1. This paper reviews progress on three distinct, but related, issues dealing with UNHCR's relations with its implementing partners. The issues are: audit certification, training and evaluation. These issues have been the subject of comment recently by the Board of External Auditors (A/AC.96/869, paragraphs 34-35, 126), and the Advisory Committee on Administrative and Budgetary Questions (ACABQ)(A/AC.96/865/Add.4, paragraphs 6, 29-32, 38-39). More recently (July 1997), the Joint Inspection Unit completed a study, Execution of Humanitarian Assistance through Implementing Partners (JIU/REP/97/3) which deals with some of these issues.1
II. AUDIT CERTIFICATION OF IMPLEMENTING PARTNERS
2. The United Nations Board of Auditors in its 1996 Report to the General Assembly on the Accounts of the Voluntary Funds Administered by the United Nations High Commissioner for Refugees (A/AC.96/869) recommended that the accounts of UNHCR's implementing partners should be regularly audited by an independent audit authority and that UNHCR should obtain audit certificates provided by them to verify the correctness and propriety of expenditures incurred by the implementing partners. UNHCR's response to this recommendation was set out in a conference room paper (EC/46/SC/CRP.45) presented to the fourth meeting of the Executive Standing Committee (September-October 1996). This conference room paper had also been presented to the Office of Internal Oversight Services (OIOS), the External Auditors and the ACABQ for their comments. The responses of the OIOS and the External Auditors to UNHCR's proposal on audit certification were also presented to the Standing Committee (EC/46/SC/CRP.45/Add.1); the comments of the ACABQ were set out in their report on the Overview of UNHCR Activities 1995-1997 (A/AC.96/865/Add.4, paragraphs 29-32). In view of these responses, and the comments of delegations in the Standing Committee (A/AC.96/874, paragraphs 48-51), UNHCR revised its proposal on the audit certification of implementing partners. This proposal was submitted to the Board of External Auditors in a letter dated 5 June 1997. Its main features are set out below.
3. At present, the reporting requirements and financial management procedures set out in sub-agreements are the same for all implementing partners and all projects, regardless of the type of implementing partner and the monetary value of a project. UNHCR now proposes to differentiate between the various categories of implementing partners for audit purposes; it will also introduce the consideration of the monetary value of a project in dealing with certain categories of implementing partners .
4. UNHCR proposes to divide implementing partners into three categories:
(i) United Nations and Related Agencies;
(ii) Government Partners;
(iii) International and National Non-governmental Organizations (NGOs).
5. In 1996, the funds channelled by UNHCR through United Nations and related Agencies represented only 5 per cent of funds allocated to all implementing partners. Projects implemented by government partners represented 26 per cent of all implementing partner funding. International and national NGOs accounted for the remaining 69 per cent of implementing partner funding in 1996, namely 1,024 projects valued at some $ 393 million.
1. United Nations and Related Agencies
6. Since the implementing partners in this category follow the same or similar Financial Rules and Regulations as UNHCR, and as their accounts are audited, for the most part, by the same or comparable authority that audits UNHCR's accounts, it is proposed that no additional audit certification be sought, other than the Annual Audited Financial Statement that is presented by them to their governing body.
2. Government Partners
7. UNHCR relies on the capacity of the corresponding national audit authority to provide the required audit certificate. Experience has shown, however, that audit certificates for projects implemented by government agencies are often difficult to obtain. The contracting of independent audit firms by UNHCR to conduct audits of these government implementing partners may not be possible as this would prove contrary to many governments' legislation. UNHCR will, nevertheless, continue to insist through its governing body on the importance of the submission of audit certificates by this category. Furthermore, through the regular monitoring undertaken by UNHCR staff, and with the assistance of the Audit Management Control Division (AMCD) missions to the programme areas, UNHCR should be able to obtain reasonable assurances that the expenditure reports submitted are free of material misstatements.
3. International and National NGOs.
8. UNHCR proposes to adopt two different approaches for this group, depending on whether international or national non-governmental organization are the implementing partners .
(a) International NGOs
9. Based on UNHCR's experience in collecting audit certificates in 1996, it is evident that most of UNHCR's international implementing partners have an independent audit carried out on a yearly basis by a company of recognized repute. For these partners, UNHCR proposes to adopt the "Single Audit Concept ", whereby the submission on a yearly basis of their Annual Audited Financial Statements, reflecting UNHCR financed activities, will be considered sufficient audit certification for all the projects implemented by that particular NGO. All NGOs falling under this category will be advised at the outset of an operation that UNHCR expects that they are in a position to comply with this requirement and that they are expected to cover the cost involved. The correctness and propriety of the expenditures incurred will be further assured through the regular audits that the AMCD will continue to conduct of UNHCR programmes.
(b) National NGOs
10. In keeping with the practices of other agencies, such as UNICEF, a more differentiated approach is being considered for this sub-group. For projects under a certain monetary value, simplified agreements and reporting requirements are envisaged. Using the already accepted limits governing the award of contracts, UNHCR is strongly considering the amount of $ 100,000 as the threshold value for the strict application of the requirement for an audit certificate. This threshold value will be applied to the global value of activities undertaken by national NGOs on behalf of UNHCR. It does not preclude that, for projects less than $ 100,000, an audit certificate may still be requested. Regular financial monitoring by UNHCR staff and AMCD Audit missions should be sufficient to obtain reasonable assurance that the funds are spent for the specified purposes and that the agency follows acceptable accounting practices and standards. For those local NGOs who are implementing projects over $ 100,000, an audit certificate will be required. In the case of those who are not in a position to provide the required audit certification, UNHCR will have the option to discontinue its association with the NGO or to arrange for the funding of an independent audit. Guidelines for the terms of reference for these audits are being developed with the assistance of AMCD. Furthermore, the financial correctness of the partners' records and reports will be verified through the regular financial monitoring undertaken by UNHCR staff and by AMCD during their missions to the programme areas. If a national NGO has to be selected as no other agency is available, despite the fact that the agency is unable to establish its competence to comply fully with UNHCR audit requirements, there would be an obligation on the organization and the UNHCR office concerned to undertake the necessary strengthening of the organization's financial monitoring, control and reporting mechanisms within a set time frame. It is also envisaged that the project budgets would include provision to finance an independent audit at the outset of the programme and during the implementing partners' association with UNHCR.
C. Board of Auditors
11. UNHCR is awaiting the reaction of the External Auditors to these proposals. The Office feels, however, that the proposals represent a practical and cost effective approach to the important issue of audit certification.
12. In another document (EC/47/SC/CRP.52) before the Standing Committee on UNHCR-NGO relations in the context of the follow-up to the June 1994 Global Conference on Partnership in Action (PARinAC), a section is dedicated to the training of NGO implementing partners. It will be recalled that, of late, both the Board of Auditors and the ACABQ have drawn attention to how little of the training given to UNHCR's implementing partners relates to administration, finance, procurement and logistics.
13. In July 1997, the Senior Management committee of UNHCR adopted a new Training Strategy for UNHCR. Section 8 of this Strategy is dedicated to the training of operational partners. The introductory paragraph to this section (8.1) notes:
"In view of the many tasks which are increasingly contracted out to UNHCR's operational partners, training for these partners represents an area which must be considered in any organizational training strategy. Appropriate training can increase the effectiveness and capacity not only of the operational partners, but also of UNHCR itself. In its report submitted to the General Assembly (A/AC.96.853, paragraph 129), the UN Board of Auditors recommended in particular that a larger share of the available training slots...be earmarked for training of the personnel of major implementing partners to improve their understanding of UNHCR financial procedures and rules on programme management".
14. The Strategy goes on to note (in paragraph 8.6) that the development needs of partners are to be identified in a consultative process. Among the areas that training should particularly encompass, the following two areas are among the four areas highlighted:
"... skills to improve the overall capacity of staff of national/indigenous operational partners, with whom UNHCR works, or intends to work, in refugee/refugee related operations, to permit such partners to work effectively and technically, administratively and financially to the standards required by UNHCR;
... as needed, a detailed overview of the programme, administrative and financial requirements of UNHCR, as well as the standards and guidelines which should be adhered to in refugee operations."
The other two areas highlighted for specific training were those of UNHCR's protection mandate and related principles, and security training for operational partners working in insecure situations.
15. The Strategy notes that the training of operational partners, unlike that of UNHCR staff, is met through the various country operational budgets. With the increasing trend to decentralize UNHCR's operations, steps will need to be taken to develop mechanisms to ensure appropriate monitoring and evaluation. The point is made, however, which echoes an earlier observation of the ACABQ, that the Training Advisory Board (TAB) will set organizational training priorities on the basis of strategic operational directions established for UNHCR by its Senior Management Committee chaired by the High Commissioner.
16. In May 1997, UNHCR concluded a review of its implementing arrangements. Part of the study looked at the question of the review and evaluation of implementing partners.
17. The study notes that periodic evaluation of the performance of implementing partners is another means of professionalizing UNHCR's approach to implementing partners. Evaluation would help shift programme attention more to effectiveness, rather than the current tendency to focus exclusively on budgetary issues. This approach would also encourage better performance, while at the same time indicating areas where improvements/strengthening were required.
18. In the evaluation study, the point was made that although there were many proponents for reinforcing the evaluation of implementing partners, there were also sceptics. Critics pointed out that evaluations are perceived as being subjective and had the potential to strain partner relationship.
19. It was felt that the use of performance benchmarks in evaluating activities would go a long way in addressing the evaluation sceptics. "Hard" evaluation criteria, which left little room for subjective judgement could be formulated on the basis of the objectives of the project. Furthermore, a partner could be given the opportunity to point out where factors outside its control prevented it from meeting stated objectives. Agencies could also be given the opportunity of making suggestions on the quality of UNHCR support and how the UNHCR performance in the specific operation could be enhanced.
20. A final observation in the study noted that the level and depth of an evaluation could take into account the size of a project. In the case of large projects, such as those over $ 2 million, a more in-depth assessment led by Headquarters' staff in cooperation with the agency concerned could be undertaken. In addition, a comprehensive review of implementing arrangements could form part of the terms of reference of inspection missions.
21. Based on these observations, there are two recommendations relating to evaluation in the overall evaluation of UNHCR's implementing arrangements which are before the Senior Management Committee for endorsement. These are as follows:
"Implementing arrangements should be subject to regular review. The terms of reference of inspection missions and country-specific evaluations should include examination of the appropriateness and cost-effectiveness of implementing arrangements." (Recommendation 4).
"Implementing partner performance in UNHCR-financed projects should be regularly evaluated on the basis of agreed criteria and performance indicators. In the evaluation process, partners should be given the opportunity to highlight any constraints encountered in implementation and to comment on the quality of UNHCR support and guidance. More elaborate evaluation should be undertaken for larger projects." (Recommendation 5).
22. In a related initiative, UNHCR has decided to set up a single database on NGOs. The background to this initiative is set out in document EC/47/SC/CRP.52. The questionnaire which has been sent to NGOs requests information on a number of the subjects which are relevant to the issues discussed in this paper: the financial rules and procedures of the implementing partner, yearly independent audit certification and training activities. The database, which will be operational by mid-1998, will also contain information on evaluations and compliance with submission of reports by NGOs. Parts of the database will be confidential. This database, while it will serve a broader purpose and will be of use to both UNHCR and NGOs, will, nevertheless, help UNHCR to respond to oversight and audit demands for greater accountability and transparency in its implementing arrangements.
1 See EC/47/SC/CRP.42