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In accordance with the provisions of Article 101 of the General Standards to Govern the Operations of the General Secretariat, I am submitting herewith for the consideration of the Permanent Council, the annual report on the evaluations, audits, and inspections conducted in 1996, with special emphasis on the recommendations of the Board of External Auditors and on the suitability of the resources allocated to my Office. This second annual report differs from the first one (CP/doc.2706/96) in that it proposes to give a more comprehensive account of the activities of the Office of the Inspector General. First, audits are classified by type-whether they deal with operations, compliance, or finance to give a better understanding of how the OIG conducts its work. Second, audit coverage is shown by listing audits by technical area of the General Secretariat, following the same format used for the Organization's program-budget. Third, the report quantifies the potential and actual savings generated by the work of the Office of the Inspector General by prevention of overpayment, repayments, deobligations, and savings of administrative costs. It seemed useful to incorporate data for 1995 in this format, both for comparative purposes and in the interest of standardizing presentation. The process of strengthening the Office of the Inspector General was started in 1994 with the General Assembly's approval of resolution AG/RES. 1279 (XXIV-O/94), which entrusted the Permanent Council with the task of studying the structure and functions of the Organization's auditing systems, especially the Office of the Inspector General, and instructed it to submit to the next regular session its recommendations for broadening the scope and number of internal audits conducted by the Office and to provide it with the resources and structural independence needed for its activities. In its report to the General Assembly (AG/doc.3206/95), the Permanent Council endorsed the Report of the Committee on Administrative and Budgetary Affairs on the Strengthening of the Inspector General's Office (CP/doc.2592/95), which formed the basis for the study by the working group established specifically for that purpose, and submitted a draft resolution including a proposed amendment of Chapter VII of the General Standards. The Assembly approved the proposal at its annual session in 1995. The General Assembly also granted my request to create two professional posts in the 1996 budget, in addition to the position of Deputy Inspector General, established by the Secretary General in 1995, and the position of Principal Auditor, which has been in existence for many years. The Assembly further approved additional budgetary resources under other headings for the operation of the OIG, as requested. I wish to stress that the Secretary General has forwarded to the Assembly the unamended draft OIG budget submitted by the Inspector General. With regard to the independence essential to proper performance of the Inspector General's functions, I wish to take this opportunity to reiterate that the Secretary General has publicly and repeatedly stated, at the highest management levels of the Secretariat that the Inspector General has absolute freedom to conduct any audits, evaluations, inspections, and investigations deemed appropriate and to formulate any recommendations judged necessary. All the recommendations I have made since I assumed the position in November 1994 have been approved by the Secretary General. With the exception of two studies, one requested by CAAP and the other by the Secretary General, the 31 studies on which these recommendations were based were conducted at my own initiative. In 1996, a number of offices in the General Secretariat became more receptive to the Inspector General's reports. Timely compliance with the recommendations derived from those reports, though obligatory once the Secretary General approves them, has posed some problems which, I believe, are being overcome. I am pleased to note, in that regard, that my office has received assistance from the Unit for the Promotion of Democracy in implementing the recommendations made in the MICIVIH audit. It has also been assisted by the Executive Secretariat of CICAD and the UPD, which promptly provided the information we requested during the audit of official travel, and by the management of the Art Museum of the Americas and the Executive Secretariat of the CIM in the audits conducted in these branches of the Organization. I am therefore in a position to inform the Permanent Council that the process of strengthening the OIG, in two and a half years, has yielded positive and tangible results. But I think that there is still work to be done. As I submit this report, I am proposing a number of administrative measures to the Secretary General which, in my opinion, will guarantee complete independence for the Office of the Inspector General in terms of budget and human resources. In this way, I hope to follow the guidelines that the governing bodies of the Organization, the Board of External Auditors, and the Secretary General himself have given for the effective performance of the duties entrusted to me. January 28, 1997 Guillermo A. Belt The origins of the Office of the Inspector General date back to 1975, when the Secretary General regulated the operation of the office then known as the Office of Audit and Evaluation. In 1988 the name of the Office was changed to the current one. On May 8, 1995, the Secretary General, underscoring the importance placed on the strengthening and independence of the Office of the Inspector General, issued Executive Order 95-05, which strengthened the technical and administrative autonomy of the OIG. In June of that year, the General Assembly decided to institutionalize the process, during the strengthening of the OIG, which began in 1994 with resolution AG/RES. 1279 (XXIV-O/94), and proceeded to change the General Standards to Govern the Operations of the General Secretariat, by introducing Articles 99, 100, 101, and 102. The OIG is in charge of ensuring strict compliance with the rules and regulations of the General Secretariat, in financial, operational, and administrative matters. It also has the duty of examining and analyzing the operating procedures and financial transactions carried out in the General Secretariat and the Secretariat offices in member states, with a view to:
The Office of the Inspector General reports directly to the Secretary General and is governed by the articles of the above-cited General Standards to Govern the Operations of the General Secretariat, Executive Order No. 95-05, and Chapter XV of the Budgetary and Financial Regulations. The OIG has access to any official records, documents, or papers at headquarters or outside that it considers necessary for the effective performance of its examinations. The Office currently has a staff of five: the Inspector General, the Deputy Inspector General, a Senior Auditor, and two auditors. Based on the number of General Secretariat staff recorded in Objects 1 and 2 of the 1996 program-budget, the ratio of these staff to the number of auditors is 131:1. Comparative figures are 346:1 for the United Nations and 125:1 for the U.S. Federal Government. On November 1, 1994, the Secretary General appointed the current Inspector General ad interim and he began a process of reforming the functions of the OIG to more effectively cater to the new programs and structure of the Organization. Consequently, the OIG has changed its priorities, placing greater emphasis on operational audits, compliance checks, and risk assessment. Table No. 1 shows the number of audits carried out by the OIG in 1996, classified by type of report. For comparative purposes, data for 1995 is also included. Table No. 1 shows that the OIG has prepared 14 operational audit reports, 4 financial audit reports, and 13 reports on compliance with the regulations. (The details of these reports are given in Annex 1). Table No. 1: Audits Conducted by the Office of the Inspector General 1995 - 1996
Recent annual reports submitted by the Board of External Auditors have pointed to four main areas of concern in respect of the Office of the Inspector General: coverage of audits, staffing, independence of the OIG, and follow-up of audit recommendations. The Office of the Inspector General continues to make every effort to respond to the concerns expressed by the Board of External Auditors. It has been firmly supported by the Secretary General in this task, and by the Committee on Administrative and Budgetary Affairs of the Permanent Council of the OAS.
During 1995 and 1996, in response to the observations of the Board of External Auditors and the new focus that the Inspector General is giving the Office, the number of audits at General Secretariat headquarters has considerably increased. These audits have covered practically all the departments of the General Secretariat, as shown in the following table. Table No. 2: Audits Conducted by Technical Area
Specific actions have been taken to strengthen the personnel of the OIG. In 1995, the Secretary General appointed a Deputy Inspector General and in June 1996 the Inspector General was able to have an internally recruited staff member join the office, filling the new post that the General Assembly had approved in its budget that year. In addition, the General Assembly held in Panama approved resolution AG/RES. 3396 (XXVI-O/96) requesting the Secretary General to establish the permanent post of Deputy Inspector General, thereby regularizing the staff of the OIG. This staffing allows the OIG to have a reasonable number of auditors to perform its functions. The funding for performance contracts, under Object 8 of the budget, is a demonstration of considerable support for the operations of the OIG, since it makes coverage of many more issues and technical levels possible through the contracting of external auditors, particularly in the area of assessment of operations. The budgeted amount does not meet the needs of the OIG, in view of the number of audits that the Inspector General wishes to conduct in 1997. In 1996 this item was inadequate and was exhausted by end-September. Notwithstanding, the Inspector General will continue to work within the general parameters of the budget set for the Organization.
Considerable progress has been made regarding the concern of the Board of External Auditors about the independence of the Office of the Inspector General. The Inspector General prepares his audit plan with full autonomy, without prejudice to the inclusion in said plan of the audits requested by the Secretary General and the Permanent Council (the latter pursuant to the provisions of Article 98 of the General Standards). The Inspector General submits the operational budget for the OIG directly to the Secretary General, who has hitherto approved it with no amendments and referred it to the General Assembly through the regulatory channels. The Secretary General has stressed the Inspector General's freedom of action every time attempts have been made to limit his authority, and has approved all the recommendations that the Inspector General has submitted to him to date. In the Permanent Council, a number of representatives have congratulated the Inspector General for his work on more than one occasion. The Committee on Administrative and Budgetary Affairs has also expressed its support of the Inspector General's work, and its Working Group on the Strengthening of the Inspector General's Office played a very important role in this regard, culminating in approval of the measures that the Group recommended, first by the Permanent Council then by the General Assembly in Haiti. However, there is still some resistance from some management departments of the General Secretariat which, in the past, treated the OIG as if it were just another operational department, especially in personnel and budgetary matters. In 1995, this resistance often forced the Inspector General to attend to routine administrative matters, which should not have occupied his time. For instance, during the fiscal year, the OIG was requested to submit a detailed schedule of travel to audit the Offices of the General Secretariat in the Member States. It goes without saying that the confidentiality of the OIG's work programs is the best way to ensure the effectiveness of its audits. Consequently, the Inspector General decided to give general information on said travel, sufficient for budgetary programming purposes, without disclosing inappropriate details. Similarly, the OIG was included in the process of staff redeployment resulting from the reduction in force exercise (RIF), despite the fact that the staff of the OIG has been selected for its specific auditing qualifications, thereby exposing these officers to the risk of being replaced by others assigned to the OIG on the basis of seniority. Consequently, the Inspector General will redouble his efforts to achieve complete autonomy for the OIG, in terms of both the budget and staffing, to ensure that the Office can function free of all pressure from any operational area of the General Secretariat.
In 1996, the Office of the Inspector General became more active in the area of follow-up of the recommendations submitted in the internal audit reports. First, efforts were made to convince staff of the General Secretariat of the need for prompt compliance with the Inspector General's recommendations. Traditionally, the attitude has been to downgrade the importance of OIG's recommendations, resulting in excessive delays in their execution. Through contacts at all levels of the General Secretariat, the OIG is beginning to convince staff that its recommendations are aimed at improving the management and internal control system, improve operating systems, correct deficiencies and errors, and increase the effective implementation of the various programs and projects of the Organization. In order to facilitate compliance with the recommendations and answer any questions that the staff targeted by these recommendations may have, the Inspector General appointed one of his staff as a Compliance Officer, in charge of following up the recommendations submitted in the audit reports. This will help speed up the response to the recommendations made by the OIG. In 1995, some advances began to be made in this area which, as indicated, has been one of special concern to the Board of External Auditors. At the request of the Inspector General, the Secretary General sent a memorandum in November 1994, to the main staff of the Secretariat, resulting in compliance with all the recommendations pending from previous years. At the beginning of 1996, there were 112 pending recommendations. This number was reduced to 93 at the end of that year, including the 183 new recommendations made in the audit reports prepared in 1996. A large number of the recommendations pending for one year or more have been met, thereby eliminating all pending recommendations predating 1995. In the opinion of the Inspector General, this is a positive and noteworthy trend. Since the appointment of the current Inspector General, i.e. between November 1, 1994, and December 31, 1996, the OIG has conducted a total of 31 audits, including inspections, investigations, and follow-up audits. Work has focused on operational audits, compliance audits, and risk assessment. During this period also, greater emphasis has been placed on audits at headquarters, as suggested by the Board of External Auditors. However, for 1997, the Inspector General is planning a number of audits away from headquarters, since the OIG is required to examine the areas of greatest risk to the Organization. The Offices of the General Secretariat in the Member States, given the restructuring process the Secretariat is undergoing and the perceived isolation of these offices, have this characteristic and there is a greater risk of noncompliance with the rules and regulations of the General Secretariat by staff working in these offices. Another factor influencing the decision to continue to conduct audits away from headquarters is the execution of large-scale projects in member states, which are particularly important to the General Secretariat in terms of its new objectives. These projects, such as MICIVIH, CIAV, and the electoral observation missions, require that the OIG conduct inspections regularly. During the period covered by this report, the OIG conducted audits in the offices in Guatemala, St. Kitts and Nevis, Saint Lucia, Ecuador, Antigua and Barbuda, Grenada, Trinidad and Tobago, and Jamaica. Through these audits, the OIG was able to ascertain the degree of effective performance of the functions of these offices and their compliance with the applicable regulations. The main problem encountered by the OIG is the isolation felt by staff working in these offices away from headquarters, a feeling that has grown more acute in the last two years owing to the Organization's restructuring. As a result, these offices generally interpret the rules in their own way and, in some cases, are even completely ignorant of them. This has given rise to serious conflicts of interest, which have led to disciplinary measures ranging from censure to termination of employment of staff in these offices. A number of operational audits were performed during this period. The purpose of this type of audit is to identify areas or systems that can be improved, thereby increasing efficiency and correcting defects. This approach was used to examine such areas as Conferences, fixed assets inventory, MICIVIH, the Internet, long-distance calls, official travel from headquarters, etc. Annex 1 contains a list of all the audits conducted during the period covered by this report, indicating the type of audit used in each case. Table 3 shows potential and actual savings by the OIG through the recommendations made in its audit reports. Table 3: Savings generated by OIG audits
Following the guidelines of the Board of External Auditors, the Office of the Inspector General made audits at headquarters its priority focus. During the period covered by this report, audits and investigations were conducted covering most of the technical areas and departments at headquarters. As shown in Table No. 4, one of the areas on which OIG efforts were concentrated was the Secretariat for Management. In that area, the OIG attempted to focus its analysis on the sectors having the greatest impact on the operations of the General Secretariat and those that could generate considerable savings, either through improvement of their internal controls, changes or improvements in their regulations, or changes in operational systems. To that end, the OIG conducted audits in such areas as procurement of equipment, inventory control, and contractual and employment mechanisms. During the next year, the OIG will continue to allocate resources to those areas which have the greatest impact on General Secretariat operations, in the Secretariat for Management and elsewhere. Table No. 4: Audits Conducted by Area
The quarterly activity reports of the OIG, which have been submitted, as required, to the Permanent Council and considered by the Committee on Administrative and Budgetary Affairs, outline each of the audit reports prepared by the Inspector General during the period covered by this annual report.
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Coverage of Audits
