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Audit follow-up: financial management and programme management

Executive Committee Meetings

Audit follow-up: financial management and programme management

25 May 1998




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 year ended 31 December 1996 (A/AC.96/885) relating to Financial Management and Programme Management.

This paper should be read in conjunction with the UNHCR response to the Board of Auditors Recommendations (A/AC.96/885/Add.1) presented to the forty-eighth session of the Executive Committee. The present comments build on those found in that document.


2. Recommendation 10 (j): UNHCR Administration should urgently review the present system of recording of expenditure by implementing partners. The Administration should also ensure that all outstanding financial reports are received from implementing partners and are used for adjusting the funds lying in the memorandum suspense account in the Financial Management Information System after proper verification of these reports.

3. The great majority of outstanding reports from implementing partners in respect of projects implemented in 1994, 1995 and 1996 have now been received and processed in FMIS. Due to technical constraints, some 4 to 5 per cent of instalments paid to implementing partners in respect of 1994, 1995 and 1996 projects have not yet been cleared. The manual processing of expenditure reports received from implementing partners continues, and it is expected that all but 1 per cent will have been cleared by the end of 1998. Instalments paid to implementing partners under 1997 projects remain in the memorandum suspense account primarily because the liquidation period for the majority of 1997 projects runs at least until 31 March 1998. Reports are therefore received and processed in the field during April and May 1998. The process described above is consistent with established UNHCR financial procedures. The receipt of reports from implementing partners and the processing of these in FMIS is being closely monitored and the backlog is expected to be fully cleared by the end of 1998; the processing of current year data is also being closely monitored.

4. Recommendation 10 (c): UNHCR should focus more attention on timely review and cancellation of obligations no longer required.

5. Unliquidated obligations are constantly under review and amounts no longer needed are immediately cancelled.


6. Recommendation 10 (d): Programme delivery and administrative support costs in the budgets of various country programmes should be reviewed and norms should be established.

7. Programme Delivery (PD) and Administrative Support (AS) costs are examined throughout each year but particular attention is paid to the level of these costs during the annual budget review. Although the level of PD and AS costs needs to be controlled, UNHCR does not generally establish norms for these costs in relation to those of operational projects. Many of the costs budgeted under PD, in particular, include those activities which UNHCR is mandated to carry out. Providing protection is a labour intensive function and is not an overhead linked to any other activity. The coordination, monitoring, and reporting on refugee populations, the promotion of refugee law and the creation of public awareness programmes are UNHCR mandated activities, and do not represent additional costs which can be "fixed" on a regional or country basis. AS costs, on the other hand, do constitute an overhead and norms can be established in relation to the size of PD and operational projects. UNHCR has recently agreed to harmonize its budget structure with that of some other United Nations agencies. When that exercise is completed, the norms of administrative costs in relation to those for operations can be established and maintained.

8. Recommendation 10 (e): Project objectives should be clearly defined and quantified so that there is no conflict between objectives and inputs and the executing agency has a clear idea of the targets to be achieved at the end of the project period.

9. The programme management system which UNHCR has used for many years is based upon the principle of management by objectives. The budgeting system, however, remains very much oriented around quantifiable inputs rather than impact and achievements. The need to base both operations planning and budgeting on clearly defined objectives which are quantifiable and verifiable was identified at the inception of the change process and is one of the principal components of the operations management system which is under development. Both the planning methodology and the budgeting system within the new system will be output-oriented at all levels, from the overall goal of the operation to the objectives established with implementing partners for the components of individual projects. A new format for the annual Country Operations Plans was introduced in 1998 to encourage offices to develop country objectives and identify progress indicators. This will be further developed in future reporting exercises.

10. Recommendation 10 (f): Pending the introduction of the new operations management system, preparation of work plans should be strengthened and made more programme specific and include appropriate performance indicators.

11. As in previous years, UNHCR encourages field offices to establish work plans with implementing partners whenever this would prove beneficial. This is generally done on a sub-project basis, as the establishment of work plans in a broader context added little of value to the operation and was therefore made optional. It has proved impractical to impose a work plan format for country programmes under the current programme management system. However, the introduction of work plans in the context of the operations management system is being reviewed and, at present, it is planned to reintroduce this component as a planning and monitoring tool within the new system.

12. Recommendation 10 (g): Sub-project descriptions should be specific with clear identification of the nature of assistance and the implementing partners responsibilities and should include appropriate performance indicators for the purpose of monitoring.

13. The Financial and Management Information System which UNHCR introduced nearly a decade ago requires that the narrative in each project description reflect very closely all the activities included in the budget attached in annex to the project documentation. This has ensured consistency between the two and facilitated monitoring, but the quality of the project description has been somewhat restricted as a result. One of the aims of the Operations Management System is to devote greater attention to the project description, which should include more detailed description of the activities to be carried out and the means to monitor progress. UNHCR hopes to introduce this in the 1999 programme documents.

14. Recommendation 10 (h): The Administration should intensify its efforts to obtain project monitoring reports.

15. The preparation of Project Monitoring Reports by offices in the field is often delayed due to late submission of financial reports from implementing partners. Implementing partners frequently face difficulties in meeting reporting deadlines because they often incur expenditure in more than one currency and in more than one location. This is a structural problem which can only be overcome by improved technology, by means of which financial data can be transferred quickly from one location to the next, consolidated centrally and transmitted to UNHCR quickly. In view of the isolated locations and poor communication facilities in many areas where UNHCR and its partners operate, this will not take place immediately. As a result, although the Project Monitoring Reports remain a useful and mandatory component of the Programme Management System, it is not the most important tool used by Headquarters to monitor progress in most projects. Other, more accessible reports from field offices, such as situation reports, notes for the file, sectoral updates, monthly accounts, sub-project monitoring reports and other means of communication are generally more important than the project monitoring report for keeping Headquarters informed of developments in the field. Nevertheless, UNHCR is taking steps to reduce involvement with those implementing partners who are unable to respect reporting deadlines. Although this will be difficult, since some partners face problems which are not all of their own making, this element will be a factor in negotiation of agreements for 1999 projects.

16. Recommendation 10 (i): UNHCR should establish procedures to ensure that quick impact programmes generate results within a limited period.

17. Quick Impact Projects (QIPs) are often very successful in facilitating the return and reintegration of refugee populations back into their own countries. Where they are unsuccessful, there are often constraints which are unrelated to the project design. These include security problems, insufficient funding, lack of implementing partners and disputes concerning land ownership. Despite these difficulties, the concept of QIPs remains an important aspect of UNHCR's efforts to assist in the reintegration of returning refugees. In 1997, a special unit within the Programme and Technical Support Section was created to assist managers with the formulation of reintegration strategies, including QIPs. The unit has just issued a manual on self-reliance and employment within this context, which supplements guidelines issued earlier on related topics.