In a letter to the HLCM and UNDG Chairs of 11 July 2014, USG Valerie Amos of UN-OCHA highlighted the need to harmonize system-wide approaches to fraud cases of implementing partners. In consideration of the ongoing work by HLCM on risk management and oversight, HLCM discussed the subject with a view to developing an appropriate response to UN-OCHA's request, in coordination with UNDG.
In preparation for the discussion, professional advice on the matter was sought from UN-RIAS, as well as from the HLCM Procurement Network, with respect to the different modalities used by various organizations to contract implementing partners; to the corresponding monitoring and oversight approaches; and, to the possibility (and corresponding required actions) of building on the work already completed by the Procurement Network with the Vendor Eligibility Framework.
The Under Secretary General for Management underlined that, together with misconduct, fraud undermines the stakeholders’ trust in the organization and damages its reputation for integrity. While even the most effective anti-fraud policies and procedures cannot guarantee that misconduct will not occur, a good anti-fraud programme can substantially assist the organization in fraud prevention, detection and response and protect the organization’s assets, integrity and reputation. Ensuring that organizations have a strong anti-fraud programme in place is, therefore, the responsibility of managers.
The problems that had recently emerged in the context of programmatic operations in fragile states had highlighted the need to move towards an integrated strategic approach to tackling fraud. Assessing the effectiveness of the established controls of the organization; proposing mitigation strategies and risk treatment and response plans; and, preparing action plans for their execution, should be at the core of this integrated strategic approach.
The USG proposed that the discussions within the HLCM evolve towards the goal of a common strategy and the harmonisation of anti-fraud policies.
The Co-Chair of the UNDG Business Operations Working Group explained that UNDG had set up a time-bound task force on Risk Management in Fragile States to identify policy gaps and prepare recommendations on how to reinforce risk management practices in an interagency environment. The task force will focus on three key deliverables: (a) An overview of current UN risk management practice in an integrated programme and funding environment with special focus on conflict and transitions settings; (b) A gap analysis assessing policy gaps in the current risk management practice, based on an analysis of risk management deficiencies based on recent experiences; (c) Recommendations for additional policy content required to reinforce risk management practices, particularly in a conflict and transition settings. As a part of this work, the issue of sharing of information on fraud cases detected or investigated will be addressed.
UN-OCHA outlined its efforts to strengthen risk management for Country Based Pooled Funds. A number of mechanisms have been put in place, including corporate guidelines that define all financial and programmatic processes and accountability requirements for management of the funds, a set of key criteria to assess potential fraud cases, and Standard Operating Procedures for actions to be taken when cases are under investigation. Still, additional work is required, especially towards the common treatment of implementing partners when there exist an allegation of fraud. NGOs may continue to receive funding from one agency while being suspended by another as the result of detected fraud.
In respect to the delivery of humanitarian assistance, a distinction should be made between NGOs as implementing partners in a programmatic perspective as opposed to NGOs as vendors from a strict procurement perspective. The need was stressed to address the gap in terms of system-wide policies for communication and information sharing regarding fraud cases, so that the UN system as a whole can ensure good and timely communication and information sharing internally, as well as to donors, in a coherent manner.
UN-OCHA also underlined that further harmonization and coordination between development and humanitarian partners is necessary in terms of how NGO capacity assessments are carried out. In this regard, UN-OCHA recommended that a common approach be explored. An expanded version of the HACT could be a starting point for such discussions.
The ensuing discussion focused on the distinction between implementing partners and vendors. While some organizations use procurement processes for services from NGOs, in which case the same vetting, oversight and suspension procedures apply to both, most organizations agreed that the notion of implementing partner is radically distinct from that of a contractor, making the “procurement” approach neither feasible nor desirable.
In the view of the Procurement Network, although certainly not all partners can be treated as vendors - even if in some cases, in the modern world, an entity may be both - many of the principles of procurement can still be useful for the assessment, selection and monitoring of implementing partners. Knowledge of markets, comparative evaluations and strong oversight mechanisms, along with diligent programme management, are all principles that can apply across all different contexts. Furthermore, the existing United Nations Global Marketplace could be adjusted to track implementing partners in a similar way as it tracks suspect vendors, which could provide a platform for information sharing. The Committee also noted that many lessons that were learned in setting up the UN Global Market Place could be useful as we move forward, particularly in regards to the due diligence process.
The Committee also recalled the importance of the lessons from the Harmonized Approach to Cash Transfer (HACT), and the processes of assessment of implementing partners that it has put in place. It was noted that in most cases, strict application of HACT would address many of the issues under discussion. However, in many difficult locations full implementation of HACT may not effectively address these concerns.
UN-RIAS and UN-RIS (the Representatives of Investigation Services of the United Nations - a newly established professional network covering investigation functions within the UN System), supported the HLCM plans towards developing a common framework. They expressed willingness to continue to assist in the work as it moves forward. They supported the approach used by the UNGM on vendor eligibility and saw possibilities, if expanded, to apply it to implementing partners as well.
While unanimously supporting the key requirement of information sharing, HLCM noted that any mechanism towards this end should not compromise the ability of each organization to use the shared knowledge according to its programme criticality and other assessments, as appropriate. The Committee finally noted the importance of developing mechanisms that recognize the concept of risk sharing with non-contractual partners as well as with donors.
Requested the establishment of a task force, which should include the Procurement Network and ideally members of the former HACT advisory committee, and should report on its progress at the spring 2015 session of HLCM, to:
a. Develop definition of use – when an NGO is considered a vendor, and when it should be considered as an implementing partner; b. Assess the feasibility of adapting the UN Global Marketplace as a platform to track fraud cases related to implementing partners; c. Explore alternative means of information sharing; d. Assess opportunities and limitations to expand areas currently covered by HACT assessments, and explore applicability of HACT risk management tools/instruments to vendors and implementing partners; e. Assess the value and feasibility of adapting procedures from the Vendor Eligibility Framework, as appropriate, for implementing partners; and, f. Propose common approaches to mitigating risks.
Requested that this work be conducted in full coordination with the relevant bodies on UNDG and the audit and investigation professional networks.