FC 104/8

Finance Committee

1. In the 102nd Session (May 2003) the Finance Committee desired the External Auditor to prepare his proposal for the Value-for-Money (VFM) audits for the next biennium and present it in the September Session. This document provides an overview of the selection of subjects for audit of administrative and management operations of FAO.

2. It is recalled that the scope of activity of the External Auditor is governed by the provisions of paragraphs 12.4 to 12.6 of the Financial Regulations of the Basic Text. The issue of report by the External Auditor is governed by the provisions of paragraph 12.9 of these Regulations. External auditor has two main functions viz. providing opinion on the financial statements of FAO and audit of the administrative and management operations. These later type of audits are covered under the value for money audits.

3. In line with 2002-2003, approximately 40% of the resources of External Auditor would be spent on VFM audit and 60% on financial audit during the biennium 2004-2005. In selection of the subjects of VFM audit we have drawn on our experience in understanding the operations of FAO and considered that our work should add value to these operations and help the organisation to achieve its mandate in efficient, economic and effective manner. Our selection of subjects takes into account the priorities of the governing bodies and cover areas where significant resources are allocated and which are topical and important. Decision about selection of subjects are reviewed and updated during the biennium taking note of important developments.

4. At this stage we have identified the following subjects for possible VFM examination. We intend to audit up to four of these subjects in the forthcoming biennium:

• Oracle based financial information management and its interface with other IT systems
• Treasury operations
• Selected areas of Human Resource Management
• Official Travel
• Efficiency savings due to expansion of IT facilities
• Contracts for local services

5. In our audit of field units, we will examine the financial and accounting records and controls and review the fraud awareness and prevention measures in selected units. We will also examine the management of projects in selected FAOR.

6. On completion of each audit in the HQ and in the field units, the audit findings will be raised in the form of management letter. Based on the replies of the management, long form audit report will be prepared containing our findings and recommendations at a high level of aggregation for presentation to the Finance Committee.