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GB.274/PFA/2
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Programme, Financial and Administrative Committee |
PFA |
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SECOND ITEM ON THE AGENDA
Follow-up on the report of the Chief Internal Auditor
for the year ended 31 December 1997
1. At the 271st Session (March 1998) 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 1997. The Chief Internal Auditor's observations and recommendations are addressed below in the order in which they appear in the report.
2. The Chief Internal Auditor's observations related to three main areas: the Central Payroll Unit of the Budget and Finance Branch, the International Institute for Labour Studies and the Payment Authorization Section of the Budget and Finance Branch. Recommendations were also made regarding the rules and procedures in place concerning the award of printing contracts to external contractors as well as field audits.
3. Central Payroll Unit: The Chief Internal Auditor's observations under this heading related to the policies, procedures and controls exercised over the preparation of the payroll of all ILO officials, excluding the calculation of local staff salaries in the field, and of experts engaged for technical cooperation projects. The audit did not reveal any major internal control or procedural weaknesses, but identified the need to strengthen the control and improve the reconciliation process for contributions to the United Nations Joint Staff Pension Fund (UNJSPF) and to correctly document the process; to spread more widely the sample used for the verification of major salary elements; to strengthen the control of staff payroll advances; and to obtain additional and more timely information from the Personnel Department to ensure better reconciliation of personnel records with payroll records and reduce the need to make large numbers of retroactive payroll adjustments.
4. Work related to the processing and reconciliation of UNJSPF contributions has undergone major changes since the audit report was issued in May 1997. Significant progress achieved through the development and installation of the local payroll computerized system in the field and the Year End List computer application now allow the monthly electronic import of Pension Fund contribution data of local staff from the field offices, improvement in the reconciliation process overall, and the compilation of information on all participants and their contributions to the Pension Fund, in accordance with the reporting requirements of the UNJSPF. A satisfactory technical solution for the transmission of pension data of the officials of the International Training Centre of the ILO in Turin still has to be found and this is being pursued further in coordination with the Centre. Work is in progress in the Central Payroll Unit in reviewing and documenting procedures, taking into consideration the gradual automation of work processes and addressing such issues as leave without pay and retroactive adjustments.
5. Arrangements have been made with the Information Technology and Communications Bureau (ITCOM) of the Office to produce salary statements in accordance with a revised schedule in order to allow the Central Payroll Unit to spread the sample used for the comprehensive verification of major key salary elements on the Personnel data bank.
6. As recommended by the Chief Internal Auditor, action is taken to strengthen control of staff payroll advances through the regular analysis and follow-up of the accounts. Outstanding balances have been reviewed and brought up to date.
7. Discussions were held between the Personnel Information Management Unit of the Personnel Department and the Central Payroll Unit of the Budget and Finance Branch on the possibility of providing a list of appointments, extensions, cessations, and leave without pay for both regular and expert staff in order to ensure a better reconciliation of personnel records with payroll records. Previously, this information could only be provided by manual intervention which made it costly in terms of human resources. It is now possible to obtain this information from the database of the Personnel Information System (PERSIS). The Central Payroll Unit is currently defining its requirements to the Personnel Information Management Unit to allow the reports to be produced on a monthly basis.
8. As regards the large number of retroactive adjustments which were being done manually and which represented an incremental cost to the Office in terms of staff resources, the Personnel Department has taken steps to reduce these adjustments, but they have not yet been substantially reduced. Concerning automating the functions for calculating any necessary retroactive adjustments which would save staff time that could be better utilized, the Integrated Management Information System (IMIS) project of the United Nations, once completed, will provide for this possibility.
9. The International Institute for Labour Studies -- The Chief Internal Auditor identified the need for the Institute to improve the monitoring of sales of its publications in order to evaluate promotional activities that would enhance the Institute's outputs; consult more regularly with the reproduction bureau (REPRO) which specializes in printing matters to ensure the best technical specifications and prices are obtained for the Institute's external printing contracts; limit the authority for the issue of external collaboration contracts; and improve control over staff leave and performance appraisals.
10. The Institute has taken action to obtain six-monthly statistical information on the sale of publications from the Publications Bureau (PUBLNS) and it was agreed that they would work jointly to monitor sales and evaluate promotional activities in order to enhance them. The Institute has also developed a website with information on publications and selected full texts of free publications.
11. Consultations were made by the Institute with the Document Production and Distribution Branch (PRODOC) of the Relations and Meetings Department and it was agreed that bids for printing work would be submitted to them for review and approval in order to ensure that the best specifications and prices are obtained for the Institute's external printing contracts.
12. The Institute has taken action to limit the authority to sign contracts to its Director and to the head of its Personnel, Finance and Administrative Section. Action has also been taken to improve the control over leave and performance appraisals. All outstanding staff performance appraisals had been completed.
13. Payment Authorization Section: The Chief Internal Auditor's observations under this heading related to the policies, procedures and financial controls in place with regard to the payments processed by the Payment Authorization Section and the efficiency and effectiveness of operational processes. The review resulted in recommendations concerning the strengthening of control over travel by ensuring travellers' supervisors review travel claims, the assurance that all travel is verified to the extent feasible by the submission of airline boarding passes, ticket stubs, etc.; the reduction of administrative expense 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 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 per cent of the daily subsistence allowance is made if accommodation is provided to a traveller on the ground; and a review of work processes to ensure that these are performed in the most effective and economic manner possible.
14. Instructions have been issued to managers concerning, inter alia, the approval of mission expense claims and the provision of evidence that travel took place. With regard to the possibility of reducing administrative expenses associated with travel advances by the issue of "permanent" advances to frequent travellers, this measure does not outweigh the administrative work involved in defining a frequent traveller, determining which staff members qualify, determining the type and extent of travel to establish levels of advances, and monitoring the continued application of such status. The Chief Internal Auditor's recommendation has been noted however and will be considered further as computerized systems are upgraded.
15. Concerning the recommendation to improve the analysis and clearance of staff advance accounts, outstanding balances have been cleared, and the monitoring of the accounts has been improved. As part of the decentralization of financial activities to the regions, the control of all local staff advances as well as travel advances are handled in the field. In briefing sessions with the directors of external offices, the Office is now emphasizing the importance of the prompt clearance of advance accounts.
16. With regard to procedures and instructions in respect of the reimbursement of US taxes paid by ILO officials, documentation has been received from other agencies concerning their practices and the Chief Internal Auditor's recommendations will be addressed as other priorities permit. Guidelines are expected to be prepared and issued in the course of this year.
17. Current procedure of paying full DSA when officials are on overnight flights is in line with the recommended practice of the organizations of the United Nations system. The policy of paying 50 per cent of the DSA for the final day of the mission is under review.
18. Printing contracts: The audit on the award of printing contracts to external contractors at ILO headquarters 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 formalized.
19. The Document Production and Distribution Branch (PRODOC) of the Relations and Meetings Department, in coordination with the Finance Department, has prepared a revised version of Circular No. 16, Series 12 which clearly defines responsibilities for the monitoring, authorization and certification of external printing and binding contracts.
20. Field audits: Following the audit of a number of external offices during 1997, the Chief Internal Auditor reported on certain weaknesses found in the application of established controls and procedures.
21. At the end of December 1997, the installation of PC-based software for the local payrolls, the imprest reports and the preparation and management of budgets in the external offices were completed in one region, and was largely completed in 1998 in the other regions. These computer applications, and the training given in their use to finance and programming staff, have progressively improved financial controls and the timely reporting of financial data through the Internet. They also allow for improved control over budgets and the recording of budgetary commitments. The checks built into these computer applications will continue to progressively enhance the control environment. In 1998, the Finance Department also reviewed the functions of the account verifiers in the regional offices as well as their future training needs in order to enable them to be better equipped in their oversight role. In addition, there is now increased consultation and dialogue with the chiefs of the regional administrative services.
22. The Office will continue to work in close liaison with the Chief Internal Auditor on the follow-up of recommendations which are in the course of being implemented.
Geneva, 24 February 1999.