Current challenges and measures to address them
2. For the 2006-2007 biennium the Board of Auditors had issued a modified audit opinion, in which, among other concerns, there were three matters of emphasis, namely, the unreconciled inter-fund account mainly with the United Nations Development Programme (UNDP), deferred revenue and non-expendable assets. The financial situation of the organization has improved significantly over the course of the last three biennia. This has occurred despite the fact that in the last five years, in addition to a number of significant write-offs, UNOPS made exceptionally high bad-debt provisions, covering sizeable losses from prior periods, and made full accrual for all end-of-service liabilities, including after-service health insurance. As at December 2009, UNOPS reserves were fully replenished at $42.7 million, representing an addition of some $38.4 million since December 2005.
Issues to watch and risks to mitigate
In paragraph 45, UNOPS agreed with the Board’s reiterated prior recommendation to review its accounting policies regarding revenue recognition, as part of its preparation for IPSAS implementation.
1. UNOPS has established an IPSAS project board to drive the organization-wide
transition from UNSAS to IPSAS by January 2012. UNOPS is presently reviewing
and drafting its revenue recognition policy for project revenue. The policy will be
based on the percentage completion method.
Department responsible: Finance
Status: In progress
Priority: High
Target date: December 2010
In paragraph 48, UNOPS agreed with the Board’s recommendation to establish procedures to review the reasonableness of the interest income received from the UNDP Treasury.
2. UNOPS has conceptualized a methodology to review the interest received
from the UNDP Treasury for reasonableness on a quarterly basis.
Department responsible: Finance
Status: In progress
Priority: High
Target date: December 2010
In paragraph 51, UNOPS agreed with the Board’s recommendation to regularly monitor administrative budgets on a line-by-line basis to ensure that budgets are not exceeded.
3. UNOPS follows a rigorous half-yearly budget review process of administrative
expenditures throughout its country offices, regional offices and headquarters.
Department responsible: Finance
Status: In progress
Priority: Medium
Target date: December 2010
In paragraph 57, UNOPS agreed with the Board’s recommendation to address instances of obligations raised that are not supported with valid and appropriate obligating documents.
4. UNOPS retired the imprest modality in April 2010, and further occurrences of
the instances noted by the Board have been prevented. UNOPS monitors purchase
orders on its financial dashboard, and random purchase orders are selected for
review at headquarters. In addition, quarterly certification of obligating documents
is requested from regional directors.
Department responsible: Finance
Status: Completed
Priority: High
Target date: Fully implemented
In paragraph 64, UNOPS agreed with the Board’s recommendation to implement controls and reports to accurately differentiate between project receivable and payable balances and project balances that represent over-expenditure.
5. UNOPS has implemented a quarterly project quality assurance review process
for all projects. Any project over-expenditure is highlighted for action through the
quality assurance process. Furthermore, reports will be prepared for the next audit to
clearly differentiate project receivable and project payable balances.
Department responsible: Finance
Status: In progress
Priority: High
Target date: December 2010 & April 2011
In paragraph 65, UNOPS agreed with the Board’s further recommendation to improve its system controls to prevent and detect any classification errors in financial reporting in a timely manner.
6. UNOPS will implement monitoring and review controls to detect
misclassifications in a timely manner and prior to financial reporting.
Department responsible: Finance
Status: In Progress
Priority: High
Target date: December 2010
In paragraph 69, UNOPS agreed with the Board’s recommendation to account for the funds received in advance from donors as a liability upon receipt of the funds and not as a credit entry within the accounts receivable accounts.
7. UNOPS will implement an annual review process to identify credit balances in
accounts receivable and to reclassify these as accounts payable.
Department responsible: Finance
Status: In Progress
Priority: Medium
In paragraph 72, UNOPS agreed with the Board’s recommendation to (a) follow-up and clear the credit balances in the accounts receivable, and (b) reclassify credit balances in accounts receivable and account for them as payable.
8. UNOPS will implement an annual review process to identify credit balances in
accounts receivable and to reclassify these as accounts payable.
Department responsible: Finance
Status: In Progress
Priority: Medium
Target date: December 2010
In paragraph 83, UNOPS agreed with the Board’s recommendation to resolve the disputed inter-fund differences in its accounts with UNDP.
9. Resolution of the historic UNOPS-UNDP inter-fund differences is sought and
is currently under discussion at the Executive Director level. These negotiations are
expected to be finalized by the end of 2010.
Department responsible: Finance
Status: In progress
Priority: High
Target date: December 2010
In paragraph 86, UNOPS agreed with the Board’s recommendation to (a) follow-up the rejected project expenditures and make appropriate accounting entries, (b) improve the validation of information captured on its system to ensure that the incidents of rejections are minimized, and (c) consider alternate arrangements with UNDP to further improve the acceptance rate.
10. UNOPS continues to submit project expenditures to UNDP on a quarterly
basis. In late 2009, UNOPS developed a project expenditure validation system to
detect possible rejections and correction of data prior to submission to UNDP.
Overall, the validation process has reduced the rate of rejections to below 1 per cent
for the 2009 year. In addition, UNOPS is also in the process of implementing new
controls to prevent incorrect posting of project expenditures to the chart of accounts.
Department responsible : Finance
Status : In Progress
Priority : High
Target date : December 2010
In paragraph 91, UNOPS agreed with the Board’s recommendation to (a) continue to follow-up on the unreconciled inter-fund differences in its accounts, and (b) engage with the relevant United Nations agencies in order to resolve the old inter-fund differences.
11. As part of the UNOPS project closure phase 2 initiative, meetings will be set
up with the relevant UN agencies to negotiate a resolution of the old inter-fund
differences.
Department responsible: Finance
Status: In Progress
Priority: High
Target date: March 2011
In paragraph 111, UNOPS agreed with the Board’s recommendation to consider a revision of its policy for the valuation of the annual leave liability in its implementation of International Public Sector Accounting Standards.
12. UNOPS selection of policies for the valuation of the annual leave liability is
based on decisions made for the entire United Nations system. At the United
Nations IPSAS task force meeting, which was held in late August through early
September 2010, further guidance on the accounting and disclosure of all end-ofservice-
liabilities in compliance with IPSAS was requested.
Department responsible: Finance
Status: In progress
Priority: High
Target date: December 2010
In paragraph 116, UNOPS agreed with the Board’s recommendation to take appropriate measures to ensure the validity, accuracy and completeness of the data used in the computation of all post-retirement and end-of-service liabilities in future financial periods by ensuring that the information pertains to the correct reporting period.
13. UNOPS selection of policies for the valuation of all end-of-service liabilities is
based on decisions made for the entire United Nations system. An expected outcome
of the aforementioned UN IPSAS task force meeting has been further guidance on
the accounting and disclosure of all end-of-service-liabilities in compliance with
IPSAS.
Department responsible: Finance
Status: In progress
Priority: Medium
Target date: December 2010
