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Risk Management & Audit in Not for Profit Organizations: The Case of UNHCR Somalia & WFP Somalia

MBA Degree Research Rovena Kokoshi September 2014

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SOMALIA – WFP - UNHCR Risk Management

Accounting Internal Control

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Which are/is

WFP/UNHCR Somalia IA and Accountability elements that count in RM

Risk categories. Their range of intervention in WFP/UNHCR performance

Som. managers opinion about IA/Acc/RM contribution to Org Fin.net worth

Org. objective influence in the WFP/UNHCR organization risk appetite

Managers preferable approaches to measurement and risk quantification

Research Questions

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Background

Refuges 1,037,554 East AfricaIDP 1,100,0002300 other nationalities refugees

UN Internal Audit

Rules + IIA Rules

WFP Somalia

UNHCR

Somalia

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General insecurity

Repatriation process interrupt

Lack of banking system /money vendor Dahabshil

Local authorities often not in line with humanitarian projects /activities

Difficulties on assuming national staff /clan related /competencies

Background

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Different Mission

Financial net worth different

IPSAS 2008/2012

Risk Management 2005/2008/2006/2012

Background 2005/lack of : Clear guidance to staff Distribution of skills &

responsibilities horizontal communication

2013 Risk trend analysis IA and Acc Standard

Compliance Financial risk frameworks WfP policies to manage risk /no

guidance to implement them through org

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R1 Issues Time frame longer than other

investment

Partial Monitoring system

IA in field offices incomplete

Partial use of Authority of delegation / Standard Operation System

Difficulties to indentify local partner

Difficulties to reach all regions

Tender procedures outside

IPSAS/expenses/inventories

Risk Assessment infancy period

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R2 ISSUES

Different scales of risk estimations

Institutional risks

Contextual risks

Programmatic risks

Lower partner capacity Insufficient investments Gaps policies/practice

Insecure environment /uncertainty

Funding environment

Multiple emergencies Program design not optimal

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IA/Acc/RM direct impact on organization financial net worth involving organization credibility and operational results

Independently of risk degree, Risk appetite goes parallel with organization’s core objectives

Org. Risk exposure quantification is at level zero Internal competition between Un agencies generates contradictory

tendencies towards local government authorities’ relationship

R3/R4/R5 Issues

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WFP UNHCR Somalia Common Risks

INSTITUTIONAL

CONTEXTUAL

Transfer purposes - lower partner capacity

Providing results with lack of systems-monitoring management gaps

Gaps in Policies and Practices

Funding Lack – donors/ admin cost

Insecurity level and uncertainty- divers R. App

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WFP UNHCR Somalia Common Risks

PROGRAMATIC

Overextended in multiple emergencies

Program design not optimal

Inflations scale

Misbalance R. APP/ Fin R.Capacity

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Differences

UNSAS IPSAS

Modified cash basis Purchase orders are dispatched Voluntary contributions are

considered revenues prior to receipt of cash

Assets are considered expenses upon purchase

Employee benefits recognized on cash basis

All liabilities not reported on financial Statements

Accrual basis of accounting Transactions and events are

recognized when they occurred Rev. are considered when

enforceable agreements are signed/may differ revenue recognition

Assets are capitalized with all associated cost/ depreciation considered

Employee benefits recognized when they’re earned

Distinguish short term/long term benefits

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Increase accountability and transparency in financial donor reporting

Same basis of financial reporting as most of Member States

Consistent information on organization financial wealth and health

Better understanding of future obligations and cash flow and needs

IPSAS Benefits

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All offices manage their assets. More accurate accounts of assets/ decrease qualification by auditors

Units responsible for self monitoring/ Internal control increase

Risk Register helps Management decision

Risk will be dynamic and responsive to contextual changes

Audit capacity development should be tailored to the situation

Accounting/Risk/Internal Audit

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Increase information shearing between sibling agencies/ implementing partners

Co-sourcing of auditors

IPSAS training to the new staff /medium- long term perspective

Partners and contractors selection decision to be made by regional bureau

More transparency towards donors

Balance operational strategies with permanent critical risks

The creation of a corporate fund covering unexpected emergencies

Recommendations