audit of the public sector alliances and resource ... · pdf fileinternal audit of the public...

Internal Audit of the Public Sector Alliances and Resource Mobilization Office

(PARMO)

December 2013

Office of Internal Audit and Investigations (OIAI)

Report 2013/54

Internal Audit of the Public Sector Alliances and Resource Mobilization Office (2013/54) 2 ____________________________________________________________________________________________

Summary The Office of Internal Audit and Investigations (OIAI) has conducted an audit of the Public Sector Alliances and Resource Mobilization Office (PARMO). The audit was conducted from May to July 2013, and covered the period from January 2012 to May 2013. PARMO has the lead responsibility for UNICEF’s overall resource mobilization from public sector donors. (“Resource mobilization” and “fundraising” are often used interchangeably, but the former also includes mobilizing resources in the form of people, partnerships, or equipment. However, fundraising is its largest single component.) As UNICEF’s primary liaison with donor governments, PARMO is responsible for the management of the overall relationship with them. It works both through partnerships with public‐sector donors, and by providing UNICEF offices with advice and support for their own resource‐mobilization efforts. In an uncertain global economic environment in 2012, PARMO raised US$ 2.84 billion (US$ 2.75 billion in 2011) as income from public sector resources. This constituted 72 percent of UNICEF total revenue and exceeded the target by 15 percent or US$ 365 million. The share of UNICEF’s total regular resources raised by PARMO was 48 percent. (Regular Resources are core resources that are not earmarked for a specific purpose, and can be used by UNICEF wherever they are needed.) As of July 2013, PARMO had 58 approved posts, of which six were vacant. PARMO has offices in New York, Brussels and Tokyo. Its New York office is divided into eight clusters, of which seven manage a specific portfolio of donors (including inter‐UN organizations) and one coordinates strategic planning, field support and advocacy. The office in Brussels leads engagement with the European Union; and the Tokyo office, with Japan and the Republic of Korea. The approved budget of PARMO for 2012‐2013 was US$ 21 million. UNICEF initiated an organization‐wide Effectiveness and Efficiency review of headquarters functions in 2012. In May 2013 it identified several proposals, and two of them related to fundraising and contribution management (areas that directly relate to PARMO’s activities). The audit did not review the basis of the proposals. As of the end of the audit, the exercise was on‐going and PARMO considered them in formulating the agreed action plans.

Action agreed following audit As a result of the audit, and in discussion with the audit team, PARMO has agreed to take a number of measures, in association with other divisions and offices as appropriate. The Office of the Executive Director has agreed to implement the following two as high priority:

Issue a revised executive directive on fundraising, setting out the strategic vision and implementation framework for UNICEF’s resource mobilization and outlining the roles and responsibilities assigned to PARMO and other UNICEF organizational units.

Establish a strategy at the global level to improve the quality and timeliness of donor reports; and clarify responsibilities regarding oversight and support on donor reporting.


Conclusion The audit concluded that overall, subject to implementation of the agreed actions described, the controls and processes over the management of public sector alliances and resource mobilization, as defined above, were generally established and functioning during the period under audit. The Office of the Executive Director and PARMO will work with OIAI to monitor implementation of the measures that have been agreed.

Office of Internal Audit and Investigations (OIAI) December 2013


Contents Summary 2 Objectives and Scope 5 Audit Observations 6 Governance of public sector alliances and resource mobilization 6

Satisfactory key controls 6 Risk management 6 Roles and responsibilities 7

Governance area: Conclusion 9

Donor relationship management 10 Satisfactory key controls 10

Guidance on donor visibility and recognition 10 Donor information systems 11

Emerging‐economy donors 12 Donor relationship management: Conclusion 13

Oversight of contributions management 14 Structures and mechanisms for grant management 14

Review and approval of donor agreements 15 Donor reporting 17 Grant extensions and amendments 18 Expired grants 20

Oversight of contribution management: Conclusion 21 Annex A: Methodology, and definition of priorities and conclusions 22


Objectives and Scope The objective of the audit was to provide assurance as to whether there were adequate and effective controls, risk‐management and governance processes over the following areas selected for audit:

Governance of public sector alliances and resource mobilization.

Donor relationship management.

Oversight of contributions management. The report is split into the three areas mentioned above. The introductory paragraphs that begin each of these sections explain what was covered in that particular area, and between them define the scope of this audit. Where appropriate, the report also identifies satisfactory key controls in these three areas. The audit reviewed the grants involving PARMO and not those handled by other divisions. The audit did not review the use of grants for compliance with agreements, since the responsibility for managing the contribution rests with the office that received it (country or regional office, or HQ division). OIAI reviews these areas as part of the internal audit of the office concerned. The audit covered the period from January 2012 to March 2013. Effectiveness and efficiency: UNICEF began an organization‐wide Effectiveness and Efficiency review of headquarters functions and processes in 2012. In May 2013, it identified several proposals and two of them were related to fundraising and contribution management (areas that directly relate to PARMO’s activities). They were as follows:

Establish a fundraising strategy and division of labour to adapt to the changing donor landscape.

Streamline donor reporting and cash management through an improved contributions management unit.

The audit did not review the basis of the proposals. As of the end of the audit, the exercise was ongoing, and PARMO and the Office of the Executive Director considered them in formulating the agreed action plans.


strategy or policy), should be escalated to the appropriate risk owner for timely and appropriate action. Although PARMO and PFP are identified as the risk owners for “funding and external stakeholder relations”, there are risks related to public sector resource mobilization that cut across multiple offices, have wider impact beyond PARMO, and require global corporate action or policy change. Such risks would need to be escalated beyond the risk owner for better coordination, involving assistance from the Deputy Executive Director (External Relations) and the ERM focal point in UNICEF’s Change Management Office (CMO). Risks and opportunities in resource mobilization that require such escalation can relate to coordination between PARMO and other divisions. This could be the case for PFP in the context of the One Country approach,2 or country offices seeking Regular Resources without affecting available opportunities for thematic or Other Resources,3 or crafting and negotiating complex clauses in grant agreements. There are several other examples. These risks had not hitherto been escalated because the new guidelines on escalation were issued only in March 2013. As of the end of the audit, PARMO indicated that it had updated its risk assessment in the Performance Management System. Agreed action 1 (medium priority): The Public Sector Alliances and Resource Mobilization Office, as the main risk owner for public sector resource mobilization, agrees to conduct annual reviews of risks related to public sector resource mobilization, including those that cut across multiple offices, have wider impact beyond PARMO, and/or require global corporate action or policy change. It also agrees to escalate the risks that cannot be addressed by PARMO to the Deputy Executive Director for External Relations as part of their ongoing meetings, for review and guidance in accordance with the Risk Assessment and Reporting Guidelines. Responsible staff: Director, Deputy Director and Senior Advisor for Strategic Planning, Field Office Support and Advocacy Date by which action will be completed: Ongoing with annual review and reporting on risk assessment in line with PARMO’s OMP and Performance Management System.

Roles and responsibilities UNICEF’s strategic vision and implementation framework for resource mobilization with governments and intergovernmental organizations have been outlined in two executive directives over the last two decades. The first, CF/EXD/1994‐005, established field offices as partners in fundraising for UNICEF, and 2 The One Country Approach aims to create an agreed agenda with clear goals, actions and accountabilities for different UNICEF offices involved in NATCOM countries. (A NATCOM is a National Committee for UNICEF in a donor country.) The cardinal rule of the ‘One Country Approach’ is that there should be no “one size fits all”, with an approach tailored to the unique contexts in each of the 36 NATCOM countries. See Mobilizing Resources in a Changing Environment: UNICEF Strategy and Action Plan 2011‐2012 (page 15). 3 As stated earlier,Regular Resources are core resources that are not earmarked for a specific purpose, and can be used by UNICEF wherever they are needed. Other Resources are contributions that may have been made for a specific purpose such as a particular programme, strategic priority or emergency response, and may not always be used for other purposes without the donor’s agreement. Country offices are expected to raise the bulk of the resources it needs for the country programme itself, as Other Resources.


defined their specific fundraising responsibilities and their relationship in this area with regional offices and relevant HQ divisions. The subsequent directive, CF/EXD/2003‐13, stated: the fundraising goal (to raise resources to help children); the objectives for 2002‐2005 in terms of regular resources and other resources and the related fundraising framework; and how UNICEF would address new challenges and opportunities. CF/EXD/2003‐13 specifically assigned the Programme Funding Office (PFO, now PARMO) to “orchestrate UNICEF’s overall resource mobilization within the framework of the Medium‐Term Strategic Plan, coordinating with all other UNICEF organizational units”. To deal with new challenges and opportunities, the directive also made PFO the convenor of a group composed of PD, PFO, DPP, and DFAM4 “to provide timely, efficient and effective guidance and decisions on non‐standard funding modalities”. PARMO refers to the executive directive CF/EXD/2003‐13 as its main policy document. The directives were issued in the context of major changes both within UNICEF and in the general environment for public sector resource mobilization, and they helped shape the way forward and the policies governing resource mobilization efforts. However, there has not been a similar executive directive since 2003, although significant changes have taken place within UNICEF and in its operating environment. For example, as part of the on‐going Effectiveness and Efficiency review, PARMO has identified areas that would benefit from clarification of accountabilities, including management of the Global Polio Eradication Initiative, or GPEI (between PARMO and PD), and inter‐agency common policy positions on development funding and transition financing (between PARMO and GMA5). The significance of the role of PD and Office of Emergency Programmes (EMOPS) in resource mobilization (including Central Emergency Response Fund and Humanitarian Thematic Funding) also needs clarification. PARMO has also perceived the need to engage with countries on a more streamlined and coordinated basis with GMA and EMOPS, especially since currently all three Divisions hold lead responsibilities in donor intelligence‐gathering and analysis, liaising with specific missions to the UN, and policy advice. Further, the role of the Tokyo office in fundraising needed to be clear. These and other concerns were captured in the Effectiveness and Efficiency review proposal to “establish a global resource mobilization strategy and division of labour to adapt to the changing donor landscape”. This review was on‐going as of the time of the audit. In addition to the above, other significant changes influencing UNICEF since the 2003 executive directive include the introduction of Enterprise Risk Management. They also include an increased need for collaboration between PARMO and PFP (together with National Committees) in the context of the need to increase core resources, public‐private partnerships, the One Country Approach and decentralized donor decision‐making. The UN General Assembly’s 2012 resolution on the ‘full‐cost recovery principle’ will also influence organizational resource mobilization strategies, since it will lead to a larger share of core resources being allocated to programme activities; in so doing, it will make provision of core resources more attractive to donors. It will also have an effect on different types of contributions such as government cost‐sharing and South‐South cooperation. In this context, and given the time that has elapsed since the previous directives, a clear

4 PD = Programme Division; DPP = Division of Policy and Practice; DFAM = Division of Financial and Administrative Management. 5 GMA is UNICEF’s office of Governance, UN and Multilateral Affairs.


organizational policy on resource mobilization, issued as an executive directive, would improve consistency between UNICEF offices in their understanding of the vision, strategies, principles and accountabilities underlying the resource mobilization activities. Oversight of contributions management: Contributions management processes typically involve multiple divisions and offices, depending on the nature of the contribution. In general, PARMO, country offices and DFAM are involved in all grants related to public‐sector contributions, and some cases may also involve regional offices and HQ divisions. The Programme Policy and Procedures Manual (PPPM) emphasizes that the primary responsibility for contributions management resides with the office (country office, regional office, HQ division) managing the grant, and that regional offices, in collaboration with Division of Policy and Strategy (DPS), have an oversight role with regard to the use of funds in accordance with the donor agreements. However, the institutional/corporate oversight responsibilities and procedures were not clearly articulated in policy documents such as the PPPM or PARMO’s draft directive on Contributions to UNICEF and Management of Other Resources Contributions. In their responses to an audit questionnaire, regional offices indicated the need for increased system support and advice for monitoring and overseeing the contributions management functions. The launch of the VISION regional dashboard, under development at the time of the audit, was expected to increase regional offices’ capacity to oversee the performance of country offices regarding contributions management. Organization‐level system reports that are not currently available, but which could enhance global oversight and overall donor engagement, would include causal analysis for refunds and reprogrammed amounts of grants, underspent/overspent contributions, ageing reports for expired grants, proportion of funds utilization to elapsed grant period, and ageing of receivables. Clear assignment of oversight responsibilities, and adequate institutional‐level monitoring indicators and systems, would help provide enhanced global oversight on contributions management, and more effective engagement with donors. As part of the organization‐wide Effectiveness and Efficiency review that was on‐going at the time of the audit, the Office of the Executive Director had already identified the need to establish a fundraising strategy and division of labour to adapt to the changing donor landscape; and to streamline donor reporting. This would inform the revision of the executive directive on fundraising, including contributions management. Agreed action 2 (high priority): The Office of the Executive Director agrees to issue an executive directive stating the strategic vision and implementation framework for UNICEF’s resource mobilization function, and outlining the roles and responsibilities assigned to PARMO and other UNICEF organizational units. Responsible staff: Deputy Executive Director for External Relations Date by which action will be completed: September 2014

Governance area: Conclusion Based on the audit work performed, OIAI concluded that, subject to implementation of the agreed actions described, the controls and processes over the Governance area, as defined above, were generally established and functioning during the period under audit.


2 Donor relationship management In this area, the audit reviewed the structures of engagement with donors and the processes for partnership development and for protecting and increasing public‐sector funding. The scope of the audit in this area included the following:

Intra‐divisional structures and capacity for effective engagement with donors.

Systems and tools for gathering and sharing intelligence on funding opportunities, donor trends and priorities amongst HQ divisions, country offices and regional offices.

Mechanisms for soliciting, evaluating and responding to donor feedback.

Cohesion in communications and advocacy strategy amongst country offices, regional offices and HQ divisions.

Satisfactory key controls There was clear demarcation of responsibilities for donor engagement between the divisional staff. This was managed through creation of clusters in New York and offices in Brussels and Tokyo with designated staff representing specific portfolios of public‐sector donors. In addition, PARMO’s offices in Brussels and Tokyo enabled strategic engagement with the European Commission (and other European Union institutions); and with Japan and the Republic of Korea respectively. PARMO had also maintained strategic engagement, including face‐to‐face meetings with donors, which contributed to mobilizing US$ 2.84 billion in 2012 from public sector donors (15 percent more than the target). PARMO had prepared an Advocacy and Communication Strategy 2012‐13 to provide UNICEF staff engaged in resource mobilization with a concise, comprehensive and actionable overview of the organization’s advocacy and communications activities. About once a month, it also issued a succinct one‐page newsletter with: updates on the global economic situation, aid efficiency, effectiveness and results; insights on development cooperation strategy and trends; and global aid environment and perspectives. The Brussels office issued a quarterly newsletter to provide useful information about developments in the European Union (EU) aid environment; this was being circulated to all UNICEF offices. In 2012, PARMO Brussels Office continued to position UNICEF as a strategic partner for EU institutions – which led the EU to donate its Nobel Peace Prize money to UNICEF for its work in Pakistan. PARMO obtained feedback from resource partners through formal and informal procedures including Executive Board interaction, donor assessments, consultations and donor briefings.

Guidance on donor visibility and recognition Recent experience has shown that donors prefer to support highly visible programme interventions and that they need visibility and recognition of contributions (not only financial but also supplies and materials) to justify their investments. PARMO has received various types of donor requests for visibility and recognition including an expression of thanks in reports and publications, use of donors’ names and logos in press reports, or a press conference and a TV event to announce the grant. However, the audit found no specific guidance on criteria to be applied consistently and fairly across all offices and divisions. At the


time of the audit, PARMO and the Division of Communication were working together to finalize the donor visibility and recognition guidelines. Agreed action 3 (medium priority): The Public Sector Alliances and Resource Mobilization Office agrees to, together with the Division of Communication and with the participation and inputs from Regional and Country Offices, finalize and disseminate guidelines on public sector resource partners visibility and recognition. Responsible staff: Senior Adviser for Strategic Planning, Field Office Support and Advocacy (PARMO); Deputy Director (Division of Communication) Date by which action will be completed: 31 March 2014

Donor information systems The document entitled Organization of UNICEF (E/ICEF/Organization/Rev.3 dated 24 April 1998) requires PARMO to maintain up‐to‐date information on actual and potential donors and produce donor profiles. PARMO currently has a system for maintaining donor profiles within the intranet (by country) and also uses Google Maps for highlighting donor priority countries, websites, main thematic areas of interest, etc. Donor profiles typically include information on political context, ODA policies and processes, and partnerships with UNICEF. Different clusters within PARMO are responsible for keeping the donor profiles updated with latest donor intelligence and funding trends. However, the audit found that the nature and extent of donor information recorded varied, depending on the clusters managing it; there were no guidelines on what information should be available on the intranet, or how often it should be reviewed and updated. Regional offices have indicated that the current process is not systematic enough for coordinated engagement by HQ, regional and country offices, and that donor intelligence and opportunities are not shared systematically across the three levels. Regional offices also commented that field offices that contacted PARMO when meeting with donors found that it did not always have information on the strategic approach of specific governments – which can be critical when discussing regional cooperation. This was especially important in the absence of a mechanism for systematic feedback from country‐ and regional‐level strategic engagement with government donors that could assist donor relationships at global level. PARMO, with the Division of IT Solutions and Services (ITSS), had prepared a business case for development of an online template; this would have a standardized structure that staff could use to update donor profiles, and to enable direct participation by country and regional offices. Besides providing PARMO with the latest information, this should strengthen accountability within Divisions and promote communication and learning between country offices. There is an opportunity for greater coordination between PARMO and PFP in tools for donor intelligence. In 2012 PFP launched a “Funding Marketplace” tool for sharing content between the NATCOMs and the country offices. The next phase of the system’s development will allow country offices to edit documents and upload them back into the system, thus making it truly collaborative. A dashboard for country offices and NATCOMs was also being planned, along with options to integrate information from VISION to this web platform. Coordination between PARMO and PFP would also be useful for income forecasting. While PARMO does this using spreadsheets, PFP has been using market software. Greater


technological linkages between the donor intelligence systems of PARMO and PFP would assist resource mobilization, especially in the context of the One Country approach, increased focus on public‐private partnerships and the importance of engaging with NATCOMs. Enhanced coordination amongst divisions would increase efficiencies and resource mobilization. PARMO indicated that it had initiated steps to leverage the benefits of current systems with PFP. Agreed action 4 (medium priority): The Public Sector Alliances and Resource Mobilization Office (PARMO) agrees to: i. Launch PARMO’s Donor Partnership Management System (DPMS, Phase I), to gather and

disseminate resource partner intelligence for use by UNICEF staff, to facilitate and strengthen targeted partnership engagement.

ii. Develop tools such as Private Fundraising and Partnership Division’s ‘Funding Marketplace’ tool, for an external audience, to allow viewing information such as funding status per partner, funding gaps and reports.

Responsible staff: Senior Adviser for Strategic Planning, Field Office Support and Advocacy (PARMO); Deputy Director (Division of Policy and Strategy) Chief Programme, Donor Matching (PARMO) and ITSS specialist (Information Technology Solutions and Services) Date by which action will be completed: 31 March 2014 (i), 31 March 2015 (ii)

Emerging‐economy donors PARMO’s Office Management Plan (OMP) for 2014‐17 highlighted the strategic need to broaden the donor base, and emerging donors were considered important in this respect. There should be mechanisms in place to analyze a heterogeneous emerging donor base, and develop partnerships and mobilize resources accordingly. PARMO established a separate cluster to manage emerging donors in 2012. To broaden UNICEF’s donor base, PARMO expanded its partnerships with countries that had both UNICEF programmes of cooperation and good potential for resource mobilization, including the BRICS (Brazil, Russia, India, China and South Africa), Gulf countries and other middle‐income countries (MICs). Engagement with these countries also entails resource development opportunities in the nature of south‐south cooperation, government cost‐sharing, etc. For 2012‐2013, PARMO had prepared resource mobilization, advocacy and communications strategies for the BRICS, the Gulf and four other countries (Argentina, Mexico, Malaysia, and Turkey). The purpose of these strategies was to review current public and private sector resource mobilization activities, and identify funding trends, opportunities and suggestions for future engagement. The selected countries were chosen based on their funding potential and economic growth. PARMO informed the audit that it had started reviewing its emerging‐donor base so as to identify other MICs with funding potential. Agreed action 5 (medium priority): The Public Sector Alliances and Resource Mobilization Office (PARMO) agrees to update its resource mobilization, advocacy and communications strategies to include all middle‐income countries with funding potential. Responsible staff: Senior Advisor for Emerging Partnerships and Innovative Financing Date by which action will be completed: December 2014


Donor relationship management: Conclusion Based on the audit work performed, OIAI concluded that, subject to implementation of the agreed actions described, the controls and processes over the donor relationship management, as defined above, were generally established and functioning during the period under audit.


3 Oversight of contributions management In this area, the audit reviewed the effectiveness of the following:

Policy and procedures with respect to oversight responsibilities for contributions management.

Intra‐divisional structures and coordination for grant management in VISION.

Process for review and approval of donor agreements, grant extensions and amendments; and organization‐level monitoring systems for timeliness and quality of donor reporting.

Systems for monitoring expired grants (from grant expiry to grant closure in VISION). Contributions are recorded as grants in VISION, which captures their lifecycle from inception to closure. Grants are created in VISION by various divisions including PARMO (for public‐sector contributions), PFP (for private‐sector contributions), Supply Division (for procurement services on behalf of Government and other organizations), Division of Human Resources (for contributions related to Junior Professional Officers), and DFAM (for RR budget allocations, RR set‐aside, and RR for unfunded OR and Central Emergency Response Fund loans). This review covers only the grants which are authorized by PARMO in VISION. The audit did not review the utilization of the grants for compliance with agreements, since the responsibility for managing the contribution and ensuring its utilization for intended purposes rests with the office that is the recipient of funding (country office, regional office or HQ division). This review also excludes the processes for allocation of global thematic or multi‐country non‐thematic contributions, as these are not direct responsibilities of PARMO. In May 2013, the organization‐wide Effectiveness and Efficiency review of headquarters functions and processes proposed streamlining donor reporting and cash management through an improved contributions management unit. The audit did not review the basis for this proposal. As of the end of the audit, the exercise was ongoing and PARMO considered it in formulating the agreed action plans.

Structures and mechanisms for grant management Within PARMO, designated staff in New York, Brussels and Tokyo are assigned to manage specific portfolios of public‐sector donors. In the New York office, such assignment has been by ‘cluster’, each of which is headed by a Senior Advisor and aided by professional and support staff. Each cluster and office had its own designated staff to manage all aspects of contributions for its portfolio of donors, and could exercise flexibility in management of these processes. The key processes in the contribution management cycle, involving many stakeholders in the organization, are the management of new contributions; modifications (amendments, extensions etc.) to existing contributions; and reporting and closure of contributions. These processes in turn each involve a large number of activities, some handled by PARMO and some by DFAM. The Grants Management System in VISION, as a management information system for PARMO, did not fully meet the information and reporting requirements at the global and transactional level, and diluted user’s confidence in the system and reliability of its information. This led PARMO clusters and offices to develop ad hoc tools in isolation from each other. The existing structure of PARMO did not provide for effective coordination of work processes and


knowledge‐sharing among those of its staff entrusted with direct responsibility for contribution management. As part of the organization‐wide Effectiveness and Efficiency review that was on‐going at the time of the audit, PARMO staff had identified issues of inequity in terms of capacity and workloads of clusters and offices, non‐standardized job descriptions of contribution management staff, and ambiguity on responsibility and on reporting on results. Agreed action 6 (medium priority): The Public Sector Alliances and Resource Mobilization Office (PARMO) agrees to review its existing divisional structures for contribution management responsibilities, to ensure effective intra‐divisional coordination and improve inter‐divisional efficiency gains. PARMO also agrees to define its information monitoring and reporting needs for contribution management (in association with the Division of Information Technology Solutions and Services) and ensure its information needs are promptly addressed. Responsible staff: Focal point for contribution management Date by which action will be completed: To be confirmed based on conclusion of Effectiveness and Efficiency review

Review and approval of donor agreements Some PARMO offices, and clusters within the New York office, followed good practices that deserved to be more widely used in the division. For instance, one office of PARMO sends a cover letter (after the donor agreement is signed) to the office responsible for managing the grant to highlight salient features of the agreement such as the duration, important dates and milestones, reporting accountabilities, recommendations for meeting donor representatives and suggested methods for donor visibility and recognition. In another case, a cluster in PARMO had produced a catalogue of standard clauses that could be included in an agreement without having to re‐negotiate text with their portfolio of donors each time. These practices merited broader use within PARMO. However, the audit also noted the following. Divisional capacity to address complex issues in agreements: The review of draft donor agreements in PARMO was done by the staff managing the relevant donor relationship. Though the staff understood fiduciary aspects and programme management well, they did not necessarily have legal expertise. They sought guidance from the legal office for specific issues as they thought necessary. PARMO did not have dedicated legal capacity to provide such advice/clearance or help resolve complex issues in relation to grant agreements. The absence of such capacity resulted in avoidable delays, non‐optimal use of existing resources and lack of guidance for a coordinated divisional approach to dealing with complex issues. At the time of the audit, PARMO was working on an arrangement with the office of the Legal Advisor in the Office of the Executive Director to provide it with funding for a legal specialist to support PARMO regarding contribution agreements (including complex clauses). Prior approval for signing grants agreements: Draft agreements between UNICEF and a donor for restricted contributions (OR) are expected to be cleared by the Director of PARMO, or a delegated authority within PARMO. In general, offices did consult PARMO before signing donor agreements by the offices negotiating the grant. However, there was no systematic record of PARMO’s approval, or of cases where agreements had been signed before it was given. These included a few cases wherein PARMO learned of the agreements when they had not only been signed by country


offices, but the grant had been received and then expired without the use of funds. In other instances, pertaining to UN Joint Funding mechanisms, agreements were signed locally (by the country office) without the involvement and/or prior approval of PARMO. In one instance, an agreement signed locally by a country office with a donor was later cancelled when amendments suggested by PARMO were not mutually acceptable to the parties concerned. Systematic monitoring of compliance exceptions would prevent such practices, especially when offices are eager to tap funding opportunities in a difficult aid environment. Adequate involvement of PARMO and its prior approval would improve donor relationship management and protect the interests of UNICEF. Type of instruments and complex clauses: UNICEF’s Medium Term Strategic Plan 2006‐2013 states (para 175) that the use of standard agreements will be sought whenever possible and that the extent to which they are used will be monitored as a proxy indicator for transaction costs and flexibility of contributions. Grant agreements are negotiated with the donor by PARMO, other HQ divisions, or locally by country or regional offices, depending on the nature of grant and the donor; but they are expected to be reviewed and approved by PARMO before they are signed. It is important to also ensure that contractual agreements and arrangements in any instrument type comply with the broad framework of UN and specific UNICEF rules, regulations and stated policies. However, eagerness to tap funding opportunities without strategic perspective caused different types of donor agreements to be signed, without PARMO involvement. Donors often influenced the type of instruments used, which could be standard agreements, Memoranda of Understanding as part of General Framework Agreements, Arrangement Schedule to the Master Arrangement, Project Cooperation Agreements, Exchange of Letter, and tailor‐made agreements. The criteria for using types of contractual instruments with emerging‐economy donors were unclear; they varied from exchange of letters to tailor‐made agreements and stipulations. The number, type and content of clauses in the legal instruments would vary from donor to donor and, with a single donor, from agency to agency. The types of clauses in the grant agreement may have legal, programmatic, and fiduciary implications. Certain clauses are more complex and need more engagement between the negotiating offices, PARMO clusters handling the agreement and the UNICEF Legal Advisor. Examples included clauses related to donor visibility, anti‐terrorism, transparency, efficiency (value for money), and repayment in cases of fraud or misuse. Many agreements had a non‐standard donor visibility clause; these varied from a simple paragraph of thanks in the reports and publications, to use of the donor’s name and logo in press reports, to a clear stipulation for UNICEF to have a press conference and a TV event to announce the grant in the recipient country. A single organizational standard or framework agreement for all grants would not be practical. However, the use of defined principles and criteria for selection of instrument types and definitive guidance on clauses for legal agreements would minimize reputational risk. PARMO recognized the legal capacity needs (in the 2014‐2017 OMP) and has called for a Legal Specialist to be contracted under the Legal Advisor and funded by PARMO to support the division’s work. Agreed action 7 (medium priority): The Public Sector Alliances and Resource Mobilization Office (PARMO) agrees to:

i. Strengthen its capacity to enable internal coordination within the division on matters


of grant agreements. ii. Maintain a record of approvals and monitor grants signed prior to their clearance. iii. Provide training to the staff concerned on managing risks related to contribution

agreements, and on addressing complex issues in donor agreements. Responsible staff: Focal point for contribution management Date by which action will be completed: To be confirmed based on conclusion of Effectiveness and Efficiency review

Donor reporting The offices managing utilization of the grant have the principal responsibility for submission of high‐quality donor reports as scheduled in the agreement with the donor.6 Reports to public sector donors should always be submitted through PARMO, or Brussels in the case of the European Union (EU), unless otherwise specified in the agreement with the donor.7 However, regional offices are responsible for monitoring the quality and timeliness of donor reports submitted by country offices. Independent assessments of donor reporting conducted in 2012 by the Multilateral Organisation Performance Assessment Network (MOPAN),8 and also by an external consultant, called for improved reporting on results. UNICEF has acknowledged the need for improved timeliness and quality of donor reports. In June 2013, DPS and PARMO updated the guidance for donor reporting to integrate recommendations from the external and internal evaluations. The guidance includes an 11‐point checklist for donor reporting, and a checklist for the preparation, review and clearance of donor reports. The checklist also provides for review of reports by the regional office. The audit reviewed the information in VISION for timeliness of submission of donor reports for non‐thematic grants between January 2012 and December 2012 (for thematic areas, individual consolidated reports are prepared). At the time of the audit, as per the information in VISION, 34 percent of the reports had not been submitted in time to donors. Of these, 62 percent were delayed beyond 30 days of due date. At the time of the audit, 21 percent of reports were overdue. According to PARMO, it had reviewed the information provided in VISION with respect to report submissions and found that it was not entirely accurate. In many cases, the date of actual submission was recorded either incorrectly or not at all. In some cases, VISION was not updated when, after signature of a donor agreement, it was agreed to include the report as part of the consolidated report. In other cases, offices entered the submission date as the same as the due date, though the reports had in fact been submitted late. Where a delay had occurred, however, PARMO identified the following reasons:

Deficiencies in quality of draft donor reports require exchanges between PARMO and country offices for correction and revision.

The financial reporting to the EU is unique in format and cannot be generated from the

6 CF/EXD/2003‐013 Annex 1 – Reporting. 7 CF/EXD/2003‐013 Annex 1 – Reporting. 8 MOPAN is a network of 17 donor countries with a common interest in assessing the organizational effectiveness of multilateral organisations. MOPAN was established in 2002 in response to international fora on aid effectiveness and calls for greater donor harmonization and coordination.


system in a standard form, as in the case of other donors. PARMO stated that, though offices were reminded in advance of the EU requirements, there were still delays.

Some grant types, such as thematic, require only one consolidated donor report, even though there are many sub‐grants assigned to a number of regional and country offices. Instead of flagging the donor report requirement only for the main grant, the system flags all sub‐grants in VISION, giving a false count of reports required and due.

VISION consists of SAP9 ERP and the Performance Management System (PMS). PARMO had started working with ITSS to improve donor report tracking in SAP to better clarify responsibilities of the different offices. PMS reports had been modified to better show the office responsible for sending the reports.

Interviews with regional offices showed that they used the VISION Dashboard to monitor overdue reports as part of their oversight responsibility, as they are also a key performance indicator for country offices. However, there are no specific ageing reports for analysis of delayed submissions. Further, four of the seven regional offices confirmed that they did not conduct an annual quality assurance review of a sample of donor reports, although this is recommended as a best practice by the PPPM. Concerted efforts to minimize the proportion of late or unsatisfactory quality of donor reports would enhance relations with donors and lead to improved resource mobilization. Agreed action 8 (high priority): The Office of the Executive Director agrees to establish a strategy and clarify the requirements (as part of the revised executive directive referred to in agreed action 2) to improve the quality and timeliness of donor reports at the global level; and clarify the responsibilities of PARMO and Regional Offices regarding oversight and support on donor reporting. Responsible staff: Deputy Executive Director for External Relations Date by which action will be completed: September 2014

Grant extensions and amendments A PARMO ‘draft’ directive (PARMO/Directive/2012‐001/Supplement 6: Grant Extensions for Non‐Thematic Other Resources Contributions) requires country offices to seek grant extensions only in exceptional cases and to request them from the donor in a timely manner, and at least three months prior to the grant expiry date. All requests for extension must be made in the VISION Grant Management System. According to the directive, the action to amend the grants in the SAP Grant Management System will be done by PARMO. The DFAM policy on revenue management explains what reasons may be given for making amendments to grant agreements, and the process by which they should be made. Offices are expected to provide a new comprehensive plan for project implementation in the proposed extended period, to avoid multiple grant extensions. For locally negotiated grants, country offices should obtain approval for an extension from the local donor representative, and should attach a copy of the completed and signed extension request form to the VISION

9 SAP is an acronym for Systeme, Anwendungenund Produkte in der Datenverarbeitung (Systems, Applications and Products in Data Processing). The acronym serves as the name of the German‐based software corporation SAP AG. SAP ERP (Enterprise Resource Planning) software allows the updating of data in real time across a range of locations.


records, for PARMO’s review and update of the grant master records. The audit reviewed the information in VISION from January 2012 to April 2013 and found that as of 2 May 2013, from a total of 4,260 grants, 714 extensions had been agreed and 409 amendments made. Of the extensions, 11 percent related to requests for multiple (two to six) extensions of the same grant. To assist analysis, VISION provides for assignment of a reason code for extensions and amendments. However, the defined reason codes are insufficient for constructive analysis. For example, reasons assigned for extensions include Agreeable extensions and Funding/Agreement related, constituting 53 percent of the cases. Further, in 18 percent of cases, the reason codes were not assigned. Similar issues were observed in cases of amendments. Extensions to grants, unless justified by exceptional situations, may affect the confidence of the donors in UNICEF’s capacity to plan effectively and deliver on time. The audit reviewed a sample of 18 extensions and 13 amendments, and identified the following shortcomings:

Extension request forms in VISION had incorrect information in data fields. For example, the dates of the request form and the original and proposed expiry dates were the same in most cases; and in many cases the data field for the authorizing person (to be manually entered) was either blank or had wrong data.

Justifications for extensions were not clearly explained in the extension request forms in VISION in 39 percent of the sampled cases.

Appropriate information and attachments were generally not available in VISION records. Extensions were also posted based on emails received from country offices, but without necessarily reviewing the approval from the donor. PARMO staff did not always review details received from country offices and/or verify the data in the request form in VISION before posting extensions and changing the expiry date.

PARMO staff were inconsistent in the way they updated information in VISION to record extensions. In some cases it was done by creating an amendment to the grant master, and in others by editing the master data on the grant expiry dates. Amendment options should be used, as they constitute a change to the original grant agreement.

There was no periodic institutional analysis on the reasons for extensions and amendments (though some clusters maintained relevant worksheets for their portfolio of donors).

The above shortcomings were caused by: the absence of formal guidance specifying the procedural responsibilities of staff in PARMO and country offices; lack of VISION data validation checks on fields like dates, justification, authorization etc., causing data integrity issues; and the need for better training and awareness in country offices. Reliable information on extensions and amendments in VISION would improve PARMO’s capacity to analyze causes and implement corrective action. At the time of the audit, PARMO indicated that it was working with ITSS to improve reporting within the limitations of the system. Agreed action 9 (medium priority): The Public Sector Alliances and Resource Mobilization Office (PARMO) agrees to:

i. Review and clarify guidance on the use of VISION for extensions and amendments. ii. Address data validation checks to strengthen data integrity in association with ITSS. iii. Design reports for analysis of extensions and amendments.


Responsible staff: Focal point for contribution management Date by which action will be completed: To be confirmed based on conclusion of Effectiveness and Efficiency review

Expired grants UNICEF Financial and Administrative Policy 3 on Revenue Management (Supplement 1), and PARMO’s draft directive on Contributions to UNICEF and Management of Other Resources Contributions, provide guidance to PARMO and DFAM for action to be taken on expired grants (with unspent, overspent or unpaid balances), leading to their closure in the SAP grant management system. Grants related to public‐sector contributions can only be created, amended and extended in VISION by PARMO. Hence, it needs to ensure that the grant information recorded in VISION is accurate and complete. PARMO receives a cumulative summary report from DFAM each year after the year‐end financial closure, reflecting the status of all contributions by donor. This report also includes previous years’ contributions relating to expired grants with unspent balances, on which action should be taken (transfer to RR, re‐programme or refund). PARMO liaises with the donors on unspent balances and, upon agreement with them, recommends appropriate action through a Note for the Record to DFAM for settlement and closure of the grant. The audit noted the following shortcomings in the management of expired grants:

The respective clusters managing donor relationships share the annual cumulative report (provided by DFAM) with donors, seeking their advice on unspent balances. However, there was no mechanism for subsequent coordinated divisional monitoring of expired grants with unspent balances and the actions taken regarding them.

The refunds to donors of unutilized grants in 2012 and 2011 were US$ 4.1 million and US$ 7.8 million respectively. There were no mechanisms for a consolidated analysis, by donor and cause, for refunds and underutilization (including transfers to regular resources and reallocations to other programmes).

The grant management system did not accurately reflect the status of expired grants. As per VISION data (May 2013), 104 grants that expired prior to 2005 (including 25 grants expired prior to year 2000), and 2,119 grants that expired during 2006‐2010, awaited closure in the grant management system. An expired grant is closed in VISION by DFAM, following advice provided by PARMO after its review and communication with the donor.

PARMO has, with DFAM, begun to review the results above and reflect the status of the expired grant records more accurately. PARMO indicated that it was working with DFAM to clarify the procedures and responsibilities for the different steps of grant closure and reviewing the feasibility of an electronic Note for the Record workflow. The availability of ageing reports on open expired grants, key monitoring indicators for expired grants and the assignment of responsibilities would help PARMO provide more effective oversight. Agreed action 10 (medium priority): Taking into account its lead responsibility in managing the records in the grant management module of VISION, the Public Sector Alliances and Resource Mobilization Office (PARMO) agrees to, together with DFAM:

i. Clarify the procedures and responsibilities related to expired grants; ii. Identify key report requirements and establish plans for developing the reports


accordingly. iii. Periodically monitor the expired grants until closure in VISION.

Responsible staff: Focal point for contribution management Date by which action will be completed: To be confirmed based on conclusion of Effectiveness and Efficiency review

Oversight of contribution management: Conclusion Based on the audit work performed, OIAI concluded that, subject to implementation of the agreed actions described, the controls and processes over the oversight of contribution management, as defined above, were generally established and functioning during the period under audit.


Annex A: Methodology, and definition of priorities and conclusions

The audit team used a combination of methods, including interviews, questionnaires, document reviews, and testing samples of transactions. The audit compared actual controls, governance and risk management practices found in PARMO against UNICEF established standards from various sources including the 1998 accountability document (Organization of UNICEF; E/ICEF/Organization/Rev.3 dated April 1998); the Executive Directive on Fund Raising (CF/EXD/2003‐013); PARMO Directives on Contributions to UNICEF and Management of Other Resources Contributions (draft); PARMO Office Management Plans; DFAM policy on revenue management; and the Programme Policy and Procedures Manual. Structured questionnaires were sent to all seven regional offices and their responses analyzed. In addition, interviews were held with staff from six HQ divisions (PD, EMOPS, PFP, DOC, DPS and GMA) that have significant roles in collaborating with PARMO on public sector alliances and resource mobilization. OIAI is firmly committed to working with auditees and helping them to strengthen their internal controls, governance and risk management practices in the way that is most practical for them. With support from the Office of the Executive Director, PARMO reviews and comments upon a draft report before the finalization of the audit. The Director and their staff then work with the audit team on agreed action plans to address the observations. These plans are presented in the report together with the observations they address. OIAI follows up on these actions, and reports quarterly to management on the extent to which they have been implemented. When appropriate, OIAI may agree an action with, or address a recommendation to, an office other than the auditee’s (for example, a regional office or HQ division). The audit looks for areas where internal controls can be strengthened to reduce exposure to fraud or irregularities. It is not looking for fraud itself. This is consistent with normal practices. However, UNICEF’s auditors will consider any suspected fraud or mismanagement reported before or during an audit, and will ensure that the relevant bodies are informed. This may include asking the Investigations section to take action if appropriate. The audit was conducted in accordance with the International Standards for the Professional Practice of Internal Auditing of the Institute of Internal Auditors. OIAI also followed the reporting standards of International Organization of Supreme Audit Institutions.

Priorities attached to agreed actions

High: Action is considered imperative to ensure that the audited entity is not exposed to high risks. Failure to take action could result in major consequences and issues.

Medium: Action is considered necessary to avoid exposure to significant risks. Failure

to take action could result in significant consequences. Low: Action is considered desirable and should result in enhanced control or better

value for money. Low‐priority actions, if any, are agreed with the auditee but are not included in the final report.


Conclusions

The conclusions presented at the end of each audit area fall into four categories: [Unqualified (satisfactory) conclusion] Based on the audit work performed, OIAI concluded at the end of the audit that the control processes over the country office [or audit area] were generally established and functioning during the period under audit. [Qualified conclusion, moderate] Based on the audit work performed, OIAI concluded at the end of the audit that, subject to implementation of the agreed actions described, the controls and processes over [audit area], as defined above, were generally established and functioning during the period under audit. [Qualified conclusion, strong] Based on the audit work performed, OIAI concluded that the controls and processes over [audit area], as defined above, needed improvement to be adequately established and functioning. [Adverse conclusion] Based on the audit work performed, OIAI concluded that the controls and processes over [audit area], as defined above, needed significant improvement to be adequately established and functioning. [Note: the wording for a strongly qualified conclusion is the same as for an adverse conclusion but omits the word “significant”.] The audit team would normally issue an unqualified conclusion for an office/audit area only where none of the agreed actions have been accorded high priority. The auditor may, in exceptional circumstances, issue an unqualified conclusion despite a high‐priority action. This might occur if, for example, a control was weakened during a natural disaster or other emergency, and where the office was aware the issue and was addressing it. Normally, however, where one or more high‐priority actions had been agreed, a qualified conclusion will be issued for the audit area. An adverse conclusion would be issued where high priority had been accorded to a significant number of the actions agreed. What constitutes “significant” is for the auditor to judge. It may be that there are a large number of high priorities, but that they are concentrated in a particular type of activity, and that controls over other activities in the audit area were generally satisfactory. In that case, the auditor may feel that an adverse conclusion is not justified.

audit of the public sector alliances and resource ... · pdf fileinternal audit of the public...

Documents