Organization of American States Report of the Board of External Auditors to the Permanent Council...

Organization of American StatesOrganization of American States

Report of the Board of External AuditorsReport of the Board of External Auditors

to the to the

Permanent CouncilPermanent Council

May 7, 2008May 7, 2008

Presentation to the Secretary GeneralPresentation to the Secretary General

Members of the Board of External Members of the Board of External AuditorsAuditors

• Bradford R. Higgins, ChairBradford R. Higgins, Chair- United StatesUnited States

• Terrance S. Bastian, MemberTerrance S. Bastian, Member- The BahamasThe Bahamas

• Joseph Freamo, MemberJoseph Freamo, Member- CanadaCanada

Board of External Auditors


Responsibility of BoardResponsibility of Board

Oversee audits of OAS and related Oversee audits of OAS and related entities’ financial statements.entities’ financial statements.

Review OAS and related entities’ Review OAS and related entities’ operations and identify internal control operations and identify internal control issues and opportunities to improve issues and opportunities to improve efficiency.efficiency.

Assess the resources, work, and plans of Assess the resources, work, and plans of the Office of Inspector General. the Office of Inspector General.

Issue report on these issues within the Issue report on these issues within the first four months of the year.first four months of the year.


Ernst and Young performed the following audits:

• Regular Fund, Voluntary Funds, and Specific Funds of the OAS • Leo S. Rowe Pan American Fund (Rowe Pan American)• Rowe Memorial Benefit Fund (Rowe Memorial)• Trust for the Americas • Medical Benefits Trust Fund (Medical Benefits)• Inter-American Defense Board Fund (IADB)• Retirement and Pension Fund (Pension)• Agreed-upon procedures related to the Regular and Specific

Funds

Received unqualified (clean) opinions.

One significant deficiency.• Strengthen review process over significant accounts

and processes.

Financial Statement Audit ResultsFinancial Statement Audit Results


Regular Fund – Financial Results and Projections

Notes:

A Income mainly consists of quota collections, but also includes such items as rental and interest income.

Regular Fund Financial Results (in millions)

Account/Line Item 2006 2007 2008 2009 2010

Income without Reserve Fund(A)

$76.6 $82.4 $82.1 $83.3 $85.8

Funds from Reserve Fund 3.7 - 5.4 6.8 7.0

Expenditures 80.3 80.5 87.5 90.1 92.8

Operating ResultsIncrease (Decrease) (3.7) 1.9 - - -

Fund Balance at end of year

$13.8 $15.7 $10.3 $3.5 $(3.5)


FINANCIAL CONDITIONFINANCIAL CONDITION

Quota CollectionsQuota Collections

– OAS has chronic funding shortfall because quotas OAS has chronic funding shortfall because quotas are not set to match mandatory cost increases.are not set to match mandatory cost increases.

– Situation made worse by irregular (late) timing of Situation made worse by irregular (late) timing of quota payments.quota payments.

– Liquidity situation unacceptable (not in Liquidity situation unacceptable (not in compliance with OAS policy for 30 percent compliance with OAS policy for 30 percent reserve).reserve).

– Day-to-day funding requirements are driving Day-to-day funding requirements are driving strategic policy decisions.strategic policy decisions.


FINANCIAL CONDITIONFINANCIAL CONDITION

Budgetary Resources*Budgetary Resources*

– Annual quotas are not set to cover the operating budget. Annual quotas are not set to cover the operating budget. – Continuing decline in critical cash reserves. Continuing decline in critical cash reserves.

– Recommendation from Secretary General for semi-Recommendation from Secretary General for semi-automatic mechanism has not been implemented.automatic mechanism has not been implemented.

– In order to maintain current services, Member States In order to maintain current services, Member States need to provide funding adjusted for inflation.need to provide funding adjusted for inflation.

– Unless Member States invest in this important multi-Unless Member States invest in this important multi-lateral organization, OAS will have no choice but to lateral organization, OAS will have no choice but to drastically cut back programs and activities in the next drastically cut back programs and activities in the next five years.five years.

* - New recommendations.* - New recommendations.


MODERNIZATIONMODERNIZATION

Integrated Real Property and Capital Plan*Integrated Real Property and Capital Plan*

– Maximize the potential of OAS property, including Maximize the potential of OAS property, including alternative fundraising strategies.alternative fundraising strategies.

– Make a decision on real property needs and goals.Make a decision on real property needs and goals.

– Begin to address the serious deferred maintenance Begin to address the serious deferred maintenance needs.needs.

– Sell the Pink Palace and use funds to cover some of Sell the Pink Palace and use funds to cover some of the needed capital expenditures. Relocate IADB staff the needed capital expenditures. Relocate IADB staff to acceptable accommodations.to acceptable accommodations.



MODERNIZATIONMODERNIZATION

Recovery of Administrative and Oversight Recovery of Administrative and Oversight CostsCosts

– The Board was pleased to see the ICR initiative was The Board was pleased to see the ICR initiative was implemented, providing for more realistic cost implemented, providing for more realistic cost allocation between Regular and Specific Funds.allocation between Regular and Specific Funds.

– Important to institutionalize process and ensure it Important to institutionalize process and ensure it continues to be viable.continues to be viable.

– Provides incremental funding for Specific Fund Provides incremental funding for Specific Fund oversight and accountability.oversight and accountability.


OTHER MODERNIZATION ISSUESOTHER MODERNIZATION ISSUES

The Board recognizes various modernization The Board recognizes various modernization initiatives within OAS that will lead to improved initiatives within OAS that will lead to improved efficiencies, transparency, and accountability. efficiencies, transparency, and accountability.

STAMP Initiative*STAMP Initiative* Planning and Strategic Goals*Planning and Strategic Goals* Accounting Standards*Accounting Standards* Financial and Accounting SystemsFinancial and Accounting Systems Project ManagementProject Management* - New recommendations.* - New recommendations.


OTHER MODERNIZATION ISSUESOTHER MODERNIZATION ISSUES

Reliance on Short-term Staff*Reliance on Short-term Staff* Planning for the Aging Workforce*Planning for the Aging Workforce* Job DescriptionsJob Descriptions Reassessing the Procurement Process*Reassessing the Procurement Process* Contractor Oversight ProcessContractor Oversight Process Travel Voucher Process*Travel Voucher Process* TrainingTraining Web Pages*Web Pages*



OTHER CONTROL ISSUESOTHER CONTROL ISSUES

National OfficesNational Offices Vendor ListingsVendor Listings Information Technology System IssuesInformation Technology System Issues Accountable Advances*Accountable Advances* Departure Process*Departure Process* Performance Evaluation and Award Process*Performance Evaluation and Award Process* Fixed Asset TrackingFixed Asset Tracking Ownership of Assets*Ownership of Assets* Personally Identifiable Information*Personally Identifiable Information*



Issues Related to Other OAS Issues Related to Other OAS EntitiesEntities

Trust for the Americas*Trust for the Americas*

– Develop a strategic plan to support the significant Develop a strategic plan to support the significant current growth and long-term potential of the current growth and long-term potential of the Trust.Trust.

IADB*IADB*

– Consider consolidating administrative functions Consider consolidating administrative functions with GS/OAS.with GS/OAS.



Office of Inspector General Office of Inspector General IssuesIssues

Staffing and BudgetStaffing and Budget

Training and Professional DevelopmentTraining and Professional Development

Professional Standards ReviewProfessional Standards Review

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