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 The OIOS audit also found multiple policies within the UNPA that are unclear and outdated, including policies on discounts and commissions, tracking and valuation of inventory, licensing and purchase of artwork, postal agreements and financial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