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Department of Public Information . News and Media Division . New York

6 December 2005

“We are peeling this onion down to its core and doing our best to swiftly restore the integrity and honour of the United Nations procurement system”, Under-Secretary-General for Management, Christopher Burnham, told correspondents at a Headquarters press conference this afternoon.

Presenting to the press the outcome of an independent survey on the United Nations procurement service, which had been prompted by the findings of the Office of Internal Oversight Services (OIOS) and Volcker Commission on impropriety and corruption, the Organization’s top management official called it one of the most thorough reports he had seen in his career. Conducted by the consulting firm Deloitte and Touche, the study had begun on 4 October. Not investigatory in nature, the study did not seek to find specific instances of fraud and corruption, which were under the purview of the United Nations watchdog, the OIOS, Mr. Burnham said.

While there was no doubt that most of procurement staff were honourable international civil servants, he continued, the study had identified significant internal control deficiencies and insufficient management oversight of procurement operations due to outdated procurement processes; failure to align and support the procurement needs of clients; inconsistent execution of processes; and poor governance structure. Among the key areas of weakness were the lack of urgency in responding to adverse audit findings and unclear lines of authority and accountability. Deloitte and Touche found that procurement staff members effectively constituted the only controls in place. To improve the situation, it was necessary to establish a “trust, but verify” system of oversight and controls. Needed within a corporate entity were a culture of ethics “from the top”, internal and external audit, training and up-to-date systems.

He said the consultants’ main recommendations related to the need to improve governance effectiveness; update procurement policies, procedures and guidelines; improve professional development of procurement management and staff; enhance ethics and integrity; improve communication and integration among the components of the service; replace existing procurement and financial systems; take immediate steps to close gaps in the automation of procurement processing; and define the Secretariat’s procurement strategy.

The study would be followed by an expanded forensic audit of procurement -– both at Headquarters and in the field. “When you do a forensic audit, you are certainly looking for irregularities and anomalies”, he added. Later on, it would be necessary to examine the reasons for such irregularities. There was also an ongoing OIOS investigation. The Organization had full cooperation with the United States and international law enforcement authorities, as well as other national institutions. Efforts on forensic and diagnostic review of procurement transaction would be intensified.

Among other developments, he mentioned the fact that the United Nations had adopted improved financial disclosure requirements as of 1 December, which now applied to the procurement and investment division staff. Another -– “terribly important” -- event was last week’s agreement among the organizations of the United Nations system to adopt the International Public Sector Accounting Standards. Those needed to be approved by the General Assembly on an urgent basis.

Mr. Burnham also emphasized the importance of good leadership and ethics rules, and stressed the urgent need of setting up an ethics office, which should be “a place where you can go to say whether or not can we accept this box of chocolate sent by a vendor, or should we give it -- as is the policy today -- to a homeless shelter?” In the area of training, apart from ethics and integrity training, a procurement officer certification programme was needed. There was also a need to upgrade and modernize the Organization’s systems, including its 15-year-old Integrated Management Information System (IMIS) system.

Responding to several questions about the proposed ethics office, he said that it was essential to the management reform process. Such an office was definitely needed to fully empower the new whistle-blower protection policy, which was virtually “ready to go”. The culture tolerant of waste, fraud and corruption should not be tolerated. The staff had a duty to report such practices and should have confidence to come forward. He was working with Member States “trying to bring that in without having the chicken, or the egg, or the cart, or the horse, or whatever order you want to put all four in, to make sure that we can proceed in an orderly fashion”. Should the Assembly agree on the approval and funding of the Office in the next two weeks, it would be possible to quickly move forward with whistle-blower protection as well.

On the reforms in general, he referred to the need to move the United Nations from the organization set up to run conferences to the organization that had all the controls, accountability and transparency of an institution with a nearly $10 billion budget and global operations involving, all told, over 100,000 people around the world. The Organization needed to be modernized and brought into the twenty-first century. He felt that the Assembly urgently felt the responsibility to act.

While some saw the reform as a diplomatic effort, he viewed it as a legislative one, he said. “We are trying to change the structure of the governance, rules and regulations of an organization, and that is always going to be a difficult process. But as it moves through -– to paraphrase [ Germany’s first Chancellor] Otto von Bismarck –- ?the sausage factory’, in the end, I have high confidence that we will have an outcome that will fulfil the vision of the world leaders who came here two and a half months ago”.

Asked when a report “on kickbacks, bribery and corruption in the Procurement Division, which, some say, would put the oil-for-food to shame”, would come out, Mr. Burnham said that the Organization now had “this report on internal controls”. The natural progression would be to follow up with a thorough forensic audit, which would examine the last two years of procurement. He expected that to be completed by June next year. Obviously, there was also an OIOS investigation. By next summer, in addition to the action plan that the Deloitte study had clearly laid out, he expected to have “full appreciation for the problem we have”. In the next few months, it was also necessary to look into “how we can best deliver $1.37 billion worth of procurement to our customers”. He had an “utmost sense of urgency” regarding the need to provide for the needs of some 70,000 men and women in uniform, and some 13,000 civilians trying to keep the peace at some 18 locations around the world. It was necessary to manage the multi-billion dollar organization in an ethical way, with honour and integrity.

Responding to a question about Andrew Toh, Assistant Secretary-General for the Office of Central Support Services, he said the Procurement Division had been removed from reporting to him and switched to reporting, on a temporary basis, to United Nations Controller, Warren Sach. Today, he did not intend to discuss his concerns about a “significant lack of managerial oversight in the past”, but that was one of the findings of the report by Deloitte and Touch. The issue was being reviewed, and the Secretary-General would act swiftly.

A correspondent referred to a previous report on procurement, which had not been as critical as the one presented today. To that, Mr. Burnham replied that the study in question had been completely controlled and executed by the Procurement Division. He could not call that independent. Clearly, an independent opinion was needed after that.

Asked if he was concerned about possible delays with the budget, he said that it would be a problem both for his Department and the United Nations as a whole. It was necessary to press forward with a full budget now, and it was necessary to press forward with reforms. He believed that both could be accomplished. In that connection, he referred correspondents to his Op-Ed in the Wall Street Journal today, where he had outlined some of those reforms.

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For information media • not an official record

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