INTERNAL AUDIT REPORT

Transcription

1 INTERNAL AUDIT REPORT OF COTE D IVOIRE OPERATIONAL HUB (CIOH) AT ABIDJAN, COTE D IVOIRE AND DAKAR, SENEGAL Final Audit Report No. IAIG/4004 Issue Date: 14 July 2014

2 Contents I. Executive summary... 2 II. Audit report Audit objectives and scope Background of the Office... 4 III. Detailed assessment Strategic management and leadership Project Management Procurement and supply chain Human resources Finance Annex 1. Definitions of audit terms ratings and priorities Annex 2. Glossary Audit report no. IAIG/4004: Côte d Ivoire Operational Hub (CIOH) 1

3 Report on the internal audit of the Côte d Ivoire Operational Hub (CIOH) I. Executive summary Introduction As part of its annual work plan for 2014, the Internal Audit and Investigations Group (IAIG) conducted an audit of the Côte d Ivoire Operational Hub (CIOH) in Abidjan, Côte d Ivoire, and in Dakar, Senegal. The audit was carried out in accordance with the International Standards for the Professional Practice of Internal Auditing. These standards require that IAIG plans and performs the audit to obtain reasonable assurance on the adequacy and effectiveness of governance, risk management, and control processes. Audit rating In IAIG s opinion, the overall level of internal control over CIOH activities is Partially Satisfactory. 1 This opinion is based on limited scope audit procedures which were performed on a sample basis. During the audit, no material issues have come to IAIG s attention which would indicate that a different rating is more appropriate. Key audit issues and recommendations The audit report contains 14 recommendations, eight of which are high priority and the remaining six of which are medium priority. The high priority recommendations include: Function Strategic management and leadership Audit recommendation In consultation with the Regional Office, the Director, CIOH, should: a) Implement critical measures to improve the financial health of the Operational Hub by capturing available opportunities; b) Develop a comprehensive business strategy and detailed implementation plan taking into consideration the profiles and priorities of the countries and donors; c) Prepare a business diversification plan to lessen dependence on a small number of sectors and donors. The Director, CIOH, should prepare a terms of reference for the Côte d Ivoire Operational Hub, reiterating its scope and jurisdiction as per Organizational Directive 15 (addendum 2), defining the objectives, functions and functional titles, organizational structure, reporting lines, communication protocol, accountability framework and coordination mechanisms. The Director, AFO, in collaboration with the Director, CIOH, should review the current structure and responsibilities of CIOH with a view to assessing the adequacy and relevance of its resource allocation. 1 See definitions in Annex 1 Audit report no. IAIG/4004: Côte d Ivoire Operational Hub (CIOH) 2

4 B INTERNAL AUDIT AND INVESTIGATIONS GROUP Function Audit recommendation The Director, AFO, should analyze advantages and weaknesses of the Côte d Ivoire and Senegal sub-offices to decide in which country CIOH will be based. The Director, CIOH, should put in place a strong oversight system by: a) Drafting clear and concise Standard Operating Procedures for main activities; b) Developing an oversight system of the field activities; c) Considering filling the key positions; d) Reviewing all TORs of CIOH personnel and ensuring consistency with their current tasks and titles; e) Updating the organigram complete with clear reporting lines; and f) Ensuring positions in the organigram reflect the job descriptions in the TORs of personnel. Procurement and supply chain Human Resources Finance The Director, CIOH, should ensure that: a) Approval of the composition of all Bid Evaluation Committees should be appropriately accorded by the procurement authority and recorded on file; b) The chair of a Bid Evaluation Committee should have a minimum of five years of procurement experience; c) Bid Evaluation Committees should consist of at least three members; and d) When client representatives are appointed as members of an evaluation team, the majority vote is with UNOPS personnel. The Director, CIOH, should ensure that there is strict compliance with delegation of authority procedures in all recruitment cases. The Director, CIOH, should conduct a full review of VAT paid and not yet refunded and initiate the process for reimbursement. The Director, AFO Region, should: a) Ensure that every OH/OC/PC under AFO jurisdiction conducts a full review of VAT paid and not yet refunded and initiates a process for reimbursement; b) Use a monitoring system to ensure that VAT is refunded within the fiscal year. The Director, CIOH, should review and correct the TORs of finance personnel where there is a conflicting role or a lack of segregation of duties. The Director, FPG, should ensure that, when granting bank signatory rights, they are within the scope of the TOR of the person concerned. The medium priority recommendations include actions required to: strengthen the engagement acceptance process by following strictly the pricing policy and ensuring consistency between the lead system and the Implementation Analysis Note; ensure that risk increment is charged to the projects to protect UNOPS from potential revenue losses and that any deviations from the system-generated risk estimate are fully documented, and that risk logs are maintained and updated regularly for all projects; ensure that declarations of Conflict of Interest are signed by all Bid Evaluation Committee members and filed appropriately; ensure that the proper procurement process is followed in all requests for quotations; strengthen the process followed when recruiting by desk review as per UNOPS instructions; and apply properly the guidelines on locally managed direct costs, and record all direct support costs through the LMDC project. Audit report no. IAIG/4004: Côte d Ivoire Operational Hub (CIOH) 3

5 II. Audit report Audit objectives and scope The audit objectives were to determine whether the governance, risk management and control processes over the Office s operations provide reasonable assurance to the Executive Director that: a) Significant objectives will be achieved in all projects, programmes, plans and businesses; b) Resources are used economically and efficiently; c) Financial, managerial and operating information is accurate, reliable, relevant and timely; d) Activities and transactions comply with policies and procedures and the relevant agreements and contracts; and e) Assets are safeguarded. The audit was completed as per the approved planning memorandum and taking into account the findings of the risk assessment exercise carried out prior to the audit. IAIG reviewed the effectiveness of key controls over operational processes and management practices, with particular focus on the functional areas relating to (i) corporate strategic management and leadership, (ii) project management, iii) procurement and supply chain, (iv) human resources, and (v) finance. Identified opportunities for improving management control over other functional areas are also reported as deemed appropriate. The audit covered the activities of the office from 1 January 2013 until 31 March Background of the Office The Senegal Operations Centre (SNOC) and Côte d Ivoire Operations Centre (CIOC) were merged in 2013 to form the Côte d'ivoire Operational Hub (CIOH). It then expanded in October 2013 to include countries from the former South Africa Operational Hub. Today CIOC only has a single project (on human resources with UNHCR), while SNOC has an aging portfolio consisting of regional projects in the areas of environmental and rural development. The aged portfolio in Senegal and the lack of business in Côte d Ivoire led to limited revenues being generated by the projects, and justify the need to reduce operational costs, to optimize the organizational structure of CIOH and to further develop and expand its portfolio. CIOH focuses mainly on project development, coordination, and technical management. Its key programmatic areas are: a) Construction and rehabilitation b) Infrastructure c) Government support services d) Capacity building e) Rule of law and security f) Counter-piracy g) Procurement IAIG wishes to extend its appreciation to the management and personnel involved in the audit at CIOH, as well as practice personnel at Headquarters, for their full cooperation during the audit. The detailed audit observations and recommendations are provided in Part III of the report. Audit report no. IAIG/4004: Côte d Ivoire Operational Hub (CIOH) 4

6 III. Detailed assessment 1. Strategic management and leadership Observation 1 Portfolio management As required by Financial Regulation 9.01, As a self-financing entity UNOPS shall operate on the basis of full cost recovery and shall set its management fees accordingly. Resulting from its ordinary activities during each financial period, UNOPS shall generate sufficient net surplus to maintain operational reserves at the level established by the Executive Board. Consequently, UNOPS must on an annual basis generate sufficient revenue to cover all its costs, and make contributions towards operational reserves at the level established by the Executive Board. Therefore, each regional business unit (Operational Hub, Operations Centre, Project Centre or Cluster) needs to develop and deliver enough business to ensure it is financially viable and self-sustaining, and to contribute to the overall financial sustainability of UNOPS. Sustainability of portfolio IAIG conducted an analysis to find out whether CIOH is sustainable in the medium term and to assess the risks and mitigating measures in existence to safeguard the portfolio. i. Analysis of medium term sustainability of CIOH The award balance for ongoing projects (taking into account the implementation budget for 2014) is USD 2,246,402: less than a tenth of the 2013 total delivery of USD 22,630,000. Given that these are not adequately supplemented by the pipelines (initiation stage) and engagement additions, the sustainability of CIOH (as of 14 April 2014) in the medium term is questionable, and the financial health of the Operational Hub is critical. ii. Analysis of donors, partners and the countries where projects are being operated IAIG observed the following (as of 15 April 2014): The 2014 delivery target at CIOH is USD 29 million, which is 21 percent higher than the 2013 delivery (USD million). Leads in the initiation phase total USD 1 million, with no initiation leads at all in Liberia and Mali. Achievement of targeted delivery is therefore a matter of concern. The 2014 engagement acquisition target is USD 63 million, which is 163 percent higher than 2013 delivery (USD million). Actual engagement acquisition was only USD 7.7 million at the time of the audit mission, which makes the achievement of targeted engagement acquisition unlikely. iii. Analysis of opportunities available in priority countries and from major donors According to the 2014 business plan, CIOH has a presence in ten countries: Cameroon, Côte d'ivoire, the Gambia, Guinea, Liberia, Mali, Nigeria, Senegal, Sierra Leone and Zimbabwe. Seven of these (Côte d'ivoire, Guinea, Liberia, Mali, Nigeria, Sierra Leone and Zimbabwe) will be considered as priority targets for business development. IAIG reviewed the aid pledged by donors to priority countries to find out the potential opportunity for business development for UNOPS, and analysed the ability of CIOH to capture a significant share of the pledged aid available. iv. CIOH ability to seize business opportunities in priority countries. The analysis of the data provided by CIOH on opportunities available in priority countries indicates that in the top five priority countries (Nigeria, Côte d Ivoire, Liberia, Mali and Senegal), which account for 90 percent of the total pledged aid (USD 13,949,498,718 out of USD 15,422,165,818), UNOPS has been able to capture only 0.13 percent (USD 18,212,684) of the pledged aid (Nigeria Audit report no. IAIG/4004: Côte d Ivoire Operational Hub (CIOH) 5

7 (0.05%), Côte d Ivoire(0.17%), Liberia(0.00%), Mali (0.25%) and Senegal(0.57%)). This indicates that considerable effort is needed by the CIOH management to capture the available opportunities. Analysis of the data provided by CIOH on opportunities available with donors in priority countries indicates that UNOPS has been able to capture only percent (USD 11,434,334 out of USD 13,420,977,223) of the total aid pledged. For the top five donors, which together account for 87 percent of total pledged aid, the share captured by UNOPS is as follows: World Bank 0.04%, Global Fund 0.05%, African Development Bank 0.05%, European Union 0.36%, and Agence Française de Dévelopement (0.00%). This indicates that considerable effort is needed by the CIOH management to capture the available opportunity with the donors. Recommendation: IAIG/4004/01 Priority: High In consultation with the Regional Office, the Director, CIOH, should: a) Implement critical measures to improve the financial health of the Operational Hub by pursuing and capturing available opportunities; b) Develop a comprehensive business strategy along with a detailed implementation plan taking into consideration the profiles and priorities of the countries and donors; c) Prepare a business diversification plan to reduce dependence on a small number of sectors and donors. Well noted. Following the IAIG mission, a comprehensive Hub strategy has been developed (outline attached), which details the implementation plan and the business diversification strategy that is being conducted by CIOH. It will be submitted to AFO RD for his approval. Observation 2 Setting up of Côte d Ivoire Operational Hub need for systematic and structured approach, with effective support from the Regional Office for Africa The structure and responsibilities of CIOH changed considerably in Organizational Directive (OD) 15 (addendum 2) established the previously named Côte d Ivoire Operations Centre (CIOC) as an Operational Hub with effect from 15 March 2013, with responsibility extending to more than 20 countries in the Africa region. OD 15 (addendum 2) also led to the addition of Nigeria, Sierra Leone and Liberia with effect from 1 January Moreover, in October 2013, the South Africa Operational Hub and the Senegal Operations Centre (SNOC) merged with CIOH. Overall, CIOH covers more than 20 countries in Western and Southern Africa with the Director of the Operational Hub based in Abidjan, Côte d Ivoire, and with operational support provided in Dakar, Senegal. Section 3.2 of OD 15 states the requirement that terms of references (TORs) be developed for regional entities, but no TOR exists for CIOH. Sections establish the role Regional Offices play in overseeing and enabling efficient and effective delivery of support to partners and clients in line with the corporate strategy. Under OD 15, Regional Offices are expected to provide strategic direction and engagement development support, oversee regional portfolio performance, and advise on application of corporate policies and tools. IAIG noted the need for a TOR with clearly defined scope and jurisdiction as per OD 15 (addendum 2), defining the objectives, functions and functional titles, organizational structure, reporting lines, communication protocol, accountability framework, and coordination mechanisms. IAIG observes that this situation may lead to financial and reputational risk when setting up new businesses, and the root cause may be attributed to lack of or inadequate corporate policies or procedures. Recommendation: IAIG/4004/02 Priority: High Audit report no. IAIG/4004: Côte d Ivoire Operational Hub (CIOH) 6

8 The Director, CIOH, in collaboration with the Director, AFO, should draw up a terms of reference for the Côte d Ivoire Operational Hub, reiterating its scope and jurisdiction as per Organizational Directive 15 (addendum 2), defining the objectives, functions and functional titles, organizational structure, reporting lines, communication protocol, accountability framework and coordination mechanisms. The Director, AFO, in collaboration with the Director, CIOH, should review the current structure and responsibilities of CIOH with a view to assessing the adequacy and relevance of its resource allocation. Well noted. CIOH s TORs have been developed following the IAIG mission (attached), subject to clearance of the RO. Observation 3 Dual Structure of CIOH In accordance with UNOPS rules and regulations and best practice, Operational Hubs, Operations Centres and Project Centres are each responsible for carrying out key functions, such as support services and programme management. The Senegal Operations Centre (SNOC) and Côte d Ivoire Operations Centre (CIOC) were merged in 2013 to form the Côte d'ivoire Operational Hub (CIOH). The following positions are based in the Abidjan Office: Director and Representative, Administrative Assistant, Procurement Assistant, Finance Assistant, Partnership Advisor, Project Management Office Team Leader and Driver. Meanwhile, the Dakar Office has the Regional Programme Manager, two Project Management Officers, one Procurement Clerk, one Procurement Specialist, one Human Resources Specialist, two Human Resources Assistants, one Operations Assistant, one Administrative Assistant and one Driver. The total office cost was USD 576,092 and USD 858,296 for Abidjan and Dakar respectively, and the cost forecast for 2014 was USD 784,599 for Abidjan and USD 1,340,603 for Dakar. The IAIG review revealed unnecessary duplication of certain positions and costs and unclear reporting lines between the two offices. For example between the HR assistant in Abidjan and HR specialist in Dakar; between the Finance Specialist in Dakar and Finance Assistant in Abidjan, and between the Project Management Office Team Leader in Abidjan and the Project Management Officers in Dakar. The current dual-office structure is not efficient. To function properly as one team, reporting lines should be clearly defined, and communication and coordination should be strengthened. CIOH informed IAIG that it is currently in the process of establishing the right structure to meet this purpose. Recommendation: IAIG/4004/03 Priority: High The Director, AFO, should conduct an analysis of the strengths and weaknesses of the Côte d Ivoire and Senegal sub-offices and decide in which country CIOH will be based. Well noted. This will be done in the next quarter, for a final decision before last quarter Observation 4 Oversight of activities and operations OD 2 (rev. 1) defines oversight as the general process of review, monitoring, evaluation, supervision, reporting and audit of UNOPS programmes, activities, policy implementation and results. The objective of the OD is to ensure organizational, financial, operational and ethical accountability, and effective internal controls. The IAIG review revealed: Audit report no. IAIG/4004: Côte d Ivoire Operational Hub (CIOH) 7

9 An unclear organigram where the link between the two sub-offices is not clearly defined; Unclear reporting lines between the two sub-offices and between each sub-office and the field; Insufficiently clear communication protocol between the two sub-offices and between each suboffice and the field; Lack of segregation of duties due to confusing TORs of personnel and the absence of Standard Operating Procedures (SOP); Vacancy of key positions such as Head of Support Services; Lack of control mechanisms for project offices such as the Nigeria office, which is handling its own pay cycle, has a procurement delegation of authority (DOA) level 2 and a finance DOA level 2 as well, and over which the OH has no overall control; Inconsistency between the TORs of personnel and their actual current tasks or titles. Lack of oversight is one of the key weaknesses in CIOH and may lead to lack of organizational, financial, operational and ethical accountability and effective internal controls. Recommendation: IAIG/4004/04 Priority: High The Director, CIOH, should put in place a strong oversight system by: a) Drafting clear and concise Standard Operating Procedures for the main activities; b) Developing an oversight system of the field activities; c) Considering filling the key positions; d) Reviewing TORs of CIOH personnel and ensuring consistency with their current tasks and titles; e) Updating the organigram complete with clear reporting lines; and f) Ensuring positions in the organigram reflect the job descriptions in the TORs of personnel. a) CIOH has circulated between December 2013 and May 2014 SOPs and memos on main delivery practices: HR (2 SOPs and 2 memos), Finance (3 SOPs), Procurement (4 SOPs) and Project Management (3 SOPs); copies are attached. b) CIOH has established the following support and oversight system of field activities based on existing material: i) consolidated project risk log and mitigation tools, ii) Continuous improvements through training and knowledge sharing with project managers, iii) Communication tools on compliance (see: iv) Portfolio monthly assurance v) Field oversight missions focusing on quality and compliance. c) Head of Support Services: the position has been advertised with a closing date extended to 20/06/2014, VA is attached. A local ICT position has also been advertised, VA is attached. d) All TORs of personnel in Dakar and Abidjan Office have been revised and aligned with the structure. Copies of revised and signed TORs are attached. For all project personnel, the review will be completed by end June e) and (f) Organigram and TORs have been revised (copy of revised organigram attached) Audit report no. IAIG/4004: Côte d Ivoire Operational Hub (CIOH) 8

10 2. Project Management Observation 5 Engagement acceptance process As per section 5.4 Risk Management of OD 4 Engagement Acceptance Policy, UNOPS must define potential risks and liabilities through rigorous analysis of the implementation and financial arrangements. Out of 60 cases of adjustments, amendments and leads finalized during the period of audit, IAIG has noted: Six instances where leads have been finalized but no contract has been signed. Thirteen instances where legal review information is either not available or not conducted. Sixteen instances where financial review information is either not available or not conducted. Four instances where pricing policy is not followed. Eight instances where the management fee is lower than that prescribed as per pricing policy. Two instances where costings in the lead system and the Implementation Analysis Note differ. Recommendation: IAIG/4004/05 Priority: Medium The Director, CIOH, should strengthen the engagement acceptance process by: a) Following strictly the pricing policy; and b) Ensuring consistency between the lead system and the Implementation Analysis Note. a) CIOH takes note of the recommendation to follow strictly the pricing policy. Since audit, Memo AIM/CIOH/2014/PM/14 has been issued accordingly. b) CIOH will implement a quality monitoring system ensuring all leads entered are regularly verified. Observation 6 Engagement risk management As per section 6 of OD 22 Client Pricing Policy, UNOPS Financial Rule , and the Engagement Acceptance Policy, a Risk Increment shall be budgeted for and charged per engagement in order to allow the recovery of any direct or indirect costs that may not be billable to a particular client or may be incurred due to unforeseen risk. The Risk Increment will cover the normal occurrence of cost overruns due to emergency situations, extra security costs, write-offs of receivables that are uncollectible from the client, costs associated with delayed payments by clients, and also other reasonable expenses that may arise in the course of business. This fee is determined based on historical or speculative knowledge of high business risk programmes, regions, or clients. Further, the Risk Increment shall be determined for each specific engagement based on historical or speculative knowledge of engagements, regions and clients. The Risk Increment is calculated based on historical cost overruns, portfolio risk, client payment risk, maturity of financial management infrastructure, and other relevant parameters added as UNOPS understanding of risk evolves. Also, as per section 5.4 of OD 4 Engagement Acceptance Policy, UNOPS must define potential risks and liabilities through an exercise of rigorous analysis of the implementation and financial arrangements. This analysis is an essential part of the acceptance process. Appropriate provisions must be made to manage and mitigate the risks that have been identified in accordance with the Internal Control and Risk Management Framework. Out of 60 leads reviewed, IAIG observed that: In 57 instances, no risk increment was budgeted for and recorded, where such charges could, according to standard rates, normally have been expected to amount to USD 1,128,043. Audit report no. IAIG/4004: Côte d Ivoire Operational Hub (CIOH) 9

11 In three instances, the risk increment has been incorrectly or over charged. In 58 instances, neither the potential risks were identified in the Implementation Analysis Notes nor were risk logs maintained or uploaded in Electronic Blue Files. IAIG observes that the situation mentioned above may lead to potential financial and reputational losses due to engagement risks not being properly managed and/or incorporated in project costs and the root cause of the same may be attributed to lack of supervision at the Operational Hub level. Recommendation: IAIG/4004/06 Priority: Medium The Director, CIOH, should: a) Ensure that risk increment is charged to the projects to protect UNOPS from potential revenue losses and that any deviations from the system-generated risk estimate are fully documented; and b) Ensure that risk logs are maintained and updated regularly for all projects. a) IAIG s recommendation is well noted; an Internal Memo (attached, IM/CIOH/2014/PM/015) on risk increments has been sent to all project managers and lead developers on the subject. b) Risk Logs for all CIOH projects have been uploaded in the Project Document Centre between April and May 2014; in addition, CIOH maintains since March 2014 a comprehensive Risk Log Matrix which is monitored and updated on a monthly basis, attached. 3. Procurement and supply chain Observation 7 Declaration of Conflict of Interest As per chapter 8.2 of the Procurement Manual rev. 5, all persons participating in the evaluation process (Evaluation Committee Members) are required to review and sign a declaration on Conflict of Interest prior to participating in an evaluation. The declaration must be reviewed and cleared by the Project Manager of the Evaluation Committee and approved by the Procurement Authority. In 14 out of 15 procurement cases reviewed during this audit, none of the Bid Evaluation Committee members had signed declarations of Conflict of Interest. Recommendation: IAIG/4004/07 Priority: Medium The Director, CIOH, should ensure that declarations of Conflict of Interest are signed by all Bid Evaluation Committee members and filed appropriately. CIOH took action and circulated memo IM/CIOH/2014/PROC/018 detailing regulation on declarations of Conflict of Interest by all members of Bid Evaluation Committees and filing of forms in relevant case files. Monitoring is now done by systematic verification of declarations of Conflict of Interest as part of the pre-clearance of submissions, which is also reflected in the Procurement Check-List. Evidences of action taken are also attached for Nigeria and Guinea. Observation 8 Bid evaluation committees As per chapter 8.2 of the Procurement Manual rev. 5 (chapter of the Procurement Manual rev. 4), the chairperson appointed to lead the evaluation panel should have at least five years of procurement experience. Audit report no. IAIG/4004: Côte d Ivoire Operational Hub (CIOH) 10

12 Furthermore, representatives from the funding source, the client organization or national counterparts may be appointed as members of the evaluation team or act as observers. However, UNOPS personnel must always have the majority vote in the evaluation team. The Procurement Manual also states that an Evaluation Committee should consist of at least three members. The technical evaluation team members shall be appointed in writing by the Procurement Authority, to provide objective and independent advice based on their knowledge of the specific subject matter. Review of bid evaluations in a sample of 15 procurement cases revealed the following: a) In 13 out of 15 cases, the approval of the Bid Evaluation Committees by the Procurement Authority was not available on file. b) In four out of 15 procurement cases and as per interviews with personnel at Sierra Leone Office, the Chair of the Bid Evaluation Committee did not have the required minimum of five years of procurement experience. c) In one case (related to PO ), the Evaluation Committee consisted of only two members, one of which was the client, which meant that UNOPS did not have the required majority vote. Furthermore, the composition of the Evaluation Committee had changed post facto and was not appropriately documented with written approval of the Procurement Authority. Recommendation: IAIG/4004/08 Priority: High The Director, CIOH, should ensure that: a) Approval of the composition of all Bid Evaluation Committees should be appropriately accorded by the procurement authority and recorded on file; b) The chair of a Bid Evaluation Committee should have a minimum of five years of procurement experience; c) Bid Evaluation Committees should consist of at least three members; and d) When client representatives are appointed as members of an evaluation team, the majority vote is with UNOPS personnel. CIOH took action and circulated memo IM/CIOH/2014/PROC/019 on nomination of the Bid Evaluation Committees. Monitoring is now done by verifying evidence of nomination letters as part of the preclearance process of submissions. Evidence of action taken are also attached for Nigeria and Guinea. Observation 9 Due diligence in the RFQ process Chapter of the Procurement Manual rev. 5 (chapter of the Procurement Manual rev. 4) provides guidance on Requests for Quotations (RFQs). The RFQ is an informal solicitation method, which is used if the value of the procurement is below the specified monetary threshold established for formal methods of solicitation of USD 50,000. A review of one procurement case (related to PO ) revealed several issues that were not handled as per UNOPS guidance. There were multiple RFQs set out for lots of a contract that in total exceeded the sum of USD 50,000. The file stated that the two lowest-priced bidders were unreachable at the time of appointing the bid. The bid was then not re-advertised, but instead a full contract was awarded to the third lowest-priced supplier, whose bid was more than USD 60,000 higher than the other two. After notification that the contract was awarded to that supplier, the Office negotiated with the supplier to lower the price. The purchase order (which functioned as a contract) was only signed by UNOPS, not by the supplier. Recommendation: IAIG/4004/09 Priority: Medium The Director, CIOH, should ensure that the proper procurement process is followed in all requests for Audit report no. IAIG/4004: Côte d Ivoire Operational Hub (CIOH) 11

13 quotations. This should include, but is not limited to, the following: a) RFQs are only to be used for procurements with the value of USD 50,000 or less; b) After awarding a contract, no further price negotiations should take place; and c) Where the lowest-priced bidder becomes unreachable, the RFQ should be re-advertised CIOH took action since the audit and circulated memo IM/CIOH/2014/PROC/022 on adherence to the pre-clearance procedures of the cases by Procurement Reviewer to comply with observation (a-c) above. Monitoring will be done through review and pre-clearance of submissions as follows: a) ensuring that requisitioned amounts are within the solicitation methods; b) issuing reminders on negotiation rules in accordance with the PM paragraph 8.9.3; c) ensuring that suppliers with lowest-priced offers are selected. 4. Human resources Observation 10 Strengthen the process of desk review of recruitments and their approval Administrative Instruction AI/HRPG/2012/01 (rev.1) on Individual Contractor Agreements (ICAs) states in paragraph 4.3 that in a situation where a hiring unit requires a consultant for a short period of time, the hiring unit may conduct a desk review. For the selection method to be considered competitive, the desk review must be conducted by comparing the CVs of at least two candidates. If only a desk review was conducted, the proposed ICA contract can only be issued for up to 100 working days in a 12- month period, and the ICA can be extended only if the original ICA plus the extension(s) do not cover more than 100 working days in a 12-month period. In the event the services of the individual contractor are still required after 100 working days, a new competitive selection process, including interviews, must be conducted. A sample of nine cases was reviewed and the following was noted: a) In all nine cases examined, the terms of extension of the contract had been approved retroactively and/or no proper competitive process had followed the desk-review recruitment. b) Desk reviews were not executed properly as per UNOPS guidance and instructions. For example, in a case with three candidates, the panel declared that two did not meet the job requirements, thus reducing the selection pool to only one eligible candidate. The selection minutes indicated that candidates were assessed based on their motivation and English proficiency. Recommendation: IAIG/4004/10 Priority: Medium The Director, CIOH, should strengthen the process followed when recruiting by desk review as per UNOPS instructions. This should include, but is not limited to, the following: a) ICA recruitments by desk review should only be issued for up to 100 working days in a 12-month period; b) In the event the services of the individual contractor are still required after 100 working days, a new competitive selection process, including interviews, should be conducted; and c) Efforts should be made to enlarge the pool of suitable candidates, and desk reviews should be conducted in a proper manner. a) CIOH took action in this regard as none of the contracts issued following a desk review in 2014 have been extended beyond 100 days; extract from Management Work Space (MWS) is attached. Such monitoring will continue in the future on a monthly basis. b) Competitive processes have been systematically launched in 2014 for cases where services were still required beyond the initial 100 days; extract from MWS is attached. Factual evidence is Audit report no. IAIG/4004: Côte d Ivoire Operational Hub (CIOH) 12

14 attached for Mali. c) CIOH has taken action through a system that was put in place to maintain and continuously update a list of suitable candidates identified from recruitment processes conducted across CIOH countries since 1 January 2014; list is attached. Two cases are also attached for this observation. Observation 11 Delegation of Authority Administrative Instruction AI/HRPG/2012/01 (rev.1) states in paragraph 7 that an award is the authorization given by authorized personnel to establish a commitment, and that only individuals with valid delegations of authority for procurement can award ICAs. During the audit, the following were noted: a) In two out of nine desk-review cases, the award was not signed by the appropriate Procurement Authority. b) In three out of 30 pre-selection recruitment cases, IAIG found that contracts/awards were not signed by the appropriate Procurement Authority. Recommendation: IAIG/4004/11 Priority: High The Director, CIOH, should ensure that there is strict compliance with delegation of authority procedures in all recruitment cases. This is well noted. Management will issue instruction to concerned HR practitioners to ensure that only appointed Procurement Authorities with a valid delegation of authority will award contracts. Award verification will be enforced through systematic filling of the HR Procedures check-list form. 5. Finance Observation 12 VAT recovery As a United Nations entity, UNOPS is VAT exempted for all its transactions. Invoices related to project , TRIDOM, based in Cameroon and the Congo, are paid inclusive of VAT. The VAT is charged to project expenditure for this project and submitted to the government for reimbursement or refund. Upon receipt of the refund the project is crediting again the expenditure. IAIG reviewed 51 payments and noticed that the related invoices were paid VAT inclusive for an aggregated amount of USD 6,000 for which CIOH has not yet initiated any action to get the VAT refunded by the government. In addition to the project expenditure overestimate, CIOH exposes the Organization to financial risk. Recommendation: IAIG 4004/12 Priority: High The Director, CIOH, should conduct a full review of VAT paid and not yet refunded and initiate the process for reimbursement. The Director, AFO Region, should: a) Ensure that every OH/OC/PC under AFO jurisdiction conducts a full review of VAT paid and not yet refunded and initiates a process for reimbursement; Audit report no. IAIG/4004: Côte d Ivoire Operational Hub (CIOH) 13

15 b) Establish a monitoring system to ensure that VAT paid is refunded within the fiscal year. a) This observation pertains to Gabon. In the absence of a formal agreement between UNOPS and the Government of Gabon the submission is done through UNDP as our representative. This is a problem that all international organizations face in Gabon. Rejected submissions for reimbursement of VAT have been escalated to the UN RC (see attached documentation). b) CIOH will open a register book for VAT paid, which will allow follow-up on VAT reimbursement. Formal communication will be sent to Gabon authorities and the RC for the recovery of the VAT. Observation 13 Segregation of duties IAIG has reviewed the TORs of some finance personnel and noticed a lack of segregation of duties within the Finance Unit in CIOH. For example, according to the Finance Specialist s TOR, the role includes: passing all accounting entries and journals, establishing cheques; performing bank reconciliation; editing fact sheets of accounting entries; making quarterly analysis of accounts, and signing checks. The Finance Specialist is also in the bank signatory panel. Meanwhile, the Finance Assistant is, according to their TOR, tasked with maintaining and controlling petty cash fund and preparing report for replenishment, and also with reviewing vouchers and supporting documentation for accuracy and correctness of accounts codes charges and inputting in the computerized accounting and finance system. IAIG review found that: a) With regards to the Finance Specialist s TOR, there is a conflict of interest between the oversight role (reviewing/examining imprest account statements for compliance with UNOPS guidelines, editing fact sheets of accounting entries, performing bank reconciliations, making quarterly analysis of accounts, and ensuring that all other financial and accounting programme management activities are done accordingly) and the delivery role (passing all accounting entries and journals, establishing the cheques, statements of payment and transfer orders, and signing of cheques). b) With regards to the Finance Assistant s TOR, there is a lack of segregation of duties between the petty cash management (maintaining a daily running cost, processing cash payment, closing the petty cash and requesting for a replenishment) and the oversight role (reviewing vouchers, reconciling the petty cash, reviewing petty cash supporting documentation, and issuing vouchers for petty cash replenishment). The lack of segregation of duties and the conflict of interest observed in the Finance Unit constitute a high risk of financial loss. Recommendation: IAIG 4004/13 Priority: High a) The Director, CIOH, should review and correct the TORs of finance personnel where there is a conflicting role or a lack of segregation of duties. b) The Director, FPG, should ensure that, when granting bank signatory rights, they are within the scope of the TOR of the person concerned. a) The process of revising and amending the TORs is completed for personnel in Finance, Nigeria (see attached amended TOR). b) The process of updating bank signatories for Nigeria has been done and is awaiting a signed letter from the Chief Finance Officer, Finance Practice Group (see attached). Audit report no. IAIG/4004: Côte d Ivoire Operational Hub (CIOH) 14

16 Observation 14 Management of locally managed direct costs Following the guidelines on locally managed direct costs (LMDC), all Direct Cost charges should be channeled through the LMDC project so that it will be possible to determine the actual cost of running the office. The overall management of LMDC falls under the OH/OC Director. In 2013, Nigeria recorded USD 235,397 in direct support costs (DSC) as per the MOUs of the projects. This amount was fully utilized by the projects to cover four salaries (one international ICA and three local ICAs), along with missions and trainings costs. The DSC, which as per LMDC guidelines should be incorporated in CIOH LMDC, was retained by Nigeria without an authorization from the OH Director. This practice is against the LMDC guidelines and may expose the OH to lack of resources to run the office. Recommendation: IAIG 4004/14 Priority: Medium The Director, CIOH, should apply properly the guidelines on locally managed direct costs, and record all direct support costs through the LMDC project. Following the audit, action was taken to implement the recommendation. The recovery of LMDC for 2014 retained by Nigeria office for the DSC to be incorporated in CIOH LMDC has been processed see attached documentation and related General Ledger Journal Entries, approved and posted. Audit report no. IAIG/4004: Côte d Ivoire Operational Hub (CIOH) 15

17 Annex 1. Definitions of audit terms ratings and priorities A. Audit ratings Effective 1 January 2010, the internal audit services of UNDP, UNFPA, UNICEF, UNOPS and WFP adopted harmonized audit rating definitions, as described below. IAIG assesses the entity under review as a whole as well as the specific audit areas within the audited entity: Satisfactory: Internal controls, governance and risk management processes were adequately established and functioning well. No issues were identified that would significantly affect the achievement of the objectives of the audited entity. Partially Satisfactory: Internal controls, governance and risk management processes were generally established and functioning, but needed improvement. One or several issues were identified that may negatively affect the achievement of the objectives of the audited entity. Unsatisfactory: Internal controls, governance and risk management processes were either not established or not functioning well. The issues were such that the achievement of the overall objectives of the audited entity could be seriously compromised. B. Priorities of audit recommendations The audit recommendations are categorized according to priority, as a further guide to management in addressing the issues in a timely manner. The following categories of priorities are used: High: Prompt action is considered imperative to ensure that UNOPS is not exposed to high risks (that is, where failure to take action could result in critical or major consequences for the organization). Medium: Action is considered necessary to avoid exposure to significant risks (that is, where failure to take action could result in significant consequences). Low: Action is desirable and should result in enhanced control or better value for money. Low priority recommendations, if any, are dealt with by the audit team directly with the management of the entity under review, either during the exit meeting or through a separate memo subsequent to the fieldwork. Therefore, low priority recommendations are not included in this Report. Audit report no. IAIG/4004: Côte d Ivoire Operational Hub (CIOH) 16

18 Annex 2. Glossary AfBD AFD AFO ATLAS CIOC CIOH DOA DSC EC ERP EU F&A FPG FRR HQ HR(PG) IAIG IAN ICA IDA ITB KEOH LMDC MOU MWS OC OD OH PA PC PMO PO RC RD RFQ RO SNOC SOP TOR TRIDOM UNCDF UNDP UNHCR UNICEF UNIFEM UNOPS USD VA VAT WB African Development Bank Agence Francaise de Development Africa Region Office UNOPS ERP system, jointly with other agencies Côte d Ivoire Operations Centre Côte d Ivoire Operational Hub Delegation of Authority Direct Support Costs European Commission Enterprise Resource Planning European Union Facility and Administration Finance Practice Group UNOPS Financial Regulations and Rules Headquarters Human Resources (Practice Group) Internal Audit and Investigations Group Implementation Analysis Note Individual Contractor Agreement International Development Association Invitation To Bid Kenya Operational Hub Locally Managed Direct Costs Memorandum of Understanding Management Work Space Operations Centre Organizational Directive Operational Hub Procurement Authority Project Centre Project Management Officer Purchase Order Resident Coordinator Regional Director Request for Quotation Regional Office Senegal Operations Centre Standard Operating Procedures Terms of Reference Tri-national Dja-Odzala-Minkébé (project name) United Nations Capital Development Fund United Nations Development Programme United Nations High Commissioner for Refugees United Nations Children s Fund United Nations Development Fund for Women United Nations Office for Project Services United States Dollars Vacancy Announcement Value Added Tax World Bank Audit report no. IAIG/4004: Côte d Ivoire Operational Hub (CIOH) 17