Geneva, March 1997
SEVENTH ITEM ON THE AGENDA
Reports of the Programme, Financial and
First report: Financial and general questions(1)
Report of the Joint Inspection Unit of the United Nations on its activities for the year ended 30 June 1996
Report of the Joint Inspection Unit on "Accountability, management improvement and oversight in the United Nations system"
United Nations Administrative Committee on Coordination (ACC):
Statistical report on the budgetary and financial situation of organizations of the United Nations system
Financial arrangements for a Commission of Inquiry to examine the complaint concerning the observance by Myanmar of the Forced Labour Convention, 1930 No. 29) made by delegates to the 83rd Session (June 1996) of the Conference under article 26 of the Constitution of the ILO
1. The Programme, Financial and Administrative Committee of the Governing Body met on 11 March 1997 under the chairmanship of Mr. Arrate Mac Niven, Chairman of the Governing Body. Mr. C. Gray (Workers' spokesman) was the Reporter.
2. The Committee had before it a paper(2) containing information on the 1996-97 regular budget account and the position of the Working Capital Fund as at 31 December 1996.
3. Mr. Marshall, on behalf of the Employer members, asked whether the information in the document was a fair reflection of the position half-way through the biennium and whether the Office had any projections at present of what the final position at the end of 1997 was likely to be.
4. The representative of the Government of the United States observed that expenditure levels reported in the Office paper were well below one-half of the approved biennial expenditure, and asked if this could be explained by the Office.
5. Mr. Gray, on behalf of the Worker members, said that although the Committee might be happy with a budgetary surplus half-way through the biennium, that should not give rise to undue optimism. The Workers were seriously concerned that at that same point no fewer than 36 member States had lost their right to vote.
6. The representative of the Director-General (the Treasurer and Financial Comptroller) explained that the figures did not represent a full 12 months' expenditure; for example, records from field offices normally took several weeks to reach Geneva, so it was not possible at present to report total actual expenditure for 1996. Nevertheless, it was true that expenditure for the first year of the biennium was lower than usual. The amount reported in the Office paper was just over 39 per cent of 1996-97 budgetary expenditure, compared with 43 per cent at the same point in the previous biennium and 46 per cent in the biennium before that. During the first half of 1996 there had been considerable uncertainty as regards the collection of contributions and severe financial restrictions had been in force. In addition to the $21.7 million of programme reductions approved by the Governing Body in November 1995, the Director-General had taken a number of other measures to keep expenditure to a minimum. It was only in the second half of the year that the picture became clearer and this inevitably meant that budgetary expenditure and programme delivery were running behind normal.
7. Mr. Marshall expressed appreciation for the Treasurer's comments, and asked whether there was likely to be a surplus at the end of 1997 if the approved budgetary programme was carried out in full.
8. The representative of the Government of Japan said that Governing Body sessions and the Conference took place in Geneva, so expenditure recording for these items should not be delayed, but the figures recorded at the end of 1996 were much less than half the total for the biennium. Was this because some elements of 1996 expenditure would not be paid until 1997?
9. The Treasurer, in reply to the comments by Mr. Marshall, said that it was almost impossible to predict the cash position at the end of the biennium in the absence of information from governments on the amount and timing of payments of contributions, but if 1996 was taken as a guide it was safe to say that there would be a cash surplus at the end of the present biennium. In reply to the previous speaker, he said that some items of expenditure were still outstanding. For example, the rental of the Palais des Nations for the 1996 Conference had still not been paid; and any Governing Body expenses for November 1996 paid for by field offices would not yet be included in expenditure figures. Members should be careful not to interpret the figures as representing full budgetary expenditure for half the biennium.
10. The Committee took note of the Office paper.
11. The Committee had before it a paper(3) giving details of regular budget contributions received since 1 January 1997.
12. The Treasurer reported that, since the preparation of the Office paper, contributions had been received from the following member States:
Of this amount, approximately Sw.frs.385,000 were arrears of contributions and the remainder were current contributions for 1997.
13. The Committee took note of the Office paper.
14. The Committee had before it a paper(4) setting out the Office's response to the report of the External Auditor for the 1994-95 biennium.
15. Mr. Gray, for the Worker members, observed that a number of recommendations in the Office paper had already been the subject of Governing Body decisions, in particular the sections on fraud and accounting standards. Action had also been taken concerning the management of funds received from UNDP, and later at the present session the Committee would be considering matters related to the ILO Staff Pension Fund. The situation in respect of management matters was more complex, but the Workers realized that many of the points raised by the External Auditor were linked to the process of decentralization, and they shared his concern that they be addressed seriously. Section III of the paper gave additional information on action taken on the External Auditor's report on the 1992-93 accounts, and dealt mainly with computers and information technology. The Workers were pleased to see that this field had been given particular emphasis in the Programme and Budget proposals for 1998-99.
16. The Committee took note of the Office paper.
17. The Committee had before it a paper(5) containing the findings of the Chief Internal Auditor resulting from internal audit and investigation assignments undertaken in 1996.
18. Mr. Marshall said that the Employers were pleased to see the close cooperation that existed between the Office and the Chief Internal Auditor, and would appreciate in due course some information on the Office's response to his report.
19. The representative of the Government of Japan agreed with the comments by the previous speaker, and said that proper follow-up would be the most important benefit from the work of the Chief Internal Auditor, and there should be regular reports on how this was being carried out. Coordination with the External Auditor would also be necessary to ensure that maximum benefit was derived from the work of each. It would also be useful to have the Director-General's comments on the report of the Chief Internal Auditor, as required by the Financial Rules, as well as a report in due course from the Chief Internal Auditor on the monitoring, evaluation and reporting system (MERS) developed recently.
20. Mr. Gray expressed appreciation for the Office paper, and said that, for the Workers, the most important points in the document were, first, that the Director-General considered the work of the Chief Internal Auditor to be extremely valuable and his assurances that recommendations were followed up, and second, that the Chief Internal Auditor considered that his findings and recommendations were positively accepted by management.
21. The representative of the Government of the United Kingdom expressed appreciation for a thorough and reassuring document and agreed with the Employers and the Workers on the need for follow-up action.
22. The representative of the Government of the Russian Federation thought that future reports of the Chief Internal Auditor should be more detailed and precise, and should include a description of the consequences resulting from problems identified. The responsibilities of the Chief Internal Auditor were described in article 13 of the ILO's Financial Rules, and amendments may be necessary to see that the work had a proper legal basis.
23. The representative of the Government of the United States welcomed the Office paper as a public document which strengthened the Office's authority and credibility, as it was the first of the specialized agencies to give such a concrete example of its commitment to make internal oversight more transparent. In doing so the ILO had brought its procedures closer to those of the United Nations Office of Internal Oversight Services, and as other organizations followed suit there would be an increase in member States' confidence in the management of UN agencies. She expressed agreement with previous speakers who had called for future reports from the Director-General on the recommendations of the Chief Internal Auditor.
24. The representative of the Government of Namibia referred to paragraph 8 of the Office paper and asked what action would be taken to prevent a recurrence of currency profiteering.
25. The representative of the Government of Nigeria referred to the illegal use of official vehicles described in paragraph 8 of the Office paper and suggested that the report of the Chief Internal Auditor should in future include recommendations to prevent a repetition of these problems.
26. The Treasurer, in reply to comments by Committee members, said that although the document before the Committee was the first report of the Chief Internal Auditor, working relationships within the Office continued as before. The Treasurer, the Director of Finance and the Chief Internal Auditor had always enjoyed a relationship of mutual trust and confidence and discussed matters of common concern. However, the Chief Internal Auditor was completely independent -- his recommendations were taken very seriously, with continuing dialogue and follow-up action. From now on, in line with the practice for the report of the External Auditor, there would be a regular paper to the Governing Body on the action taken in response to the recommendations of the Chief Internal Auditor.
27. In reply to the query by the representative of the Government of Japan, the Treasurer confirmed that the Office had decided to implement MERS, and the Chief Internal Auditor would himself decide on the extent to which it should be subject to internal audit evaluation. Replying to the query by the representative of the Government of the Russian Federation, he explained that it would not be possible to give an immediate report on the follow-up given to the recommendations of the Chief Internal Auditor. The process of discussion and evaluation, first of the recommendations and later of the follow-up action, took time and would have to be described in a paper to the Committee at a later date.
28. Replying to the representative of the Government of Nigeria concerning the comment about the illegal sale of a vehicle, an internal audit examination recently carried out had uncovered the illegal sale of a vehicle seven years previously; the Director who was responsible for the office at the time had retired four years ago. An official who had been involved in the transaction was still employed by the ILO, and after protracted correspondence he had been informed by the Director of Personnel that it was proposed to issue a reprimand. It was difficult to accelerate these matters because an official accused of misconduct was entitled to the benefit of due process.
29. In reply to the query by the representative of the Government of Namibia concerning illegal currency profiteering, it was important to note that this concerned a country where the official exchange rate was artificial and bore no relation to the actual exchange rate. In this and similar ILO area offices there were strict instructions that transfers from a hard currency account to a local currency account should be done by bank transfer, with no cash transactions such as a physical withdrawal of hard currency and a physical deposit of local currency. In the case mentioned the accounts showed there was a direct bank transfer, but an internal audit examination revealed that there had been a physical withdrawal of hard currency and a physical deposit of local currency. There was no loss to the Office, but there was a suspicion of profiteering by an official. At an interview the official strenuously denied the allegation and in the absence of proof it was impossible to say who had profited from the transaction, the official or a bank officer. Without additional information further follow-up would be pointless, but the threat of detection would discourage future offenders.
30. The Chief Internal Auditor confirmed that the top priority was to see proper follow-up on the audit recommendations. He acknowledged the comments by Committee members and undertook in his next report to provide more detail in support of his specific recommendations.
31. The Committee took note of the Office paper.
32. The Committee had before it a report of its Building Subcommittee(6) describing progress on the extension of the ILO Regional Office in Abidjan and on the construction of the ILO's premises in Islamabad.
33. Mr. Chotard, Chairman of the Building Subcommittee, introduced the report. Work on the extension of the premises for the ILO Office in Abidjan was progressing well and was expected to be finished by the end of the year. As far as the ILO premises in Islamabad were concerned, he recalled that the installation of air-conditioning had been included in a list of project elements that could be purchased at a later date, possibly out of future income from the rental of the conference hall. However, the architect had pointed out that it would be preferable and cheaper to install it during the construction phase so as to avoid the additional cost of adapting the building at a later date. The cost of this work was estimated at $353,000. Mr. Chotard pointed out that this figure could be reduced by the net interest earned of approximately $115,000 on the original allocation, after taking into account cost increases allowed in the original contract. After taking this into account, the Committee was being asked to approve a supplementary credit of $325,000 for the installation of the air-conditioning system during the course of the construction.
34. Mr. Tabani, speaking on behalf of the Employers, endorsed Mr. Chotard's remarks and supported the point for decision.
35. Mr. Khurshid Ahmed, on behalf of the Workers, was pleased to note that the Abidjan Office would be finished by the end of the year. The Workers hoped also that the ILO would be able to move to the new premises in Islamabad in September 1997, as stated in the Office paper. He expressed full support for the statement by Mr. Chotard and also for the point for decision.
36. The Committee recommends to the Governing Body --
(i) that it accept the proposal to install the air-conditioning for the building and to authorize an additional credit of $325,000 for this purpose;
(ii) that the additional cost of $325,000 be financed by the Building and Accommodation Fund.
37. The Committee had before it a paper(7) on the delegation of authority to the Officers of the Governing Body for the duration of the 1997 Conference.
38. The Committee decided to delegate to its Officers (the Chairman and the spokespersons for the Employer and Worker members of the Committee), for the period of the 85th (June 1997) Conference, the authority to carry out its responsibilities under article 18 of the Standing Orders of the Conference in relation to proposals involving expenditure in the 65th financial period ending 31 December 1997.
39. The Committee recommends that the Governing Body make a similar delegation of authority to its Officers under article 18 of the Standing Orders of the Conference.
Report of the Joint Inspection Unit of the United Nations on its activities for the year ended 30 June 1996(8)
Report of the Joint Inspection Unit on "Accountability, management improvement and oversight in the United Nations system"(9)
The United Nations Administrative Committee on Coordination (ACCD): Statistical report of the budgetary and financial situation of organizations of the United Nations system(10)
40. The Committee had before it for information two reports of the United Nations Joint Inspection Unit and a report from the United Nations Administrative Committee on Coordination.
41. The representative of the Government of Japan recalled that the contributions by the JIU to the functioning of the Office had been discussed in detail some two years previously during discussions on rationalization and reform in the ILO. The report of the JIU referred to in the Office paper contained a number of suggestions and recommendations that were highly relevant to the ILO. He urged the Office not only to decide in principle to put all these recommendations into effect, but also to make regular progress reports to the Governing Body.
42. Mr. Marshall, for the Employers, expressed appreciation for the four papers, which would be referred to the Committee on Technical Cooperation once the comments of the Administrative Committee on Coordination (ACC) were issued. Annex 2 to the report also referred to two other documents which could be relevant to discussions in the Programme, Financial and Administrative Committee, and which the Employers would like to receive. The first was document A50.507, relating to management in the United Nations, and the second was A50.692, relating to travel in the United Nations and other issues of efficiency and cost-saving.
43. The representative of the Government of the United Kingdom associated himself with the remarks by the representative of the Government of Japan. As a rule short Office papers were preferable to long ones, but this one was perhaps too short. The JIU report raised some serious questions about its future work and the scope for it to provide a better service to organizations in the UN system. In recent years the ILO had been quite critical of the work of the JIU, and it would be interesting to know the Office's opinion of the JIU proposals to provide better service to its customers.
44. The representative of the Government of the Russian Federation associated himself with the remarks by the representative of the Government of the United Kingdom concerning document GB.268/PFA/7/1, and noted the information contained in that document. A more detailed analysis of the proposals contained in the document would be welcome and would help to improve understanding of the work of the JIU and evaluate its potential. Document GB.268/PFA/7/2 on accountability, management improvement and oversight in the UN system was also considered very important in that a comparison of the different practices of the various specialized agencies and a continued search for rational solutions in that field would lead to positive changes.
45. Mr. Gray, speaking on behalf of the Worker members, drew attention to the recommendation by the JIU on the strengthening of management development and training programmes, as well as that on oversight bodies, which called on all the groups to firmly and consistently assert their leadership role.
46. A representative of the United Nations Joint Inspection Unit informed participants that an additional ACC report had been issued on 26 June 1996 and was available on the Internet. This report had unfortunately not yet been put before the ILO's Governing Body. He therefore expressed concern with the procedures concerning the review of JIU reports. It took as much as one year and sometimes even longer for JIU reports to be reviewed, and because of these delays the usefulness of these reports was considerably reduced. Efforts should be made by the ACC to review the JIU reports and submit their comments within six months of the report's publication, as was required by the JIU's statute. Although he was pleased to note the Committee's increasing interest in JIU reports, it was regrettable that those reports were only put before the Committee for information and were not given the same consideration as other reports such as the report of the Chief Internal Auditor.
47. A representative of the Director-General (the Director of the Bureau of Programming and Management), responding to a question raised by the Employers' group, said that although JIU reports which specifically related to other agencies were not normally discussed, they were available and could be obtained for the Employers' group without difficulty. With regard to the point raised by the representative of the Government of the United Kingdom concerning the lack of detailed analysis and the brevity of the document under discussion, it should be noted that the 28th report of the JIU on its activities for the year ended 30 June 1996 had still not been officially received by the ILO, but that a copy had been obtained from the United Nations and reproduced for the Committee. The format of the report had changed by comparison with previous years in that it no longer described the substance of the various JIU reports, which explained why a detailed analysis of the JIU report's contents had not been possible.
48. With regard to the observations by the representative of the JIU concerning delays by the ACC in reviewing JIU reports, there was little the ILO could do in that area, and Governing Body procedures required that ACC reviews of JIU reports were available before those reports could be put before the Governing Body and its committees.
Financial arrangements for a Commission of Inquiry to examine the complaint concerning the observance by Myanmar of the Forced Labour Convention, 1930 (No. 29) made by delegates to the 83rd Session (June 1996) of the Conference under article 26 of the Constitution of the ILO
49. The Committee had before it a paper(11) detailing the expected costs of a Commission of Inquiry to examine the observance by a member State of an ILO Convention.
50. The representative of the Government of Japan, referring to the financial aspects of the proposal, requested more details regarding the number of persons involved in the proposed inquiry, the fees to be paid and the travel costs involved. He also requested clarification on the funding arrangements proposed in the paper.
51. Mr. Gray, speaking on behalf of the Workers' group, supported the point for decision, but remarked that it was not clear why constitutional obligations such as the one being proposed had not been provided for by the Office as unforeseen expenditure.
52. Mr. Marshall, speaking on behalf of the Employers' group, recognized the need for the Commission of Inquiry, but felt that a brief outline of the structure of the Commission, together with details of costs relating to its activities, would have been a useful aid to the Committee during its decision-making process.
53. The representative of the Government of Austria was surprised at the extent of the costs associated with the Commission of Inquiry, and wondered whether a less costly alternative was perhaps possible at a time when the Office was constantly seeking ways of cutting costs.
54. Mr. Blondel (Worker member) stated that the establishment of a Commission of Inquiry was a fundamental obligation of the Organization under article 26 of its Constitution, and that financial considerations should not in any way compromise that obligation. He wondered, however, whether it would be possible to determine the costs of such inquiries more accurately, and to include the provisions for such costs in the Organization's regular budget, thus ensuring that sufficient funds would be available as and when required. The complaint mechanism prescribed by the Constitution was extremely important and the funding aspect should be the subject of further study by the Office in order to ensure that constitutional obligations were not subjected to financial considerations in future.
55. The representative of the Government of Namibia, while supporting the point for decision, agreed with the remarks made by the representative of the Government of Japan that, given the substantial amount involved, further details regarding the proposed expenditure should be made available to the Committee, together with clarification as to the proposed funding of the Commission of Inquiry through savings in the regular budget.
56. Mr. Marshall said that the Employers fully supported the proposal in the Office paper in view of the ILO's constitutional obligations, but further financial information would be welcome. It would perhaps be prudent to create a provision for unforeseen expenditure specifically for similar cases in the future.
57. The representative of the Government of South Africa agreed with the remarks made by the representative of the Government of Namibia.
58. The representative of the Director-General (the Treasurer and Financial Comptroller) assured the Committee that no Commission of Inquiry had ever been curtailed or refused on financial grounds. With regard to the charging of the costs of the inquiry to savings in Part I of the budget rather than to unforeseen expenditure, the financial procedures required that expenditure could only be charged against Part II of the budget (Unforeseen expenditure) once Part I had been fully utilized. As discussed earlier by the Committee, Part I would not be fully utilized in the current biennium, and sufficient savings would be available to cover the Commission of Inquiry's costs for 1997.
59. For the 1998-99 portion of the Commission's costs, the point for decision had been worded to take into account the fact that the 1998-99 budget had yet to be approved. If the budget was approved and it was found that savings in Part I were not sufficient to cover the Commission's costs for 1998-99, the Director-General would then request the Governing Body's authorization to use Part II, Unforeseen expenditure. Activities such as a Commission of Inquiry were by definition unforeseeable and were not therefore normally incorporated in the budget. Part II of the budget (Unforeseen expenditure) existed specifically to provide for such contingencies.
60. With regard to the cost estimate, and in response to a number of requests for further details, the estimated costs could be broken down as follows:
(24 months' Professional and
12 months' General Service)
|Meetings in Geneva||22 845||26 175||49 020|
|Incidental costs||20 000||-||20 000|
|Three linguistic staff||-||32 770||32 770|
|Three ILO staff||-||29 250||29 250|
|Three Commission members||-||29 675||29 675|
|Translation costs||-||98 200||98 200|
|Total in US dollars||269 549||443 830||713 379|
61. The representative of the Government of Japan questioned the necessity of including 24 work-months of Professional staff and 12 work-months of General Service staff in the cost estimate for the Commission of Inquiry.
62. The representative of the Director-General (the Treasurer and Financial Comptroller), in reply to a question raised by the Workers' group and the Governments of the United States and Germany concerning the possible inclusion of the 1998-99 portion of the Commission of Inquiry's costs in the 1998-99 budget, pointed out that this could be done, but would prejudge a Governing Body decision, since the Programme, Financial and Administrative Committee would make a recommendation on the adoption of the Programme and Budget for 1998-99 to the Governing Body before the latter had taken a decision regarding the establishment of a Commission of Inquiry.
63. With regard to a question raised by the Government of Japan, the inputs proposed by the International Labour Standards Department were in line with those pertaining to past cases such as those that had concerned South Africa and Romania. The Department estimated that it was absorbing 18 Professional work-months and four General Service work-months prior to resorting to supplementary credits.
64. The representative of the Government of Chile stated that the Committee on Legal Issues and International Labour Standards had been working towards a stronger supervisory system and that it was possible that financial and budgetary procedures would have to be reviewed and adapted to reflect that goal in future.
65. Mr. Blondel (Worker member) insisted that the procedures addressed by article 26 of the Constitution of the ILO were exceptional. It would be helpful to know how many such cases had been submitted during the past 20 years. The cost of the current submission might appear high, but this was because it used a great deal of professional resources and external experts' time. This should not mean that this particular case should be blocked, or indeed that the Constitution should be revised, as this exceptional procedure was only invoked in very particular cases.
66. The Treasurer, in reply to Mr. Blondel, explained that there had been four Commissions of Inquiry in the past 12 years: in 1986 with respect to Germany; in 1991 with respect to Nicaragua and Romania; and in 1991-92 with respect to South Africa.
67. The Committee recommends to the Governing Body that, should it decide to establish a Commission of Inquiry concerning Myanmar --
(a) an honorarium at the rate of $300 per day be paid to each member of the Commission of Inquiry;
(b) the cost of the Commission in 1997, estimated at $270,000, be financed by savings in Part I of the budget; and that the cost in 1998-99, estimated at $445,000, be financed in the first instance from savings in Part I of the budget on the understanding that, should this subsequently prove impossible, the Director-General would propose alternative methods of financing at a later stage in the biennium.
Geneva, 26 March 1997. (Signed) C. Gray,
Points for decision: