After a series of puzzling financial decisions that put tens of millions of dollars at risk, the board of directors of a little-known United Nations agency took the rare step on Friday to vote to quickly implement a series of reforms.
The actions of the board of the Office for Project Services, or UNOPS, followed a DailyExpertNews report that revealed a series of questionable investments at the agency totaling about $61 million, more than a third of which may be has been lost.
Friday’s actions by the agency’s board, which provides logistics services to other UN agencies, imposed strict restrictions on all financial reserves at UNOPS and halted operations at the investment unit. The watchdog’s auditing and ethics functions will, among other things, be reviewed and the current business model will be re-evaluated.
In addition, a team of 10 members will investigate the institutional failures at UNOPS that led to the questionable investments and recommend further reforms.
UN officials said the speed and scope of the board’s actions were rare for the United Nations, where bureaucracy often hampers swift action.
“The US has been pushing for months for greater transparency and accountability regarding financial mismanagement at UNOPS,” said Chris Lu, the US representative for UN governance and reform. “We are pleased that the UNOPS Board of Directors acted quickly and decisively.”
The incident has damaged the credibility of the United Nations and weakened the confidence of donor countries at a time when the organization is seeking major funding for a series of global crises.
The United States, which sits on the agency’s board of directors, has cut funding to UNOPS, Mr Lu said, adding that the United States would push for “appropriate law enforcement action against all wrongdoers.”
The then chief of the agency, Grete Faremo of Norway, resigned just hours after The Times published its investigation into UNOPS’s fraught investments. She resigned at the request of António Guterres, the UN Secretary General, a UN official said.
UN agencies hire UNOPS to build roads, deliver supplies and perform other logistical tasks.
The financial troubles began when it accumulated millions of dollars in excess funds, and agency officials lent $58 million to a single group of companies, all linked to a British businessman whom members of the agency’s investment unit had met at a party in 2015.
An additional $3 million was donated to the university daughter of the same British businessman for advocacy for ocean protection.
Dragan Micic, who represented UNOPS at the board meeting, said the agency hoped “to move towards greater transparency and restore the trust of our board members and partners”.
The deputy of Mrs. Faremo, Vitaly Vanshelboim, was placed on leave while an investigation was finalized by the UN’s internal oversight agency. The report is now ready and is at the office of Mr. Guterres, which may take further disciplinary action.
“The next steps include possible administrative sanctions or referral to the relevant judicial authorities in the event of possible criminal violations,” said Stéphane Dujarric, a spokesman for Mr Guterres.
The loans were intended to finance sustainable energy and housing projects in developing countries. But UN auditors later said the companies were more than $22 million in default. Accountants said one of the companies admitted it had used most of its UN loan – intended to finance energy projects – to pay off pre-existing debt.
Lawyers for the businessman, David Kendrick, released statements last month saying that neither Mr Kendrick nor his daughter had done anything wrong and that the projects UNOPS had invested in had been delayed by government decisions and the Covid-19 pandemic. Mr. Kendrick was still expected to succeed, according to the statement.