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GB.271/PFA/5
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Programme, Financial and Administrative Committee |
PFA |
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FIFTH ITEM ON THE AGENDA
Report of the Chief Internal Auditor
for the year ended 31 December 1997
Report of the Chief Internal Auditor on significant findings
resulting from internal audit investigation assignments
undertaken in 1997
1. In accordance with the decision taken by the Governing Body at its 267th Session (November 1996), the Director-General transmits herewith the report of the Chief Internal Auditor on significant findings resulting from audit and investigation assignments carried out during 1997 (see appendix).
2. The Director-General considers the work performed by the Internal Auditor to be extremely valuable in assessing strengths and weaknesses in procedures and controls within the Office. Recommendations made by the Chief Internal Auditor are thoroughly evaluated, and there is constant dialogue between the administrative services and the Internal Auditor to give effect to them.
Geneva, 19 February 1998.
Appendix
Report of the Chief Internal Auditor on significant findings
resulting from internal audit and investigation assignments
undertaken in 1997
Introduction
1. The internal audit function in the ILO is established under article 30(d) of the Financial Regulations of the Organization. It is a management control that measures and assesses the effectiveness of other controls and compliance with ILO policies and procedures. The internal audit function is directed towards the review and appraisal of financial, administrative and operational procedures and activities, the objectives thereof being to ensure: sound internal control at reasonable cost; compliance with ILO regulations and rules, policies and procedures; the integrity and soundness of management practices; the most economical and efficient use of resources; and the accuracy of the accounting, financial and other data used for management information. The detailed programme of work for the year was coordinated with the External Auditor, and all audit findings and recommendations were communicated to the External Auditor.
2. At headquarters, audits were aimed at reviewing selected functions, systems and operations to determine: their contribution to programme objectives; the adequacy of their internal controls; proper authorization and recording of expenditures; control over receivables; compliance with established ILO rules, procedures and policies; the efficient and economic use of resources and the integrity of data generated for management purposes; control security and accounting for fixed assets.
3. Audits of external offices, multidisciplinary advisory teams and technical cooperation projects aimed to ensure that resources were used economically and efficiently, expenditure was properly incurred, authorized and recorded, and that assets were properly controlled, safeguarded from loss and correctly accounted for.
Headquarters audits
4. An audit was carried out of the Central Payroll Unit of the Payment Authorization Section in the Budget and Finance Branch. The unit is responsible for preparing, managing and controlling the payroll of all ILO officials, excluding local staff in the field, and of experts engaged for technical cooperation projects executed by the ILO. The objectives of the audit were to review policies and procedures; to examine the extent, adequacy and effectiveness of the controls exercised over the preparation of the payroll and to review the effectiveness of work methods and procedures followed in the unit. The audit did not reveal any major internal control or procedural weaknesses but did show that there was a need to strengthen the control and improve the reconciliation process for contributions to the United Nations Joint Staff Pensions Fund and correctly document the process; the sample used for the verification of major salary elements needed to be more widely spread; the control of staff payroll advances could be strengthened; additional and more timely information should be made available to the unit by the Personnel Department to ensure a better reconciliation of personnel records with payroll records and reduce the need to make large numbers of retroactive payroll adjustments.
5. A comprehensive review of financial, administrative and personnel procedures applied at the International Institute for Labour Studies was undertaken with the objective of assessing the soundness of internal controls and the extent of compliance with established policies, procedures and regulations. The review indicated that the Institute's financial, administrative and personnel matters were well managed and in accordance with the relevant regulations and no significant deviations from established policies or rules were noted. Recommendations were, however, made regarding the monitoring of the sales of the Institute's publications in order to evaluate promotional activities that would enhance the Institute's outputs; more consultation with the branch in the ILO specializing in printing matters to ensure the best technical specifications and prices for the Institute's external printing contracts; the limitation of authority for the issue of external collaboration contracts and better control of staff leave and performance appraisals.
6. An audit on the awarding of printing contracts to external contractors at ILO headquarters was carried out. The objectives of the audit were to verify that the relevant financial rules and circulars are sound and being complied with; publications and documents are printed by the most economical means; payments to printers are properly supported and authorized. The audit showed that the responsibilities with regard to the monitoring, authorization and certification of external printing and binding contracts needed to be more clearly defined and that certain delegations of authority had not been correctly formalized.
7. The policies, procedures and financial controls in place with regard to the payments processed by the Payment Authorization Section in the Budget and Finance Branch of the Department of Finance were reviewed. The aim of the review was to determine whether the latter were sound and being adhered to. In addition, the efficiency and effectiveness of operational processes were examined. The review resulted in recommendations concerning the strengthening of control over travel by ensuring travellers supervisors' review travel claims, the assurance that all travel was verified to the extent feasible by the submission of airline boarding passes, ticket stubs, etc.; the reduction of administrative expenses related to travel by the issue of permanent advances to frequent travellers; the better analysis and clearance of staff advance accounts; improved administration of taxes payable by staff members of United States nationality; enhanced control and operational efficiency in the processes for the receipt of goods; the need for a further review of the policy existing under the Staff Regulations where 50 per cent of the daily subsistence allowance is paid to travellers on the last day of a mission, which is not the policy applied throughout the United Nations system; the policy under which travellers are paid full daily subsistence allowance when on overnight airline flights, whereas a deduction of 50 percent of the daily subsistence allowance is made if accommodation is provided to a traveller on the ground; a review of work processes to ensure all functions are performed in the most effective and economic manner feasible.
Field audits
8. In 1997 audits were carried out of 14 ILO offices and eight multidisciplinary teams in 15 different locations in the field, together with the Inter-American Vocational Training Research and Documentation Centre in Montevideo, Uruguay (CINTERFOR). The aim of the audits was to assess the soundness of internal control, the extent of compliance with established regulations, policies and procedures, whether resources were being utilized in the most economical and efficient manner, the reliability of accounting data and the extent to which assets were accounted for and safeguarded against loss. As a result of the field audits, recommendations were made to management in order to more rigidly comply with established controls and procedures or to enhance management efficiency and create economies in expenditure. The recommendations related to the improvement of bank and cash management controls and procedures and the accounting for banking functions to ensure optimal security and control over cash funds on hand in the field; improvements needed in the procedures used at Regional Offices for the verification of field office imprest report expenditure to ensure the best possible control of expenditure at the regional level; ensuring that offices use the most economical travel arrangements, and particularly the most direct route available, to minimize travel costs; better control and accounting for external accounts receivable and staff advances to ensure the earliest possible collection of amounts due to the Office; improvements in the application of local payroll and other personnel functions to ensure that staff salaries and other allowances paid are valid; better application of budgetary control procedures to ensure that established budgets of offices are well controlled and do not result in expenditure overruns; greater use of telephone callback services to reduce communications costs; outsourcing of printing services to reduce these costs; improved reviews of competitive prices for local purchasing; improvement of control and accounting for the sale of publications; enhanced control and accounting for fixed assets and more frequent reviews of the adequacy of insurance coverage, and the elimination of the illegal copying of computer software to avoid exposing the ILO to legal action for copyright infringement.
Assignments in progress
9. At the end of 1997, a review and appraisal of a number of the functions of the Personnel Department was in progress and the results will be included in the Chief Internal Auditor's report for the year 1998.
Investigations
10. During 1997 Internal Audit was not called upon to carry out any major investigations of fraud or malpractice.
Monitoring of follow-up action
11. Internal Audit is responsible for monitoring the action taken by management on its findings and recommendations. With regard to the action taken by management on the recommendations resulting from the audit assignments undertaken in 1996, as included in the report of the Chief Internal Auditor for 1996 considered by the Committee at the 268th Session of the Governing Body (March 1997),(1) implementation action during the earlier part of 1997 was slow but was accelerated in later months. Management has now implemented a substantial number of the recommendations and is working to complete the remainder, and the Chief Internal Auditor is monitoring progress on this work. The follow-up and implementation by field offices of all 1996 internal audit recommendations was totally satisfactory. All audit findings and recommendations made in respect of 1997 headquarters audits were accepted positively by management for consideration, and the Chief Internal Auditor is monitoring follow-up action thereon. Follow-up and implementation by field offices of audit recommendations made in 1997 has been entirely satisfactory.
17 February 1998.