UN OVERSIGHT: AUDIT REVEALS UNAUTHORIZED POSTAL

UNCLAS USUN NEW YORK 001345

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: AORC KUNR UNGA
SUBJECT: UN OVERSIGHT: AUDIT REVEALS UNAUTHORIZED POSTAL
ARCHIVES SALE



1. SUMMARY: An OIOS audit of the United Nations Postal
Administration (OIOS Audit No. AH2005/213/02) for the
bienniums 2002-2003 and 2004-2005 found concerning evidence
of poor management, inaccurate financial information,
procedural violations, and substantial vulnerability to
contingent liability of up to $344 million. The UNPA recently
went from a $48 thousand loss to over a $2.6 million profit
position, primarily through the sale of the UN Postal
Archives, a sale which was unauthorized and conducted in
violation of established UN procurement procedures. The OIOS
audit also found multiple policies within the UNPA that are
unclear and outdated, including policies on discounts and
commissions, tracking and valuation of inventory, licensing
and purchase of artwork, postal agreements and financial
recording. Substantial reform and further investigation are
recommended on almost every count, with particular concern
given to the controversial sale of the UN Postal Archives.
END SUMMARY.


2. The 2003 sale of the UN Postal Archives occurred without
the authorization of the General Assembly or the Headquarters
Property Survey Board, and without the advice of the Office
of Legal Affairs. OIOS concluded that there was no documented
or approved justification for the sale, and the documentation
regarding the sale was incomplete. Documents displaying gaps
in necessary information may have deliberately been
concealed.


3. The process used in selecting an auctioneer for the sale
of the archives violated procedure, and the vendor was
invalid at the time of receiving the contract.


4. The collection of material auctioned off was inaccurately
described. It is possible that the stated description of the
auction both failed to account for all material actually
auctioned, and claimed exclusivity of material that was also
in possession elsewhere. This could leave the UN vulnerable
to legal issues.


5. The total auction proceeds were $3.068 million, but the
value may have been substantially higher had the collection
been broken up and sold over a period of time. One industry
expert stated the profit potential as closer to $12 million.
Conducting the sale in this way could also have sustained
interest in the archives and involved more bidders, which
were stated goals of the sale.


6. The current system of complimentary stamp distribution
lacks a system of tracking and controls. They are recorded at
historical face value, but are likely to be worth
substantially more than the reported value, and controls over
this system need to be strengthened.


7. There is currently no written policy on the large
discounts and commissions granted to dealers and agents to
generate interest in UN stamps. For the 2004-2005 biennium,
discounts and commissions amounted to $2.1 million, and
policies in this regard need to be clarified and enforced.


8. The current system of using artists, original work by
the UNPA for stamps and other products lacks clarity and
written policy. There are no controls to track and secure
artwork property, and no clear guidelines on the purchase of
exclusive artwork or rates of payment. Failure to establish
these guidelines may lead to hesitancy of artists to provide
future original work to the UNPA.


9. The UNPA Procedures Manual needs updating, particularly
to provide consistency between the NY, Geneva and Vienna
operations.


10. The UNPA has sold over $344 million in stamps and other
products over the last 25 years, and over 90% of this is not
purchased for actual use as postage. However, each stamp sold
constitutes a contingent liability should owners suddenly
decide to use it as postage. Other postal authorities have
contingency funds for this purpose, and the UNPA remains
vulnerable unless they establish one of their own.


11. Records of stamp inventories are extremely poor,
containing hundreds of inaccuracies. In addition, the
valuation of off-sale stock needs to be revalued, and regular
stock needs consistent and frequent revaluation.


12. UNPA,s computer systems are not sufficiently integrated
with other systems, creating inefficiencies. Mega System, one
of the UNPA,s computer systems, is a particular cause for
concern given that only one individual, the Danish creator,
has complete knowledge of the system.


13. The UNPA has been sustaining losses for the past few
years, and cost-cutting measures have been undertaken to


increase revenue. Financial records are incomplete.


14. The UN currently has postal agreements with the US,
Austrian and Swiss postal services. While the Austrian and
Swiss agreements have been revised to provide more favorable
terms for the UN, the US agreement may need to be updated or
possibly terminated.


15. The findings of this audit have brought to light
numerous procedural violations surrounding the controversial
sale of the UN Postal Archives, a transaction which was
neither authorized nor executed properly. Beyond the sale of
the archives, the UNPA needs significant clarification and
documentation of policy surrounding discounts and
commissions, the purchase of artwork, inventory and sales,
and addressing the contingent liability identified by the UN
Board of Auditors.


16. COMMENTS: Throughout the report, the OIOS consistently
recommends actions by the Under-Secretary-General for
Management in addressing each of the points of inefficiency,
vulnerability and error raised by this report. While punitive
action regarding procedural violations may also be necessary,
the findings of this report would suggest that more
substantive and far-reaching reforms must also occur to
address a lack of policy clarification and enforcement in
almost every UNPA activity. END COMMENTS.
BOLTON