There’s an information briefing scheduled
for today, Wednesday, 21 March 2018, in conference room F, by the UN
participant representatives/members of the UN Staff Pension Committee.
A major question for the briefing is what
remedial measures have been taken as called for by General Assembly resolution
72/262 to address serious problems in the Fund.
The UN internal governance
audit of the Pension Board, called for by the Assembly, is currently being
conducted by the UN Office of Internal Oversight Services (OIOS).
Prospects for
meaningful improvements in Fund management are slim without Pension Board
reform and radical changes in its membership with a focus on professionalism,
transparency, and accountability to optimize its oversight function.
In the meantime, there’s a management vacuum
in the Fund Secretariat, and the leadership of the UN retiree organization (FAFICS) continues its
state of denial, as confirmed by a letter from the outgoing president of AFICS
Australia dated 20 February 2018 addressed to members (link below).
On the investment side,
time will tell how the Secretary-General through his Representative for
Investments addresses chronic investment underperformance and risks in foreign
exchange losses with the potential to threaten the long-term sustainability of
the Fund, as mentioned in the Assembly's resolution.
In the Fund Secretariat, what is being done, and by whom, to address the following outstanding problems (not an exhaustive list) given the current management vacuum – the Chief Executive Officer reportedly on leave for the past several months, and his Deputy expected to retire in August 2018, and who, if anyone is being held accountable:
a) the backlog in pension payments that still affects thousands of long-suffering survivors, including widows and orphans, and new retirees;
b) shortcomings in the new IT system, including increases in manual processing, and the possible susceptibility of the infrastructure to security breaches as reported by OIOS audit 2017/104;
c) inaccurate data provided by the Fund Secretariat for the actuarial valuation, as reported by the Board of Auditors (A/72/5.Add.16), and related funds paid to consultants; and,
d) mismanagement of contracts and procurement detailed by OIOS audit 2017/110?
e) establishing a client grievance redressal system.
Status updates on these issues are nowhere to be found in the newsletters, updates, or on the websites of the Fund or the UN retiree organization, FAFICS, none of which make any mention whatsoever of UN internal audits of these issues.
The continuing pension payment
backlog and flaws in the IT system
Although the silence on the issue is deafening, the sad reality is that the payment backlog continues and thousands
of long-suffering survivors and new retirees remain to be paid. Recall OIOS audit 2017/104 which found that flawed managerial decisions behind the
payment backlog caused beneficiaries (survivors and new retirees) to wait for
months and some for more than a year to receive payment. Moreover, weaknesses
in the IT system have increased manual processing; the system and its
infrastructure may be susceptible to security breaches; and a majority of
top-priority benefit types (survivor, disability and reinstatement benefits)
were not included in testing. As a consequence of these persistent problems,
the audit noted, the monthly average of processed cases is barely over the
average for the old system, despite a $1.3 million task force set up to defray
the backlog in pension payments.
Inaccurate data for the actuarial
valuation
Recall also that Board of Auditors report
A/72/5/Add.16 noted that the latest actuarial valuation was unable to be
completed because of inaccurate data provided by the Fund Secretariat. Although not mentioned by the BOA, it is reported that some $285,000 was paid by the Fund to the consultants who were unable to complete the work.
Irregularities in contract
management and procurement
OIOS
audit 2017/110 identified disturbing deficiencies in procurement and contract
management in the Fund Secretariat, recalling concerns in recent years about
Arvizu’s attempts to change the financial rules on procurement. The audit found
that contractual services were the largest segment of non-staff costs (63.2
percent) during the 2014-2015 biennium; and that the Fund spent $2.2 million on
a contract with a vendor, reportedly PriceWaterhouseCoopers, for accounting
consultancy services. Of the total amount, only $497,815, or 21.8 percent, was
for services within the scope of the contract. The remaining 78.2 percent of
the work was related to non accounting services outside the contract, yet the
work was “awarded, certified, and paid,” according to the audit, including
$495,000 not listed in the formal proposal and resulting from “top-heavy
billing of hours.”
Establishing a client grievance
redressal system
Board of Auditors report
A/72/5/Add.16, para. 111 noted that while the Fund has taken certain steps to
improve client servicing, including opening a call center in 2016; and adding a
member self service section to the website (quote): “in the absence of a
documented client grievance redressal mechanism, there is no guidance on
segregation, prioritization or a timeline for the disposal of queries ….no centralized
reporting system with respect to monitoring the status of queries…and no system
of obtaining feedback from the clients…which is a very basic requirement of any
organization providing client service.”
Board composition and reform
The current audit of the governance of the Pension Board,
including checks and balances between the Board and the Fund management, must
also address issues of composition and imbalance in representation which has exacerbated
the Board’s split into UN and non-UN groupings, evidenced in its oversight
failures.
UN retiree
representation
FAFICS (the
Federation of Associations of Former International Civil Servants) sits on the
Pension Board (four
members and two alternates, without voting rights but with the ability to speak)
where it wields considerable influence as representatives of almost 80,000 UN
retirees world-wide, almost one-third of the entire UNJSPF membership. In a recent “update” to retiree associations
world-wide, the FAFICS president stated
that the payment backlog was “largely a thing of the past” and that her
“considered opinion” was that implementation of the IT system was “largely
successful”.
Recently, the
FAFICS president took the unusual step of trying to pre-empt a letter to the UN
Office of Internal Oversight Services, signed by 297 retirees, requesting OIOS
to consider, in conducting its governance audit called for by the Assembly, issues
of legitimacy in FAFICS representation, by writing her own letter disparaging
retirees and dismissing the concerns expressed in the letter.
The AFICS Australia president’s letter dated 20 February
2018 appears to recognize that its retiree membership is ill-served by the FAFICS
leadership and concludes as follows "The FAFICS leadership should be
strongly reminded by its members that its task is to protect, defend and
advance the rights of all UN retirees, not those of the CEO, no matter how nice
a fellow he is personally" (See link below for the full text of the letter).
Need for professionalized Pension
Board membership
The
General Assembly and the Advisory Committee on Administrative and Budgetary
Questions (ACABQ), the Board of Auditors, and OIOS, have done laudable work in
detailing the issues on both sides of the Fund, and calling for necessary action
to address them, including the current OIOS governance audit.
The UN staff unions and UN participant representatives have worked tirelessly and courageously in the interest of Fund members and in the face of intimidation by the Board and Fund leadership.
For his part, the Secretary-General has taken action to put things
right by appointing a new Representative for Investments, and opting for a
three-year instead of five-year contract for the Chief Executive Officer, with continuation of his contract subject to a performance review this summer.
Which brings us full circle to
the question of what, if anything, one can reasonably expect concerning the
issues to be addressed by the Pension Board (which includes the leadership of the UN retiree representative organization) and the Fund management, given their current
performance deficits.
In short, it’s clear that there’s
much work left to be done and problems to be overcome. It’s also clear that nothing short of recommendations
by the Office of Internal Oversight Services, and implementation by the
Assembly and the Secretary-General, of radical changes to address deficiencies
in the Board, with a focus on professionalism, transparency, and
accountability, will produce the necessary changes in Fund management to ensure the continued health of our Fund.
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