Refugees Magazine Issue 102 (The high cost of caring) - The origins of Delphi

Refugees (102, IV - 1995)

A number of checks and balances are in place to ensure that UNHCR spends its money wisely.

By Rupert Colville

Eyebrows were raised in 1972 when UNHCR's total annual expenditures jumped from $9.4 million to $24 million in the space of a single year. Twenty years later, another budgetary quantum leap occurred. This time, it took two years for expenditures to double, but the sums involved revealed an organization that had entered a totally different financial league. In 1990, the total annual expenditure was $544 million. By 1992, it had soared to $1.07 billion, mainly as a result of a succession of huge displacements caused by wars in Iraq, Somalia, the Caucasus, Croatia and Bosnia-Herzegovina. By 1995, with Rwanda added to the list of colossal disasters, the budget stood at around the $1.3 billion mark. The number of UNHCR staff and field offices have also more or less doubled since 1990.

In the business world, such rapid growth in the middle of a world recession would be a triumph. In the humanitarian world, it is a stark reflection of the mayhem that has occurred since the end of the Cold War, and as such is a cause for deep concern rather than celebration. It has also put a huge burden on UNHCR's administrative and financial systems.

With such large sums of money involved, the agency's performance is coming under increasingly close and critical scrutiny. So far, it has managed to scramble from one massive emergency to the next without coming seriously unstuck. Nevertheless, UNHCR itself recognizes that it cannot afford to be complacent, and that it needs to plan for the future if it is to maintain high standards of efficiency. As a result, it has embarked on wide-ranging, radical review of its entire modus operandi - a process code-named Project Delphi.

"Any organization - intergovernmental, governmental or private - would be placed under strain by such rapid growth," said Jean-Marie Fakhouri, UNHCR's Controller. Unlike a private company, UNHCR's performance cannot, of course, be measured by profits or increased turnover. "Our credibility and ability to attract funds depend on confidence, which depends on two things," said Fakhouri: "the way we conduct our operations, and accountability. In other words, we have to provide value for money and be seen to do so. The donors have been good to us over the past few years. They have to justify their funding of UNHCR to their taxpayers. Similarly, we have to justify the confidence they have placed in us. We cannot, and do not, take that confidence for granted."

A number of checks and balances are geared to ensuring that UNHCR spends its money wisely. They operate at different levels, within and beyond the agency, and at different stages. They range from the regulations that govern all aspects of UNHCR's current and planned operations, to the delivery and tracking systems, and the various internal and external auditing and evaluation bodies that aim to expose any wastage, incompetence or corruption (see box below).

Problems still occur, despite the exhaustive operational rules and systems - designed to prevent things going awry - and the different layers of oversight mechanisms - designed to spot things that have gone awry and recommend improvements. That is true of any organization of comparable size, in both the public and private sectors. Whether the problems are acceptable or not is a question of frequency and scale.

Much depends on the quality of staff: not only UNHCR personnel, but also those working for its implementing partners - i.e. governments and non-governmental agencies (NGOs). Against a background of a succession of massive emergencies taking place in extremely difficult operating environments, finding enough qualified and experienced staff (while, in UNHCR's case, simultaneously maintaining the geographical and gender balance to which the U.N. is committed) has been one of the biggest difficulties. With such large amounts of money involved, and speed essential, it only takes one ingenious crook to pull off a fraud or one incompetent or chronically understaffed manager to produce serious wastage. Both will be discovered sooner or later by UNHCR itself or by the auditors, but in the meantime they may have inflicted considerable damage.

"Fraud is not acceptable," Fakhouri said. "Even minor fraud is theft from our own limited budgets, and from the refugees who depend on us for protection and help. Fortunately, in recent years, given the rapidity of growth, number of staff, and the temptations that exist, incidents of fraud and mismanagement have been fairly limited. But we must remain vigilant, and constantly search for improved methods of minimizing the risks."

UNHCR has to strike a particularly delicate balance between remaining flexible enough to respond quickly to huge and unpredictable emergencies and maintaining a tight grip on the financial reins. This is not a problem that faces most companies or ministries of similar size. Too much elasticity and corner-cutting can lead to serious waste and fraud. Too much red tape designed to maximize financial and administrative control can lead to a sluggish, bureaucratic response which, in a major emergency, can cost lives. If the pendulum swings slightly too far in either direction, UNHCR expects - and receives - little sympathy.

There are a number of similar tensions: UNHCR is committed to treating the NGOs with whom it works - who number some 500 in all and account for approximately 30 percent of its expenditure - as partners. Yet at the same time, it is responsible for monitoring NGOs' performance, which means exercising close control. Recent criticisms of UNHCR operations by the various auditors and overseers have tended to focus on UNHCR's monitoring of its financial arrangements with its implementing partners - both NGOs and governments. The importance of building up the capacity of local NGOs is widely accepted. At the same time, it is easier and safer to rely on tried and trusted international NGOs, with their own highly developed administrative and financial tracking systems. The different aims are not easily reconciled.

In a recent speech to UNHCR's Executive Committee, High Commissioner Sadako Ogata made it clear that she intends to make UNHCR "a slimmer, trimmer organization." Recognizing the strains caused by the rapid growth that has occurred since she took office in January 1991, and keen to take preemptive measures to deal with incipient or recognized problems, she said, "We must restructure the way in which we work, so as to improve our delivery, accountability and performance and build the capacity to contract and expand in response to operational demands."

It is against this backdrop that UNHCR has embarked on what may turn out to be the most fundamental and wide-ranging review of its own methods of operation in its entire history, employing both internal and external "change management" expertise. Project Delphi, as it is known, was set up in October 1995. By December it was fully operational. In the spring of 1996, after close examination of UNHCR processes, it will deliver its first report and set of options for change to the High Commissioner.

"There is a commitment to change this organization," said Fakhouri, who helped set up Project Delphi. "We're reviewing all our processes, the way we work, the way we think, so that we're equipped to enter the 21st century."

The Watchdogs

Internal UNHCR systems include the following:

• Exhaustive rules governing allocation of funds (for staffing, projects, equipment etc). All UNHCR rules must be in accordance with general U.N. rules.

• Contracts Committee: all substantive purchases require at least three competing tenders. Bids for contracts exceeding $70,000 (rising to $100,000 as of 1 Jan. 1996) are examined by a Contracts Committee.

• Stringent reporting requirements: every financial commitment and payment has to be authorized and documented.

• Built-in monitoring of projects carried out by implementing partners.

• A recently-formed Inspection and Evaluation Service (which can inspect and evaluate any aspect of any operation both at headquarters and in the field and reports directly to the High Commissioner).

Internal U.N. systems:

• The Audit and Management Control Division (AMCD): a Geneva-based section of the central U.N.'s Office of Internal Oversight Services (OIOS), which acts as UNHCR's permanent auditing body. It has been increased in size to match UNHCR's growth and conducts detailed audits at headquarters and in field offices. If UNHCR suspects something is amiss, it directs the AMCD towards it.

• The OIOS itself, run by Under-Secretary-General Karl Paschke, has extensive powers of oversight.

External systems of governance and oversight:

• Donor governments have the right to conduct on-the-spot checks of programmes which they are funding.

• The Board of Auditors: an auditing body, drawn from three different governments (currently India, the United Kingdom and Ghana), appointed by the General Assembly. Each year, they spend several months examining UNHCR financial and management records in headquarters and the field. They can go anywhere they choose. The Board of Auditors also follows up on clues gleaned from the internal auditors' reports. In their annual report to the General Assembly, the Board makes comments and recommendations, to which UNHCR is obliged to respond.

• UNHCR's Executive Committee (EXCOM), which currently comprises 50 states, oversees UNHCR's general policies and use of funds. Each year, UNHCR reports directly and at length to EXCOM.

• The General Assembly's Advisory Committee on Administrative and Budgetary Questions (ACABQ) examines the Board of Auditors' reports as well as UNHCR's budgets and administrative and financial reports.

• The General Assembly's Fifth Committee, which oversees all administrative and budgetary matters within the U.N., considers the reports of the Board of Auditors and of the ACABQ.

Source: Refugees Magazine Issue 102 (1995)