The United Nations Office for Project Services (UNOPS)

Statement to the Annual Session of the Executive Board 2022

Statement by Jens Wandel, Acting Executive Director of UNOPS, to UNDP/UNFPA/UNOPS Executive Board, Annual Session – 6 June 2022

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UNOPS S3i Initiative

Up-to-date information on UNOPS action plan to address issues related to S3i can be found here.

Madam President, honourable Executive Board members, ladies and gentlemen,

Let me address matters in hand right from the start; the failures surrounding the Sustainable Investments in Infrastructure and Innovation (S3i) initiative have dominated the works of UNOPS lately. This situation continues to be taken extremely seriously and at the forefront of our work every day.

I have spent the last month dedicated to addressing the key issues at hand in full coordination with the Executive Board (EB) and United Nations (UN) oversight bodies and would like to thank those of you who have engaged to rectify the situation.

In my statement today, I will detail the extent of activities currently underway or in process.

The UN Office of Internal Oversight Services (OIOS) led and concluded the investigation into the S3i Chief Executive. Their report has been concluded. Their findings have been formally issued and handed over to the Office of Human Resources Management and the UN Office of Legal Affairs (OLA) for potential disciplinary and legal action.

On behalf of the UN system, OLA is leading efforts to recover funds. They will be supported by required legal expertise with the costs to be carried out by UNOPS, and there will be interaction between the OLA recovery process and the UNOPS process of evaluating the potential loss.

As you are aware, I have provided elements of timelines for these two parallel efforts in a letter sent to the President of the Executive Board. The results of which will be presented to the EB as they unfold.

Overall, my aim is to apply an initial round of measures to ensure we never create this situation again.

With this in mind, the immediate priority is the clear need for an independent review of what has happened.

Following your guidance I have a six point plan of action covering:

  1. An independent review of UNOPS internal controls and governance structure;

  2. An immediate evaluation of S3i;

  3. Strengthening of independence and communication between UNOPS internal audit, investigations, ethics functions, Audit and Advisory Committee — and the Executive Board;

  4. Accelerated implementation of oversight body recommendations;

  5. Addressing the need of a maximum reserve and moving surplus into development action;

  6. Access to more of your own UNOPS partner data - increasing real time transparency.

First, let me turn to actions where I need your support:

Point 1: I plan to request OIOS to undertake an independent review of UNOPS internal controls and governance structure. This would be on a reimbursable basis. If I receive your support, I would welcome an OIOS mission to UNOPS headquarters in Copenhagen to start work next week.

Point 2: There are already two earlier EB decisions requesting UNOPS to undertake an evaluation of the S3i proof of concept. However, those EB decisions preceded the events that, among other things, led to me arriving on 9 May as the Acting Executive Director. I believe there is a need for undertaking an evaluation to find a way forward for S3i, but this may require a broader view of UNOPS business model and general approach to development. I hope that the Executive Board can provide guidance in this respect. Impact investment remains one of the three pillars of our recently approved Strategic Plan 2022-2025.

Members, I would now like to highlight two challenges related to a possible evaluation:

The first is more of a dilemma - the broader the scope of the evaluation the more interesting but also the longer it will take. This causes an issue as we need the insights of such an evaluation now. The reason we need this sooner rather than later is to adjust UNOPS with a view to prevent a recurrence of the type of large scale business failure we find ourselves in at the moment.

On a more practical note, there are very good arguments for accelerating the use of blended financing given difficulties surrounding global development currently. However this also raises fundamental questions such as: does UNOPS have a role to play in this just now? And if so, which role would that be? This is where a well thought through evaluation could help provide some options for you to consider.

The second challenge is that UNOPS does not have an evaluation function itself. Therefore, we need to find an arrangement that works and provides an acceptable level of independent evaluation, without allowing operational issues to cause unnecessary delays.

As mentioned, it is my hope that the Executive Board can provide guidance on these matters during this session. This is so we can proceed with the intention to present, at the very least, preliminary findings to the Executive Board at the Second Regular Session later this year. The findings will then allow you to determine the future of the S3i initiative and UNOPS future role in impact financing.

Now let me now turn to other actions that are already in progress:

Point 3. Efforts are underway to strengthen communications and oversight between UNOPS respective ethics and investigations functions, as well as the Audit Advisory Committee (AAC) and the Executive Board. My impression is that this has led to improvements. If the Review confirms this, we should formalize the arrangements in order to meet your expectations.

Point 4. I have issued instructions to accelerate all recommendations made by oversight bodies on an accumulated basis. An integral part of redirecting UNOPS away from similar business practices to S3i is to ensure we leverage the insights of the United Nations Board of Auditors (UNBOA), the Joint Inspection Unit (JIU), and all types of recommendations made by UNOPS Internal Audit and Investigations Group (IAIG).

In short, I want to have recommendations available, assigned, and tracked in a transparent manner so we can ensure progress and remove barriers to implementation. 

Investigations at UNOPS have been the subject of much scrutiny, as should be the case given our current circumstances. However, it is important to note that IAIG has recently undergone external independent assessments, receiving the top rating in International Standards for the Professional Practice of Internal Auditing, and the Institute of Internal Auditors’ Code of Ethics. IAIG’s investigations section received the same rating in 2020. Based on this and my experience working with them over the last month, I have confidence in UNOPS internal investigation’s function.

Importantly, this function also has more than 20 agreements with Member States and partners, allowing investigative offices to share information, including during active investigations. I extend an invitation to Member States and partners to establish similar agreements.

Turning to Point 5 let me address the question surrounding UNOPS reserves.

The original purpose of UNOPS was that it should be run as efficiently as possible so that projects it implemented could have the greatest development impact. Making resources go further means that we can help more people and make more progress towards sustainable development.

However, the UNOPS of today finds itself in a situation where it has a surplus to its mandatory minimum requirements - where the income collected via the fee for service policy and investments have, over many years, accumulated total net assets of USD $360 million, from which UNOPS allocates funds to all of its reserves and its budgets.

We need to break this fund accumulation in 2022 as one of the central changes that will return UNOPS back to its original purpose.

To ensure we get it right, I believe we will have to create a link between the June and September Board sessions - and get busy in the period in between.

It is my hope we can establish an agreement on the principles defining a maximum reserve. This would include defined running costs as well as multi-year reserve and investment requirements. It should constitute a calculated maximum reserve and could be based on the UNOPS presentation made to the Executive Board informal meeting held on 2 June.

Any funds in excess of the maximum reserve should go back into development through lowering and adapting UNOPS fee for service levels.

A concrete proposal on fee reduction was offered in the 2June presentation. It included a “first round” of steps to simplify and reduce our fee levels - something I believe should happen right away.

Under normal circumstances, lowering the fee should suffice until a new balance between fee for service and expenditure are reached. However, we are not in normal circumstances. From existing audit recommendations, there is a need to make changes to UNOPS' staffing composition as well the environment of independent controls and governance.

Over the summer, the Review and the Evaluation should produce recommendations for improvement of management arrangements, possible structural adaptations and other changes. All required to bring UNOPS back to its purpose.

This will create new dynamics across UNOPS very diverse project portfolios that are difficult to estimate or predict on the basis of the historical data.

I plan to keep the Board informed on such adaptations as part of reporting back on oversight recommendation implementation and response to planned reviews and evaluations.

Concurrently, several of the projects that we implement with our partners around the world have experienced disruptions and a sense of uncertainty as a consequence of partners losing confidence in UNOPS. Some funding sources to existing projects have been stopped, and the pipeline is slowing down across parts of the portfolio.

However, it is difficult to get a full overview or predict how this will play out going forward. It will create some uncertainty on staffing and future demand for fees for services from UNOPS. I would like to emphasize this is not yet a major issue, but a potential "adaptation through disruption" is unusual and may result in unexpected expenditures and management overheads.

This uncertainty is with us now but could be better modeled and presented in September at the Second Regular Session.

Finally, from today, I will offer to any partner - donor or host country - direct access to our systems to monitor their portfolio with UNOPS. Technically, it will be through a special partnership gateway that will allow visibility down to the last payment. This should facilitate joint monitoring of portfolio performance and facilitate verification of contracts, payments and fees as required.

The situation is dynamic so it is my hope you will support a sequence where we make two specific changes to the fee formula that will simplify it and lower it today. At the same time, following this meeting, we will immediately hire outside expertise to help calculate the elements of the maximum reserve and present a comprehensive proposal in September 2022 for decision.

Given the uncertainty around UNOPS, I would also recommend that the September decision is reviewed in early 2023. This is to ensure that we allow for two rounds of balancing for fee levels covering UNOPS cost and to ensure continued change until the Executive Board is satisfied that UNOPS has an efficient and appropriate structure to deliver the services provided to partners - at quality.

If this route is made available, then I can also confirm that the UNOPS cost recovery model is fully aligned with the UN system wide recommendations made by the UN Business Innovation Group (BIG), which UNOPS is a part of - and potentially could do more as part of supporting the wider UN reform.

Dear Executive Board Members, before closing, I would like to explain how UNOPS will begin to rebuild its regular operations and impact on sustainable development.

In October 2021, the results of the assessment by the Multilateral Organization Performance Assessment Network (MOPAN), an independent body which represents a group of 19 donor countries, were made available.

It recognized achievements of UNOPS what I would call UNOPS regular operations. However, a key recommendation was to invest in a better impact assessment framework.

By introducing a systematic linkage of projects to the partners intended development objective, and a certain degree of post project assessment work on the contribution of outputs to these development objectives, UNOPS can strengthen the credibility of the self-reported results - sustainable development impact beyond numbers, contracts, and revenue.

This should also allow UNOPS to learn from this year's presentation of the Annual Report and provide more substance in annual reports going forward; Fairly reflecting the strategic risks, challenges, and lessons to be learned from the previous year’s portfolio.

In closing, what I want to achieve over the next two Executive Board meetings is essentially two things:

Firstly, we need to analyse, evaluate, review, and make appropriate decisions - so we understand what has happened, confront the weaknesses of UNOPS, ensure accountability and implement oversight recommendations without hesitation or bureaucracy.

Secondly, we need to take what is good in UNOPS and offer it to partner countries and development partners on a backdrop of an unprecedented negative development outlook for the world.

Thank you for your attention.

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