Hundred and seventy-fifth session REPORT BY THE EXTERNAL AUDITOR ON FOLLOW-UP TO RECOMMENDATIONS FROM PRIOR REPORTS SUMMARY

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1 ex United Nations Educational, Scientific and Cultural Organization Executive Board Hundred and seventy-fifth session PARIS, 25 August 2006 Original: English Item 34 of the provisional agenda REPORT BY THE EXTERNAL AUDITOR ON FOLLOW-UP TO RECOMMENDATIONS FROM PRIOR REPORTS SUMMARY In accordance with Article 12 of the Financial Regulations, this document contains the External Auditor s report on the status of implementation of the audit recommendations made during her second mandate covering the period of Decision proposed: paragraph This report contains an updated status report provided by the Director-General on the implementation of the External Auditor s recommendations and the External Auditor s comments on the reported status. 2. The recommendations were raised by the External Auditor in her financial and performance audit reports issued during her second mandate from 2000 to There are 66 recommendations made as follows: : 33 recommendations in 165 EX/ : 30 recommendations in 169 EX/29, 170 EX/22, and 171 EX/ : 3 recommendations in 174 EX/27 3. The review by the External Auditor concluded that 46 of the 66 recommendations have been implemented and are classified as completed or closed. There is satisfactory progress in the implementation of 16 recommendations and slow progress for 4 of them.

2 page 2 4. The Secretariat is firmly committed to continuing to implement the remaining open recommendations. 5. The Executive Board may wish to adopt a decision along the following lines: The Executive Board, 1. Recalling Article 12 of the Financial Regulations, 2. Having examined document, 3. Notes the status of implementation of the recommendations of the External Auditor; 4. Requests the Director-General to take prompt action to implement those recommendations where further action is needed.

3 page 3 STATUS REPORT ON THE IMPLEMENTATION OF EXTERNAL AUDIT RECOMMENDATIONS This is a status report on the results of our follow-up of recommendations made by the External Auditor in the last three biennia from 2000 to This report was prepared in English. ACKNOWLEDGEMENT We wish to express our appreciation for the cooperation and assistance during our audit by the Director-General, his officers, and members of his staff. We also wish to express our thanks to the Governing Bodies for the support and interest shown in our reports. Sheila Fraser, FCA (Auditor General of Canada) External Auditor Ottawa, Canada 26 July 2006

4 page 5 Table of Contents Main Points 7 1. Introduction 9 2. Focus of the Audit Observations and Recommendations 10 (a) Overall Assessment of Progress 10 (b) Strengthening Management Systems and Accountability 11 Financial Management and Control 11 Financial Reporting to Member States and management 12 Internal Audit and Evaluation 12 Results-Based Management 13 Governance and Management of the Medical Benefits Fund 13 Planning, Management, and Reporting of Extrabudgetary Funds 13 (c) Areas of Slow Progress 13 Monitoring Extrabudgetary Funds 14 Implementation rate 14 Support Costs 14 (d) Monitoring of Audit Recommendations Conclusion 15 Annex

5 page 7 MAIN POINTS 1. What we examined: This status report examines what UNESCO has done to address the recommendations in our financial and performance audit reports issued during our second mandate, from 2000 to Our reports dealt with financial management, control, and audit issues, and with the following performance audit subjects: Natural Science Sector Managing and Governing for Results in the Intergovernmental Oceanographic Commission (IOC), the International Hydrological Programme (IHP) Education Sector Institutes: Managing and Governing for Results UNESCO Medical Benefits Fund Management of Extrabudgetary Funds: Roles and Responsibilities, Reporting, and Support Cost Issues Management of Extrabudgetary Funds: The planning, implementation, monitoring, and reporting of extrabudgetary projects. 2. Why it is important: Our work was intended to help UNESCO implement its mandate and to identify ways the Secretariat could make performance improvements. Financial management issues arose from our audit of the financial statements. These recommendations were intended to help improve financial management, control and reporting. We selected the performance audit subjects based on our analysis of significant risks and on our assessment of matters that should be brought to the attention of Governing Bodies. 3. What we found: We made 66 recommendations in our reports from 2000 to 2005 and all were accepted by the Director-General. Overall we found the progress in implementing our recommendations to be satisfactory. The results of our assessment show that 46 of the 66 recommendations have been implemented and are classified as completed or closed. There is satisfactory progress in the implementation of 16 recommendations and slow progress for 4 of them. (a) We found that UNESCO has achieved many important improvements. For example: Financial management and control practices have improved by implementing a new financial and budget system called FABS at Headquarters in 2002 and by reengineering work methods to take advantage of the new information system. The rollout of FABS in field offices and institutes is in progress. The Committee on Budget and Finance has been instrumental in strengthening financial management and controls. For the first time, the financial statements in the last two biennia were produced on time, as required by the Financial Regulations. In prior biennia they were prepared up to three months late. The Organization now also produces quarterly financial statements to ease the financial monitoring of income and expenses throughout the biennium. The establishment of the Internal Oversight Service (IOS) in 2001 has strengthened the audit and evaluation functions. The quality and quantity of audit and evaluation work has steadily improved since the Service was established, and its work receives increasing

6 page 8 management attention; IOS significantly helped strengthen UNESCO s control environment. Planning and performance monitoring have been improved, and documents C/5 and C/3 now have better information about the expected results UNESCO aims to achieve as well as the actual results. The Director-General designated a focal point for coordinating all extrabudgetary activities and acted quickly to address our concern about the management of extrabudgetary (EXB) activities in Brazil. (b) However, we noted that for important recommendations, particularly some contained in our first report on EXB tabled in March 2004 (Ex 169/29), the progress of implementation is slow. For example: Few of the overall EXB management performance indicators we suggested, and that the Secretariat agreed to collect, are being produced and monitored by senior management; The financial implementation rate of projects is still the main measure of EXB performance rather than more substantive summary measures of progress or results achieved; The policy on support costs has not yet been revised or clarified, with the result that there are still areas of uncertainty and inconsistencies in application.

7 page 9 1. Introduction STATUS REPORT ON THE IMPLEMENTATION OF EXTERNAL AUDIT RECOMMENDATIONS This status report examines what UNESCO has done to address the recommendations in our financial and performance audit reports issued during our second mandate from 2000 to In our reports, we made 66 recommendations as follows: recommendations in 165 EX/ recommendations in 169 EX/29, 170 EX/22 and 171 EX/ recommendations in 174 EX/27 Our reports dealt with financial management, control and audit issues, such as the quality of information provided to governing bodies particularly about unliquidated obligations, the need for improvements in accounting work methods and the need to monitor how the Financial and Budgeting System (FABS) is implemented. Our reports also dealt with the following performance audit subjects: Natural Science Sector: the quality of results statements, work plans, monitoring and evaluation; Managing and Governing for Results in the Intergovernmental Oceanographic Commission (IOC), the International Hydrological Programme (IHP); Education Sector Institutes: Managing and Governing for Results; UNESCO Medical Benefits Fund: focusing on the Fund s governance, planning and budgeting, contribution rates, benefits design, and other financial and accounting issues; Management of Extrabudgetary Funds: Roles and Responsibilities, Reporting and Support Cost Issues; Management of Extrabudgetary Funds: The planning, implementation, monitoring and reporting of extrabudgetary projects. The recommendations are summarized in Exhibit 1.

8 page 10 Exhibit 1 External audit recommendations, EX/29 Add. 169 EX/ EX/ EX/ EX/27 Totals Financial management Natural Science Sector 9 9 IHP/IOC 8 8 Extrabudgetary funds Education Sector Institutes 7 7 Medical Benefits Fund Total Focus of the Audit The previous status report on the implementation of the External Auditor s recommendations was presented by the Director-General at the 172nd session of the Executive Board in the autumn of At the time, we had assessed that 13 of the recommendations issued in the period had been completed or closed. For this final status report, we reviewed the implementation of all the open audit recommendations based on progress reports provided by the Secretariat, interviews, reviews of supporting documentation and our knowledge of the Organization as its External Auditor. We applied the same criteria to assess the status that we had used previously: Closed or completed: Actions have been taken and have either corrected the problems identified or gone as far as we consider practicable to implement the recommendations. Satisfactory progress: Significant actions have been taken to implement this recommendation and some problems have been corrected. But more remains to be done to deal with the recommendation s main substance. In most cases work is under way and it is described in the Secretariat s status of implementation comments. Slow progress: We look for evidence of action such as plans and schedules, identification of organizational responsibility for implementation, and specific outputs and results that actually correct problems. If these indicators are not evident, we assess the status as slow progress. 3. Observations and Further Recommendations (a) Overall Assessment of Progress Overall, we found the progress in implementing our recommendations to be satisfactory. We found that UNESCO has achieved many important improvements in the areas addressed by our recommendations. There are, nonetheless, certain recommendations for which the progress of implementation is slow.

9 page 11 As mentioned earlier, the previous status of implementation presented in the autumn of 2005 showed that 13 of the recommendations made had been assessed as completed/closed. At the beginning of this follow-up exercise we reviewed the 53 open recommendations and based on the information readily available, we were able to determine that another 13 recommendations were also completed or closed. For the 40 recommendations that were still open, we sought further information from management, conducted interviews, and reviewed relevant documentation. We also relied on our knowledge of the Organization that we have accumulated through successive audits we conducted during the two mandates. We assessed another 20 recommendations as completed or closed, for a total of 46 completed/closed. There were 16 recommendations for which progress was satisfactory and four where progress was slow. Exhibit 2 summarizes the final status with respect to the 66 recommendations we made. The Annex contains the list of 40 open recommendations for which we sought additional information for this report, along with management comments and our assessment. Exhibit 2 Final status of external audit recommendations, EX/29 Add. 169 EX/ EX/ EX/ EX/27 Total Completed Satisfactory Slow Progress Subtotal (b) Strengthening management systems and accountability The past six years have been a period of intense managerial renewal, as the Director-General launched many reform initiatives. Our audits have supported the renewal process. Many reforms have been completed, and some are still under way. We consider these reforms to be extremely important and essential to ensure effective delivery of UNESCO s mandate and good governance. Some of our recommendations were directly related to these high priority management reforms; for example, those concerning the institutes governance, results measurement and reporting, internal audit, and evaluation. The following paragraphs provide some examples of important improvements. Financial management and control We made many recommendations aimed at improving financial management and control; for example, to help modernize accounting work, to improve internal control systems and procedures, and to improve financial reporting. The response has been favourable. Improvements were made as a result of many factors such as the commitment of senior management, the dedicated efforts of staff, and the increased work of the Internal Oversight Service (IOS), especially in all of UNESCO s field offices. In 2002, there were serious problems with the new financial system (FABS), including a backlog in processing payments. We reviewed the experience and made recommendations to help

10 page 12 UNESCO manage the conversion process as well as the later extension of FABS to field offices. Our recommendations were accepted, and the rollout of FABS to the field and to UNESCO s institutes is under way. Also in 2002, we noted that responsibility for financial management and control was fragmented. We recommended the creation of a finance committee to provide more unified senior management attention and address financial risks and improvements. In response, the Committee on Budget and Finance (CBF) was created. Senior management, at the CBF s request, has taken action to deal with dormant extrabudgetary (EXB) projects, in particular those that have deficits. In 2003 we found there were more than 900 dormant projects, over 100 of which had deficits. Currently, excluding UBO, there are fewer than 80 dormant projects and none of them have deficits. We also noted that recently the CBF was reviewing other current EXB projects that have deficits. In our view this is a good initiative. It also signals senior management s support for improving financial management at UNESCO. The CBF is not a decision-making body and it is no longer chaired by the Deputy Director-General. It is important that the Committee s recommendations in the future continue to receive strong senior management support. Financial reporting to Member States and management In our long-form report for the biennium presented at the 170th session of the Executive Board, we reported that for the first time since 1994 when we were appointed External Auditor of UNESCO, we were presented with a complete draft of the financial statements including the schedules and notes on time; that is, on 31 March For the biennium, the Secretariat again met the statutory deadline and on 31 March 2006 presented us with a full set of draft financial statements. This was a significant improvement from the previous biennium where the accounts were only finalized in August In addition the Secretariat now produces quarterly financial statements for enabling management to exercise a better monitoring of income and expenditures throughout the year. UNESCO has been receptive to our suggestions for improving the financial statement presentation and information provided to management. In addition, the Secretariat has paid more attention to unliquidated obligations and attempted to minimize the amount of invalid obligations. Progress has been made, although this continues to be a difficult issue and will require ongoing management vigilance. Internal audit and evaluation The establishment of the Internal Oversight Service has strengthened the audit and evaluation functions. The quality and quantity of audit and evaluation work have steadily improved since the Service was established, and we relied on its work in several of our performance audits as well as our financial audits. In addition, the reports to the Executive Board summarizing audit and evaluation results, as well as the IOS annual report and the IOS commentary on the C/3 document, help the Board fulfill its oversight responsibilities. The work of IOS receives increasing management attention, although the IOS annual report for 2005 (174 EX/29) shows slow implementation of many IOS recommendations by Headquarters.

11 page 13 Results-based management The need to clarify results was a central concern about UNESCO as a whole as well as a main theme of our performance audit reports on the Science and Education Sectors and the Management of Extrabudgetary Funds. The C/5 and C/3 documents now have much better results information than previously, although major challenges remain in developing results statements and good work plans to support them. We also developed a results-based governing framework for UNESCO s subsidiary organizations and applied it to the subsidiary organizations in the Natural Science and Education sectors. Since our audits, progress has been made in defining expected results and reporting relationships. These frameworks could be applied to any of UNESCO s subsidiary organizations. The Governance and management of the Medical Benefits Fund At the request of the General Conference, we carried out a financial and operational audit of the Medical Benefits Fund (MBF). In recent years, concerns had been raised about delays in processing claims and the Fund s long-term viability. Good progress has been made in some areas requiring urgent attention. For example, we recommended that the Secretariat examine the feasibility of subcontracting claims processing administration with a view to improving processing times and strengthening controls to prevent financial losses, and this was completed. The Secretariat has also begun to take action to improve the Fund s governance, modernizing the benefits design, and updating the contribution rates structure to offer a better plan to members while ensuring its long-term financial viability. Our audit also addressed a number of accounting issues related to the Fund, including the accounting for UNESCO s after-service medical liability. The planning, management and reporting of extrabudgetary funds Responsibilities for managing extrabudgetary activities have been more clearly defined, with a table of authority and accountability in the final review stages before implementation. We note in particular the clarification of responsibility for preparing strategic frameworks and resource mobilization strategies, and the decision to have the College of ADGs monitor extrabudgetary activities at least twice a year. In addition the Director-General has designated the Division for Cooperation with Extrabudgetary Funding Sources (ERC/CFS) as the overall focal point for coordinating EXB activities and for assembling information both for management and the Executive Board. Clarifying responsibilities is the first essential step towards implementing those responsibilities. In its 174th session, the Executive Board supported these recommendations and called for an action plan and a progress report at the 175th session of the Board, and for regular reports thereafter on full and rapid implementation. The results of internal reviews and policy discussions are summarized in 174 EX/INF.4 Rev., which contains the draft action plan and a set of next steps. This addresses our concluding observation in 169 EX/29 that UNESCO should develop an agenda and an action plan to monitor progress in implementing all aspects of an effective and efficient management framework for extrabudgetary activities.

12 page 14 We note that the Executive Board urged the Director-General to develop an action plan to improve the management of extrabudgetary activities and requested that a report on this be presented to the Board at its 175th session. (c) Areas of slow progress Monitoring extrabudgetary funds The first recommendation, 169 EX/29 paragraph 23, dealt with the monitoring of extrabudgetary programmes. In its response at the time, the Secretariat stated that the Committee on Budget and Finance had established a list of performance monitoring indicators, based on the one we provided, and was reviewing the practicality of obtaining the data. We note that the Secretariat has now responded that implementation on the numerous measures to enhance monitoring is somewhat hampered by difficulties in developing the requisite tools notably the recasting of SISTER. In addition, the Secretariat advised us that it intends to establish sector alert systems to help identify projects in need of remedial action and to train colleagues in project formulation. In our view, however, management needs to start collecting, reviewing and reporting some of the indicators without awaiting changes to the SISTER system. Key indicators we identified previously include: trends in the number, size and duration of active projects; the number of projects that were active, opened and closed during a biennium; the percentage of project completion reports prepared on time; and the number of EXB projects independently evaluated. Implementation rate Two recommendations concerned the preoccupation with reporting on the financial implementation rate as the key measure of EXB project performance. The implementation rate is the ratio of actual funds released to projects for spending, compared with the approved allocations for each year. Our recommendations were in 169 EX/29, paragraphs 38 and 45, and they have not yet been implemented. There is no summary reporting on EXB projects ahead of or behind schedule. The implementation rate is still the main measure of EXB project performance rather than more substantive summary measures of physical progress or results achieved. Management had indicated that it would undertake a review of this performance measure in early 2005, but there have been no results. Support costs We made a specific recommendation in paragraph 61 of our 2004 report, 169 EX/29, about the need to define responsibilities for EXB project support and overhead costs. At that time we did not report in detail on support cost problems because the Secretariat, as stated in the text, was carrying out an internal audit of support cost arrangements. It had also committed to prepare an action plan to deal with the recommendations and to make it available to us for review. However, the action plan for support costs has not been prepared and most of the IOS recommendations were not implemented. Studies have been done and proposals have been developed, and all the necessary background assembled for a policy decision and a change in practice. But, no policy decisions have been made and there were no changes in the practice for support costs.

13 page 15 This subject has been of concern to the Executive Board for some time. Decision 161 EX 13(b) rendered on 29 June 2001 asked for a report on extrabudgetary overhead costs. Paragraphs of 169 EX/29 related our concerns about the inconsistencies, anomalies, and uncertainties in the practice for support costs in More than two years after we made our recommendation and five years after the Board expressed concerns, policy decisions have yet to be made. Recommendation: UNESCO should expedite the implementation of the remaining recommendations where progress has been slow. Comments by the Director-General Agreed. The Director-General is firmly committed to expediting progress in implementing the remaining recommendations where progress has, in the view of the External Auditor, been slow. (d) Monitoring of audit recommendations In the Executive Board paper 171 EX/32, we noted the creation of the Committee on Budget and Finance and that its terms of reference included an oversight role for the Secretariat s implementation of external audit recommendations. We reported at that time that its review would be better served through the preparation of a regular status report containing target dates, the responsible party, and the expected outcomes. Since that time, the CBF has not met to follow up on the Secretariat s progress in implementing the recommendations. No periodic status reports were prepared except those requested by the Executive Board. If there were urgent or other competing priorities, or when circumstances changed, there was no forum for the responsible manager to discuss making changes to the response and commitments that were previously made. Observations from external audits as well as internal audits and evaluations identify weaknesses in systems and practices. The Organization maximizes the value of these audits and evaluations by acting upon the recommendations. In our view, closer monitoring of the implementation of audit recommendations is warranted. Recommendation: The Secretariat should charge the Committee on Budget and Finance to review periodically the implementation of audit recommendations made by the External Auditor and the Internal Oversight Service. In order to carry out such a review, the secretariat of that committee should call for periodic status reports. Comments by the Director-General Agreed. It is management s responsibility to follow up on the recommendations made by the External Auditor and the Internal Oversight Service effectively. In the future this will be a regular feature of the work of the Committee of Budget and Finance and the College of ADGs. 4. Conclusion Overall, we found satisfactory progress in implementing our recommendations. The Secretariat achieved many important improvements and implemented 46 of the 66 recommendations.

14 page 16 However, during the follow-up work, we noted that limited progress has been made to date on several important recommendations in our first audit report on the Management of Extrabudgetary Funds. In our view, it is important to expedite the actions to address them. Further, in order to maximize the value of audits and evaluations, it is essential to put in place a more formalized practice of monitoring periodically the progress made in implementing audit recommendations.

15 ANNEX EXTERNAL AUDITOR S RECOMMENDATIONS , 165 EX/29 Add. Recommendation Status of Implementation 175 EXB External Auditor s Final Comments 165 EX/29 (paragraph 70) Participants /delegates travel. UNESCO should: review delegates travel expenditures to detect any ways of reducing costs; decide whether to continue reporting on delegates travel by object of expenditure; encourage use of economy travel for all delegates travel; prioritize the number of conferences and delegates to meet allocated budgets; and ensure that coding to delegates travel accounts is correct. DCO: There are two aspects to this recommendation: 1. Budget control and reporting by object of expenditure and 2. Controlling participant and delegate travel expenditure Under item 1 a. The redesign of SISTER has been completed and includes reporting by object of expenditure b. SISTER also enables the Organization to monitor expenditure against budgets Under item 2 a. Periodic reporting on travel expenditure is made to top management to enable early remedial action when necessary. b. Furthermore non-application to travel policy where non-economy class tickets are issued is done through the exception report also addressed to top management on a periodic basis. Finally the meetings and conferences database has been run in the Science Sector on a pilot basis early this year and steps are being taken as from this summer to deploy Organization-wide. Satisfactory progress. 165/EX/29 (paragraph 86) Financial and Budget System (FABS). UNESCO should: prepare and review contingency plans for the field implementation of FABS; and report to the Executive Board regularly on the progress of field implementation. Further progress has been reported to the Board (172 EX/65 Part II). All field offices but one enter their Fund reservations directly in FABS. FABS FI has been rolled out to 36 field offices and the other offices use FOX. FABS has also been successfully rolled out to the three major institutes in January. Satisfactory progress. The rollout of FABS FI is a good start; however, the rollout does not encompass all relevant FABS modules. In order to ensure consistent processing of transactions across the organization, UNESCO should continue its FABS rollout efforts to include all relevant modules. Annex

16 Recommendation 165 EX/29 (paragraph 108) Science Sector. UNESCO should identify specific desired outcomes for the Natural Sciences Sector s main lines of action in its plans and reports to Member States that are consistent with the broader strategic outcomes identified in the Medium-Term Plan. Status of Implementation 175 EXB The Natural Sciences Sector has thoroughly reviewed its planning and reporting practices and implemented RBM programming. MLAs in the 33 C/5 contain a description of the expected results, the definition of which makes them specific. Performance indicators and benchmarks are also assigned to the expected results. The headings of the various programmes and subprogrammes of the Natural Sciences Sector (MP II) of the 33 C/5 as well as the expected results are in line with the strategic objectives for MP II in the Medium-Term Strategy Finally the information in SISTER on the proposed activities provides a wellarticulated reference following the logframe approach for concrete work and reporting thereon. The Sector therefore considers this recommendation completed. Completed. External Auditor s Final Comments Annex page EX/29 (paragraph 113) Science Sector. UNESCO Natural Sciences Sector should report total spending on outputs, as well as the extrabudgetary and regular programme financial contributions to them. 165 EX/29 (paragraph 117) Science Sector. UNESCO Natural Sciences Sector should demonstrate its comparative advantage by documenting in its plans, and assessing in all its evaluations, the extent to which it brings special skills or expertise to partnership projects. The Natural Sciences Sector reporting procedure through the EX/4 has been thoroughly reviewed, which has led to substantial quality improvements in the C/3, including by providing clear indications of achievements, challenges, and lessons learned. As noted earlier, the reports demonstrate the complementarity of regular programme and extrabudgetary funding to achieve expected results. SC considers this recommendation completed at sector level. SC has sought to demonstrate its comparative advantage in some cases being the only UN agency to address a subject, in other cases by virtue of its intergovernmental nature and its intersectoral coverage of topics, for example in the two evaluation TORs prepared in the second half of the biennium, and in its Work Plans for the biennium. Results from evaluations are noted and carried into future planning strategies. Partnerships are indicated in SISTER. The Sector therefore considers this recommendation completed. Completed (at the sector level). We noted that about half of the Science Sector subprogrammes report well in the C/3 including, as challenges, some activities that were not completed as planned. This is better reporting than in most other major programmes in the C/3 where it is difficult to compare results with the C/5. Completed.

17 Recommendation Status of Implementation 175 EXB External Auditor s Final Comments 165 EX/29 (paragraph 124) Science Sector. UNESCO Natural Sciences Sector should: consider implementing new management control systems along with the new SISTER and FABS information systems. These should place the primary responsibility at the section head level for managing outputs to achieve expected outcomes, and the responsibility for overseeing the achievement of outcomes (and exceptions) at the Director and ADG levels; develop work plans that include target dates; a results chain of objectives, outcomes, outputs and activities; an indication of who will do the work or who else will be involved in implementation; and a link to a specific user once the work is completed; attach the relevant part of the work plan to each employee s performance appraisal, as a basis for the following year s assessment in the new appraisal system that is being developed. The Natural Sciences Sector has made tremendous use of the new management tools (FABS and SISTER) to better develop its Work Plans and to ensure close monitoring of both regular and extrabudgetary-funded activities. RBM planning and monitoring procedures using SISTER were developed to the satisfaction of the Sector. For the work plans for , clear objectives, outcomes, performance indicators, and benchmarks were defined and recorded in SISTER. These processes include joint programming between headquarters units and field offices, and a biennial calendar for the programme review. This is now part of the programming culture of the Sector. The work plans developed for activities were used as a basis for the performance appraisal of each staff member of the Sector within the context of the new performance evaluation policy. The Natural Sciences Sector considers this item as completed. Completed. 165 EX/29 (paragraph 140) Science, ERC/CFS, IOS. UNESCO should carry out a special evaluation of its donors to determine the extent to which UNESCO has added value to the partnership. In 174 EX/27 the External Auditor called on UNESCO to increase evaluation coverage of extrabudgetary activities and this is now taking place. An important issue covered in all such evaluations is dialogue with donors to test their satisfaction with the value added provided by UNESCO. On reflection, therefore, UNESCO does not see the need for a special evaluation of science programmes to pursue this issue. IOS is actively engaged in four evaluations of extrabudgetary activities in Brazil and has recently been helping UNESCO Iraq to establish effective monitoring and evaluation processes. ERC has been active in promoting the need for evaluations, together with the need for related funding, in the guidance it provides. Completed. The original recommendation about the Science Sector has been bypassed by events, and can be closed. Although a central evaluation of EXB was promised and proceeded through the initial planning stages, it was cancelled in The Secretariat s response suggests that a central evaluation is no longer necessary and will be replaced by more and better project evaluations. The evidence supports the Secretariat s claim that project evaluation coverage is increasing and improving, with strong support from IOS. But IOS is not involved in EXB project evaluations unless asked to review their evaluation frameworks or Annex page 3

18 Recommendation Status of Implementation 175 EXB External Auditor s Final Comments terms of reference, and this rarely happens. There is no system in place to ensure that EXB project evaluations are adequately resourced and planned. IOS is not staffed for reviewing the evaluation frameworks and terms of reference for more EXB projects. Annex page EX/29 (paragraph 143) Science Sector. UNESCO Natural Sciences Sector should: schedule regular meetings between the ADG, Director and the person responsible for each Main Line of Action to review progress, as input to UNESCO s semi-annual report on budgetary performance to the Board; and progress reports on budgetary performance should focus on solutions, not problems, and report variances from plans as well as the action the Sector is taking to improve the situation. The programme review meetings established in 2002 have become part of the programme management tools of the Natural Sciences Sector. Reports are produced on a quarterly basis and meetings are organized on a semi-annual basis between ADG/SC and the Directors and staff of the programme Divisions to review the progress made in the implementation of the programme. These meetings examine the budget implementation and variance to the plans. They serve as input to the EX/4 reports to the Executive Board. The Natural Sciences Sector therefore considers this item as completed. Completed. 165 EX/29 (paragraph 146) Science Sector. UNESCO s Natural Sciences Sector should keep a database of the skills of its consultants and an assessment of the results of their work. The database on consultants was completed in May The application will be accessible from the Internet for consultants wishing to record a résumé in the database. This résumé will be evaluated and transferred to the Intranet database for recording of assigned missions and the assessment of results. System tests were completed. The application will be accessible on the Internet by early July The Natural Sciences Sector considers this item as completed. Completed.

19 EXTERNAL AUDITOR S RECOMMENDATIONS , 165 EX/29 Add. Recommendation The Secretariat s Comments on the Status of Implementation, June 2006 External Auditor s Final Comments 165 EX/29 (paragraph 180) IHP/IOC. UNESCO should: proceed with rationalizing the activities of IOC/IHP including, setting firmer priorities: greater discipline in planning and funding is needed by governing bodies and their secretariats. The requirement for consensus among and the interests of Member States need to be recognized and fitted in the statements of expected results; and put in place administrative means so that when extrabudgetary-funded projects are adopted, there are relatively easy ways of enhancing capacity to manage them. For larger extrabudgetary amounts, the capacity to manage the funds should be in place prior to accepting the funds. Under request of ADG/IOC, and through Memo LA/GEN/2005/006 dated 13 January 2005, the UNESCO Office of Legal Affairs established that since the ADG/IOC has authority to establish trust funds, he also has the authority to sign funds-in-trust agreements that are necessary for the establishment of the trust funds. However, since the Director-General has not exempted IOC from UNESCO financial regulations and other related rules it must be assumed that IOC must still obtain the usual necessary visas before entering into such agreements, and it is DCO that will open and ensure the financial administration and controls over the related accounts. This clarification enabled IOC to request creation of IOC subsidiary accounts, notably for managing extrabudgetary resources received for tsunami activities. As well, this guideline has been followed for negotiations and signatures of Funds in Trust. Since water and associated ecosystems was declared a principal priority for the natural sciences in 2002, the changed circumstances of the IHP have given rise not only to greater growth and diversity of implementation mechanisms but also to improved planning and increased funding both from the regular programme and from extrabudgetary sources. For example there are now 12 category 2 water centres operating under the auspices of UNESCO which are independent of UNESCO yet help to provide the services required by Member States using funding not from UNESCO but from the countries themselves. The modus operandi and therefore the capacity of IHP has thus shifted to a less traditional approach towards greater delivery by institutions associated with the Organization and committed to its goals. Satisfactory progress. Annex page 5

20 Recommendation 165 EX/29 (paragraph 199) UNESCO, IHP and IOC should continue to improve their performance reporting. In particular, they should: base reporting around the MLAs; report summary results information from both regular and extrabudgetary activities to the governing bodies on the extent to which they are meeting their respective outcomes and objectives, with references to the detailed project-level reporting for those interested; include summaries of relevant evaluations; make use of referencing in reporting; for example, C/3 could make reference to more detailed reports on performance; disclose the strengths and weaknesses of the data reported; develop a multi-year performance story which is updated every two years; provide summary information on options and costs; and focus project activity reporting on the exceptions. The Secretariat s Comments on the Status of Implementation, June 2006 As previously reported, the C/3 report contained a short section on the C/5 MLAs (see Also, as in previous years, the IOC 2005 Annual Report included under the Executive Secretary Report to the IOC Executive Council includes a section named Mandate and Summary of 2005 Global Results and Achievements. Regular reporting to the governing bodies of the IHP (Bureau and Council) is done on the various programme and budgets of UNESCO. At the 16th session of the IHP Council (2004) for example, a report by the secretariat on the implementation of the 32 C/5 was presented by the Secretary of the IHP under agenda item 6.1 and duly reflected in the report. At the 17th session (2006), there was a similar agenda item and reporting exercise. At the Bureau meetings taking place about once per year the same thing is done. External Auditor s Final Comments Satisfactory progress. There have been improvements in IOC s reporting to its Governing Bodies and it is based on MLAs. Targets and benchmarks in the 33 C/5 are much improved over the 32 C/5. Some improvements are still needed in internal reporting to ensure readers can compare results and resources used with plans. Annex page EX/29 (paragraph 210) UNESCO, IHP and IOC should: proceed with external evaluations of their organizations, developing procedures to ensure adequate objectivity and independence, and make sure the recommendations are implemented; ensure recommendations in their recent evaluation are fully implemented; increase the use of internal evaluations, improving their objectivity and focusing on results accomplished and the contribution made by IHP and IOC activities; As in previous reports, the Secretariat of IOC continues to submit to its Governing Bodies regular reports on progress made on recommendations issued from previous reviews. IOC is planning, with IOS support, review of existing programmes. Specifically, the review of ITSU was suspended in view of the huge involvement of all IOC s experts on tsunami in the development of an Indian Ocean Tsunami Warning and Mitigation System. This review will be re-defined in view of the establishment of several Intergovernmental Coordination Groups mirroring the experience of ITSU. Satisfactory progress.

21 Recommendation The Secretariat s Comments on the Status of Implementation, June 2006 External Auditor s Final Comments address in their evaluations, among other issues, the contributions their activities and programmes are making to their respective MLA and UNESCO outcomes and goals; and introduce more regular project-level evaluation and seek self-evaluations from Member States on what results they are getting from IOC and IHP projects in their countries and regions. A Comprehensive External Evaluation Report (CER) of the Fifth Phase of the IHP ( ) was undertaken in collaboration with IOS. The results of this evaluation were presented to and discussed by the IHP Bureau and by the 16th session of the IHP Intergovernmental Council which devoted a specific agenda item to this issue (ref. document IHP/IC-XVI/3). Many if not most of the recommendations of this evaluation have been acted upon. The most significant was in terms of modernizing IHP governance, including the strengthening of IHP National Committees (committees asked to review their functioning according to guidelines set out by the Council) and the proposed establishment of Regional Governmental Councils. On the latter matter discussion is still ongoing within the IHP Council. The Secretary of the IHP Council (also serving as Director SC/HYD) reports regularly to the IHP Bureau and council which are the governing bodies of the programme on progress made and problems encountered. These bodies then provide guidance or direction to the implementation of the programme to ensure that it remains tuned to the needs and priorities of Member States. The outcomes of the governing bodies are then reflected in UNESCO programming, an example being provided by the preparation of the Strategic Plan for IHP Phase VII ( ) and the recommendation of topics for MLAs concerning freshwater in the 33 C/5 to correspond to this strategic plan. 165 EX/29 (paragraph 242). UNESCO should continue its efforts to build its evaluation capacity, developing appropriate standards and guidelines. In so doing care needs to be taken that plans developed are realistic and can be delivered by current and planned IOS resource levels. (i) The pilot phase of training in self-evaluation, sponsored by HRM, was successfully completed with Tehran as the last FO covered. In total some 92 staff members (up from the originally planned 60) participated in the training. Feedback shows that staff members who participated in the training are applying what they have learnt in their day-today management of the programmes/projects for which they are responsible. The best example to date comes from the Completed, but as noted above and in our latest report 174 EX/27, para. 66, there is still a problem in matching IOS evaluation resources with expectations. Annex page 7

22 Recommendation The Secretariat s Comments on the Status of Implementation, June 2006 Windhoek cluster office, which decided to use selfevaluation to conduct a mid-term review of the implementation of its cluster strategy. As noted in 172 EXB, this recommendation has been implemented. Further work continues to promote self-evaluation. (ii) In addition to the above, UNESCO was actively involved in the development of the United Nations Evaluation Group (UNEG) Norms and Standards for Evaluation in the UN system in Evaluation units have now adopted this in the UN system, including UNESCO IOS. IOS continues to refine and enhance the various guidelines and tools it has developed to facilitate evaluation in UNESCO. External Auditor s Final Comments Annex page EX/29 (paragraph 243). UNESCO s evaluation strategy should include strong, visible and persistent leadership support, with strategies for providing middle and senior management in UNESCO with results information. (i) Document 34 C/3 was indeed produced in time for the 174th session of the Executive Board in The report was jointly produced by IOS and BSP from the inputs provided by the Sectors and Services. It shows achievements and challenges with respect to the expected results captured in the 32 C/5. (ii) IOS continues to dialogue with the sectors in reaching agreement on actions to be taken with regard to findings from evaluations, and also to track the implementation of these actions. (iii) Report back seminars where external evaluators present their findings to management continued to be organized. (iv) The Evaluation Strategy has been reviewed, and the findings and new proposals will be presented to the 175th session of the Executive Board. It should be noted, however, that work is already ongoing with respect to providing middle and senior management in UNESCO with results information, in that IOS is continuing its work with FOs and sectors in building on selfevaluation training to emphasize the importance of data collection in Monitoring and Evaluation (M&E). Such training took place in Amman in May 2006 covering the UNESCO Iraq programme and was taking place in June 2006 in the Brasilia Office. Completed, but full implementation of resultsbased management requires further and sustained training and the attention of senior management. The Secretariat indicated to us that it recognizes further improvements are needed to reporting on results (for example, comparing achievements with the plans in the C/5). Initiatives are being taken to strengthen results-based management training to help secure such improvements.

23 EXTERNAL AUDITOR S RECOMMENDATIONS , 169 EX/29 Recommendation The Secretariat s comments on the status of implementation, June 2006 External Auditor s final comments 169 EX/29Add (paragraph 23) Monitoring of extrabudgetary programmes (ERC/CFS, BB, DCO) To plan and manage extrabudgetary funds effectively, UNESCO senior management should determine what information they need to monitor regularly, and what information central units, sectors and field offices can monitor on their behalf. UNESCO should design a summary reporting strategy and inform governing bodies of key developments in the planning and implementation of extrabudgetary funds. The report could be based on 166 EX/35, and the Secretariat should be prepared to provide more detailed information on request. As will be detailed in document 175 EX/34 on management of extrabudgetary resources and activities, measures to this effect are foreseen in the draft Action Plan presented to the Executive Board in document 174 EX/INF.4 Rev. While concrete implementation on the numerous measures foreseen to enhance monitoring, both by UNESCO s senior management, and by the Governing Bodies, is somewhat hampered by difficulties in developing the requisite tools notably the re-casting of SISTER internal planning is well advanced, and notably highlighted in the detailed Table on Delegation of Authority and Accountability on extrabudgetary activities, expected to become operational before the 175th session of the Board. Slow progress. We hope that a full monitoring and reporting procedure can be put in place as a result of the decisions announced in 174 EX/INF.4 Rev to re-institute a summary Board report on EXB and for the College of ADGs and the Committee on Budget and Finance (CBF) to monitor performance. Although the CBF agreed originally to monitor a series of indicators that we proposed, action to obtain the required information has been slow. So far, CBF monitoring has been limited to closing dormant projects, and to monitoring deficits and execution rates. The Secretariat s data systems do not provide useful qualitative information about EXB projects. 169 EX/29 Add. (paragraph 27) Management of extrabudgetary resources (ERC/CFS, BB, DCO). The Secretariat should identify a focal point for coordinating the preparation of all extrabudgetary summary information for senior management and governing bodies. Completed. This recommendation is superceded by 174 EX/27 para 83(2). 169 EX/29 Add. (paragraph 31) Published reporting on extrabudgetary activities (ERC/CFS, BB). Information for governing bodies should focus on timely and useful summaries and analyses of extrabudgetary activities rather than details, with the understanding that details can be provided if requested. The information in document 175 EX/34 is presented in compliance with these recommendations. Subject to the views of the Board at that session, similar formats will be applied to future regular reports on extrabudgetary activities to the Governing Bodies, starting with the 176th session. Satisfactory progress. As noted above, the Secretariat has agreed to re-introduce an overall summary report on EXB. Challenges remain to improve internal data systems and resolve differences in interpretation so that consistent summary information can be prepared. Annex page 9