• The UN General Assembly Urges the $54 Billion Pension Fund to Shape Up

    by  • January 2, 2017 • UN Employment, UN pension fund • 4 Comments

    Zohrab Mnatsakanyan of the UN General Assembly and Armenia’s ambassador to the UN, with Catherine Pollard, another top UN official, as the assembly adopted numerous resolutions, including one rebuking the UN pension fund, on Dec. 23, 2016. ESKINDER DEBEBE/UN PHOTO

    The United Nations General Assembly sharply rebuked the United Nations Pension Fund, which it oversees, reaffirming control of the $54 billion account by the UN Secretariat and calling on the fund to improve its problematic performance and service to its 72,000 beneficiaries.

    The strongly worded resolution came amid other resolutions being finalized at the tail end of the assembly’s 71st session in late December. The pension fund has been embroiled in problems affecting both investments and payouts to beneficiaries. (See PassBlue’s article in September 2016.)

    The fund’s recent inability to pay thousands of recent retirees — some waiting for more than a year — after initiating a new software system has been one of many thorns in the side of UN Secretary-General Ban Ki-moon as he prepared to leave office on Dec. 31, 2016. (António Guterres became the new secretary-general on Jan. 1.)

    Addressing retirees in May, Ban promised that the payment delays would be cleared up by the end of that month. But the fund is still struggling to catch up.

    For more than two years, UN staff unions and retirees have protested a series of changes proposed by the fund’s chief executive officer, Sergio Arvizú, charging that he was moving the fund from UN oversight into an environment prone to risk, corruption and exploitation by outsiders. The fund, which had long been managed by internal staff members, has in recent years turned 15 percent of its portfolio over to commercial investment managers.

    In its resolution, the assembly told the fund to “take appropriate measures to use existing internal capacities and avoid the use of consultants in operations. . . . ”

    The resolution addressed other issues raised by staff unions, including reaffirming the secretary-general’s control over the fund’s financial rules and regulations as well as the role of the UN’s oversight body, the Office of Internal Oversight Services (or OIOS), which it asked to undertake a comprehensive audit of the fund.

    The assembly noted with “serious concern” the high number of vacancies of senior posts in the fund’s investment management division, where the heads of investment and risk management have been empty for more than a year.

    The resolution expressed concern about the near-term underperformance of the fund, which has not met its benchmark of a 3.5 percent return for the past two years. The resolution requested the secretary-general to “make all efforts to improve the Pension Fund’s performance.” Of particular concern were foreign-exchange losses, which the resolution put at $3.4 billion during 2014-2015. The resolution also urged the fund to further diversify its investments.

    The assembly also requested a performance evaluation of Carolyn Boykin, the special representative of the secretary-general, who heads the fund’s investment management division. The assembly noted that an evaluation was missing from Ban’s recent report on the fund.

    It was the backlog in payments to recent retirees, however, that drew the attention of several members of the budget committees who produced the resolution. Sounding almost satirical in its diplomacy, the resolution said that it “welcomes the successful implementation of the Integrated Pension Administration System” — the software meant to streamline operations of the fund. But it was the lack of preparation on the fund’s administrative side, led by Arvizú, that delayed payments to thousands of new retirees. Indeed, the resolution expresses “serious concern at the continued delays” in sending such payments.

    Arvizú had argued that a huge influx of beneficiaries from downsizing peacekeeping missions inundated the fund as it was switching IT systems and that relevant UN agencies had not always supplied timely paperwork. The assembly asked member organizations to expedite information processing “to resolve this situation.”

    But if there were more beneficiaries, “the increase in the number of separations could have been anticipated,” said Babou Sène, the vice president of the UN’s Advisory Committee on Administrative and Budgetary Questions (ACABQ), during an assembly meeting in late November.

    The OIOS seemed to agree in a draft audit, which looked into the delays processing pension benefits. (The draft, which was recently leaked to staff union representatives, does not include responses from the fund.) Contrary to protests by the fund that it was overwhelmed by newly retiring peacekeeping staff, the draft indicates that the number of new beneficiaries from 2014-2015 had actually declined.

    “Risk factors which caused the delays in pension processing were not adequately assessed or mitigated,” the draft report said, citing two “blackout periods” of 40 days in mid-2015 when the pension processing system was not available, contributing to the backlog in later months.

    The assembly granted the fund only nine of the 20 temporary posts it requested to handle the backlog.

    The fund issued a statement in late December welcoming the assembly resolution and some of the requests by the fund that the assembly endorsed.

    “The Fund also welcomes the fact that this GA resolution has convinced critics that the Pension Fund will not distance itself from the UN” — or “privatize,” as it said — and that it will continue to use UN machinery to service its administrative needs.

    The resolution was a clear acknowledgement of two years of work by staff unions and several independent retirees.

    “The General Assembly’s actions are good for staff but a setback for the fund’s board and its CEO, Sergio Arvizú. They follow a staff union campaign, extensive meetings with member states and a petition signed by 14,000 of you,” said the Coordinating Committee for International Staff Unions and Associations (CCISUA) on its website.

     

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    About

    Susan Manuel has worked extensively in UN peacekeeping and other UN entities as well as in journalism, receiving various awards. Currently, she is an international communications consultant. Previously, she was director, ad interim, of communications and public information for the AU-UN peacekeeping mission in Darfur; chief of the peace and security section in the UN Department of Public Information; acting director of strategic communications and spokesperson's unit for the UN mission in Afghanistan; spokeswoman and deputy director of communications for the UN mission in Kosovo; regional public affairs officer for the World Food Program; and spokeswoman for the UN peace operations in the Balkans. She also worked for the UN in South Africa and in Cambodia.

    In journalism, Manuel worked for more than a decade as a newspaper reporter and columnist, including in Honolulu, Washington, D.C., and Nevada. She has a master's degree in journalism and a bachelor's degree in social sciences from the University of California, Berkeley.

    4 Responses to The UN General Assembly Urges the $54 Billion Pension Fund to Shape Up

    1. PassBlue
      January 6, 2017 at 6:39 am

      In response to the article, “The UN General Assembly Urges the $ 54 Billion Pension Fund to Shape Up”, published on 2 January I have the following comments. The resolution was adopted on the 23 of December 2016.

      The first line of the article suggests that the Fund wants to leave the UN, it does not (this is mentioned at the end of the article). According to the Pension Board, the Chairman of Board, the CEO of the Fund and the Representative of the Secretary-General, who is responsible for investments, no one has or is contemplating the idea of “taking the Fund out of the UN”. The General Assembly did not refer to the 72,000 existing beneficiaries (as stated in the first sentence) in any “problematic” reference, because as noted a number of times by the CEO of the Fund and the Pension Board, all existing beneficiaries who were receiving monthly payments were the success story of the new system. Since the new Integrated Pension Administration System or IPAS went live in August 2015, over one million payments to some 70,000 people in 213 countries and territories were paid, accurately and on time, taking into account inflationary and currency adjustments (as prescribed), seamlessly. Indeed, the Fund won an award for this operation.

      Concerning “delays” at the Fund. From August 2015 to June 2016 too many retirees waited longer than six weeks, and some waited six months, but by March 2016 and since, more cases have been processed per month than ever. As of August 2016 all cases were being completed within six to eight weeks. The on-going suggestion that the Fund is responsible for retirees waiting “more than a year”, is a recurring theme, but when the Fund requests details of these cases, 95% of them are not the responsibility of the Fund. There are retirees that waited a year or more, but very, very few waited that amount of time because of the inaction of the Fund. The majority of cases are delayed because documents are not sent to the Fund in a timely manner or information provided is incorrect. Anyone with an outstanding case is welcome to send it to me: woodyear@un.org, and I will ensure that a quick and factual response is sent about why the case is delayed. When it is inaction due to the Fund, I will say as much (as I have been doing over the last six months).

      Concerning Financial Rules, and as the Fund stated in its Statement welcoming the GA resolution (21/12/2016), the General Assembly has no jurisdiction over the rules of the Fund. The 63rd UN Joint Staff Pension Board approved these Financial Rules, as was made clear in the “Report of the United Nations Joint Staff Pension Fund” (A/71/9) paragraph 14, h:
      “The Board considered and approved the financial rules of the Fund, which will be part of the Administrative Rules. It was noted that nothing in the financial rules changed the governance or operations of the Fund; they merely codified the existing practice and provided a proper legal framework for financial management, thereby reinforcing the Fund’s internal control mechanism;

      In the same report, paragraphs 251 and 253 the Board stated the context for these Financial Rules:
      251. At its sixty-first session, in 2014, the Pension Board recommended to the General Assembly an amendment to article 4 of the Regulations of the Fund to make reference to Fund-specific financial rules (see A/69/9, annex XI). By paragraph 9, resolution 69/113, the Assembly approved the proposed amendment in order to establish clear authority and reference to the financial rules of the Fund. In paragraph 10, the Assembly emphasized the importance of the Board promulgating financial rules that would govern the financial management of the Fund. At its sixty-second session, the Pension Board was updated on the Fund’s efforts to finalize its consultative process in respect of the drafting such financial rules, taking into account the governance structure, mandate and funding source of the Fund.

      253. The rules address the financial administration of the Fund and fill in gaps not otherwise covered by the Fund’s Regulations and Administrative Rules. The rules provide, specifically, that for procurement activities and other administrative services, the Fund continues to use the United Nations “machinery” under the Financial Regulations and Rules of the United Nations. The rules in no way change the governance or operations of the Fund; they merely codify the existing practice and provide a proper legal framework for financial management, thereby reinforcing the Fund’s internal control mechanism. The Chief Executive Officer noted that this was a step in the right direction in terms of good governance, improved financial framework and increased transparency.

      What the GA said:

      8. Recognizes that the Financial Regulations and Rules of the United Nations remain the highest framework governing all aspects related to the administrative services provided by the United Nations Secretariat, including the procurement of goods and services, the management of property and internal and external audit arrangements;

      Reaffirms what the Financial Rules themselves state, which is that the United Nations officials continue to perform their functions under the authority of the Secretary-General – and in accordance with the United Nations Financial Regulations and Rules in respect of those administrative services, including procurement of goods and services, the United Nations provides for the Fund.

      The Financial Rules were already integrated into the Regulations and Rules of the Fund.
      Finally, concerning the leaked OIOS “report” to which this article refers, and to which the UN staff unions have referred, it was not a report. The reference is to unfinished, working papers dated 18 October 2016 that were published by the staff confederation CCISUA on 9 December 2016 (the same day that the Pension Fund was holding a town hall meeting in New York). The draft report, which is not a public document, was sent to the Fund for comments and to review factual correctness in December and the Fund recently provided its comments to OIOS. This audit will be made public in coming weeks and it will include the comments of the Fund. This article sites these papers and refers to the average number of cases that the Fund received in 2014 – 2015, suggesting that the Fund misrepresented the “surge” of new cases. For the record, from August 2015 to September 2016 the Fund received 26% more new, calculable separation cases per month than the 10-year monthly average. Also for the record, it should be understood that OIOS conducts eight to 10 audits of the Fund each year, on any topic they consider relevant and the Fund is also audited by the United Nations external auditors.

      Lee Woodyear, Senior Communications Officer, United Nations Joint Staff Pension Fund (UNJSPF) New York, 5 January 2017

    2. January 6, 2017 at 12:57 pm

      Lee Woodyear’s response to Susan Manuel’s article is yet another attempt by the Fund’s Chief Executive Officer, Sergio Arvizu (Woodyear is his spokesperson) to gloss over the facts behind the General Assembly’s resolution that reaffirms the Secretary-General’s control over the fund’s financial rules and regulations; requests the Secretary-General to “make all efforts to improve the Pension Fund’s performance”, including low investment performance and $3.4 billion foreign exchange losses over 2014-2015; provide a performance evaluation of the Representative of the Secretary-General for Investments (RSG, Carolyn Boykin); and entrust the UN Office of Internal Oversight Services with conducting a comprehensive review of risk management, investment management, and other administrative processes at the Fund.

      After almost three years of denial and obfuscation, finally the truth is out, with compelling reports of the Board of Auditors (A/71/5/Add.16), the Advisory Committee on Administrative and Budgetary Questions (ACABQ, A/71/621), a leaked OIOS audit report on the unprecedented backlog in pension payments, all of which have culminated in this General Assembly resolution. UN management, Fund management on both sides (Fund Secretariat headed by the CEO, and Investment Management Division headed by the RSG), and the Pension Board, chaired by Vladimir Yossifov, have failed in carrying out the duties entrusted to them to ensure a well-run and healthy Fund for current and future generations of UN retirees.

      These reports show clearly that the Fund’s CEO failed to take timely action to address the causes and consequences of the backlog; and to report fully on the full extent of the backlog. As one example, the figures that are promulgated by the CEO do not include so-called ‘non-actionable’ cases, i.e., where all documentation is not available for processing. The full extent of the number of these cases, the hardships endured by retirees and survivors, waiting in vain, some for years, remains unreported.
      While the CEO and his spokesperson try to propagate the fiction that it’s long-suffering retirees and survivors and employing agencies who bear all responsibility for providing the necessary documentation, they fail to note that the Fund receives $20 million each biennium to perform this function and has clearly failed to do so.
      On the investment side, in addition to low investment performance that places the long-term viability of the Fund at risk, and foreign currency losses of $3.4 billion, without a mitigating mechanism in place, the Board of Auditors (paras. 86 and 88) noted that in 2011, the Fund decided to treat the selection of external investment managers as an investment decision rather than a procurement exercise. Yet, at the end of 2015, no guidelines for their evaluation or selection had been finalized, thus “the Fund may have to renew the contracts with the existing fund managers and therefore miss the opportunity to hire better external managers and negotiate more favourable terms and conditions.”

      Reportedly, the Fund’s Investment Management Division has never compared its brokerage commission fees with its peers, although such data is widely available through custodians. If this is correct, it seems negligent. One of the actions that must happen is the comprehensive OIOS audit called for by the GA resolution must include an audit of brokerage commissions paid for each region to ensure that IMD is paying reasonable commissions compared to industry peers.

      OIOS might wish to look into why the CEO insists on selecting (twice so far) an OIOS staff member for the D1 post of Chief, Information Management Systems Service, despite findings of unlawfulness (twice so far) by the UN Dispute Tribunal (all documents are in the public domain: Wilson vs the UN Secretary-General).

      The Fund’s Chairman presided over a Pension Board meeting in July 2016 in Vienna, that muzzled the UN staff federations, attempted to intimidate the media, obliged all Board members to sign a confidentiality agreement by which they were prohibited from sharing information with us, the stakeholders/owners of the Fund; gave the Fund CEO high marks for his performance and tried to push through renewal of his contract a year in advance. Recently, the Board Chair tried to shut down a statement by a staff representative at the UN Geneva town hall on pension matters.

      Mr. Yossifov continues to claim “misconceptions” about the UN staff federations’ reporting on the General Assembly resolution, in his whistling-in-the-dark Fund newsletter dated December 2016 (available on the Fund’s website). He directs Fund participants and beneficiaries to (among other sources) the Associations of Former International Civil Servants, for “accurate information about the Fund and its activities”.

      The irony is that AFICS/NY and FAFICS (the Association of Former of International Civil Servants and its parent body, the Federation of Associations of Former International Civil Servants), which shared a president until recently, did not join the efforts of the UN staff federations and those of their dues-paying members to dig beneath denial and obfuscation to uncover and address problems at all levels in our Fund, and instead tried to thwart those efforts at every turn (see article on CCISUA’s website where the CCISUA president states: “The Federation of Associations of Former International Civil Servants (FAFICS), representing retirees, did not support the campaign).

      We’re faced with a situation where serving UN staff can be sure about who represents their interests (the UN staff federations), but UN retirees are unable to rely on their representative organization, FAFICS, to ensure the safety of our life savings. This isn’t acceptable or viable. It has to change, and soon.

      Alarmingly, it’s clear that some Pension Board members and participants lack the knowledge and skills for the task. Elections for membership in the UN Staff Pension Committee (four members and two alternates), who are also participants on the Pension Board, are expected to take place in February. It’s imperative that the UN Administration ensures that accurate contact information is provided for all 86,000 eligible voters to ensure a fair and clear election process with maximum participation. Reportedly, this information may need to be wrested from the hands of the Fund CEO.

      So what happens now? So far the record on accountability has been far from encouraging. There’s every reason to expect the Board Chair, the CEO and the RSG to continue chair-shuffling on deck. They’ve betrayed our trust. They must be replaced. The ball is in our new Secretary-General’s court to ensure that UN management, the Fund and the Board have the competent leadership that they require to address the Fund’s current deficiencies and ensure that it weathers whatever global financial and political challenges may arise. Time will tell how quickly he will move to address issues raised in the resolution and put things right at our Fund.

      Loraine Rickard-Martin, Former Senior Political Affairs Officer, UN Department of Political Affairs
      UN Pension Blog

    3. Alfred Lechat
      January 11, 2017 at 6:32 am

      Bravo, Ms. Rickard-Martin,
      Again, I would agree. Furthermore, as you pointed out, AFICS/NY and FAFICS are not fighting for their membership but instead side with the management of the Fund in its denial. Does it not weaken the legitimate outcry of retirees, the observations of UN staff federations and the recommendations made by the various oversight organs?
      In addition to the possible appointment of a new RSG to the Fund by the new SG, would not one of the most efficient step be to organize the membership of AFICS and FAFICS to exert forceful pressure on their respective Boards to better uphold the interest of the retirees and to draft amendments to existing bylaws?

    4. January 14, 2017 at 4:41 pm

      Very well said, Mr. Lechat. Last year, a group of UN retirees led by Lowell Flanders (former UN Staff Union president) presented to the leadership of the Association of Former International Civil Servants, New York(AFICS/NY) the representative body for the interests of UN retirees based in the NY area, proposed revisions to the organization’s By-laws, aimed at fostering more transparency and accountability to its dues-paying membership.

      The response from the AFICS/NY leadership was to stonewall and circulate a two-page diatribe at the annual general meeting last May, deriding the dues-payment members who would dare suggest such a thing. The AFICS/NY Governing Board has twice in the past year and a half rejected petitions by 50 plus members under the By-laws: one for a meeting to discuss contentious issues pension matters; and the other to discuss proposed changes to the By-laws aimed at more transparency and inclusiveness in AFICS/NY activities.

      On 1 June 2016, the AFICS/NY president at the time, Linda Saputelli, who is the current president of the Federation of Associations of Former International Civil Servants (FAFICS), the umbrella organization for AFICS, sent a (leaked) email to the UN Office of Internal Oversight Services presenting several reasons why in her view, the OIOS audit of the unprecedented delays in pension payments to new retirees and survivors (orphans and widows) was a bad idea. We now know that the audit uncovered serious management deficiencies in terms of anticipating, addressing, and reporting on the full extent of the backlog in pension payments, among other findings.

      To say that the AFICS/NY Governing Board is no bastion of participatory democracy is a gross understatement. Candidates for election are “handpicked” each year: six members whose terms are up for election; and others sought out and nominated by a committee designated by the president. The Governing Board does not make a general call for nominations and indications are that few if any candidates are nominated by petition as provided for under the By-laws (20 signatures of AFICS/NY members). Informed sources say Ms. Saputelli was extended in her position several times after her term had expired, by decision of the head of the nominating committee announced to the Governing Board members as a fait accompli.

      Participants and beneficiaries are the owners of the Fund and have the right to read documents submitted to the Pension Board. The practice up to now has been that the AFICS/NY president has the password for documents which is not shared with members as the documents are deemed “confidential.”

      AFICS/NY’s unconditional support for the Fund CEO despite allegations of mismanagement is but one indication that the leadership had its own agenda – at least under the former president — and that AFICS/NY must change the way it operates. For the same reason, changes are also needed in the presidency of the umbrella organization, FAFICS, which holds six seats on the Pension Board.
      AFICS/NY/FAFICS has discouraged contacts among members, including on pension matters, and for this reason is unlikely to provide an updated member directory any time soon (the current one is three years old with massive numbers of incorrect contact emails). AFICS/NY has also severely limited information on its website as well as information sent by email to its dues-paying membership to strictly control its message to the membership.

      There’s a new president and other officers of the AFICS/NY Governing Board and signs of positive change, i.e., the substance of the most recent AFICS/NY message to members (November 2016, available on the AFICS/NY website) indicated an almost 180 degree difference from previous messages in that it requests the Fund to be more proactive in a number of areas. Still, these new officers were all members of the Governing Board that consistently pushed back at member’s attempts for more democratic and accountable operations. It remains to be seen whether or not constructive change is in AFICS/NY’s future.

      The Governing Board members have only a few days ago, 9 January, returned from a month-long holiday break. Since the November newsletter, there’s been no further news on developments such as the important General Assembly resolution adopted on 23 December 2016.

      In any case, the members of AFICS/NY are a small fraction of the number of UN retirees around the world (72,000 plus), who are served by other AFICS organizations world-wide. Unless these organizations do their job in keeping members informed, UN retirees can rely only on the severely limited and one-sided perspective of the CEO made available in newsletters on the Pension Fund’s website.

      As I note in my previous comment, serving UN staff know that their interests are represented by the UN staff federations. Many retired UN staff have no such certainty in the leadership of the organizations that purportedly represent our interests, including assuring the continued safety of our hard-earned pensions.

      Loraine Rickard-Martin
      Former Senior Political Affairs Officer, United Nations Department of Political Affairs (retired)
      UN Pension Blog
      http://unpension.blogspot.com/

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