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Sixty-fourth session
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Item 127 of the preliminary list*
Proposed programme budget for the biennium 2010-2011
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???????????????? Internal oversight: proposed programme budget for the biennium 2010-2011
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???????????????????? Report of the Independent Audit Advisory Committee
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??? Summary |
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?????????? The present report reflects the comments, advice and recommendations of the Independent Audit Advisory Committee on the Office of Internal Oversight Services proposed programme budget for the biennium 2010-2011. |
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?????????? I.?? Introduction
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1.?????? The Independent Audit Advisory Committee has undertaken a review of the proposed programme budget for the Office of Internal Oversight Services (OIOS) for the biennium 2010-2011 in accordance with paragraph 2 (d) of its terms of reference (see resolution 61/275, annex). The Committee¡¯s responsibility in this respect is to review the budget proposal of OIOS, taking into account its workplan, and to make recommendations to the General Assembly through the Advisory Committee on Administrative and Budgetary Questions. The present report contains the Committee¡¯s comments, advice and recommendations relating to the OIOS proposed programme budget for the biennium 2010-2011 for consideration by the Advisory Committee on Administrative and Budgetary Questions and the General Assembly.
2.?????? The Programme Planning and Budget Division of the Department of Management provided the Committee with the internal oversight section of the proposed programme budget for the biennium 2010-2011 as well as relevant supplementary information. OIOS also provided supplementary information relating to its budget proposal, which the Committee took into consideration. At its sixth session, which was held from 13 to 15 April 2009, the Committee allocated a significant proportion of its agenda to discussions with OIOS, as well as the Controller, on the OIOS budget.
3.?????? The Committee would like to acknowledge the efforts of the Programme Planning and Budget Division in expediting the preparation of the internal oversight section of the budget for review by the Committee. The Committee also appreciates the cooperation and responsiveness on the part of OIOS in providing information for the preparation of the present report.
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????????? II.?? Review of the proposed programme budget for the Office of Internal Oversight Services for the biennium 2010-2011
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4.?????? The proposed programme budget for OIOS for the biennium 2010-2011 (regular budget) is estimated at $40,252,300 (before recosting), which is an increase of $2,769,600, or 7.4 per cent ($4,559,900, or 12.2 per cent after recosting), compared with the revised appropriation for the biennium 2008-2009. Comparison between the 2008-2009 and 2010-2011 bienniums in the present report uses values before recosting, which excludes estimated increases owing to inflation and currency fluctuations, in order to facilitate comparison of the base budget.
5.?????? Allocations to OIOS for the biennium 2010-2011, from both the regular budget and extrabudgetary funds combined, total $103,165,300 (before recosting) compared with $101,920,300 for 2008-2009, which is an increase of 1.2 per cent. The Committee noted that while the total budget had increased overall, the extrabudgetary component had decreased by 2.3 per cent from $64,437,600 for 2008-2009 to an estimated $62,913,000 for 2010-2011, reflecting the proposed decrease in the budget of OIOS under the support account for peacekeeping operations for 2009/10.
6.?????? The table below presents the regular budget appropriations for OIOS for the biennium 2008-2009 compared with the proposed programme budget for the biennium 2010-2011.
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Approved |
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Proposed |
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Variance (percentage) |
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2008-2009 |
2010-2011 |
2010-2011 (after recosting) |
2010-2011 |
2010-2011 (after recosting) |
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A.?? Executive direction and management |
2 321.9 |
2 441.1 |
2 571.1 |
5.1 |
10.7 |
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B.?? Programme of work |
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????? Subprogramme 1. Internal audit |
14 790.3 |
15 809.7 |
16 431.5 |
6.9 |
11.1 |
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????? Subprogramme 2. Inspection and evaluation |
7 933.5 |
7 795.0 |
8 206.9 |
(1.7) |
3.4 |
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Subprogramme 3. Investigations |
10 122.7 |
11 551.0 |
12 043.0 |
14.1 |
19.0 |
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C.?? Programme support costs |
2 314.3 |
2 655.5 |
2 790.2 |
14.7 |
20.6 |
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????? Total |
37 482.7 |
40 252.3 |
42 042.6 |
7.4 |
12.2 |
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Note: Budget figures were provided by the Programme Planning and Budget Division of the Department of Management.
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7.?????? The increase in the budget compared with the 2008-2009 biennium is primarily the result of the delayed impact of 27 posts (9 in internal audit, 16 in investigations and 2 under programme support) provided for in the 2008-2009 biennium, which were allocated at 50 per cent utilization and are now being budgeted for at full (100?per cent) utilization. With regard to the number of posts, OIOS has proposed an increase in established posts from 114 to 123 through the conversion of 9 posts (in subprogramme 2, Inspection and evaluation) that were funded as general temporary assistance positions in the previous biennium. In this respect, the Independent Audit Advisory Committee draws attention to its report regarding vacancies in OIOS (A/63/737) and reiterates that particular attention should be paid to filling vacant posts expeditiously.
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???????????? A.??? Executive direction and management
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8.?????? The proposed number of posts in the Office of the Under-Secretary-General for Internal Oversight Services for the biennium 2010-2011 remains unchanged at seven. The increase in the proposed programme budget is attributable to travel costs and a one-time cost for modifications to the OIOS recommendations monitoring system, known as Issue Track. The modifications are intended to provide management with access to the database in order to update the status of implementation. The Independent Audit Advisory Committee supports the changes that will facilitate improvements to the efficient and timely recording of the status of implementation of recommendations.
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???????????? B.??? Programme of work
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??????????????????????????? Subprogramme 1
Internal audit
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9.?????? The proposed programme budget for subprogramme 1, Internal audit for the 2010-2011 biennium, is $15,809,700 ($16,431,500 after recosting). That amount represents a growth of $1,019,400, or 6.9 per cent, compared with the appropriation of $14,790,300 for the previous biennium. The Committee notes that the post requirements for internal audit, however, have remained unchanged at 48, but that the funding requirement for posts has increased owing to the delayed impact resulting from the 9 new posts that were established in the biennium 2008-2009, which are now being budgeted for at full (100 per cent) utilization.
10.???? The Committee held extensive discussions with OIOS on their risk-based audit work planning process to ascertain how the internal audit workplan is taken into account in determining the level of resources required to deliver the programme of work. Using risk assessments to prioritize and allocate audit resources is a best practice which the Committee supported in its report on the budget for OIOS under the support account for peacekeeping operations for the period from 1 July 2008 to 30 June 2009 (A/62/814). According to the Institute of Internal Auditors¡¯ International Standards for the Professional Practice of Internal Auditing, the internal audit function must establish risk-based plans to determine the priorities of the internal audit activity, consistent with the organization¡¯s goals.
11.???? OIOS reported to the Committee that in the preparation of the internal audit risk-based workplan for 2010-2011, comprehensive risk assessments had been conducted in 51 departments/entities from July 2007 to September 2008 covering approximately 90 per cent of the OIOS audit universe. In response to the Committee¡¯s enquiry, OIOS confirmed, however, that their risk ranking is based on inherent risk only and does not take into consideration the effect of internal controls. Inherent risk, according to the widely accepted definition provided by the International Federation of Accountants, is the susceptibility of an account balance or class of transactions to material misstatement, either individually or when aggregated with misstatements in other balances or classes, irrespective of related internal controls. The Committee and OIOS agree that inherent risks will provide an overly conservative estimate of the level of risks in an organization, and while this approach may be acceptable for prioritizing the use of existing resources, it would not be appropriate or practical as a basis for proposing the total level of resource requirements. OIOS expects the proportion of high risks to reduce once the risk registers are updated to reflect residual risk, which is the level of risk remaining after the effect of internal controls and other risk mitigating activities.
12.???? The Committee established that the proposed programme budget for OIOS subprogramme 1, Internal audit, for the biennium 2010-2011 uses the subprogramme¡¯s appropriation for the 2008-2009 biennium as a baseline. The OIOS internal audit workplan was subsequently prioritized to cover risks that could be addressed within the given level of resources. The Committee also noted that the OIOS budget submission for subprogramme 1, Internal audit, did not include justification for resource requirements using risk assessments and the workplan prioritization as a base. It appears to the Independent Audit Advisory Committee that the previous budget determined the extent of coverage in the internal audit workplan rather than the workplan determining the level of resources required in the budget. The Committee therefore makes no comment on the proposed programme budget for OIOS subprogramme 1, Internal audit, for the 2010?2011 biennium.
13.???? The Committee recognizes that compilation of risk information is time-consuming and intensive and that OIOS is currently at the beginning stages of this process. It is apparent, therefore, to the Committee, that OIOS is not yet in a position to present a budget based on the Organization¡¯s residual risk. In order to move from an incremental budget process to a fully risk-based process in time for the next biennial budget, the Independent Audit Advisory Committee recommends that OIOS design and implement a plan to complete its risk analysis, taking into account its view on the effect of controls that management has put in place to mitigate risks.
14.???? Notwithstanding that the current workplan is not yet a reliable determinant for internal audit resource requirements, the Committee accepted the assurance of OIOS that the prioritization in the audit workplan would address the highest risks in the Organization. Based on its workplan, OIOS proposes to produce up to 400 audit reports for programme managers during the biennium. The Independent Audit Advisory Committee recognizes the level of productivity with respect to the number of internal audit outputs and reiterates its recommendation (see A/63/703) that OIOS show the value of the services delivered to the Organization by reporting on the achievement of results.
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??????????????????????????? Subprogramme 2
Inspection and evaluation
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15.???? The proposed programme budget for the inspection and evaluation subprogramme amounts to $7,795,000 (before recosting), representing a net reduction of $138,500 compared with the 2008-2009 biennium. The net increase in the number of established posts from 16 to 25 reflects the proposed conversion of 9?general temporary assistance positions to established posts. The effect on the budget for inspection and evaluation is a decrease of $1,480,200 in requirements under general temporary assistance, which is offset by an increase of $1,341,700 in post costs.
16.???? In the view of OIOS, an eight-year cycle of programme evaluation covering all 27 programmes is necessary to provide the Secretary-General and the General Assembly with comprehensive programme-level evaluations on each of the programmes within a reasonable time frame. OIOS also explained to the Committee that all the high and upper range of medium-risk programmes would be covered by the evaluation workplan in the next four years. In addition, all programmes will be subject to an inspection of their monitoring and evaluation systems in the same four?year cycle. This will provide assurance that the programme¡¯s performance and self-evaluation reports are adequate and credible.
17.???? OIOS has agreed to assess the feasibility of the Committee¡¯s suggestion that consideration be given to adopting a risk-assessment approach at the subprogramme level, as opposed to the current one, which is at the programme level. Through that approach, OIOS could make more effective use of its evaluation resources by identifying subprogrammes that are at risk of not achieving mandates and evaluate those high-risk subprogrammes on a higher priority than the OIOS programme-level evaluation cycle might dictate. The Independent Audit Advisory Committee recommends the approval of the proposed programme budget for subprogramme 2, Inspection and evaluation, on the basis of the workplan. The Committee further recommends that OIOS review the 2010-2011 inspection and evaluation workplan to include high-risk subprogrammes of entities that are not planned as full programme evaluations.
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??????????????????????????? Subprogramme 3
Investigations
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18.???? The proposed programme budget of OIOS for the biennium 2010-2011 for subprogramme 3, Investigations, amounts to $11,551,000, representing a net increase of $1,428,300 (before recosting) compared with the 2008-2009 biennium. While the number of posts requested remains unchanged at 35, the costs associated with those posts have increased, reflecting the delayed impact of 16 posts established during the biennium 2008-2009, which are provided for at 100 per cent utilization for the biennium 2010-2011.
19.???? According to OIOS, the workplan for investigations is defined in large part by the need to strengthen the investigations function while maintaining the current level of productivity without any material increase in staff resources. The investigations workplan comprises three parts, namely, the investigations case load (which is largely demand driven), internal projects to strengthen the investigations function, and management and administrative tasks. According to information provided by OIOS, the number of cases submitted for investigation averages approximately 200 per year, and the total case load as at the end of February 2009 comprised 399 cases, 64 per cent of which had been categorized as related to either personnel (staff misconduct issues) or procurement. The Independent Audit Advisory Committee acknowledges the reactive nature of the investigations function but still believes that OIOS should be able to prepare a workplan based on its existing case load, planned projects and an estimate of cases that will be taken in. In its report (A/63/703), the Committee made a recommendation that OIOS prepare a schedule of investigation cases and staff resources in the form of a workplan. Admittedly, preparation of the proposed programme budget of OIOS preceded the Committee¡¯s recommendation.
20.???? OIOS submits that the investigations function will maintain the productivity achieved in the previous biennium and therefore proposes a budget for the subprogramme with no material increase. Given that the proposed programme budget for investigations for 2010-2011 is based on the revised appropriations provided for 2008-2009 rather than on the Investigations workplan, the Independent Audit Advisory Committee makes no comment on the level of the budget.
21.???? Included in the budget is the proposal to redeploy seven posts within the investigations subprogramme as part of the organizational restructure to strengthen the investigations function. OIOS justified the redeployment of investigations staff as facilitating its effort to effectively deal with the remaining caseload of the Procurement Task Force, which was transferred to the Investigations Division at the beginning of 2009. OIOS reported that the absorption of the Procurement Task Force cases is progressing well and according to plan. In principle, as stated in its reports A/62/814, A/62/814/Add.1 and A/63/703, the Independent Audit Advisory Committee supports the restructure proposed by OIOS.
???????????? C.??? Programme support
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22.???? The proposed budget for programme support costs for 2010-2011 amounts to $2,655,500. That amount represents a net increase of $341,200 compared with the 2008-2009 biennium. The number of posts remains unchanged at eight. The increase in costs under posts reflects the delayed impact of two new posts that were established during 2008-2009, which are provided for at 100 per cent utilization for the biennium 2010-2011. The increase in non-post resources is attributable mainly to the increased cost of the information technology service-level agreement, which is a standard cost for information technology services provided by the Office of Information and Communications Technology.
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??????? III.?? Conclusion
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23.???? The members of the Independent Audit Advisory Committee respectfully present the present report containing its comments and recommendations for consideration by the General Assembly.
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(Signed) David M. Walker
Chairman, Independent Audit Advisory Committee
(Signed) Vijayendra N. Kaul
Vice-Chairman, Independent Audit Advisory Committee
(Signed) Vadim V. Dubinkin
Member, Independent Audit Advisory Committee
(Signed) John F. S. Muwanga
Member, Independent Audit Advisory Committee
(Signed) Adrian P. Strachan
Member, Independent Audit Advisory Committee
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