though Ban says he's doing fine.

Frustration is rising fast at the United Nations over Secretary General Ban Ki-moon's inability to police the organization's huge and fast-growing peacekeeping budget, which looks sure to exceed $8.4 billion this year.

That budget, which covers the period from July 1, 2010 to June 30, 2011, is still under intense debate, especially among the 37 of 192 countries at the U.N. that pick up virtually all of the peacekeeping tab. By far the biggest contributor is the U.S., whose share this year amounts to 27.17 percent of the total, or nearly $2.3 billion. Others include Japan, Germany and Britain.

The issue is not only how much money is being spent, but how the U.N. is spending it. Donor countries are expressing, in undiplomatic terms, their concern at the way Ban's Secretariat has handled the huge peacekeeping enterprise in the past. And so is Ban's independent Board of Auditors.

A report issued just weeks ago by one of the General Assembly's main budget oversight committees, the Advisory Committee on Administrative and Budgetary Questions (ACABQ), and obtained by Fox News, takes Ban harshly to task. The 11-page document was labeled for general distribution, but only went to selected members of a working group attached to the "special committee on peacekeeping operations," which began to meet on April 4 and is still in session.

The report keys in on the U.N.'s peacekeeping performance in the 2008-2009 budget year — when peacekeeping cost only $7.1 billion — and cites, among other things:

• the U.N.'s mismanagement of huge amounts of peacekeeping property at various sites around the world, including "inaccurate" and "unreliable" record-keeping, and "high stock levels" of property that "will result in waste, deterioration and obsolescence as well as possible loss due to theft";
• procedures that excluded "reputable vendors" from its procurement procedures at various missions in Africa;
• "widespread" irregularities in procurement in "many" peacekeeping operations, including in contract awards and monitoring of vendor performance;
• over-budgeting of expensive air transport resources;
• major gaps in Ban's methods of measuring and improving his top officials' performance of their duties to manage peacekeeping better.

Moreover, the report charges that Ban's lack of effective management has become a disturbing habit.

In the U.N.'s customarily congested language, the report says the ACABQ "continues to be concerned" with the U.N. Secretariat's "persistent non-compliance" in implementing Board of Auditors recommendations to improve the situation, and adds that it is "of great concern" to the committee that "effective remedies have not been applied."

Chief among those remedies, the report makes clear, is making U.N. managers more accountable for their actions — or in many cases, inactions, "at Headquarters and in the [peacekeeping] missions."

The sheer scope of the U.N.'s expanding peacekeeping operations is a major part of the challenge. The Board of Auditors' report covers 14 of 16 current U.N. peacekeeping operations and notes — not for the first time — that a mammoth overhaul of the U.N.'s computerized management and accounting systems, known as an enterprise resource planning system (ERP) is far behind schedule, and will not be ready until 2014, at the earliest.

Specifically, the committee notes that "there was no documentary evidence to fully substantiate the actual performance at the United Nations Operation in Cote d'Ivoire (UNOCI)," and that a similar fogginess surrounded the remaining U.N. mission in Kosovo.

The committee also emphasized that the Board of Auditors had complained for three years running about "significant discrepancies" between the U.N. records for "expendable and non-expendable property at various missions" — meaning that the organization could not really account for the huge amounts of goods it had — or did not have — on hand.

The problems of "deficiencies in the monitoring of the inventory" also applied to the main U.N. logistical base for peacekeeping in Brindisi, Italy, where supplies seemed to languish despite the rapid growth in missions that ostensibly needed them.

The same gap between supply and demand occurred in peacekeeping aviation budgets, where the committee and the auditors noted that the U.N. seemed to budget for many more hours of air transport time than its records showed it used. In other words, expensively-contracted aircraft and helicopters were often just sitting around.

Other "irregularities" were also noted, including a $5.3 million overpayment to a vendor in Darfur, and another $3.3 million worth of equipment that was delivered but not used due to various bureaucratic snafus.

In terms of managing peacekeeping personnel, the committee also found the U.N. wanting. Vacancy rates for needed personnel ranged as high as 35 percent, or nearly twice what the organization was supposed to accept — which in turn raised the potential stress on existing staff.

The solution to all this, the committee concluded, was that that Ban and his officials should actually implement the measures that auditors had long suggested for rectifying the problems, especially holding management feet to the fire when required.

The fact that it hadn't happened so far, the report concludes, was an indication of "weaknesses in administration at all levels of management."

Click here to read the committee report.

Not surprisingly, Ban has taken considerable exception to those conclusions, in a 55-page companion document responding to the auditors' comments, also obtained by Fox News, that offered his own assessment of how well the U.N. Secretariat had done in accepting its auditors' recommendations.

Among other things, Ban noted that his administration "has achieved significant improvements in ensuring that the indicators of achievement and outputs ... are formulated as specific, measurable, attainable, realistic and time-bound."

In other words, he and his officials were doing as well as could be expected in measuring their accomplishments. Ban added that consideration also had to be given to the political climate where peacekeeping missions operated, which often limited outcomes.

On issues such as the use of expensive aircraft, Ban pointed to his administration's rebuttal in the auditors' own report, to the effect that "forecasts could not be exact owing to the nature of emergency situations. It was preferable to have sufficient capability on the ground than to be faced with a shortage when a crisis occurred." (But Ban's Administration also admitted that in the case of peacekeeping in Darfur, at least, it was cutting its planned use of aircraft in the future by nearly 50 percent.)

Ban also pointed out that even the auditors felt that his administration had done better this time than in the previous year — by lifting the rate of implementation of audit recommendations from 32 percent to 40 percent, as of March 2010. The rate was even better for those deemed of the "highest priority." Still others, he declared, were "in progress" or had target dates set for completion.

Click here to read Ban's response to the auditors.

However, Ban's rebuttal also said that there was no target set at all for 11 of the auditors' highest priority recommendations.
His rebuttal did not mention what those recommendations were.

George Russell is executive editor of Fox News.

U.N. Auditors Find Development Program Broke Rules in Offering Aid to North Korea

By George Russell

Did the United Nations Development Program, the U.N.’s multibillion-dollar development flagship, break its own rules in offering assistance to the dictatorship of Kim Jong Il?

The long awaited answer, offered up by the U.N.’s own Board of Auditors, is a clear "Yes" — though UNDP itself quickly spun the answer as a vindication.

The long-awaited and controversial audit of United Nations operations in North Korea has concluded that, in line with accusations first raised by a senior U.S. diplomat, the United Nations Development Program and other agencies contravened their own regulations in hiring local staff nominated by the dictatorial North Korean government, and in making unauthorized hard currency payments to the Kim Jong Il regime.

The auditors, who stressed that their work was only a preliminary investigation, also declared they were unable to determine the total amount of unorthodox payments that had made. They lacked access to documentation from the U.N.’s offices in North Korea, a frequent observation throughout their report, and even lacked access to the cashed checks involved in the transactions. The auditors also were refused access to North Korea by the Kim Jong Il regime, which refused to cooperate in the investigation.

Paradoxically, the results of the audit immediately were hailed as a vindication by the UNDP, the United Nations’ flagship development organization, which has been largely responsible for running U.N. operations in North Korea.

The UNDP claim was that the report did not specifically support all the charges originally raised last January by U.S. Ambassador to the U.N. Mark Wallace, citing unpublished previous U.N. audits, that tens of millions of dollars in UNDP spending might have been misappropriated by the Kim Jong Il government as a result of the UN’s unorthodox policies in North Korea. Among other things, Wallace declared that it was “impossible” for the U.N. aid agency to verify whether its funds “have actually been used for bona fide development purposes or if the DPRK [North Korea] has converted such funds for its own illicit purposes.”

According to UNDP spokesman David Morrison, the latest audit findings are still under review by the U.N. development organization, which plans to file a formal response. But Morrison declared that the latest audit findings explicitly ruled out the possibility that there had been any diversion of UN funds to North Korea’s nuclear weapons program, and, contrary to U.S. Ambassador Wallace’s January assertions, said that UNDP officials had in most cases been able to visit UN development projects in North Korea to determine that money had been properly spent. “the money went where it was intended,” he said.. Moreover, he claimed, the audit confirmed that there were only “modest” levels of funding involved.

In fact, the specific language of the audit did not necessarily support Morrison’s assertion, especially insofar as the auditors declared they had not even had access to the checks used to pay North Korean staffers or other bills. Morrison’s arguments about the “modest” size of UNDP payments were also immediately contested by a U.S. official, speaking on background, who pointed out that the report tallied more than $72 million in spending by various U.N. agencies in North Korea from 2002 to 2006, and the list of agencies was far from inclusive. (The latest audit specifies thaht UNDP processed payments on behalf of all the mentioned agencies.) During that period, UNDP and one of its subordinate agencies operated anywhere from 28 to 41 projects in North Korea.

The same official pointed out that the audit report said only that visits to projects “only occurred in a coordinated way with the authorization and supervision of DPRK authorities.” (Nor did the report specify whether locally hired UNDP staffers, who continued to work for the Kim Jong Il government, were the ones actually carrying out the visits.)

For his part, Secretary-General Ban Ki-Moon was more cautious in drawing conclusions about the audit findings. A statement issued by his official spokesman, Michelle Montas, noted that the report “does not indicate that large-scale UN funding has been systematically diverted, as has been alleged” -- an unsurprising conclusion, as the report specifically declared that it was unable to judge the amount of funds involved in hard currency payments, without access to documentation in North Korea. But the spokesman’s statement also declares that the auditors’ document “identifies practices not in keeping with how the UN operates elsewhere in the world.”

Ban’s spokeman said that the Secretary General would ask for a further continuation of the auditing process, including a visit by auditors to North Korea, without mentioning the fact that North Korea already has rejected any such cooperation.

In one sense, the entire debate over diversion of UNDP money in North Korea became moot two months ago. At that time, even while declaring it had done no wrong, UNDP revised its policies to prevent further North Korean selection and control of local staff, and banning any payments in hard currency in that country. North Korea refused to accept the new rules, and all UNDP staff have subsequently left the country. A variety of other U.N. agencies, however, including the World Food Program and UNICEF, continue to operate there.

Even while declaring that it lacked access to documents that would have revealed the full extent of hard currency payments to North Korea, the latest audit makes clear that North Korean input into UNDP operations in the country was extensive and pervasive. Of 31 UNDP staff in North Korea in February, 22 were described as local hires, meaning North Korean government nominees, who, the report notes. These included four of UNDP’s program officers, the Information Technology officer who managed local computer networks, and the finance officer.

According to the report, these local hires were “seconded” to the UN agencies from the North Korean government, meaning that they were still government employees, and in general considered to be immune to U.N. rules and regulations governing staff conduct.

The report also noted, as Ambassador Wallace had done in his original complaint, that the unorthodox hiring and foreign exchange practices of the UNDP in North Korea had been exposed in previous audits dating back to 2001.

In his original complaint, Wallace noted that audits had uncovered the practices dating back to 1994; his point was that nothing was done as a result. In a brief on-the-record comment after the latest audit report was released, Wallace declared that the document “vindicated certainly some of our concerns.”

The UNDP’s current argument, on the other hand, is that members of the 36-nation Executive Board supervising UNDP activity (which includes both the U.S.and North Korea) were aware of those practices through the previous audits, and tacitly accepted them. UNDP spokesman Morrison indicated his agency’s view that there were no restrictions, for example, on the type of currency to be used in local economies.

The audit report itself noted that the UN’s current chief representative in North Korea, known as the Resident Representative, viewed the paying of North Koreans in hard currency to be an “established practise” in place when he first arrived in July 2005.

The latest audit report, on the other hand, while noting a lack of basic documentation on payment practices in North Korea, specifically mentioned that hard currency payments were made in violation of specific sections of a basic operating agreement covering UNDP operations in North Korea.

The latest audit report added a further mystery of its own. It was signed not by the auditors who carried out the investigation, but by senior officials in the member countries who had provided the experts under U.N. auspices. UNDP spokesman Morrison was unable to say why the auditors themselves did not sign the document, but it is known that one member of the three-man team who carried out the work, Pierre Brodeur of France, abruptly resigned from the group before the audit was made public. Brodeur was contacted prior to the audit’s publication by FOX News, but refused to make any statements.

There has been widespread speculation that Brodeur resigned due to disagreements with the audit’s conclusions, or the lack of access to documents required for a more definitive report.

UN Board of Auditors gives an unsatisfactory rating for UNDP Treasury (report shows)

223. During the biennium, the Office of Audit and Investigations performed an audit of the Treasury Division of UNDP covering the period from 1 July 2004 to 30 June 2007. An “unsatisfactory” rating was assigned to the Treasury Division based on the
audit. The major findings of the audit were:

(a) The Atlas general ledger system contained numerous incorrect balances dating back to January 2004, lacked functionality, was not optimally configured and lacked security measures;

(b) Bank reconciliations were not completed in a timely manner, and unreconciled items had accumulated and were not investigated in a timely manner;

(c) Access controls surrounding Atlas, Treasury shared drives, and servers were inadequate or non-existent;

(d) There was inadequate segregation of duties;

(e) There was a lack of adequate resources, and limited guidance within the Treasury Division.

224. The Board noted, based on its audit findings, that bank reconciliations had been largely addressed by UNDP, but that some ledger accounts continued to reflect pre- Atlas transactions and balances. The Board also noted that UNDP had developed anaction plan to address other issues raised by the internal audit of the Treasury Division.