INDEPENDENT NEWS AND COMMENT ON WORLD AFFAIRS
19 October 2017: Secretary-General António Guterres announced today the appointment of Sudhir Rajkumar of India as his representative for the investment of the assets of the UN Joint Staff Pension Fund (UNJSPF). He will succeed Carol Boykin of the United States.
The appointment comes in the wake of Fund losses topping $4 billion related to currency fluctuations in the last two years and vocal expressions of staff mistrust of the management.
Mr. Rajkumar brings to the position more than twenty-eight years of broad-based global investment experience, covering formulation and implementation of investment policies, and hands-on experience with global bond markets, private equity and project finance transactions, and corporate finance and privatization advisory engagements.
He is currently head of the global pension advisory programme at the World Bank Treasury, serving also as a member on the External Advisory Committee on Investments of the Food and Agriculture Organization, the Investment Committee of the United Nations Office for Project Services, and as Vice-Chair of the Board of Directors of the International Centre for Pension Management (ICPM).
Mr. Rajkumar began his career at the World Bank in Eastern Africa Operations as a Young Professional in 1988. Since then, he has worked in various regions and capacities with the World Bank and International Finance Corporation, including as Principal Investment Officer. Prior to that he served in managerial positions with the Shriram Group in New Delhi and Kota, India.
He holds a Master of Business Administration from the University of Chicago, a Master of Science in Economics from the London School of Economics and a Bachelor of Science in Engineering from the University of Delhi. He is co-editor and an author of the book Governance and Investment of Public Pension Assets: Practitioners’ Perspectives published by the World Bank.
3 August 2017: Ibrahima Faye, a Representatives of the staff of the UN Joint Staff Pension Fund has posted the following account of the CEO of the Fund, Sergio Avizu. An appointee of the former Secretary-General, Avizu is best known for running up a $2 billion loss to the Fund, ascribed in polite company to currency volatility. Mr. Faye writes:
"By simple observation, I can say without bias that it's more about how the CEO operates by deception than how many high level supporters he has.
1) He has a substantial travel budget that enables him to travel often to the Agencies in Europe and lobby to gain their mechanical support for his proposals at every session of the Pension Board session and to rally them against the "Giant UN family system".
2) He engages in subtle Union busting and accuses the Staff Associations of running maligning campaigns and making frivolous accusations against his own person. He does this in order to hide behind his own country's influence in the UN system so that the Secretariat will not take a position on him. Look at Mexico's geo-strategic positioning in the UN's Fifth Committee to understand what is happening in this area.
3) He terrorise his managers by telling them that either they are with him or against him. He divides the entire staff of the Fund by having them permanently fighting each other and encouraging them to bad-mouth their elected Staff Representatives and the Staff Associations in exchange for promotions and speedy career progress.
4) He is the person who decides how many retirees will be flown to each Board meeting (the Fund pays) and once these retirees are chosen, they advocate for him to other Board members and support every proposal he puts to the Board. These individuals, including the representatives of FAFICS and AFICS, have unobstructed access to Fund's governing bodies, executive heads and participants groups in the Board as they promote his agenda.
5) He - literally - bullies OIOS auditors and controls who their investigators can talk to as they audit the Fund's activities. (The most recent OIOS audit report talks about this in very clear terms). Once audit reports are out, he often rejects every single finding that is negative for him. Sadly, the audit cycle usually ends just before the Board's annual session, and his delayed response makes it impossible for Board members to have read the new report before or while the Board is in session.
6) We all know the CEO has become better at communicating recently because now he has an outstanding Communication Officer in Lee Woodyear who formats his speeches and communication style to make him seem to be a sympathetic, likable, person in the eyes of fair-minded observers. Well, we work with him. We are his staff. We are closer to him than anyone else and we see what is happening. That is why we are resolved to ensure that the Fund is managed transparently.
7) CEO Avizu is good at creating diversions whenever he knows a bad report is going to go public. He uses FAFICS representatives, denies access to properly-elected Participants Representatives to the Board, and then asks other Board members to support him in refusing to allow us to take our rightful place in the Board's meetings because there is big stake in allowing these "two" staff representatives to attend the Board's meetings. [We, Michelle Rockcliffe and myself, the Fund's Staff Representatives, know too much, of course.]
He violates the rights of staff members and Staff Representatives, as set out in the UN staff regulations and rules, in order to keep lawyers in the Office of Legal Affairs busy with proceedings in the UN Dispute Tribunal and the UN Administrative Tribunal. He obliges them to battle in the name of the Secretary-General, as the Respondent before the court, against staff who can barely represent themselves let alone afford to hire lawyers at their own expenses given the fact that these UN courts seldom award litigation costs.
I can go on and on ...
6 October 2017: The United Nations Joint Staff Pension Fund is a multi-employer defined benefit plan established in 1949 by the General Assembly to provide retirement, death, disability and related benefits for the staff of the United Nations and such other organizations as might be admitted to membership.
As of 31 December 2016 the Fund was servicing 23 member organizations with a combined number of 203,050 active participants and beneficiaries consisting of 74,788 retirees and beneficiaries receiving monthly pension payments. There were 128,262 active participants accumulating pension rights and continuing to be serviced by the Fund. The value of the net assets of the Fund stood at $54.5 billion at the end of 2016.
Administration of the Fund
Under regulations adopted by the General Assembly, the Fund is administered by the United Nations Joint Staff Pension Board, a staff pension committee for each member organization and a secretariat to the Board and to each such committee. One third of the Board members are chosen by the General Assembly and the corresponding governing bodies of the other member organizations, one third by the executive heads and one third by the participants.
The Pension Board reports to the General Assembly on the operations of the Fund and on the investment of its assets. In addition, the Secretary-General reports directly to the General Assembly on the investments of the United Nations Joint Staff Pension Fund and on measures taken to increase the diversification of the Fund. The Board also decides eligibility for participation and the benefits to which participants and their dependents may become entitled.
Who Oversees Investments?
The investments are managed by the Representative of the Secretary-General on behalf of the Secretary-General after consultation with the Investments Committee and in the light of the observations and suggestions made from time to time by the Pension Board on investment policy.
Currently, staff members contribute 7.9 per cent of their pensionable remuneration to the fund. Participating organizations contribute 15.8 per cent at present. When necessary, the Board recommends amendments to the regulations that govern those contributory rates.
Day to Day Operations
The day-to-day operations of the Fund secretariat, which currently has 187 posts, are overseen by the Chief Executive Officer. The Representative of the Secretary-General manages the Fund’s Investment Management Division and its 85 posts. A detailed description of the Fund and its operations and activities is included in the present budget document and the accompanying supplementary information.
Costs of the Fund
The expenses of the Pension Fund are met by the Pension Fund, and the costs incurred by member organizations are met by the organizations. All member organizations of the Pension Fund are required to provide their own Staff Pension Committee; however, the Fund is providing the services of a Staff Pension Committee of the United Nations (including its funds and programs) on behalf of the United Nations.
In order to reimburse the Pension Fund for the expenses incurred in providing those services on behalf of the United Nations, the Pension Fund and the United Nations have agreed on a cost-sharing arrangement. Accordingly, the budget estimates separate total resource requirements between the Pension Fund and the United Nations.
The “management vision, the new approach and the plans to transform the Fund into a responsive, agile and service-oriented organization” is described in a report of the Secretary-General (download). A supplementary document includes detailed description and justification for the requested resources.
In resolutions 70/248 and 71/265, the General Assembly approved appropriations for the biennium 2016-2017 totaling $180,055,400, comprising administrative costs ($91,378,400), investment costs ($84,808,700), audit costs ($2,902,700) and Board expenses ($965,600).
Of that amount, $158,190,100 is chargeable directly to the Fund and $21,865,300 is the share of costs borne by the United Nations. In addition, resources amounting to $164,700 were authorized for extrabudgetary costs and funded by a number of member organizations.
16 August 2017: "While there were no material deficiencies in the financial statements prepared by the Fund," says the external Board of Auditors of the UNJSPF, there is "scope for improvements" in disclosures "that would enhance the completeness and transparency of the information provided to the stakeholders."
In a section on "Auditor's Responsibilities" the report says "Our objectives are to obtain reasonable assurance as to whether the financial statements as a whole are free from material misstatements, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the International Standards on Auditing will always detect a material misstatement when it exists."
The key findings of the audit are the following:
Article 12 of the Regulations of the Fund provides that the Pension Board shall have an actuarial valuation made of the Fund at least once every three years. On the basis of the examination of the actuarial valuation, the Board found anomalies in the data supplied to actuaries for making calculations.
The number of participants indicated in the financial statements for 2015 was 126,892, whereas in the actuaries’ report the number cited was 114,375.
The number of benefits disbursed to the retired participants by the Fund was 71,474 in the financial statements for 2015, whereas the corresponding figure in the actuaries’ report was 75,299.
Therefore, the Board expressed the view that "the valuation done by the actuary was based on inconsistent data and was not reliable."
On that being pointed out, the Fund decided not to use the actuarial valuation for disclosure in the notes to the financial statements and instead roll forward the previous actuarial valuation as at 31 December 2013 to 31 December 2016.
Investment Risk Management
In April 2017, the Fund subclassified the risk budget for fixed income at the currency and duration levels. However, for the equities, the risk budget has been allocated only on the basis of equity portfolio by region, and no suballocation between countries or currencies has been made. The Board also observed that no risk budget has been prepared for real assets, alternative investments and cash and cash equivalents.
Foreign Currency Losses
The Fund has been experiencing foreign currency losses since 2013, which has resulted in a total foreign currency loss of $4.68 billion. The foreign currency losses are in all asset classes during 2016. The Board in its previous audits had raised concern over the foreign currency losses and had recommended employing suitable procedures and tools to mitigate them. The Fund informed the Board that procurement of an expert is under way to conduct a formal currency study, which would include a review of foreign currency exposure and related tools.
Business Continuity, Disaster Recovery
The report notes that the disaster recovery protocols were enabled in the Investment Management Division only for services related to portfolio management, trade execution, financial analytical systems, accounting, trade matching and settlement, and risk and compliance. The protocol for services related to information technology/operations was not enabled.
The Investment Management Division has not carried out a business impact analysis study. Furthermore, the business continuity and disaster recovery plan does not define the recovery time objectives for all critical applications. The Board "observed that the information supplied to the actuary for valuation of pension benefits payable as at 31 December 2015 was inconsistent with the data provided with the financial statements."
The report also says there is scope for improvement in processing pension benefits and client services, "particularly in redressing the complaints of the beneficiaries." The Board urges "proactive steps in collaboration with member organizations to expedite the receipt of the documents required for calculating and awarding pension benefits."
There is also a "need to streamline the procedures for obtaining the certificate of entitlement and the reconciliation of contributions received from member organizations."
The section on Auditor's responsibilities spells out the limits on the ability of auditors to deal with malfeasance. "Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
"As part of an audit in accordance with the International Standards on Auditing, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
"We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit."
The Audit report can be downloaded here