| GB.267/PFA/5
267th Session November 1996 |
| Programme, Financial and Administrative Committee | PFA |
FIFTH ITEM ON THE AGENDA
Amendments to the Financial Rules
1. Article 40 of the Financial Regulations provides that "Rules made by the Director-General in order to carry out the provisions of these Regulations shall be communicated to the Governing Body for approval".
Amendments required to reflect the
delegation of financial authorities
2. Financial Rule 1.40 stipulates that the Treasurer is responsible to the Director-General for the application and implementation of the Financial Rules. It also provides that, where appropriate, the Treasurer may delegate specific authorities vested in him. To ensure that the Active Partnership Policy is implemented in an efficient and effective manner, it is proposed that certain additional delegations of authority be given to the directors of external offices. Also, to streamline the processes at headquarters, it is planned that similar financial responsibilities will be delegated to the programme managers. These delegations relate to the establishment and clearance of obligations to incur expenditure (funds control), and the preparation and revision of budget estimates on technical cooperation projects.
3. The decentralization of fund control responsibilities at headquarters makes it necessary to modify the requirement in the Financial Rules for all obligations at headquarters to be submitted in advance to the Budget and Finance Branch. The modification of this requirement would result in consistent treatment between headquarters and external offices, thus making possible a simplification of the Rules, which at present provide for different procedures.
4. To ensure clarity and to reinforce the accountability of the officials to whom specific delegations of authority is made, a further sentence is proposed to Rule 1.40 stipulating that they are accountable to the Treasurer for the responsibilities he has delegated to them. This matter was raised by the External Auditor in his report on the 1994-95 Financial Statements where he recommended that the ILO should define clearly the relationships and financial responsibilities of staff in the regions to the Treasurer and the Financial Services Department at headquarters.
5. In conjunction with the proposed delegation of responsibilities, precautions will be taken to ensure that financial controls are not weakened. Should any such delegation prove unsatisfactory, it will immediately be withdrawn until corrective measures can be taken.
6. It is therefore proposed that the following Financial Rules be amended as set out in the appendix to this paper:
| I. | Authority and Applicability, Rules 1.20, 1.40, 1.50(b) and 1.60; |
| II. | Preparation of Budget Estimates, Rule 2.30; |
| IV. | Appropriations and Allocations, Rule 4.40; |
| V. | Control of Obligations, Rules 5.30, 5.40, 5.50, 5.60, 5.70 and 5.80; |
| VI. | Presentation and Audit of Claims, Rules 6.60(c) and 6.80; |
| VII. | Payments, Rule 7.80. |
Fraud, presumption of fraud and attempted fraud
7. Although cases of fraud, presumption of fraud and attempted fraud have always been reported to the External Auditor, this procedure is not formally required by the Financial Rules. Following a recommendation by the External Auditor in his report on the 1994-95 Financial Statements, it is therefore proposed to amend Rules 8.40 and 11.40 to include this requirement, as set out in the appendix to this paper.
Financial services
8. In order to reflect the new financial services structure more accurately, it is proposed to replace all references in the Financial Rules to "the Chief of the Budget and Finance Branch" and "the Chief of the Treasury and Investments Branch" with "the Director of the Financial Services Department".
9. In accordance with article 40 of the Financial Regulations, the Committee may therefore wish to recommend that the Governing Body approve the amendments to the Financial Rules as set out in the appendix to this paper and in paragraph 8 above.
Geneva, 28 October 1996.
Point for decision: Paragraph 9.
Appendix
Amendments to the Financial Rules
(Additions are shown in bold type; deletions are indicated by square brackets)
I. AUTHORITY AND APPLICABILITY
1.20 Definitions
...
| Financial Services: | [The Budget and Finance Branch and the Treasury and Investments Branch.] The Financial Services Department at headquarters. |
| Certifying Officer: | An official authorised by the [Chief of the Budget and Finance Branch] Treasurer to certify the budgetary or financial propriety of proposed obligations or disbursements. |
...
1.40 Responsibility for Implementation
-
The Treasurer is responsible to the Director-General for the application and implementation of these Rules. The Treasurer may delegate any specific authority vested in him pursuant to these Rules [to the Chief of the Budget and Finance Branch, to the Chief of the Treasury and Investments Branch, to Directors of external offices, to Chief Technical Advisers, or to officials replacing them in their absence]. Officials to whom such specific delegations of authority have been made shall be accountable to the Treasurer for the responsibilities delegated to them.
1.50 Additional Instructions to be Issued by the Treasurer
...
| (b) | The Treasurer may determine the extent to which these Rules shall apply to external offices, to the offices of Chief Technical Advisers and to officials on individual assignments away from headquarters. He may establish separate financial rules, instructions and procedures for such offices and officials taking into consideration their special conditions and requirements. The separate rules, instructions and procedures thus established shall normally be incorporated in comprehensive manuals of financial and administrative practices and procedures drawn up for the use of offices away from headquarters. No changes in such rules, instructions or procedures shall be made without the approval of the Treasurer. The authorities given to officials away from headquarters [Directors of external offices and Chief Technical Advisers and officials on individual assignments away from headquarters] under the present Financial Rules shall be exercised in conformity with all relevant rules, instructions and procedures approved by the Treasurer. In matters for which no separate rules or instructions have been thus established the present Financial Rules shall apply.
|
1.60 Responsibilities of the Financial Services
-
The Financial Services are responsible to the Treasurer for the performance and/or supervision of all budgetary, financial and accounting operations. They are responsible for establishing and monitoring the application of policies and procedures relating to all financial operations [carried out in the field].
* * *
II. PREPARATION OF BUDGET ESTIMATES
2.30 Furnishing of Cost Estimates
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The Budget and Finance Branch shall be responsible for the preparation of all cost estimates that may be required in connection with the activities of the Organisation including estimates of the cost of all projects, meetings, staff salaries and missions. No official shall issue cost estimates for use outside the Office without prior written authorisation [clearance of the estimates by] from the Treasurer [the Chief of the Budget and Finance Branch].
* * *
IV. APPROPRIATIONS AND ALLOCATIONS
4.40 Periodic Review of Expenditure Position
-
The Director of the Financial Services Department shall ensure that programme managers have ready access to information on [Programme managers shall be informed regularly by the Budget and Finance Branch of] the expenditures and unliquidated obligations recorded against their allocations. The [Chief of the Budget and Finance Branch] Director of the Financial Services Department shall monitor the extent to which allocations are used and prepare reports for the Director-General on amounts currently allocated, obligated and expended, and expected future expenditure, under the allocations.
* * *
V. CONTROL OF OBLIGATIONS
5.30 Control of Obligations [at Headquarters]
| (a) | All contracts, appointments, mission orders, purchase orders, or other documents by which a financial obligation is to be incurred on behalf of the Organisation must be submitted in advance [to the Budget and Finance Branch for financial clearance] to an official authorised by the Treasurer to provide financial clearance under Article 30 of the Financial Regulations, except as provided in subparagraph (d) below. |
| (b) | An [authorised] official [of the Budget and Finance Branch] who has been authorised to provide financial clearance shall [review the obligating documents submitted in the light of] exercise this authority only after ensuring that the proposed expenditure is in conformity with the applicable financial regulations and rules, and the approved budget, and is within the available balances in the respective allocations. He shall also [assure himself] ensure that the principles of sound economy are maintained. [If the obligating document conforms with above requirements, it] A record of obligations incurred or foreseen shall be [certified by an authorised official of the Budget and Finance Branch that funds are available and have been reserved to meet the resulting expenditure. Approved obligations shall be recorded] kept in a [register] form approved by the Budget and Finance Branch which will serve, for the purpose of Article 14 of the Financial Regulations, as a record of obligations incurred. |
| (c) | No obligating document shall be released outside the Organisation without the certification by an authorised official [of the Budget and Finance Branch] that funds are available. |
| (d) | An authorised official [of the Budget and Finance Branch] may issue lump-sum certificates to cover minor routine purchases which involve individual expenditures each of which does not exceed the equivalent of US$1,000. [The certificates shall normally cover an amount sufficient to provide for one month's operation. At the end of the period for which the certificate is issued, it shall be returned together with a record of the obligations incurred against it, and shall be supported by copies of the corresponding obligating documents.] A lump-sum certificate shall be recorded in the accounts as a valid obligation [, which shall be adjusted to actual obligations when the certificate is returned]. |
| (e) | Major obligations to be incurred shall be coordinated in advance with the competent administrative and financial services at headquarters.
|
[5.40 Control of Obligations Away from Headquarters
| (a) | An official away from headquarters who has been authorised to incur financial obligations in relation to funds allocated to him shall exercise this authority only after ensuring that the proposed expenditure is in conformity with the applicable financial regulations and rules, the approved budget and the available balance in the allocation. He shall also assure himself that the principles of sound economy are maintained. A record of obligations incurred or foreseen shall be kept in a form approved by the Budget and Finance Branch. |
| (b) | Major obligations to be incurred by officials away from headquarters shall be coordinated in advance with the competent administrative and financial services at headquarters.]
|
[5.50] 5.40 Obligations to be Incurred in Conformity with the Budget
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Obligations shall be incurred only in strict conformity with the relevant budget. All obligating documents submitted for financial clearance shall be accompanied by an indication of the appropriate accounting classification. In case of doubt, the correct classification against which any charge is to be made shall be determined by the [Chief of the Budget and Finance Branch] Director of the Financial Services Department.
[5.60] 5.50 Objection to Proposed Obligations
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If [the Chief of the Budget and Finance Branch] an authorised official cannot approve an obligating document submitted for certification he shall state his objections in writing. If the requesting official does not agree with the objection, the matter shall be referred to the Treasurer for decision.
[5.70 Information on Available Balances
(See Rule 4.40.)]
[5.80] 5.60 Downward Adjustments of Obligations
-
If part or all of an amount recorded as an obligation is no longer required for the purpose originally foreseen, the responsible programme manager shall [inform the Budget and Finance Branch immediately, in writing] take the necessary action to adjust the amount.
* * *
VI. PRESENTATION AND AUDIT OF CLAIMS
6.60 Claims to Be Accompanied by Receiving Reports
...
| (c) | For goods delivered to a place outside [Geneva] the country where the ordering unit is located, payment may be authorised upon receipt of documents provided that the goods were dispatched appropriately insured to their destination. A duly executed receiving report must be forwarded to the [Budget and Finance Branch] Certifying Officer not later than one month after receipt of goods. |
...
6.80 Objection to a claim
| (a) | When the [Chief of the Budget and Finance Branch] Director of the Financial Services Department, or an official authorised to make payments, objects to the payment of a claim in full or in part, he shall communicate his objection to the official presenting the claim. If the official does not agree with the objection, he may appeal through proper channels to the Director-General. |
| (b) | If the Director-General decides that a claim is to be paid notwithstanding an objection by the [Chief of the Budget and Finance Branch] Director of the Financial Services Department, his decision shall be reported to the External Auditor. |
* * *
VII. PAYMENTS
7.80 Responsibility for Payments
| (a) | An instruction from a superior official shall not relieve an official authorised to make payments from responsibility for an irregular payment, unless, before payment was made, written notification had been received from the Director of the Financial Services Department that the official's doubts concerning the regularity of that payment were unfounded. |
| (b) | An instruction from a superior official shall not relieve the Financial Services from responsibility for an irregular payment, unless the irregularity was pointed out by the [Financial Services] Director of the Financial Services Department to the Director-General in writing before the payment was made, and [their] his objection overruled. Any such overruling shall be given in writing and shall be reported to the External Auditor. |
* * *
VIII. MANAGEMENT OF FUNDS
8.40 Loss of Cash or Negotiable Instruments, Cases of Fraud
-
Any loss of cash or negotiable instruments and any case of fraud, presumption of fraud or attempted fraud must be reported at once to the Treasurer who will ensure that appropriate follow-up action is taken and that full details are submitted to the External Auditor with the related accounts, in conformity with Rule 11.40.
* * *
XI. PROPERTY
11.40 Treatment of Cases of Loss of Assets, Fraud or Unrecovered Debt
...
| (e) | Any case of fraud, presumption of fraud or attempted fraud must be reported to the Director-General through the Treasurer. Full details of such cases shall be submitted to the External Auditor with the related accounts. |