INTERNAL AUDIT REPORT

Transcription

1 INTERNAL AUDIT REPORT OF ASSET MANAGEMENT IN UNOPS AT HEADQUARTERS, COPENHAGEN Final Audit Report No. IAIG/3104 Issue Date: 17 July 2013

2 Contents I. Executive summary... 2 II. Audit report Audit objective Audit scope Audit methodology Overview of asset management in UNOPS... 4 III. Detailed assessment Control activities Operational processes... 9 Annex 1. Definitions of audit terms ratings and priorities Annex 2. Asset management process flows Annex 3. Accounts Payable-Asset Management (AP-AM) interface clean-up process Annex 4. Glossary Audit report no. IAIG/3104: Asset Management in UNOPS 1

3 Report on the internal audit of Asset Management in UNOPS I. Executive summary Introduction As part of its annual work plan for 2013, the Internal Audit and Investigations Group (IAIG) conducted an audit of Asset Management in UNOPS. The audit covered the period from 1 January 2012 to 28 February On-going and planned developments of internal controls were taken into consideration. The audit was carried out in accordance with the International Standards for the Professional Practice of Internal Auditing. These standards require that IAIG plans and performs the audit to obtain reasonable assurance on the adequacy and effectiveness of governance, risk management, and control processes. Audit rating In IAIG s opinion, the overall level of internal control over Asset Management in UNOPS is Partially Satisfactory. 1 This opinion is based on limited scope audit procedures which were performed on a sample basis and the fact that Management plans to recognise assets in the UNOPS Statement of Financial Position within five years from the date of first adoption of accrual accounting (1 January 2012). Key audit issues and recommendations The audit report contains 11 recommendations, four of which are high priority and seven of which are medium priority. The high priority recommendations include: Function Control activities Audit recommendation The Director, Corporate Support Practice Group (CSPG), should update and issue asset management instructions that specify the procedures to be performed by all UNOPS offices during the preparatory period when International Public Sector Accounting Standards (IPSAS) transitional provisions have been adopted, leading up to full adoption of IPSAS. These should include but not be limited to: a) Indicators of impairment and guidance as to what extent third party confirmations would be required. b) Recommended methods for disposal of different categories of assets, keeping in view sustainability and impact on environment. c) Treatment of assets at the time of project closure, where the project agreement makes no mention of this. d) Assessment of residual value of assets. e) Recognition of leasehold improvements. f) A checklist of documents to be maintained in support of the lifecycle of an asset. The Director, CSPG, should provide guidance to UNOPS personnel responsible for managing items with an acquisition value of less than USD 2, See definitions in Annex 1 Audit report no. IAIG/3104: Asset Management in UNOPS 2

4 Function Operational processes Audit recommendation The Chief Financial Officer/Comptroller, Finance Practice Group (FPG) should ensure that the asset details in the Asset Module are periodically reviewed and verified with the General Ledger, to ensure they agree for financial reporting purposes. Physical verification certification should be completed for all offices in a timely manner, so as to identify gaps in the available asset data, and certify the asset balances. The medium priority recommendations include: ensuring that materiality analysis is performed on UNOPS assets in light of the UNOPS adoption of IPSAS; coordinating with UNOPS offices to obtain missing information, and correct the asset tag numbers, serial numbers, and updating the Atlas Asset module; ensuring close coordination between the UNDP Office of Information Systems and Technology (OIST) and the UNOPS Atlas Team taking into account all the necessary requirements for IPSAS compliance; ensuring that project budget asset data from before 1 January 2012 is uploaded into the Atlas Asset module; carrying out a data based analysis to inform a decision whether to acquire a comprehensive asset management system; reconciling physically verified assets to the Atlas Asset record and excel spread sheets; and initiating a survey to assist in understanding the training needs of UNOPS offices related to asset management. Audit report no. IAIG/3104: Asset Management in UNOPS 3

5 II. Audit report 1. Audit objective The objective of the audit was to assess the adequacy and effectiveness of the internal controls over the management of administrative and project budget assets. This includes those items that are below USD 2,500 in value and are therefore, as per Administrative Instruction (AI) AI/EO/2011/02, not classified as assets. 2. Audit scope The audit was carried out as per the approved audit planning memorandum, taking into account the findings of the risk assessment exercise carried out prior to the audit. The scope covered the management of assets in UNOPS for the period from 1 January 2012 to 28 February On-going and planned developments of internal controls were taken into consideration. 3. Audit methodology a) IAIG reviewed UNOPS asset management policies, procedures, and documentation including asset reports from the Atlas Asset module and those maintained on excel spread sheets, as well as project assets reported in the Accounts Payable financial report. b) Discussions were held with key stakeholders at Headquarters and UNOPS field units. c) A survey was conducted, using judgemental sampling, to ascertain the current status of asset management in the following UNOPS offices: the Afghanistan Operations Centre, which has over 60 percent of UNOPS administrative budget assets; the Mine Action Cluster, which has over 60 percent of UNOPS project budget assets (as of 1 January 2012); and both the Argentina Operational Hub and the Iraq Operational Hub. 4. Overview of asset management in UNOPS The terms property, plant and equipment and assets are used interchangeably to represent the same group of assets. These include those administrative budget assets and project budget assets that meet the following criteria: a) They were acquired using administrative and project funded budgets; b) They have an acquisition value of USD 2,500 and above; and c) They are expected to be used for more than one reporting period. Financial regulation (a) of UNOPS Financial Regulations and Rules (FRR) defines asset management as the proper receipt, custody, maintenance, transfer and disposal of assets. A. UNOPS Administrative Instructions The following UNOPS Administrative Instructions provide guidance as described below: a) AI/E0/2011/02 Management of assets. The purpose of this AI is to provide instructions and establish the processes for the management of assets in UNOPS, and to specify the authorities that may be delegated in asset management and the conditions applicable to the exercise of such authorities. b) AI/FPG/2011/01 - IPSAS compliant accounting policies. The purpose of this AI is to establish new UNOPS accounting policies, under International Public Sector Accounting Standards (IPSAS), for corporate financial statements. The scope of this AI provides specific guidance on each accounting policy based on IPSAS, including disclosure by UNOPS with respect to each recognized class of property, plant and equipment. Audit report no. IAIG/3104: Asset Management in UNOPS 4

6 B. IPSAS guidance on assets As a means to achieve best practices in the areas of accounting and financial reporting, UNOPS adopted IPSAS with effect from 1 January Amongst other things, this has an impact on the way UNOPS manages its assets. The IPSAS standards compel UNOPS to have detailed guidelines on how to acquire, maintain, transfer and retire assets. In accordance with IPSAS, the UN Board of Auditors reviewed UNOPS opening balances as of 1 January It was recognized that key business changes had taken place, with UNOPS now acting as principal or agent for project activities. This led to a significant change in corporate policy on the management of assets in December For financial reporting purposes, UNOPS adopted a transitional arrangement, as permitted under IPSAS Under this arrangement, UNOPS will not recognize in its Statement of Financial Position any property, plant and equipment for a period not exceeding five years from the date of first adoption of accruals accounting (1 January 2012). Management plans to recognize assets for the first time in its Statement of Financial Position in 2015, beginning with land and buildings. IAIG s audit will provide support to management in preparing for this transition. An IPSAS policy guide has been developed, which will serve as a reference guide on IPSAS and provide insights on the key operational issues that UNOPS has to address, including those relating to property, plant and equipment. It covers the recognition, measurement, presentation and disclosure of property, plant and equipment under IPSAS 17, including general purpose administrative budget assets used to support UNOPS business, and assets acquired for specific projects, and the transitional provisions. C. Structure of the Asset Management Team and ERP Support Team The Asset Management Team at UNOPS Headquarters consists of the following: the Administrative Team Lead, an Asset Management Specialist, an IPSAS Technical Advisor, an Asset Management Assistant and an IPSAS Assistant. Support on the Atlas Asset module is obtained from the Atlas Support Specialist, who is assisted by the Atlas Coordination Associate and Atlas Support Associate. Director CSPG Administrative Team Lead Atlas Support Specialist Asset Management Specialist Asset Management Assistant IPSAS Assistant IPSAS Technical Advisor Atlas Coordination Associate Atlas Support Associate The responsibilities of the Asset Management Team include but are not limited to: improvement of business processes to support overall management of UNOPS assets; advising on UNOPS IPSAS compliant asset management processes; ensuring that assets acquired through the procurement process are interfaced in the Atlas Asset module correctly and accurately; policy guidance, materials and process documentation for the management and coordination of policies and processes on asset management; and designing of a training strategy on IPSAS-related processes and procedures. Coordination amongst UNOPS regional offices and the operation centres in different countries is through the Regional Directors, who have the delegated authority to manage assets. Each Regional Director assigns Asset Focal Point(s) and/or Asset Manager(s) for the Regional Office, and for each of the Operations Centres or Operational Hubs, and other Project Centres under him/her. Audit report no. IAIG/3104: Asset Management in UNOPS 5

7 D. Process flow in Asset Management The Asset Management process defines work flows, processes and methods for the management of assets in support of UNOPS business objectives in compliance with the Financial Regulations and Rules applicable to UNOPS. It involves managing all the stages in the life cycle of an asset: acquiring the asset, receiving the asset, maintaining the asset (including tagging and physical inventory count), and disposal of the asset. Acquiring an asset Receiving, maintaining (and transfer of) an asset Disposing of an asset The Asset Management process is initiated by the acquisition of an asset by buyers and/or asset focal points. Assets which are procured are recorded through the creation of an entry in the Atlas Asset module, either as procurement catalogue 1 for administrative budget assets, or as procurement catalogue 2 for project budget assets. The recording of any assets acquired through alternative methods, such as donations, is achieved by manually adding the item to the Atlas Asset module through an online request made to the Asset Management Specialist. The process is explained in more detail in Annex 2. The receiving, maintenance, adjustment, and transfer of assets involves the following: the clean-up process which occurs at the Accounts Payable-Asset Management (AP-AM) interface; the updating of asset records in the Atlas Asset module to record changes in custodians, locations, and transfers to other projects, and finally the disposing of the assets. The asset clean-up process is explained in more detail in Annex 3. Acknowledgement IAIG wishes to extend its appreciation to the management and personnel of Corporate Support Practice Group, Finance Practice Group and all those who were involved in the audit, for their full cooperation. The detailed audit observations and recommendations are provided in Part III of the report. Audit report no. IAIG/3104: Asset Management in UNOPS 6

8 III. Detailed assessment 1. Control activities Control activities are policies, procedures, and practices that ensure management objectives are achieved and risk mitigation strategies are carried out. 2 Observation 1 Asset management policies and procedures AI/EO/2011/02 provides for the management of assets in UNOPS. During the review, IAIG noted that there is limited guidance on the following aspects: a) Paragraph of AI/E0/2011/02 does not stipulate the kind of evidence required where there is impairment of an asset, in the case, for example, of a motor vehicle accident. There is also no guidance given on the extent to which third party confirmations would be required to support such a claim, nor as to when an assessment of impairment will be carried out. b) Regarding recommended methods for disposal of specific categories of asset, for example security sensitive communications equipment, there is no guidance with respect to the impact on the environment of any disposal, nor as to who bears the cost of such disposal. c) Regarding the treatment of assets at project closure, there is no guidance on the action to be taken in cases where a project agreement is silent on such treatment, as to whether, for example, the assets should be donated or retained. d) There is no guidance on how to assess the residual value of property, plant and equipment. e) There is no guidance on how to recognize improvements to buildings by leaseholders in determining the overall value of the asset. f) There is no list of documents required to be maintained by each office in support of each asset acquired, e.g. purchase contracts, title deeds for land and buildings, or invoices on cost, insurance and freight. Recommendation: IAIG/3104/01 Priority: High The Director, Corporate Support Practice Group (CSPG), should update and issue asset management instructions that specify the procedures to be performed by all UNOPS offices during the preparatory period when International Public Sector Accounting Standards (IPSAS) transitional provisions have been adopted, leading up to full adoption of IPSAS. These should include but not be limited to: a) Indicators of impairment and guidance as to what extent third party confirmations would be required. b) Recommended methods for disposal of different categories of assets, keeping in view sustainability and impact on environment. c) Treatment of assets at the time of project closure, where the project agreement makes no mention of this. d) Assessment of residual value of assets. e) Recognition of leasehold improvements. f) A checklist of documents to be maintained in support of the lifecycle of an asset. CPSG fully agrees and will launch the first round of instructions later in 2013 as per the work plan for the transitional provision period, as shared with IAIG. 2 Defined by the Committee of Sponsoring Organizations of the Treadway Commission Audit report no. IAIG/3104: Asset Management in UNOPS 7

9 Observation 2 Policies and procedures relating to items with acquisition values below USD 2,500 In accordance with UNOPS FRR, Financial Rule , (a) The head of operations at Headquarters shall determine the types of property, plant and equipment and intangible assets for which records shall be maintained, and shall establish the nature and extent of those records in keeping with the purpose of these Financial Regulations and Rules, (b) Records shall be maintained for each item of property, plant and equipment valued at the time of purchase at USD 2,500 (the capitalization threshold) or more and meeting the useful life criteria. The capitalization threshold of USD 2,500 may be adjusted by the Executive Director to achieve an acceptable coverage of all material transactions in the UNOPS account. IAIG noted the following: a) There is a lack of consistency in the approach regarding management and recording of items whose acquisition values are less than USD 2,500. The total value of these items could not be quantified as these are tracked differently by each UNOPS office, as shown below: i. The Mine Action Cluster implemented its own Asset Tracking System. This system allows all Mine Action projects to track, maintain and depreciate their assets 3 and print a variety of asset tags to label the equipment for items valued at USD 1,000 and above. ii. The Afghanistan Operations Centre maintains data on items with acquisition values below USD 2,500, acquired through the administrative budget, on excel spreadsheets. This data includes security sensitive information and telecommunications equipment, as well as mine clearance equipment. iii. The Information and Communications Technology (ICT) unit at Headquarters maintains details of ICT equipment on excel spreadsheets. This includes laptops and computers with a purchase price of less than USD 2,500. Details such as acquisition date and value are not captured. b) A materiality analysis was carried out for UNOPS assets in 2011, prior to promulgation of Financial Rules and Regulations, Organizational Directive 3 (revision 1) incorporating the threshold value of assets at USD 2,500. This has not been reviewed in light of the UNOPS adoption of IPSAS, and the significant change of corporate policy on the management of assets in December Recommendation: IAIG/3104/02 Priority: High The Director, CSPG, should provide guidance to UNOPS personnel responsible for managing items with an acquisition value of less than USD 2,500, to ensure consistency in the management of these items across the organization. CSPG agrees with the recommendation and will issue guidance to the personnel responsible. Recommendation: IAIG/3104/03 Priority: Medium The Director, CSPG, should ensure that materiality analysis is performed on the threshold applied by UNOPS on assets in light of its adoption of IPSAS and the significant change of corporate policy on the management of assets in December CSPG agrees with the recommendation as this is done regularly as materiality analysis is an integrated part of all thresholds setting in UNOPS asset management. 3 Although described here as assets, such items (of value below USD 2,500) are not formally classified as assets. Audit report no. IAIG/3104: Asset Management in UNOPS 8

10 2. Operational processes Observation 3 Incomplete records in the Atlas Asset module According to paragraph 2.3 of AI/EO/2011/02, Headquarters, Regional Offices, Operations Centres and other UNOPS locations worldwide are responsible for maintaining complete and accurate records of all acquisitions of assets, which may be acquired through the following modalities: (a) Purchase; (b) Transfer; and (c) Donation. IAIG noted the following from a review of asset reports from the Atlas Asset module: a) The details including asset tag numbers for some administrative assets did not follow the UNOPS numbering system prescribed in paragraph 3.1 of AI/EO/2011/02, which states that 12 alphanumeric characters must be used. This was found to apply to 26 out of 292 motor vehicles, 155 out of 302 items of ICT equipment, 8 out of 9 items of furniture, and 14 out of 31 items of heavy machinery and equipment. b) A project budget assets report from Atlas for the period 1 January to 31 December 2012 shows missing information. 674 out of 740 project budget assets do not have tag numbers, while 666 out of 740 project budget assets have no serial numbers. According to management, this is because there was an error in the initial AP-AM interface run by the UNDP Office of Information Systems and Technology (OIST). Recommendation: IAIG/3104/04 Priority: Medium The Director, CSPG, should ensure that the Asset Management Team coordinates with UNOPS offices to obtain missing information, and correct the asset tag numbers and serial numbers, and ensure that these are updated in the Atlas Asset module. CSPG agrees and this is happening as a part of the annual verification, which has been conducted since 2010 for administrative budget assets and which was extended for the year of 2013 to include project budget assets, as of the policy change of December Observation 4 Discrepancy in figures reported from the Atlas Asset module As per rule (c) of UNOPS FRR, the head of operations at headquarters shall be responsible for the maintenance of records of property, plant and equipment records and such records shall be maintained for headquarters, regional offices, operations centres and other locations worldwide, and shall show separately property, plant and equipment belonging to UNOPS and/or entrusted to the charge of UNOPS. IAIG noted from a review of asset reports from the Atlas Asset module that the total value of administrative budget assets in the asset management summary report differs by USD 4,519,617 from that given in the asset management detailed report. This shows an inconsistency in reporting on the same assets from the Atlas Asset module as of 31 December 2012, as shown in the table below: Total value of administrative budget assets as at 31 December 2012 Asset management detailed report USD 15,198,689 Asset management summary report USD 10,679,072 Difference USD 4,519,617 Audit report no. IAIG/3104: Asset Management in UNOPS 9

11 Recommendation: IAIG/3104/05 Priority: Medium The Director, CSPG, should ensure that the relevant ATLAS Team and Asset Management Team members prioritize close coordination between UNDP OIST and the UNOPS Atlas team so that any updates to the Atlas Asset module take into account all the necessary requirements for the assets management process to be IPSAS compliant, facilitating reporting which meets the needs of the UNOPS business model. CSPG agrees and this is already happening today where both the ATLAS Team and the Asset Management Team are working together to meet all deadlines for coordination in a timely manner. Observation 5 Difference between the General Ledger and Atlas Asset module Administrative Instruction AI/FPG/2011/01 IPSAS compliant Accounting Policies subheading IPSAS 17. Property, plant and equipment (PP&E) states that for each class of property, plant and equipment recognized reconciliation at the beginning and end of the period must be shown with specified postings. For General Ledger account heads 72210, 72215, 72216, 72370, and 72805, IAIG compared the total value of purchase orders (of USD 2,500 and above) as given in the project budget asset accounts in the General Ledger with the total project budget assets registered in the Atlas Module as of 31 December A difference of USD 7,606,473 was found between the two totals, as shown below: Project budget assets of USD 2,500 and above as per the above General Ledger accounts Project budget assets of USD 2,500 and above as per the Atlas Asset module 1 January to 31 December 2012 USD 8,723,781 USD 1,117,308 Difference USD 7,606,473 Although project budget assets were vouchered and procured through the project asset procurement catalogue, the asset records were not created in the Atlas Asset module. There is no systematic process for reconciling asset data between the General Ledger and the Atlas Asset module. Recommendation: IAIG/3104/06 Priority: High The Chief Financial Officer/Comptroller, Finance Practice Group (FPG) should ensure that the asset details in the Asset module are periodically reviewed and verified with the General Ledger, to ensure they agree for financial reporting purposes. The Chief Financial Officer/Comptroller, FPG, agrees and will coordinate with CSPG to put procedures in place. Observation 6 Comprehensive asset management system Regulation (a) of UNOPS FRR states that the management of inventories, property, plant and equipment includes actions necessary for proper receipt, custody, maintenance, transfer and disposal. IAIG noted the following from a review of the asset management system and from responses received from the surveyed asset focal points: a) Asset data relating to assets of UNOPS projects acquired prior to 1 January 2012 is not maintained in the Atlas Asset module, but rather on excel spreadsheets, which are prone to manipulation and errors, Audit report no. IAIG/3104: Asset Management in UNOPS 10

12 with no trail maintained on updates relating to, for example, transfers and disposals. Wherever projects are audited, a certificate on non-expendable property is provided by the auditors. b) The total value of an asset under IPSAS includes the cost, plus any freight, insurance, installation and custom clearance charges. The latter charges cannot be directly linked to the cost, as payments in Atlas are linked to vendors, and the additional charges will usually go to different vendors. This means that the only way to obtain the full value of an asset is to manually collect all the relevant purchase orders and add up the totals. This process is prone to errors and omissions. c) The Atlas asset management system does not support management reporting and decision making on the effective and efficient use of assets. For example, the monitoring of fuel consumption of motor vehicles and mileage travelled would inform management decisions regarding whether to retain or dispose of a vehicle, and regarding the scheduled maintenance and insurance of assets. d) The Atlas Asset module does not facilitate user-friendly tracking or adjustments of the asset data. In addition, the Atlas Asset module does not provide for the recording of any actions taken between the raising of a receipt and the disposal of the asset. The Afghanistan Operations Centre is currently maintaining two sets of assets records, one in Atlas and one on excel spreadsheets to facilitate tracking. Recommendation: IAIG/3104/07 Priority: Medium The Director, CSPG, should ensure that project budget assets acquired prior to 1 January 2012 which will continue to exist when assets are recognised in the Statement of Financial Position, are uploaded into the Atlas Asset module. CPSG fully agrees and this is planned for implementation as per the work plan for the transitional period, as shared with IAIG. Recommendation: IAIG/3104/08 Priority: Medium The Director, CSPG, should consider whether to acquire a comprehensive asset management system that will provide both financial and non-financial performance management data and facilitate tracking of assets from acquisition to disposal, including system computation of total asset value. CSPG agrees. The analysis is envisioned to be part of the implementation of a new Enterprise Resource Planning (ERP) solution. Observation 7 Asset physical verification certification According to AI/E0/2011/02 paragraph 4.1.1, Physical verification is the process of taking stock of items that are currently being used, maintained, or owned by UNOPS. The purpose is to ensure that the inventory report is complete and correct. IAIG reviewed the asset physical verification certification reports (as of 30 April 2013) and noted the following: a) Nineteen out of the 35 UNOPS offices which had administrative budget assets, had not completed the certification process for these assets held as of 31 December The amount uncertified was USD 13,311,646 (88 percent of the total administrative budget assets held). b) Twenty-one out of the 31 offices, which also had project budget assets, had not completed the certification process for the project budget assets. The amount uncertified was USD 38,833,927 (91 percent of the total project budget assets held). In the absence of certifications, the actual total value of administrative and project budget assets as at 31 December 2012 cannot be fully ascertained. c) In six of those offices whose certification process was complete, the project budget asset stock taking sheets were lacking data in at least one of the following fields: asset ID, acquisition date, and asset condition. In addition, the asset tag numbers did not conform to the UNOPS numbering sequence. Audit report no. IAIG/3104: Asset Management in UNOPS 11

13 d) Project budget asset lists prepared by the Asset Management Team in preparation for the physical verification exercise did not include totals, making it difficult to match the closing balance as per the certification report to the closing balance on the stock taking sheet for each office. e) On completion of the certification exercise, details relating to project budget assets are to be uploaded to the Atlas Asset module, after making adjustments for transfers and disposals. This process had not commenced by 30 April These details are therefore not complete, which will impact on the quality of data uploaded into the Asset module. Recommendation: IAIG/3104/09 Priority: High Physical verification certification should be completed for all offices in a timely manner, so as to identify gaps in the available asset data, and certify the asset balances. CPSG agrees and this will happen when all data is in the system from January Recommendation: IAIG/3104/10 Priority: Medium The physically verified assets should be reconciled to the Atlas Asset record as well as the asset record maintained on excel spread sheets, and any necessary adjustments made for obsolete or disposed assets on a timely basis. CSPG agrees and this will be extended to the project budget assets as per the new policy change. Observation 8 Asset management training Paragraph 1 of Organizational Directive (OD) 29 states that UNOPS is committed to the development of its human resources in order to achieve its mandate and to continuously adapt to new challenges in a changing environment. The review revealed that, at the time of audit, the Asset Management Team had no written plan to identify training needs of asset focal points in UNOPS offices. In 2012, the Asset Management Team organized training on IPSAS-related changes to asset management, for asset focal points in only two Regional Offices and one Operations Centre. Responses from the surveyed asset focal points revealed needs which were not met by the training provided, e.g. on the Atlas Asset module and fleet management. Recommendation: IAIG/3104/11 Priority: Medium The Director, CSPG, should ensure that the Asset Management Team initiates a survey to assist in understanding the training needs of UNOPS offices related to the asset management process and structure training programmes to address the skills needed. CPSG fully agrees and this is planned by end-2013 as per the work plan for the transitional period, as shared with IAIG. Audit report no. IAIG/3104: Asset Management in UNOPS 12

14 Annex 1. Definitions of audit terms ratings and priorities A. Audit ratings Effective 1 January 2010, the internal audit services of UNDP, UNFPA, UNICEF, UNOPS and WFP adopted harmonized audit rating definitions, as described below. IAIG assesses the entity under review as a whole as well as the specific audit areas within the audited entity: Satisfactory Internal controls, governance and risk management processes were adequately established and functioning well. No issues were identified that would significantly affect the achievement of the objectives of the audited entity. Partially Satisfactory Internal controls, governance and risk management processes were generally established and functioning, but needed improvement. One or several issues were identified that may negatively affect the achievement of the objectives of the audited entity. Unsatisfactory Internal controls, governance and risk management processes were either not established or not functioning well. The issues were such that the achievement of the overall objectives of the audited entity could be seriously compromised. B. Priorities of audit recommendations The audit recommendations are categorized according to priority, as a further guide to management in addressing the issues in a timely manner. The following categories of priorities are used: High: Prompt action is considered imperative to ensure that UNOPS is not exposed to high risks (that is, where failure to take action could result in critical or major consequences for the organization). Medium: Action is considered necessary to avoid exposure to significant risks (that is, where failure to take action could result in significant consequences). Low: Action is desirable and should result in enhanced control or better value for money. Low priority recommendations, if any, are dealt with by the audit team directly with the management of the entity under review, either during the exit meeting or through a separate memo subsequent to the fieldwork. Therefore, low priority recommendations are not included in this Report. Audit report no. IAIG/3104: Asset Management in UNOPS 13

15 Annex 2. Asset management process flows A. Recording administrative budget assets B. Recording project budget assets (Source: information provided by CSPG) Audit report no. IAIG/3104: Asset Management in UNOPS 14

16 Annex 3. Accounts Payable-Asset Management (AP-AM) interface clean-up process (Source: information provided by CSPG) Audit report no. IAIG/3104: Asset Management in UNOPS 15

17 Annex 4. Glossary AI ATLAS AP-AM CSPG ERP FPG FRR HQ IAIG ICT IPSAS OD OIST PP&E UNDP UNFPA UNICEF UNOPS USD WFP Administrative Instruction UNOPS ERP system, jointly with other agencies Accounts Payable-Asset Management Corporate Support Practice Group Enterprise Resource Planning Finance Practice Group UNOPS Financial Regulations and Rules Headquarters Internal Audit and Investigations Group Information and Communications Technology International Public Sector Accounting Standards Organizational Directive Office of Information Systems and Technology, UNDP Property, Plant and Equipment United Nations Development Programme United Nations Population Fund United Nations Children's Fund United Nations Office for Project Services United States Dollars World Food Programme Audit report no. IAIG/3104: Asset Management in UNOPS 16