At the upcoming meeting in Rome from 26 July to 3 August, UN
Pension Board members will be chewing over the OIOS (UN Office of Internal
Oversight Services) comprehensive governance audit called for by the General
Assembly under para. 8 of its res. 72/262 (now in provisional format pending editing and
publishing --see summary of some of the audit's findings below).
The members of various Board factions must dig deep, access
their higher selves, move beyond self
interest, and work toward unified positions
that place the collective interests of members above their own self interest.
It'll be a challenge, not least in considering the composition
of the Board, which the audit notes needs to be “fair and equitable …to reflect
the actual distribution of active participants in the Fund”. Currently the UN family has 68 per cent of active participants and only 36 per cent of
voting members, while other members including Specialized Agencies, have 32 per
cent of active participants and 64 per cent of voting members.
The Specialized Agency representatives must consider that having
a majority of voices and a minority of Fund members works against the overall
interests of the Fund and rise above any tendency toward illogic in thinking of
the audit as a plot to deprive them of their surfeit of seats and influence on
the Board.
FAFICS, the retiree representative organization, must find a way to move beyond its contentious and
fallacious position that OIOS has “exceeded its mandate in attempting to
interfere in the internal workings of an autonomous body” as well as the
fiction that “it is not within the
authority of the Pension Board or the General Assembly to establish
requirements for retirees to select its own retiree representatives” which is
the “sole prerogative of FAFICS”. The some 50,000 retirees and beneficiaries
who are not members of, or may never have heard of, FAFICS, might tend to
disagree.
The Board, including its Audit Committee, will have to face up to the fact that the audit corroborates
and sets out the various findings of oversight bodies and internal audits over
the past four years, concerning the myriad ways in which the CEO has used his
dual position as Secretary to the Board to manipulate the Board and Audit Committee and try to make
changes including to the structure of the Fund without consultation, and
against the interests, of stakeholders, and the equal number of ways that the
Board and the Audit Committee have failed to hold him accountable.
The Audit Committee will have to own up to its failure to hold the CEO to account when he underreported the
extent of the backlog; and when it accepted and submitted to the GA a report
from a consulting company that gave a positive report on IPAS (the Fund's IT system) implementation, which
was reflected in GA resolution 72/265, and which findings were subsequently
contradicted by the Board of Auditors.
The Board must also accept the audit’s findings, and related
recommendations, among others:
- that the Board used
the CEO’s s own self-evaluation as a basis for trying to push through his
reappointment in 2016, and again in 2017;
- a
lack of basic competency requirements or restrictions of conflict of interest
in the Board members themselves;
- that the Fund failed
to report, and abdicated all responsibility for, 15,000 cases in the backlog,
because of missing documentation, on which it failed to follow up despite that
task being among its responsibilities under the UN Staff Pension Committee;
- a lack of
transparency and accountability on the part of the Board, and unnecessary
control of information to Fund stakeholders;
- a lack of
independence and impartiality on the part of the CEO when he accepted an
award from a vendor that had previously employed him, and insisted on that
vendor being contracted, incurring an additional commitment of $1 million
beyond the lowest bidder;
- a lack of integrity and ethical values represented
by conflicts of interest in the selection and activities of senior Fund staff
and three cases of verified retaliation against Fund staff;
- that
there was deviation and arbitrariness in the process to select a replacement
DCEO and that it needs to be redone;
- a lack of performance
evaluation and succession planning for both the DCEO and the CEO.
We can expect
the UN participant representatives to do their utmost to advocate for action, in
response to the governance audit, that is in the interests of active staff and
retirees and beneficiaries alike. But we should not underestimate the challenge
they’re facing.
This is the
moment for the Board to show that it’s capable of self-reflection and change,
and get on board the effort to increase oversight and effective management of
our Fund.
The General
Assembly and its Advisory Committee on Administrative and Budgetary Actions
(ACABQ), and the Secretary-General, who has ultimate fiduciary responsibility
for the Fund, will get their turn. The findings of the governance audit are yet
another indication that the tide of change is gaining momentum and will be ever more difficult to turn back.
Summary of some audit findings
“The audit showed that the Board needs to strengthen its
governance in critical areas such as: (i) fair and equitable representation of
member organizations on the Board; (ii) entrusting its Standing Committee to
provide more effective oversight of the United Nations Joint Staff Pension
Fund’s operations; (ii) separation of functions of its Secretary and the Fund’s
Chief Executive Officer (CEO) to ensure the Board’s independence from the
Fund’s management; (iv) effective performance management to promote a culture
of accountability; and (v) setting the appropriate tone with regard to
integrity and ethical values.
The Board also needs to take additional steps including: (i)
facilitating transparent and democratic representation of beneficiaries; (ii)
retiring its Assets and Liabilities Monitoring Committee which duplicated the
work of the Investments Committee and the Committee of Actuaries; (iii)
ensuring that the Fund’s Secretariat utilizes resources in accordance with
legislative decisions; and (iv) proper succession planning for the positions of
CEO and Deputy CEO to allow adequate time for their competitive selection.”
Board competency
There are no terms of reference, competencies, and no
limitations or restrictions to avoid conflicts of interest.
Board composition
Although the Board membership is 33 and decisions are to be
taken by a majority of members present, the Board operates on consensus among a
bloated number of almost 100 members and alternates.
The Board composition bears to resemblance to its actual
membership. UN Specialized Agencies have one-third of active participants and
two-thirds of board seats; the UN family has two-thirds of active participants
and one-third of board seats.
Retiree representation and role of FAFICS
Among
the audit’s findings are "FAFICS only represents 18,500 beneficiaries (approximately 25 per cent) out of a total beneficiary population of 74,788 as of 31 December 2016; conflicts of interest between FAFICS representatives
to the Board and the Fund management; a discrepancy (for the last two biennia)
in the absorption by the Fund of the cost of six retiree representatives to
attend each Board session instead of three as approved by the GA and the Board;
the dissemination of erroneous information by the FAFICS president, including
about the backlog in pension payments; electronic circulation to beneficiaries
(including the vast majority who were not FAFICS members) by the Fund
Secretariat of a letter from the FAFICS president of January 2018 that “gave
the appearance of “collusion between FAFICS and the Fund’s Secretariat to
challenge the authority of the Secretary-General and the General Assembly in
governance matters of the Fund…”; and attendance of two retiree
representatives to the meetings of Staff Pension Committees “which are
essentially a forum for participants…. further increase[ing] the influence of
FAFICS in the Fund’s governance structure.”
Frequency of Board meetings
The Board meets once a year for a week. It’s standing
committee which is set up to meet while the Board is not in session, has a
practice of meeting for a day while the Board is in session. A lack of attention to governance issues has
contributed to the problems which the audit was set up to address.
Role of the UN Appeals Tribunal
The CEO has pushed to assert primacy of Board decisions over
those of the UN Administrative Tribunal, in contravention of Fund regulations.
Staff Pension Committee – the backlog
The Fund Secretariat receives $20 million each biennium for
tasks that include follow up on missing documentation for UN family cases. The percentage of cases with missing
documentation for the UN SPC is 39 per cent compared to 13 per cent for the
Specialized Agency Secretariats. Yet, in the face of a backlog of 15,000 cases, the Fund continues to insist that follow up
on missing documentation is the responsibility of member organizations.
Audit Committee
The Audit Committee needs to use a “higher standard in
managing perceived conflict of interest situations” and ensure “adherence to
higher ethical standards” including when the CEO accepted an award in
contravention of the relevant UN administrative instruction; and when the Fund
engaged an accounting firm to the tune of more than $100, 000 to produce a risk
register which was never produced; and when it accepted the Fund’s management
assertions that its non-implementation of OIOS recommendations was because it
“had lost confidence in OIOS”.
Checks and balances between the Board and Fund
Management- dual role of the CEO
The CEO’s dual role as Board Secretary and CEO allowed him
to control the Board’s self-evaluation and information presented for his own
performance evaluation; to abolish the
quality management policy set up to hold him accountable to the Board; to present
proposals to alter the Fund’s governance by “ending the bifurcated structure”
and “empower himself to amend the Fund’s administrative rules”; to attempt to empower
himself to restrict the authority of the Board of Auditors; to present
incomplete information by which the Fund’s Executive Office was dissolved, with
payment of salary to two staff members ($2.4 million over almost three years)
although they were no longer working for the Fund, without disclosing this
information to the Board; to fail to recover renovation costs on unutilized
office space for more tan two years, leading to a financial loss for the Fund
of between $100,000 to 220,000 as of May 2018.
In 2016 the CEO presented to the Board a positive report on
IPAS implementation prepared by a consulting firm improperly hired using a
contract for accounting services, at a cost of $291,200. The Board “reported the project’s success,
which the Assembly welcomed (res. 71/265). A subsequent audit by the Board of
Auditors found several problems with IPAS, including incorrect data provided to
the actuaries “which led to unreliable actuarial valuation.”
The audit concludes that there is an excess of authority
concentrated in the hands of a single individual, as CEO and Secretary to the
Board, who controls the accuracy and content of information submitted to the Board
and “significantly compromises checks and balances”.
Performance reporting
The Fund failed to report 15,000 cases in the backlog
claiming that it “wasn’t responsible for them until all three documents were
received”, while it was also failing to follow up on the missing documentation.
Performance evaluation of the CEO and Deputy CEO
In 2016, prior to its push for early reappointment of the
CEO, the Board’s “bureau” did a
performance evaluation of the CEO based on the 2014-2015 cycle, which either
excluded or failed to prioritize “clear deliverables and indicators…quality of
core services, operational efficiency or implementation of critical projects”
and his performance as Secretary of the UN Staff Pension Committee. “The
evaluation relied significantly on a self-appraisal submitted by the CEO which
understated performance issues such as delays in benefit processing and
overstated achievements such as implementation of IPAS.” The performance of the
Deputy CEO was never evaluated.
Culture, tone, and attitude of the organization
Under the heading of “culture, tone and attitude” of the
organization, the audit found a lack of transparency and accountability,
including unnecessary restriction against the sharing of documentation from the
Fund’s stakeholders “who may not be assured of accountability if the required
transparency and access to information is absent”.
Independence and impartiality
On “independence and impartiality”, the CEO accepted in 2016 an award
from a vendor where he had previously been employed, which in 2012, the then CEO, i (when Arvizu was Deputy CEO) had contracted against
the advice of the Headquarters Committee on Contracts, “which resulted in
rejecting the lowest acceptable proposal and incurring an additional commitment
of $1 million (OIOS report 2016/136).”
Integrity and ethical values
Under “integrity and ethical values”, the audit cites a
number of cases of conflicts of interest in selection of staff, and actions by
senior staff, and three cases of Fund staff where the Ethics Office had
established that retaliation had taken place.
Resource distribution
Under “resource distribution” the Fund systematically used
more resources for support functions than for its programme of work; Fund
reorganization took place that prioritizes a legalistic rather than managerial
approach toward risk and control; there
is a disproportionate number of senior level posts; and questionable use of
temporary resources to fund senior-level posts.
Shortcomings of the search process
The audit cites “shortcomings of the search process” for replacing
the Deputy CEO, Regarding a lack of succession planning, “in light of deviations and apparent
arbitrariness in the process” the audit recommends that the process be
restarted. Under “succession planning” the audit cites a lack of timely and
adequate performance evaluation of both the CEO and DCEO and succession
planning despite adequate notice of the DCEO’s planned retirement, and the fact
that the CEO was on extended sick leave. It calls on the Board to “ensure
proper succession planning [for both positions] to allow adequate time for
their competitive selection based on pre-established procedures.”
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