Problem

Intergovernmental organization mismanagement

Other Names:
Maladministration in international organizations
Fraud in intergovernmental organizations
Corruption in intergovernmental organizations
Embezzlement in intergovernmental organizations
Nature:

Mismanagement of inter-governmental organizations may include: inattention to administrative detail; careless formulations of redundant programmes; programme ineffectiveness; overlapping, dispersion, and fragmentation of activities; and lack of clarity in the definition and achievement of goals.

Incidence:

The USA and the UK cited some of the above reasons for their decisions to leave UNESCO. In 1991 the USA expressed concern about the seriousness and number of cases of fraud and presumptive fraud in the office of the UN High Commissioner for Refugees (UNHCR). Large amounts had been embezzled by UNHCR staff. In 1993 publicity was given to the fact that at least 39 UN staff, including high officials, were retained on full salary (in one case amounting to £100,000 per year) without having any actual job. Officially known as supernumeraries they cost taxpayers and donors an estimated £2 million per year; there is no procedure whereby such payments can be terminated. Internal audit reports reveal a pattern of abuse, mismanagement and individual greed that are seen as endemic in the case of the UN. In the period 1991-92, one former UN official alleged that £540 million had been squandered. Whilst the organization makes official appeals for funds and special donations from members, its official are perceived as enjoying generous benefits, perks in lifetime positions that would not be tolerated in other contexts. A series of financial irregularities have been reported in the field operations of UNHCR, including diversion of relief supplies to the profit of UNHCR staff and the sale or gifting of vehicles. An internal UN investigation discovered numerous irregularities involving procurement, agency property, food aid, exchange rates, and use of agency aircraft.

Even when the people involved in irregularities are suspended or forced to resign, they usually maintain their pension rights. A practice known as "double dipping" allows officials, especially at the highest level, to retire on a pension and then to be re-employed at generous consultancy rates to supplement their pensions. Several thousand consultants are employed by the UN system. The report of an internal investigation initiated in 1992 into this system of appointments was suppressed in 1993. Such information is used by critics to demonstrate how funds that should be earmarked for relief and peacekeeping is spent in supporting a vast and uncontrolled bureaucracy. Self-interest, profligacy and lack of proper financial controls are reported as rife throughout the UN. The current UN Secretary-General, who planned a wide range of reforms, was reportedly shocked at the level of over-manning in certain UN offices. It was found that in some major reviews of budgetary and financial controls had not been executed for years. Some units were not audited at all.

At the height of the famine in Ethiopia in 1984, when relief agencies were appealing desperately for funds, the UN set aside £54 million to build a regional office complex in Addis Ababa. By 1993 costs had risen to £70 million with an expected termination date of 1995. In 1992-93 travel costs for the UN secretariat alone (excluding specialized agencies) were estimated at £25 million. An audit found that air tickets for employee home visits from an in-house travel agency were up to 55% more expensive than elsewhere.

In 1993 the Court of Auditors reported the existence of fraud in the annual accounts of the European Union and calculated that £130 million had been wasted in irregular outlays and lost receipts during 1992. This had been partly due to a combination of weak management, poor financial controls and fraud in member states, compounded by administrative chaos and financial impropriety within the Commission itself. The report claimed that accounts were not properly presented. Waste, fraud and inefficiency continued to plague the EEC/EU Common Agricultural Policy. Italy, Germany and Spain were reprimanded for steel subsidy fraud. Certain national airlines and car manufacturers were allowed to continue to receive government subsidies in direct contravention of the Treaty of Rome, whilst the European Commission appeared paralyzed or unwilling to act. Of the fraud detected, only a small amount of the funds involved are recovered: £7 million of £212 million detected in 1992. Members of the European Parliament estimated in 1994 that some 10% of the EEC/EU annual $79.03 billion budget was lost through administrative blunders and deliberate theft.

By the end of 1992, the European Bank for Reconstruction and Development had incurred expenses of $306 million since its founding in 1991 (including $84 million on its new London headquarters), while only disbursing $153 million in loans and investments. The Court of Auditors also noted allegations of embezzlement at the Council of Europe.

In 1994 European Parliament officials were accused of impropriety and mismanagement in relation to the contract for the new parliamentary complex in Brussels costing £800 million. An attempt was made to hide an agreement to almost double the contractor's profit margins. It was estimated that £70 million in excess payments had been avoided by special investigation of the arrangements.

In 1993 an internal UN report indicated that the organization was almost totally lacking in effective means to deal with fraud, waste and abuse by staff members. The chronically fragmented and inadequate structures for audit, inspection, investigation and programme evaluation were considered so ineffective that it had repeatedly had to call on ad hoc teams to carry out investigations into allegations of serious wrongdoing. In 1995, the internal auditor reported that the UN had grown without pruning, its procedures were too rigid, there was serious overlapping and duplication of responsibilities, rules were too numerous and too complicated to provide proper guidance, and engaging necessary new talent was as problematic as removing non-performers. More than 50 percent of all audit finds identified weaknesses in the internal control system.

Counter Claim:

Financial management in intergovernmental organizations is frequently supervised by member states who are responsible for ensuring that funds are well spent. Mismanagement of any kind is therefore in some measure the responsibility of member governments rather than of the intergovernmental organizations. Questionable practices in intergovernmental organization are often merely a reflection of practices considered acceptable in some at least of the member countries where the auditing practices may not be as strict as in intergovernmental organizations.

Problem Type:
D: Detailed problems
Date of last update
31.10.2017 – 18:00 CET