Audit follow-up: procurement and asset management
PROCUREMENT AND ASSET MANAGEMENT
1. This report gives an update on UNHCR's follow-up on measures taken or proposed in response to the recommendations in the Report of the Board of Auditors to the General Assembly on the Accounts of the Voluntary Funds Administered by the United Nations High Commissioner for Refugees for the Period ended 31 December 1996 (A/AC.96/885) relating to procurement and asset management.
2. Recommendation 10 (j): The progress already achieved in obtaining annual purchasing plans from field offices should be taken forward by covering even more field offices (see para. 76).
3. By way of background information to the reply to this recommendation, it should be noted that each autumn, as part of the annual programming exercise, all Representatives and Chiefs of Mission in the field are requested to submit a plan of purchases anticipated for the following year. The annual purchasing plan is designed to provide the Supply and Transport Section (STS) at Headquarters with information on the planned requirements for high volume or value items that may be amenable to special purchasing arrangements. The data is used by STS to determine which frame or extended price validity agreements they should renew and if other items can be included. A full description of these arrangements can be found in Update on International Procurement (EC/47/SC/CRP.33).
4. The purchasing plans provide STS with its only formal opportunity to identify major procurement that will be undertaken either by a field office or an implementing partner. The information permits STS purchasing staff to initiate a dialogue with the field in order to agree on the most effective and cost-efficient procurement strategy. The information could also result in STS initiating procurement sourcing or developing specifications for commodities not known to the field. STS has achieved major savings both in time and cost on planned procurement in this fashion.
5. The annual purchasing plans do not initiate a specific procurement process. The evolution of programmes, the regional operational review process and the funding situation in a particular year or in respect of a specific programme may substantially alter the number and nature of the requirements that were foreseen months in advance of the new programme year. All these factors can result in a considerable variation between planned and actual procurement. While UNHCR is giving serious consideration to redesigning the procurement process under the Supply Chain Project, the plans today constitute essentially a strategic planning document to determine the priority areas on which to focus long-term procurement planning.
6. In any given year, STS will undertake international procurement on behalf of UNHCR programmes located in some 65 to 70 countries, that is, in slightly more than half of all UNHCR Offices. This figure has remained relatively stable despite the significant drop in the value of international procurement, particularly since 1995. The value of actual procurement for the different country programmes ranges from several hundred to tens of millions of dollars. UNHCR programmes are, by their very nature, not static. Offices open and close, and programmes evolve corresponding to developments in the local and regional refugee situations. Thus, the number of offices expected to present purchasing plans does not remain constant and, indeed, a number of field offices, particularly in Western and Central Europe and the Americas, do not normally have any procurement requirements.
7. Since 1993, the external auditors have commented extensively on the annual procurement plans. At the start of this period, STS received, at best, less than 22 per cent of the anticipated plans from field offices. In view of the poor response and in the absence of a clear raison d'être for the plans, the requirement was actually dropped from the 1995 programming exercise. In this period, however, UNHCR developed new tools and strategies to improve the response to field requirements. These developments include the Central Emergency Stockpile in Amsterdam, the conclusion of frame agreements for key relief items and the recognition that field office and implementing partner procurement were areas in need of rationalization and professionalization. The input from the annual purchasing plans has a clear role to play in each of these areas.
8. The purchasing plans' instructions contained in the 1996 programming exercise were substantially revised to take these newly defined needs into account. A stringent programme of follow-up was also initiated by STS to ensure compliance. The results were immediately apparent. Purchasing plans were received that year from 37 countries, representing more than half of the anticipated total. Improvements were made to the instructions contained in the 1997 exercise. In response, 55 plans, or approximately 80 per cent of the anticipated total, were submitted. For 1996 and 1997, an additional 15 countries confirmed that they foresaw no procurement. Further changes, based on the experience of earlier years, were introduced to the 1998 purchasing plans. Taken together, these changes have facilitated the completion of the plans by programming staff and improved the quality of the information received. Combined with the usual follow-up, it is hoped that the current positive trend will continue.
9. When the implementation of the Supply Chain project is completed in the year 2001, UNHCR will have fully complied with the auditors' recommendation.
III. ASSET MANAGEMENT
10. Recommendation 10 (m): The MINDER system should be upgraded to enable electronic transfer of data from the procurement system to the asset management system (see para. 107).
11. As noted in Measures taken or Proposed in Response to the Recommendations in the Report of the Board of Auditors to the General Assembly on the Accounts of the Voluntary Funds administered by the United Nations High Commissioner for Refugees for the year ended 31 December 1996 (A/AC.96/885/Add.1) presented to the forty-eighth session of the Executive Committee of the High Commissioner's Programme, UNHCR is currently engaged in renewal of its corporate systems at Headquarters and in the Field, and it is reluctant to invest any additional funds in the upgrading of present systems (MINDER) where these will be overtaken by the planned system improvements. The objective of the audit recommendation, however, is recognized and has been incorporated into UNHCR's plans for its new systems. These will allow the electronic transfer of data from the procurement system to the asset management system. Current work on the Supply Chain Project (including procurement) will include the logistic side of UNHCR assets. The new financial management information system will cover UNHCR assets from the financial viewpoint. When the new systems are in place, the tracking of assets will be greatly enhanced.
12. In the development of systems for the management of its assets (Supply Chain Project), UNHCR is taking into account the system recently developed by the Department of Peace-keeping Operations (DPKO).
13. Recommendation 10 (n): Physical verification of all assets, including those not recorded into the system, should be completed expeditiously (see paras. 113).
14. To give effect to this recommendation, bar code readers were sent to field offices in August 1997, together with the most recent upgrade of the MINDER software. The delay in sending these bar code readers to the field was due to technical difficulties with both the software and the hardware. A further delay was encountered with the customs clearance of the equipment in a number of countries. In these countries, electronic equipment requires that exemption certificates be requested and issued by the competent government departments.
15. The physical check of assets at Headquarters started early in December 1997, as part of the year-end accounts closure exercise. Field offices are carrying out physical checks of assets which have been recorded into MINDER. The consolidated results of this stocktaking exercise will be known at the beginning of the second quarter of 1998.