I. Audit Reports
 

Eight audits and two investigations were completed during the year ended December 31, 2004 and sixty-one recommendations were provided to correct identified internal control weaknesses. Two recommendations related to the need to update records of fixed assets for inventory control purposes, fifty-seven recommendations were issued for compliance with GS/OAS directives, as well as for improvements to operational efficiency and controls and two related to computer security. All reports and recommendations submitted to the Secretary General were approved. The OIG continues to monitor efforts made by the General Secretariat to address audit findings and to implement recommendations. The Inspector General is satisfied that every effort is made by the General Secretariat to implement OIG recommendations within budgetary constraints.

Audit SG/OIG/AUDIT-01/04 was undertaken to review the security control features of the infrastructure supporting the applications and to determine whether adequate safeguards are in place to ensure the overall integrity of the Organization’s data. Infrastructure areas include: Web activity controls – Internet and Server, firewall controls, operating system controls, web network component controls, browser controls, virus protection, business continuity plan, backups of key data files, maintenance contracts for hardware (servers, printers, etc), and connections of Oracle to National Offices. The audit noted that the Enterprise Resource Planning (ERP) system operated by GS/OAS is complex and requires diligence in establishing effective security and control techniques. The audit also noted that there has been significant progress since the 2002 audit and in general, staff members are more effective in their jobs as a result of their improved knowledge of the system and their job responsibilities. However, there is need (1) for security policies and procedures for wireless connections to prevent existing exposures and to meet today’s threat filled environment and (2) to consolidate security functions into one group reporting to the Data Security Manager. The audit also noted that written policies and procedures were promptly issued to mitigate the exposures after access to OAS internal network by an unauthorized wireless connection was identified.

Audit SG/OIG/AUDIT-02/04 was undertaken to review the security and control features of the Oracle application to determine whether adequate safeguards are in place to ensure the overall integrity of the data of the General Secretariat of the Organization of American States OIG noted that the OASES system is working in a more efficient manner due to the diligence and work effort of all staff members and many areas have achieved noticeable progress since the previous audit.

Major high risk findings related to the assignment of super user rights and a lack of effective segregation of duties for some individuals. Other findings included the need to (1) arrive at a quantifiable method to ensure that resources are being used wisely in the production of financial reports and to encourage users to construct their own reports using available tools (2) implement guidelines in defining account code configuration changes versus definition changes and (3) formalize a Data Classification methodology in protecting GS/OAS data particularly in report distributions and file transfers.

The main purpose of Audit SG/OIG/ 03/04 was to assess and evaluate internal controls for travel expenditures paid at Headquarters and to review travel costs, including home and repatriation expenses incurred in 2003. The OIG noted that the GS/OAS has successfully continued to reduce the overall travel costs paid by the Regular Fund as mandated by the Member States. However, there is need to reduce travel costs paid from Specific Funds and for compliance with GS/OAS travel directives. OIG recommendations include implementation of measures to reduce penalty fees for changes to travel itineraries as well as the need for (1) approval of requisitions prior to travel, (2) timely submission of Travel Expense Claims, (3) salary deductions for failing to submit timely Travel Expense Claim Reports, (4) automation of  the travel expense claim review process for operational efficiency, (5) written procedures and supporting documentation for official travel undertaken by Performance Contractors (CPRs) and (6) a requirement for the submission of travel expense claim reports from CPRs.

Audit SG/OIG/ -04/04 was undertaken following a request from the Chief of the OAS Special Mission to Strengthen Democracy in Haiti to identify those controls in effect over operational activities, including cash receipts and disbursements in the OAS Special Mission and to verify that the mission is executing its administrative responsibilities in accordance with General Secretariat directives. The audit covered the period January 16, 2002 to May 31, 2004. For the most part, the OIG ascertained with reasonable assurance that strong internal controls exist in the OAS Special Mission for safeguarding assets, proper recording of transactions and amounts, efficient use of resources and compliance with established rules and directives. In addition to the issues related to reimbursement of overpayments of per diem allowances, the main audit findings were the need for compliance with GS/OAS directives regarding performance evaluations, the local bank account, official long distance telephone logs, official vehicle log and quarterly reports on control of releases for goods imported duty free.

Audit SG/OIG/ 05/04 was undertaken at the request of the United States Permanent Mission to review the total amount of Specific Funds contributed by that Government to the Inter-American Agency for Cooperation and Development (IACD). The Office of Budgetary and Financial Services continues to process the financial record keeping and the administration of the IACD funds under the terms of the 2003 agreement with the former Secretariat for Management. For the most part the IACD complies with GS/OAS directives regarding the management of its Specific Funds. However, the audit noted that during the audit period the IACD did not always comply with GS/OAS directives for disbursements, purchase orders and performance contracts, Recommendations were provided to (1) improve the financial reporting process, (2) obtain donor approval prior to transfer of funds between projects (3) comply with the donor’s terms regarding overhead costs and interest distributions and (4) revisit the terms of the 2003 agreement to determine its cost effectiveness.. 

Audit SG/OIG/ 06/04 was performed to review and evaluate internal controls within the General Secretariat Office in Costa Rica during the period January 2003 through September 2004. The audit determined that, for the most part internal controls are satisfactory. However, in addition to the need for collection action regarding arrears of loan payments due to the Leo Rowe Fund, there was need for compliance with GS/OAS directives regarding the registration of the authorized signatures at the local bank account, voided checks, authorization and use of the Petty Cash Fund and updating the Fixed Asset Inventory Report. Three projects executed in GS/OAS Costa Rica were selected for audit (1) Formulation of a Strategic Action Program for the integrated Management of Water Resources and the Sustainable Development of the San Juan River Basin and its Coastal Zone (2) Program Assistance for Small Hotels in Central America and (3) the Second Phase of the Technical Protocol for the establishment of the Program Observatory for Democracy in Central America. OIG review of those projects indicated that all progress and final reports were submitted and that the objectives established in the respective agreements were achieved.

Audit SG/OIG/ 07/04 was undertaken to follow up on the 2000 internal audit of the Program for Joint Reconstruction of Homes in Communities of Central and Northern Nicaragua. OIG review of the Project Office execution progress reports indicated that the program was very successful. The audit noted that since the 2000 audit there have been significant improvements in internal controls particularly in the disbursement of project funds. Areas of major improvements were:

• Effective supervision and project management by Headquarters and the GS/OAS Office in Nicaragua.
• Effective internal controls in the receipt and disbursement of project funds, including the method of payment for project expenses, procurement and recording of inventory.
• Compliance with the terms of the project agreement.

Major findings were the need to ensure that (1) amendments to project agreements are finalized in writing and signed by both parties and (2) contracts to performance contractors are awarded only when funds are available. 

Audit SG/OIG/ 08/04 was undertaken to review the Assistance for Demining project in Nicaragua (PADCA). The audit noted that the project is being executed according to the terms of the project agreements and GS/OAS directives. The major audit findings were the need to standardize the method of identification in support of payments to sappers and for the submission of timely information for updating the Fixed Asset Inventory Reports at Headquarters.

Investigation SG/01/04 of the PADCA Project in Guatemala was undertaken at the request of the General Program Coordinator of the former Unit for the Promotion of Democracy regarding allegations of irregularities made against the National Project Coordinator. The investigation noted several irregularities in the execution of that project including violations of GS/OAS Rules and Budgetary and Financial Rules regarding family relationship, authorized bank accounts, authorization and use of a Petty Cash Fund, effective supervision and management of project personnel by Headquarters staff and updating fixed Asset Inventory Reports. Recommendations were provided for strengthening internal controls in the execution of the project and for the termination of two contracts. In addition, the local Project Coordinator’s contract was not renewed beyond December 31, 2004.

Investigation No. 02/04 addressed the difference in the conflict of interest standard in the classification levels for employment of relatives that were identified in Administrative Memo. 82 for Temporary Conference Services Contracts and for performance contractors under the Performance Contract Rules in Executive Order 01-4. OIG recommended that a change be made to address this inconsistency when Administrative Memorandum 82 is amended. 

II. STAFFING

Three auditor positions are assigned to the Office of the Inspector General in the Program-Budget of the Regular Fund. The Inspector General continues to utilize performance contractors for auditing services to supplement the staffing resources provided by the Regular Fund. In 2004 the Secretary General approved the Inspector General’s request to change the G6 Principal Secretary position to a G6 Junior Auditor position. The Junior Auditor position will provide assistance in auditing activities and will follow up on outstanding recommendations in order to provide the relevant reports to the Inspector General for the annual meeting of the Board of External Auditors. In 2004 in addition to Regular Fund allocations, the OIG received amounts totaling US $38,000 to assist in carrying out auditing activities related to Specific Fund projects. 

The draft 2006 Program Budget of the Regular Fund includes a request for an additional P3 auditor position for the OIG. In addition, in 2005 the Acting Secretary General approved the Inspector General’s request for funds from the overhead received by the General Secretariat to carry out audits of Specific funded projects.

III. OTHER
 
In addition to the meetings of the Permanent Council and the CAAP, the OIG observed GS/OAS meetings including those related to OASES, the Renovations of OAS buildings, Contract and Awards Committee, COVENT and the Publications Board Committee. The Inspector General continues to meet with managers of the General Secretariat to discuss the implementation of audit recommendations, as well as other operational issues related to the internal control environment.

April, 2005

Linda P. Fealing
Inspector General