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.