January 1 to March 31, 1999

Audit Reports

The three audits conducted during the first quarter of 1999 were carried out as part of the Inspector General's 1999 audit plan.

1. An audit of the General Secretariat Office in St. Vincent and the Grenadines (OAS St. Vincent) was performed to identify those controls in effect over its operational activities. We examined selected operational and financial activities including cash receipts and disbursements for the period January to December 1998 to evaluate effectiveness, efficiency and economy of internal controls and to verify whether the office is executing its responsibilities in accordance with OAS Rules and procedures. We ascertained with reasonable assurance that for the most part, internal controls in OAS St. Vincent are adequate for providing proper authorization of transactions and activities, adequate safeguard over assets, records and the proper recording of transactions and amounts. We found that the internal controls which are in place have enabled that office to continue carrying out its operational activities in a satisfactory manner, particularly during the absence of an on-site Director for a period of almost nine months. We found that the main weaknesses identified during the audit were the need for two signatures on disbursements in excess of $5,000 and the failure to submit quarterly releases on goods imported duty free. We feel that the lack of an on-site Director and the limited human resources available in that office during most of the period under review, were primarily responsible for the weaknesses identified during the audit. The five recommendations contained in the audit report (SG/OIG/Audit-01/99) have been approved by the Secretary General.

2. An audit of official travel within the General Secretariat (SG/OIG/Audit 02/99) was conducted as a follow up to the 1996 audit and to assess the degree to which GS/OAS has complied with rules governing travel on official business. The audit focused on current internal controls governing justification, approval, preparation and submission of expense reports, travel advance procedures, rendering of accounts upon returning from official travel and recording of vacation time taken by staff during travel. The audit identified weaknesses from noncompliance with current OAS directives. Specifically, the report addresses (1) the lack of proper supervisory authorization, (2) the delay in submitting Travel Expense Claims (TECs) within the required 15 day period, (3) delays in submitting reimbursements to GS/OAS, (4) discrepancies found in travel expenses paid (5) absence of supporting documentation for adjustments to per diem rates and (6) the need for more effective review by the Directors responsible for authorizing the travel.

Following his review of the draft report and prior to our issue of the final report, the Assistant Secretary for Management issued Memorandum MAN/AS/061-99, which brought to the attention of Directors and Managers the main weaknesses identified in the audit i.e. need for authorization at the appropriate supervisory level, more effective supervisory review and for submitting TECs and reimbursements, if any, within the required 15 day time period.

The report provides four recommendations for strengthening internal controls in the operational processes of official GS/OAS travel. Specifically the report recommended (1) that a follow up system be implemented by the Department of Financial System for monitoring TECs including due dates for submission (2) need for approval at the appropriate management level (3) need for written documentation in support of adjustments to per diem allowances granted by the Department of Human Resources (4) and the deduction of an amount equivalent to unauthorized leave taken by a staff member while on official travel.

3. SG/OIG/Audit 03/99 was undertaken to determine compliance with the terms of project agreements and to evaluate internal controls in the execution of project activities. This audit confirmed prior audit findings in which we found that there is need for more effective management of projects by the Executive Secretariat for Integral Development (SEDI) and for timely disbursement of project funds in order that project objectives may be achieved by the project deadline. The audit examined the following four projects:

• Improvement of Teaching of Science and Mathematics at the Primary Level
• Economic Diversification and Integration Trade Liberalization and Market Access
• Small Business Development
• Heritage Tourism

The Improvement of Teaching Science and Mathematics project was designed to enhance the delivery of science and mathematics curriculum based on the use of the natural environment as a learning resource and to train teachers in the use of the Internet both as a communications medium and as an information source. The project funds were sent directly to the Executing Agency whereas funds for the other three projects were disbursed using the new Trust Account mechanism. The Trust mechanism provides the Director of the National Office in the Member State with authorization for disbursing project funds from a Trust Account at Headquarters to the Executing Agency.

During this audit we found that although the Executing Agreement required that funds for this project should be kept in a separate bank account and that full, free and unlimited access be granted to the Inspector General, we were limited in our audit scope because the Executing Agency (CCST), represented by the Director of UNECLAC (a subsidiary agency of the United Nations), restricted our access to project documentation, bank records and invoices.  We found that, contrary to the terms of the project agreement, SEDI provided authority to CCST to utilize the UNECLAC bank account for receipt and disbursement of project funds. During our field visit the Executing Agency informed us that UNECLAC=s rules prohibit the audit of its books by any other agency. We reviewed the statements of expenditure which showed receipts of $421,210 and total expenses including administrative overhead of $386,558.00, leaving a balance of $34,651.69 which was refunded to the OAS on January 28, 1999.  Copies of invoices for supplies and travel authorizations provided to us in support of some expenses amounted to approximately 15% of incurred expenses, consequently there was lack of evidence or supporting documentation for  85% of project expenditure.  We met with the Executive Secretary for Integral Development and some of his staff and discussed the circumstances of this audit.  The report recommends that SEDI should consider terminating any contract in which Executing Agencies do not comply with the requirements of execution agreements, particularly the need for separate bank accounts and unlimited access by the Inspector General. Recommendations were also provided for more effective project management by SEDI to ensure compliance with contract agreements.

The Economic Diversification and Integration, Trade Liberalization and Market Access project was designed to assist in assessing the impact of trade liberalization on the economy and identify those sectors into which investment could be channeled and which demonstrate a high export growth potential. The audit found that only 40% of project funds were disbursed but all project expenditures were fully documented. We found that the Project Coordinator had stated that minor difficulties were encountered in finalizing the course content of the first part of the project and activities for the second and third parts of the projects were not undertaken because of the limited time available to acquire a suitable consultant and complete the study. However, in his project evaluation the Director of the National Office stated that the major problem with this project was the inadequate management capability. Our examination has confirmed that project objectives were not achieved and we have recommended that SEDI arrange for adequate supervision of projects to ensure that resources, including contracting of suitable individuals, are effectively utilized.

The objective of the Small Business Development project is to enhance business opportunities in a Member State through coordinating and facilitating the creation and expansion of investment, employment and self-employment opportunities through management training and development of support extension services to support development of the Small Business Sector. We found that only 70% of project funds were disbursed and according to OAS guidelines, the balance will be returned to the FEMCIDI account. We also found that certain planned activities for approximately 42% of disbursed funds were not carried out and we recommended that this be returned to the FEMCIDI account by the Executing Agency. It is our opinion that project objectives were not achieved primarily because disbursements were not provided on a timely basis for compliance with the project deadline

The objectives of the Heritage Tourism project are principally the promotion, documentation and presentation in various media of the traditions and heritage of the member State, the development of craft villages and the craft sector for teaching, production and sale of crafts, development and management and marketing of heritage tourism sites and activities. The audit verified that expenses were properly justified and documented and follow up reports were supported by adequate financial analyses and invoices. We found that about 80% of total project funds were disbursed through the Trust Account mechanism and almost 48% of expenditures were incurred for project management, including office rent and the contract services of the project coordinator. The Executing Agency expressed satisfaction with the completed project work and the Director of the National office has reported that overall project objectives have been achieved.

At the time of writing this report the ten recommendations contained in Audit Reports SG/OIG/Audit 02/99 and SG/OIG/Audit 03/99 which have been submitted to the Secretary General had not yet been approved.

Other Activities

The Inspector General and representatives of the Office of the Inspector General continued to participate as observers in committees and working groups of the General Secretariat on matters which are of special interest to the OIG. The Inspector General attended staff meetings of two of the areas within the General Secretariat, held discussions with the staff with a view to strengthening internal controls within the General Secretariat and explaining the role and mandate of the Office of the Inspector General.

May 10.1999

Linda P. Fealing
Inspector General

SG/Audit 04/99 (Overtime payments made by the General Secretariat) was performed this quarter in accordance with the Inspector General's 1999 audit plan. That audit was undertaken specifically to verify compliance with Resolution No. 1 of the 25th Special Session of the General Assembly on the 1999 Program Budget (AG/RES.1 XXV-E/98), which instructed the Secretary General to pay overtime in compensatory leave as much as possible, and also as a follow up on recommendations made in the 1995 audit (SG/OIG Audit 15/95).

The audit reviewed transactions made during the period January 1998 through January 1999 and found that many weaknesses in internal controls which had been identified in the 1995 audit still existed. Specifically, we found that proper procedures for completing the overtime form were not always followed, resulting in insufficient and inaccurate information for the payments which were made. There were also instances of duplicate payments as well as overpayments. In addition, claims were not always supported by Sign-out sheets which are required for verification of the entry and departure times shown on overtime claim forms. The seventeen recommendations provided for improvement in the management of overtime and to strengthen internal control weaknesses were approved by the Secretary General and have already been implemented by the Secretariat for Management.

SG/OIG/INVEST-01/99 was conducted to investigate the circumstances surrounding the 1997 purchase and shipment of computer equipment to one of the National Offices. We determined that in late 1997 the equipment was shipped by the Department of Material Resources (DMR) on behalf of the Department of Management Systems and Information Technology (DMSIT) but at the time of the investigation the equipment had not been received by the National Office. Our investigation revealed that the DMR successfully carries out a large number of shipments on behalf of the GS/OAS on a regular basis but this case was an isolated incident because follow up procedures regarding the receipt of the equipment had not been effectively followed. We were told that due to staff reduction in DMR new procedures in that department require that, upon notification of the shipment date, follow up action should be carried out by the office which initiated the request for shipment of the equipment.

Following our inquiries, the equipment was located in an airport warehouse but we found that the airline had previously failed to notify the National Office of its arrival. Prior to finalizing the report we were notified that the National Office was in the process of completing the required duty free documents in order to take possession of the equipment. In order to avoid future occurrences two recommendations were provided for implementing procedural policies regarding notification to consignees of any computer equipment shipped from Headquarters. These recommendations were approved by the Secretary General and have been implemented.

All audits reports submitted to the Secretary General for the period ended June 30, 1999 have been approved.

Work in Process

In accordance with the work plan of the OIG the following auditing activities were in process during the second quarter but had not yet been completed:

1. Unit for Social Development and Education
2. Unit for Sustainable Development and Environment
3. Office of Science and Technology
4. International Civilian Mission in Haiti (MICIVIH)
5. Long distance telephone calls.

Details of the final reports will be reported in the next quarterly report.

Other Activities

The Inspector General and representatives of the Office of the Inspector General continued to participate as observers in various committee and working groups of the General Secretariat matters in the weekly meetings of the Oracle HRMS Project Implementation Team, the Board of Publications and the Selections and Awards Committee. In keeping with the requirement for pursuing programs of continuing education and professional development, the Inspector General attended the 58th International Conference of the Institute of Internal Auditors held in Montreal during June 20 to 23,1999.

August 12, 1999

Linda P. Fealing
Inspector General

July 1 to September 30, 1999

During this period four audits and one investigation were completed and all reports submitted to the Secretary General have been approved.

Audit Reports

1. A Memorandum of Understanding (MOU) dated July 17, 1997 between the United Nations (UN) and the OAS contains the terms and conditions governing the structure, support and activities of the joint MICIVIH mission including arrangements for budgets and the basis for cost sharing arrangements. The Inspector General was instructed by the Secretary General to conduct a special audit specifically to determine (1) the extent of GS/OAS obligations to UN joint expenses (2) the amount of resources available to satisfy those obligations (3) how substantial unfinanced alleged estimated obligations were allowed to accumulate during the period January 1998 to April 1999 in the absence of firm commitments for project financing (4) whether controls contained in the 1997 MOU were circumvented to allow accumulation of outstanding obligations and finally to provide a report with recommendations. SG/OIG/Audit-05/99 (OAS/UN Billing Costs for the MICIVIH Project) provided the required information to the Secretary General regarding the extent of the liability and the amount of resources available. The audit also determined that the Senior Specialist (UPD) did not effectively manage the MICIVIH project from Headquarters and specifically miscalculated the amount of funds available in 1999 to settle the outstanding liability to the United Nations. Seven recommendations were provided specifically related to settling the outstanding OAS/UN liability, for more effective project management and for strengthening internal controls in order to avoid recurrence of this isolated incident.

2. SG/OIG/Audit-07/99 (OAS Bahamas and Projects) was undertaken in accordance with the 1999 work plan to evaluate internal controls in OAS Bahamas over cash receipts and disbursements and to verify whether that office is executing its responsibilities in accordance with OAS policies and procedures. We ascertained with reasonable assurance that, for the most part, internal controls in that office are adequate for recording transactions and disbursements. However, we found that there is need to strengthen internal controls regarding prior authorization for disbursements and the use of OAS assets, including the telephone and automobile. The main weaknesses identified during the audit were the need to comply with OAS directives regarding telephone, travel, use of the OAS vehicle, and disbursement of miscellaneous expenses as well as the need to obtain two signatures for amounts in excess of $5,000. During our review we also examined three projects (Development of an Environment Impact Assessment Program, Bahamas Youth Enterprise and Development of a Community Library/Resource Center) which were executed in that Member State. We found that one of the final reports was not submitted. In our opinion the objectives of two of those projects were not met, due primarily to slow implementation, the delay in disbursement of project funds and in acquiring project equipment/materials by the December 31, 1998 deadline. Eleven recommendations were provided for strengthening those internal control weaknesses that were identified. The audit also identified certain personal expenses of the Director which were included in OAS disbursements and recommendations for repayment of those expenses and for appropriate disciplinary action have been reported separately to the Secretary General.

3. SG/OIG/Audit-08/99 (Oracle Government Financial™ NT Server) and SG/OIG/Audit- 09/99 (Oracle Government Financial J Applications and Database Servers) were undertaken to analyze the security and controls of the NT Server and its associated NT network domain, the security and data integrity procedures of the production Oracle Database Server and production Oracle Government Financials and Oracle Project Management. Both these audits identified security and control weaknesses for which appropriate recommendations were issued. SG/ OIG/Audit-08/99 and SG/OIG/Audit-09/99 provided thirteen and twenty recommendations respectively. In addition, because the audit report discloses certain weaknesses and vulnerabilities of the system, the OIG has taken certain precautionary measures including restricted distribution of the report for protection of the OAS computer system from unauthorized access.

4. SG/OIG/Invest-02/99 (Investigation of Long distance Telephone Calls) was undertaken to study and evaluate internal controls of long distance telephone expenditures in the General Secretariat and to verify that expenditures were disbursed in accordance with GS/OAS policies and procedures. We found that a special plan designed to reduce rates of Government institutions has been introduced in the OAS but the volume of long distance telephone calls increased between 1997 and 1998. The investigation determined that telephone costs incurred during 1998 were excessive and that staff members were not effectively complying with GS/OAS policies and procedures regarding long distance telephone calls. Based on our findings and discussions with the Department of Material Resources corrective measures, including the issue of Memorandum MAN/DMR/278/99 which provided additional procedures for more effective control of long distance calls, were taken by that Department prior to finalizing the report. The report contains two recommendations primarily related to increased use by the General Secretariat of the E-mail and facsimile for reducing long distance telephone costs.

Other Activities

The Inspector General and representatives of the Office of the Inspector General continued to participate as observers in various committee meetings and working groups of the General Secretariat on matters that are of special interest to the OIG. In keeping with the requirement for pursuing programs of continuing education and professional development, the Senior Auditor attended a training course in auditing automated business applications held in Boston during August 9 to 11, 1999.

October 8, 1999

Linda P.  Fealing
Inspector General

October 1 to December 31, 1999

Summary

Six audits were completed during the final quarter of 1999 in which the Office of the Inspector General (OIG) reviewed the operational activities in the OAS Office of the General Secretariat in Bolivia, the Units for Sustainable Development and Environment and Social Development and Education and performed evaluations of a number of projects executed by those Units. We also examined internal controls in the Department of Financial Services and investigated suspected misuse of OAS computer systems. All recommendations contained in these audit reports have been approved by the Secretary General. The Office of the Inspector General continues to follow up on responses from various areas of the General Secretariat (GS/OAS) to ensure that recommendations have been effectively implemented.

Audit Activities

Our examination of the operational activities of the Unit for Sustainable Development and Environment (USDE) disclosed that the Unit complies with its mandate and with OAS rules and procedures. However, there is room for improvement in performing some of the administrative functions regarding posting and maintaining Time and Attendance records, recording and control of inventory items. There is also a need for effective follow up action on remaining balances relating to completed projects financed from external sources. Our review of projects executed by that Unit was restricted to examination of documentation at Headquarters.

The three Specific Funds funded projects executed by USDE which were reviewed are:

1. US Aid Caribbean Disaster Mitigation Program (CDMP) designed to establish sustainable private/public sector mechanisms for disaster mitigation which measurably lessens loss of life, physical and economic damage and the length of time involved in recovery from natural disasters in the Dominican Republic, Haiti, Belize, Jamaica and some Eastern Caribbean countries which are served by the US Aid Regional Development Office of the Caribbean,
2. ECHO Flood Hazard Mapping Project for developing national flood hazard mapping and alert systems in the Central American region and
3. National Program for the Strengthening of Brazil's Water Resources Sector for promoting the sustainable use of Brazil's water resources by establishing the basis for the implementation of the instruments of a National Water Resources policy.

The audit determined that USDE effectively manages projects according to signed agreements.

The three FEMCIDI-funded projects managed by USDE which were reviewed are:

1. Regional Project of Sustainable Development of Border Areas in the Central America Isthmus
2. Sustainable Development in Border Areas of Latin America and
3. Plan of Action of Santa Cruz de la Sierra.

These projects were undertaken to promote sustainable development at the Central American level and in the border areas of the Amazonian region and to support efforts for coordination and cooperation between bilateral and international agencies and non governmental organizations in pursuit of the goals established by the Member States of the OAS in the Plan of Action Santa Cruz de la Sierra. This Plan of Action seeks to develop a concrete plan for the structure and preparation and presentation of a final network blueprint for functioning and implementing the network.

We investigated suspected misuse of OAS Computer Systems and Internet Connectivity and found

1. an artificial complexity of the Windows NT system which serves the content for one of the OAS web servers and
2. that there was unauthorized activity related to that server.

Recommendations included a need for stronger internal controls for improved system security regarding the PIX firewall configuration, administrative access, password archiving and centralized backup processes. Disciplinary action was recommended against three employees involved in these activities for breach of OAS guidelines which are provided in the General Standards and Staff Rules regarding conflict of interest and conduct expected of International Civil servants.

We reviewed the operational activities of the Unit for Social Development and Education and found that internal controls are adequate and that the Unit complies with the GS/OAS directives for proper authorization and disbursement of expenditures. We also reviewed three FEMCIDI-funded projects executed by that Unit:

1. Inter-American Labor Market Information System (SISMEL) to assist the labor ministries in designing and creating an Information System about Labor Markets;
2. Inter-American Program of Port Training to contribute toward the improvement and modernization of the ports of the Western Hemisphere so that they can reach high levels of efficiency and competitiveness, which are necessary in order to facilitate expansion and development of trade with the Americas and
3. Program of Support for Social Policies to Overcome Poverty, Module 2, Social Network of Latin America and the Caribbean, to support the countries in designing and executing social policies that will strengthen mechanisms for the participation of civil society in efforts to overcome poverty and discrimination.

No discrepancies or irregularities in the disbursement of funds or project activities were disclosed in our examination and we found that project disbursements were in accordance with project activities, were adequately supported by appropriate documentation and, according to final reports submitted, objectives were achieved. Unspent balances in the total amount of US$88, 483.41 remaining at the conclusion of three FEMCIDI-funded projects were reimbursed to the OAS prior to the finalization of the audit report.

We visited the GS/OAS Office in Bolivia and examined selected operational and financial activities, including cash receipts and disbursements to evaluate effectiveness, efficiency and economy of internal controls and to verify whether that office is executing its responsibilities in accordance with OAS Rules and procedures. We found that, except for the submission of quarterly releases for goods imported duty free, internal controls in OAS Bolivia are adequate for providing appropriate authorization of transactions and activities, proper safeguard over assets and records and the accurate recording of transactions. The audit determined that OAS Bolivia complies with the requirements of its mandate and with OAS directives. However, there is need for effective follow up action by the Department of Material Resources to ensure proper inventory control and for more timely response by the Department of Financial Resources in providing authorization relating to disbursements for amounts which exceed US$5,000.

We also evaluated three projects executed in Bolivia:

1. Programa Nacional de Gobernabilidad (PRONAGOB) undertaken for establishing an appropriate institutional, normative and political environment in that country conducive to economic and social development in Bolivia.
2. Cultural Heritage Protection Program for supporting the Government of Bolivia's efforts at preserving the country's cultural heritage through the conservation of historical sites and archaeological assets and
3. Rio Bermejo Watershed Management Project undertaken for the development of the Upper Bermejo and Grande de Tarija river basins to promote the sustainable development in that area and optimize the use of natural resources.

The audit determined that the PRONAGOB and Rio Bermejo projects were executed in accordance with their respective project agreements, but certain PRONAGOB project expenses (telephone and miscellaneous supplies) were included in operational disbursements paid from the Regular Fund. We also found that the Cultural Heritage Protection Program was only partially executed due to a combination of factors, e.g., (a) the Coordinator's accessibility to funds was delayed during investigation of a double payment of one of the advances and (b) SEDI did not provide effectively follow up action during the period of execution. A balance of US$7,690.91 in unspent project funds was reimbursed by the Executing Agency to the OAS.

Our examination of the adequacy of Internal Controls in the Department of Financial Services after the January 1, 1999 implementation of the Oracle Financials ™ System determined that the system was implemented on schedule with the resources available. However, although a number of problems were identified and solved, several important tasks are not fully implemented, e.g., bank reconciliations were not up to date, a large number of National Office transactions were rejected by the System because they were coded incorrectly and training provided to users at Headquarters on the use of the system is not sufficient to prevent ongoing errors and inefficiency that could lead to problems in providing reports. Our review found that every effort is made by staff members in DFS to get the job done and, for the most part, individuals are hardworking, dedicated and loyal to the OAS. We were told that the Oracle training provided to the field offices in October was excellent and well received. However, in general, the new processes are not well documented and not clearly understood by users, many users in the technical areas do not have access to or do not know how to access the information they need to manage their programs effectively and many need additional training.

In prior years the Board of External Auditors has called attention to the reduced number of personnel in DFS, the increased workload from Specific Funds and the need for adequate reimbursement from these funds for administrative services. We feel that these factors also contribute to the difficulties within DFS in providing needed personnel, appropriate training, improved supervision and more effective communication with technical areas. The audit concluded that the increased workload from Specific Funds and the need for adequate reimbursement from these funds for administration services contributed to the difficulties in DFS in providing needed personnel, appropriate training, improved supervision and more robust communication with technical areas. The report identified an urgent need for strong leadership within the Department of Financial Services as well as additional, qualified, experienced and competent staff to undertake the major functions in DFS. A new Executive Order with an outline of a new organizational structure was issued subsequent to the issue of the audit report and arrangements have been made for the appointment of a new DFS Director in 2000. In addition, a new project accounting manual which enables users to manage projects financial information by goals and objectives and to query information by any attribute assigned to a project, has been distributed to the General Secretariat. We have also been informed that other procedural manuals are being developed. Since DFS is one of the most critical and vulnerable areas of the General Secretariat, and the new system has significantly changed GS/OAS operational processes, we will continue to perform follow up audits of GS/OAS processes particularly in the DFS to ensure that an environment for strong internal control exists within the General Secretariat.

Other activities

The Inspector General and representatives of the Office of the Inspector General continued to participate as observers in committees and working groups of the General Secretariat on matters which are of special interest to the OIG, including the implementation of the Human Resources and Payroll module of the Oracle Financials System.

Linda P.  Fealing
Inspector General

March 7, 2000

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