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GB.271/PFA/4
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Programme, Financial and Administrative Committee |
PFA |
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FOURTH ITEM ON THE AGENDA
Follow-up on the report of the Chief Internal Auditor
for the year ended 31 December 1996
1. At the 268th Session (March 1997) of the Governing Body, the Committee considered the report of the Chief Internal Auditor on significant findings resulting from internal audit and investigation assignments undertaken in 1996.(1) The Chief Internal Auditor's observations and recommendations are addressed below in the order in which they appear in the report, the relevant paragraph numbers being indicated in brackets.
Headquarters audits (paragraph 4)
2. The Chief Internal Auditor's observations under this heading related to the policies and procedures governing the contracting of work and services and identified inconsistencies and weaknesses which had appeared over the years.
3. As part of the reorganization of the Internal Administration Bureau, a new section has been created to deal with the procurement of goods and services for headquarters and the field (including equipment for technical cooperation projects). This section incorporates a contracting unit which is specifically responsible for ensuring the efficient administration and control of contracting operations throughout the Organization, as well as the consistent use of the different types of contracts involved. Clearly formulated guidelines are being prepared which will incorporate policies and procedures at present contained in a number of separate circulars and directives, and will include revisions that directly address the weaknesses and inconsistencies noted by the Chief Internal Auditor in his report.
Staff Health Insurance Fund (SHIF -- paragraph 5)
4. In accordance with the Regulations of the Staff Health Insurance Fund (SHIF), the audit of the SHIF was conducted by the ILO Internal Auditor in his capacity as SHIF auditor. The audit report was considered by the SHIF Management Committee at its 113th Meeting (12 December 1996).
5. The Auditor recommended that the operating procedures followed by the SHIF staff should be documented. As a new Health Insurance Information System (HIIS) is currently being developed, and this system will require considerable changes in operating procedures, it is intended to comply with the Auditor's recommendation in conjunction with the implementation of the HIIS later this year.
6. The Auditor also recommended that the SHIF Management Committee continue to review the contribution rates for voluntarily covered dependants, whose insurance must be financially self-supporting within the Fund. The Management Committee reviewed and adjusted these rates at its 115th Meeting (April 1997). However, further adjustment may be necessary in order to erase the accumulated deficit, and the Management Committee intends to keep the matter under review.
7. The Auditor made a number of recommendations concerning improvements in the process for reviewing claims. In this connection, advice was sought from the Office's Management Advisory Services Unit (PROG/MAS), and changes in work organization were introduced which enabled the SHIF secretariat to eliminate the serious and growing backlog of claims that had developed. The Management Committee decided to defer consideration of the Auditor's recommendation that at least two staff members should be involved in each payment transaction and to review the matter in due course in the light of the new HIIS system and of the cost implications of such a measure.
8. In the past year, the Fund has faced a number of problems which seriously hampered its ability to address some of the issues raised by the Auditor. These included long-term studies of the future operation of the Fund (options envisaged included privatization, delocalization and decentralization of claims administration); the internal management study mentioned above; and the prolonged sick leave and subsequent transfer of its Secretary. Issues raised by the Auditor that could not be addressed, or not adequately addressed in 1997, will be taken up this year once a new Secretary has been installed and in the light of the operational capabilities and requirements of the HIIS. These issues include the matter of a formal agreement between the ILO and ITU on the operation of the Fund, the handling of questionable claims, and the role of the Medical Adviser.
Inventory (paragraph 6)
9. Large infrastructure projects such as the Building Management System mentioned by the Chief Internal Auditor are now systematically subject to the techniques of project management, requiring detailed feasibility studies and improved planning, budgeting and evaluation procedures. Emphasis is also placed on providing project management training to the staff involved. Monitoring and reporting procedures have also been introduced to track progress and ensure proper cost control.
10. The recent reorganization of the Internal Administration Bureau included the designation of the Chief of the Building Management Section of the Bureau as being directly responsible for the Building Management System. A computer specialist has also been designated to monitor system development.
11. In 1997 a consultant was engaged to carry out a review of inventory procedures, including those relating to technical cooperation equipment. This review resulted in the preparation of an inventory procedures manual as well as the introduction of a number of changes to rules and procedures for equipment inventories at headquarters and in the field. These include the revision of criteria for defining expendable and non-expendable equipment, depreciation categories, and acquisition and replacement values. The incorporation of technical cooperation equipment into the Building Management System is foreseen as part of the reorganization of the Internal Administration Bureau and the technical issues involved are currently being studied.
Travel (paragraph 7)
12. Controls relating to proof of travel for home leave have been reviewed and the circular governing the optional lump-sum payment has been revised to improve control over authorized travel itineraries.
13. A new contract, recently signed with the in-house travel agency, foresees improved use of computer systems to manage official travel and control transport costs in order to ensure that full advantage is taken of the most economical air fares available. The contract also includes conditions that call for the immediate reimbursement to the Organization by the travel agent of unused official travel tickets.
Field audits (paragraph 8)
14. Following his audit of external offices during 1996, the Chief Internal Auditor reported on weaknesses found in the application of established controls and procedures in a number of locations.
15. During 1997, regional training courses were held for financial and administrative staff in Africa, Asia and Latin America. Directors of external offices and their deputies also received individual briefing on taking up their assignments. These courses and briefings drew attention to the importance of the controls and procedures highlighted by the Chief Internal Auditor. In addition, as part of the programme to support the Active Partnership Policy, PC-based software has been developed for local payrolls and Imprest accounts as well as the preparation and management of budgets in the external offices. The checks built into these computer applications should greatly enhance the overall control environment.
16. With regard to the case of possible personal profiteering referred to by the Chief Internal Auditor, further investigation has revealed significant confusion in the procedures which had been applied by the local bank in response to a new directive from the central bank of the country concerned. Although no evidence of any malpractice or disloyal action on the part of any ILO official was found, the investigation showed that the officials concerned had been negligent, albeit with mitigating circumstances, and had followed improper procedural requirements established by the bank. They had also failed to follow internal financial directives and procedures with respect to the maintenance of complete and accurate accounting records. Appropriate disciplinary procedures have been initiated.
17. Corrective action was taken immediately following the audit with respect to the procedures followed, and steps are also being taken to ensure improved briefing on the handling of such situations for non-financial Professional staff assigned to administrative and managerial positions in external offices. As indicated by the Auditor, this matter did not result in any loss to the Office.
18. The case of the irregular sale of an office vehicle reported by the Chief Internal Auditor was thoroughly investigated and a sanction issued to the staff member concerned.
Ongoing follow-up
19. The Office will continue to work in close liaison with the Chief Internal Auditor concerning follow-up on recommendations currently being implemented.
Geneva, 20 February 1998.
1. GB.268/PFA/3.