UNESCO INTERNAL AUDITOR ON EDUCATION SECTOR REFORM

C O N F I D E N T I A L SECTION 01 OF 02 PARIS 001192 SIPDIS FROM USMISSION UNESCO PARIS E.O. 12958: DECL: 3/26/17 TAGS: AORC UNESCO SUBJECT: UNESCO INTERNAL AUDITOR ON EDUCATION SECTOR REFORM CONTROVERSY Classified by USUNESCO Ambassador Louise Oliver, for reasons 1.4 (b) and (d). ¶1. (C) Summary. In an off-the-record conversation (please protect),UNESCO's Director of Internal Oversight Services (IOS): (i) offered a harsh professional view of the overall quality of the External Auditor's recent report on contracting procedures used to carry out UNESCO Education Sector reforms, in effect labeling the report unprofessional and biased; (ii) said he is urging follow-up work by UNESCO's in-house auditor (vice the External Auditor) to strengthen internal controls on derogations from contract procurement rules; and (iii) cast doubt over the quality of Navigant Consulting's work product (deliverables). End Summary. ¶2. (C) On March 16, US Mission UNESCO Legal Adviser met discreetly over coffee with the Director of UNESCO's Internal Oversight Services Office, John Parsons, as the Mission has done periodically over the past year. Parsons is a trusted and well-informed interlocutor whom we regard as genuinely committed to holding UNESCO to high standards of accountability and transparency. ¶3. (C) The Mission had primarily requested the meeting to obtain his views on the current status of the still-festering issue of the Brasilia Field Office, including UNESCO's follow-up to the External auditor's 2006 audit of that Office, and rumors of new charges involving serious violations of Brazilian law by that Office. (See septel for report on discussion of that issue.) Mission had also timed this meeting to solicit the IOS Director's views about the recent controversy surrounding the External Auditor's report on contracting procedures used to carry out reforms in UNESCO's Education Sector and the consequent resignation of Peter Smith as the head of that Sector after 21 months. ¶4. (C) The IOS Director chose to begin with the latter issue. He noted his agreement with the External Auditor that procedures relating to "derogations" in procurement contracting at UNESCO were seriously flawed, needed clarification and strengthening for all levels within the Organization. He stressed that the follow-up work to examine procurement derogation rules and practices within UNESCO should focus not just on one sector but rather be done on a cross-sectoral, institutional-wide basis. He counseled against turning once again to the External Auditor's Office to conduct this work, saying instead that the Director General (DG) would be wise to assign that task to the internal auditor, IOS) which is capable of doing so in a professionally sound manner. Using IOS, he said, would also help depoliticize this issue, in contract to the approach taken in the External Auditor's report. ¶5. (C) Commenting on Navigant Consulting (the U.S. contractor used by Smith to carry out his Education Sector reforms),the IOS Director expressed "serious concerns about the quality of its (Navigant's) work product" (the deliverables). ¶6. (C) In response to Mission Legal Adviser's query as to his opinion of the overall quality of the External Auditor's report, the IOS Director termed it "disgraceful" in an emphatic tone of voice, speaking from a professional standards viewpoint. He added that, in his professional opinion, the report failed to meet minimum standards of objectivity and impartiality. (Note: His comportment while discussing this issue clearly suggested a serious degree of professional discomfort about what he termed the appearance of a lack of impartiality reflected in the report.) He shared (please protect) that his concerns about the overall quality of the External Auditor's report have been sufficiently strong to prompt him to solicit discreetly an off-the-record opinion from an internationally renowned academic in the accounting/auditing field, who is also a trusted colleague. At the time we spoke, that opinion had not yet been provided, but the IOS Director said he hopes to be able to share it with a very senior member of the UNESCO DG's front office inner staff. ¶7. (C) Comment: The degree of the IOS Director's low professional regard for the overall quality of the External Auditor's report is surprising and serves to highlight two divergent schools of thought within the UN's system of international audit professionals. In one school are those who firmly believe that audit reports should produce high quality substantive findings and recommendations but also reflect a high degree of professional objectivity, impartiality, and fairness. In the other school are those who seem less motivated to meet the high standards of professional objectivity in their work product that would withstand peer review. These differing optics could very well suggest that, when deciding in future for whom to vote to fill External Auditor positions at various UN agencies, the U.S. Government may want to consider supporting candidates who subscribe to both professional ideals of the first school of thought mentioned. We will endeavor to obtain, and will report on, any noteworthy developments resulting from the IOS Director's external consultation regarding the professional rigor of the External Auditor's report. End comment. Oliver