UN Audit Uncovers Fraud in Peace Missions

by Thalif Deen

The UN's peacekeeping operations, whose annual budget is expected to increase from $838 million in 1998-1999 to over $2 billion in 2000-2001, were the biggest offenders, accounting for most of the financial and administrative shortcomings in the UN system.

A payroll audit revealed that the UN Interim Administration in Kosovo (UNMIK) made overpayments of about $324,000 as subsistence allowances to staffers because of computer software problems. Based on the recommendation of the OIOS, UNMIK subsequently recovered the monies.

But the rapid deployment of UNMIK also resulted in "deficiencies and irregularities" in the recruitment of local staff members. Their grades and hourly salary rates did not conform with the applicable guidelines of the UN Office of Human Resources Management.

A new 52-page annual report released by OIOS Nov. 13 also points out that UNMIK awarded a construction contract to a vendor who subsequently reneged on his commitment.

But instead of terminating his contract, UNMIK re-negotiated with the vendor and increased the contract price by nearly 20 percent without adequate justification -- and without reference to the committee on contracts which approved the original contract.

A review of the transport workshops at the UN Mission in Bosnia and Herzegovina (UNMIBH) found "serious weaknesses in management controls" over the inventory of stores and spare parts.

The OIOS discovered that assets valued at about $198,000, which should have been reviewed by the UN property survey boards, had been written off and removed from inventory without proper review.

As a result of audit findings, however, the management of UNMIBH took appropriate corrective action, according to the report.

The head of OIOS, Under-Secretary-General Dileep Nair told reporters on Nov. 10 that by combating fraud and misconduct, his office had saved the organization about $17 million over a one-year period.

Although there were more cost savings the previous year -- amounting to about $72 million -- the total savings of $17 million was lower last year because it was mostly audits of a policy and programmatic nature.

The OIOS, he said, had completed 82 audit reports and 35 investigative reports, of which 20 had been reported to the General Assembly. The office had also logged about 287 new investigations: a 16 percent increase over the previous 12 months.

The rate of implementation (of OIOS recommendations) was about 73 percent -- again, marginally higher than what it had been in the previous year.

The 11 audits in peacekeeping operations, he said, included investigations into wire fraud in Angola, travel in UNMIBH and aviation safety.

The evidence obtained during the investigation revealed that the faxes were not sent by or on behalf of the staff members whose names and accounts were used in making the requests. The fraud had been perpetrated by a former locally-recruited staff member of MONUA.

The OIOS also found that about $290,000 owed to MONUA by the staff-operated "post exchange" duty-free store had not been reimbursed. But the management subsequently informed OIOS that this amount has since been recovered.

In Bosnia-Herzegovina, the former Chief of the UN Traffic and Travel Unit had initiated a scheme under which a local travel agent and an airline employee submitted fraudulent invoices for excess baggage charges for UN employees and military observers travelling on official duty.

These criminal actions resulted in a loss of about $800,000 to the organization. Subsequently, the Chief was tried and convicted in a U.S. district court on five counts of international wire fraud and conspiracy to commit fraud.

He has been sentenced to 41 months in federal prison, and ordered to make restitution to the organization. But so far, he has only made a single payment of $110,000 to the United Nations.

In an introduction to his annual report, Nair said that peacekeeping is likely to continue to be a priority area for OIOS. Resident auditors are currently deployed by OIOS in all of the major peacekeeping missions.

"When these operations take on additional challenges, such as peacemaking and the establishment of transitional authorities, as was done in Kosovo and East Timor, it is essential to put in place internal controls and ensure that no one exploits the lack of proper civil administration for personal gain," Nair said.