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 Introduction General
information
Recommendations of the Board of External Auditors Summary
of audits conducted By
type of audit By
technical area List of
Audits Performed during 1997
Introduction
Pursuant to Article 101 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 course of 1997. The Report makes particular reference to the recommendations of the Board of External Auditors and to the adequacy of the resources allocated to the Office of the Inspector General. During the 12 month period covered by this report, the Office of the Inspector General conducted a total of 16 audits, of which 9 were carried out in dependencies located at OAS headquarters and 7 in offices and projects of the General Secretariat located in the member states, or in Inter-American organs, agencies, and centers. In addition, one evaluation was performed away from headquarters during this period, while at headquarters two studies were conducted and one investigation was initiated. Without by any means overlooking the high-risk areas found in certain offices and projects in the member states as recognized by the Board of External Auditors in its comments with respect to the operations of the Office of the Inspector General (CP/doc.2923/97,p.21.) an attempt was made to ensure the broadest possible coverage of audits within the OAS headquarters itself, in light of the Board's recommendation to this effect. There were three major issues of particular concern. The staff cuts introduced in 1996 and 1997 have had the effect of weakening internal controls, particularly in the financial area. While the external auditors did not identify any glaring shortcomings, it was recommended both by Ernst and Young and by the Board of External Auditors that the General Secretariat's administrative strategies for restructuring accounting and information procedures should be evaluated along with the current staffing level of the Department of Financial Services, in order to ensure that, as responsibilities are reassigned in light of available human resources, due provision is made for fundamental controls. I agree with that observation, and my office will be addressing the issue once again early in 1998. The new computerization system that the General Secretariat is planning to introduce is the second issue that deserves special attention. I have participated as an observer, together with members of my staff, in the bidding process for this plan. I intend to maintain a close watch over the work of designing and implementing the system, as was suggested by the Board of External Auditors. In the third place, the new mechanism adopted for CIDI projects calls for participation by the Office of the Inspector General, which will be empowered to audit those projects within the national executing bodies, as provided for in the model agreement prepared by the General Secretariat. We have therefore devoted priority attention to the development of this mechanism, in particular with respect to the need to maintain adequate internal controls over the disbursement of funds and to verify that goals have been accomplished, and to make sure that clear responsibilities are assigned to the bodies that are to carry out these functions. During 1997, the activities of the Office of the Inspector General led to savings, either real or potential, in the operations of the General Secretariat, amounting to $615,000, primarily through the deobligations. the avoidance of over-payments and the reduction of administrative costs, and to a lesser extent, the recovery of funds. Table 1 provides details on these savings. With respect to the adequacy of personnel resources, the Board of External Auditors stressed its concern over the loss of one position in the Office of the Inspector General, pointing out that the members of the Board ". . . do not feel it is appropriate to eliminate any positions from the Office of the Inspector General, which in our view is already required to function with the bare minimum of staff." In addition, the Board recommended that the position should be filled by an auditor with computer systems experience, since tests of the new computer system will be vital over the next few years, and the Office of the Inspector General will consequently need to have staff qualified to conduct such tests. In my comments on the Board's Report, I stated that I shared the concern expressed therein in this regard, and indicated that if the efforts I was requesting under other budget items for 1998 did not permit this loss to be compensated, I would ask for the eliminated position to be restored. On the basis of the experience gained during the bidding process for the new computer system, I can state that, as anticipated by the Board of External Auditors, it is absolutely essential to have an auditor experienced in this area as quickly as possible, now that the General Secretariat has undertaken a project to modernize that system, with an approved expenditure of $ 8.8 million. Consequently, I shall give the highest priority to efforts to restore the position that has been eliminated, and to recruit for it an expert who will give the Office of the Inspector General the capacity to conduct a proper review of this project, which will have an impact on the entire Organization over the coming years and which, as the Board has noted, is a major undertaking, fraught with complications and risks. The independence I enjoy as Inspector General continues to be reflected in the complete freedom with which I have been able to plan and conduct the work of my office; in the fact that the budget for my office has been submitted, without any changes, to the responsible bodies; and in the prompt approval that the Secretary General has given to all of the recommendations that I have made during the year. There has continued 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. Conscious of the problems related to staff reductions, I have set priorities as to the dates by which the various steps recommended should be put into effect, as suggested by the Board of External Auditors. I wish in particular to note the cooperation provided in this respect by officials of the Secretariat for Management who, especially during the second half of 1997, made a major effort to keep my office fully informed on compliance with our recommendations. January 30, 1998Guillermo A. Belt The origins of the Office of the Inspector General date back to 1975, when the Secretary General issued regulations governing the former Office of Audit and Evaluation. In 1988 its name was changed to its current title. On May 8, 1995, the Secretary General, as a demonstration of the importance that he attached to strengthening the Office of the Inspector General and ensuring its independence, issued Executive Order 95-05, which reinforced the technical and administrative autonomy of the OIG. In June of that year, the General Assembly decided to institutionalize the Office, as part of the process for strengthening the OIG that began in 1994 with resolution AG/RES. 1279 (XXV-O/94), and to this end it amended the General Standards for the Operations of the General Secretariat, introducing Articles 99, 100, 101, and 102. The OIG is responsible for ensuring that the standards and regulations of the General Secretariat are faithfully complied with, both in financial terms and in operational and administrative respects. It is also responsible for examining and analyzing the operating procedures and financial transactions carried out in the headquarters of the General Secretariat and in the Offices of the General Secretariat in the Member States, with a view to:
The Office of the Inspector General answers directly to the Secretary General and is governed by the articles of the General Standards for the Operations of the General Secretariat cited above; Executive Order No. 95-05; and the Budgetary and Financial Rules of Procedures, Chapter XV. The OIG may have access to any official, record, document, or file, within or beyond headquarters, as it deems necessary for the effective conduct of its examinations. The OIG has established priorities whereby it places particular emphasis on operational audits, on verifying compliance with existing standards, and on risk evaluation. The results of these efforts are shown below in Table 1, which indicates the actual and potential savings associated with putting into effect the recommendations of the audit reports prepared by the Office of the Inspector General. Table 1: Savings attributable to OIG Audits in 1997
Recent annual reports presented by the Board of External Auditors have drawn attention to four major areas of concern with respect to the Office of the Inspector General: the coverage of audits, staffing levels, the independence of the OIG, and follow-up to the recommendations contained in the audits. The Office of the Inspector General is continuing to make every effort to address the concerns expressed by the Board of External Auditors, as described below.
During 1997, in response to the observations of the Board of External Auditors, the scope of audits conducted embraced practically all dependencies of the General Secretariat, as can be seen from the following table. Table 2: Audits conducted by technical area
As the Board of External Auditors has pointed out, the Office of the Inspector General is operating with a minimum staff complement. For reasons beyond the control of the Secretary General, and without any consultation with the Inspector General, the 1997 budget eliminated the position of Senior Auditor, a position that this office had for many years, upon the early retirement of its incumbent. As a result of this decision, which the Board of External Auditors called inappropriate, the Office of the Inspector General was reduced from five professional officers (the Inspector General, the Deputy Inspector General, the Senior Auditor and two Auditors) to its current level of four. The Inspector General will redouble his efforts to correct this situation, as noted in the introduction to this annual report. He will also undertake further steps during 1998 to secure the greatest possible independence in recruiting and hiring staff for his office. In the Inspector General's view, his staff must be free from any possible pressure on the part of the administrative offices of the General Secretariat that they are called upon as auditors to examine, inspect, and investigate.
Significant progress has been made towards satisfying the concerns of the Board of External Auditors as to the independence of the Inspector General's Office. The Inspector General has a completely free hand in planning his program of audits, although this program does include audits that are requested by the Secretary General and the Permanent Council (as provided in Article 98 of the General Standards). All of the recommendations made in 1997 by the Inspector General were given prompt approval by the Secretary General. The Inspector General submits the operating budget for his Office directly to the Secretary General, who has to date accepted it without any changes and submitted it to the General Assembly through the regular channels. In the budget execution phase, the Secretary General has imposed no restrictions of any kind on the items allocated to the Office of the Inspector General, in contrast to the situation with some other offices
There was a major improvement during the year in the timeliness with which dependencies of the General Secretariat reported to the Inspector General on their compliance with the recommendations directed at them. It may also be said that there is now a better understanding of the work of the Inspector General's Office, and hence a greater acceptance of its role, a factor that has made the task of follow-up much easier. Between January 1 and December 31, 1997, the OIG carried out 16 audits, one evaluation and two studies; in addition, one investigation was initiated, which was still underway at the time this annual report was prepared, and a number of follow-up actions were undertaken. Work has focused on operational audits, compliance audits, and risk assessments. Moreover, during this period increased emphasis has been devoted to conducting audits at headquarters, in response to the suggestion made by the Board of External Auditors. Without prejudice to this focus, however, the Inspector General is planning to undertake a greater number of audits away from headquarters during 1998, especially for the various projects now in execution under the new operating procedures of CIDI. In addition, the OIG will need to perform regular audits and inspections of MICIVIH in Haiti, the Technical Cooperation Program for the Consolidation of Peace and Reintegration in Nicaragua, and the Special Program to Support the Peace Process in Guatemala. As can be seen from Table 3, in 1997 the OIG prepared 8 operational audit reports, 7 reports on compliance with rules and regulations of the General Secretariat, and one financial audit (see Annex 1 for a list of these reports). That same table shows comparative data for 1996. Table 3: Audits conducted by the Inspector General's Office 1996 - 1997
The OIG has kept its efforts focused on operational and compliance audits. Financial audits have for the most part been left to the external auditors, whose primary function is to review the operations of the General Secretariat from a financial point of view. Operational audits are intended to review not only the financial aspects, but also the operating system in place in the various areas and in the projects carried out by the General Secretariat, with a view to identifying possible ways of economizing, by enhancing the efficiency with which the various functions are carried out. In this manner, the OIG seeks to ensure that the resources administered by the General Secretariat are put to the best possible use. The principal purpose of a compliance audit is to ensure that the various areas, and their staff, are following the pertinent standards and regulations of the General Secretariat. The OIG pays particular attention to compliance with regulations on funds management and the purchase of goods and equipment, with a view to maintaining full transparency in matters related to money management. This type of audit is also intended to guard against any irregular or improper use of funds of the General Secretariat or of projects that are being implemented in member states. As can be seen from Table 4 below, audits undertaken in 1997 tended to focus on those areas of the General Secretariat that have the greatest responsibilities in terms of funds management. These areas are the Secretariat for Management, which includes the departments of Financial Services, Material Resources and Systems; the Offices of the Secretariat in the Member States, and the specialized agencies. For 1998, the OIG is planning to be more active in the area of the Inter-American Council for Integral Development (CIDI), where, as noted in the introduction to this report, there are new operating procedures in place under which funds contributed by member states for the various projects are to be placed directly at the disposal of the executing agency, a situation that implies greater activity on the part of the Inspector General's Office, which must review the internal controls that are put in place for each project in order to ensure the effective use of the financial resources allocated to it. As can be seen from Table 1, during 1997 the OIG managed to achieve significant savings, thanks in large part to the fact that its work was focused on those areas of the General Secretariat with the heaviest financial management responsibilities. Table 4: Audits Conducted by Area
The quarterly activity reports of the OIG, which have been regularly submitted to the Permanent Council and considered by the Committee on Administrative and Budgetary Affairs, contain a summary of the conclusions and recommendations found in the audit and evaluation reports prepared during the period covered by this Annual Report.
SG/OIG/EVALUACION-1/97, Evaluation of the Administrative Autonomy of the Inter-American Court of Human Rights, September 30, 1997.
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Coverage of the audits 
