|
Pursuant to Article 113 of the General Standards for the operations of the General Secretariat, I hereby submit for consideration of the Permanent Council the annual report on audits, evaluations, investigations and inspections conducted during the calendar year ended December 31, 1998. The Report makes reference to the recommendations of the Board of External Auditors and the adequacy of resources, including the level of staffing allocated to the Office of the Inspector General. In accordance with Article 111 of the General Standards, the Secretary General has established appropriate internal auditing procedures to verify compliance with standards and regulations in force, especially through systematic and selective examination of official transactions and operational procedures related to the resources administered by the General Secretariat. The Office of the Inspector General has been established as the dependency responsible for applying these procedures and exercising the functions related to the internal auditing procedures. Executive Order 95-05 issued by the Secretary General on May 8, 1995, established the declaration of responsibility, purpose and authority with respect to Internal Audits and the composition of the Office of the Inspector General. The general objectives of the OIG include promoting economy, efficiency and effectiveness in General Secretariat operations and all OAS programs and projects, as well as assisting all levels of management in the prevention or detection of fraud and abuse and the risk thereof in programs or operations. Specifically, the Office of the Inspector General is responsible for ensuring systematic review of internal management and accounting controls, and when necessary, inspections and investigations of all offices, departments, programs, divisions, units, activities and projects, both at General Secretariat Headquarters and in all member states or other locations. The OIG is required to determine whether the functions of planning, organization, management, documentation, accounting, custody and control of resources are carried out (1) in accordance with instructions, policies, standards, regulations, manuals, procedures and other administrative provisions, (2) efficiently, effectively and economically and (3) in accordance with the Organization's overall aims and the highest standards of administrative practice. The work plan of the Inspector General places particular emphasis on the proposals made by the Board of External Auditors and any special requests from the Permanent Council and the Secretary General. Audit activities are directed toward those with the highest degree of risk and promote economy, efficiency and effectiveness in General Secretariat operations and all OAS programs and projects. The Inspector General reports directly to the Secretary General and is governed by the Articles of the General Standards for the operations of the General Secretariat, Executive Order 95-05 and Budgetary and Financial Rules and Procedures. According to Article 114 of the General Standards the Secretary General is required to respond to the Inspector General's reports within thirty days of the date of submission. If no observations are put forward within that period, then the Inspector General automatically assumes that the report is accepted. Executive Order 95-05 provides that Directors and other supervisors responsible for the appropriate corrective action which has been recommended, must report to the Inspector General within 30 days following receipt of the transmission of the report.  INTRODUCTION
During the 12-month period covered by this report, the Office of the Inspector General conducted a total of thirteen audits, nine of which were carried out in dependencies located at Headquarters and four in offices and projects of the General Secretariat located in the member states. In addition, three investigations were performed at Headquarters and another investigation as well as two inspections were performed away from Headquarters. In accordance with the General Standards, audits were conducted with particular emphasis on high risk areas and/or those with the greatest potential for increasing efficiency, economy and effectiveness as well as taking into consideration the proposals of the Board of External Auditors, particularly regarding the need to maintain significant audit coverage at headquarters. Table 1 which is shown below, provides the results of 1998 audit activities and indicates anticipated savings of $1,116,813, through recovery of funds/overpayments and administrative costs as a direct result of implementing recommendations of the audit reports prepared by the Office of the Inspector General. Table 1
In the 1997 Annual Report the Board of External Auditors reiterated that staffing in the OIG is below the appropriate level and emphasized the need to ensure that due attention continues to be given to the coverage of Headquarters' programs. In addition to issues identified by the Board of External Auditors, some issues continue to be of major concern - (1) the need for an additional experienced professional auditor with computer expertise and significant experience in internal auditing in the Oracle environment including Oracle Applications , (2) the need to evaluate internal controls, not only in the Department of Financial Services but other areas of the General Secretariat such as the Department of Material Resources, which is responsible for purchase requisitions (including performance contracts processed through the new computerization system), (3) the need to ensure that adequate internal controls are maintained in the disbursement of technical project funds for achievement of objectives in a cost effective manner and (4) the need for updated procedural manuals to provide overall policies and procedures governing daily operations of the General Secretariat, particularly those affected by the implementation of the new Oracle Financials™ System. The Acting Inspector General, Guillermo Belt, retired on June 30, 1998. The Deputy Inspector General was appointed to act as Inspector General on July 1, 1998 and was confirmed in the permanent position effective January 1, 1999. The vacant position of Deputy Inspector General has reduced the level of professional experienced staff available for conducting audits. Further, the implementation of the new Oracle System creates a need within the OIG for the skills of a professional auditor with computer expertise and significant experience in internal audits within the Oracle environment. Following the implementation of the new system, operational changes and new procedures create opportunities for complications and risks to internal controls. The recruitment of a professional auditor with the required computer skills and experience in the Oracle environment is of the utmost urgency and, in 1999 I intend to give the highest priority to efforts for filling the vacant position of Deputy Inspector General. I have revisited the issue raised by the Board in the 1997 Audit Report concerning the development of an OIG field office in Panama and I have concluded that the concept of developing an OIG field office in Panama and the location of a junior auditor does not utilize resources at maximum efficiency. Consequently, arrangements have been made to relocate this post to Headquarters effective from January 1, 1999. In the performance of our activities, the Inspector General and Staff of the Office enjoy full, free and unrestricted access to all functions, activities, operations, records, properties and staff of the General Secretariat, as may be considered necessary for planning and the effective performance of audits. My program budget has been submitted without any changes to the responsible bodies and all recommendations made by the Inspector General during the year have been promptly approved by the Secretary General. There continues to be a high degree of compliance with our recommendations on the part of the dependencies of the General Secretariat to which they have been directed, and priorities have been set as to the implementation dates as recommended by the Board of External Auditors. I wish to note the cooperation provided by officials of the General Secretariat and the major effort made to inform the OIG of actions taken in complying with audit recommendations. Executive Order 95-05 requires systematic and selective audits of all operations, in accordance with a long-term cyclical plan that ensures complete auditing within an appropriate time period. In 1999 I intend to continue, within the limitation of available resources, to direct audit activities toward operations with the highest degree of risk and/or those with the greatest potential for increasing efficiency, economy and effectiveness, emphasizing on proposals made by the Board of External Auditors and any special requests from the Permanent Council and the Secretary General. Annex 2 provides the 1999 Work Plan which includes evaluating internal controls within the Secretariat for Management (particularly those operations affected by the new Oracle System), selected projects implemented by certain Units and Specialized Offices and disbursement of project funds by the Secretariat for Integral Development under CIDI's new operational framework. SUMMARY OF AUDITS CONDUCTED
During the period January 1 to December 31, 1998, the OIG carried out thirteen Audits, four Investigations and two Inspections. Activities focused on operational and compliance audits and in response to the recommendations of the Board of External Auditors, effort was made to maintain significant audit coverage at Headquarters. At the same time audit activities were directed toward operations with the highest degree of risk and/or those with the greatest potential for increasing efficiency, economy and effectiveness. Table 2 provides an analysis of completed audits - nine operational, two compliance and two risk assessments. Operational audits review not only records but also provide recommendations which lead to more efficient operations, improvements in management and accounting controls, reduction in costs and prevention of losses. Compliance audits primarily determine whether the General Secretariat complies with OAS mandates, established rules, standards, procedures and regulations, including agreements between the General Secretariat and other parties e.g., donor agencies. Table 2
An analysis of audits conducted according to technical area is provided below in Table 3. According to the 1998 work plan, audits were focused in the area of the Inter-American Council for Integral Development to examine internal controls established in the new operating procedures for providing project funds directly to executing agencies. In addition to the recommendations of the Board of External Auditors, audits focused on those areas or activities of the General Secretariat which indicated activities involving matters of significant or high risk to the internal controls of the General Secretariat e.g, audits undertaken in the Secretariat of Management area which carries the heaviest financial management responsibility within the General Secretariat such as the Tax Reimbursement Program. Two risk assessments were conducted in respect of areas of concerns raised by the Board of External Auditors in the 1997 Audit Report. - (1) the General Secretariat's readiness to the Year 2000 issue and (2) the Impact of the implementation of the Oracle Financials™ System. Table 3
Quarterly Reports Quarterly activity reports which provide a summary of the findings found in the individual audit reports completed during the period covered by this Annual Report, have been submitted to the Permanent Council in conformity with the Article 113 of the General Standards and the provisions of operative paragraph 5 of Executive Order 95-05 of May 8, 1995.
In past years the Board of External Auditors expressed concern about the Office of the Inspector General's audit coverage, staffing, independence and follow up of recommendations. These issues were again presented in the Board's 1997 Audit Report. The Inspector General continues to make every effort to address the concerns expressed by the Board and to review these areas of concern on a continuing basis.
During 1998 the OIG activities focused on the areas of high risk and efforts concentrated on maintaining significant audit coverage at Headquarters. During the 12 month period covered by this report, the Office of the Inspector General conducted a total of thirteen audits, of which nine were carried out in dependencies located at Headquarters and four in offices and projects of the General Secretariat located in the member states. In addition, three investigations were performed at Headquarters and another investigation, as well as two inspections were performed away from Headquarters. An analysis of the 1997 and 1998 results showing audits conducted by technical area is provided below in Table 4. Table 4
The Board continues to express concern about the level of staffing in the Office of Inspector General and reiterated that appropriate staffing is vital to ensure that adequate internal controls are maintained. In 1997 the Board further stated that employees chosen to fill vacant positions within the OIG should fulfill the requirements of the position and located appropriately. In the1996 Audit Report the Board recommended that an auditor with computer expertise be appointed to ensure that qualified personnel are available to review the new MIS program. The appointment of the Deputy Inspector General to act as Inspector General consequent upon the retirement of the former Acting Inspector General, further reduced the level of professional and experienced staff members available for conducting audits. In 1999, I intend to give the highest priority to efforts for the recruitment of a professional auditor with the required computer expertise and significant experience in the Oracle environment to fill the position of Deputy Inspector General, which has now become vacant as a result of my permanent appointment as Inspector General. In 1997 the Board also expressed concern about the development of a field office in Panama, the supervision of this junior staff person away from Headquarters and the qualifications of this new employee. As stated earlier, I have revisited the issue and have concluded that in order to ensure maximum utilization of resources, the position of Junior Auditor should be relocated to Headquarters. The Director of the Department of Human Resources has initiated the relocation process effective January 1, 1999 and the incumbent staff member, who has over 30 years seniority with the General Secretariat, has indicated a willingness to accept the transfer to Headquarters. In prior years the OIG has utilized performance contractors to supplement staffing requirements and, in 1999 I intend to continue to use this method, thanks to additional Object 8 funds provided in the 1999 program Budget. Independence The Inspector General has complete independence in planning audit programs and in performing and reporting on all audit activities as provided in Article 112 of the General Standards. The Inspector General submits the operating budget for the office directly to the Secretary General and no restrictions have been imposed on the resources allocated to the Office of the Inspector General. Audit Follow-up In 1998, audit reports from the Inspector General issued 155 recommendations. Except for the two final reports dated December 31, 1998 containing 28 recommendations, all reports and recommendations have been promptly approved by the Secretary General. At December 31, 1998 forty-four per cent (44%) of approved recommendations had been fully implemented and the remaining recommendations are in the process of implementation. The Office of the Inspector General has successfully established a system to track actions on recommendations and is satisfied with the major improvement demonstrated during the year regarding the timeliness with which the General Secretariat has reported on actions taken for compliance with the recommendations. As suggested by the Board, the Inspector General continues to prioritize the recommendations and to assist management in understanding those recommendations which require immediate implementation.
In the 1997 Audit Report the Board suggested that a formal policy be established to include formal comments as an appendix to each report. The OIG continues to discuss all findings and recommendations with auditees and all comments provided to us are taken into consideration prior to finalizing each report. The Board has also been provided with copies of those formal comments which have been provided to the OIG.
There is an urgent need to update procedural manuals within the General Secretariat particularly because of the implementation of the new Oracle Financials ' System and this matter was included in the concerns noted in the Board's 1997 Audit Report. I intend to devote priority attention to monitoring the General Secretariat's efforts at updating the relevant manuals to ensure the adequacy and timely provision of proper guidelines and operating procedures, particularly for those operations which have been affected by the new Oracle System. January 31, 1999Linda
P. Fealing
List of Audits performed during 1998
1999 Audit Work Program
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
