FC 102/8![]() |
Hundred-and-second Session |
Rome, 5 – 9 May 2003 |
Progress Report on the Implementation of the External Auditor’s Recommendations |
Attached for the information of Finance Committee Members is the Progress Report on the implementation of the External Auditor’s recommendations.
In response to the request made at the Hundredth Session of the Finance Committee in September 2002, Attachment 1 to this document sets out a brief summary of the operations of the “Oil-for-Food” project from its inception to date.
LONG FORM REPORT | ||||
External Auditor’s Recommendation |
Priority |
External Auditor’s Suggested Timetable |
Action taken and status |
Auditor’s Comments |
FINANCIAL MATTERS Format of the Financial Statements Manual Adjustments I recommend that the Organization critically review the chart of accounts to identify further possibilities of reducing manual adjustments (See paragraph 12). |
Significant |
Before the 2002-03 closure |
A review of FAO’s chart of accounts is in process. Any opportunities identified for reducing manual adjustments will be implemented prior to the 2002-03 closure, as recommended by the External Auditor. Status: In course of implementation |
Progress in this area will be examined during the audit of the 2002-03 financial statements. |
Absence of Consolidation of non-main Stream Activities I am of the opinion that the accounts of the Credit Union and of the Commissary should be consolidated with the ones of the FAO in order to produce truly consolidated financial statements (See paragraph 14). |
Not indicated |
Before the next Finance Committee Meeting |
The objective of the External Auditors’s recommendation is that the assets and liabilities of the FAO be clearly reported to Member Nations as part of the Organization’s financial statements. Having reviewed this recommendation in the light of prior decisions of the Governing Bodies and considering the need to report clearly to Members, the Organization proposes to describe the relationships between the FAO and the Credit Union and between the FAO and the Commissary by way of a disclosure note to the FAO’s financial statements. In arriving at this decision, the Organization has considered the factors set out in Attachment 2 to this document. Status: Not for implementation |
The matter will be examined. |
Presentation of Statement I I recommend the following disclosure more in line with the presentation prescribed by Annex II to the UN Accounting Standards (UNAS) and the respective importance of the financial amounts concerned:
· The gains or losses on exchange would be disclosed separately in one line entitled “Currency exchange adjustments”;
· The proceeds of sales of information products and the revenue from advertising in and sponsoring of such products would be disclosed separately in one line entitled “Revenue producing activities”;
· The GCC would also be disclosed separately under the line “Government cash contributions for local costs”; The line entitled “Miscellaneous income” would regroup, as prescribed by Financial Regulations 4.4. and 7.1., lapse of accrued liabilities and other miscellaneous income. [paragraph 15] |
Merits attention |
For the 2002-03 accounts |
As recommended by the External Auditor, the 2002-03 biennial accounts will include separate disclosure for the items shown below, as follows: i) Gains/losses on exchange; ii) Information Products Revolving Fund; iii) Government Cash Contributions; and iv) Miscellaneous income. Status: In course of implementation |
This will be verified during audit of the 2002-03 financial statements. |
I recommend that a new line entitled “Prior period expenditure” be added after the computation of the excess/shortfall of expenditure, as prescribed by Appendix II to the UNAS. [paragraph 16] |
Merits attention |
For the 2002-03 accounts |
The Organization already follows the United Nations System Accounting Standard (UNAS) paragraph 17. No further action is required on this recommendation. Status: Accounting Standard is already in place |
This will be examined. |
Rounding Policy I recommend that, starting with the 2002-03 financial statements, a note relating to the rounding policy be included clearly indicating the level of rounding off. [paragraph 18] |
Merits attention |
or the 2002-03 accounts |
The rounding policy applicable to the Organization’s financial statements will be stated in a note to the 2002-03 biennial accounts. Status: In course of implementation |
Noted. |
Financial Position of the Organization Applicable Rules and Regulations for Employment of Retirees I recommend the following:
· The existing guidelines and practices for the re-employment of former staff members who have been separated should be consolidated into a comprehensive policy, which should address, in particular, the following issues: minimum time lapse between termination and re-employment, maximum time of employment, nature of the assignment, financial and other conditions of employment.
· As far as the first point is concerned, I consider the UN standard rule of three years minimum to be a good practice. It should be duly recalled in all termination agreements. The Director-General could, of course, always grant a waiver to this rule on the basis of detailed justifications. The maximum time of employment could be based on the one for retirees (six months).
· Once defined, the rules governing re-employment of separated staff should be incorporated into the FAO Manual under Section 300. [paragraph 31] |
Significant |
Early in 2003 |
The Organization maintains that the current practice, as described in the internal adminstrative document (Key Information Circular – KIC 99/7 dated 1 July 1999), should continue to apply, i.e. no re-employment of a former staff member can be considered during the period covered by the indemnity of an agreed termination. The provisions of this Circular will be reflected in the relevant Manual Section during the first half of 2003. The terms of employment including time and remuneration are governed by the relevant United Nations General Assembly decision concerning the employment of retirees (Decision number 51/408) and the rules and regulations of the United Nations Joint Staff Pension Fund. Status: In course of implementation, except as indicated above. |
This will be verified. |
Specific Financial and Accounting Issues Contributions receivable Normally, no shortfalls should be incurred for Trust Funds in line with the provisions under Section 250.113 of the FAO Manual, which states the following: "In principle, the Organization makes no financial commitment and disburses no funds under a Trust Fund until funds have been received. Advance financing arrangements may be made in exceptional circumstances." This rule is recalled in paragraph 50 of the AFF procedural manual II entitled "Accounting for projects". "A fundamental element of financial management for projects is to ensure that funds are available before financial commitments and disbursements are undertaken. For externally funded projects, this means ensuring that funds from donors have been received, whether for an individual project or to cover a range of projects.
I recommend that the rules and regulations recalled above be more strictly applied to avoid any Trust Funds projects going into deficit. [paragraph 43] |
Significant |
Immediate effect |
The Organization is now monitoring the cash position of projects and donors balances on a more frequent basis than in the past, making use of a recently developed report. In addition, the full implementation during 2002 of formal invoicing of calls for funds from donors has provided for improved monitoring and control of calls made and of funds received. Status: Implemented |
The impact of these measures will be verified during the audit of the 2002-03 financial statements. |
MANAGEMENT MATTERS Implementation of the “Oil for Food” Programme Security of Cash and Valuables I recommend that detailed rules and guidelines on the safe handling of cash and valuables be issued as soon as possible for all FAORs and that the specific case of Iraq also be addressed. [paragraph 56] |
Significant |
By mid-2003 |
Detailed guidelines concerning the safe handling of cash and valuables at field offices have been prepared and are being reviewed in-house. These guidelines will be issued within the deadline suggested by the External Auditor. In the specific case of Iraq, action has been taken to ensure the safe handling of cash and valuables in all the offices of the “Oil-for-Food” Programme. A procedure for “Cash Handling at the Time of an Evacuation in Iraq”was issued in May 2002. In addition, since the time of the External Auditor’s review, three new field positions have been established and filled under the Iraq Programme, i.e., those of Programme Co-ordinator (D-1), Financial Controller (P-4) and Finance Officer (P-3). These actions have greatly strengthened financial controls over FAO operations in Iraq, including controls over cash and valuables. Status: In course of implementation |
Progress in this matter will be examined. |
Management of the Locally Generated Funds I recommend that the Organization continue to make the necessary efforts to solve all pending matters regarding LGF [Locally Generated Funds] procedures and that LGF income and expenditure be duly included in the FAO’s financial statements for the 2002-03 biennium. [paragraph 97] |
Fundamental |
Before the 2002-03 closure |
Draft guidelines for Locally Generated Funds (LGFs) have been prepared and in August 2002 the Organization forwarded these guidelines to the Office of the Iraq Programme (OIP), New York, for endorsement. In response, on 20 December 2002, the Executive Director of OIP approved guidelines concerning the utilization of LGFs for all UN agencies. These guidelines have been transmitted to the FAO office in Iraq, for implementation. As recommended by the External Auditor, LGF income and expenditure will be included in the FAO’s financial statements for the 2002-03 biennium. Status: In course of implementation |
This will be verified. |
Procurement Process Delays I recommend that a study be initiated in order to determine precisely when and where delays were generated and investigate their reasons with the objective of re-engineering the procurement process or adjusting the staffing level, if necessary. [paragraph 105] |
Significant |
By mid-2003 |
A study has been carried out in line with the External Auditor’s recommendation. The report is being reviewed and the Auditor’s recommendation will be implemented well ahead of the indicated timetable. Status: In course of implementation |
This will be verified. |
REVIEW OF THE ORGANIZATION’S INTERNAL CONTROLS Organization of the Overall Function of Oversight at the FAO Applicable Rules and Regulations I recommend that the Financial Rules, which constitute Section 202 of the FAO Manual, and Section 108 that relates to the AF Department be updated as soon as possible in order, notably, to give a comprehensive view of the oversight functions within the Organization. [paragraph 131] |
Merits attention |
Before the end of 2002 |
In view of the planned changes in Finance Division, Sections 108 and 202 of the FAO Manual Section are being updated as part of the preparation of the PWB for the 2004-05 biennium. Status: In course of implementation. |
Noted. |
Overall Organization and Respective Mandates I recommend that the FAO examine the possibility of combining AUD and PBEE with the view of creating a single office or division for oversight. The present Controls Branch, which operated at a different level, could remain within the Finance Division. However, working relationships should be formally established in order to avoid any duplication of work. [paragraph 137] |
Merits attention |
Before the end of 2003 |
A document entitled “The Independence and Location of the Evaluation Service” is being presented to the Joint Meeting of the Programme and Finance Committees in May 2003. Status: In course of implementation. |
Noted. |
Review of the Office of the Inspector-General Organizational Status and Mandate I recommend that a section dedicated to Internal Audit be established on the FAO’s Intranet site since I am of the opinion that such could further enhance the visibility of AUD and its strategic importance within the Organization. The section should contain the following information: organisational status and mandate, organisational chart, work plan for the current year and annual activity reports for, at least, the past two biennia. Last but not least, in line with the practice of other UN or non-UN organisations, reference could be made to a “hot line” or a confidential fax number to report fraud, abuse of FAO’s resources, mismanagement or theft. Procedures should be established to deal with cases reported. [paragraph 140] |
Significant |
Before the end of 2002 |
The Intranet site for the Office of the Inspector-General is now available on the FAO Intranet. Status: Implemented. A confidential fax hotline has been installed and communicated to all staff by means of a Director General’s bulletin. The fax machine is kept under lock and key and access is restricted. The Office has a standing procedure for handling any reported cases. Status: Implemented. |
Noted.
Noted. |
I recommend the following:
· The Finance Committee should be consulted as well before the renewal of the incumbent [Inspector-General’s post]. · As suggested by the Finance Committee, and in line with the recent practice for Directors’ posts, future vacancies for the Inspector-General’s post should be posted on the FAO’s Intranet and Internet sites with a job description attached thereto. [paragraph 143] |
Significant |
Before the end of 2002 |
At its last session, in September 2002, the Finance Committee took note of an explanation provided by the Legal Counsel on the requirement for consultation with the Committee on the appointment and termination of the Inspector-General. In particular, following consultations with the Legal Offices of other organizations that have adopted provisions identical to those of the Charter for the Office of the Inspector-General and after considering the jurisprudence of the ILO Administrative Tribunal, the Legal Counsel clarified that it would not be legally correct to consult the Finance Committee on a purely administrative matter such as the renewal of the appointment of the Inspector-General. Status: Not for implementation The post was advertised on the Internet in line with current policy. Status: Implemented |
Noted.
Noted. |
Use of Audit Committee I recommend that an audit committee be established. According to agreed standards it could be chaired by an external person and also include a representative from another UN organisation. [paragraph 147] |
Fundamental |
Before the end of 2003 |
In line with the commitment to the 100th Session of the Finance Committee, the Organization has reviewed arrangements in place at other UN specialised agencies and the Director-General has now established the FAO Audit Committee. Its composition and terms of reference are set out in the Director-General’s bulletin No. 2003/6 Rev 1 dated 2 April 2003. Status: Implemented. |
Noted. |
Audit Responsibilities I recommend that a specific unit for investigation be established at the FAO and staffed with persons with appropriate competence and skills (lawyers, certified fraud examiners, ex policemen, etc.). [paragraph 152] |
Significant |
Before the end of 2003 |
The responsibility for investigations has been assigned to the Special Assignments group in the Office of the Inspector-General which has been renamed Special Assignments and Investigations. The staffing of this group, headed up by the Principal Auditor, has recently been strengthened by the addition of a staff member with a legal and investigative background Status: Implemented. |
Noted. |
Audit Planning I recommend that AUD revise and improve its entire approach to audit planning taking into account the following specific recommendations.
· Audit planning should be carried out at three different levels on a long and medium term basis, on a biennium basis and on an annual basis). · A risk assessment process should be conducted and updated on a regular basis (at least once per biennium). Its overall objective would be to collect and analyse data, both quantitative and qualitative, to describe the form, dimension, and characteristics of the risks faced by the Organization. [paragraph 156] |
Significant |
By mid-2003 |
The External Auditor’s recommendation has been taken into account in updating the work plan for 2003 and will be followed in preparing future work plans. Status: Implemented.
AUD has engaged a senior consultant to develop a risk assessment methodology for audit planning. The review will be completed in two parts: the first in April 2003 and the second in good time for the results of the review to be applied during the 2004-2005 planning cycle Status: In course of implementation. |
Noted.
Noted. |
Actual Audit Coverage I recommend the following:
· The time dedicated to Headquarters activities should be increased significantly and areas such as Oracle implementation, investments and other treasury functions should be addressed as soon as possible in view of the risks and shortcomings already identified. On the contrary, considerably less time could be spent on Commissary and Credit Union, which had to be reviewed on a regular basis by the External Auditor because of the necessity of issuing an audit opinion on the yearly accounts. Furthermore, in my opinion both non-stream activities were well managed.
· The following improvements should be made to the DTS [Daily Time Sheet] system. Audit staff should be asked to report on a bi-weekly or weekly basis and the reporting by sub-activities should be made more consistent. Reporting should provide a comparison between planned and actual. [paragraph 163] |
Fundamental
|
Immediate effect
Immediate effect |
This recommendation was based on a misconception regarding the amount of time spent on Headquarters activities. As the Organization explained to the Finance Committee in September 2002, consideration of the time spent by AUD on the Headquarters activities should also include the time spent on Special Assignments and Investigations, almost all of which were undertaken at Headquarters. When this is done, the total time spent on Headquarters activities was in line with the current target and was closer to the levels recommended by the External Auditor. AUD’s target is 50% decentralised activities, 25% Headquarters activities, and 25% Special Assignments and Investigations. On the basis of AUD’s current risk assessment of the operations of the Commissary and Credit Union, the audit time devoted to these two operations remains stable for the current biennium. As part of the planning process for the 2004-05 biennium, AUD will reassess the risk profile and plan the audit effort accordingly. Again, this recommendation was based on a misconception, as the Organization has explained to the Finance Committee in September 2002. AUD staff record their time on a daily basis and a planned and actual comparison for the office as a whole is performed monthly. Furthermore, planned to actual comparisons are performed for each assignment at the end of the assignment. The time recording system is exclusive to AUD within the Organization and is up-to-date. |
AUD’s assumptions will be verified.
Noted. |
Staffing I recommend that top priority be given to recruitment and that, in the meantime, external resources be contracted in order to address the issues not covered as planned in the 2000-01 work plan. [paragraph 166] |
Fundamental |
Immediate effect |
AUD’s recruitment efforts are receiving top priority and, indeed, certain key positions have already been filled. In the meantime, consultancy assistance is being used as required. Status: Implemented. |
Noted. |
Professional Qualifications In view of the growing importance of ICT [Information and Communication Technology] in the field of auditing, I recommend that priority be given to candidates with a strong background in this area. Furthermore, I recommend that recruitment be more diversified than at present in order to obtain proficiency in a variety of technical disciplines. In view of the FAO activities, auditors with agronomic, statistic or economic background would be a welcome addition. [paragraph 167] |
Significant |
Immediate effect |
In the current recruitment actions of AUD, these areas of expertise continue to be taken into account, for example, the Office has recently recruited an auditor with a law degree. In addition, audit staff is encouraged to enrol in the Certified Information Systems Auditor (CISA) programme and ICT experience is given a high rating in current recruitment actions. Status: Implemented. |
This will be verified. |
Training I recommend that training be intensified and focused, in particular, on information system audit. In addition, some existing auditors should be encouraged to become CISAs [Certified Information System Auditors] or Oracle “Certified Professionals”. [paragraph 168] |
Significant |
For 2003 training plan |
Training and development continue to be important aspects of the overall management of the Office of the Inspector-General. Such training comprises three elements:
· professional audit training,
· language training, and
· training in the use of office technology. As part of the ongoing training efforts, computer fraud courses were held in Rome for the entire Office in 2000 and 2001. In October 2002, a special course was held in Rome by an internationally recognised expert in the areas of preventing, detecting and investigating fraud, including technology-based detection. A course on information systems audits, concentrating on auditing Oracle applications, is being organised in Rome for the entire Office for late 2003. The Office of the Inspector-General has increased its investment in training in recent years. At present, approximately 3.5 percent of total staff time is invested in formal training and it is expected that this will increase in future years. Status: In course of implementation. |
Noted. |
Performance of Audit Work I recommend the following:
· Dramatic improvements should be made to the audit manual to turn it into a useful tool for the auditors. Priority should be given to include sections on risk assessment, statistical sampling and materiality. The section dedicated to Headquarters should be expanded to cover the information system, treasury functions and investments, procurement and human resources audits. · For the working papers, the prescribed format for the “Audit Summary File” should be followed in all cases and the information regarding planned/budgeted schedule and costs versus actual should be duly completed. In addition, working papers of audits conducted in the field should be repatriated to Headquarters. · On an annual basis, an overall comparison should be made between the work plan and the actual audit conducted and duly reported in the annual activity report. [paragraph 172] |
Significant |
By mid-2003
Immediate effect
For 2002 |
The audit manual will be updated during the first half of 2003, taking into account the results of the work on risk assessment methodology and the new standards for the professional practice of internal auditing adopted in June 2002. Status; In course of implementation.
The Audit Summary File is being completed in line with the External Auditor’s recommendation.This is a continuing process. Working papers for audits conducted in the field by the regional auditors are retained by the regional auditors for reference, and are brought to Headquarters when necessary. Status: Implemented.
This recommendation has been implemented for the 2002 annual activity report. Status: Implemented. |
Progress will be verified.
Noted.
Noted. |
Reporting and Follow-up of Audit Findings I recommend the following:
· The results of all audit assignments should be documented in a formal report.
· For each type of audit assignment a standard report should be developed. Compliance to the agreed content and format should be closely monitored.
· Relative importance and timeframe for implementation should be duly mentioned for all recommendations and, if applicable, the cost implication of their implementation should be estimated.
· Procedures should be established and duly followed to ensure quality control on the audits conducted and reports issued. [paragraph 175] |
Significant |
Immediate effect |
This recommendation was based on a misconception. All audit assignments are documented in a formal report. AUD is carrying out a comparative review of the practice of other agencies and will consider ways to implement this recommendation without stifling creativity and initiative on the part of the auditor. Implemented.
|
Noted.
This will be verified.
This will be verified. |
I recommend that a section be included in the AUD annual report regarding the implementation of all recommendations issued. [paragraph 177] |
Significant |
For 2002 anual report |
Implemented. |
Noted. |
Review of the InternalControls over the Use of the Organization’s Resources In view of the deficiencies of the review conducted and the unreliability of the results, I recommend that another review be conducted as soon as possible with an appropriate methodology, namely a risk assessment. The assessment should first look back at past cases of fraud and misuse of the Organization’s resources in order to determine the factors that facilitated their occurrence. On the basis of how existing rules, regulations and procedures were indeed applied, the assessment should then look ahead and try to predict the possible risks of misuse of the Organization’s resources and recommend ways of preventing them. [paragraph 187] |
Fundamental |
In 2003 |
In this respect, an expert consultant has been retained to assist in developing a new risk assessment methodology and with this tool the issue will be revisited during the first half of 2003. Status: In course of implementation. |
Noted. |
Local Audits I recommend that the present arrangements be evaluated by AUD together with AFF with regards to their costs and that alternatives be sought. In view of the presence of one internal auditor in each RO, the Organization might consider having the work performed by its own staff. [paragraph 190] |
Significant |
Before the end of 2002 |
In coordination with AFF, AUD has reviewed the local audit programme and issued a report in December 2002. AFF has also prepared a report with proposed changes to the current arrangements. Status: Implemented |
Noted. |
Overall Conclusions To conclude on the review of AUD, I recommend that the deficiencies identified above in terms of audit planning and coverage, professional resources, performance of audit work, reporting and follow-up be addressed. A detailed plan of action should be prepared and closely monitored under the authority of the audit committee, if established as recommended. [paragraph 191] |
Fundamental |
Detailed plan of action before the end of 2002 |
An action plan was provided to the Finance Committee in September 2002 and the present document states the current position. Status: Implemented |
Noted. |
Review of the Set-up of Controls in Oracle Systems-development Process I recommend that priority be given to the following:
· an overall strategy should be formalised;
· a well-proven project methodology should be adopted for the Human Resources and Budget projects and any other future projects;
· existing documentation should be completed and/or updated (especially all parameters’ guides) and procedures defined for their maintenance;
· all controls carried out either at the level of AFI or AFFS should be formally documented. [paragraph 195] |
Fundamental |
Before the end of 2002 |
· Strategic Objective E.1 of the Strategic Framework 2000-2015 seeks to provide “An integrated information resource base, with current, relevant and reliable statistics, information and knowledge made accessible to all FAO clients…” This is further elaborated in the Medium Term Plan (MTP) 2002-2007 where it is estimated that 22.4% of total resources are allocated to the Strategic Objective E.1. The administrative aspects were also covered in the Strategic Framework under the cross organizational strategy “Continuing to Improve the Management Process”.
· PRINCE2 (Projects In a Controlled Environment 2) has been adopted as the methodological framework for both Oracle Phase II project components (Oracle HR & Payroll and PIRES).
· As part of the Oracle 11i upgrade process (completed in August 2002), standard Oracle configuration documentation was completed for all applications. In addition, procedures are now in place to document future changes to the configuration as part of the standard systems change procedure.
· Current procedures and controls in relation to system access and security are now being formally documented. Status: In course of implementation |
Progress in these matters will be verified. |
Interfaces Although I acknowledge that the Controls Branch has started to address these problems through the monitoring and reporting of interface activity and follow up of issues arising, I recommend that efforts be continued to establish procedures for the following: frequency of up-dates; regular analysis of rejects; recycling and audit trail. [paragraph 196] |
Significant |
Immediate effect |
As noted by the External Auditor, regular review and reporting of interface activity is already in place. Procedures are currently being reviewed to extend the work in this area also to cover the points raised by the External Auditor. It is expected that this work will continue throughout 2003. Status: In course of implementation |
Progress in these matters will be verified. |
FOLLOW UP REVIEW OF THE TREASURY MANAGEMENT Organizational Arrangements Investment Committee I recommend that a second member be appointed and that FAO continue the discussions with the WFP regarding the possibility of having its Treasurer participate in the functions of the FAO Investment Committee. [paragraph 209] |
Merits attention |
Before the end of 2002 |
The Organization has invited the Treasurer of the WFP to participate in the FAO Investment Commiteee meetings, just as the WFP has invited the Treasurer of the FAO to attend its investment committee meetings. Status: Implemented |
Noted. |
Advisory Committee on Investments I recommend that the ACI [Advisory Committee on Investments] meet twice a year, by teleconference and that informal consultation be encouraged in between. Minutes should be prepared in all cases, even for informal consultation, and promptly issued, as previously recommended. [paragraph 213] |
Merits attention |
In 2003 |
The recommended approach is being implemented from 2003 onwards depending on the availability of ACI members and the issues to be discussed. For urgent issues, phone conference calls will be made. Status: In course of implementation |
Progress in these matters will be verified. |
Banking Arrangements I recommend prompt action to implement the third tier of the strategy in order to further streamline the number of retail banking relationships and reduce the cost of banking. [paragraph 215] |
Significant |
Before the end of 2003 |
With regard to the third tier of the banking strategy, initial contacts have now been made with the main service providers for the FAO regions. A banking expert has been engaged as a consultant to establish agreements with major banks and to prepare the linkages with their electronic banking systems. Status: In course of implementation |
Progress in these matters will be verified. |
Short-Term Investments 2002 Update I recommend that the transfer (of the short-term investments) only be made once all the arrangements for the monitoring of the investments are in place as detailed below. [paragraph 217] |
Significant |
By mid-2003 |
Status: Implemented |
Noted. |
Long-Term Investments
While regretting that the existing arrangements were not reviewed earlier, as recommended in my previous report, I urge the Organization to progress on this issue (transfer of the long-term investments) as soon as possible now that a Chief, Treasury Unit has been appointed. [paragraph 224] |
Fundamental |
y mid-2003 |
The Finance Committee, at its Session held in September 2002, was informed that an asset and liability study would be performed in order to address the situation of growing liabilities for current and past after service medical care obligations with only partial funding and a possibly unrealistic expectation to meet such liabilities solely from the FAO’s long-term investments. The ACI had noted that one of the Organization’s outstanding investment strategies concerned dividing the equity portion of the long-term portfolio between a value investor and a growth investor. This strategy was subject to an assessment of the current investment manager’s performance and a detailed asset and liability study was necessary before any partitioning could take place. An specialized firm has been contacted to carry out an asset and liability study. Once the study has been completed, depending on the results, a transfer of assets to other investment managers together with other cost efficient alternative actions will be considered. In parallel with the above, preparatory work is now underway to identify potential new long-term asset managers. Status: In course of implementation |
This will be verified. |
FOLLOW UP REVIEW OF THE AFF REORGANISATION AND STAFFING Staffing review I recommend that on the basis of the final report of the consulting firm, a detailed action plan on how to address the unresolved issues faced by the AFF division be prepared and that its implementation be closely monitored through the regular issuance of progress reports. [paragraph 254] |
Significant |
Detailed plan of action before the end of 2002 |
The recommendations of the consulting firm are being considered as part of the budgetary process and proposals to address the staffing situation will be included in the PWB for 2004-05. Status: In course of implementation |
Noted. |
ACTION TAKEN IN RESPONSE TO PREVIOUS REPORTS Human Resources Management Use of Other Human Resources Regarding the use of other human resources, I recommended that the conditions of services and contracts be standardised and that a control and monitoring system over the corporate use of external collaborators be put in place [paragraph 119 of my 1998-99 report]. At the time of writing this report, my staff were informed that the envisaged new contractual arrangement called “Personal Services Agreement”, which would replace four previous types of contracts, and would be implemented in October 2002. |
Not indicated |
Not indicated |
A new contractual arrangement called "Personal Services Agreements" was introduced in October 2002 to replace the previous four types of contracts (Reimbursable Loan Agreements, Special Services Agreements, Employment of National Professional Project Personnel and Contracts for Technical Writers, Technical Editors, Illustrators, Translators, Typists, Proof Readers and Publishers). The new Manual Section 319 has been made available on the FAO Intranet at Policies & Procedures, FAO Administrative Manual (AFH), and the Organization is providing assistance in the implementation of this new contractual arrangement. In addition, a control and monitoring system over the use of external collaborators is being addressed within the context of the implemenation of Oracle HRMS. Status: In course of implementation |
Progress will be verified. |
Support Cost Arrangements Support Costs In my 1996-97 report, I had commented on the proliferation of support costs of various types and recommended that a comprehensive but much simplified framework for support cost arrangements be prepared. Following extensive reviews by the Finance Committee at its 94 |
Not indicated |
Not indicated |
In response to the suggestion of the External Auditor, the Organization has reviewed the referenced WFP Report [FC 100/16] which is an examination of WFP’s policies and procedures for charging indirect support costs to donors. Currently WFP utilises a single rate of 7.8% of total direct project expenditures which is calculated biennially and designed to achieve full recovery of costs incurred in its Programme Support and Administrative (PSA) Budget. The said report explains the difficulties WFP has faced in the past several biennia as actual recoveries have not kept pace with support cost expenditures. WFP’s Executive Director proposes reducing the indirect support charge to 7.0% commencing in 2003, recovering the costs of certain variable expenditures currently included in its PSA budget through direct charges to project budgets and using interest generated on unexpended project funds to finance potential future deficits. Unlike the FAO, WFP is a voluntary agency with no assessed contributions, and is required to recover all its fixed and variable support costs through an indirect support cost charge. The FAO’s Governing Bodies have, on the other hand, established policies limiting the recovery of support costs to incremental costs incurred. Under these policies the costs of the FAO’s fixed overhead infrastructure attributable to support to field projects are financed through its Regular Programme. WFP’s Executive Board has established a single rate for the recovery of support costs notwithstanding studies which have shown significant differences in the costs of providing support to its development, emergency relief and refugee relief activities. Instead, the FAO’s support cost recovery policy has been designed to attempt to relate, as closely as possible, its variable costs incurred to the rate charged for the delivery of technical cooperation, normative, emergency, TCP/SPFS and other project services. While a single support cost rate might appear to simplify the accounting procedures related to support cost charging, it is also likely to complicate relationships with donors asked to reimburse for support services provided using rates unrelated to costs incurred. The comparisons mentioned in the External Auditor’s comment provide information comparing operating expenditures and support costs budgeted for UNDP, UNFPA, UNHCR, UNICEF and WFP. All of these agencies are financed primarily through voluntary funding and are not involved in delivering project technical services. While the information is of interest to all organisations within the UN system, the significant differences in agency mandates, methods of delivery service and financing limit their applicability to the FAO. The External Auditor’s also expressed the view that further streamlining could be possible although without indicating how this might be achieved. The Organization is of the view that this might be difficult if the current policy objectives are to be met – in particular, to relate, as closely as possible, the FAO’s indirect variable costs incurred to the rate charged for the delivery of its services. On the other hand, every opportunity to reduce the process costs should be grasped and, in this regard the Organization will continue to review and share with the Finance Committee the cost of supporting the field programme, the extent to which such costs are recovered and the application of the current policy always with the objective of improving performance in the broadest meaning of that term. Finally, the Organization draws attention to the fact that the Finance Committee will have a further opportunity to discuss this issue in its consideration of the JIU’s report 2002/3 "Support costs related to extra-budgetary activities in Organizations of the UN system" In conclusion, the Organization suggests that the work on this recommendation be considered complete. Status: Implemented |
The matter will be examined. |
1. In the immediate aftermath of the Gulf War, the UN reported the makings of “an imminent catastrophe...” if minimum needs of the civilian population were not rapidly met. Following the approval of UN Security Council resolution 986 (SCR 986), a Memorandum of Understanding was signed between the UN Secretariat and the Government of Iraq, authorizing Iraq to sell oil to meet the humanitarian needs of the population. The Programme, known as the “Oil-for-Food” Programme became effective in 1997 and was renewed under subsequent Security Council resolutions. The latest resolution extends the Programme until June 2003.
2. The Government of Iraq (GOI) implements the humanitarian programme in the 15 central and southern Governorates of Iraq. United Nations’ agencies are entrusted with the responsibility for observing, monitoring and reporting on the equitable distribution to beneficiaries of the humanitarian goods procured by the Government. In the case of those items which have a potential "dual-use", UN agencies are also responsible for monitoring the receipt, storage and end-use of these items. A total of nine UN agencies and programmes are involved in the implementation of the SCR 986 Programme.1
3. In the three northern Governorates of Dohuk, Erbil and Suleimaniyah, where the central government withdrew its public services in 1991, UN agencies implement the humanitarian programme on behalf of the GOI. The UN is entrusted with the responsibility for assessing needs, procuring humanitarian inputs and ensuring receipt, storage, distribution of these inputs and providing technical assistance.
4. The following is a brief overview of FAO’s involvement in the Programme in the centre/south of the country and in the northern Governorates of Dohuk, Erbil and Suleimaniyah.
Centre/South
5. Within the framework of SCR 986, FAO’s role in the 15 central and southern Governorates of Iraq is to observe the effective and equitable distribution of agricultural inputs (procured by the GOI) to beneficiaries.
6. FAO has designed an effective tracking mechanism to trace the movement of agricultural inputs throughout the various stages from point of entry, storage in warehouses to end-user. A team of international observers is in place to carry out observation field visits and where possible, periodic rapid assessment surveys are undertaken to evaluate the impact of inputs distributed on agricultural productivity.
7. Reports on observation activities are prepared on a regular basis by FAO’s observation unit and if necessary technical clarifications are provided to the Office of the Iraq Programme (OIP) and United Nations Monitoring, Verification and Inspection Committee (UNMOVIC) to facilitate the release of contracts placed on hold by the “661 Committee”, the New York based control body established under UN Security Council resolution 661.
8. FAO’s observation structure is complimented by UNOHCI’s Observation Unit consisting of various sectoral experts.
Three Northern Governorates
9. Agriculture represents an important economic sector in the three northern Governorates of Iraq, where over 70 percent of the 3.5 million people are living in rural areas. From 1990 to 1996, destruction to infrastructure caused by civil strife and shortage of inputs due to the embargo led to a serious deterioration of the agriculture sector in the region.
10. In the three northern Governorates, FAO is responsible for fully implementing the agriculture programme on behalf of the Government of Iraq. This involves identification of needs, procurement, receipt and storage, sale (at nominal cost) and distribution to beneficiaries, as well as the provision of specialized technical assistance.
11. During the first two years of the Programme, FAO’s assistance focused mainly on the delivery of agricultural inputs and equipment required to resume agricultural production. The programme has since steadily evolved into more complex and challenging agricultural rehabilitation.
12. The FAO programme activities in the three northern Governorates currently target a wide range of agricultural subsectors, including water resources and irrigation, plant protection and production, forestry, mechanization, agro-industry, animal production and health, extension, training and research. The Programme also involves the rehabilitation of agricultural infrastructure and provision of technical assistance.
13. FAO has helped farmers throughout the northern Governorates to develop a more vibrant agricultural economy, with more jobs, greater productivity and increased incomes.
14. As irrigated agriculture contributes significantly to food production and food security in northern Iraq, FAO’s programme has focussed on the rehabilitation of irrigation infrastructure and water resources.
15. With the onset of drought from 1998 to 2001, FAO conducted surveys, established action committees and formulated a drought mitigation programme. During this period, some 1 200 villages were supplied daily through water tankers with 39 million litres of water for both animal and crop production use.
16. Under this sector, farmers are provided with drilling equipment, pumps, generators and deep well pipes. The construction of 186 irrigation schemes has been completed so far, covering 16 000 hectares of land and assisting over 12 000 farmers.
17. With regard to groundwater use for irrigation purposes and livestock watering, the total number of wells and pumps in operation in the northern Governorates prior to 1995 was around 9 000. Since the start of the agricultural programme, the number of existing wells in the three northern Governorates has doubled to nearly 18 000.
18. By helping farmers to utilize available ground and surface water in a sustainable manner, the Programme has contributed to the continuous increase of irrigated land and farm productivity in the northern Governorates of Iraq.
19. FAO’s seed, fertilizer and pesticide distribution campaigns have increased agricultural productivity in the region, contributing to bumper harvests of wheat and barley during the 2001/2002 season. Cereal production reached 600 000 tonnes in 2002, the highest level in the last five years. Summer crop production of vegetables, sunflower and other irrigated crops has also increased considerably. Tomato yields alone averaged approximately 50 tonnes per hectare, in comparison to 28 tonnes per hectare the previous season. These remarkable increases in yield can be attributed to good rains during the winter season, high quality inputs, training provided by the Programme and the farmer’s adoption of improved farming techniques also introduced by the FAO Programme.
20. In the animal health sector, FAO distributes drugs, vaccines and veterinary supplies aimed at controlling major epidemic and endemic livestock diseases. Animal vaccination services are provided to farmers in the north, free of charge, and mobile clinics offer veterinary services in remote areas. A total of 45 veterinary centres have been renovated in the region.
21. Vaccination campaigns have been mounted to control animal diseases for approximately 12.3 million sheep and goats and 330 000 cattle in 2002. To date, nearly 95 percent of small ruminants and cattle have been treated against external and internal parasites.
22. FAO’s role in animal health has broadened to include emergency preparedness and early warning of animal disease outbreaks. During the past year, contingency plans with defined control policies have been developed in conjunction with national veterinary authorities for important animal diseases, such as foot-and-mouth disease and rinderpest. Furthermore, an information system has been set-up for the collection, storage, collation and interpretation of animal health data to enable better planning of disease control policies.
23. Prior to FAO’s programme in the north, there were only 25 poultry farms and one hatchery in operation. Through the rehabilitation of poultry houses and the distribution of inputs, the number of active poultry farms has increased to 630, along with 15 hatcheries and five slaughterhouses. The rate of poultry production is now 39 900 metric tonnes of poultry meat per year, and egg production has risen from 150 million per year in 1997 to 375 million in 2002. The market price of poultry meat and eggs has fallen dramatically benefiting vulnerable groups. FAO’s assistance also aims to enhance the nutritional status of farming communities and vulnerable groups, particularly widowers and female-headed households, through support to backyard poultry raising. Overall since 1999, some 216 000 layer chickens and 2 862 metric tonnes of poultry feed were distributed to over 24 000 families in 1 000 villages.
24. The main objectives of FAO’s forestry and erosion control programme include environment and watershed rehabilitation through the implementation of soil conservation measures, enhancing community and agro-forestry through the distribution of forest tree seedlings, and increasing the awareness of the population to forests and the development of non-wood forest products. Achievements so far under the Programme include the establishment of nine forest nurseries, a community nursery and an annual production of 6.4 million forest tree seedlings.
25. Most farm machinery available in the three northern Governorates, including tractors, combine harvesters, seed drills and threshers, has become aged and obsolete. The objective of FAO’s mechanization programme is to re-equip the agricultural sector with the appropriate machinery as well as to provide operators and service technicians with training. Hundreds of tractors, as well as other machinery and spare parts have been delivered to northern Iraq, contributing to higher productivity levels and better services for the farming community.
26. Before the sanctions, agro-industries were established in the northern Governorates for tomato paste, fruit juice, sugar, oil and dairy products. These plants were either destroyed or out of order before the local authorities started reconstruction of the food processing industry in 1997. Currently, a number of small-scale agro-processing plants have been rehabilitated to produce tomato paste, fruit juice, dairy products and sunflower oil.
27. FAO’s programme in Iraq is playing an important role in improving the technical knowledge and skills of farmers, rural women and youth, encouraging them to adopt improved agricultural technologies and practices which are essential for increasing agricultural production and income.
28. To date, some 13 000 farmers and agricultural staff have benefited from FAO’s extension services by attending courses and field demonstrations. In addition, hundreds of extension meetings and agricultural exhibitions have been organized and information on improved technologies and practices has been widely disseminated in the local language.
29. In the field, the Programme is implemented under the overall supervision and leadership of a Programme Manager based in Baghdad, who is closely supported by a Coordinator for the north, based in Erbil. The set-up in the northern Governorates consists of a coordination office (Erbil) and three suboffices, one in each of the three Governorates.
30. A core team of managers including two directors, an evaluation officer, a resident auditor and a financial controller have been appointed to ensure rigorous management of resources allocated to the Organization under the Programme.
31. FAO currently has a total of 72 international and 600 (highly qualified and experienced) national staff working under the Programme in the centre/south and the northern Governorates of Iraq, deployed as follows:
32. At headquarters, the Special Emergency Programmes Service (TCES) has the direct responsibility for coordinating and managing the operations of the Iraq Programme. International procurement is carried out through FAO’s Procurement Service (AFSP).
33. The Programme draws on the expertise of various technical departments at FAO headquarters throughout all stages of project implementation. This technical support has played an instrumental role in the effectiveness of the Programme.
34. In view of its magnitude and nature, the Programme is regularly audited by the Office of the Inspector General (AUD) and the appointed External Auditor. To date, over 20 reports have been submitted to programme management since 1997 and an extensive review of the Programme was carried out by External Audit during 2001 and 2002.
35. The political context of the intervention and state of the economy have resulted in a number of constraints for implementing an agricultural policy geared towards sustainable rehabilitation. These constraints include a closed economy (due to sanctions), the effect of humanitarian supplies on local markets, the lack of a banking system and the limited supply of currency.
36. In parallel to this, since 1999, the “Oil-for-Food” Programme has expanded steadily in terms of volume of funding, nature and scope, presenting UN implementing agencies and programmes with unprecedented challenges. The main change was that of a reorientation in scope of the Programme from the relatively simple distribution of inputs to more complex rehabilitation, quasi development-type activities.
37. To this end, in 2000 FAO embarked on the formulation of a strategic framework for sustainable agricultural rehabilitation in northern Iraq. This framework laid the basis for the design of a three-year agriculture programme. Various multi-disciplinary missions have been fielded to work on the design of this programme. Since April 2002, a full-time team led by TCES and the Investment Centre’s FAO/WB Cooperative Programme Service (TCIP) has been working on this exercise at FAO headquarters involving all major technical divisions and programme field staff.
38. The three-year programme logic focuses on five major components, namely (i) addressing agriculture-related needs of vulnerable groups (small-scale farmers, female-headed households, IDPs); (ii) improving farming systems and use of natural resources; (iii) rehabilitation of agriculture-related infrastructure; (iv) supporting agricultural services; and (v) improving programme planning, implementation and management. Its cost over the next three years has been estimated at approximately US$600 million.
39. The FAO Programme is funded by two distinct budgetary windows, corresponding to agreed allocations of oil revenues: the “13% account” and the “2.2% account”.
40. Under the 13% Account, FAO is allocated funds for the procurement of agricultural inputs and equipment for the Programme in the northern Governorates. Allocations made to FAO amount to US$657 505 291 and US$142 078 921 is in the pipeline (see Table 1).
41. Under the 2.2% Account, FAO has been allocated US$68 822 715 to cover administrative and operational costs related to observation activities in the centre and south and implementation activities in the north (see Table 2).
TABLE 1: 13% ACCOUNT
SCR 986 - FAO ASSISTANCE PROGRAMME FOR IRAQ
(as at 31 December 2002)
(Amounts expressed in US$)
Phase |
Confirmed |
Amount in |
Expenditure and Hard Commitments |
Rate of | |
I |
20 150 000 |
20 150 000 |
100.00 | ||
II |
26 000 000 |
26 000 000 |
100.00 | ||
III |
26 000 000 |
26 000 000 |
100.00 | ||
IV |
36 000 000 |
35 896 072 |
99.71 | ||
V |
58 900 000 |
58 682 538 |
99.63 | ||
VI |
124 000 000 |
99 562 226 |
80.29 | ||
VII |
187 141 500 |
124 081 733 |
66.30 | ||
VIII |
151 327 712 |
59 878 997 |
39.57 | ||
IX |
22 128 500 |
16 971 500 |
2 194 183 |
9.92 | |
X |
4 857 579 |
55 107 421 |
|||
XI |
1 000 000 |
29 000 000 |
|||
XII |
41 000 000 |
||||
TOTALS |
657 505 291 |
142 078 921 |
452 445 749 |
68.81 | |
TOTAL APPROVED: TOTAL PIPELINE: TOTAL APPROVED + PIPELINE: |
657 505 291 142 078 921 799 584 212 |
TABLE 2: 2.2% ACCOUNT
SCR 986 - FAO ASSISTANCE PROGRAMME FOR IRAQ
(as at 31 December 2002)
(Amounts expressed in US$)
Phase |
Total Budget
|
Expenditure and Hard Commitments |
Balance |
I to XII (1997-2002) |
68 822 715 |
68 058 061 |
764 654 |
Considerations on the note disclosure in the Organization’s financial statements concerning the FAO Credit Union and Commissary activities
1. FAO CREDIT UNION
1.1 The Credit Union is a form of co-operative for credit and savings formed by active FAO staff, set up in 1954 with the approval of the Director-General, with the objective of encouraging thrift among its members and providing credit for emergency needs and for the general benefit of those members. Towards 1975, it had appeared that the Credit Union, while having a substantial number of members and assets and operating with the approval of the Director-General, lacked appropriate legal status. A request was initiated by the Credit Union membership and supported by the Director-General for integration in the FAO, as other means of obtaining legal status had been considered, after investigation, impracticable. This allowed for clarification of the status of the staff employed by the Credit Union, created conditions for financial security and ways of obtaining collateral for loans, and, more generally, gave the Credit Union an appropriate legal status. It may be of interest to add that, subsequent to that, in 1984, a number of additional measures were taken. These included a reduction in the size of the Credit Union, through the elimination of some forms of deposits, of associated membership and of membership from other Rome-based agencies. All these changes have been reflected in the Statutes of the Credit Union and approved by the membership and subsequently by the Director-General.
1.2 The Credit Union is operated by a Board of Directors and a Credit Committee, elected from among the Members, under the authority of the Director-General. The Director-General has the right to order corrective action if he considers that the Credit Union is conducting its affairs in a manner that adversely affects the interests of the FAO and in the absence of such corrective action may appoint a liquidator to wind up the activities of the Credit Union.
1.3. The processes carried out in 1975 were carefully considered by the Finance Committee, at its Thirty-Fourth Session (Rome, 14-27 May 1975), by the Council, at its Sixty-Sixth Session (Rome, 9-20 June 1975) and by the Conference, at its Eighteenth Session (Rome, 8-27 November 1975).
1.4. The Finance Committee noted, in particular, that the “Statutes provided that the funds and assets of the Credit Union would be placed in a special account to be administered separately from all other funds and assets administered by the Organization. All costs incurred in the operation of the Credit Union and any financial liabilities, including bad debts and losses, arising out of its activities were chargeable to the Credit Union funds and assets”. At that time, the Finance Committee also requested further clarification on questions concerning legal liability and was assured “that the financial implications that might possibly arise as a result of the Credit Union’s legal personality being the same as that of FAO would devolve exclusively on the Credit Union”.
1.5. The Council, for its part, noted that “the Organization and its Member Nations were adequately safeguarded against any financial implication” arising from the integration of the Credit Union in the FAO. Finally, Conference Resolution 37/75 “(decided) that the Credit Union shall become an integral part of FAO provided that : (a) the Credit Union’s funds and net assets shall be placed in a special account to be administered separately from all other funds and assets administered by FAO; (b) all costs incurred in the operation of the Credit Union and any financial liabilities, including bad debts and losses, arising out of the Credit Union’s activities shall be chargeable to the Credit Union’s funds and assets”; (c) “the Statutes of the Credit Union contain provisions safeguarding the position of the Organization as set forth in the Annex to this Resolution”.
1.6. These principles, as well as those set out in the annex to the resolution, were duly incorporated in the Statutes of the Credit Union. In particular, Article II, Section 2, of the Statutes states that “all costs incurred in the operation of the Credit Union and any financial liabilities, including bad debts and losses, arising out of the Credit Union’s activities shall be chargeable to the Credit Union’s funds and assets” and members are made aware of this.
1.7. It is of the very essence of a co-operative such as the Credit Union that shareholders or members – who own the equity and not the FAO - should bear collectively, through the Credit Union’s funds and assets, any financial liabilities, including bad debts and losses, in line with the provisions of Conference Resolution 37/75 and the Statutes.
1.8. The equity of the Credit Union is the property of its members and not of the FAO. In view of the above functional requirements, the relationship with the FAO is largely aimed at providing the Credit Union with an appropriate legal status. In particular, the relationship does not extend to ownership of the Credit Union assets which are to be kept distinct and separate from those of the Organization. This relationship is best reported in the form of a disclosure note in the Organization’s financial statements, rather than by the consolidation of the Credit Union’s accounts within the audited accounts of the Organization.
2. FAO COMMISSARY
2.1. The operations and funds of the Commissary are, both conceptually and in practice, distinct from the operations and funds of the Organization.
2.2. These operations and funds are based, not on any right or any statutory objective or function of the Organization per se, but on a right of the individual officials of FAO, as defined by Article XIII, Section 27, of the Headquarters Agreement which recognizes that such officials enjoy “(j) the right to import, free of duty and other levies, prohibitions and restrictions on imports” and “(ii) through the medium of FAO, reasonable quantities, to be agreed upon in accordance with a procedure to be established between the Government and FAO, of foodstuffs and other articles for personal use and consumption and not for gift or sale”.
2.3 The Commissary is a pooling mechanism for the collective exercise of individual rights organized through “the medium of the FAO”, on a quasi-commercial basis. The main operating principles were adopted by the Governing Bodies of the FAO, including the Conference, through Conference Resolutions 69 of 1953, 29/71 and 18/93.
2.4 At the Seventy-fourth Session of the Finance Committee held in September 1992, it was recognised that the Commissary was a self-sufficient unit which was required to operate without cost to the Organization. To this effect, the Commissary maintains a Working Capital Fund (currently set at 13% of sales turnover and amounting to approximately Euro 1,470,000 as at 31 December 2002). In addition, the Commissary has created a reserve for the costs for staff terminal indemnities and fully accrues for known liabilities in accordance with generally accepted accounting principles applicable to commercial concerns. The FAO’s liability in this respect would therefore be limited to the responsibility for redeploying staff members if the Commissary were required to close down.
2.5 Conference Resolution 18/93 recognized that “over the past years the Commissary had obtained specific authorization to establish certain reserve accounts, which (were) reflected in the annual financial accounts” and that “in consideration of the commercial nature of the Commissary operations, it would be useful to grant Senior Management, in consultation with the Finance Committee, greater discretion over related decisions”. The Conference decided that:
2.6 Oversight of the Commissary operations is carried out by The Joint Commissary Committee with advisory functions. The annual accounts used to be submitted to the Finance Committee and discussed in some detail, and reported to the Council. However, there was no formal approval of the accounts, although any dissatisfaction expressed by the Finance Committee would have led to appropriate action.
2.7 In 1996 the External Auditor recommended that, in the future, the final accounts of the Commissary be formally adopted by a Governing Body of the Organization. While pointing out that the Commissary funds and accounts could not be equated to the accounts of the FAO, the Finance Committee submitted to Council a draft resolution for the adoption of the Conference which recommended that such accounts should be “submitted to and approved by the Finance Committee”. This proposal was eventually reflected in Conference Resolution 16/97 adopted on 17 November 1997.
2.8 Consequently, given the underlying principles and operating mechanisms of the Commissary, the size of its operations, which are closely interrelated to entitlements of individual staff members and not to a right or statutory obligation of the Organization, as well as the fact that the Commissary funds and accounts cannot be equated to the normal funds and accounts of the Organization, it is best to reflect the relationship between the FAO and the Commissary through a disclosure note in the financial statements of the Organization.
__________________________
1 Food and Agriculture Organization of the United Nations (FAO), United Nations Educational, Scientific and Cultural Organization (UNESCO), World Health Organization (WHO), International Telecommunication Union (ITU), United Nations Development Programme (UNDP), United Nations Children’s Fund (UNICEF), World Food Programme (WFP), United Nations Office for Project Services (UNOPS) and the United Nations Settlements Programme (UN-Habitat)