Wednesday, September 07, 2005

From Scandal to Reform at the U.N.

The Volcker Committee has delivered its report on the oil-for-food scandal at the UN. See also the BBC report about it here.

Although it finds no direct wrongdoing by Kofi Annan, the Commission puts at his feet the responsibility for the Oil-for-Food Program being inadequately managed and going awry. We’ve already written much on the various allegations and preliminary findings. Now is the time, particularly with all the reform issues that will be debated in the coming weeks at the UN, to focus on what needs to be done so that there is some real financial accountability. The Committee makes the following recommendations:

1. Create the position of Chief Operating Officer (“COO”). The COO would have authority over all aspects of administration and would be appointed by the General Assembly on the recommendation of the Security Council. The position would report to the Secretary-General and the United Nations Charter should be amended as appropriate.

2. Establish an Independent Oversight Board (IOB) with a majority of independent members. In discharging its mandate, the IOB should have functional responsibility for all independent audit, investigation and evaluation activities, both internal and external, across the United Nations Secretariat and those agencies receiving funds from the United Nations and for which the Secretary-General appoints the executive heads..

3. Improve the coordination and the oversight framework for cross-Agency programs.
Strengthen the quality of the United Nations management and management practices.

4. Extend the financial disclosure requirement well below the current assistant secretary-general level within the organization and specifically include the Secretary-General and the Deputy Secretary-General as well as all UN staff who have any decision-making role in the disbursement or award of UN funds (eg. Procurement Department, Office of the Controller).

5. Expand and better define the United Nations conflict of interest rules so that they encompass actual, potential and apparent conflicts of interest.

6. Agencies involved in a United Nations program are entitled to reasonable support for “overhead” as well as direct expenses. In the context of the Oil for Food Programme, those charges were excessive and the Agencies involved should return up to $ 50 million in excess compensation secured as a result of work performed under Security Council Resolution 1483.

While independent review boards and other such structures play their part, what is most sorely needed is a culture of accountability. The Committee is correct for pointing out the organizational changes that need to be made but we also need to focus on the attitudinal changes that are required. In the era of Enron, the importance of fostering such a sense of corporate ethics, as well as methods of formal oversight, should be of no surprise.

A couple of days ago, I posted some observations on what private lawyers can bring to public international law. Here is another example. If there’s one thing that private attorneys have been grappling with in recent years (especially in the U.S., which takes financial transparency particularly seriously), it is the elucidation of best practices for financial accounting, disclosures, and decision-making. Some of the insights we have gained due to recent corporate scandals can be put to use in the service of building better international organizations. The U.N. will only be as good as we make it.