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GB.274/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 External Auditor
on the accounts for 1996-97
1. At the 271bis Session (June 1998) of the Governing Body, the Committee considered the report of the External Auditor on the accounts for the 1996-97 financial period. The report of the External Auditor included recommendations and observations on certain financial and operational matters which are addressed below in the order in which they appear in the report.
Financial matters
United Nations system accounting standards
Recommendation 1. The ILO should press ahead with the work required to ensure that the 1998-99 financial statements fully comply with the United Nations system accounting standards. This will require the consideration of some changes to the ILO's financial rules and regulations.
2. As explained in Note II to the financial statements for 1996-97 (General notes to the financial statements and schedules), the ILO did not comply with the accounting standards in two areas: accrual accounting, and disclosure of liabilities in respect of after-service medical benefits. The first issue is addressed in another paper before the Committee.(1) As regards the after-service benefits, the Office will be carrying out an actuarial review towards the end of 1999 in order to have an estimate of the liability at the end of the current financial period.
External collaborator contracts
Recommendation 2. The ILO should remind technical units of the importance of ensuring that, in every case, employment contracts best reflect the nature and conditions of the work involved.
3. A communication has been issued to all units reminding them of the importance of ensuring that the correct form of contract is used and referring them to established procedures set out in ILO circulars.
Seminar costs
Recommendation 3. When advances for seminars or similar activities are made, the ILO should ensure that recipients certify they have received an advance and introduce a requirement that they must submit a full expenditure statement within one month of the end of the seminar.
Recommendation 4. The ILO should ensure that all advances for seminars are charged to a suspense account pending receipt of a full expenditure statement supported by sufficient evidence that the activity took place and that the costs were valid.
4. By mid-1999 the Office will have a procedure in place that will ensure that recipients of seminar advances certify that they have received an advance and provide a statement, together with supporting documents, detailing what expenditure has been incurred. The one-month deadline suggested by the External Auditor for the submission of the expenditure statement has been carefully considered. In view of the fact that seminar dates are often changed and that for advances made directly by UNDP, the dates when the advances were made are only available to the ILO after some delay, it is felt that a longer deadline would probably be more practical. Advances will not be charged to expenditure until the expenditure statement and supporting documentation have been provided.
Other funds and special accounts
Recommendation 5. The ILO should fully document the procedures to be applied to the management and control of all of its special funds and accounts, and disclose their income and expenditure in the financial statements.
Recommendation 6. The ILO should review balances on special accounts with little or no movement and close those which are no longer required.
5. Other funds and special accounts consist of a number of ongoing funds and activities managed by the Office (e.g. the ILO Administrative Tribunal, the subsidy from the World Food Programme, the Language Training Programme, etc.), and grants or gifts made in support of regular budget activities. Tighter controls have been introduced for the accounting of new activities, and procedures have also been introduced to ensure a more regular review and resolution of accounts with little or no movement. Old balances are being investigated and cleared. Procedures for the handling of special funds and accounts are being reviewed and will be fully documented during the course of this year. In accordance with the United Nations system accounting standards, income and expenditure for these accounts will be disclosed in the financial statements, or in notes to the financial statements, when they are material.
Management matters
Programme and performance evaluation
Status of the ILO's planning framework
Recommendation 7. The ILO should consider shortening the preliminary implementation report by using summary tables to compare outputs delivered to those planned. This should enable readers more readily to assess the progress made in implementing the programme.
6. This report is presented to the November session of the Programme, Financial and Administrative Committee during the second year of the biennium. The first experiment in presenting such an interim report in November 1997 did not meet the expectations of the Governing Body. The Office is reflecting on the matter and has initiated various consultations. Two points have now been accepted, namely that the next version will be radically different from that presented in November 1997 and secondly, the Office will undoubtedly follow the recommendation of the External Auditors to try and shorten this report and present a maximum amount of information in the form of tables.
Recommendation 8. The ILO should consider including a discrete strategic planning section in the biennial programme and budget document.
7. The programme and budget proposals are now contained in two volumes, the first of which deals with strategic planning, thus complying fully with Recommendation 8.
Monitoring, Evaluation and Reporting System (MERS)
Recommendation 9. The ILO should develop a cost measurement system which could be used to estimate the financial costs of staff time used in meeting its objectives.
Recommendation 10. The ILO should consider the possibility of introducing a time recording system to monitor the amount of staff time spent on key activities.
8. The idea of estimating the cost of achieving the different objectives is perfectly legitimate. But it is not easy to implement since the Office accounting system was not designed for this kind of operation. This does not mean however that the objective cannot be achieved. The proposed method will consist, as regards staff costs and to some extent inputs other than staff costs, of analysing the level of resources allocated to the different objectives of a subprogramme or programme. These estimations have an interesting indicative value in so far as the allocation criteria are clear and systematically applied both for the different types of project and over time. This should provide a satisfactory response to Recommendation 9. Recommendation 10, which suggests the establishment of a system for recording the time spent by staff on each activity, a practice adopted in law and consultancy firms, would require considerable investment without any guarantee of better results than those achieved by the system proposed in response to Recommendation 9. The Office is continuing its examination of a method which will take account of the concern expressed in this Recommendation.
Recommendation 11. The ILO should consider strengthening the oversight of MERS implementation by assigning responsibility for monitoring implementation to a central unit, which could report to the General Management Committee and the Director-General as appropriate.
9. The External Auditors emphasized that the full commitment of senior management is essential and, in particular, that members of the General Management should spare no efforts in ensuring the effective use of the MERS management system. They noted that the decision to introduce the system is a recent one, although there are signs which suggest that implementation lagged behind expectations in 1998. Although programme and major programme managers are responsible for ensuring the rigorous application of the concepts and systematic use of the tools, they noted that there is no central administrative unit responsible for the day-to-day monitoring and control of the implementation of the system. In order to give effect to Recommendation 11 the Director-General sent all members of the General Management (including regional directors) a communication recalling the terms of Circular No. 549 of 21 November 1997 on programming, monitoring evaluation and reporting of ILO activities, and requesting them to forward to him, no later than 26 February 1999, with a copy to PROGRAM, the evaluation syntheses and notes covering all the branches, departments and offices concerning the action carried out in 1998. This documentation will be transmitted to the new Director-General.
Recommendation 12. Staff should be reminded of the need to include indicators of achievement and measurable outputs in project documents. If necessary, renewed emphasis should be given to this subject through the provision of targeted training courses.
10. Recommendation 12 is already applied in so far as indicators of achievement must necessarily be included in the description of each project. The same applies in the Programme and Budget proposals for 2000-01. Undeniable progress has already been noted in the quality of proposals in this respect. The training courses provided by PROG/EVAL attach considerable importance to this matter.
Recommendation 13. The evaluation unit should produce a detailed evaluation strategy, updated at least biannually, setting out which activities are to be subject to evaluations.
Recommendation 14. The ILO should review the criteria governing the selection of activities for independent evaluation, in particular the continued relevance of a threshold of $250,000.
11. Recommendation 13 is applied in so far as provision is made for a detailed evaluation strategy in the PROG/EVAL work plan for 1999. As regards Recommendation 14, an examination of this question has not led to the identification of any reasons to justify a change in the threshold of $250,000 for activities subject to an independent evaluation.
Recommendation 15. The evaluation unit should monitor and control the quality of evaluation work and provide formal feedback on the quality of reports to evaluators.
Recommendation 16. The evaluation unit should ensure that evaluation teams are suitably qualified and experienced to conduct evaluations.
12. The evaluation unit has already begun to monitor the evaluations carried out within the Office. However, these evaluations are very numerous and therefore the full implementation of Recommendation 15 will depend on the volume of resources available to this unit. As regards Recommendation 16, the evaluation unit provides advice to the different Office units on the setting up of evaluation teams and their terms of reference. However, it is not necessarily consulted on the composition of the teams, in particular when the latter fall within the competence of bodies other than the ILO, i.e. the financing bodies concerned.
Recommendation 17. The evaluation unit should ensure that the results of all evaluations are recorded on the database and made available to users.
Recommendation 18. The evaluation unit should modify the evaluation database to record findings on key aspects of all evaluations performed to facilitate the production of high-level summary reports of performance.
Recommendation 19. The evaluation unit should reintroduce the production of an annual report summarizing the results of evaluations performed and lessons learned.
13. The monitoring of Recommendations 17 and 18 concerning the availability of the results of evaluations and modifications to be made to the respective databases is included in the PROG/EVAL work programme for 1999. This is also the case with Recommendation 19 concerning the production of an annual report on the results of evaluations carried out.
Recommendation 20. In the light of [the External Auditor's] findings, the ILO should consider increasing the resources devoted to the planning, monitoring and controlling of evaluation work.
14. The Office will propose to strengthen the capacity of the Evaluation Unit in 2000-01 in response to Recommendation 20.
Property management
Recommendation 21. The ILO should review and more clearly define the division of responsibility between INTER and the external offices.
15. Responsibility for the day-to-day management of the external offices lies with the respective directors of the offices concerned. INTER (Internal Administration Bureau), however, retains responsibility for the management of major construction and renovation work and the provision of policy guidance to the external offices on estate management matters.
16. The division of responsibility between INTER and the external offices has been reviewed. Any proposal in respect of major infrastructural work, such as changes to the telephone system, cabling system, procurement matters and communications, should be first referred to INTER for guidance. Similarly, as specified in the External offices manual, lease agreements and any proposed changes to such agreements must be referred to INTER to ensure that these are consistent with ILO policies.
17. INTER maintains a monitoring and advisory role in respect of buildings, the maintenance and repair of heating and air-conditioning installations, and safety and health issues. The INTER sections of the External offices manual are being revised and guidelines concerning the question of the division of responsibility between INTER and the external offices will be clearly addressed in the new draft.
Recommendation 22. INTER should provide external offices with more detailed guidance, in particular on tendering and the appointment of property specialists.
18. Tendering for the procurement of equipment is carried out only at headquarters and is processed by the Contracts Committee in accordance with the ILO's financial rules, regulations and directives. The services of local property specialists are used for the selection of rental premises whenever the need arises. The advantages of using these services will be drawn to the attention of external offices in the revised version of the External offices manual.
Recommendation 23. The ILO should consider widening INTER's role in relation to the external offices beyond the provision of guidance on the management of external office accommodation.
19. Any expansion of INTER's role in this area should be viewed in the context of resources available for this purpose. To the extent possible, INTER provides technical support to External Offices on issues that are within its competence. In recent years, INTER has sent its technical specialists to several external offices at the request of their directors.
Recommendation 24. The ILO should consider greater use of outside consultants in areas where they lack in-house expertise.
20. The Office fully agrees with this recommendation and outside consultants will be used whenever these are required. Local consultants will also be particularly useful for external offices, as they are more familiar with local conditions and are in a better position to perform the necessary preparatory work on property and accommodation matters.
Recommendation 25. The ILO should document an accommodation strategy for the Organization.
21. An accommodation strategy will be completed during the course of this year. It is intended that the strategy would provide an overview of current properties, an assessment of the extent to which current accommodation can support the Office's present and future operational requirements, and a property plan which would include guidelines and standards for bringing office accommodation into line with these requirements. Such a strategy must allow for the fact that conditions vary considerably in different host countries. ILO offices are accommodated in various types of premises: some are located in common premises with other United Nations agencies, others are in rented apartments or houses, and a few are located in ILO-owned property or in premises made available free of cost by the host country. In view of this diversity, the application of an accommodation strategy will always require a degree of flexibility.
Recommendation 26. The ILO should examine the scope for developing and using performance indicators of the type outlined in figure 7 covering both the quantity and quality of the accommodation support provided.
22. INTER has taken steps to use the outline provided in the External Auditor's report to prepare a questionnaire which has been distributed to the external offices. The form also incorporates questions relating to figure 10 (Recommendation 30), and the information gathered will be entered in the database of the Office's computerized building management system (BMS). There are limits however, to the extent to which comparisons can or should be made between accommodation costs in different offices and different cities.
Recommendation 27. The ILO should review its policies on the allocation of office space to determine whether the 1970s space standards remain valid and match those of comparable organizations.
23. The standards relating to the allocation of space to officials are regularly reviewed by the Office. Current standards have been found acceptable and realistic and are comparable to those currently used by other international organizations.
Recommendation 28. The practice of allocating offices to individuals should be evaluated against the current best practice of utilizing open-plan offices for certain types of administrative work.
24. The open-plan system has been introduced in several branches. Successful examples are the ILO bookshop, the Reprography Section, the Publications Bureau and the Information Technology and Communications Bureau. Open-plan offices have been firmly rejected by some departments because of their specific work requirements. There may well be scope for further office sharing, however, and this will be systematically followed up with all units.
Recommendation 29. The ILO should examine the scope for making better use of the space available in the main office accommodation area and monitor office occupancy levels regularly.
25. Modifications to the central areas in the headquarters building, apart from presenting certain structural difficulties, would be extremely expensive and would not be justified in terms of any benefits derived from such an exercise. Such modifications would also create new problems such as the relocation of storage areas currently located in these central areas. Office occupancy levels are monitored and recorded in the Building Management System on an ongoing basis.
Recommendation 30. The ILO should establish a comprehensive information system, by using the BMS system if possible, to capture the data listed in figure 10. The system should cover both headquarters and external office accommodation.
Recommendation 31. INTER should also amend the database of the Building Management System so that it can identify unoccupied rooms in the headquarters building, help ensure compliance with ILO space standards and facilitate the cost-effective use of this asset.
26. Most of the information in figure 10 is already available in the Building Management System. As indicated in paragraph 22 above, a questionnaire has been distributed to the external offices and the data collected will be entered in the central database. Office occupancy is also recorded in the Building Management System and updated regularly from information provided by several sources. These include reports on staff movements, which are produced by the Personnel Information and Payroll System (PERSIS) as well as occupancy reports prepared by the Internal Services Section of INTER (SERVINT) on the basis of physical checks.
Recommendation 32. In future, in addition to general justification of the need for new offices, the proposals for new office accommodation should be supported by a detailed business case.
27. External offices are required to present a business case to justify any proposals involving a change in accommodation. Office space requirements also have to be justified, and price comparisons of the various premises available are conducted before any new lease is authorized. In addition, the Office will always include in its assessment the need to ensure ease of access to the premises for representatives of employers' and workers' organizations.
Recommendation 33. The ILO should nominate project managers and project sponsors to manage future construction contracts. Their roles and responsibilities should be clearly defined.
28. This Recommendation has been duly noted. The responsibilities of project managers and sponsors will be clearly identified and defined for all future construction contracts.
Recommendation 34. To facilitate effective control over the cost of future projects, the ILO should ensure that the tender drawings and associated bill of quantities are finalized as far as possible before contracts are placed. Modifications to the original design should be kept to the absolute minimum.
Recommendation 35. Project monitoring arrangements for future projects should ensure that the content of progress reports is clearly specified and include a clear statement of the estimated cost and time to completion.
Recommendation 36. The ILO should seek to validate the information set out in the reports of project progress by reference to other evidence such as the design drawings and the contractor's running bills.
Recommendation 37. All variations shall be thoroughly reviewed, agreed in writing and reflected in the contract price.
Recommendation 38. For the avoidance of doubt, when a consultant or other third party is employed to supervise a project on behalf of the ILO, their responsibilities should be clearly defined. In particular they should be required to ensure that the cost of a project is kept within the budget set for it.
29. These Recommendations relate to the construction of new office premises and have been examined and fully endorsed by the Office. Detailed guidelines, based on these Recommendations, are being prepared and will be strictly followed both by INTER at headquarters and by the external offices concerned.
Additional information concerning action taken on the
External Auditor's report on the 1994-95 accounts
30. Funds received from UNDP (paragraph 14). The forecasting techniques developed in 1997 and 1998 have been further refined. In addition, UNDP has changed its procedures so that all project expenditure is now reimbursed on a global basis rather than on a project-by-project basis. This will facilitate the management of the ILO's account with UNDP.
31. External offices manual (paragraph 23). The review and updating of this manual is an important and integral part of the decentralization process. This process includes the introduction of a number of software packages to be used in the field in support of the preparation and management of the imprest accounts, field payrolls and budget preparation and monitoring. Before the External offices manual could be updated, however, it was essential for these new applications to be fully tested and operational, and for user manuals specific to these applications to be available.
32. The introduction of the software packages referred to in paragraph 31 has now been completed and the new computer applications are fully operational. Following a recent review of the existing manual, it is clear that sections of the manual dealing with financial, budgetary and payroll issues will need to be almost completely rewritten. Priority is being given to the identification of available resources to ensure that the External offices manual is updated with the least possible delay.
33. The sections in the External offices manual relating to INTER are expected to be revised during the course of 1999. The personnel sections of the manual are updated on an ongoing basis and can be accessed on the ILO's Intranet site.
34. Verification (paragraph 31). As stated by the External Auditor, the Office continues to monitor and improve the procedures for the verification of field accounts. Training in verification was carried out in one of the regions in 1998 and will be extended to the other regions in the coming months.
Ongoing follow-up
35. The Director-General will continue to work in close liaison with the External Auditor with regard to follow-up on his Recommendations, as he attaches great importance to them and wishes to ensure that the Organization derives full benefit from the work performed by the External Auditor.
Geneva, 25 February 1999.