Wrongdoing costs UN up to $298m

By Mark Turner
January 23, 2006
The Financial Times
Original Source: http://news.ft.com/cms/s/f314e824-8c69-11da-9efb-0000779e2340.html

United Nations investigators estimate the world body may have lost as much as $298m through irregularities in peacekeeping procurement, according to an unofficial draft of a report into alleged fraud and mismanagement.
The unofficial report, seen by the Financial Times, paints a damning picture of poor or bypassed financial controls, insufficient oversight by senior management, as well as a revolving door of employment between UN procurement staff, and the private companies whose services the UN hires.
The scale and allegedly systematic nature of wrongdoing has raised fears of a scandal as large if not larger than the Iraqi oil-for-food programme affair, which may hit even closer to UN headquarters.
The $298m figure, almost a third of the $1bn of contracts examined, was removed from a subsequent final document, as were references to named companies and officials. UN member states will be officially sent the final version.
Christopher Burnham, the UN’s head of management, acknowledged on Monday that the cost of fraud and mismanagement in peacekeeping procurement could go into the “tens of millions of dollars”, and the figure was likely to rise over coming months.
There are currently 200 separate investigations related to procurement. Over recent weeks, a new interim head of the procurement service has been appointed, and the UN’s internal investigative arm, OIOS, which conducted the investigation, has established a procurement fraud taskforce.
Last week, the UN announced it had placed eight staff members on administrative leave, although without any presumption of wrongdoing. “The UN is being proactive,” Mr Burnham said, citing co-operation with US federal authorities. “We are ferreting out corruption and fraud where is existed and where it exists.”
Contracts awarded to companies through violations “certainly will be terminated”, he added, and the secretariat would seek compensation.
The draft report also raised questions about the UN’s Headquarters Committee on Contracts, which reviews contracts above $200,000. It named eight officials which worked both for the UN and its contractors at different times.
Also under investigations was the UN’s controls over performance bonds, which are used to guarantee satisfactory completion of a contract. In nine sampled contracts, the bonds received ranged between zero to 7.6 per cent of the contract value, even though the minimum suggested was 10 per cent.
“OIOS noted the systematic erosion over many years of a fair and competitive source for the UN procurement,” the draft report said in its overall assessment. “A lack of enforcement of accountability and a reluctance to investigate mismanagement…has led to a pattern of corrupt practices.”