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NINTH ITEM ON THE AGENDA

Other financial and general questions

1. Representatives of the governments of a number of member States have had discussions with the Director-General in recent months in order to review the internal oversight mechanisms of the Office and to make them as effective as possible.

2. It was made clear that these initiatives were not a result of any perceived weakness in the financial and management controls of the Office and that there was no implied criticism of the internal control mechanisms in place. This review was an integral part of similar initiatives being taken in all the organizations of the United Nations system.

3. The government representatives expressed the wish to introduce arrangements that would afford a greater measure of autonomy and independence to the Chief Internal Auditor both in respect of his appointment and possible dismissal as well as his access to the Governing Body to report on his activities. It was, however, recognized that any such arrangements must of course be in conformity with the Constitution and the Financial Regulations of the Organization as well as the Staff Regulations.

4. It is recalled that the internal audit function was introduced in the ILO in 1969. Although, for administrative purposes, it is placed within the Bureau of Programming and Management, the Chief Internal Auditor enjoys total autonomy and independence and has direct access to the Director-General. Internal audit does not develop or install procedures or engage in any activity that it would normally review and appraise or which could be construed as compromising either its independence or objectivity. It recommends improved control features for systems and procedures under its review, and its work is designed to ensure sound internal control at reasonable cost; compliance with ILO rules, regulations, policies and procedures; the integrity and soundness of management practices; the efficient use of resources; and the accuracy of the accounting, financial and other data used for management information. Internal audit has full and free access to all staff and records and has the authority to demand whatever information it may require. A system of follow-up has been introduced to ensure that all audit recommendations are properly followed up.

5. The Chief Internal Auditor reports his audit findings and makes recommendations resulting from his findings to the Director-General. He forwards copies of all of his reports to the External Auditor, who may take these into account in the performance of his audit, the formulation of his report on the accounts of the Organization for each financial period and in giving his formal audit opinion on the accounts. The report and opinion of the External Auditor is included in the Financial Report and Audited Financial Statements for each biennial financial period and submitted to the Governing Body, through its Programme, Financial and Administrative Committee, and to the International Labour Conference for adoption at its first session following the completion of each financial period.

6. In order to meet the concerns expressed by the government representatives to reinforce internal oversight in the manner mentioned in paragraph 3 above, the Director-General agreed to propose to the Programme, Financial and Administrative Committee, after due consultation with the Officers of the Governing Body, the following concrete measures:

1. By analogy with the procedure that already exists under the Staff Regulations for the appointment of Deputy Directors-General and Assistant Directors-General, the appointment of the Chief Internal Auditor, and his possible dismissal, would be made by the Director-General after consultation with the Officers of the Governing Body. This would require amendments to article 4.2 and article 11.1 of the Staff Regulations, as set out in the Appendix.
2. The Chief Internal Auditor would prepare a totally autonomous and independent report on his activities for each calendar year which would include all significant findings resulting from his audits and investigations. This independent report would be submitted each year by the Director-General to the Programme, Financial and Administrative Committee of the Governing Body together with any comments that the Director-General might wish to make on the report. In addition to this annual report, the Chief Internal Auditor would have the right to submit additional reports in the same manner to any session of the Governing Body should he deem this to be necessary. This procedure would be introduced by an appropriate addition to article 13.10 of the Financial Rules, as set out in the Appendix.

7. In accordance with the provisions of article 10.2(a) of the Staff Regulations, the Administrative Committee was consulted on the proposals for the amendment of the Staff Regulations. The representatives of the Staff Union Committee took note of the proposal to amend the Staff Regulations submitted by the Administration on account of the specific nature of the post in question. However, the Staff Union Committee expressed concern, and considered that this was an exceptional measure that should in no way constitute a precedent for other posts in the Office.

8. The Programme, Financial and Administrative Committee may wish to recommend that the Governing Body approve the amendments to articles 4.2 and 11.1 of the Staff Regulations and Financial Rule 13.10 as set out in the Appendix.

Geneva, 18 October 1996.

Point for decision: Paragraph 8.

Appendix

A new article 4.2(e) would be inserted and would read as follows:

5. The position of Chief Internal Auditor shall be filled by the Director-General after consulting the Officers of the Governing Body.

The current article 4.2(e) will become article 4.2(f) and the current articles 4.2(f) to 4.2(i) will become 4.2(g) to 4.2(j) respectively.

The following sentence would be added at the end of the article:

The Director-General shall consult the Officers of the Governing Body before terminating the appointment of the Chief Internal Auditor.

Rule 13.10 Responsibilities of the Chief Internal Auditor

The current rule 13.10 will be renumbered 13.10(a) and would read as follows:

1. Without derogating from the control and audit responsibilities of the Treasurer and the Financial Services, the Chief Internal Auditor shall carry out such independent examinations and make such reports to the Director-General as he may consider necessary, or as the Director-General or the persons designated by him may specifically require, in order to ensure an effective internal audit in accordance with paragraph (d) of article 30 of the Financial Regulations.

A new paragraph 13.10(b) would read as follows:

2. The Chief Internal Auditor shall prepare a report for the Governing Body on significant findings resulting from internal audit and investigation assignments undertaken in each year. The Director-General shall submit this report, together with any comments thereon he deems appropriate, to the first session of the Governing Body in the following year. Additional reports on significant internal audit and investigation findings may be similarly prepared by the Chief Internal Auditor and submitted to the Governing Body in the same manner, should he deem this to be necessary.

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