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OAS Permanent Council Received the Report of the Board of External Auditors for 2014

The Permanent Council of the Organization of American States (OAS) today received the annual report of the Board of External Auditors for 2014, which includes recommendations on administrative, budgetary and modernization aspects to improve the management of the Organization.

The report presented by the Chair of the Board of Auditors and General Comptroller of the Republic of Ecuador, Carlos R. Pólit, outlines ten specific recommendations related to the definition of a budget that considers the operational and strategic needs of the Organization; the timely payment of quotas by member states; introducing measures regarding non-payment of some countries; implementing changes in personnel policies; the development of a results-based management structure; designing a strategy to maximize fixed assets and boost investments in its portfolio; and financing for sustainable corporate enterprise system, among others.

As for the management and administration of the General Secretariat, the report says that the Secretary General, José Miguel Insulza, presented in 2014 to the Permanent Council a "Strategic Plan for Management Modernization of the OAS," which it considers "condenses the main concerns expressed by the Board in recent years." The Board also congratulates member states for committing to this "critical" initiative and hopes that countries "take positive decisions."

In this regard, Pólit said that the Strategic Plan "clearly lays out the desire to have political dialogue guide the administrative and budgetary issues." "The proposed reforms will help manage the necessary changes in many of the key issues facing the OAS," he said.

On the basis of his report, Pólit noted that the "structural budget imbalance" in the Organization means that "the budget does not adequately cover all necessary expenses." "Clearly, the existing budget is not sufficient to cover the necessary investments the OAS must make," stresses the report.

Specifically, the Board of Auditors expressed its concern that "the majority of budgetary cuts have been within the administrative functions." "After years of achieving efficiencies, there are very little additional savings to be realized. Simply put, to achieve the OAS mandates at current levels, the revenue generated from the quota system is insufficient. There are not enough savings that can be found to adequately fund the OAS; rather, the quotas must be increased and special assessments will likely be needed to adequately fund the Organization."

In addition to the deficit caused by the above reasons, the report notes that the Organization is affected by delays in quota payments by some countries, which affects the proper functioning of the OAS. This forced the entity to take loans to maintain its operations, and although they have resolved the immediate short term cash flow requirements of the OAS, "the Board remains concerned with the Organization´s liquidity position into the medium and long term." The cash flow problems, adds the report, "are entirely preventable if member states make necessary decisions to rectify the structural deficit."

The report also highlights that the OAS received favorable opinions in its financial statements for 2014, which indicated "no material weaknesses or significant deficiencies in internal controls over financial reporting." "Notwithstanding the cash flow issues associated with the Regular Fund, the Board considers that "this is a notable accomplishment given the complex and diverse operating environment of the OAS, and in light of reduced operating costs and capabilities of the financial offices within the OAS."

The OAS Secretary General, José Miguel Insulza, said that the report concludes 10 years of his mandate and said he was pleased that the report has the final verdict of the firm as "unqualified" for the tenth consecutive year, which means, according to the technical accounting terminology, the accounting process has been done correctly. He stressed four areas which seriously affect the finances of the Organization: the imbalance produced by the fact that personnel wages increase automatically but quotas remain the same every year; discounts that apply to countries that pay their dues on time; the extra costs the Organization has to cover for borrowing to cover unpaid fees by some countries; and the fact that some buildings owned by the OAS generate maintenance costs higher than if the offices were relocated to a rental building.

Finding solutions to these problems, argued the Secretary General, “is not complicated but requires decisions by the countries.” "These are basic things that can be agreed without any difficulty, that do not hurt anyone, but that would keep us from continuing with a structural deficit year after year," he said. "We have to take decisions, we must take the report and read it paragraph by paragraph, because there are reflected all the financial problems that the Organization has, and we must draw the appropriate conclusions, define what can and what cannot be done," he concluded.

The 2014 Board of External Auditors of the OAS is composed of representatives from Ecuador, Canada and the United States who are elected by the General Assembly for a period of three years.

At this point on the agenda of the Council the delegations of Mexico, Costa Rica, Ecuador, Uruguay, Barbados, St. Vincent and the Grenadines, Chile, the United States, Haiti, Nicaragua and Colombia took the floor.

A gallery of photos of the event is available here.

For more information, please visit the OAS Website at www.oas.org.

Reference: E-170/15