Fraud? What fraud? Watchdogs find UN in 'a state of near denial' about internal corruption
UN Secretary General Ban Ki-moon speaks to journalists on the unfolding crisis in South Sudan during remarks at United Nations headquarters in New York on July 11, 2016. (UN Photo/Mark Garten)
EXCLUSIVE: The United Nations, which spends tens of billions of its member states’ dollars annually, apparently has a simple approach to dealing with fraud in its sprawling operations – ignore it.
That is the main thrust of a 133-page examination of “fraud detection, prevention and response” across 28 organizations in the U.N.’s network, carried out by members of the world organization’s Joint Inspection Unit (JIU), a special group of experts mandated to carry out examinations across the entire array of U.N. funds, organizations and programs.
After a nine-month examination last year of the U.N. organization’s anti-fraud policies, what JIU examiners found was something akin to anarchy: a “state of near denial” among some U.N. organizations about the theft of their goods, money and services; and inertia, incoherence and a “perceived sense of impunity for fraud perpetrators” in many others.
Among other results: the report declares that “more than half” of some 16,000 U.N. staffers and 164 executive managers consulted in a JIU “fraud perception survey” that formed part of the work, “indicated that they believe that fraudulent behavior goes unpunished in their organization.”
“The report is pretty devastating,” observes Brett Schaefer, an expert on U.N. finances at the conservative Heritage Foundation. “The U.N. apparently has very little interest in policing fraud, and there is very little reason to believe its own figures and data about it.”
The JIU inspectors, appropriately enough, could not put a figure on the fraud that they detected the U.N. was not equipped, or willing, to discover. But they cocked a deeply skeptical eye at the U.N.’s own fraud statistics, which claimed to discover wrongdoing only in microscopic amounts.
According to the inspectors, the U.N. finds fraud in the range of only 0.03 percent of its annual revenues. Average estimates of fraud in the public and private sector, the report says, normally run in the range of 1 percent to 5 percent of total revenue – or 33 to 165 times higher.
“In other words,” the inspectors declared, “under-reporting and/or non-detection [of fraud] in the United Nations system could be significant and endemic.”
The anemic efforts at fraud reporting, the inspectors indicate, are proceeding behind anti-fraud assurances from U.N. organizations that resemble Potemkin villages: lots of words up front, with not much architecture, organization or will to turn them into real efforts.
The report cites a long litany of “challenges” to the effort that include:
“the absence of a strong ‘tone at the top’ in dealing with fraud;
no promotion of a broad anti-fraud culture;
no systematic assessments of the level of fraud risk exposure;
lack of resources;
delays of investigations coupled with a lack of investigators;
lack of follow-up to those investigations, including criminal referrals
Some of them also have “inability and/or unwillingness to acknowledge and deal with the threat of fraud at the appropriate level.”
Even when individual U.N. organizations claimed to have strong anti-fraud policies, the inspectors found, by and large, they were mostly backed up by fuzziness: “a lack of clear definition of roles, responsibilities and accountabilities, or a lack of clear guidance on how to operationalize the policy.”
Moreover, there is “little, if any, information on the performance of anti-fraud activities based on specific performance indicators, the level of fraud exposure . . . credible fraud statistics, sanctions, fraud losses and recovery of assets and lessons learned.”
In short, just about everything.
Small wonder that “many respondents” in the mammoth JIU fraud perception survey “did not perceive a clear commitment on the part of the senior management to tackle fraud in their organizations.”
The inspectors pointedly noted that U.N. Secretary General Ban Ki-moon’s New York Secretariat is one of the places where that impression might come from. “Fraud is not considered a corporate risk” in the Secretariat, the document says, “and no specific fraud risk assessments are conducted.”
In fact, there isn’t even a U.N. system-wide definition of the term “fraud” itself, the inspectors discovered – “even within the same organizations” – although there was tantalizing evidence that efforts to fill that void in the past had been squelched at the highest level.
According to the JIU report, which synthesized interviews with some 380 U.N. officials, “it was mentioned” in the course of the probe that a committee of U.N. organization chiefs set out in 2005 to work out the common fraud definition “but the work of the group was discontinued.”
“No documentation was provided to the Inspectors for a review of the work conducted by this group,” the report states, “and no explanation was offered or reasons adduced . . . as to why this effort was terminated.”
[The inspectors do not mention it, but a document referenced in the JIU report shows that the timing of the earlier effort coincided with the 2004-2005 explosion of the Oil-for-Food scandal, a mushroom-cloud of bribery, financial misappropriation and unsupervised allocation of hundreds of billions of dollars in sanctioned Iraqi oil revenues, to the benefit of its then-dictator, Saddam Hussein.
The internal reluctance to define fraud comprehensively, the report says, is echoed in a U.N. reluctance to fund anti-fraud training, cooperate on information sharing about vendor behavior, or conduct due diligence on so-called implementing partners – including government ministries to which the U.N. increasingly funnels development assistance, including cash transfers, to do its work.
Many U.N. organizations, the report indicates, are equally “silent” on the application of anti-fraud policies to vendors who also carry out U.N. work, as well as those who supply the effort, and when they do address the issue are a hodge-podge of different levels and degrees of oversight.
Fraud investigation efforts, the report says, are not only underfunded but, in complicated cases, nearly endless: it can take an average of 12 to 18 months to complete a fraud investigation, followed by another 4 to 8 months of management “follow-up.”
And follow-up often just ends: the U.N. bureaucracy is reluctant to prosecute fraudsters even when discovered. The reason: it may involve lifting “the immunity of witnesses and related United Nations documents, and may exposure the United Nations organizations to counter-claims.”
The brakes on prosecution, in other words, come from the U.N.’s own lawyers, who the report says “were very direct in expressing reservations about the United Nations system’s ability to effectively pursue cases with national authorities.”
The same reluctance apparently also applies to recovering stolen money and property.
In other words, the report confirms what U.N. employees feel: What’s the point of speaking out, when the organization doesn’t want to punish the fraudsters?
As the report notes, that attitude puts a damper on the most effective anti-fraud action of all: encouragement of whistle-blowers who actually see offenses taking place.
The report calls comprehensive support for whistle-blowers “key to an effective anti-fraud program,” and says whistle-blowers “alone account for the uncovering of more fraud and corruption than all other measures of fraud detection combined.”
What to do about it all? The JIU report lists a long roll call of recommendations, most of which boil down to: quit doing what you do now, and do the opposite. Among other things:
The U.N.’s diverse organizations should come up with “common definitions of fraudulent, corrupt, collusive, coercive and obstructive practices,” and a “joint statement with a clear and unambiguous position on fraud.”
Senior managers should take direct responsibility for anti-fraud policy. Anti-fraud training and awareness should be provided to all.
Fraud allegations should be centralized. “Key performance indicators” for investigations should be established, along with “adequate capacity to investigate.”
Top U.N. management should present annual reports on anti-fraud activities, along with more “key performance indicators.”
U.N. agencies “should revise their whistle-blower policies with a view to adopting good practices.”
They should also “strengthen existing protocols and procedures” to bring fraud cases to national enforcement authorities and courts,” as well as for “asset recovery.”
Many of the JIU recommendations are addressed to the U.N.’s highest inter-agency body, the U.N. Chief Executives Board for Coordination, which is chaired by Ban Ki-moon. Fox News asked Board officials whether the Board would take up the inspection report at its next meeting, or the meetings of any of its high-level committees.
The response was that the JIU report “was only very recently released,” and “none of the Chief Executives Board bodies have met subsequent to its release.”
But it seemed very, very, unlikely that the recommendations would be taken up directly, or soon.
Instead, the response said, “the analysis, findings and recommendations of the report will inform a review of the subject matter that is already ongoing” in a sub-grouping of the Board’s top-level management committee, “in the context of the follow-up to the General Assembly’s consideration of the Secretary General’s report on the accountability system in the United Nations Secretariat.”
And that, in turn, “is intended to develop system-wide guidance so as to achieve consistent application across all organizations of the United Nations system.”