From WikiLeaks

Release date

January 12, 2009

United Nations Office of Internal Oversight Services (UN OIOS) 15 Mar 2007 report titled "Audit of Property Management [AE2006-321-01]" relating to the Office at Vienna. The report runs to 6 printed pages.

File | Torrent | Magnet

Context

International organization

United Nations Office of Internal Oversight Services

Simple text version follows

                   UNITED NATIONS                       NATIONS UNIES

                            Office of Internal Oversight Services
                                   Internal Audit Division

                                       MEMORANDUM


  REF:   AUD/1729/06                                                     15 March 2007

  TO:                Mr. Antonio Maria Costa
                     Director-General
                     United Nations Office at Vienna, and
                     Executive Director
                     United Nations Office on Drugs and Crime

  FROM:              Corazon C. Chavez, Officer-in-Charge
                     Internal Audit Division, Geneva and Nairobi
                     Office of Internal Oversight Services

  SUBJECT:           OIOS Audit of Property Management at UNOV (AE2006/321/01)



1.    I am pleased to submit the Final Audit Memorandum Report on the audit of Property
Management at the United Nations Office in Vienna (UNOV)/ (AE2006/321/01), which was
conducted in November 2006 in Vienna by Ms. Gloria Irvin and Ms. Evgenia Atanasova.

2.      The main audit results were discussed with the Chief of General Support Section
during the Exit Conference held on 10 November 2006. A draft of the report was shared with
the Deputy Director-General of UNOV on 23 February 2007, whose comments which were
received on 8 March 2007, are reflected in this final report.

3.      I am pleased to note that UNOV has accepted the audit recommendations contained in
the final report. I would appreciate if you could provide me with an update on the status of
implementation of the audit recommendations not later than 31 May 2007. This will facilitate
the preparation of the twice-yearly report to the Secretary-General on the implementation of
recommendations, required by General Assembly resolution 48/218B. In accordance with
General Assembly resolution A/RES/59/272, the Secretary-General should ensure that the final
audit report in its original version is, upon request, made available to any Member State who
may make it public.

4.      Please note that OIOS is assessing the overall quality of its audit process. I therefore
kindly request that you consult with your managers who dealt directly with the auditors,
complete the attached client satisfaction survey form and return it to me under confidential
cover. Thank you for your cooperation.


-----------------------------------------------------------------------------------------

                                        I.     INTRODUCTION

5.      The Office of Internal Oversight Services (OIOS) conducted an audit of Property
Management at the United Nations Office in Vienna (UNOV) in November 2006. The audit
was conducted in accordance with the International Standards for the Professional Practice of
Internal Auditing.

6.     The Division of Management has responsibility for property management at both the
United Nations Office at Vienna (UNOV) and the United Nations Office on Drugs and Crime
(UNODC), and is headed by the same Director who serves as Deputy Director-General of
UNOV. Within the Division of Management, the General Support Section is designated to
provide oversight of the property management function, and the Commercial Operations Unit
(COU) is responsible for the day-to-day property management operations for several United
Nations Funds and Programmes in the Vienna International Centre, except for the Office for
Outer Space Affairs (OOSA) and UN specialized agencies.

7.     The COU is responsible for all aspects of inventory control to include maintaining the
property management database, submitting financial information to the Division of
Management, UNODC, for inclusion in the financial statements, and conducting physical
inventory. For UNODC field offices, oversight for property management falls under the Fund
Budget Unit.

8.      Property is categorized as either expendable or non-expendable. As of 31 October
2006, the total value of property in the UNOV/UNODC inventory system was $20.9 million1.
Property with individual acquisition cost of at least $1,500 is classified as non-expendable
and is reported in the Notes to the financial statements of the United Nations. For financial
statement purposes, the value of non-expendable property was $10.5 million as of 31
December 2005. In 2006, UNOV/UNODC wrote off property valued at some $588,000 and
acquired non-expendable property valued at $2.5 million.


                                      II.      AUDIT OBJECTIVES

9.     The audit objective was to determine if there were adequate controls over property
management, including their proper accounting, tracking, monitoring and safeguarding in
accordance with United Nations policies and procedures. Specifically, the audit determined
if:

    �    UNOV/UNODC had adequate controls over its inventory, and if those controls were
         functioning as intended;
    �    UNOV/UNODC conducted periodic physical inventory in accordance with prescribed
         policies and procedures; and
    �    UNOV/UNODC had adequate procedures for the write-off, sale, or disposal of
         property as well as procedures for lost, stolen or damaged items.




1 This amount includes inventory of clients.


-----------------------------------------------------------------------------------------

                                              2


                   III.   AUDIT SCOPE AND METHODOLOGY

10.     The audit consisted of a preliminary audit of UNOV/UNODC property management.
OIOS auditors obtained an overview and conducted a walk-through of each aspect of property
management, sampled data, assessed the reliability of data contained in the automated system
for property management, and determined if adequate controls were in place to provide
reasonable assurance that assets were safeguarded. OIOS auditors reviewed UNOV/UNODC
records, supporting documentation, and files for calendar years 2005 through October 2006.
As a result of the preliminary audit, OIOS did not believe it was necessary to conduct a more
in depth audit of UNOV/UNODC property management.

11.     OIOS auditors reviewed existing policies and procedures, reports generated from the
automated property management systems for Vienna, and to a limited degree, for the UNODC
field offices. The auditors conducted discussions with staff from Commercial Operations
Unit, the receiving department, and members of the Property Survey Board. In addition, the
auditors reviewed other property management reports, minutes of the Property Survey Board,
and discussed the UNOV/UNODC insurance policy and coverage. The auditors compared the
UNOV/UNODC property management policies and procedures with those established at
United Nations Headquarters in New York. The auditors also conducted a limited review of
the procedures for property management at UNODC field activities. The audit did not include
an assessment of the automated system.


               IV. AUDIT FINDINGS AND RECOMMENDATIONS

Overall Assessment

12.    Overall, OIOS found that controls over property management at UNOV/UNODC were
adequate, and UNOV/UNODC could provide reasonable assurance that property was
safeguarded. However, the following areas needed improvement and are further discussed in
the succeeding sections of this report:

           UNOV/UNODC needs to update the property management policy 9151T dated
           1994 to reflect pertinent changes in regards to ST/AI/2003/5 and Property
           Management Manual. Although property controls are tight to ensure that
           properties are safeguarded and their records are properly maintained, they do not
           provide enough assurance for proper accountability by responsible offices and
           divisions.

           UNOV/UNODC needs to conduct physical inventory in accordance with United
           Nations policy.

Delegation of Authority to Departments and Offices

13.     According to ST/AI/2003/5, each head of department or office shall designate a
Property Records Custodian (PRC) as the focal point. The designation of PRCs was also
cited in the A/57/5 Board of Auditors report dated 3 July 2002. At the time of our review,


                                                                                               2


-----------------------------------------------------------------------------------------

                                               3

UNOV did not have PRCs, instead, the responsibility for property management and inventory
had been given to the Commercial Operations Unit (COU).

14.     Two COU staff members shared the bulk of responsibility for property management at
UNOV/UNODC. This included all aspects of property management ranging from entering
new property into the automated property management database, deleting property from the
database, conducting inventory, to preparing and signing forms for lost, stolen, damaged, or
loaned property, preparing property for disposal, and entering this information into the
database. The COU also prepared reports for submission to the Financial Resources
Management Service for inclusion in UNOV/UNODC biannual financial statements, as well
as prepared reports for the Property Survey Board (PSB), and executed the recommendations
of the PSB.

15.     While the auditors found that overall property management at UNOV/UNODC was
adequate, concentration of the controls of the property management functions solely on the
two COU staff did not provide for appropriate segregation of duties or responsibilities. For
example, if an employee borrowed equipment the property staff entered the information
directly into the SYBASE inventory control database, but the employee was not required to
sign, or complete form "Requisition for Furniture and Fixtures" as stated in the Manual. If
property is lost or damaged, the responsible office or employee notifies the property office,
and the property office staff completes and signs the form "Case Report Recommendation
Form," not the individual responsible for the loss. According to our discussions, other than
IT personnel for technical support, no one else had access to the automated system, property
reports were not provided to offices or Division management for review, and employees were
not required to sign or complete forms. This practice did not allow sharing of accountability
and responsibility for property management with responsible offices and staff, and put the two
employees in a precarious situation.

16.     In case of disagreement, there is no supporting documentation to determine if
procedures were followed in case of discrepancies in the automated system. In one instance,
an employee borrowed night vision goggles/binoculars and two searchlights. According to
records, the employee returned the items sometime in May 2001; however, the automated
records still showed that the night vision goggles were not returned. An investigation was
conducted and the property staff stated that the employee returned the other items, but not the
night vision goggles. The staff members stated that all the equipment was returned at the
same time in May 2001. Because of the lack of a completed and signed form "Requisition
for Furniture and Fixtures," the issue was never resolved. After many months of waiting for
the matter to be resolved, the Human Resource Management Section processed the staff
member's form for retirement without collecting funds for the lost equipment, because it was
never determined who was at fault. If the staff had been required to complete and sign the
form "Requisition for Furniture and Fixtures" when borrowing and returning the equipment,
and then signed by the property staff, it is likely that the issue could have been resolved, and
funds collected if the goggles were not returned.

17.     OIOS believes that UNOV/UNODC should update the policy to reflect current
procedures, and put those procedures into practice particularly for the completion of forms by
the responsible office/division. This will protect both the property staff, and UNOV/UNODC


-----------------------------------------------------------------------------------------

                                               4

employees, and will also place some of the responsibility for property management on the
divisions and offices.

Property Records Custodians

18.   ST/AI/2003/5 on for property management, quoted below, requires that Property
Records Custodians (PRC) be assigned.

       "Each head of department or office shall designate a Property Records
       Custodian as the focal point for the Facilities Management Division. The
       Property Records Custodian shall be responsible for keeping records of all
       property assigned to his or her department or area of responsibility."

19.    UNOV/UNODC has not instituted this practice and has not assigned PRCs. We
believe that if UNODC/UNOV institutes this practice to some degree, the assignment of
PRCs will ensure segregations of duties, and share accountability and responsibility for
property management with offices and staff.

  Recommendations:

       The Director, Division of Management should ensure UNOV/UNODC
       update its property management policy to reflect current policies and
       procedures as stated in ST/AI/2003/5, to include provisions for the
       completion and signing of the appropriate property forms by staff, office
       heads, and property managers (Rec. 01).

       The Director, Division of Management should designate an appropriate
       number of Property Records Custodians, as stated in ST/AI/2003/5 (Rec.
       02).

       UNOV/UNODC accepted both recommendations and stated that they are
       updating their property management policy and that they are in the
       process of appointing additional custodians. Estimated target date for
       implementation is May 2007. OIOS will record the recommendations as
       implemented upon receipt of a copy of the updated property management
       policy and a list of the additional property custodians.

Physical Inventory

20.     UNOV/UNODC had not conducted a physical inventory in over five years. Instead,
there has been an effort to conduct it since November 2004 and a plan to continue it through
August 2007. As offices move from one floor for asbestos removal and back, inventory is
conducted and records updated. United Nations policy requires that entities conduct physical
inventory once every two years, and prescribes the use of bar coding and scanning to facilitate
physical inventory. During the asbestos removal project, UNOV/UNODC was still
conducting inventory manually. In our discussions with an UNOV/UNODC official, it was
stated that the bar code system and scanner was tested, but there were too many problems
such as software incompatibility issues and reconciliation problems between the scanning


-----------------------------------------------------------------------------------------

                                               5

system and the automated property record system. As a result, UNOV/UNODC discontinued
the use of the bar coding and scanning to conduct physical inventory.

21.     During the exit conference the Chief of General Support Section raised concerns about
the requirement to conduct a 100 percent physical inventory, and in a draft revision of the
property management guidelines dated January 2005, proposed that, "physical counting of
property items shall take place when received and disposed..." However, the draft was never
finalized. To some degree, OIOS also ponders the necessity to conduct a 100 percent physical
inventory every two years and the possibility of biannual inventory sampling, i.e., high dollar
items, attractive items, or 10 percent inventory within certain dollar ranges, etc... In today's
environment, the type and amount of equipment has changed to include high tech equipment,
attractive items, and security related items, that the need to count a very large number of
items, or low risk items may be too time consuming given resource constraints. On the other
hand, however, if the bar codes and scanner system were used to conduct physical inventory,
it would minimize resource demands. The designated PRCs would also assist with physical
inventories.

      Recommendation:

            The Director, Division of Management, should require and ensure that
      physical inventory is conducted biannually in accordance with
      ST/AI/2003/5; explore the use of bar coding and rectify the past problems
      with the scanning equipment in order to facilitate conducting physical
      inventory; and consider alternative approaches to enable a comprehensive
      physical inventory such as phased inventory taking, inventory sampling, etc
      (Rec. 03).

      UNOV/UNODC accepted the recommendation and stated that they are
      reviewing their inventory management policy. Estimated target date for
      implementation is May 2007. OIOS will record the recommendation as
      implemented upon receipt of the result of the UNOV/UNODC review of
      their inventory management policy or an updated policy on physical
      inventory taking.



Attachment: Client Satisfaction Survey Form

cc:    Mr. F. Baumann, Deputy Director-General, UNOV (by e-mail)
       Mr. C. Kirkcaldy, Audit Focal Point, UNOV/UNODC (by e-mail)
       Mr. J. Childerley, Chief, Oversight Support Unit, Department of Management, United
       Nations (by e-mail)
       Mr. S. Goolsarran, Executive Secretary, United Nations Board of Auditors (by e-mail)
       Mr. R. Bellin, BOA, France (by e-mail)
       Mr. M. Tapio, Programme Officer, OUSG, OIOS (by e-mail)
       Ms. G. Irvin, Auditor-in-Charge, IAD, OIOS (by e-mail)
       Mr. J. Boit, Auditing Clerk, IAD, OIOS (by e-mail)


-----------------------------------------------------------------------------------------