29 August 2022 – Mukesh Kapila
In exposing misconduct and mismanagement at UNOPS through a dozen or so articles in this series, some common themes have emerged to explain how egregious misdeeds including profiteering, fraud, and corruption got embedded at the United Nations Office for Project Services (UNOPS), enabled by an unaccountable leadership that enjoyed widescale impunity. These factors came together in the explosive failure of UNOPS’s dodgy S3i initiative that sustained multi-million-dollar losses.
The UNOPS (and UNDP, UNFPA) Board meeting on 29th August to 2nd September in New York will consider progress with UNOPS reform, initiated after the appointment of Mr Jens Wandel as Acting Executive Director. Available Board papers and other information coming from within UNOPS provide useful insights. Several governments and UNOPS partners have got in touch for my analysis that is openly offered in this article.
A systemic failure of oversight
By any standard and over many years, the UN Secretary General Mr Antonio Guterres, his UN Secretariat, and the UNOPS Executive Board have been failing their oversight role. It took a globally-publicised scandal shaking the foundations of the wider UN system to rouse them. The suspension or severe restriction and conditionalising of UNOPS funding from important governmental and multilateral donors such as the US, EU, Global Fund and World Bank finally compelled action.
At the core of the UNOPS debacle was lack of supervision and oversight. The irony is that the highly-bureaucratic UN system is not short of oversight bodies. But UNOPS is a past master at ignoring them or doing as little as possible as late as possible.
Thus, a staggering 150 recommendations for UNOPS action, from the UN Board of Auditors, Joint Investigations Unit, Advisory Committee on Administrative and Budgetary Questions (ACABQ) and UNOPS’s own Internal Audit and Investigations Group – several of them going back at least two years – are still open. 107 of them are promised to be implemented by the end of 2022.
While this is awaited, it is fair to point out that several of UNOPS’s open recommendations depend on system-wide actions to be taken. However, the Secretary General has been in no hurry to take remedial action to reduce the myriad risks and vulnerabilities to the UN’s integrity. This is good news for extra-slippery entities such as UNOPS as it provides excuse and alibi for continuation of its own shady practices.
Therefore, it is no wonder that trust in the UN system is at its lowest since its foundation – at a time that the United Nations is needed more than ever.
Internal control systems
The Board demanded a third-party review of “UNOPS internal control systems, risk management and overall governance structures including an assessment of the integrity of the wider UNOPS portfolio”. This is quite a hotch-potch of issues lumped together. They are also complex matters raising questions of methodology as well. Unsurprisingly, this review is somewhat delayed. It is supposed to report by the end of November. Only a rushed, superficial approach will allow this deadline to be hit. Inevitably, that has the possibility of affecting the credibility and utility of this review.
As with other internal control functions that had been ‘captured’ by a self-serving UNOPS leadership, the Ethics Office has been heavily – and justifiably – criticised for failing its duty. The Board has demanded an independent third-party review; this is not expected to report until well into 2023.
Meanwhile, a new ethics policy and an “operational instruction on protection against retaliation” have been instituted over recent days. We wait to see how they work out in practice. A lot depends on the competence , integrity, and independence of whoever is appointed to a renewed Ethics Office.
Internal audit and investigations
A core accountability problem was the functioning of UNOPS’s Internal Audit and Investigations Group (IAIG). Executive Board decision DP/2022/27 asked for a comprehensive review of its independence. This has been conducted but, ironically, it was an internal IAIG self-assessment and not an external third-part review as with the other Board-demanded studies. Why was that the case?
Nevertheless, the report confirms that IAIG was just a creature of senior leadership and management. It was appointed by and reported to the Executive Director with no independent right of access to the Board. (Why the Board and its Audit Advisory Committee allowed this to continue for so many years is not addressed in this report; a separate assessment is needed for that).
IAIG budgets and access to information crucial for its investigations were subject to haggling with senior management. As they were themselves under the IAIG’s remit, there was an obvious conflict of interest. Indeed, the report acknowledges that there were many instances when IAIG enquiries were curtailed, diverted, or ignored by top and senior management. The charge by lower-level staff that IAIG had double standards is effectively proven.
Indeed, the report confirms that IAIG investigators self-censored when reporting investigations that implicated senior management. It says bluntly that the UNOPS structure “not only deters whistleblowers, but it also fails to allow IAIG to freely and independently challenge UNOPS senior management without fear of improper influence or retaliation”.
The report seeks to pin exclusive blame on the “Executive Office”, a coy reference to the disgraced Executive Director Grete Faremo and Deputy ED Vitaly Vanshelboim. They can be easily scapegoated, now they are safely-departed. However, a careful reading of the report makes evident that fraud, corruption, and personnel abuse and exploitation found fertile ground in UNOPS through the self-serving culture that was the prevailing norm. That included the former Senior Leadership Team and regional directorates, all of whom are still in office.
There is no shadow of doubt left by its own self-admission that IAIG was an egregious failure. However, there is no expression of regret or apology in the report that is shameless in pleading for understanding on the grounds that IAIG was under-resourced, and itself a victim of top and senior management. That should not excuse IAIG’s own directors and staffing for lacking the professional courage, ethics, and principles to stand up against the wrong-doings going-on under their nose.
Instead, IAIG personnel pursued their own self-preserving path and caused grave hurt and harm to very many UNOPS personnel by actively conniving with the corrupted senior leadership. These IAIG staff disgraced their profession and need to be held accountable, in their own right.
Mr Wandel is acting to strengthen IAIG’s independence through his new Operational Directive OD.ED.2022.01 dated 23rd August. This is good but the credibility of implementation depends on whether the earlier IAIG leadership and staff implicated in egregious malpractices remain in position.
It is a principle of transparency in public administration that a publicly-funded report is publicly available. However, Deloitte’s 51-page report on UNOPS reserves, costing US$105,000 in consulting fees, has been removed from the UNOPS website. Availability is now restricted to governments by application to Mr William Axelsson, a protégé of the disgraced Ms Grete Faremo and a former Deloitte’s employee who is now the UNOPS Head of External Relations in New York – after a spell in UNOPS Geneva as expert practitioner of the dark arts under Mr Moin Karim. (Eager readers who want the Deloitte report can send me their email to receive a copy, if they are rebuffed by Mr Axelsson).
The Deloitte report is excellent and full of facts and figures that explain why UNOPS feels compelled to withdraw it from public view. It confirms well-known criticisms and provides a useful precis of where UNOPS ignored or bypassed advisories from the UN’s oversight bodies. Poor financial literacy in the Board also meant that it was easily bamboozled.
In short, the report confirms that over many years, UNOPS made obscene profits from donor-funded operations, the impact of which was to cheat poor and vulnerable beneficiaries who needed UNOPS projects most. UNOPS profits averaged approx. US$45 million per year and a whopping US$90.4 million in 2021, when the COVID-19 pandemic brought a further opportunity to profit from the world’s desperation.
These surpluses mean that by the end of 2021, UNOPS’s net assets had grown to more than 250% of the minimum reserves required for the agency’s financial viability. Obviously, such a windfall was too tempting for a venal UNOPS management and explains, in part, the rush into the highly questionable S3i venture.
Deloitte’s comments also hint at the lack of clarity and transparency over UNOPS’s so-called “growth and innovation” reserve which spawned a designated S3i reserve. The loosely-defined scope of the innovation fund reads more like a ‘slush fund’ that the UNOPS leadership can use for all sorts of tasks and functions that would, under any normal agency, be clearly identified as part of its routine operating budget; for example, implementing its own strategic plan. In principle that includes the possibility of UNOPS management able to reward friends with favours around so-called innovation projects. It is easy to see how such a system can be easily manipulated or corrupted.
The key issue now is on what to do with the accumulated excess reserves. Deloitte-suggested options include UNOPS returning the money to the projects and donors it had cheated. But figuring out what to reimburse to whom would be very cumbersome and generate huge transaction costs. A related option to distribute the excess to all member states or to a common UN fund such as the Resident Coordinator system smacks of an invitation to benefit from ‘immoral earnings’. It is also unfair as not all states are UNOPS contributors or beneficiaries.
Perhaps, the most practical option is to reduce future project fees to significantly below actual costs, so that to exhaust past excess profits. UNOPS will then have to ensure that its future pricing structure does not recreate the profiteering problem. There is considerable scope for this as explained in a previous article that outlined how UNOPS’s rapacious business model works, exemplified by its Geneva office under the exploitative leadership of its Europe Director, Mr Moin Karim who generated huge immoral profits for the agency.
A new business model?
Sensing the writing on the wall, UNOPS Chief Finance Officer, Ms Marianne de la Touche rushed out an internal management note on 24th August indicating that UNOPS is reducing its fees and charges with effect from 29th August (coinciding happily with the start of the Board meeting).
The note promises greater transparency confirming, inter alia, that its prevailing business practices are anything but… Most significantly, it promises that UNOPS will no longer charge an additional premium for risk unless there were exceptional circumstances. That was a major scam that inflated its fees and charges.
No details have been publicly released on the new model‘s variables, assumptions, and computations. Obviously, it was rushed out under pressure of the imminent Board meeting.
Initial internal staff reactions are that of bafflement. Ms de la Touche’s note says that the new pricing applies to new projects – the presumption here being that existing projects will continue to be bled for outrageous profits on current terms. With so many other qualifications and caveats outlined in Ms de la Touche’s note, it appears that the ‘new model’ may well be a smoke-and mirror visualisation of the ‘old model’.
The written Board papers are silent on S3i – the original fire that burnt the UNOPS house – other than confirming that all its investments have been suspended. A third-party review of S3i oversight and its internal control systems is to be commissioned, with a report due in November.
Meanwhile, there is no update on progress with retrieving lost funds or any legal actions underway to visit accountability upon external partners or internal staff who may have connived with potential fraud and corruption.
Presumably, a fuller update to Board members will be provided by Mr Wandel. But the longer the lack of transparency continues with respect to enquiries and findings round S3i, the more the suspicion grows that the UN system is engaged in a cover-up of what actually happened, despite any lesson-learning exercises for the future.
UNOPS senior management changes
As is well-known, former Executive Director Faremo and Deputy Executive Director Vanshelboim have departed in disgrace. However, it is unclear if they are going to be held accountable for mismanagement and misconduct, or if they will be allowed to fade away discreetly, cushioned by their lucrative pensions and other emoluments, as is usually the case in the UN system.
In recent days, it was encouraging to hear that Chief Legal Counsel, Mr James Provenzano will not be allowed to serve out his full term till his retirement next year. Instead, he will leave at the end of 2022. Internal sources suggest that he will probably go sooner – around October – to enjoy a long ‘terminal’ leave. For the hundreds of staff who have suffered indescribably due to him, his departure cannot come too soon. Apart from the former ED and Deputy ED who had titular authority, Mr Provenzano is probably the most important creator of the greedy shark culture created at UNOPS which ultimately thrashed the agency’s reputation. Will Mr Provenzano be held accountable for his own misdeeds and egregious transgressions?
Close behind is Mr Honoré Dainhi, UNOPS Director for Regional Portfolios i.e. ultimate master of all continents under whose remit abuses proliferated everywhere, while UNOPS country and field staff were degraded and denigrated. In past days, he has been stripped of his title, and demoted just to the directorship of Africa. This does not bode well for the continent which needs most help.
These are small steps for accountability at UNOPS. But insufficient. Other key co-conspirators such as a CFO Marianne de La Touche, Communications Director Peter Browne, Implementation and Standards Director Nick O’Regan, and Europe Director Moin Karim remain in post.
Several existing directors are even aspiring for the two new Assistant Secretary-General positions, and busily lobbying at present. Indeed, it would be a travesty – adding insult to injury – if they remained in position for too long or, worse, even got promoted.
Is the UNOPS reform glass half full or empty?
Some changes do appear to be underway at UNOPS. While the reform train seems to be moving in the right direction, stakeholders have been so deeply betrayed by UNOPS that regaining their trust will take more than bare intentions or cosmetic changes. The best to be said so far is that the UNOPS reform glass is still half empty.
For the glass to be half full needs not just structural, systems, and process reforms but hard accountability for the wrong-doings of individual UNOPS senior leaders, most of whom remain in position.
Frankly, Mr Wandel has done only the easy stuff so far, in a plodding bureaucratic manner that is a no-brainer. Akin to the froth on top of a glass of beer being poured out. Whether Mr Wandel has the courage or stamina to make the real transformational shift at UNOPS remains to be seen.