by Claus Andreasen
The internal audit functions within the UN organizations underwent a noticeable development in the first ten years after the turn of the century. The “Oil-for-Food scandal” marked a turning point for the development of oversight within the UN. It resulted in better-resourced and -qualified internal audit and investigation functions and ensured more independence from management.
The Independent Inquiry Committee (Paul Volcker Committee) was formed in 2004 to investigate alleged corruption and fraud in the United Nations Oil-for-Food Programme in Iraq. In its report, the committee pointed towards deep flaws in the UN oversight of the Programme. This triggered several management reform initiatives within the UN, including reforms for ethical conduct; strengthening internal oversight and accountability; reviewing budgetary, financial, and human resources policies; and reviewing mandates. A general call for more accountability and transparency of public spending and activities in countries with big public sectors had already resulted in improved oversight in several members states in the 1980s and 1990s. However, similar advances had not yet been seen in the UN system organizations, but the Oil-for-Food scandal changed this.
In UNICEF, the Internal Audit Office (OIA) in 2000 was reasonably well resourced in terms of number of professional staff to meet its mandate. The office was well resourced to do financial audits of the many country offices, and most audits covered all main activities and functions at a typical country office. The focus was on the financial aspects and related controls, but interestingly, several audits also covered programme management aspects. This part of the audit programme had been developed by Steve Adkisson, who brought strong programme management skills to OIA. Steve was OIA’s deputy director from 2000 - 2005. The audit approach was risk-based and the audit system-based, which means that the audits’ main purpose was to identify risks to the achievement of the objectives of the country office workplans and programmes. The audits pointed to systemic issues within management practices and would suggest improvements in systems, procedures, and controls to mitigate or eliminate risks. As such, the internal audit function was quite well developed and probably ahead of comparable UN organizations. Whereas the audit coverage of country offices was reasonably developed, this was not quite the case for central and transversal entities and systems, but some such audits did take place.
In 2002, together with most internal audit functions within the UN, UNICEF decided to follow the Institute of Internal Audit’s (IIA) definition of internal audit and perform work according to the IIA principles and standards. According to the IIA latest and updated definition, the internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes .
This was an important decision that in the long run would ensure better coverage and quality of the evaluation of the effectiveness of the organization’s risk management, control and governance processes. To ensure that audit work was performed in accordance with the IIA principles and standards, OIA would have to submit itself to an independent external quality assurance review at regular intervals.
Another important development in this period was the establishment of an audit committee consisting entirely of external experts. Prior to this, UNICEF had an audit committee with internal members only apart from a short period where there was also an external member. The situation was not unlike that in most other UN organizations. However, the concept of an audit committee in accordance with international best practice was established from around 2005 throughout the UN system. The audit committee, nowadays often called oversight committee, is advisory and contributes to the strengthening of an organization’s governance, accountability, transparency and assists the Executive Director and Executive Board in their oversight responsibility. It provides advice on governance, risk management, and internal control practices, on the operation of external audit, internal audit, and investigation. In UNICEF, the committee supported improvements and development of the internal audit and investigations functions. Thus, in the second half of the decade, the investigation function was established with three professional investigators working according to professional standards and investigating misconduct and harassment cases. This was a major step forward. Prior to this, cases were either not reported or not properly investigated. During the same period, the UNICEF Ethics Officer function was establish which helped raising awareness about reporting misconduct and harassment cases.
Alongside this positive development, the OIA saw a considerable increase in its budget allowing for an improved audit capacity, particularly for doing more efficiency and effectiveness audits at Headquarters, such as IT and procurement audits. The audit of programme management in country offices was enhanced considerably and included all main management practices and risks to the achievement of programme objectives. OIA benefitted greatly from the programme management expertise of its deputy director Detlef Palm (2005- 2009) who brought strong theoretical and practical skills in this area, and Steve Adkisson who during a special assignment develop the methodology for programme assessments. Both were instrumental in developing OIA’s strategy and UNICEF was probably ahead of other Funds and Programmes in emphasizing programme management audits. However, despite their great potential for adding value, such audits were not that well received by country offices who preferred traditional audits that focused on operations such as finance, procurement, IT, or human resource management. Possibly, senior staff in bigger country offices considered programme management to be solely their area of expertise.
The increase in OIA’s budget did not come easily. During the financial crisis, in 2008, where most funds and programmes experienced cuts in their contributions. Especially the budgets of operations or administration, which many considered OIA to be part of, were typically reduced. OIA followed the ordinary budget process for HQ divisions, and OIA’s request for additional resources for its audit strategy did not meet the approval of the budget committee. However, Executive Director Ann Veneman overruled the budget committee’s decision at the final budget review and approved OIA’s budget request. This enabled OIA to establish a professional investigation function and a considerably upgraded efficiency and effectiveness audit.
Claus Andreasen was the Director of the UNICEF Office of Internal Audit and Investigations, from 2000 to 2010.
The Independent Inquiry Committee (Paul Volcker Committee) was formed in 2004 to investigate alleged corruption and fraud in the United Nations Oil-for-Food Programme in Iraq. In its report, the committee pointed towards deep flaws in the UN oversight of the Programme. This triggered several management reform initiatives within the UN, including reforms for ethical conduct; strengthening internal oversight and accountability; reviewing budgetary, financial, and human resources policies; and reviewing mandates. A general call for more accountability and transparency of public spending and activities in countries with big public sectors had already resulted in improved oversight in several members states in the 1980s and 1990s. However, similar advances had not yet been seen in the UN system organizations, but the Oil-for-Food scandal changed this.
In UNICEF, the Internal Audit Office (OIA) in 2000 was reasonably well resourced in terms of number of professional staff to meet its mandate. The office was well resourced to do financial audits of the many country offices, and most audits covered all main activities and functions at a typical country office. The focus was on the financial aspects and related controls, but interestingly, several audits also covered programme management aspects. This part of the audit programme had been developed by Steve Adkisson, who brought strong programme management skills to OIA. Steve was OIA’s deputy director from 2000 - 2005. The audit approach was risk-based and the audit system-based, which means that the audits’ main purpose was to identify risks to the achievement of the objectives of the country office workplans and programmes. The audits pointed to systemic issues within management practices and would suggest improvements in systems, procedures, and controls to mitigate or eliminate risks. As such, the internal audit function was quite well developed and probably ahead of comparable UN organizations. Whereas the audit coverage of country offices was reasonably developed, this was not quite the case for central and transversal entities and systems, but some such audits did take place.
In 2002, together with most internal audit functions within the UN, UNICEF decided to follow the Institute of Internal Audit’s (IIA) definition of internal audit and perform work according to the IIA principles and standards. According to the IIA latest and updated definition, the internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes .
This was an important decision that in the long run would ensure better coverage and quality of the evaluation of the effectiveness of the organization’s risk management, control and governance processes. To ensure that audit work was performed in accordance with the IIA principles and standards, OIA would have to submit itself to an independent external quality assurance review at regular intervals.
Another important development in this period was the establishment of an audit committee consisting entirely of external experts. Prior to this, UNICEF had an audit committee with internal members only apart from a short period where there was also an external member. The situation was not unlike that in most other UN organizations. However, the concept of an audit committee in accordance with international best practice was established from around 2005 throughout the UN system. The audit committee, nowadays often called oversight committee, is advisory and contributes to the strengthening of an organization’s governance, accountability, transparency and assists the Executive Director and Executive Board in their oversight responsibility. It provides advice on governance, risk management, and internal control practices, on the operation of external audit, internal audit, and investigation. In UNICEF, the committee supported improvements and development of the internal audit and investigations functions. Thus, in the second half of the decade, the investigation function was established with three professional investigators working according to professional standards and investigating misconduct and harassment cases. This was a major step forward. Prior to this, cases were either not reported or not properly investigated. During the same period, the UNICEF Ethics Officer function was establish which helped raising awareness about reporting misconduct and harassment cases.
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| The OIA team, 2008 |
Alongside this positive development, the OIA saw a considerable increase in its budget allowing for an improved audit capacity, particularly for doing more efficiency and effectiveness audits at Headquarters, such as IT and procurement audits. The audit of programme management in country offices was enhanced considerably and included all main management practices and risks to the achievement of programme objectives. OIA benefitted greatly from the programme management expertise of its deputy director Detlef Palm (2005- 2009) who brought strong theoretical and practical skills in this area, and Steve Adkisson who during a special assignment develop the methodology for programme assessments. Both were instrumental in developing OIA’s strategy and UNICEF was probably ahead of other Funds and Programmes in emphasizing programme management audits. However, despite their great potential for adding value, such audits were not that well received by country offices who preferred traditional audits that focused on operations such as finance, procurement, IT, or human resource management. Possibly, senior staff in bigger country offices considered programme management to be solely their area of expertise.
The increase in OIA’s budget did not come easily. During the financial crisis, in 2008, where most funds and programmes experienced cuts in their contributions. Especially the budgets of operations or administration, which many considered OIA to be part of, were typically reduced. OIA followed the ordinary budget process for HQ divisions, and OIA’s request for additional resources for its audit strategy did not meet the approval of the budget committee. However, Executive Director Ann Veneman overruled the budget committee’s decision at the final budget review and approved OIA’s budget request. This enabled OIA to establish a professional investigation function and a considerably upgraded efficiency and effectiveness audit.
Claus Andreasen was the Director of the UNICEF Office of Internal Audit and Investigations, from 2000 to 2010.
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