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World Meteorological OrganizationEXECUTIVE COUNCILSeventieth SessionGeneva, 20 to 29 June 2018

EC-70/INF. 16.1(3)Submitted by:

Secretary-General1.VI.2018

AGENDA ITEM 16: GOVERNANCE

AGENDA ITEM 16.1: OVERSIGHT

REPORT OF THE EXTERNAL AUDITOR

Audit of 2017 financial statementsWorld Meteorological Organization (WMO)

CDF-18068 | Report of the External Auditor | 16 April 2018

EC-70/INF. 16.1(3), p. 2

Table of contents

Executive summary ............................................................................................. Paragraphs 1-5

Regulations, standards and information ............................................................ Paragraphs 6-17

Follow-up of recommendations........................................................................ Paragraphs 18-20

Internal control system..................................................................................... Paragraphs 21-89

Preparation of IPSAS-compliant financial statements........................................ Paragraphs 90-94

Audit of 2017 financial statements ................................................................. Paragraphs 95-171

Conclusion ................................................................................................... Paragraphs 172-175

Annex 1: Report of the External Auditor

Annex 2: Follow-up of Recommendations from Previous Audits

Annex 3: Summary of Audit Findings Concerning Risk Analysis

Annex 4: Additional Entries

The mandate of externally auditing the financial statements of the World Meteorological Organization (WMO) is traditionally exercised by members of the supreme public financial auditing body of the country chosen. On the basis of this provision and further to its sixty-seventh session, the WMO Executive Council entrusted the Swiss Federal Audit Office (SFAO), in accordance with Article 15.1 of WMO Financial Regulations, with the mandate of External Auditor of WMO accounts for the period from 1 July 2016 to 30 June 2020.

The mandate is defined in Article 15 of WMO Financial Regulations and in the Additional Mandate for External Audits of the Accounts attached to those Regulations. Moreover, the mission is described and specified by the letter of 19 November 2015 confirming the mandate, the terms of which WMO accepted in its reply of 11 February 2016. The members of SFAO conducting the mandate perform their duties in an autonomous and independent fashion, with the support of their collaborators.

SFAO provides the services relating to the external audit of WMO accounts

completely independently of its role as the supreme financial oversight body of the Swiss Confederation. SFAO has a team of highly qualified professionals and has extensive experience auditing international organizations.

For further information, please contact:

Eric-Serge Jeannet, Deputy Director, Tel. +41 58 463 10 39, [email protected].

Didier Monnot, Mandate Officer, Tel. +41 58 463 10 48, [email protected].

CDF-18068 | Report of the External Auditor | 16 April 2018 2

Bestelladresse Swiss Federal Audit Office (SFAO)Adresse de commande Monbijoustrasse 45Indirizzo di ordinazione 3003 BerneOrdering address SwitzerlandBestellnummer 1.18068.952.00412.002Numéro de commandeNumero di ordinazioneOrdering numberZusätzliche Informationen www.efk.admin.chComplément d’informations [email protected] complementari twitter: @EFK_CDF_SFAOAdditional information + 41 58 463 11 11Abdruck Gestattet (mit Quellenvermerk)Reproduction Autorisée (merci de mentionner la source)Riproduzione Autorizzata (indicare la fonte)Reprint Authorized (please mention source)

EC-70/INF. 16.1(3), p. 3


EC-70/INF. 16.1(3), p. 4

Audit of 2017 financial statementsWorld Meteorological Organization (WMO)

Executive summary

1. The 2017 financial statements for the World Meteorological Organization (WMO) were drawn up in accordance with International Public Sector Accounting Standards (IPSAS). The audit has yielded a satisfactory result overall, and the Swiss Federal Audit Office (SFAO) is in a position to issue an unqualified audit opinion.

2. However, closing accounts and preparing financial statements regularly present a challenge for WMO. SFAO encountered incomplete reconciliations particularly concerning the situation in the cash accounts, where there were unexplained discrepancies. Regarding the status of the recommendations, only three have been implemented. 11 of them are still open. The SFAO encourages WMO to implement these recommendations in a timely manner.

3. In the project management process, information should be communicated throughout the Organization so that the finance service is able to draw up accurate financial statements. When financing contracts are finalized, the relevant departments do not always communicate this information in a timely manner. Estimates regarding the progress of projects should require closer collaboration between project managers and the finance service.

4. During the past year, 14 staff members left WMO and received benefits exceeding the allowances provided for in the Staff Rules. These benefits, which total CHF 734 000, should be considered ex gratia payments and should be approved by the President of WMO. The payments were made in 2017 without the necessary approvals.

5. Finally, the SFAO is concerned about the financial position of WMO. Indeed, for the fourth consecutive year, it has reported a significant actual loss despite balanced budgets. The cumulative losses of the last four years now stand at CHF 67 million. The problem is not in the explanation and justification of these losses, which have always been reported in a transparent manner. Rather, the SFAO considers that the current scope of the budget, which only includes the General Fund, is too narrow as it does not include important activities external to the General Fund. The SFAO therefore believes that it would be advisable for WMO to broaden the scope of its budget monitoring.


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Regulations, standards and information

Financial Regulations and purpose of the audit6. Financial years are regulated by the provisions of the Convention of the World Meteorological

Organization (WMO) and by the Financial Regulations, in accordance with International Public Sector Accounting Standards (IPSAS).

7. The audit covered the WMO financial statements for the year ended 31 December 2017. These comprise the Statement of Financial Position (financial statement I), the Statement of Financial Performance (financial statement II), the Statement of Changes in Net Assets/Equity (financial statement III), the Statement of Cash Flow (financial statement IV) and the Statement of Comparison of Budget and Actual Amounts for the General Fund (financial statement V), as well as a summary of the main accounting methods and other explanatory notes.

Auditing standards, information and acknowledgements8. Audits were carried out in accordance with the International Standards on Auditing (ISA 1) and

pursuant to the additional mandate which forms an integral part of WMO Financial Regulations.

9. The International Standards on Auditing specify the role that auditors must play in relation to the risk of misstatements in the financial statements, whether due to fraud or error (ISA 240). Consequently, the External Auditor has applied special procedures in this area.

10. Where audit sampling was carried out, SFAO selected samples on the basis of risks or the relative size of the amounts recorded under the headings examined.

11. Minor issues which were clarified and discussed with those responsible in the course of the work are not covered in this report.

12. During the auditing process, members of SFAO team met with Ms E. Manaenkova, Deputy Secretary-General, Mr W. Zhang, Assistant Secretary-General, Mr A. Rolli, Director of the Resource Management Department, Mr L. Ngwira, Chief of the Finance Division, Mr T. Mizutani, Chief of the Budget Office and other staff from the Finance Division and other WMO departments.

13. SFAO wishes to emphasize the excellent cooperation and spirit of openness which characterized the auditing process. We also express thanks for the willingness with which information and documents were provided by all WMO staff whose cooperation was sought.

1 International Standards on Auditing (ISA), published by the International Auditing and Assurance Standards Board (IAASB).CDF-18068 | Report of the External Auditor | 16 April 2018 5

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14. The audit findings were communicated at the final discussion on 18 April 2018. This meeting was attended by Mr A. Rolli, Director of the Resource Management Department, Mr L. Ngwira, Chief of the Finance Division and Mr T. Mizutani, Chief of the Budget Office. The External Auditor was represented by Mr M. Köhli, Competence Centre Officer, Mr A. Baumann, Audit Officer and Ms V. Bugnon, Audit Expert.

15. In accordance with point 7 of the Additional Mandate for the External Auditing of the Accounts relating to the comments of the Secretary-General to be inserted into this report, it was agreed that these comments would be e-mailed directly to SFAO. They were received on 8 May 2017 and have been duly included in this report.

16. The original language in which this report was drafted is French, and SFAO notes that it is the French text which is deemed to be authoritative.

Collaboration with the Internal Oversight Office17. SFAO noted the work carried out by the Internal Oversight Office (IOO) and wishes once again

to emphasize the excellent collaboration maintained with the WMO internal audit unit. In accordance with ISA 610, the results of the work carried out by IOO and likely to be relevant to our audit procedures were taken into account.


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Follow-up of recommendations

18. The recommendations made in our previous closing audits were followed up and their implementation status was examined at the end of March 2018. They are set out in Annex 2 as follows:

2015 audit (carried out in 2016): Of the seven pending recommendations, two have been implemented.

2016 audit (carried out in 2017): Of the seven pending recommendations, one has been implemented.

In total, three of the pending 14 recommendations have been implemented. Annex 2 describes in greater detail the status of the recommendations that are still pending.

19. The new recommendations made following the closing audit of the 2017 accounts appear in this report.

20. SFAO notes that its recommendations are no longer being implemented in a consistent manner and is concerned about this trend.


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Internal control system

21. The internal control system (ICS) and the main processes which affect the financial statements are assessed on a multi-year basis. This assessment is presented in the Audit Planning Report 2017. The processes and aims of the audit missions are analysed according to the following rotation schedule.

Process Evaluation Planned rotation

2017 2018 2019 2020

Controls at the organizational level

IT general controls (ITGC)

Regular contributions and other income

Voluntary contributions and project management

Procurement

Travel

Human resources

Fixed assets

Closure of accounts/Preparation of financial statements

22. The audit opinion is also based on an assessment of the existence of formalized processes and key controls stemming from an analysis of risks. The External Auditor does not comment on their sustainability or effectiveness. A distinction should be made between the audit of the financial statements and other types of audits, such as financial supervisory audits or the audits performed by IOO, as the latter focus more on the operational aspects of processes and on the effectiveness of the related key process controls.

23. SFAO carried out a review of the ICS during the interim audit, which took place in December 2017. This was followed up during the closing audit carried out in March 2018.


KeyThere are significant shortcomings. There is an urgent need to act because the ICS is unreliable.A significant improvement is needed. There are regular controls; however, these have not been standardized and/or strongly depend on people. The ICS is informal in nature.The results meet the expectations of SFAO.Key processes covered by the external auditKey processes not covered by the external audit (rotation principle)

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Controls at the organizational levelControl environment

24. SFAO is of the opinion that the WMO regulatory framework is of good quality and has noted that this framework is updated regularly in accordance with a predefined process. However, at this stage an anti-fraud/anti-corruption directive is still being drafted.

25. With respect to the organizational structure of WMO, SFAO notes that the flow of information and communications between the various departments is relatively limited. SFAO feels that the control culture is not sufficiently developed. This is in particular due to the lack of clearly defined responsibilities for each staff member. For example, the most recent disputes involving staff have been handled solely by the legal counsel, without the support of human resources. Moreover, the finance service was not consulted in the determination of the corresponding provisions. SFAO also notes that project management will require closer collaboration between the departments implementing the project and the finance service via reciprocal verification controls.

26. With the increase in voluntary contributions, excellent project management skills have become a necessity. Poor project management skills may lead to significant risks for the Organization. WMO agrees with SFAO on this point and is committed to providing training for its project leaders. Its goal is to develop a project management culture within the Organization.

27. In its 2017 audit report, SFAO highlighted risks that could have an impact on the governance of the Organization. The President of WMO assured SFAO in an e-mail that he shared this view and that those responsible for the governance of the Organization should lead by example. He asked the Secretary-General to establish a code of conduct for the governance bodies (Executive Council, Audit Committee, etc.). This code should be presented at the 2018 session of the Executive Council for approval.

28. SFAO noted a WMO internal audit report concerning temporary contracts (2017-IAS-3). This report comments on the common practice of rehiring retired employees and the fact that these employees may collect a pension and a salary (engage in ‟double-dipping”). According to the internal audit, in many United Nations organizations, this practice has been limited to salaries of no more than US$ 20 000 per year.

29. The internal audit report also points out that two types of contracts are being used interchangeably for temporary staff. When the maximum duration for one type of contract (for example, SSA) is reached, the employee is given another type of contract (for example, short-term staff).

30. These two cases do not involve a violation of the rules. However, the current practice raises ethical questions for the Organization.

Risk assessment

31. The WMO Risk Management Committee operates under the supervision of the Deputy Secretary-General. This committee mission in terms of risk policy and risk management is set out in Service Note No. 14/2010 of 12 August 2010 (‟Risk Management Committee”). A service note issued on 6 March 2014 (4/2014, ‟Implementation of risk management”) instructs department heads, programme managers and divisions to regularly review risks relating to their field of activity. The committee consolidates the results at the organizational level. The Risk Management Committee submits risk maps to the Audit Committee.

Control activities


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32. The controls are primarily carried out by the departments, which prepare an annual Statement on Internal Controls. The basis for establishing the controls (for example, a risk and control matrix) is unclear.

33. According to the Financial Regulations, all commitments, obligations and expenditures require at least two authorized signatures. They must first be signed (certified) by a duly designated certifying officer. Following certification, a duly designated approving officer must sign the documents to indicate approval for the establishment of obligations, the recording of expenditures in the accounts and the processing of payments. Certifying officers are also responsible for managing the use of resources.

34. SFAO noted that the signature of the certifying officer is missing from the termination indemnities for two staff members and in relation to a dispute involving a third staff member. These exceptions do not affect the accuracy of the accounts since the expenditures were authorized at multiple levels within the Organization. However, WMO has not followed all the steps set out in its Financial Regulations.

35. SFAO also noted that some certifying officers confirmed their responsibilities with reservations when they were appointed. As a result, the controls theoretically carried out by these individuals when validating an expenditure cannot be considered valid.

Professional assessment by SFAO

SFAO believes that the internal financial management rules should be followed for the approval of every expenditure. Certifying officers should be able to carry out their responsibilities as set out in the regulations.

Recommendation No. 1

SFAO recommends that each WMO expenditure, without exception, be approved by a certifying officer who fulfils the responsibilities described in the financial rules of the Organization.

The recommendation is accepted.

The three non-compliance cases identified by the External Auditors are regrettable. The certifying officers should be involved in all expenditure categories without exception. WMO will ensure full compliance with the Financial Rules and Regulations (Deadline: May 2018).

Control monitoring36. As it is currently structured, WMO has no internal control manager responsible for verifying

that the internal control system and the control monitoring process function appropriately. This position is tasked with ensuring that the internal controls are suitable and efficient. The monitoring carried out by IOO does not replace the oversight provided by this manager. IOO, in fact, provides the third line of defence; the internal control manager provides the second line of defence.


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SFAO believes that WMO does not have an adequate second line of defence capable of reducing the risk of breakdowns in the internal control system.


SFAO recommends that WMO assign one of its senior managers the task of overseeing the internal control system of the Organization. This person would be responsible for preparing and updating the documents relating to the controls, conducting a sampling procedure in order to ensure that the controls set out are followed and making the staff aware of the usefulness of the internal controls.

Comment by the Secretary-General

The recommendation is accepted. The expenditure control second line of defense role will be attributed to the Assistant Secretary-General (ASG) to reinforce the control system (Deadline: June 2018).

37. Compliance with the internal control system and overseeing its effectiveness are also control responsibilities pertaining to the position of operational manager. This position prepares administrative information, including a system of indicators, for management purposes and analyses the organization external financial reporting. WMO does not have such a position. However, the tasks corresponding to this position are carried out, to a certain extent, by the Budget Office, the Performance Officer and the Monitoring and Evaluation Focal Points within the departments. A controller is primarily needed in the project management process (to carry out project control functions).


EC-70/INF. 16.1(3), p. 12

Process involving fixed assets38. The process involving fixed assets affects various services within WMO. The controls are

therefore carried out at different levels by different individuals (control owners). SFAO notes that the description of the process is incomplete and should be updated. The role of overseeing the process as a whole (process owner) has not been defined. These deficiencies are addressed in Recommendation 1/2017, which is still pending.

Acquisitions

39. WMO has established a capitalization threshold of CHF 5 000 per item. These assets are entered into the accounting system without undergoing a control by a second person. Their allocation to the correct account, amount and useful life are not verified. There is also a risk that the person responsible for processing the acquisitions will not receive all the pertinent information.

40. In an exemplary workflow, the requisition already specifies whether the asset should be capitalized and its expected useful life. All the necessary information is communicated at the different approval steps, and the person in charge of the capitalization is involved in the workflow.

41. According to the process, the asset accounting entry always corresponds to the amount on the invoice. IPSAS 17 makes a clear distinction between goods or services which should be capitalized and goods or services which should be expensed. For example, if an extended warranty is purchased for a piece of IT equipment, this warranty may not be capitalized, even if it appears on the same invoice as the piece of equipment. As a general rule, it is therefore incorrect to capitalize the amount of the invoice without conducting a detailed analysis of the information.


In order to ensure greater compliance with IPSAS, SFAO feels that the acquisition procedure should be improved. The related responsibilities should be redefined, and controls should be put in place.


SFAO recommends that WMO implement a control with regard to creating an accounting entry for an asset. The person given the corresponding responsibility should attach his/her approval to each invoice in order for the invoice may be capitalized. Information such as the amount, the date the asset became operational, the asset category and the useful life should be reviewed by a second person.


The WMO will improve the description of the internal part of the acquisition process of fixed assets for what concerns a clear identification of a “process owner” and a “control owner” (Deadline: Dec. 2018).

42. When assets are entered into the accounting system, the system assigns them a corresponding asset number and barcode. This makes it possible to conduct a regular inventory by scanning the asset. An inventory was last conducted in 2013. SFAO encourages WMO to carry out this control more regularly.


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EC-70/INF. 16.1(3), p. 14

Depreciation

43. Depreciation is calculated automatically by the system based on the useful life of each asset. As indicated in point 33, there is no control in place to verify that the useful life is entered correctly. Recommendation No. 3 aims to address this deficiency.

Retirements

44. Asset retirements are documented and approved. However, due to the absence of regular asset inventory checks, WMO cannot verify all the retirements. The person responsible for assets is not systematically made aware of asset retirements.

Procurement process45. The procurement process analysed by SFAO covers activities and controls starting with the

request for procurement and ending with the provision of payment for the item procured.

Documentation

46. The procurement process is described independently in the WMO documentation, both in various chapters of the Standing Instructions as well as in the WMO financial rules. There is no complete overview of the procurement process from request to payment. Key internal controls are not clearly identified and described. This situation validates the observations made regarding the internal control system and Recommendation 1/2017 issued by SFAO. A clear description of the processes, established across the Organization, would bring transparency to internal control. A risk and control matrix based on these processes would clarify responsibilities.

47. For example, the part of the procurement process attributed to the Procurement Division was described in a new chapter 10 of the WMO Standing Instructions, beginning with the request for a requisition by a division and ending with the creation of the order. This description does not include the other divisions involved in the overall process. It includes a flow chart, but this flow chart does not represent all the activities carried out. Key risks, controls and responsibilities are also not represented.

Implementation

48. SFAO notes that some invoices for expenditures are received even before the process has officially begun. In fact, in some cases, SFAO has observed that the date on the invoice is earlier than the start date of the expenditure requisition.

49. SFAO believes that formalizing the procurement of an item in accordance with the steps of the process only after receipt of the invoice does not ensure the validity of the expenditure. SFAO is not issuing a recommendation but encourages WMO to respect the predefined activity flow.

Multiple approvals

50. For each new procurement item, there are multiple validation steps: when the requisition is made, when the supplier is designated, when the order is prepared, when the invoice is received and validated and when payment is made. Each approval phase involves multiple individuals, and the approval thresholds and levels vary from one activity to another. In this regard, SFAO has identified one procurement item for which six people approved the requisition (ITCSD, C/BO, D/REM), one person approved the order (C/PCTD), nine people approved the invoice (ITCSD, C/BO, D/REM, FIN) and two people approved the payment (DSG,


EC-70/INF. 16.1(3), p. 15

Treasury). The process of awarding tenders includes further analyses and approvals by other employees. The inclusion of numerous approvers and approvers at very high levels results in an ineffective control. This example also illustrates the inefficient nature of the process.

51. In the future, WMO plans to include the Budget Office in the approval of all requisitions involving budgetary controls. This would make the approval process even less efficient.

IT systems

52. The procurement process includes numerous activities and controls performed manually even though IT systems have been put in place. The Elios application allows documents relating to procurements to be archived. In addition, Oracle accounting software has been installed. Although these different systems provide documentary evidence, there is still paper-based traceability. As a result, the installation of these IT applications has not increased the efficiency of the process.

53. In addition, SFAO notes that the Oracle electronic invoice approval workflow is not used for all expenditures and payments. Validations are sometimes requested manually for prepayments. Expenditure statements for projects are always authorized manually by the corresponding division. Extending electronic approval to all expenditures would ensure an efficient validation process. The approval process for invoices is usually identical to the approval process for requisitions. Nevertheless, SFAO notes that some expenditures are not approved by all the same people who approve the requisition. Exactly who should approve the invoices is not clearly defined. The automatic inclusion of project managers into the Oracle invoice approval workflow cannot be guaranteed since the invoice approval workflow follows the requisition workflow. It should also be noted that the approval workflow may be interrupted.


SFAO considers that the number of approvals necessary should not exceed two for each step in the process. Approvers should be defined according to their level of responsibility.


SFAO recommends that WMO review the procurement process in its entirety in order to improve the efficiency of the process.

The recommendation is accepted. WMO will simplify the expenditure approval process, with the objective of making it more efficient and effective. When appropriate, project managers will be included in the approval process

(Deadline: Dec. 2018).

Review of open orders

54. Pursuant to chapter 5, paragraph 5.12.4 of the Standing Instructions, designated officers should carry out the monthly review and processing of open orders. This review is initiated by the Budget Office but is formally carried out by the responsible officer. In practice, this control is actually carried out quarterly. SFAO has noted that in 2017, this control was not carried out monthly or quarterly. This assessment confirms Recommendation No. 5 issued by SFAO in its report of 2 May 2017.


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Review of suspense accounts

55. Invoices that cannot be allocated with certainty to a specific expense account when they are registered are temporarily recorded in a suspense account. In order to ensure that all transactions are allocated and completed at the end of the financial year, SFAO encourages the WMO finance service to institute a monthly review of outstanding invoices.

Process for voluntary contributions and project management56. In response to SFAO recommendations from previous years, WMO encourages the exchange

of information between departments and services. To this end, WMO has acquired a new document management system (Elios), which together with the Oracle portal and MS Project, makes up the project management suite.

57. This tool should enable information concerning the signing of pledges to be shared between services in a timely manner. SFAO notes, however, that some financing contracts signed in 2016 were not submitted to the finance service in time for them to be taken into account in the year-end closure of accounts. They were only submitted to the finance service with the first instalment of contributions in 2017.

58. During the final review of the annual accounts in March 2018, the finance service was made aware, upon receipt of a contribution payment, that a new agreement with the World Bank had been signed in November 2017. The internal WMO project leader did not inform the finance service of this contract at the closing of the accounts despite a request from the finance service at the beginning of the year. As a result, it cannot be guaranteed that all pledges were taken into account at the closure of 2017.

59. At the closure of 2016, SFAO noted that significant progress had been made in the accounting treatment of voluntary contributions. In response to SFAO recommendation, the finance service has centralized financial data categorized by ‟pledge”. This means each pledge can be monitored for the entire duration of the corresponding project, and the information can be reconciled with the financial statements.

60. At the time of the 2017 interim review, SFAO noted that the centralized monitoring of pledges had not taken place. At the closing of accounts, the list was also missing important information. SFAO was not able to assess the current state of a number of projects. SFAO wishes to highlight the importance of conducting regular monitoring.

61. The WMO project coordination unit (PCU) also compiled a list containing projects being monitored. Unfortunately, this list does not match the list compiled by the finance service. Similarly, there have been no consultations between the finance service and PCU. One of the findings in the 2017 IOO reports is the lack of a comprehensive list of all the projects in progress at WMO.

62. The financial service issues estimates so that projects may move forward. As the risk of uncertainty is high, these estimates receive special attention in accordance with the audit standard.

63. Revenue recognition, directly related to these estimates, is defined by SFAO in its audit operations as a key risk to WMO. It is therefore imperative that WMO put in place controls in order to ensure their accuracy. There is no four-eye control. Only the Chief Financial Officer estimates the progress of the projects. This issue was raised in Recommendations 1 and 2 of the audit report 16127 of 20 April 2016. These recommendations are still open.


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Process relating to human resourcesEarly Retirement and Voluntary Separation Incentive Programmes (ERP & VSP)

64. The United Nations General Assembly decided in its Resolution 70/244 of 23 December 2015 that the mandatory age of separation for staff who entered into service before 1 January 2014 should be raised to 65 years of age (MAS-65)2. This resolution came into effect on 1 January 2018. WMO anticipated and took advantage of this change to support the early retirement or encourage the voluntary separation of 14 employees.

65. The ERP/VSP was planned as follows:Initiation of programme by management

Formal launch of the ERP /VSP Programmes, Last date for receipt by C/HRD of expressions of interest

calculation of indemnity and other separation payments, deadline for acceptance of formal requests

Jan 17 Feb 17 March 17 Apr 17 May 17 June 17

Service Note issued by SG, requests confirmed by SG

Communication of SG’s decision, formal acknow ledge-ment and letter of separation

Communication of end of service arrangements

Formal separation, end of contracts, execution of payments

July 17 Aug 17 Sep 17 Oct 17 Nov 17 Dec 17

Briefing of president about programme

Jan 18 Feb 18 March 18 Apr 18 May 18 June 18

66. The contractual employment relationships were terminated at the end of December 2017, and as a result, WMO employees were not affected by MAS-65.

2 https://hr.un.org/article/change-mandatory-age-separation-updateCDF-18068 | Report of the External Auditor | 16 April 2018 17

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67. The total amount for this separation programme comes to CHF 2.2 million. The details are indicated in the following table.

Type Amount Ex gratia payment

Termination indemnities

1 498 337 287 704

3 months in lieu of notice

445 845 445 845

Accrued annual leave 246 690 0Total 2 190 873 733 549

68. As there was no budget for these measures, WMO accounted for all the costs as payment advances. The effect in the expenditure accounts was therefore neutralized. As the employment contracts were terminated at the end of 2017, the impact of these measures should also be reflected in 2017. At the request of SFAO, the accounts were adjusted.

69. This adjustment has budgetary implications. The Budget Office has indicated that due to the lack of a sufficient budget in 2017, it has only certified the payment for the accounting of the expenditure in the 2018 accounts. According to the Budget Office, the 2017 expenditure was therefore not certified by a certifying officer. Additionally, no requisition was prepared. The Financial Regulations were therefore not respected. SFAO has already mentioned the deficiency with respect to controls in the chapter regarding controls at the organizational level.

70. SFAO notes that of the amounts paid, CHF 733 5493 should be considered as ex gratia payments. According to the Staff Rules in effect, this amount exceeds the legal obligation of the employer (WMO) in the case of separation.

71. Article 13.4 of the WMO Financial Regulations establishes that the Secretary-General may, with the approval of the President, make such ex gratia payments as he deems necessary in the interest of the Organization. SFAO notes that formal approval of the President has not been granted. He was only informed of this situation at the start of 2018. The ex gratia payments were therefore made without his approval.

72. SFAO also wishes to highlight that according to Rule 113.9 of the Financial Regulations, WMO must submit a summary statement of all ex gratia payments to the external auditor within three months after the end of the financial year.


SFAO is of the opinion that the payments to former staff members were wrongly considered as severance pay without an ex gratia element. Senior bodies (Audit Committee, Financial Advisory Committee (FINAC) and Executive Council (EC)) must be informed of these ex gratia elements when approving the 2017 accounts. A similar situation occurred with respect to the 2016 financial year.

3 CHF 702 350 WMO, CHF 31 199 JCRFCDF-18068 | Report of the External Auditor | 16 April 2018 18

EC-70/INF. 16.1(3), p. 19


SFAO recommends that WMO comply with the financial rules for determining and approving ex gratia payments.


WMO will duly report ex gratia payments to the Audit Committee, FINAC and Executive Council. WMO will take measures to fully comply with the regulations and rules with regard to ex gratia payment. WMO will include reference to ex-gratia payments in HR and other relevant regulatory documents as well as definition of associated appropriate authority (Deadline: June 2018).

Repatriation and relocation grants

73. In accordance with the Staff Rules, WMO employees may receive repatriation and relocation grants. SFAO was made aware of one special case during the audit. At the end of 2016, one international staff member residing in Switzerland informed the Organization of his intent to obtain Swiss nationality. During the spring of 2017, this employee left the Organization and received from WMO grants for repatriation and relocation to his country of origin. This former employee received Swiss nationality in December 2016; however, WMO was not informed of this until later. Part of the grant money had already been paid to him even though he had Swiss nationality at the time of his leaving the Organization.

74. On one hand, the Staff Rules need to be clarified. Article 142.2 stipulates that for staff members with multiple nationalities, the nationality to be taken into account in the application of the Staff Rules is the one with which, in the opinion of the Secretary-General, the staff member is mostly closely associated. This rule does not indicate any criteria for determining the nationality which should be considered. Without systematically establishing and documenting the dominant nationality, the Organization may grant benefits to staff differently depending on the nationality chosen. This regulation carries a risk of opportunistic selection.

75. On the other hand, SFAO notes that the internal controls for the process of awarding repatriation grants do not function correctly. In this case, WMO did not follow up on the acquisition of Swiss nationality by its former employee before awarding these grants and it did not take this information into consideration in its decision-making process. The WMO internal audit also examined this case.

Closing processControls for the closure of accounts and quality of the financial statements

76. The financial statements were provided at the start of the audit. However, SFAO considers that the quality assurance related to the work and to the closing controls should be improved. The first version presented to the auditors contained errors in the calculations and the years and incorrect explanations.

77. The closing of accounts is carried out according to a closing programme which sets out deadlines and responsibilities. From a formal point of view, the programme meets expectations; however, the efficiency of the controls must be improved.

78. SFAO notes that the principle of periodic adjustment is not respected. As a result of the work carried out, several items entered into the accounts as accruals include errors and are not subject to controls, which increases the risk of error. In 2016, the finding was the same. Among the errors detected, SFAO notes the lack of reconciliation between the amounts paid and the positions open at the end of the year. These weaknesses in the periodic adjustment of costs


EC-70/INF. 16.1(3), p. 20

and revenue are confirmed in the adjustments proposed by the external auditor (see Annex 4). Recommendation No. 4/2016, regarding respect for the controls in this area, is therefore still open.

79. Despite a control being provided in the closing checklist, the UNDP and UNICC cash and receivables accounts are not reconciled correctly. They contain significant discrepancies (see Other short-term receivables). SFAO proposes adjustments in the amount of CHF 148 716 for UNICC and CHF 165 050 for UNDP (see Annex 4). The monthly reconciliation of cash accounts is required according to the WMO Financial Regulations and Rules (Rule 111.9). SFAO declines to issue a new recommendation and makes reference to Recommendation No. 4/2016, which is still open. This recommendation requests clear reconciliations and relevant supporting documents. SFAO wishes to emphasize that cash accounts are an important part of financial statements that is characterized by an increased risk of fraud.

Interfund eliminations

80. As part of the preparation of WMO consolidated accounts, interfund transactions should be eliminated. These transactions mainly occur in the rebilling of IT or telecommunication costs between departments. Contributions between funds, for example, from the general fund to a trust fund, should also cancel each other out.

81. Note 6.3, ‟Utilities”, shows a positive balance of CHF 127 000. This is due to an elimination entry of an amount greater than the charges recorded on the account. Preparing these elimination/consolidation entries is not included in the controls carried out by a second person, who could discover this type of error. SFAO reminds WMO of the importance of carrying out a comprehensive review of the financial statements.

IT general controls82. The maturity of the internal IT control environment at WMO has improved since 2016 due to

the hiring of a new Chief Information Security Officer (CISO) and the implementation of procedures and controls.

Password parameters

83. SFAO notes that the rules for passwords in Windows AD and Oracle do not comply with current policy. In addition, SFAO notes that the password security policy is not current. (The most recent version is from 2013.) SFAO recommends updating this policy and applying it to Windows AD and Oracle.

User access management

84. SFAO has reviewed the assignment of administrator profiles and notes that the change of position of one staff member is not accurately reflected in the system: the administrator rights of the user have not been withdrawn.

85. SFAO notes that the procedure for managing user departures is not in place and that nine permanent employees who left WMO in 2017 still had access to Oracle as at 15 December 2017. SFAO has verified that these users have not connected to the Active Directory since their departure date.


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SFAO is of the opinion that expired administrator and access rights increase the risk that an unauthorized user may access information and perform unauthorized transactions.


SFAO recommends that WMO remove the administrator access rights of the person in question by the end of January 2018 and review the actions of the user in Oracle from 1 October 2017 until the removal of those rights. SFAO also recommends that a control be established in conjunction with the Human Resources Department to ensure that the access of users leaving WMO is deactivated in a timely manner.


The WMO will implement the proposed actions (Deadline: June 2018).

Review of Oracle access rights

86. Reviews of access rights to Oracle and to Windows AD were carried out in 2017 by the business owners of each division. These reviews were spearheaded by the CISO. The review of Oracle access rights was in the process of being finalized on the date of the interim audit (15 December 2017).

87. SFAO recommends that WMO finalize the review by the end of January 2018 and ensure that all the matrices are reviewed and approved by the business owners.

ISAE 3402 report

88. The International Computing Centre (ICC) provides services to WMO such as the operation of the Oracle application.

89. In its work during December 2017, SFAO took note of the ISAE 3402 (Type 2) report of the ICC produced by KPMG for the period from 1 January to 31 December 2016. SFAO noted the reservations in this report and will monitor developments. A reservation was also issued in 2016 for the 2015 period. The report for 2017 will be published during 2018.


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Preparation of IPSAS-compliant financial statements

90. The WMO 2017 financial year closed in accordance with IPSAS. These standards constitute a rapidly changing accounting framework and require a constant updating of knowledge and of the presentation aspects of the financial statements.

91. In 2017, the following five standards came into effect:

IPSAS 34, Separate Financial Statements; IPSAS 35, Consolidated Financial Statements; IPSAS 36, Investments in Associates and Joint Ventures; IPSAS 37, Joint Arrangements; and IPSAS 38, Disclosure of Interests in Other Entities.

They replace the following standards: IPSAS 6, Consolidated and Separate Financial Statements; IPSAS 7, Investments in Associates; and IPSAS 8, Interests in Joint Ventures.

92. SFAO has advised WMO in the application of these new standards without calling into question its independence as the external auditor. A workshop with WMO was held in summer 2016 and was followed by several joint follow-up sessions.

93. The next change will occur in 2018 with the entry into effect of IPSAS 39, Employee Benefits, which will replace IPSAS 25. The main differences are the following4:

Introduction of the net interest approach for defined benefit plans; Amendment of certain disclosure requirements for defined benefit plans and multi-

employer plans.

94. This standard requires a restatement of opening balances related to actuarial liabilities. A restatement of the opening balance on 1 January 2017 should be carried out for the 2018 closing based on an actuarial valuation.

4 https://www.ifac.org/publications-resources/ipsas-39-employee-benefitsCDF-18068 | Report of the External Auditor | 16 April 2018 22

EC-70/INF. 16.1(3), p. 23

Audit of 2017 financial statements

STATEMENT I – BALANCE SHEET

Cash and cash equivalents 95. The balances as at 31 December 2017 for the various cash accounts were CHF 68 million (CHF

74.8 million at the end of 2016). The distribution is as follows:

WMO Regional Office Total

Bank account 67 877 769 -2 791 67 874 978

Bank control account (in transit) -713 205 759 205 047

Petty cash 1 503 31 851 33 353

Petty cash control account 0 -89 073 -89 073

Total 67 878 559 145 747 68 024 306

96. The analysis carried out by SFAO led to the following observations:

The balance of the control accounts should in principle be zero at 31 December, except for rare exceptions when there is cash-in-transit at the end of the year. These accounts have not been cleared for several years and have a cumulative balance of CHF 115 974.

The balance of the bank accounts of the regional offices is negative, while the balance of the corresponding control account is CHF 205 759.

The petty cash balance of the regional offices is CHF 31 851. This is extremely high for a cash balance, especially since this money is not available at WMO headquarters in Geneva. Taking into account the difference with respect to the control account, the negative balance is CHF 57 222.


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97. The cash balances were compared to the bank statements. In the absence of confirmations, they were verified based on the bank statement at 31 December 2017.

Amount Difference

Bank confirmation 67 723 851 15 523

Bank statement 153 919 0

No evidence 146 559 -146 559

Total 68 024 328 -131 035

98. The above table shows that the majority of the balances were able to be verified based on bank confirmations. However, SFAO was not able to obtain evidence for a balance in the amount of CHF 146 559. These balances also include petty cash. SFAO expected to be able to verify these balances with a cash register signed by at least two people at the end of the year. The lack of controls at the headquarters, especially for the negative balances at the regional offices, is alarming and poses significant risks for WMO.

99. Some of the reconciliations submitted to the auditors date from several months prior to closing or the evidence does not exist (bank statement, tally sheet). Unexplained discrepancies in the area of liquidities are unacceptable. Reconciliations must be carried out monthly, as specified by the WMO Financial Regulations (Rule 111.9). Recommendation 4/2016 remains applicable.

100. As was the case last year, only individual signing rights are required for some bank accounts, as per the confirmations of business relationships received at 31 December 2017 (for example, for the Banco National de Costa Rica). As in the previous closing, the Finance Division informed SFAO that individual signing rights were sometimes necessary in the regional offices, where the segregation of duties was not feasible, given the small number of staff on site. SFAO declines to issue a recommendation, but still wishes to mention this point.

Statutory contributions101. Short-term receivables tied to contributions amount to CHF 17.1 million (CHF 6.8 million at the

end of 2016). Long-term receivables tied to contributions amount to CHF 0.4 million (CHF 0.2 million at the end of 2016). The increase is mainly due to one Member country which had arrears of statutory contributions in 2017. The amount due was paid at the beginning of 2018.

102. The provision relating to statutory contributions was able to be validated by SFAO. Provisions are made for outstanding contributions if the Member country loses its right to vote. This is the case if it does not comply with its payment obligations two years in a row. It regains the right to vote and the provision is removed if the amount owing is paid or if the country agrees to follow a payment plan.

103. Two Member countries lost their right to vote and WMO was not able to arrange a payment plan. Provisions should be made for outstanding debts. SFAO proposes an adjustment of CHF 73 643 (see Annex 4).


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Voluntary contributions104. Short-term receivables tied to contributions amount to CHF 18.3 million (CHF 9.5 million at the

end of 2016). Long-term receivables tied to contributions amount to CHF 4.4 million (CHF 3.6 million at the end of 2016).

105. The selection of new contracts (pledges) signed in 2017 and the verification of payments to confirm the existence of open balances are a part of the tests carried out by SFAO. These have led to significant adjustments due to an erroneous assessment of a new Norwegian pledge (see Annex 4). Instead of treating the contribution as assigned to a project and delimiting the income, WMO recognized the full amount in the year the contract was signed. The impact on the accounts amounts to CHF 4.3 million.

106. Another voluntary contribution had to be cancelled because SFAO found that the contract signed with the WMO Member country was not valid. The relevant minister of the Member country did not have the required rights to sign such a contract. The impact on the accounts amounts to CHF 4.0 million.

107. Contracts with contributors (pledges) always include additional clauses stating that the total contract amount is released only if the annual budget of the contributor is approved by its parliament. Under these conditions, the annual instalment approved by the parliament is recorded as a receivable and the remainder as a contingent asset.

108. SFAO notes that in many cases, the payment instalment expected for the year following the closure is not recorded as a receivable but as a contingent asset. This instalment can be considered secured when the parliaments have approved their budgets. SFAO has proposed adjustments (see Annex 4).

Inventory109. The inventory shown in the balance sheet represents a value of nearly CHF 63 000 (CHF 75 000

at the end of 2016), consisting mainly of publications. Owing to the materiality thresholds, the auditors did not carry out any specific detailed procedures in this section.


EC-70/INF. 16.1(3), p. 26

Advances for projects and meetings110. Advances for projects and meetings amount to CHF 3.3 million (CHF 9.4 million at the end of

2016). The major project with a donation from Norway entitled ‟Climate Services Adaptation Programme in Africa”, for which WMO is working with five implementing partners, is coming to an end. Consequently, the amount of advances has decreased substantially.

111. SFAO is aware of the difficulty of obtaining financial progress reports in time to enter the expenses correctly in the profit and loss account. A further difficulty arises in that the reporting period rarely coincides with the year-end closing. Consequently, the costs to date for each implementing partner have to be estimated. WMO indicated that it wished to continue to follow this practice, despite some associated practical difficulties.

Other short-term receivables112. Other short-term receivables amount to CHF 5.3 million (CHF 4 million at the end of 2016).

They mainly include prepaid expenses, tax owed to the USA, a deposit with UNDP and education grants.

113. A confirmation of balances with the United Nations Development Programme (UNDP) has been established. WMO has two types of relationship with UNDP, reflected by the Service Clearing Account (SCA) and the Project Clearing Account (PCA). For the PCA, an adjustment of CHF 165 050 was made in relation to ASHI and other expenses from 2017 and 2016 that WMO pays for UNDP experts and should be re-invoiced (see Annex 4). This amount is already included in the PCA balance confirmation although UNDP has only confirmed an amount of CHF 7 406 (see table below).

Service Clearing Account (SCA) confirmation 2017, US$, Exch rate 0.978

Project Clearing Account (PCA) confirmation 2017, US$, Exch rate 0.978

WMO UNDP Variance WMO UNDP VarianceUS$ 1 131 047 1 049 548 81 500 191 918 7 573 184 345CHF 1 106 164 1 026 458 79 707 187 696 7 406 180 289

114. In general, and as was the case the previous year, the amounts declared by UNDP and WMO do not correspond to the account balance. The balance confirmed by UNDP is CHF 79 087 lower than the amount appearing in the WMO accounts (see table below).

Source CHF Source CHF

WMO trial balance 947 901

Adjustment 165 050

WMO trial balance 1 112 951 WMO trial balance 1 112 951

WMO SCA confirmation 1 106 164 UNDP SCA confirmation 1 026 458

WMO PCA confirmation 187 696 UNDP PCA confirmation 7 406

WMO confirmation 1 293 860 UNDP confirmation 1 033 864

Variance 180 909 Variance 79 087

115. SFAO does not propose an adjustment but does point out the importance of reconciling these balances and explaining the variances. On this basis, adjustments should be made if necessary.


EC-70/INF. 16.1(3), p. 27

A recommendation concerning this is still open (No. 6 of the report of 2 May 2017 on the audit of the 2016 financial statements).

116. The ‟other receivables” account also includes prepaid expenses. WMO has entered the separation programmes (ERP/VSP, described in the ‟ICS, human resources” section) in this account. As requested, these adjustments have been made to reflect the impact of these transactions during 2017 (see table), cancelling the advance payment.

Type Amount

Dissolution prepayment 2 162 736

./. Charged to salaries -1 278 165

./. Charged to reserves -740 535

./. Charged to TF (JCRF) -144 036

Total 2 190 873

Interests in joint ventures and associates117. With the coming into effect of the new IPSAS standards 34-38, for the first time WMO has

integrated its share of the result in the ‟Data Buoy Cooperation Panel”. In accordance with the standards, it applies the equity method. Its interest in joint ventures decreased in 2017 from CHF 1.9 million to CHF 1.6 million.

Property, plant and equipment118. The closing balance sheet shows an amount of CHF 78.1 million in respect of property, plant

and equipment (CHF 86.6 million at the end of 2016). This item includes property, plant and equipment, office furniture and fittings as well as computer equipment.

119. IPSAS 17 ‟Property, Plant and Equipment” applies to the accounting treatment in the balance sheet of the building owned by WMO. For reference, the fair value of the building for the IPSAS opening balance sheet in 2010 was estimated using the depreciated replacement value method. Note 2 of the annexes to the financial statements states in this connection that the building was valued on the basis of historical cost (as per IPSAS 17, paragraph 43).

120. The calculation of annual depreciation recorded is currently based on this method, in line with the IPSAS standards. However, SFAO noted that the useful lives are not in line with the accounting manual. When the significant parts approach was introduced, the useful lives were restated in the manual, but did not take account of the years that had already elapsed prior to the switch to IPSAS. For example, the accounting manual states that the maximum useful life of the building is 50 years. However, this useful life began in 2010 (the date of the switch to IPSAS), when the building was already 12 years old. This makes the actual useful life according to the accounts 62 years.

121. In response to recommendation 7/2016, WMO commissioned CBRE, a company specializing in real estate valuation, to provide an independent valuation of the building. Modification of the useful lives of the components resulted in higher depreciation in 2017, of CHF 8.8 million. In 2016, the depreciation was CHF 4.8 million.


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122. SFAO undertook an assessment of the CBRE report, including several exchanges with the valuers. It also checked the entry of the new useful lives in the WMO system. It detected considerable differences amounting to CHF 462 000. These are largely offset thanks to positive and negative effects. The net effect in the account is CHF 45 000. The incorrect recording of some useful lives will give rise to future errors in the calculation of depreciation. SFAO proposes correcting these errors in order to avoid adjustments in 2018.

Intangible assets123. An amount of CHF 311 000 appears in the accounts as at 31 December 2017 (CHF 513 000 at

the end of 2016) as intangible assets. This amount was checked, and did not give rise to any particular comments.

Payables and accruals124. The sum of CHF 2.9 million (CHF 3.7 million at the end of 2016) appears in the closing balance

sheet as ‟Payables and accruals”.

125. As mentioned above in the paragraphs concerning the internal control system, ineffective controls gave rise to several adjustments identified by SFAO. No provision was made for the cost of the 2017 external audit (CHF 120 000). A number of adjustments for accruals total CHF 230 380 (see Annex 4).

Contributions received in advance126. Contributions received in advance came to CHF 10.7 million at the end of the year (CHF 11.2

million at the end of 2016). They comprised regular contributions from Member States, which were paid in 2017 but relate to the 2018 financial year. These amounts were checked to ensure that the income period was properly adjusted.

Deferred income 127. Short-term deferred income was CHF 31.7 million (CHF 16.6 million at the end of 2016) and

long-term deferred income was CHF 4.5 million (CHF 3.6 million at the end of 2016).

128. SFAO reviewed a significant proportion of the contracts relating to voluntary contributions received during the accounting year 2017 in order to validate the periodic apportioning of income and the accounting treatment in accordance with IPSAS 23.

129. Major adjustments were proposed and mentioned in the voluntary contributions section. Another adjustment linked to rental income entered in 2017 but relating to 2018 was also proposed. The impact of this on the accounts is CHF 250 927.

130. With regard to presentation of the accounts, SFAO considers that the delimitation between short-term and long-term deferred income is incoherent. The short-term amount of CHF 31.7 million means that WMO intends to implement projects in 2018 equivalent to this amount. Despite the collaboration with the implementing partners, knowing the size and capacity of WMO, this amount is not plausible.

131. This incoherence is due to the deferred income not being adapted to actual project progress. WMO is facing cumulative delays on several projects, which is currently manifesting in the deferred income balance. Therefore, the finance division should regularly adjust the apportioning of deferred income between short term and long term.


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132. A project carried out in Africa and financed by the USA (pledge 1506) illustrates this well. The project began in June 2017 for a period of three years. The total value of the project is US$ 6.8 million. At the end of December 2017, only CHF 57 000 had been recognized (project progress). WMO recorded short-term deferred income of US$ 6.12 million and long-term deferred income of US$ 0.68 million. It seems unlikely that US$ 6.12 million of this project will be implemented in 2018.

Loans and other financial liabilities133. WMO borrowed funds from FIPOI for the construction of its building. The nominal amount

stands at CHF 45.8 million (CHF 47.3 million at the end of 2016). An amount of CHF 1.5 million appears in the balance sheet as short-term financial liabilities. This sum is in line with the annual repayment schedule.

134. The loan has been updated with a rate of 2.4% and recognized in the balance sheet as CHF 31.9 million (CHF 1.4 million short term). The annual charges for updating the loan amount to CHF 0.8 million.

135. IPSAS standards require the presentation of contributions in kind for services below the market value. Given that the loan is non-interest-bearing and the land was made available free of charge, WMO is receiving benefits in kind amounting to CHF 1.9 million per annum. The nominal amount of the debt with FIPOI is consistent with the confirmation of the latter.

Provisions136. The sum of CHF 31 000 (CHF 479 000 at the end of 2016) appears in the closing balance sheet

as ‟Provisions”.

137. The disputes from last year have been settled. According to our discussion with the Legal Counsel, there are currently no pending disputes. WMO is, however, facing a claim from a Member country that is critical of how its voluntary contribution has been used. The amount received from the donor is CHF 1 million, and not the sum of CHF 2 million stipulated in the contract. On this basis, WMO modified and implemented the project, with the exception of EUR 82 840, which has been reimbursed. The Member country is claiming full reimbursement.

138. WMO has informed the Member country that full reimbursement will not be possible. SFAO analysed the situation and came to the conclusion that it is not necessary to establish a provision for this, which corroborates WMO assessment.

139. The provisions also include reimbursement to donors of voluntary contributions. The balance at the end of 2017 was CHF 31 000. The WMO budget office monitors the trust funds and the reimbursement of any unused balances. In its review of reimbursements carried out in 2017, SFAO noted that, for one case, a provision of CHF 170 766 should have been established. Last year, a sum of CHF 291 985 was incorrectly apportioned.

140. Since income linked to projects entailing a ‟reimbursement risk” has been deferred, the reimbursement of an ‟unspent” balance no longer has any impact on the expenditure accounts. However, when a project comes to an end, the remaining balance must obviously be reimbursed. WMO is therefore supposed to transfer the balance of the deferred income to the provisions.


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Funds held in trust141. As the trust funds do not manage cash accounts, finance flows (payments) pass through a

current account managed by WMO. This balance totalled CHF 11.4 million in 2017 (CHF 13.0 million at the end of 2016).

142. The most significant balances concern the Intergovernmental Panel on Climate Change (IPCC) (CHF 5.3 million), Group on Earth Observations (GEO) (CHF 2.9 million), Global Climate Observing System (GCOS) (CHF 1.2 million), Joint WMO/ICSU/IOC Climate Research Fund (JCRF) (CHF 0.9 million) and Typhoon Committee (ESCAP) (CHF 0.9 million). They were reconciled at the end of 2017. The checks did not give rise to any comments.

Employee benefitsEmployee benefits: ASHI

143. WMO has a contractual obligation to finance medical care by subsidising medical insurance premiums for retired employees (Article 6.2 of the Staff Regulations).

144. WMO current financial statements show a provision for ASHI (health insurance fund) of CHF 69.5 million on the liabilities side (CHF 68.5 million at the end of 2016), an increase compared with the 2016 financial year. The increase in the provision was justified by an independent actuarial valuation.

145. The increase in this provision in 2017 is essentially due to a change in certain actuarial assumptions. The major negative impact comes from the salary increase assumption. Methods between the different United Nations entities have been harmonized with adjustments to the mortality tables, turnover rate and early retirement, which have an opposite, even positive, effect on the provision. This positive effect is supported by the benefit payments and a change in the participants. Meanwhile, the one-year extension in the retirement age generates a 4.5% increase in the actuarial liability.

146. For reference, with regard to accounting technique, SFAO notes that the Organization has adopted the ‟Other comprehensive income” (OCI) method for recognizing actuarial gains and losses. This option is consistent with the guidelines of IPSAS 25.

Employee benefits: repatriation grants

147. WMO has an obligation to pay staff members repatriation grants (Article 9.4 of the Staff Regulations).

148. The provisions entered in the accounts at 31 December 2017 as repatriation grants amount to CHF 5.4 million on the liabilities side (CHF 5.4 million at the end of 2016), and were justified by an actuarial study.

149. The discount rate decreased from 3.4% in 2016 to 3.2% in 2017. This slight change does not significantly affect the provision.

Employee benefits: accumulated leave

150. WMO has an obligation to grant home leave to staff members (Article 5.3 of the Staff Regulations).

151. Provisions for accumulated leave were entered under liabilities for an amount of CHF 3.2 million (CHF 3.3 million at the end of 2016) and were justified by an actuarial study. The discount rate decreased from 3.2% in 2016 to 3.1% in 2017.


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Actuarial assumptions

152. SFAO has verified the actuarial assumptions used by the actuary to calculate the commitment at 31.12.2017.

153. The actuarial assumptions used are in conformity with current market conditions and with the characteristics of WMO.

Data to be submitted for the actuarial study

154. SFAO carried out verifications of the data submitted to the actuary on 20 December 2017 for the actuarial calculations as at 31 December 2017.

155. During the closing audit of 31 December 2015 (recommendation 8/2016), SFAO noted that there was no formalized control mechanism for ensuring that the data is submitted correctly. SFAO invited WMO to formalize a control mechanism and procedure to ensure that the relevant data submitted for the actuarial calculation of commitments relating to employee benefits is comprehensive and reliable. During the final audit, SFAO noted that the data submitted contains several errors having an impact on the provision. Although the impact is not material, the recommendation is still open.

Employee benefits reserves156. The reserves presented in Note 3.17 of the financial statements were validated by SFAO and

comprise three elements:

-CHF 1.9 million ‟net actuarial loss arising from actuarial valuations of employee benefits”. This amount was verified based on the report of the actuary.

CHF 2.2 million ‟post-retirement benefits reserve”. The reserve is financed by the 3% payroll deduction. SFAO verified the inflows and outflows.

CHF 0 million ‟recruitment and termination reserve”. The reserve is financed by the 4% payroll deduction. It was entirely used up during the separation programmes (ERP/VSP), resulting in the adjustments proposed by SFAO and indicated in Annex 4.

STATEMENT II – INCOME STATEMENT


EC-70/INF. 16.1(3), p. 32

157. Expenditure and income were subjected to analytical checks and sampling based on the materiality threshold applied during the audit. The adjustments made are explained in the corresponding balance sheet sections.

158. Data analyses (Journal Entries Testing) were also conducted in collaboration with KPMG. They concerned manual entries and comprised specific tests (unusual users and entries, entries recorded at the end of the period, adjustment entries, etc.). Based on this work, we have a reasonable assurance of the accuracy of the expenditure and income recorded for 2017.

159. Nevertheless, WMO is still having difficulties correctly presenting expenditure according to the principles of continuity. Similar expenses are presented in different accounts from one year to another or are incorrectly apportioned. Consequently, recommendation 4/2016 is still open. Adjusting entries are proposed in Annex 4.

STATEMENT III – NET ASSETS / EQUITY160. SFAO reviewed the Statement of Changes in Net Assets/Equity (financial statement III) and

made no particular observations.

STATEMENT IV – CASH FLOW161. SFAO reviewed all the positions on the Statement of Cash Flow (financial statement IV), and

checked that the amounts shown matched the changes in balances between the opening and closing of the balance sheet.

STATEMENT V – AUDIT OF 2017 BUDGET IMPLEMENTATION162. Although the financial statements are prepared on an annual basis under IPSAS, the WMO

programme and budget cover the biennium 2016-2017. Checks were carried out on the information contained in financial statement V and in Note 7 to the financial statements. In accordance with IPSAS 24, SFAO checked the budget information for the year 2017 in financial statement V (Original budget amount). This was reconciled with the information presented at the sixty-seventh session of the Executive Council. The relevant information is included in Annex II to Resolution 9 ‟Regular Budget for the biennium 2016–2017 by expected results”.

163. For the fourth consecutive year, SFAO notes that WMO is reporting significant actual losses (CHF 13.9 million in 2017, CHF 15.9 million in 2016, CHF 21.9 million in 2015 and CHF 14.8 million in 2014) despite a balanced budget. There are various reasons for these losses. A major effect comes from depreciation of fixed assets, which totalled CHF 8.8 million. Like the impact of IPSAS 25 for employee benefits, this is not included in the budget.

164. Indeed, the budget is based solely on the General Fund, more precisely the transactions in fund 211000. However, the comparison between the budgeted amounts and expenditure (Note 7) is based on fund 211000 and the general fund family, as indicated in the enclosures:

211000 General Fund 215000 Payroll Accounting 216000 Special Account for ICT Charges 217000 Special Account for Common Services Charges 218000 Special Account for Fellowships 219000 ITCSD operating expenses 221000 Working Capital Fund


EC-70/INF. 16.1(3), p. 33

231000 Special Account for Extraordinary Works at WMO Headquarters Building 232000 Programme Support Cost Special Account 233000 Conference Facilities Insourcing Special Account

165. Not including the general fund family, there are 200 additional trust funds, called extrabudgetary funds, in the WMO accounts. They are not included in the budget monitoring. SFAO considers that the current scope of the budget, which only includes the General Fund, is too narrow as it does not include important activities external to the General Fund. SFAO believes that WMO should broaden the scope of its budget monitoring.

NOTES166. SFAO audited the notes in parallel to the balance sheet and profit and loss account positions. It

proposed a number of modifications between the first version of the financial statements and the final version. The points for improvement are mentioned in the ICS section of this report.

Note 8.2 Segment reporting167. In the financial statements, WMO presents five segments. They are defined as follows:

General Fund (financed from the regular budget) Support programmes / activities Events & awards Development, technical assistance & technical cooperation Nationally owned technical assistance

168. Each trust fund is allocated to a segment, which allows a logical and understandable distribution of assets, liabilities, revenue and expenditure.

169. IPSAS 18 concerning segment reporting provides for segments according to the internal reporting structure. These could be according to service areas or geographical areas. A grouping according to the type of trust funds reflects the respective activities of the services offered by WMO. Consequently, the structure follows the logic proposed by IPSAS.

170. Internal reporting is defined by the fact that the segments are reported to the governing body and accompanied by budgets. This is not the case at WMO, despite an internal decision on new segments dating from 2015. Nevertheless, segment reporting fulfils the IPSAS requirements, which are also applicable in the absence of internal reporting.

Note 11.3 Other commitments171. The balance of purchase orders at the end of 2017 was CHF 10.7 million (CHF 14.1 million in

2016). Despite controls defined in the closing programme (see ICS section), SFAO notes the existence of elements from 2009, and negative amounts. There is, therefore, a persistent risk for commitments that appear to be open even through the corresponding services or goods have already been received. Consequently, recommendation 5/2017 is still open.


EC-70/INF. 16.1(3), p. 34

Conclusion

172. Following the work carried out, SFAO can confirm that WMO 2017 financial statements are presented in accordance with IPSAS. Moreover, in light of the materiality threshold predefined on the basis of the International Standards on Auditing, it can also confirm that the accounting data published in the financial statements reflects WMO accounting.

173. However, SFAO notes a general reduction in the quality of the financial statements and internal controls, which has given rise to a significant increase in the number of comments in this report. This observation is also reflected in the list of adjusted and unadjusted entries in Annex 4.

174. SFAO further notes that its recommendations are no longer being implemented as thoroughly as in the past and is concerned about this trend.

175. Therefore, SFAO is able to issue the audit opinion attached to this report, which has been drawn up in accordance with paragraph 5 of the Additional Mandate for the External Auditing of the Accounts (annex to the WMO Financial Regulations).

SWISS FEDERAL AUDIT OFFICE

(External Auditor)

Eric-Serge Jeannet Didier MonnotDeputy Director Mandate Officer

Annexes:

1) Report of the External Auditor

2) Follow-up of recommendations from previous audits

3) Summary of findings concerning risk analysis

4) Additional entries


EC-70/INF. 16.1(3), p. 35

Annex 1: Report of the External Auditor

To the Executive Council of the World Meteorological Organization (WMO)

Report on the audit of the financial statements Opinion

SFAO has audited the financial statements of the World Meteorological Organization, which included the Statement of Financial Position as at 31 December 2017, the Statement of Financial Performance, the Statement of Changes in Net Assets/Equity, the Statement of Cash Flow and the Statement of Comparison of Budget and Actual Amounts for the year then ended, as well as the explanatory notes including a summary of the main accounting methods.

In the opinion of SFAO, the financial statements present fairly, in all material aspects, the financial position of the World Meteorological Organization as at 31 December 2017 as well as its financial performance and cash flow for the year then ended, in accordance with the International Public Sector Accounting Standards (IPSAS) and the Financial Regulations of the Organization.

Basis for the opinion

SFAO has performed its audit in accordance with the International Standards on Auditing (ISA). Its responsibilities under these standards are described in detail in the section ‟Responsibility of the auditor for the financial statements audit” in this report. SFAO is independent of the Organization, in accordance with the rules of professional conduct that apply to financial statements in Switzerland, and it has discharged the professional duties incumbent upon it according to those rules. It believes that the audit evidence it has obtained is sufficient and appropriate to provide a basis for its opinion.

Responsibility of the Secretary-General for the financial statements

The Secretary-General is responsible for the preparation and fair presentation of the financial statements in accordance with International Public Sector Accounting Standards (IPSAS) and WMO Financial Regulations, as well as any internal controls deemed necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

During preparation of the financial statements, the Secretary-General is responsible for assessing WMO capacity as a going concern, for communicating, where necessary, on questions relating to continuity of operations and for applying accounting principles, unless the Secretary-General intends to liquidate WMO or cease its activity or if no other realistic solution is available to it.

It is incumbent on those responsible for governance to monitor the financial reporting process of WMO.

Responsibilities of the auditor for the financial statements audit

The auditor objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to prepare an Auditor Report containing this opinion. Reasonable assurance corresponds to a high level of assurance which does not, however, guarantee that an audit in compliance with ISA standards will always allow detection of any material misstatement that may exist. Misstatements can be the result of fraud or error and they are considered significant when it is


EC-70/INF. 16.1(3), p. 36

reasonable to expect that individually or collectively they may influence economic decisions taken by users of the financial statements and based on them.

When performing an audit in accordance with ISA standards, SFAO exercises its professional judgement and applies critical thinking throughout the audit. In addition:

SFAO identifies and evaluates the risk of the financial statements containing significant misstatements, whether as a result of fraud or error, designs and implements audit procedures in response to these risks, and gathers adequate and appropriate evidence on which to base its opinion. The risk of not detecting a significant misstatement resulting from fraud is higher than that of one resulting from an error, as fraud can involve collusion, falsification, deliberate omissions, false declarations and circumvention of internal oversight;

SFAO has acquired an understanding of the elements of internal reporting relevant to the audit in order to design the appropriate audit procedures in the circumstances, and not with the aim of expressing an opinion on the effectiveness of internal reporting at WMO;

SFAO considers the appropriateness of the accounting methods used and the reasonable nature of the accounting estimates made by the Secretary-General, as well as any related information provided by the Secretary-General;

SFAO reaches a conclusion regarding the appropriate use by the Secretary-General of the accounting principle of ‟going concern” and, according to the audit evidence obtained, regarding the existence or not of significant uncertainty relating to events or situations likely to cast grave doubt over the capacity of WMO to continue its operations. If SFAO finds that there is significant uncertainty, it is obliged to draw the attention of readers of this report to information contained in the financial statements regarding this uncertainty or, if this information is insufficient, to express a modified opinion. Its conclusions are based on the audit evidence obtained to the date of the report. Future events or situations could lead WMO to cease operations;

SFAO assesses the overall presentation, the format and content of the financial statements including the information provided in the notes, and assesses whether the financial statements present the underlying operations and events in such a way as to give a true picture.

SFAO informs those charged with governance about the scope and timetable of the audit work and its important findings, including any major internal control failures it may have observed during the audit.

Berne, xx April 2018

SWISS FEDERAL AUDIT OFFICE5

(External Auditor)

Eric-Serge Jeannet Didier MonnotDeputy Director Mandate Officer

5 Postal address: Monbijoustrasse 45, CH-3003 BerneCDF-18068 | Report of the External Auditor | 16 April 2018 36

EC-70/INF. 16.1(3), p. 37

Annex 2: Follow-up of recommendations from previous audits

Report on the audit of the financial statements As mentioned in paragraph 18, this Annex describes in greater detail the situation at the end of March 2018 concerning the recommendations made in the audit reports on the financial statements for 2015 (Audit 16127) and 2016 (Audit 17085), which are still open. This situation is as follows:

Summary table of open recommendations

Audit report Recommendations

No. Date No. Type6 Unit Planned implementation date

17085 02.05.2017 1 ICS ASG, ADM/BO 31.12.2018

17085 02.05.2017 2 ICS ADM/FIN & ITCSD 31.08.2018

17085 02.05.2017 3 ICS ADM/FIN & BO, DRA/PCU

31.10.2018

17085 02.05.2017 4 ICS ADM/FIN 30.06.2018

17085 02.05.2017 5 ICS ADM/BO 31.12.2018

17085 02.05.2017 6 ICS ADM/FIN 31.12.2018

16127 20.04.2016 1 ICS PCUADM/FIN & BO, DRA/PCU

30.06.2018

16127 20.04.2016 2 ICS ADM/FIN & BO, DRA/PCU

30.09.2018

16127 20.04.2016 4 ICS ADM/FIN&ITCSD 31.10.2018

16127 20.04.2016 6 EF ADM/FIN 31.12.2018

16127 20.04.2016 8 ICS ADM/FIN 31.07.2018

6 FS: Recommendations concerning the financial statements, presentation of the accounts and accountingICS: Recommendations concerning the internal control systemIT: Recommendations concerning information technology


EC-70/INF. 16.1(3), p. 38

Recommendation No. 1 of audit report 17085 of 2 May 2017 on the audit of the 2016 financial statements

SFAO recommends that WMO take steps to ensure that a control matrix is introduced into the description of the most important processes used by the departments.

Comment by the Secretary-General: The recommendation is accepted. WMO will progressively include information about risks and related controls in the description of its key organizational processes, as part of their ongoing documentation.

Follow-up in December 2017: No progress has been observed. This recommendation is still open.


SFAO invites WMO to implement a check for the approval of project costs. During the procurement process, the project manager should be one of those responsible for approving invoices related to the projects under his or her responsibility.

Comment by the Secretary-General: The recommendation is accepted. The project managers responsibilities will be described in greater detail to ensure that responsibilities regarding procurement and financial management are clearly stated.

Follow-up in March 2018: No progress has been observed. This recommendation is still open.


SFAO recommends that WMO include in every financial report of a project a comparison of the incurred costs and budgeted costs. Costs must be regularly approved by the project manager according to the progress of the project, but at a minimum at the end of each year. The project manager must approve the accuracy and completeness of the costs incurred in his/her project annually with a signed version of the report.

Comment by the Secretary-General: The recommendation is accepted. The finance portal, which is currently under development, is expected to facilitate the generation of financial reports showing actual expenditure and budgeted amounts. The portal is expected to go live as of 1 January 2018.

Follow-up in December 2017: Development of the finance portal is underway. It is due to go live in January 2018.

Follow-up in March 2018: No progress has been observed. This recommendation is still open.


SFAO encourages WMO to use a single payment system that can automatically retrieve the necessary information from a single database.

Comment by the Secretary-General: The recommendation is accepted. One of the main objectives for 2017 is to identify and implement solutions to directly transfer payment instructions from the financial system to financial institutions. Considerable progress is expected by the end of the year.

Follow-up in December 2017: WMO has taken steps to evaluate the use of a single payment system. The project is in progress. This recommendation is still open.


EC-70/INF. 16.1(3), p. 39


SFAO invites WMO to review on a regular basis and at the closing of accounts the list of purchase orders and to eliminate all errors. Under the ‟other commitments” note, all advances should be deducted.

Comment by the Secretary-General: The recommendation is accepted. As has been the case in the past, WMO will continue to review open purchase orders on a regular basis, particularly for the year-end closure of accounts. At monthly closure of accounts, special attention should be paid to the status of the receipts for open purchase orders to ensure that accruals are accounted for accurately.

Follow-up in March 2018: SFAO obtained a list of ‟other commitments” just a few days before the end of the audit. It notes the existence of elements from 2009, and negative amounts. It concludes that the review of the list of purchase orders was not part of the closure of accounts control tasks. This recommendation is still open.


SFAO invites WMO to reconcile annually its account balance with UNDP and to eliminate any discrepancies.

Comment by the Secretary-General: The recommendation is accepted. The discrepancies will be eliminated in 2017.

Follow-up in March 2018: The balance with UNDP shows significant discrepancies. The amount indicated on the UNDP confirmation does not reconcile with the WMO accounts and the discrepancies are not explained. This recommendation is still open.

Recommendation No. 1 of audit report 16127 of 20 April 2016 on the audit of the 2015 financial statements

SFAO invites WMO to centralize project-related information and to process it on an interdepartmental basis. Information such as the progress of a project, interactions with the donor concerning extension of the project duration or reimbursements of funds should be included.

Comment by the Secretary-General: The recommendation is accepted. WMO will establish the necessary procedures to centralize project-related information and to make it available to relevant internal stakeholders as part of the Project Management Tool project.

Follow-up in December 2016: WMO has chosen three centralized project management tools (MS project, Oracle and Elios). WMO departments are not yet working with a shared information base and access to the software has not been clearly defined. The connecting element and the structure between the project number, budget code, trust fund and pledge number remains to be defined. This recommendation is still open.

Follow-up in March 2018: SFAO notes that some funding contracts have not been forwarded to the finance division in time for inclusion in the year-end accounts. Consequently, inclusion of all the pledges in the end-of-year closure is not assured.

To date, there is no exhaustive list of projects in progress used by the finance division, the budget office and the WMO departments. Moreover, WMO Internal Oversight Office notes in its report 2018-02 that the Elios application is not used in a uniform manner.

This recommendation is still open.


EC-70/INF. 16.1(3), p. 40


SFAO invites WMO to prepare a description of the project management process, from the acceptance of voluntary funds to completion of the project and any potential reimbursement. The description should include all the departments and managers involved and the key controls carried out. One key control should be validation of the overall accounting treatment for each project.

Comment by the Secretary-General: The recommendation is accepted. Initial steps have already been made in this respect with the preparation of a Project Management Handbook, which was recently approved by the Project Management Board. WMO will now endeavour to implement the procedures defined in this document throughout the Organization.

Follow-up in December 2016: With the drawing-up of the project management guidelines and handbook, WMO is making progress in its aim of improving project management. With the definition of a project life cycle, WMO has outlined the most important stages of a project. If the monitoring of the process in general and the controls in particular are to be effective, both the owner and the object of the monitoring must be clearly defined. The process does not give an overview of how voluntary contributions are processed, as monitoring is performed by different departments (e.g. annual review of trust funds, annual review of accounting treatment). This recommendation has been partially implemented.

Follow-up in December 2017: No progress has been observed. This recommendation is still open.


SFAO invites WMO to systematically establish clear reconciliations and relevant supporting documents for the account balances and to define a control in order to ensure the correct assignment of expenditure and income. Quality assurance for these tasks for preparation of the financial statements should be strengthened.

Comment by the Secretary-General: The recommendation is accepted.

Follow-up in March 2017: Reconciliations were prepared for the close of the 2016 financial year. However, a sample of entries in the expenditure accounts showed incorrect assignment of certain positions. Audit procedures for the assignment of expenditure are included on the closing checklist (point 73) but are ineffective. This recommendation is still open.

Follow-up in March 2018: During the final audit, SFAO noted major shortcomings in the reconciliation of the cash accounts. The reconciliation of the UNDP and UNICC accounts also proved problematic and had not been carried out in time for the start of the audit. According to report 2017-02 of the IOO, challenges concerning the correct assignment of expenditure accounts persist, which SFAO can confirm. This recommendation is still open.


SFAO invites WMO to improve the system for estimating project costs, particularly for projects on which the Organization works with implementing partners.

Comment by the Secretary-General: The recommendation is accepted. WMO will take steps to improve its project management practices.


EC-70/INF. 16.1(3), p. 41

Follow-up in March 2017: WMO has had some difficulties with estimating project costs, caused by its operational partners. Despite the requests sent by the finance division, partners do not always reply as they believe the reporting deadline is authoritative. In the absence of confirmation from its partners, WMO is unable to give an estimate. SFAO has noted cases where project progress according to the accounts does not correspond to reality (such as Norway II, for example). This recommendation is still open.

Follow-up in March 2018: Same observation as in 2017. WMO is not in a position to proceed with a sufficiently precise apportionment of expenditure incurred for projects (such as Climandes II, for example). Consequently, the recommendation is still open.


SFAO invited WMO to formalize a control mechanism and procedure to ensure that the relevant data submitted for the actuarial calculation of commitments relating to employee benefits (IPSAS 25) is comprehensive and reliable. Moreover, the source data used by the expert and the methodology applied should also be subject to an a posteriori control based on the actuarial report.

Comment by the Secretary-General: The recommendation is accepted.

Follow-up in December 2016: WMO prepares the data carefully. However, the control procedure could not be verified. This recommendation is still open.

Follow-up in March 2018: The errors detected by SFAO in the data submitted to the actuary for the calculation of commitments relating to employee benefits as at 31 December 2017 show that the control mechanism needs to be strengthened. Consequently, the recommendation is still open.


EC-70/INF. 16.1(3), p. 42

Annex 3: Summary of findings concerning risk analysis

The following table sets out the main points of the audit programme and the risk analysis and includes a summary of the findings of our work during the fifth year of SFAO mandate.

Significant Risk # 1 SFAO Audit Approach

Management could invalidate or override controls, requirements or directives.

Testing whether controls have been made Audit material manual accounting entries

and testing with an element of unpredictability

Analytical reviews Use of analysis tool (JET) Follow-up of previous year’s audit

recommendations issued by SFAO following the audit of the WMO financial statements

Audit findingThe WMO internal control system was audited for the 2017 financial year, particularly with regard to purchasing, fixed assets and the preparation of IPSAS-compliant financial statements. Recommendations are made in this report.


Application of IPSASThe financial statements include amounts based on estimates and assumptions by management. There is a possibility that the year-end financial statements do not entirely comply with IPSAS requirements.

Testing whether the accounting standards in 2017 have been adhered to

Review of critical accounting policies Discussion and plausibility checks of

accounting estimates Review of disclosure checklist and the

year-end financial statements Focus on changes in the standards and

new business activities and particular transactions

Testing of transactions Follow-up of previous year’s audit

recommendations issued by SFAO

Audit findingThe IPSAS standards are constantly changing, in 2017 with the entry into force of IPSAS 34 to 38. Keeping up to date with this accounting framework requires an investment of time and resources. WMO has succeeded in maintaining a good standard of quality in the compliance of its financial statements with IPSAS requirements. Nevertheless, SFAO would like to encourage WMO to follow the changes in the IPSAS standards and study their impact on its financial statements.


EC-70/INF. 16.1(3), p. 43


Revenue recognition, collection of accounts receivable and weaknesses in monitoring projects

Review of accounting policy for voluntary contributions (IPSAS 23)

Audit of significant contracts signed in 2017

Review of project progress Testing of recoverability of accounts

receivable Follow-up of previous year’s audit

recommendations issued by SFAO on project management

Audit findingChecks were carried out on income and voluntary contributions in order to ensure proper accounting treatment. The audit procedures included analyses of project management and the control environment for voluntary contributions. Substantial weaknesses were noted, and recommendations were proposed and discussed with the finance division.


EC-70/INF. 16.1(3), p. 44

Annex 4: Additional entries

The following table sums up the additional entries noted during the audit procedures on the financial statements as at 31 December 2017.

Unadjusted additional entries (Sum of unadjusted differences)

No. Amount Description Type Result for the financial year

None

Adjusted additional entries(Sum of unadjusted differences)


1 148 716 Advance payments to UNICCPayments made in 2017 but for projects in 2018

P/L 148 716

2 83 687 Provision for other receivablesBad debt of 2015 in sundry debtors

P/L -83 687

3 1 978 328 CREWS project, World BankProject not entered in the accounts; contract signed in November 2017

BS 0

4 165 050 UNDP Project Clearing Account (PCA)Amount receivable from UNDP not entered in the accounts

P/L 165 050

5 120 000 Audit fees 2017Fees for the 2017 audit to be apportioned

P/L -120 000

6 230 380 AccrualsSeveral obsolete accrual adjustments

P/L 230 380

7 250 927 Prepaid rentRent for 3 tenants for 2018 not apportioned

P/L -250 927

8 ERP / VSPPayments linked to the resignation or


EC-70/INF. 16.1(3), p. 45


2 162 736

740 535

1 278 165

144 036

retirement of 14 staff members in 2017 to be recorded with P/L impact in 2017 instead of in 2018

Dissolution prepaymentTo be charged to reserves

To be charged to salaries

To be charged to the JCRF trust fund

BS

P/L

BS

-1 278 165

9 73 643 Provision for statutory contributionsReceivables from two countries open since 2014 and no payment plan

P/L -73 643

10 4 303 728 ‟Norway II” projectPledge recorded according to the ‟restriction” treatment instead of the ‟condition” treatment

P/L -4 303 728

11 2 236 279 Contingent assetsVarious contingent asset adjustments should be recognized as receivables

P/LBS

25 2432 211 036

12 4 022 275 Italy contribution, Ministry of Environment, Land & Sea ProtectionThe contract has not been validated and the payment is uncertain and cannot therefore be recognized as revenue in 2017

P/L -4 022 275

13124 290

35 000

83 000

44 000

180 000

Reclassify as other expenditureInsurance

IT expenditure

Purchase of furniture & equipment

Meetings & Projects

IT services, software & equipment

BS 0

___________
