A/76/5/Add.11 United Nations United Nations Office for Project Services Financial report and audited financial statements for the year ended 31 December 2020 and Report of the Board of Auditors General Assembly Official Records Seventy-sixth Session Supplement No. 5K A/76/5/Add.11 General Assembly A/76/5/Add.11 Official Records Seventy-sixth Session Supplement No. 5K United Nations Office for Project Services Financial report and audited financial statements for the year ended 31 December 2020 and Report of the Board of Auditors United Nations • New York, 2021 Note Symbols of United Nations documents are composed of letters combined with figures. Mention of such a symbol indicates a reference to a United Nations document. ISSN 1020-718X [22 July 2021] Contents Chapter Page Letters of transmittal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 I. Report of the Board of Auditors on the financial statements: audit opinion . . . . . . . . . . . . . . . . 7 II. Long-form report of the Board of Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 A. Mandate, scope and methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 B. Findings and recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 1. Follow-up of recommendations from previous years . . . . . . . . . . . . . . . . . . . . . . . . . . 14 2. Financial overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 3. Financial management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 4. Budget management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 5. Procurement management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 6. Information technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 7. Risk management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 8. Travel management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 C. Disclosures by management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 1. Write-off of losses of cash, receivables and property . . . . . . . . . . . . . . . . . . . . . . . . . . 32 2. Ex gratia payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 3. Cases of fraud and presumptive fraud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 D. Acknowledgement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Annex Status of implementation of recommendations up to the financial year ended 31 December 2019 . 34 III. Financial report for the year ended 31 December 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 A. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 B. Highlights of results in 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 C. People excellence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 D. Accountability and transparency as a core value of the United Nations Office for Project Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 E. System of internal control and its effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 F. Looking ahead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 IV. Financial statements for the period ended 31 December 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 21-06983 3/129 I. Statement of financial position as at 31 December 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 II. Statement of financial performance for the period ended 31 December 2020 . . . . . . . . . . 68 III. Statement of changes in net assets for the period ended 31 December 2020 . . . . . . . . . . . 69 IV. Statement of cash flows for the period ended 31 December 2020 . . . . . . . . . . . . . . . . . . . . 70 V. Statement of comparison of budget and actual amounts for the period ended 31 December 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 Notes to the 2020 financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 4/129 21-06983 Letters of transmittal Letter dated 31 March 2021 from the Executive Director and the Chief Financial Officer and Director of Administration of the United Nations Office for Project Services addressed to the Chair of the Board of Auditors The United Nations Office for Project Services (UNOPS) hereby submits its annual financial statements for the year ended 31 December 2020. We acknowledge that: Management is responsible for the integrity and objectivity of the financial information included in these financial statements. The financial statements have been prepared in accordance with the International Public Sector Accounting Standards (IPSAS) and include certain amounts that are based on management’s best estimates and judgments. Accounting procedures and related systems of internal control provide reasonable assurance that assets are safeguarded, that the books and records properly reflect all transactions and that, overall, policies and procedures are implemented with an appropriate segregation of duties. UNOPS internal auditors continually review the accounting and control systems. Further improvements are being implemented in specific areas. Management provided the Board of Auditors and UNOPS internal auditors with full and free access to all accounting and financial records. The recommendations of the United Nations Board of Auditors and UNOPS internal auditors are reviewed by management. Control procedures have been revised or are in the process of being revised, as appropriate, in response to those recommendations. We certify that, to the best of our knowledge, information and belief, all material transactions have been properly charged in the accounting records and are properly reflected in the appended financial statements. (Signed ) Grete Faremo Executive Director (Signed ) Marianne Roumain De La Touche Chief Financial Officer and Director of Administration 21-06983 5/129 Letter dated 22 July 2021 from the Chair of the Board of Auditors addressed to the President of the General Assembly I have the honour to transmit to you the report of the Board of Auditors, together with the financial report and the audited financial statements of the United Nations Office for Project Services for the year ended 31 December 2020. (Signed ) Jorge Bermúdez Comptroller General of the Republic of Chile Chair of the Board of Auditors 6/129 21-06983 A/76/5/Add.11 Chapter I Report of the Board of Auditors on the financial statements: audit opinion Opinion We have audited the financial statements of the United Nations Office for Project Services (UNOPS), which comprise the statement of financial position (statement I) as at 31 December 2020 and the statement of financial performance (statement II), the statement of changes in net assets (statement III), the statement of cash flows (statement IV) and the statement of comparison of budget and actual amounts (statement V) for the year then ended, as well as the notes to the financial statements, including a summary of significant accounting policies. In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of UNOPS as at 31 December 2020 and its financial performance and cash flows for the year then ended, in accordance with the International Public Sector Accounting Standards (IPS AS). Basis for opinion We conducted our audit in accordance with the International Standards on Auditing. Our responsibilities under those standards are described in the section below entitled “Auditor’s responsibilities for the audit of the financial statements”. We are independent of UNOPS, in accordance with the ethical requirements relevant to our audit of the financial statements, and we have fulfilled our other ethical responsibilities in accordance with those requirements. We believe that the audit evidence that we have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis of matter We draw attention to note 11 to the 2020 financial statements, entitled “Other financial assets”, in which the ongoing investments of UNOPS relating to the Sustainable Infrastructure Impact Investments initiative (S3I) are provided. We also draw attention to paragraph 127 in note 13 to the financial statements, in which $22.2 million of the provisions relating to the disinvestments of S3I projects are reported. Our opinion is not modified in respect of these matters. Further details are provided in paragraphs 33 to 59 of the long-form report. Information other than the financial statements and the auditor’s report thereo n The Executive Director of UNOPS is responsible for the other information, which comprises the financial report for the year ended 31 December 2020, contained in chapter III below, but does not include the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information, and we do not express any form of assurance thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, on the basis of the work that we have performed, we conclude that there is a material misstatement in the other information, we are required to report that fact. We have nothing to report in this regard. 21-06983 7/129 A/76/5/Add.11 Responsibilities of management and those charged with governance for the financial statements The Executive Director is responsible for the preparation and fair presentation of the financial statements in accordance with IPSAS and for such internal control as the Executive Director determines to be necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Executive Director is responsible for assessing the ability of UNOPS to continue as a going concern, disclosing, as applicable, matters related to the going concern and using the going-concern basis of accounting unless management intends either to liquidate UNOPS or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the financial reporting process of UNOPS. Auditor’s responsibilities for the audit of the financial statements 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. 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: (a) Identify and assess the risks of material misstatement in the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than the risk of not detecting one resulting from error, as fraud may involve collusion, forgery, intentional omission, misrepresentation or the overriding of internal control; (b) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control of UNOPS; (c) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management; (d) Draw conclusions as to the appropriateness of management’s use of the going-concern basis of accounting and, on the basis of the audit evidence obtained, whether a material uncertainty exists in relation to events or conditions that may cast significant doubt on the ability of UNOPS to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause UNOPS to cease to continue as a going concern; 8/129 21-06983 A/76/5/Add.11 (e) Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and signif icant audit findings, including any significant deficiencies in internal control that we identify during our audit. Report on other legal and regulatory requirements Furthermore, in our opinion, the transactions of UNOPS that have come to our notice or that we have tested as part of our audit have, in all significant respects, been in accordance with the financial regulations and rules of UNOPS and legislative authority. In accordance with article VII of the Financial Regulations and Rules of the United Nations, we have also issued a long-form report on our audit of UNOPS. (Signed ) Jorge Bermúdez Comptroller General of the Republic of Chile Chair of the Board of Auditors (Signed ) Hou Kai Auditor General of the People’s Republic of China (Lead Auditor) (Signed ) Kay Scheller President of the German Federal Court of Auditors 22 July 2021 21-06983 9/129 A/76/5/Add.11 Chapter II Long-form report of the Board of Auditors Summary The Board of Auditors has audited the financial statements of the United Nations Office for Project Services (UNOPS) for the financial year ended 31 December 2020 in accordance with General Assembly resolution 74 (I) of 1946. The Board also examined the financial transactions and operations executed at UNOPS. Due to the impact of the coronavirus disease (COVID-19) pandemic, the audit was conducted remotely in Beijing. Opinion In the Board’s opinion, the financial statements present fairly, in all material respects, the financial position of UNOPS as at 31 December 2020 and its financial performance and cash flows for the year then ended, in accordance with the International Public Sector Accounting Standards (IPSAS). Overall conclusion The financial position of UNOPS remains sound, and the reported surpluses continue to contribute to significant reserves. There were a few cases of shortcomings in financial management and budget management, the lessons of which could further improve the delivery by UNOPS. Key findings No separate account for the growth and innovation reserve UNOPS established the growth and innovation reserve in November 2019. At the end of 2020, the reserve was valued at $124.3 million. However, there was no separate account for the reserve as at 31 March 2021. Risk exposure of the Sustainable Infrastructure Impact Investments projects UNOPS invested in all of the seven Sustainable Infrastructure Impact Investments initiative (S3I) projects (amounting to $58.8 million) by entering into agreements with seven special-purpose vehicles, all affiliated with a single private holding group. In 2020, UNOPS disinvested from two S3I projects and requested repayments totalling $25.48 million. However, UNOPS had not received the overdue payments by the end of March 2021. The expected credit loss of $22.19 million on aggregate against S3I initiative investments was reflected in its 2020 financial statements. The deficiencies in partnership diversification might further expose S3I initiative investments to risks. Deficiencies in measuring bad debt allowance UNOPS established the bad debt allowance for two disinvested S3I projects. One was at 100 per cent of the amount accrued in 2020, indicating that the present value of the future cash flows was expected to be close to zero. For the other project, UNOPS established the bad debt allowance at 50 per cent of the carrying value with an underlying asset in the nature of the power plant. However, no professional appraisal was conducted on the status or fair value of the underlying asset. The policies relating to bad debt allowance could not serve as an adequate basis, as they 10/129 21-06983 A/76/5/Add.11 do not specify the measurement method of the allowance for estimated irrecoverable amounts of S3I initiative investments. Unspecific policy of the cost recovery model for engagements relating to memorandums of understanding Upon renewal of a global agreement, the pricing model would be a reference for the pricing schedule of engagements relating to memorandums of understanding. However, the existing UNOPS policy of reviewing global agreements for financial aspects does not explain specific components such as the services involved and the risks associated with them when considering setting a fee to balance the over-cost and under-cost engagements. Unclear standard and inadequate justification in the risk increment calculatio n process The Board reviewed the documents relating to risk assessments and the risk fee increment calculation process in oneUNOPS (the UNOPS enterprise resource planning system) for some engagements and found that no justification had been given for the risk fee increment added. Furthermore, the calculation standard for complexity, which had an increment of up to 40 per cent of the minimum fee, was not clear enough. Insufficient budget estimates and no performance indicator for strategic investments The strategic investments budget in UNOPS budget estimates for the biennium 2020–2021, amounting to $20 million, lacked a basis for budget formulation. Its implementation rate as at 31 December 2020 was 25 per cent, with 36 per cent of the 2020 budget (amounting to $6 million) unallocated. Furthermore, the linkage between the strategic investment activities and the expected impacts, outputs and outcomes was not well articulated. Lack of automated mechanisms for delegations of authority The current process for requesting, revising, issuing and assigning delegations of authority was done manually. Delegation-of-authority records in oneUNOPS did not provide details such as the delegator’s and delegatee’s names, amount thresholds, scope, supervisor, special instructions or monitoring of segregation of duties. Furthermore, UNOPS used a manual process to review all roles and delegation -of- authority assignments in case of change in contract, position number or duty station. Corporate risk management unintegrated in oneUNOPS UNOPS deployed the digital tool into the oneUNOPS system for risk management at the operational and organizational levels, and the system was available to all projects. Nevertheless, the risk management at the corporate level was not embedded in oneUNOPS to be unified. Main recommendations While further detailed recommendations are set out in the present report, in summary, the Board recommends that UNOPS: No separate account for the growth and innovation reserve (a) Set up a separate account for the growth and innovation reserve in due time, develop relevant policies and maintain appropriate compliance, to ensure prudent management of the reserve; 21-06983 11/129 A/76/5/Add.11 Risk exposure of the Sustainable Infrastructure Impact Investments projects (b) Conduct a thorough risk reassessment of the existing investments and establish mechanisms to measure and control the risk concentration to avoid excessive exposures to any single partner; Deficiencies in measuring bad debt allowance (c) Review its policies on bad debt allowance for S3I initiative investments and consider complementing the specific measurement methods of the allowance for estimated irrecoverable amounts; Unspecific policy of the cost recovery model for engagements relating to memorandums of understanding (d) Strengthen the guidance on evaluating specific components such as the service provided and the associated risk to balance over-cost engagements and under-cost engagements when applying the existing pricing model to memorandums of understanding; Unclear standard and inadequate justification in the risk increment calculation process (e) Update guidelines to complement the necessary documentation on justification for the risk increment calculation as part of the management fee and devise an appropriate review mechanism on such justification to provide assurance with respect to the applicability of the pricing model during the engagement acceptance process; Insufficient budget estimates and no performance indicator for strategic investments (f) Formulate the budget estimate of strategic investments on the basis of expected expenses and link the strategic investments budget with its corresponding outcome and performance indicators; Lack of automated mechanisms for delegations of authority (g) Take effective measures to integrate complete assignment information on delegations of authority into oneUNOPS and establish automated mechanisms to ensure that transactions are processed within the scope of the delegated authorities; Corporate risk management unintegrated in oneUNOPS (h) Assess the feasibility of incorporating corporate risks into oneUNOPS and verify that the risk management operational instruction reflects the strategic direction of UNOPS regarding this subject. Follow-up of previous recommendations As at 31 December 2020, of the 39 outstanding recommendations up to the financial year ended 31 December 2019, 13 (33 per cent) had been implemented, 24 (62 per cent) were under implementation and two (5 per cent) had been overtaken by events. The details are contained in the annex to the present chapter. 12/129 21-06983 A/76/5/Add.11 Key facts $1,169.19 million Total revenue $1,140.73 million Total expenses $11.03 million Net finance income $39.50 million Surplus for the year ended 31 December 2020 $124.32 million Growth and innovation reserve $3,909.65 million Total assets $3,623.10 million Total liabilities A. Mandate, scope and methodology 1. The United Nations Office for Project Services (UNOPS) helps people to build better lives and countries to achieve sustainable development. UNOPS is a demand- driven and self-financing organization without any contributions from Member States that relies on the revenue that it earns from the implementation of projects and the provision of transactional and advisory services. It provides services that cont ribute to peace and security, humanitarian and development operations of the United Nations system. UNOPS revenues are wholly dependent on fees generated by the provision of project services through advisory, implementation and transactional services in it s five core areas of expertise, namely, infrastructure, procurement, project management, financial management and human resources. 2. The Board of Auditors has audited the financial statements of UNOPS for the financial year ended 31 December 2020 in accordance with General Assembly resolution 74 (I) of 1946. The audit was conducted in conformity with the financial regulations and rules of UNOPS, as well as the International Standards on Auditing. Those standards require that the Board comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free from material misstatement. 3. The audit was conducted primarily to enable the Board to form an opinion as to whether the financial statements presented fairly the financial position of UNOPS as at 31 December 2020 and its financial performance and cash flows for the year then ended, in accordance with IPSAS. This included an assessm ent as to whether the expenses recorded in the financial statements had been incurred for purposes approved by the UNOPS governing body and whether they had been properly classified and recorded in accordance with the UNOPS financial regulations and rules. 4. The audit included a general review of financial systems and internal controls and a test examination of the accounting records and other supporting evidence to the extent that the Board considered it necessary to form an opinion on the financial state ments. 5. The Board reviewed UNOPS operations under regulation 7.5 of the Financial Regulations and Rules of the United Nations. The Board conducted remotely the interim audit from 26 October to 22 November 2020 and the final audit from 5 April to 30 April 2021, owing to the COVID-19 pandemic and related travel restrictions. 6. The present report covers matters that, in the opinion of the Board, should be brought to the attention of the General Assembly. The report was discussed with UNOPS management, whose views have been appropriately reflected. 21-06983 13/129 A/76/5/Add.11 B. Findings and recommendations 1. Follow-up of recommendations from previous years 7. The Board noted that there were 39 outstanding recommendations up to the year ended 31 December 2019. At the time of the assessment of the Board, 13 had been implemented (33 per cent), 24 were under implementation (62 per cent), and two had been overtaken by events (5 per cent), as shown in table II.1 below. The rate of implementation of recommendations was lower than that achieved in the previous year (67 per cent). Table II.1 Status of implementation of recommendations Report of the Board of Auditors Status A/72/5/Add.11 A/73/5/Add.11 A/74/5/Add.11 A/75/5/Add.11 Total Open recommendations as at 31 December 2019 5 3 8 23 39 Status of implementation in 2020 (a) Implemented – 1 2 10 13 (b) Under implementation 4 2 5 13 24 (c) Not implemented – – – – – (d) Overtaken by events 1 – 1 – 2 Recommendations open as at 31 December 2020 4 2 5 13 24 Source : Analysis by the Board of Auditors. 8. The Board further carried out an analysis of the 24 recommendations open as at 31 December 2020 and noted that: (a) Nine related to financial management (37 per cent); six related to project management (25 per cent); four referred to procurement management (17 per cent); four related to the Bangkok Shared Service Centre (17 per cent); and one fell within the category of information and communications technology (4 per cent); (b) With regard to the ageing of the recommendations, 13 were made one year ago (54 per cent); five were two years old (21 per cent); two remained open for three years (8 per cent); and four were pending for four years (17 per cent); (c) As for the recommended corrective measures, eight indicated a need for the development of regulations (33 per cent); 14 involved regulation improvement (59 per cent); and two required corrections in compliance with regulations (8 per cent). 9. The Board acknowledged that UNOPS had progressed towards implementation of the majority of the pending recommendations and noted that preliminary actions had been initiated for a number of cases, but further efforts were requ ired for actual implementation. Details are set out in the annex to the present chapter. 2. Financial overview Financial results 10. The General Assembly, in its decision 48/501, established UNOPS as a separate, self-financing entity to provide capacity-building services, including project management, procurement and the management of financial resources. To cover its expenses, UNOPS charges its clients fees for services rendered. It continued to deliver an overall surplus with regard to its operations. It reported a surplus of $39.5 million 14/129 21-06983 A/76/5/Add.11 in 2020 against the surplus of $47.14 million in 2019. The surplus represented 3.46 per cent of the expenditure of $1,140.73 million that UNOPS had incurred. 11. The net revenue (fees) that UNOPS generates from its project activities is used to cover its central management costs. As shown in table II.2, since 2016, UNOPS has generated a net revenue from its project activities ranging from $86.70 million in 2016 to $109.05 million in 2020. During that p eriod, the net surplus generated each year included net finance income. Table II.2 Analysis of surpluses reported by the United Nations Office for Project Services (Thousands of United States dollars) 2020 2019 2018 2017 2016 Net revenue from project activities a 109 046 99 247 88 130 89 731 86 701 Miscellaneous and non-exchange revenue 8 591 4 461 1 838 2 374 2 127 b Non-project expenses (89 168) (82 202) (71 160) (73 956) (68 767) Surplus from operations 28 469 21 506 18 808 18 149 20 061 Net finance income 11 031 25 631 19 619 10 817 11 219 Reported surplus 39 500 47 137 38 427 28 966 31 280 Source : UNOPS financial statements. a Direct project revenue less direct project expenditures. b Total expenditure less direct project expenditures. Net assets and equity 12. In 2013, the Executive Board approved a policy to establish a minimum operational reserve, which was set at the equivalent of four months of the average management expenses for the previous three years. As at 31 December 2020, this equated to $22.0 million. In 2019, a growth and innovation reserve was established, the value of which was set at 50 per cent of the excess operational reserves. The reported growth and innovation reserve as at 31 December 2020 amounted to $124.32 million (2019: $104.91 million). The net assets (total reserves) as at 31 December 2020 amounted to $286.55 million (2019: $252.04 million). The details are shown in the figure below. Net assets and equity as at 31 December 2020 (Millions of United States dollars) Source : UNOPS financial statements. 21-06983 15/129 A/76/5/Add.11 13. In its previous report (A/75/5/Add.11, chap. II), the Board recommended that management review its required minimum operational reserves and adhere to its policy of full cost recovery, so that the risks arising during the course of its operations were effectively met and surpluses were not accumulated over and above the realistically assessed operational reserves. The Board was informed that, as directed in a decision of the Executive Board of the United Nations Development Programme, the United Nations Population Fund and the United Nations Office for Project Services (DP/2020/19), UNOPS undertook a review of its minimum operational reserves. The proposal for the new requirement for such reserves has been included in the budget estimates for the biennium 2022–2023; it will be presented to the Advisory Committee on Administrative and Budgetary Questions for review and afterward to the Executive Board at its second regular session, in August and September 2021. Ratio analysis 14. The Board analysed the financial health of UNOPS using a range of key ratios , as set out in table II.3. Table II.3 Financial ratios as at 31 December Financial ratios 2020 2019 2018 2017 2016 Cash ratio a Cash + short-term investments: current liabilities 0.85 0.81 0.91 0.95 0.29 Quick ratio b Cash + short-term investments + accounts receivable: current liabilities 0.87 0.84 0.95 1.01 0.35 c Current ratio Current assets: current liabilities 0.88 0.85 0.96 1.02 0.35 Solvency ratio d Total assets: total liabilities 1.08 1.12 1.09 1.09 1.09 e f Project surplus (margin percentage ) Direct project revenue – direct project $109 million $99.2 million $88.1 million $89.7 million $86.7 million expenses (9.4 per cent) (8.2 per cent) (9.4 per cent) (10.8 per cent) (11 per cent) Net surplus (margin percentage f ) $39.5 million $47.14 million $38.43 million $28.97 million $31.3 million Revenue – expenses (3.38 per cent) (3.89 per cent) (4.08 per cent) (3.47 per cent) (3.96 per cent) Source : UNOPS financial statements. a The cash ratio serves as an indicator of an entity’s liquidity by measuring the amount of cash, cash equivalents or invested funds there are in current assets to cover current liabilities. b The quick ratio is more conservative than the current ratio because it excludes inventory an d other current assets, which are more difficult to turn into cash. A higher ratio means a more liquid current position. c A high ratio indicates an entity’s ability to pay off its short-term liabilities. d A high ratio is a good indicator of solvency. e Direct project revenue and expenses relate to the project revenue/expenses reported in note 20 of the financial statements. f Margin percentage refers to project revenue/total revenue. 15. As at 31 December 2020, UNOPS had total assets of $3.91 billion (2019: $2.37 billion), consisting mainly of investments of $2.91 billion (2019: $1.71 billion) and cash and cash equivalents of $883.98 million (2019: $559.44 million). The total liabilities of UNOPS stood at $3.62 billion as at 31 December 2020 (2 019: $2.12 billion), with liabilities relating to project cash advances received at $3.18 billion (2019: $1.77 billion), representing 87.85 per cent (2019: 83.49 per cent) of the total liabilities. The significant increase in both total assets and liabilit ies in 16/129 21-06983 A/76/5/Add.11 2020 is attributed mainly to an increase in contributions that were received in advance from partners towards the implementation of the projects. 16. The Board noted that, in 2020, there was a slight increase in the current ratio, cash ratio and quick ratio and a minor decrease in total assets to total liabilities compared with 2019. The overall gross margin on project services increased from 8.2 per cent in 2019 to 9.4 per cent in 2020. The net surplus, however, did not increase proportionately, as it resulted from the net foreign exchange loss. The net finance income from investments and other financial assets decreased from $25.63 million in 2019 to $11.03 million in 2020 due to the foreign exchange loss. The overall financial position of UNOPS remained sound given that the solvency ratio was above one. Impact of COVID-19 17. In 2020, UNOPS met its revenue target on a budget basis, and the COVID -19 pandemic had a limited financial impact on its operations. UNOPS informed the Board that its financial statements had been finalized while the pandemic was still prevalent and that it was still too early to estimate the exact magnitude of the long - term economic consequences and subsequently any impact on UNOPS net assets and equity. 18. As a result of COVID-19 and the restriction of travel, UNOPS travel expenses decreased by 46 per cent ($44.5 million in 2020 compared with$83 million in 2019). Also, UNOPS management approved the extension of annual leave, which resulted in an increase in annual leave liability of 44 per cent ($33.7 million in 2020 compared with $23.4 million in 2019). The Board was informed that the principal of the UNOPS working capital portfolio remained safe, in line with its investment policy on working capital, as it held high-quality assets aimed at preserving the principal over the investment horizon. Adverse impacts in the global bond markets were the main driver for the decrease in investment revenue. 3. Financial management (a) Accounting management Incorrect recognition and disclosure of non-exchange revenue 19. In regulation 9.02 of the UNOPS financial regulations and rules, it is stated that “UNOPS revenue earned from exchange and non-exchange transactions shall be recognized in accordance with IPSAS.”. 20. According to the agreement signed by UNOPS and the Ministry for Foreign Affairs of the country where the S3I office was located, the Ministry would make contributions amounting to a maximum of €20 million in four instalments to support UNOPS in implementing S3I activities during the period 2020–2023. In May 2020, UNOPS received the first contribution of $5.43 million (€5 million). In accordance with IPSAS, this transaction was a non-exchange transaction without condition and the contribution should be fully recognized as non-exchange revenue. However, UNOPS initially recorded the contribution as deferred revenue and subsequently recognized the expenses of $437,585 as revenue from project activities in its financial statements. 21. Apart from the above contribution, UNOPS received a $210,066 (€192,000) contribution in October 2019, which was granted by the city in which the S3I office was located to cover office rental costs from September 2019 to December 2020. Since this transaction met the definition of a non-exchange transaction with condition under IPSAS, UNOPS recorded the contribution as deferred revenue and recognized in revenue the equivalent of the office rental costs incurred in 2019. Twelve months’ worth of the revenue, $163,702 (€144,000), was deferred in 2 019 and recognized as 21-06983 17/129 A/76/5/Add.11 miscellaneous revenue in 2020. However, the Board noted that, in the notes to the financial statements in 2019 and 2020, UNOPS initially omitted to include the revenue recognized within the narrative disclosure on non-exchange revenue; it was disclosed that the amount of non-exchange revenue UNOPS received was $0.1 million in both 2019 and 2020. 22. UNOPS explained that the contribution from the Ministry related to a single project that had non-exchange revenue. It was treated in the same way as project funds received in advance and therefore accounted for as deferred revenue. 23. The Board is concerned that improper recognition of deferred revenue and project activities revenue from non-exchange transactions might lead to inaccurate measurement of financial data including liabilities and revenues, which could further affect fair presentation of the financial statements. Meanwhile, inadequate disclosures of non-exchange revenue in the notes might further affect the credibility of financi al statements. 24. Upon the recommendations of the Board, UNOPS made corresponding adjustments to the corporate financial statements and disclosed the information concerning the above revenue from non-exchange transactions in accordance with IPSAS. 25. The Board recommends that UNOPS reassess the necessity of elaborating detailed processes on the recognition of non-exchange revenue in line with IPSAS. 26. UNOPS accepted the recommendation. No separate account for the growth and innovation reserve 27. In regulation 22.02 of the UNOPS financial regulations and rules, it is stated that “Within the UNOPS accounts, the following reserves may be established: … (b) A growth and innovation reserve to invest in the future revenue generating ability of UNOPS.”. In rule 122.02, it is also stated that “Separate accounts shall be maintained for all reserves.”. Furthermore, in paragraph 2.1 of the UNOPS operational instruction on financial accounting and reporting (OI.FG.2020.01, it is stated that “UNOPS GL shall be managed through the ERP system (oneUNOPS) in order to allow financial transactions to be recorded to the GL from different locations where UNOPS offices are based.”. 28. The Board noted that UNOPS had established the growth and innovation reserve in November 2019. At the end of 2020, the reserve was valued at $124.32 million. However, there was no separate account for the reserve as at 31 March 2021 and the balance was not reflected separately in oneUNOPS. 29. UNOPS explained that currently, the calculation for the reserve was maintained outside oneUNOPS due to its calculation process but that the balance for the reserve was recorded in oneUNOPS as part of reserves accounts. 30. The Board is of the view that no establishment of separate accounts for the reserve might lead to incomplete and inaccurate reflection of related transactions and the balance of account in oneUNOPS, which is not conducive to the management of the reserve. 31. The Board recommends that UNOPS set up a separate account for the growth and innovation reserve in due time, develop relevant policies and maintain appropriate compliance, to ensure prudent management of the reserve. 32. UNOPS accepted the recommendation. 18/129 21-06983 A/76/5/Add.11 (b) S3I initiative investment management 33. UNOPS had invested $58.8 million from its growth and innovation reserve and carried out seven projects under its S3I initiative as at 31 December 2020. In October 2020, UNOPS disinvested from two projects and requested the return of previous payments totalling $25.48 million. However, UNOPS had not received the overdue payment by the end of March 2021. UNOPS established bad debt allowances against the default. The expected credit losses of $22.19 million on aggregate against S3I initiative investments were reflected in its 2020 financial statements. In furtherance of audit observations in the previous year (see A/75/5/Add.11, chap. II, paras. 48–64), the Board identified some issues relating to the management of S3I initiativ e investments. Lack of partnership diversification 34. In section 5 of the guidelines for S3I operations, it is stated that “Within the context of S3I’s risk appetite, investment diversification is a key element … As a general rule, the building of a network of multiple partnerships for S3I will also reduce overdependence on too few partners, which could trigger cumulative risk exposures.”. 35. The Board noted that UNOPS had invested in the seven projects by entering into agreements with seven special-purpose vehicles, all affiliated with a single private holding group (hereinafter referred to as the partner). 36. The Board further noted that two of the seven special-purpose vehicles defaulted on the above-mentioned repayment of $25.48 million, accounting for 39.58 per cent of the financial exposure of UNOPS totalling $64.37 million to the partner and its special-purpose vehicles. As at March 2021, UNOPS still had not received the repayment; it then established bad debt allowances of $20.53 million, accou nting for 32 per cent of the financial exposure. 37. The Board is concerned that overdependence on a single partner might trigger cumulative risk exposures. It is necessary for UNOPS to build a network of multiple partnerships. 38. The Board recommends that UNOPS conduct a thorough risk reassessment of the existing investments and establish mechanisms to measure and control the risk concentration to avoid excessive exposures to any single partner. 39. UNOPS accepted the recommendation. Inadequate monitoring of S3I initiative investments 40. In rule 4.2 of UNOPS operational directive OD.FG.2018.01, it is stated that “UNOPS financial activities are carried out in a strictly risk controlled manner that upholds the highest standards of effectiveness, competence and integrity.”. It is also stated in the guidelines for S3I operations that “A maturing S3I portfolio of investments should, over time, not result in major losses of the allocated capital. Robust project and portfolio monitoring are essential for risk management purpose … Risk management requires a strong focus on the ongoing monitoring of approved projects during the design, construction and implementation phases.”. 41. In March 2019, UNOPS entered into an agreement with the partner and a special-purpose vehicle. According to the agreement, UNOPS provided $15 million to the special-purpose vehicle at a fixed interest rate of 10 per cent per annum for 15 years. The special-purpose vehicle should exclusively use the borrowed money in renewable energy pipeline projects under the authorization of UNOPS. 21-06983 19/129 A/76/5/Add.11 42. In October 2020, UNOPS signed an agreement with the special-purpose vehicle to return $15.62 million to UNOPS as a prepayment against the original loan. As at March 2021, UNOPS still had not received the payment; it then established the bad debt allowance at 100 per cent of the amount, accrued in 2020. 43. Pursuant to the initial agreement, the special-purpose vehicle should provide to UNOPS documents and information such as audited con solidated accounts, monthly management accounts, progress reports, actual and projected cash flow tables and so forth. However, UNOPS never collected such documents and information from the special-purpose vehicle. 44. UNOPS explained that it had not authorized any investment in live projects and had assumed that all the money should be in deposit. Therefore, UNOPS did not ask for the above documents and information. 45. During the audit, UNOPS asked the special-purpose vehicle to update the status of the loan, at the request of the auditors. The special-purpose vehicle responded that a large portion of the $15 million deposit had been used to discharge its pre -existing debts and liabilities. 46. The Board is of the view that UNOPS did not carry out the abo ve investment in a strictly risk-controlled manner. The Board is concerned that the insufficient monitoring of the lending with specified purposes to the special -purpose vehicle exposed UNOPS to a high credit risk, as inferred by 100 per cent provision, an d resulted in the insecure assumption on the account status. 47. The Board recommends that UNOPS establish the necessary procedures to strengthen the risk assessment and ongoing monitoring of its S3I initiative investments to ensure the safety of the investments. 48. UNOPS accepted the recommendation. Deficiencies in measuring bad debt allowance 49. In rule 3.1 of operational instruction OI.FG.2020.01 on financial accounting and reporting, it is stated that “UNOPS accounting and reporting shall comply with IPSAS.”. In paragraph 72 of IPSAS 29, it is stated that “If there is objective evidence that an impairment loss on loans and receivables or held -to-maturity investments carried at amortized cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate.”. 50. In 2020, UNOPS recognized the expected credit losses of $22.19 million agai nst other account receivables, measured through risk/experience -based assessment, in relation to the disinvestments from two S3I projects (windmill power project and renewable energy project). (i) Windmill power project 51. Pursuant to the tripartite transfer certificate of October 2020, UNOPS would transfer its original investment of $8.8 million in the windmill power project to the above-mentioned special-purpose vehicle. In exchange, the special-purpose vehicle should pay $9.86 million to UNOPS. As at March 2021, UNOPS still had not received the repayment, which had been overdue for more than three months; it then established a bad debt allowance of $4.91 million (50 per cent of the carrying value of the original investment as at 30 September 2020). 52. UNOPS stated that the fund was invested in an operating project with less liquidity, with an underlying asset related to the nature of the power plant, making it 20/129 21-06983 A/76/5/Add.11 harder for the debtor to refund the money. On the basis of the experience -based assessment, UNOPS established the above bad debt allowance. 53. The Board noted that, as reflected in the management accounts of one wind farm, the owner of that underlying asset, it was in a net liability position due to continued losses. In addition, no professional appraisal was conducted on the status or fair value of the underlying asset. (ii) Renewable energy project 54. In October 2020, UNOPS signed an agreement with the special-purpose vehicle to disinvest from the renewable energy project and return $15.62 million to UNOPS as a repayment against an original loan. 55. UNOPS explained that the $15 million was supposed to be liquid in a bank account of the special-purpose vehicle, making it easy for the debtor to repay it to UNOPS. However, as at March 2021, the repayment had been overdue for more than four months; UNOPS then established the bad debt allowance at 100 per cent of the amount, accrued in 2020. 56. The Board is of the view that according to IPSAS, the amount of the expected credit loss recognized at 100 per cent of the receivables meant that the present value of estimated future cash flows was close to zero. However, the Board noted that UNOPS still optimistically expected the full and final payment as stated in the first session of the quarterly business review and in audit interviews. 57. The Board further examined the provisions relating to bad debt allowance and noted that the existing stipulations did not specify the measurement method of the allowance for estimated irrecoverable amounts of S3I initiative investments. Only the procedural requirements for the establishment and approval were promulgated, as presented in the UNOPS operational instruction. 58. The Board recommends that UNOPS review its policies on bad debt allowance for S3I initiative investments and consider complementing the specific measurement methods of the allowance for estimated irrecoverable amounts. 59. UNOPS accepted the recommendation and reported that it would put further measures in place to complement the measurement of estimated irrecoverable amounts in relation to S3I initiative investments. (c) Management fees and fee increments Unspecific policy of the cost recovery model for engagements relating to memorandums of understanding 60. In the UNOPS operational directive on value proposition and cost recovery model (OD.EO.2018.01), it is stated that “(3.1) In line with the principle of full cost recovery, each engagement agreement UNOPS enters into, should cover direct and indirect costs incurred by UNOPS in relation to the execution of the engagement; and (3.2) Costs pertaining to the execution and delivery of the engagement are to be determined as accurately as possible, ensuring that the effort and cost of determining and recovering these costs are reasonable.”. 61. The Board noted that, in general, UNOPS calculated management fees with the clients equal to the minimum fee for cost recovery by the lowest output of the model plus a risk increment (if any) and that was the pricing policy applicable to each engagement. The Board also noted that during the negotiation of a memorandum of understanding, a fixed management fee could be a part of the memorandum of understanding and that UNOPS took the pricing policy as a reference. 21-06983 21/129 A/76/5/Add.11 62. The Board reviewed management fees for all 593 engagements relating to memorandums of understanding (amounting to $2.61 billion) as at 31 March 2021 and noted that for 308 engagements (52 per cent), amounting to $690.71 million, the management fee rates were lower than the minimum fee rates and for 203 engagements (34 per cent), amounting to $1.64 billion, the fee rates were higher than the minimum fee rates. The fee rates of the remaining 82 engagements (14 per cent), amounting to $283.28 million, were equal to the minimum fee rates. 63. UNOPS explained that it was not the percentage of engagements above or below the minimum fee but rather the total United States dollar volume of fee reductions versus fee increases that mattered. Upon renewal of a global agreement, UNOPS would review its current fee setting with the minimum fee as per the pricing policy and discuss the rates with partners, taking into consideration its recovery policy, the needs of its partners, other United Nations entities if they were part of the discussions, the services involved and the risks associated with them. 64. The Board is of the view that, when applying the existing pricing model to memorandums of understanding, the current policy of reviewing global agreements for financial aspects does not explain specific components such as the services involved and the risks associated with them when considering setting a fee to balance the engagements with costs that are higher or lower than the minimum cost. It may lead to financial loss that cannot cover the risk and influence the transparency of pricing. 65. The Board recommends that UNOPS strengthen the guidance on evaluating specific components such as the service provided and the associated risk to balance over-cost engagements and under-cost engagements when applying the existing pricing model to memorandums of understanding. 66. UNOPS accepted the recommendation. Unclear standard and inadequate justification in the risk increment calculation process 67. The Board reviewed the management fee for 397 engagements not relating to memorandums of understanding signed between 1 January 2018 and 31 March 2021 and noted that for 275 engagements amounting to $8.4 billion, the management fee rates were higher than the minimum fee rates, with the ratio of 69 per cent in quantity and 97 per cent in value, showing that fee increments totalling $103.66 million were budgeted. 68. The Board checked 29 engagements, amounting to $6.98 million, with management fee rates higher than 30 per cent, all belonging to the UNOPS Latin America and the Caribbean Regional Office. According to the guidelines on the calculation of risk increment fees issued by the Office in 2014, when the engagement has characteristics that are associated with unforeseen risks, a risk increment has to be calculated and added to the minimum fee as a mitigation. Such factors include reputation issues, disputes and arbitrations. The risk whose mitigation can be covered by direct costs was not included in the risk increment. However, the Board reviewed related risk assessments documents in oneUNOPS for all 29 engagements and found that there were no written records of any of the above-mentioned unforeseen risks. 69. In addition, the risk increment rate was calculated considering four main criteria, namely, country of operation, partners involved, service and practices, and complexity. The Board noted that the complexity level of en gagements varied from zero to 40 per cent of the minimum fee in the 29 engagements. However, there was no justification or documentation of the complexity level measurement and its consistency of application. Unlike the other three criteria, the calculatio n standard for complexity was decided at the regional level and was not sufficiently clear. 22/129 21-06983 A/76/5/Add.11 70. UNOPS stated in its guideline that the total risk increment maximum rate was suggested to be within 100 per cent of the minimum fee. The Board noted that in 39 7 engagements not relating to memorandums of understanding, there were 17 engagements, amounting to $6.89 billion, whose actual management fees were more than double the minimum fees. Adjustments were made to 16 of them (amounting to $746.21 million, excluding the $6.14 billion in the PharmaMex engagement) so as to fit the fee rate negotiated with the partners, which resulted in the actual management fee rates being more than the total calculated rates, accounting for $23.81 million more in management fees budgeted. 71. UNOPS explained that the risk associated with the engagement was currently established on a case-by-case basis by the project manager. Risk assessment of the engagement was the prerogative of the implementing office, and the above guidelines were general guidelines to be considered rather than a direct prescription to assign a risk factor. The assessment of the complexity level was to address how much complexity was actually driving the risk exposure for the organization. Those factors could not be prescribed in a mathematical model, but needed to be assessed by the country team. 72. The Board is concerned that the lack of clear standards in the risk increment calculation process and inadequate justification records may make it difficult to evaluate the reasonableness of pricing. Considerable manual adjustments of management fees and inconsistent application of risk increment calculation might make pricing models ineffective, and transparency challenged, which in turn could have a negative financial and reputational impact on UNOPS. 73. The Board recommends that UNOPS update its guidelines to complement the necessary documentation on justification for the risk increment calculation as part of the management fee and devise an appropriate review mechanism on such justification to provide assurance with respect to the applicability of the pricing model during the engagement acceptance process. 74. UNOPS accepted the recommendation. Pricing deviations of engagements without granted exceptions 75. In the UNOPS policy on pricing/management fee calculation and set -up (Process and Quality Management System 9.5.1.2), it is stated: “In summary, the minimum fee for the engagement is determined by the lowest output of the model plus a risk increment (if any). Should the agreed engagement fee with the client be different from minimum fee above, the reason can only be: (1) memorandum of understanding signed with the partner detailing a different pricing schedule; or (2) Engagement Acceptance Committee’s decision to grant an exception to the pricing calculation. In all other cases, the engagement must be equal to the lowest fee result + risk fee increment.”. 76. The Board reviewed the management fee for all 397 non-memorandum of understanding engagements provided by UNOPS as at 31 March 2021 and noted that the management fee rates of 65 engagements were lower than the minimum fee rates, among which 55 had not been approved by the Engagement Acceptance Committee. 77. UNOPS explained that after looking into the 55 engagements (amounting to $48.86 million) without Engagement Acceptance Committee approval, 18 of them (amounting to $14.88 million) were wrongly regarded as non -memorandum of understanding engagements due to a lack of linkage between engagements and memorandums of understanding in oneUNOPS, and omissions had occurred in the process of compiling information on engagements. In the remaining 37 engagements (amounting to $33.98 million), the absence of Engagement Acceptance Committee 21-06983 23/129 A/76/5/Add.11 approval had resulted from non-memorandum of understanding agreements signed with partners detailing a different pricing schedule. While the Engagement Acceptance Committee might not have had a formal review on record for the 37 engagements referenced, all waivers had also been approved by the engagement authority. 78. The Board is concerned that inadequate linkage and reference could result in inaccurate pricing and lack of transparency, which might lead to financial and reputational risks. For the non-memorandum of understanding engagements, unclear reference between the engagements and documentation on Engagement Acceptance Committee decisions in oneUNOPS makes it difficult to judge whether the pricing deviations of engagements are consistent with the Process and Quality Mana gement System requirements. 79. The Board recommends that UNOPS implement a linkage of engagements and memorandums of understanding in oneUNOPS and establish a clear reference between Engagement Acceptance Committee decisions and pricing deviations in the engagement file in oneUNOPS to monitor the process. 80. UNOPS accepted the recommendation. (d) Asset disposal Asset disposal before approval 81. In rule 3.18 of the UNOPS operational instruction on fixed and intangible asset management (OI.FG. 2018.02), it is stated that “All disposals must be reviewed by the appropriate level of authority and approval should be obtained prior to the disposal.”. 82. According to the list of asset disposals provided by UNOPS, 104 assets were derecognized via donations in 2020, amounting to $819,529.53. The Board further noted that 74 of them, amounting to $705,266.43, had been donated and handed over to recipient entities before approvals had been obtained, accounting for 71 per cent in quantity and 86 per cent in value. Most of them were prefabricated offices and containers. 83. Among those post facto cases, assets with a total net book value of $653,851.11 were handed over to a United Nations entity in March 2020. However, the disposals were approved by the Headquarters Contract and Property Committee in September 2020. 84. UNOPS explained that the primary causes of the above post facto cases included COVID-19, the communication gap among multiple project offices and the knowledge gap of asset focal points. It further explained that all the assets mentioned above were derecognized within 2020 and thus, the asset data in the annual financial statements were accurate. Meanwhile, UNOPS had already carried out some related training, and various system enhancements were being reviewed. 85. The Board is concerned that these post facto cases indicate a defect in the internal control of asset disposal, which might raise the risk of arbitrariness in asset disposal and affect the accuracy of financial data. 86. The Board recommends that UNOPS take measures to strengthen the accountability of personnel involved and develop a time schedule to expedite the launch of system enhancements to track disposal processes. 87. UNOPS disagreed with the recommendation and stated that 70 out of 74 items were related to the UNOPS South Sudan country office, not a general issue in UNOPS. 24/129 21-06983 A/76/5/Add.11 88. The Board is of the view that given the intrinsic nature of such incompliance and the potential risks in the internal control and financial credit ability, these preventive and corrective measures are still recommended for improvement. 4. Budget management Insufficient budget estimates for strategic investments 89. Pursuant to IPSAS 24, “An approved budget is not a forward estimate, or a projection based on assumptions about future events and possible management actions that are not necessarily expected to take place.”. 90. In the UNOPS operational instruction on budgeting and internal investment management (OI.FG.2018.01), it is stated that “Investment budgets are a specific category of management expense budgets that are also funded through management fee recovered from client project … Investment budgets may be issued at any time and for any period. Budget performance is measured comparing bu dget and expense, and budget balances may be carried over as approved by the CFO based the evaluation of the investment performance based on criteria set forth in UNOPS internal investment principles.”. 91. The Board reviewed the UNOPS budget estimates for the biennium 2020–2021 (DP/OPS/2019/5) and noted that UNOPS would set aside $20 million for strategic investments, which was a specific category of the management expense budget. However, unlike the management expense budget, which was classified by expense category into posts, operating expenses and so forth, the budget estimate for strategic investments could not be further classified and lacked a formulation basis, since the approval for strategic investments took place after the budget estimate was approved. 92. The Board further reviewed the past performance of the strategic investments budget. The actual implementation rate of strategic investments decreased from 48 per cent in 2018 to 25 per cent in 2020, while the unallocated investment pool increased from 15 per cent in 2018 to 36 per cent in 2020. 93. The Board is of the view that the formulation of the budget estimate for strategic investments with no basis of assumptions about future events was not in line with IPSAS 24 regarding approved budgets, which may lead to inaccurate budget estimates and affect the implementation of the budget. 94. The Board recommends that UNOPS formulate the budget estimates of strategic investments based on expected expenses in compliance with IPSAS 24 and thus make budget a reliable criterion for evaluation and performance management. 95. UNOPS accepted the recommendation and reported that it would provide a justification for the budget level for strategic investm ents as from the budget estimates for the biennium 2022–2023. Lack of performance indicators for strategic investments 96. In the joint report of the United Nations Development Programme, the United Nations Population Fund and the United Nations Children’s Fund entitled “Road map to an integrated budget: cost classification and results-based budgeting” (DP-FPA/2010/1-E/ICEF/2010/AB/L.10, para. 33), it is stated that “UNDP, UNICEF and UNFPA hold the view that there is value in developing an integra ted framework that links all cost categories (development activities, United Nations development coordination, management, special purpose) with their corresponding results and indicators of performance. Such a framework would provide the Executive Board 21-06983 25/129 A/76/5/Add.11 with an overview of the relationship between results and resources at the corporate level.”. 97. In paragraph 67 of the report of the Executive Board of the United Nations Development Programme, the United Nations Population Fund and the United Nations Children’s Fund on the UNOPS budget estimates for the biennium 2020 – 2021 (DP/OPS/2019/5), it is stated that “UNOPS aligned its budget for the biennium 2020–2021 with the harmonized presentation adopted by UNDP, UNFPA and UNICEF, based on decisions 2010/32, 2011/10, 2012/27 and 2013/9, in which the Executive Board approved harmonized approaches for cost-classification, results- based budgeting and budget presentation.”. However, unlike results-based budgeting of management resources, the above-mentioned $20 million in the strategic investments budget, as one of the categories of management expenses, did not have performance indicators and targets. 98. The Board noticed that expenses and budget implementation of strategic investment projects were tracked quarterly. At the end of 2020, out of the 17 investment projects, 10 projects had a budget implementation rate of less than 50 per cent. Due to lack of performance indicators and targets, it is unable to evaluate t he performance of the strategic investments. 99. The Board is concerned that the linkage between strategic investment activities and expected results, outputs and outcomes is not well articulated and matched. Without performance indicators, the achievement of results could not be measured and the effectiveness of strategic investments could not be evaluated. 100. The Board is of the view that setting performance indicators for strategic investments would improve clarity, transparency and accountability for the results to be achieved. 101. The Board recommends that UNOPS link the strategic investments budget with its corresponding outcome and performance indicators. 102. UNOPS accepted the recommendation and mentioned that as of the budget estimates for the biennium 2022–2023, it would incorporate strategic investments from the surplus in management resources into its budget estimate and include a related performance indicator. Lack of reporting on the utilization of management resources towards the targe t 103. In 1999, the Secretary-General introduced in his report on results-based budgeting (A/54/456) a prototype of the logical framework for results-based budgeting for results-oriented accountability and flexibility. In paragraph 39 of the report, it is stated that “The current report on programme performance, involving quantitative assessment of the delivery of outputs, can eventually be integrated into the report on accomplishments, together with information on expenditures. This will give a comprehensive overview and analysis of the accomplishments achieved, the outputs delivered and the resources utilized to achieve the accomplishments.”. 104. In the UNOPS strategic plan, 2018–2021 (DP/OPS/2017/5, para. 104), it is stated that “Past performance against the goals has ensured a strong foundation for strategy execution.”. 105. In the UNOPS budget estimates for the biennium 2020 –2021 ($138.5 million), the harmonized approach to budget presentation included seven functional clusters, with key performance indicators and associated baselines, targets and management resources. However, the Board noted that in the 2020 quarterly business review, the performance indicators for women in the workforce and women in senior positions 26/129 21-06983 A/76/5/Add.11 were evaluated towards targets without the corresponding management resource inputs. 106. The Board is concerned that lack of reporting on the utilization of management resources against performance indicators would influence the accuracy and effectiveness of the comprehensive review. The Board is of the view that the review needs to include not only the achievement of performance indicators, but also information on management resource inputs. 107. The Board recommends that UNOPS improve the review process and reports by including information on corresponding expenditures in reports together with targets and performance indicators. 108. UNOPS accepted the recommendation. Inadequate control around postings related to assets 109. In rule 114.07 of the UNOPS financial regulations and rules, it is stated that “Allotments consistent with the approved management budget shall be issued annually to each business unit for the accounts under its control, together with an employee table indicating the number and level of approved posts. The verifying officer for each business unit shall be responsible for ensuring that costs do not exceed the authorized spending limit.”. 110. UNOPS aligned its budget for the biennium 2020–2021 with the harmonized presentation based on Executive Board decisions, in which cost classification was made up of seven categories in the management budget, including posts, common staff costs, travel, furniture and equipment, and so forth. 111. The Board noted that UNOPS had revised its annual management budget three times in 2020 and that among its seven categories, the furniture and equipment expense budget had been reduced from $483,000 to $444,000. However, the actual expense for furniture and equipment in 2020 reached $1.24 million, exceeding its final allotment by $798,000 with the overrun rate of 179.7 per cent, and was even beyond its biennial 2020–2021 management budget of $967,000. 112. UNOPS explained that the overexpenditure was mainly due to the subsequent enhancement cost of oneUNOPS incurred during 2020 and capitalized against the original project during the financial closure process. The budget controls in oneUNOPS had been set at the work package and overall project level, and those controls would prevent posting transactions without sufficient funds. Currently, all general ledger accounts could be used regardless of the nature of the budget account; some central postings were not stopped by the budget control, wh ich might result in budget overrun. 113. The Board is concerned that the lack of adequate controls around postings might render the budget control of individual cost categories ineffective and again lead to budget overrun on asset categories. 114. The Board recommends that UNOPS develop effective measures to strengthen the controls around postings related to assets. 115. UNOPS accepted the recommendation. 5. Procurement management Inaccurate input of purchase orders and contract information 116. In accordance with the procurement monetary thresholds set out in the operational instruction on Contracts and Property Committees submissions and 21-06983 27/129 A/76/5/Add.11 reviews (OI.LG.2018.06), the Contracts and Property Committee shall review procurement as exceptions to the use of formal methods of solicitation above $50,000. 117. The Board compared a list of Contracts and Property Committee reviews downloaded from the Contracts and Property Committee system with procurement exceptions provided by management from oneUNOPS and noted that 91 purchase orders and 17 contracts, amounting to $34.71 million and $7.69 million respectively, had not been reviewed by the Committee in 2020. 118. UNOPS explained that 35 out of the 91 purchase orders and nine out of the 17 contracts had indeed been reviewed by the Contracts and Property Committee, and the remaining 56 purchase orders and eight contracts, amounting to $10.07 million and $3.12 million respectively, did not need to be reviewed by the Committee b ecause the users had selected the solicitation method incorrectly when creating the purchase orders and contracts in oneUNOPS. 119. The Board is of the view that incorrect data input may lead to incorrect analysis and potentially affect the execution of oversight, considering that reviewing procurement as an exception to the use of formal methods of solicitation is an important oversight duty. 120. The Board recommends that UNOPS strengthen the guidance and oversight on inputting purchase orders and contract information to ensure that the data captured in oneUNOPS are correct. 121. UNOPS accepted the recommendation and reported that it would further strengthen the guidance and oversight for users when inputting purchase orders and contract information in oneUNOPS. No written records of departures from recommendations of local Contracts and Property Committees by the regional director 122. According to paragraphs 12.1 and 12.2 of the UNOPS operational instruction on Contracts and Property Committees submissions and reviews (OI.LG.2018.06), the executive chief procurement officer is requested to record in writing his reasons for departing from any headquarters Contracts and Property Committee recommendation. If the local Contracts and Property Committee recommends that the regional director approve a request and the regional director disagrees with its advice, the regional director is requested to record in writing his reasons for departing from any local Contracts and Property Committee recommendation to approve. 123. The Board searched for the cases in which the executive chief procurement officer/regional director had different opinions from the Contracts and Property Committees in the Contracts and Property Committee online system from January 2018 to September 2020 and noted that departures of the executive chief procurement officer/regional director from headquarters Contracts and Property Committee/local Contracts and Property Committee recommendations could not be traced by the system. The Board reviewed the six cases provided and found that there were no records of the regional director’s reasons for departing from a regional local Contracts and Property Committee recommendation in two cases. 124. UNOPS explained that the system was not designed to tr ace departures and that while the regional director would normally provide a justification for their departure from the local Contracts and Property Committee’s recommendation, for those two cases, records of their reasons could not be found. 125. The Board is of the view that the lack of records of the regional director’s reasons for departure from the local Contracts and Property Committee’s recommendation may run the risk of inability to review cases of departure. 28/129 21-06983 A/76/5/Add.11 126. The Board recommends that UNOPS strengthen the monitoring of progress to ensure that all regional director’s reasons for departure from local Contracts and Property Committee recommendations are well written and documented as required by the rules. 127. UNOPS agreed with the recommendation and reported that it would remind the local Contracts and Property Committees to request regional directors to provide written comments in the event that they exercise their authority to reject a case that is recommended for award by a local Contracts and Property Committee. 6. Information technology No update of business continuity and disaster recovery plan 128. In UNOPS information security standard ST.ISM.2020.01, it is stated that “The backup and recovery plan should … define acceptable downtime. … Backup and recovery processes and procedures vary according to the needs of the organization and must be developed and periodically reviewed by the appropriate personnel.”. In information security risk management standard ST.ISM.2019.02, it is stated that “For mission-critical or high- importance services, ICT has a low-risk appetite.”. 129. UNOPS put disaster recovery as a high-level scenario in the information and communications technology (ICT) business continuity plan, and its ICT department conducted a fail-over test in October 2019. 130. The Board reviewed the updated ICT business continuity plan and noted that it did not define acceptable downtime, nor was a full recovery and reconstitution of the information system performed in contingency plan testing. The Board also noted that in 20 of its 26 information technology services, no tests had been conducted and no verification scripts had been developed by the ICT department. 131. UNOPS acknowledged the observations and explained that capacity restraints prevented difficult periodic tests and rehearsal of the business continuity and disaster recovery plan. The existing gap would be immediately closed after the migration to Google Cloud. 132. The Board is of the view that no defined acceptable downtime, lack of full recovery and reconstitution, and absence of test and verification scripts would reduce the capability of UNOPS information systems to respond to disasters and emergencies. 133. The Board recommends that UNOPS review and update its business continuity and disaster recovery plan, including defining the objective of recovery time and developing the test and verification scripts for each service, to ensure effective performance as expected. 134. UNOPS accepted the recommendation. Lack of automated mechanisms for delegations of authority 135. In paragraph 5.16 of the UNOPS operational directive on the internal control framework (OD.FG.2020.01), it is stated that “Information and communication is necessary to ensure that management and personnel have the information they need to effectively carry out their responsibilities. This presupposes that relevant and quality information is generated and made available to support the functioning of other components of internal control.”. 136. In paragraph 7.1 of the operational directive on ICT and digital systems management (OD.FG.2018.02), it is stated that “UNOPS ICT strives to ensure the 21-06983 29/129 A/76/5/Add.11 confidentiality, integrity and availability of UNOPS information ass ets, in alignment with UNOPS internal control frameworks, data classification and access policies.”. 137. The Board reviewed the request form for delegation of authority, delegation of authority assignment and delegation of authority master tables and note d that currently, the processes for requesting, revising, issuing and assigning delegations of authority were all done manually. The Board also noted that, in the delegation of authority records in oneUNOPS, elements such as the delegation of authority typ e, level and cost centre were included, but details such as the delegation name, amount thresholds, scope, supervisor, delegation of authority special instructions or checking of segregation of duties were not provided therein. In addition, UNOPS used a manual process to review all roles and delegation of authority assignments in case of change in contract, position number or duty station. 138. The Board is of the view that the incomplete information in delegation of authority records in oneUNOPS would weaken the data processing of transactions within the scope of the delegated authorities, and a manual process would pose a risk of human error in assigning delegations of authority. 139. The Board recommends that UNOPS take effective measures to integrate complete delegation of authority assignment information in oneUNOPS and establish automated mechanisms to ensure that transactions are processed within the scope of the delegated authorities. 140. UNOPS accepted the recommendation and mentioned that a new rol es and delegation of authority assignment tool was currently under development, which should be ready for release in 2021 to improve the management of delegations of authority. Finance role without delegation of authority 141. In paragraph 6.1 of the UNOPS executive operational instruction on the delegation of authority and accountability framework (EOI.ED.2019.03, it is stated that “The DoA Master Table Owners shall be responsible and accountable for establishing DoA Master Table(s) containing DoA levels and associated limits, responsibilities and accountability.”. In paragraph 6.5, it is stated that “All UNOPS personnel shall comply with this EOI, the DoA and associated limits.”. 142. In accordance with the Process guidance – Role assignment by UNOPS system support, finance delegation of authority master table and overview of oneUNOPS user roles, all requests for finance roles are accompanied by a signed finance delegation of authority (attached to the request). If no delegation of authority is attached or the signatures needed are absent, the request would be rejected. 143. The Board reviewed the list of active user accounts in oneUNOPS with roles and the list of staff members with delegation of authority and noted that two acti ve users with finance roles had not obtained any signed finance delegation of authority. UNOPS explained that the two users had the role but no delegation of authority, which made approvals not possible, hence there had been no risk. 144. The Board is of the view that oneUNOPS finance roles without a signed finance delegation of authority would lead to a risk of unauthorized access to the processing of financial and other transactions. 145. The Board recommends that UNOPS conduct a comprehensive review of roles assigned in oneUNOPS to guarantee the strict matching of roles and delegations of authority in compliance with the delegation of authority and accountability framework and establish an effective mechanism to periodically control user access provisioning/deprovisioning and segregation of roles. 30/129 21-06983 A/76/5/Add.11 146. UNOPS accepted the recommendation. Inadequate security of user accounts 147. In paragraph 2.6 of UNOPS information security standard ST.ISM.2020.01, it is stated that “Personnel shall be responsible and accountable for all communications, actions and approvals performed using their UNOPS account. Personnel to whom a password has been assigned shall not disclose the password to anyone and shall be responsible and accountable for all actions performed and transactions approved through the use of that password.”. 148. In paragraph 7.1 of the UNOPS operational directive on ICT and digital systems management (OD.FG.2018.02), it is stated that “UNOPS ICT strives to ensure the confidentiality, integrity and availability of UNOPS information assets, in alignment with UNOPS internal control frameworks, data classification and access policie s.”. 149. The Board reviewed all 11,704 active user accounts, including system users, and noted that 206 active user accounts had not set a password expiry date. Of those, the passwords of 204 accounts created prior to 22 July 2020 had a validity period be yond 90 days, the longest of which was as many as 1,904 days as at 26 October 2020. 150. UNOPS stated that those 206 users of oneUNOPS were Agresso desktop client users who could connect directly to the oneUNOPS database but that password expiration was not enforced in oneUNOPS for Agresso desktop client users. 151. The Board further examined operational instruction OI.ICT.2018.02 and noted that a mandatory password duration check was not included in the instruction. 152. The Board is of the view that the current practice on the setting of passwords for user accounts is not in compliance with information security standard ST.ISM.2020.01 and would pose a risk to the application security, identity and access management of UNOPS. 153. The Board recommends that UNOPS take effective measures to enhance account security for all user accounts and update the relevant security policy based on best practices. 154. UNOPS accepted the recommendation. 7. Risk management Corporate risk management unintegrated in oneUNOPS 155. According to paragraph 3.1 of UNOPS operational directive OD.FG.2018.03, UNOPS shall implement an enterprise risk management process, supported by associated systems and procedures. Paragraphs 4.2 and 6.11 of operational instruction OI.FG.2018.06 jointly specify that the enterprise risk management information system comprises three key levels – corporate, organizational and operational – which is aligned with UNOPS standard risk taxonomies to support effective risk management at all levels. 156. The Board reviewed the associated information system of risk management through the Intranet and noted that UNOPS had deployed the digital tool into oneUNOPS for risk management at the operational and organizational levels and that the system was available to all projects. Nevertheless, the risk management at the corporate level had not been embedded in oneUNOPS to be unified. 157. UNOPS explained that oneUNOPS Projects risk functionalities were currently already available across all organizational levels, while the system was not yet being utilized to record corporate risks. The corporate risk management process is currently integrated in the quarterly business review process. 21-06983 31/129 A/76/5/Add.11 158. The Board is of the view that having corporate risks outside oneUNOPS Projects is not strictly compliant with the operational instruction, which requires UNOPS to implement a risk management information system aligned with effective risk management at all levels, and it is not conducive to the unified management of ris ks across the organization. 159. The Board recommends that UNOPS, as part of the expected enhancement of corporate risk management, assess the feasibility of incorporating corporate risks into oneUNOPS and verify that the risk management operational instruction reflects the UNOPS strategic direction regarding this subject. 160. UNOPS accepted the recommendation. 8. Travel management Non-compliance with advance booking before departure 161. In regulation 3.02 of the UNOPS financial regulations and rul es, it is stated that “The Executive Director shall issue detailed Financial Rules and procedures to ensure effective financial administration and economical use of resources.”. In paragraph 4.1 of the operational instruction on official duty travel (OI.SS C.2018.01), it is stated that “In order for UNOPS to obtain better pricing on tickets, the traveller should aim for booking of the ticket 7 days in advance of departure.”. The same provision is described in section 2.1 of the mandatory procedures in the UNOPS policy on the management of official duty travel (Process and Quality Management System 11.4). 162. The Board reviewed the tickets issued to headquarters personnel during 2020 and noted that 99 out of 325 tickets had been booked less than seven days in advance of the departure date, accounting for 30 per cent, with the related original/exchange fee of $15,218.18 and refund fee of $34,073.44. 163. UNOPS explained that, although booking tickets seven days in advance of departure, where possible, might be a strongly recommended practice but not a policy requirement, given the nature of its operations, situations arise where personnel need to book their tickets urgently. However, UNOPS would like to keep the recommendation of seven days advance booking in the Process and Quality Management System to continue encouraging personnel to do so. 164. The Board is of the view that compliance with the provision on advance booking needs further improvement, which may result in more discounts on air tickets and travels being more cost-effective accordingly. 165. The Board recommends that UNOPS strengthen travel management by developing clear and applicable measures to encourage advance booking by personnel and ensure economical use of resources. 166. UNOPS accepted the recommendation and reported that it would ensure that measures were put in place to encourage adherence to the seven-day advance booking policy. C. Disclosures by management 1. Write-off of losses of cash, receivables and property 167. Management informed the Board that, in 2020, it formally wrote off assets in the amount of $2,522,107, including overspending of $488,533. 1 __________________ 1 Overspending occurs when UNOPS has incurred expenditure in excess of programme budgets agreed upon with clients and is therefore extracontractual. 32/129 21-06983 A/76/5/Add.11 168. As at 31 December 2020, management had also reported provisions of $38.18 million for bad and doubtful debts. 2. Ex gratia payments 169. UNOPS informed the Board that an amount of $4,000 had been paid as an ex gratia payment during the year ended 31 December 2020. 3. Cases of fraud and presumptive fraud 170. In accordance with the International Standards on Auditing (ISA 240), the Board plans its audits of the financial statements in such a way that it has a reasonable expectation of identifying material misstatements and irregularities (including t hose resulting from fraud). The audit, however, should not be relied upon to identify all misstatements or irregularities. The primary responsibility for preventing and detecting fraud rests with management. 171. During the audit, the Board makes enquiries of management regarding its oversight responsibility for assessing the risks of material fraud and the processes in place for identifying and responding to the risks of fraud, including any specific risks of fraud that management has identified or that have been brought to its attention. The Board also enquires as to whether management has any knowledge of actual, suspected or alleged fraud. 172. UNOPS informed the Board that there were 31 fraud cases in 2020. In addition, UNOPS informed the Board that six of those 31 cases had a monetary impact of $217,300 on UNOPS, a 177 per cent increase in value compared with 2019. D. Acknowledgement 173. The Board wishes to express its appreciation for the cooperation and assistance extended to its staff by the Executive Director of UNOPS and the members of their staff. (Signed ) Jorge Bermúdez Comptroller General of the Republic of Chile Chair of the Board of Auditors (Signed) Hou Kai Auditor General of the People’s Republic of China (Lead Auditor) (Signed) Kay Scheller President of the German Federal Court of Auditors 22 July 2021 21-06983 33/129 A/76/5/Add.11 Annex 34/129 Status of implementation of recommendations up to the financial year ended 31 December 2019 Status after verification Audit report Under Not Overtaken No. year Report reference Board’s recommendation UNOPS response Board’s assessment Implemented implementation implemented by events 1 2016 A/72/5/Add.11, The Board recommends that The role of UNOPS is to As one of the most important X chap. II, para. 87 UNOPS establish and adopt a deliver on demand services to project implementing partners sustainability screening tool to expand the implementation and operational resources of screen projects against capacity of its partners across the United Nations, it is sustainability standards at the all the Sustainable considered that UNOPS can design stage, fixing Development Goals, thereby expand capacity towards the contributing towards the sustainability targets and achievement of all the achievement of all the Goals. deliverables to facilitate the UNOPS does this at the Sustainable Development monitoring of progress during project level, on behalf of its Goals, which is focused on the the life of a project. partners. It is responsible for demands of partners and the project outputs rather than needs of people and countries. outcomes and impacts. Setting UNOPS should carry out the and monitoring targets for its achievement of the Goals work beyond the project through its operational outputs would clearly be activities, focusing not only on outside the scope of its project screening and business model. acceptance, but also on the Notwithstanding, the UNOPS direct and indirect influence of strategic plan for 2018–2021 project outputs and outcomes articulates a clear ambition to on partners, with effective and embed sustainable adequate communications, in implementation approaches in an appropriate way. order to realize a tangible The Board noted that UNOPS impact in its implementation had made improvements on of projects. While UNOPS environment, gender, security may not be able to support the and so forth, but that further full intent of the efforts were required. recommendations, it is The recommendation is continuously improving and considered to be under augmenting its capacity in implementation. embedding sustainability elements in its projects and activities. 2 2016 A/72/5/Add.11, The Board recommends that The role of UNOPS is to As one of the most important X chap. II, para. 95 UNOPS incorporate deliver on demand services to project implementing partners sustainability targets and expand the implementation and operational resources of 21-06983 deliverables into project capacity of its partners across the United Nations, it is 21-06983 Status after verification Audit report Under Not Overtaken No. year Report reference Board’s recommendation UNOPS response Board’s assessment Implemented implementation implemented by events initiation documents, for all the Sustainable considered that UNOPS can mandatory screening and Development Goals, thereby expand capacity towards the monitoring, measurement and contributing towards the achievement of all the reporting of sustainability achievement of all the Goals. Sustainable Development contributions at all stages of UNOPS does this at the Goals, which is focused on the project level, on behalf of its the project life cycle, from demands of partners and the partners, It is responsible for engagement acceptance, needs of people and countries. project outputs rather than quarterly assurance and outcomes and impacts. Setting UNOPS should carry out the project progress reports to and monitoring targets for its achievement of the Goals project closure reports. work beyond the project through its operational outputs would clearly be activities, focusing not only on outside the scope of its project screening and business model. acceptance, but also on the Notwithstanding, the UNOPS direct and indirect influence of strategic plan for 2018–2021 project outputs and outcomes articulates a clear ambition to on partners, with effective and embed sustainable adequate communications, in implementation approaches in an appropriate way. order to realize a tangible The Board noted that UNOPS impact in its implementation had made improvements on of projects. While UNOPS environment, gender, security, may not be able to support the and so forth, but that further full intent of the efforts were required. recommendations, it is The recommendation is continuously improving and considered to be under augmenting its capacity in implementation. embedding sustainability elements in its projects and activities. 3 2016 A/72/5/Add.11, The Board recommends that The role of UNOPS is to As one of the most important X chap. II, para. 102 UNOPS establish a standard deliver on demand services to project implementing partners procedure for sustainability expand the implementation and operational resources of results reporting at the output capacity of its partners across the United Nations, it is and outcome levels by all the Sustainable considered that UNOPS can capturing data throughout the Development Goals, thereby expand capacity towards the contributing towards business process, to be achievement of all the achievement of all the Goals. measured against predefined Sustainable Development A/76/5/Add.11 UNOPS does this at the sustainability standard project level, on behalf of its Goals, which is focused on the indicators, targets and partners. It is responsible for demands of partners and the deliverables, and having the project outputs rather than needs of people and countries. 35/129 outcomes and impacts. Setting UNOPS should carry out the A/76/5/Add.11 36/129 Status after verification Audit report Under Not Overtaken No. year Report reference Board’s recommendation UNOPS response Board’s assessment Implemented implementation implemented by events results validated through a and monitoring targets for its achievement of the Goals verification mechanism. work beyond the project through its operational outputs would clearly be activities, focusing not only on outside the scope of its project screening and business model. acceptance, but also the direct Notwithstanding, the UNOPS and indirect influence of strategic plan for 2018–2021 project outputs and outcomes articulates a clear ambition to on partners, with effective and embed sustainable adequate communications in implementation approaches in an appropriate way. order to realize a tangible The Board noted that UNOPS impact in its implementation had made improvements on of projects. While UNOPS environment, gender, security may not be able to support the and so forth, but that further full intent of the efforts were required. recommendations, it is The recommendation is continuously improving and considered to be under augmenting its capacity in implementation. embedding sustainability elements in its projects and activities. 4 2016 A/72/5/Add.11, The Board recommends that UNOPS will review the data The Board noted that UNOPS X chap. II, para. 156 UNOPS review its existing in question to assess whether had implemented the standard operating procedures more clean-up is possible. It is recommendations by adding relating to vendor database important, however, to validations and justifications management to ensure that it recognize that the United into oneUNOPS regarding has a strong system of checks Nations Global Marketplace suppliers to enhance the with defined formats for data, data are not owned by UNOPS quality of the data, control the data validation and alerts and that the UNOPS enterprise creation of duplicate data and regarding duplicates in the resource planning system maintain a cleaner database. oneUNOPS system in order to holds the vendor data of all UNOPS will review the data enhance the quality of data personnel, which by nature are in question to assess if more sets. not registered in the United clean-up is possible. Nations Global Marketplace The recommendation is database. considered to be under implementation. 5 2016 A/72/5/Add.11, The Board recommends that UNOPS will put in place The Board noted that rather X chap. II, para. 180 UNOPS ensure the measures to enforce the than demanding strict implementation of its policy recommendation to book compliance with the policies 21-06983 regarding the booking of travel at least seven days in on advance booking, it is more tickets at least seven days in advance. effective to achieve 21-06983 Status after verification Audit report Under Not Overtaken No. year Report reference Board’s recommendation UNOPS response Board’s assessment Implemented implementation implemented by events of the travel date. Systems economical use of resources should be enabled to capture by developing clear and the data related to booking, to applicable measures to allow for better monitoring. encourage personnel. The recommendation is considered to have been overtaken by events. 6 2017 A/73/5/Add.11, The Board recommends that UNOPS has been capturing The Board noted that UNOPS X chap. II, para. 42 UNOPS expedite the and keeping track of the key had deployed the enterprise implementation and discussion outputs, actions and portfolio and project operationalization of the decisions taken further to the management system, enterprise portfolio and review by the Engagement oneUNOPS, which is available project management system Acceptance Committee in for all projects for whole and the enterprise risk JIRA. UNOPS monitors the process management. In management system as implementation of the addition, a risk management planned. Committee’s conditions and information system covering continues to report on a operational and organizational quarterly basis on the levels was deployed to Committee decisions. This monitor project risks. current mechanism is being The recommendation is complemented by an considered to have been “Engagement Acceptance implemented. Committee file” feature in oneUNOPS (under testing) that will ensure that the Committee decisions are saved directly in oneUNOPS. With this last update, UNOPS has addressed the Board’s observation related to the management of risks identified during the engagement acceptance process. 7 2017 A/73/5/Add.11, The Board recommends that For 2020, UNOPS achieved a The Board noted that UNOPS X chap. II, para. 48 UNOPS initiate the process of closure rate of 93 per cent of had improved the existing the financial closure of financial closures on time. Out policy and system, reduced the projects soon after they are of the 465 projects to be backlog of projects and made A/76/5/Add.11 operationally closed, so as to financially closed in 2020, 432 progress in regard to timely complete the process within were closed within 18 months. project closure. However, the stipulated period. UNOPS further reduced its there is still room for the 37/129 backlog of projects open improvement of financial A/76/5/Add.11 38/129 Status after verification Audit report Under Not Overtaken No. year Report reference Board’s recommendation UNOPS response Board’s assessment Implemented implementation implemented by events beyond the 18-month timeline closure within the stipulated from 370 projects when the period. recommendation was issued The recommendation is (24 per cent of active projects considered to be under at the time) down to implementation. 47 projects as at 31 December 2020. Given that in 2020, a total of 1,651 projects were active, this is down to a rate of less than 3 per cent. At the same time, UNOPS improved its monitoring and notifications to project managers, which has led to an average time for financial closure in 2020 of 8.8 months, thus well below the 18-month limit documented in the UNOPS financial regulations and rules. 8 2017 A/73/5/Add.11, The Board recommends that: In order to strengthen its The Board noted that UNOPS X chap. II, para. 73 (a) UNOPS strengthen its reporting and monitoring had released the gender action reporting and monitoring mechanism for the plan in the fourth quarter of mechanism with respect to the mainstreaming of gender into 2020 as part of the new feature mainstreaming of gender into projects and ensure the in oneUNOPS Projects to projects, by ensuring that the preparation of gender action establish action plans as documentation of gender plans by all gender focal informed by the screenings. mainstreaming becomes, as far points, UNOPS released the The year-to-date performance as feasible, an intrinsic part of gender action plan in the of the gender action plans is the project management fourth quarter of 2020 as part 66.3 per cent, an improvement process. UNOPS should also of the new feature in of six points from the third ensure the preparation of oneUNOPS Projects to quarter of 2020, with 100 per gender action plans by all establish action plans as cent compliance of two gender focal points; informed by the screenings regions (New York Service (b) The role of gender focal (gender screening in the Cluster and Middle East points be strengthened by present case). The gender Region). UNOPS is confident providing necessary resources, action plan can notably be that with the appropriate tools such as time and a budget, for developed using the guidelines and the corporate and regional the effective implementation on gender mainstreaming in oversight, full compliance will of their roles and projects, which were released be soon reached. 21-06983 responsibilities. in 2019. The oversight of the 21-06983 Status after verification Audit report Under Not Overtaken No. year Report reference Board’s recommendation UNOPS response Board’s assessment Implemented implementation implemented by events milestones of the gender The recommendation is action plan is achieved considered to be under through the quarterly implementation. assurance process, the improved version of which was embedded in oneUNOPS Projects in January 2021. The results of that process can be consulted for each engagement in oneUNOPS Projects. UNOPS Corporate monitors the development of gender action plans for the engagements that were screened positively against gender mainstreaming criteria during the engagement development and acceptance process (see the gender action plan compliance dashboard). The year-to-date performance of gender action plans is 66.3 per cent (114 engagements out of 172 screened positively against gender mainstreaming criteria), which represents an improvement of six points from the third quarter of 2020. It must be noted that two regions (New York Service Cluster and Middle East Region) also reached 100 per cent compliance. UNOPS is confident that with the appropriate tools and the corporate and regional A/76/5/Add.11 oversight now in place, full compliance will be soon reached. 39/129 A/76/5/Add.11 40/129 Status after verification Audit report Under Not Overtaken No. year Report reference Board’s recommendation UNOPS response Board’s assessment Implemented implementation implemented by events 9 2018 A/74/5/Add.11, The Board recommends that The process of embedding The Board noted that X chap. II, para. 22 UNOPS ensure that the review project classification within embedding project of project classification by the oneUNOPS Projects is classification within Integrated Practice Advice and currently in process. oneUNOPS Projects is still in Support Unit or the Finance process. Group is captured in The recommendation is oneUNOPS to leave an considered to be under appropriate audit trail. implementation. 10 2018 A/74/5/Add.11, The Board recommends that The process of automation of The Board noted that the X chap. II, para. 23 UNOPS take steps to generate the corporate financial automation of the corporate the financial statements from statements is currently in financial statements within the oneUNOPS enterprise process and is expected to be oneUNOPS Projects is still in resource planning system so as completed by the end of 2021. process. to minimize the need for The recommendation is manual adjustments and considered to be under interventions. implementation. 11 2018 A/74/5/Add.11, The Board recommends that The analysis of the useful life The Board noted that the X chap. II, para. 50 UNOPS subject the property, for the UNOPS asset table was useful life analysis for 2019 plant and equipment to a completed for 2019 and the had been completed and that systematic annual review to same analysis for 2020 is the 2020 analysis was confirm the remaining useful currently under review. currently under review and life in line with IPSAS should be completed before requirements. the preparation of the financial statements. The recommendation is considered to be under implementation. 12 2018 A/74/5/Add.11, The Board recommends that UNOPS has thoroughly The Board noted that UNOPS X chap. II, para. 83 UNOPS properly document reviewed the process and was no longer charging the cases of waiver of purpose of charging an administrative fees. There was administrative fees. administrative fee. During the no need to document the cases review, it was understood that of waiver of administrative in the majority of the advance fees. financing cases, the The recommendation is administrative fee either did considered to have been not apply as per guidance or overtaken by events. was waived as per the authority of the approving 21-06983 delegation of authority holder. Also, the processing cost for 21-06983 Status after verification Audit report Under Not Overtaken No. year Report reference Board’s recommendation UNOPS response Board’s assessment Implemented implementation implemented by events the administrative fee, including the documentation and recording in UNOPS books, compared with the fee was considered not efficient. Subsequently, UNOPS management decided to abolish the administrative fee. This has now been implemented through the issuance of revised guidance on advance financing. Given that, going forward, UNOPS is no longer charging a fee, it suggests that the recommendation to document waivers for such fees be closed. 13 2018 A/74/5/Add.11, The Board recommends that UNOPS reviewed its financial The Board noted that UNOPS X chap. II, para. 84 UNOPS modify the interest regulations and rules and the had reviewed and updated the distribution tool to correctly circumstances under which it advance financing guidance allocate the interest on reasonably can charge interest note which contained the advance financing cases. on an advance financing case. chapter on interest charges on Given that rule 123.18 of the advance financing. financial regulations and rules The recommendation is prescribes that “Any negative considered to have been interest charges incurred by implemented. UNOPS pursuant to client and/or funding source request to UNOPS to advance its own funds for project activities or due to late instalment payments by the client and/or funding source, may be deducted from interest amounts that may be owed to the client and/or funding A/76/5/Add.11 source.” UNOPS decided to review the basic need to charge interest on advance 41/129 financing cases. In the review, A/76/5/Add.11 42/129 Status after verification Audit report Under Not Overtaken No. year Report reference Board’s recommendation UNOPS response Board’s assessment Implemented implementation implemented by events it was understood that UNOPS should not seek to charge interest on cases where the advance financing was provided for commitments only, as there was no immediate loss to UNOPS. Furthermore, many of the cases where advance financing is issued are related to agreements that require UNOPS to advance funds at some point. As these standard agreements do not cater for such additional charges, the application of advance financing for such agreements also did not seem feasible. As such, UNOPS decided, after discussion with the Chief Financial Officer and approval by the Deputy Chief Financial Officer, to modify its guidance to apply interest charges to advance financing cases if so specifically requested by the approving authority of the advance financing. 14 2018 A/74/5/Add.11, The Board recommends that UNOPS has implemented a The Board noted that UNOPS X chap. II, para. 136 UNOPS comprehensively process for prioritization of had implemented a process for review the pending change change requests and will prioritization of change requests, classify them on the review the process for change requests within a definite time basis of priority and bring requests in order to assess the frame and had developed them before the ICT possibility of a definite time specific operating instructions. governance bodies for period. The recommendation is consideration so that the considered to have been pending requests can be implemented. addressed comprehensively and within a definite time frame. 21-06983 21-06983 Status after verification Audit report Under Not Overtaken No. year Report reference Board’s recommendation UNOPS response Board’s assessment Implemented implementation implemented by events 15 2018 A/74/5/Add.11, The Board recommends that UNOPS has not yet made The Board noted that UNOPS X chap. II, para. 170 UNOPS incorporate the substantial progress on: (a) the had not yet made substantial requirements of Prince 2 transition of project initiation progress on the transition of methodology in oneUNOPS to documentation into project initiation enable UNOPS to manage its oneUNOPS Projects (the documentation into projects in terms of the functional requirements for oneUNOPS Projects, although requirements of Project online project initiation the functional requirements Management Manual. documentation have been for an online project initiation completed, but its integration document had been completed. as a Google Doc in The recommendation is oneUNOPS has not yet been considered to be under prioritized in the backlog of implementation. oneUNOPS development requirements); (b) the development of functional requirements for the inclusion of tolerances (against time, cost, scope) in the opportunity and engagement acceptance process. 16 2018 A/74/5/Add.11, The Board recommends that The process of automation of The Board noted that the X chap. II, para. 174 UNOPS automate preparation corporate financial statements process of automation of of financial statements to is currently in process and is corporate financial statements ensure the credibility of expected to be completed by was still in process, while the financial information. UNOPS the end of 2021. The implementation of the treasury also prioritize the implementation of the treasury management system was in implementation of treasury management system has been phase 2. management and inventory completed. The recommendation is valuation and management in considered to be under oneUNOPS. implementation. 17 2019 A/75/5/Add.11, The Board recommends that As directed by Executive The Board noted that the X chap. II, para. 23 UNOPS review its required Board decision 2020/8 , review of minimum minimum operational reserves UNOPS will undertake a operational reserves was still and adhere to its policy of full review of minimum in process. cost recovery, so that the risks operational reserves. The The recommendation is arising during the course of its review will be presented to the considered to be under A/76/5/Add.11 operations are effectively met Advisory Committee on implementation. and surpluses are not Administrative and Budgetary accumulated over and above Questions for review and will 43/129 A/76/5/Add.11 44/129 Status after verification Audit report Under Not Overtaken No. year Report reference Board’s recommendation UNOPS response Board’s assessment Implemented implementation implemented by events the realistically assessed then be presented to the operational reserves. Executive Board during 2021. 18 2019 A/75/5/Add.11, The Board recommends that UNOPS has progressed in the The Board noted that UNOPS X chap. II, para. 37 UNOPS convey to its partners implementation of its was improving its current and clients the components of corporate action plan. At the corporate action plan and the fee and fee increments that 2nd meeting of the client communicating with partners it charges for projects and board, in February 2021, it to solidify the understanding adopt more a transparent shared the client friendly note of the cost recovery model. communication methodology on costing and pricing. The UNOPS had shared the client in that regard. note is available to all friendly note on costing and colleagues in touch with pricing and made it available partners to further elaborate to all colleagues in touch with on the management fee and its partners to further elaborate on structure. Also, the system the management fee and its setup for the fee calculation in structure. oneUNOPS Projects allows The recommendation is UNOPS colleagues to clearly considered to have been understand and share when implemented. needed the details on how much of the fee is due to complexity (personnel cost), economies of scale (model) and risk (risk increment). The feedback from the client board on this initiative also was positive, and the focus has shifted from explanations on the pricing to the management and costing of shared services. On the basis of that, UNOPS suggests closing the recommendation. 21-06983 21-06983 Status after verification Audit report Under Not Overtaken No. year Report reference Board’s recommendation UNOPS response Board’s assessment Implemented implementation implemented by events 19 2019 A/75/5/Add.11, The Board recommends that In furtherance of the The Board noted that the X chap. II, para. 46 UNOPS issue specific commitment by UNOPS to guidelines for S3I operations instructions following up on expand on the policy guidance had been issued in 2020, in the issue of the framework, available for S3I activities, regard to governance, guidelines, procedures and UNOPS retained in early April accountability, risk policy to strengthen and 2020 a highly seasoned management, portfolio formalize the processing and consultant who guided the management, the investment documentation of projects work of the UNOPS senior process and so forth. funded through the growth and leadership team on the range The recommendation is innovation reserve. of relevant issues. Following considered to have been several rounds of implemented. consultations, and in line with the agreed timelines, the much-expanded policy guidance framework with a number of related annexes was approved in late October 2020 and became effective on 1 November 2020. 20 2019 A/75/5/Add.11, The Board recommends that In furtherance of the The Board noted that bad debt X chap. II, para. 63 UNOPS review the status of commitment by UNOPS to allowances had been implementation of the expand on the policy guidance recognized against a high projects, establish a more available for S3I activities, proportion of S3I initiative structured process for UNOPS retained in early April investments, during which monitoring their progress, 2020 a highly seasoned insufficient monitoring was reassess the risks to its consultant who guided the noted. investments on the basis of work of the UNOPS senior The recommendation is actual progress against the leadership team on the range considered to be under benchmarks and take of relevant issues. Following implementation. appropriate steps for several rounds of mitigation measures. consultations, and in line with the agreed timelines, the much-expanded policy guidance framework with a number of related annexes was approved in late October 2020 and became effective on A/76/5/Add.11 1 November 2020. 21 2019 A/75/5/Add.11, The Board recommends that These Legal and General The Board noted that UNOPS X chap. II, para. 78 UNOPS examine the risks of Investment Management- had confirmed that the 45/129 an investment manager portfolios managed by A/76/5/Add.11 46/129 Status after verification Audit report Under Not Overtaken No. year Report reference Board’s recommendation UNOPS response Board’s assessment Implemented implementation implemented by events investing UNOPS portfolios in pooled investment vehicles UNOPS external manager its own fund and take were divested in July 2019. Legal and General Investment appropriate mitigation Management had been measures. adjusted in July 2019 according to the recommendation. The recommendation is considered to have been implemented. 22 2019 A/75/5/Add.11, The Board recommends that UNOPS implemented the new The Board noted that UNOPS X chap. II, para. 80 UNOPS take immediate action strategic asset allocation for had conducted the asset and to implement the asset and its after-service health liability management study liability management study insurance investment portfolio and implemented the new report and restructure its on 24 November 2020. strategic asset allocation for health-care portfolio so that its after-service health the returns are sufficient to insurance investment meet future liabilities. portfolio. The recommendation is considered to have been implemented. 23 2019 A/75/5/Add.11, The Board recommends that The supplier performance of The Board noted the X chap.II, para. 90 UNOPS review and document the investment manager is consideration of UNOPS on the performance of the formally evaluated against the the performance evaluation of investment manager at contractual obligations the investment manager and intervals, as formalized in the following the prevailing would further monitor the statement of investment UNOPS procurement policies . progress in that regard. principles of January 2020. The UNOPS procurement The recommendation is policies currently require considered to be under supplier performance to be implementation. formally evaluated upon completion of the whole award, which in the case of the provident fund is in 2024. UNOPS management will work with the Board of Auditors to establish a process through which the recommendation can be closed following the UNOPS 21-06983 procurement processes and the 21-06983 Status after verification Audit report Under Not Overtaken No. year Report reference Board’s recommendation UNOPS response Board’s assessment Implemented implementation implemented by events review frequency prescribed therein. 24 2019 A/75/5/Add.11, The Board also recommends While the next time that the The Board noted that UNOPS X chap. II, para. 92 that UNOPS consider the contract of the investment would consider the performance of the investment manager is considered for performance evaluation in manager against the objectives extension and performance combination with the contract of the statement of investment against the statements of extension of investment principles, while considering a investment principles may be managers in 2022 and 2024 further extension of the in 2022, the supplier respectively. agreement with the investment performance of the investment The recommendation is manager. manager is formally evaluated considered to be under against the contractual implementation. obligations following the prevailing procurement policies of UNOPS and upon completion of the whole award in 2024. UNOPS management will work towards the implementation of the recommendation. 25 2019 A/75/5/Add.11, The Board recommends that UNOPS accepted the The Board noted that UNOPS X chap. II, para. 109 UNOPS assess its approach to recommendation and is was drafting the revised the inclusion of a provision for working on the assessment for Procurement Manual and performance security, in the additional performance associated policies, including particular for non-works security requirements as part successive reviews by the core contracts with a high value, of the ongoing revision of its policy review team, and was large volume or complexity, Procurement Manual. working on the assessment for for ensuring seriousness on the the additional performance part of suppliers and security requirements as part performance of the contract. of the ongoing revision of its Procurement Manual. The recommendation is considered to be under implementation. 26 2019 A/75/5/Add.11, The Board recommends that UNOPS accepted the The Board noted that UNOPS X chap .II, para 110 UNOPS improve its recommendation and is was currently implementing A/76/5/Add.11 monitoring to ensure that currently implementing system system enhancements to the performance securities are enhancements to the contract contract management module submitted in a timely manner management module of the of oneUNOPS to improve on 47/129 enterprise resource planning the monitoring of performance A/76/5/Add.11 48/129 Status after verification Audit report Under Not Overtaken No. year Report reference Board’s recommendation UNOPS response Board’s assessment Implemented implementation implemented by events and kept valid throughout the system (oneUNOPS) to securities received. This is contract period. improve on the monitoring of being done as part of the performance securities ongoing P2P project led by the received. This is being done as Information Technology part of the ongoing P2P Group and the Procurement project led by the Information Group. Technology Group and the The recommendation is Procurement Group (feature considered to be under #2 within the project). The implementation. functionality is currently being tested and is expected to be released in production in June 2021; it will be accompanied by adequate materials and guidance for users. 27 2019 A/75/5/Add.11, The Board recommends that UNOPS accepted the The Board noted that UNOPS X chap. II, para. 123 UNOPS assess its approach to recommendation and is was working on the the inclusion of the provision working on the assessment of assessment of its approach to of liquidated damages, in its approach to the inclusion of the inclusion of liquidated particular for high-value liquidated damages as part of damages as part of the contracts, in order to mitigate the ongoing revision of its ongoing revision of its the risk of potential late Procurement Manual. Procurement Manual. performance leading to The recommendation is financial loss to UNOPS and considered to be under its partners. implementation. 28 2019 A/75/5/Add.11, The Board recommends that UNOPS is currently The Board noted that UNOPS X chap. II, para. 129 UNOPS comply with the implementing system was working on the system guidance regarding the enhancements to the contract improvement and that the supplier performance management module of functionality was currently evaluation and complete the oneUNOPS to improve the being tested and was expected evaluations according to the timely completion of supplier to be released in production in prescribed timeline. performance evaluations. This June 2021.The auditors will is being done as part of the review the result at a later ongoing P2P project led by the stage. Information Technology The recommendation is Group and the Procurement considered to be under Group (feature #4 within the implementation. project). The functionality is currently being tested and is 21-06983 expected to be released in production in June 2021; it 21-06983 Status after verification Audit report Under Not Overtaken No. year Report reference Board’s recommendation UNOPS response Board’s assessment Implemented implementation implemented by events will be accompanied by adequate materials and guidance for users. In addition, the Procurement Group is planning to include an indicator on mandatory supplier performance evaluation compliance as part of its regular oversight and analytics engagement with UNOPS offices and regions. 29 2019 A/75/5/Add.11, The Board recommends that In addition to the The Board noted that UNOPS X chap. II, para. 136 UNOPS ensure compliance improvements made in 2020 was improving the full project with its financial regulations and shared with the Board, the closure process, which was and rules for the operational full project closure process modelled and implemented in closure of projects and put in was modelled and oneUNOPS Projects during place appropriate checks to implemented in oneUNOPS the first quarter of 2021, and Projects during the first promptly change the status of that the changes to the quarter of 2021 and the projects as soon as their changes to the software are software were currently being activities have ceased. currently being reviewed by reviewed by business business stakeholders before stakeholders before its release being released. The intent is during the second quarter of that they will be released 2021. The auditors will review during the second quarter of the result of the new software 2021. at a later stage. It is to be noted that 68 per The recommendation is cent of projects due to close in considered to be under 2020 have been operationally implementation. closed on time, which represents a seven- point increase against the baseline (61 per cent). The performance and progress are continuously monitored through UNOPS corporate oversight (which reports on the current year, year to date), and can be consulted in the A/76/5/Add.11 project closure dashboard. As noted in its response to the 2018 audit recommendation on 49/129 paragraph 95 (A/74/5/Add.11), A/76/5/Add.11 50/129 Status after verification Audit report Under Not Overtaken No. year Report reference Board’s recommendation UNOPS response Board’s assessment Implemented implementation implemented by events UNOPS recognizes the existence of risks that may potentially lead to project delays, including the operational closure. 30 2019 A/75/5/Add.11, The Board recommends that The recommendation is well The Board noted that new X chap. II, para. 147 UNOPS pursue the transfer of implemented. The new services would be transferred new lines of business to the services of payment factory to the Bangkok Shared Service Bangkok Shared Service under the treasury Centre pursuant to the UNOPS Centre and enable scalable management system structure, strategic plan for 2018–2021. operations in line with the bank accounts reconciliation The Board will evaluate the objectives of setting up the and UN Web Buy operations in 2022. Centre and the UNOPS reconciliation have effectively The recommendation is strategic plan for 2018–2021. been transferred to the considered to be under Bangkok Shared Service implementation. Centre. In addition, one more new service (United Nations Development Programme- Service Clearing Account reconciliation), was also transferred to the Centre in the first quarter of 2021. 31 2019 A/75/5/Add.11, The Board recommends that UNOPS considers that the The Board noted that UNOPS X chap. II, para. 155 UNOPS establish strong recommendation has been had strengthened its corporate governance structures to satisfied through its current control over the Bangkok identify and evaluate service corporate structure composed Shared Service Centre with lines that could be considered of the Director of the Shared specific components and for transfer to the Bangkok Service Centre, the Director of reporting lines. As shown in Shared Service Centre and Finance and Administration the minutes of the Bangkok develop business plans for and, ultimately, the UNOPS Shared Service Centre steering each of those service lines. senior leadership team. The panel meeting held on Director of the Shared Service 1 October 2020, the members Centre reports directly to the of the Panel discussed, among Director of Finance and other issues, a list of potential Administration, who sits on functions and services that the UNOPS senior leadership could be provided by the team, which is directly under Centre, including finance, the UNOPS Executive procurement, administration Director. Additionally, the and support services. Bangkok Shared Service 21-06983 Centre steering panel is being 21-06983 Status after verification Audit report Under Not Overtaken No. year Report reference Board’s recommendation UNOPS response Board’s assessment Implemented implementation implemented by events rendered more robust in terms The recommendation is of its overall strength and considered to have been influence for future service implemented. line analyses and transfers. 32 2019 A/75/5/Add.11, The Board recommends that UNOPS confirms that the The Board noted that the X chap. II, para. 161 UNOPS streamline the Bangkok Shared Service UNOPS Bangkok Shared functioning of the Bangkok Centre steering panel was Service Centre, with its strong Shared Service Centre’s established to represent the governance structure, had steering panel through views and needs of the revised the terms of reference systematic documentation of UNOPS field offices, which of its steering panel with new its recommendations and their are the Centre’s key clients. functions. Also, as shown in follow-up so that the panel UNOPS has decided to update the minutes of its meeting held contributes to the introduction the terms of reference of the on 1 October 2020, the of new service lines, which steering panel, to expand the steering panel discussed some could be followed up on by membership within the panel of the potential functions and the Centre or the Shared and to appoint new panel services that could be Service Centre Group. members. Those steps should provided by the Centre, achieve the objective of including finance, granting the panel a stronger procurement, administration role in terms of its overall and support services and so influence and its ability to forth. support the implementation of The recommendation is the transfer of services to the considered to have been Centre. implemented. 33 2019 A/75/5/Add.11, The Board recommends that UNOPS considers that the The Board noted that the X chap. II, para. 168 UNOPS identify and prioritize recommendation has already Bangkok Shared Service ICT interventions that are been implemented through the Centre actively partnered with essential for the work of the current method of evaluation ICT and jointly supported the Bangkok Shared Service and implementation of senior leadership team to Centre, in consultation with information technology assess and decide on the relevant stakeholders, for the projects. The Bangkok Shared required information fulfilment of the strategic goal Service Centre actively technology development work of providing globally shared partners with ICT and jointly and the solutions needed with transactional services with supports the senior leadership the goal of improving economy, efficiency, team to assess and decide on efficiency, automation and effectiveness and scalability. the required information compliance for the Centre. technology development work A/76/5/Add.11 The recommendation is and the solutions needed with considered to have been the goal of improving implemented. efficiency, automation and 51/129 compliance for the Centre. A/76/5/Add.11 52/129 Status after verification Audit report Under Not Overtaken No. year Report reference Board’s recommendation UNOPS response Board’s assessment Implemented implementation implemented by events 34 2019 A/75/5/Add.11, The Board also recommends The recommendation has The Board noted that, starting X chap. II, para. 170 that UNOPS develop business already been addressed within with its 2020 ICT road map, cases with details of activities, the current method of UNOPS was implementing a including ICT developments, requesting information method of requesting along with milestones, technology development work, information technology resources requirements, design and mapping of development work, design and timelines and cost avoidance solutions starting with the mapping of solutions, etc., estimates, in a holistic manner 2020 ICT road map. The 2020 divided into five streams by for consideration during road map has been divided business focus and nature of decisions on ICT submissions. into five streams by business information technology focus and nature of development. information technology The recommendation is development. considered to have been implemented. 35 2019 A/75/5/Add.11, The Board recommends that The treasury management The Board noted that phase 2 X chap. II, para. 180 UNOPS implement the system project has been of the treasury management treasury management system implemented and went live in system project was still in and related automation of the November 2020. progress; this is the whole process to save time functionality that should and funds, as well as potential enable UNOPS to speed up the loss to the projects. application of funds that have been received in its bank accounts from project contributions, allowing projects to start expenditure in a quicker manner. The recommendation is considered to be under implementation. 36 2019 A/75/5/Add.11, The Board recommends that The recommendation has been The Board noted that in 2019, X chap. II, para. 185 UNOPS consider a version implemented via the global UNOPS had introduced a new management mechanism in the introduction by UNOPS, by software suite, Google issuance and revision of the end of 2019, of a new G-Suite, as its corporate various instructions to enable software suite, Google productivity tool that would tracking of the start of the G-Suite, as the UNOPS automatically address those activity or function at the corporate productivity tool concerns, manage version Bangkok Shared Service that will automatically address control and document changes. Centre, followed by the dates those concerns. Google G- The recommendation is and nature of revisions. Suite automatically manages considered to have been 21-06983 version control as well as the implemented. 21-06983 Status after verification Audit report Under Not Overtaken No. year Report reference Board’s recommendation UNOPS response Board’s assessment Implemented implementation implemented by events dating and tracking of document changes. 37 2019 A/75/5/Add.11, The Board recommends that The recommendation has The Board noted that the X chap. II, para. 190 UNOPS incorporate reporting already been addressed. The human resources and payroll tools for performance human resources and payroll reporting platform in requirement into ICT reporting platform in oneUNOPS reports had been applications. oneUNOPS reports is put into operation. operational. The recommendation is considered to have been implemented. 38 2019 A/75/5/Add.11, The Board recommends that The recommendation has The Board noted that the “to X chap. II, para. 197 UNOPS study the processes already been addressed. The be” tool still needed to related to human resources Information Technology develop a system tool for and payroll and take steps to Group, the Finance Group, the payroll field focal points, a automate process flows and People and Change Group, the payroll validation/variance incorporate validation controls Shared Service Centre and the tool and a payroll self-service to avoid or at least reduce Partnership and Liaison Group portal to ensure data integrity repetitive feeding of the same formed a project group and and avoid manual errors. data, thereby ensuring data thoroughly analysed the The recommendation is integrity and avoiding manual processes relating to considered to be under errors. payroll/human resources and implementation. targeted automation, validation controls and data integrity. The “as is” process was mapped, a best practices exercise was completed and a “to be” process map was created. Next steps to automate those processes were taken and a guidance standard operating procedure was developed. 39 2019 A/75/5/Add.11, The Board recommends that The recommendation has The Board noted that UNOPS X chap. II, para. 207 UNOPS prepare and prescribe already been addressed. prescribed the functions of integrated timelines UNOPS has created an involved entities within delineating the functions of interactive online system UNOPS. No supporting A/76/5/Add.11 involved entities within called the Process and Quality documents showing that the UNOPS, in order to leverage Management System. problem of stagnation of the existence of the shared Processes for all UNOPS payments and inefficient 53/129 entities are delineated in the coordination between units A/76/5/Add.11 54/129 Status after verification Audit report Under Not Overtaken No. year Report reference Board’s recommendation UNOPS response Board’s assessment Implemented implementation implemented by events service centre for transactional system by both functional area and the Bangkok Shared services. and by entity. The system Service Centre had been shows detailed procedural solved were provided. workflows with delineated The recommendation is roles and responsibilities by considered to be under unit. It is also the UNOPS implementation. process repository where all key processes are stored. The system is the link between the legislative framework and daily work. It is divided into two parts addressing both policy (the knowledge part) and the process map, where the process is designed in simple steps, allowing the process user to see the sequence of the steps and which resource is responsible for every step. Total number of recommendations 39 13 24 – 2 Percentage of the total number of recommendations 100 33 62 – 5 21-06983 A/76/5/Add.11 Chapter III Financial report for the year ended 31 December 2020 A. Introduction 1. In accordance with the financial regulations and rules of the United Nations Office for Project Services (UNOPS), the Executive Director of UNOPS has certified the 2020 financial statements of the organization and is pleased to submit them to the Executive Board and the General Assembly, and to make them publicly available. The financial statements have been audited by the Board of Auditors, and its unqualified audit opinion and report are attached. Overall, UNOPS is financially robust and is continuing to make the necessary strategic investments in order to accomplish its strategic plan for 2018–2021. 2 2. The UNOPS strategic plan for 2018–2021 focuses on implementation for impact. It provides direction to support Member States and the Secretary -General in realizing sustainable development and more peaceful, just and equitable societies. UNOPS is a United Nations resource for services and solutions across peace and security, humanitarian and development efforts. While UNOPS can expand capacity towards achievement of all the Sustainable Development Goals, the focus is based on partners’ demand and the needs of people and countries. 3. The UNOPS ambition is to become a known and recognized resource providing collaborative advantages that expand implementation capacity for Governments, the United Nations, and other partners, in support of the Secretary -General and the 2030 Agenda for Sustainable Development. Its objectives are structure d around three strategic contributions goals: (a) enable partners through efficient management support services; (b) help people through effective specialized technical expertise; and (c) support countries in expanding the pool and effect of resources. 4. The midterm review of the UNOPS strategic plan for 2018–2021 reconfirmed the relevance of the strategic direction set by the Executive Board and the viability of the demand-driven, self-financed and non-programmatic UNOPS business model. Faced with the challenges posed by the coronavirus disease (COVID-19) pandemic in 2020, the organization demonstrated resilience and adapted to support its partners in the global response to the pandemic and in continuing to deliver on the 2030 Agenda for Sustainable Development. B. Highlights of results in 2020 5. The mission of UNOPS is to help people build better lives and countries achieve peace and sustainable development. UNOPS is a self-financing organization, without any voluntary or assessed contributions from Member States; it relies on exchange revenue from the delivery of flexible and modular project services, spanning infrastructure, procurement, project management, financial management, human resources and other services, which can be deployed as self-standing offerings in response to specific demand or as integrated service offerings. 6. Around 3.4 million days of paid work for local people were created through UNOPS projects in 2020, of which 850,000 were for women and 2.5 million were for men. Infrastructure activities included work on more than 2,300 km of roads, 114 schools, 9 hospitals and 8 health clinics, compared with 3,526 km of roads, 83 schools, 8 hospitals and 79 health clinics in 2019. __________________ 2 Endorsed by Executive Board decision 2017/26. 21-06983 55/129 A/76/5/Add.11 7. UNOPS procured $1.3 billion worth of goods and services for its partners in 2020, compared with the $1.1 billion reported in 2019. In locations of operations where UNOPS maintains a physical presence, 46 per cent of procurement budgets (compared with 51 per cent in 2019) were awarded to local suppliers, represe nting almost $600 million. The decrease was influenced by a large increase in health -related procurement from international suppliers as part of the COVID -19 response. In 2020, $8.6 million of procurement tenders were awarded to women -owned businesses and $292 million to micro-, small and medium-sized enterprises. 8. As part of efforts to share UNOPS knowledge and expertise, 38,000 days of technical assistance were provided to partners (up from around 28,000 in 2019). Approximately 48 per cent of relevant projects supported by UNOPS reported one or more activities that contributed to developing national capacity, compared with 55 per cent in 2019. A full account is provided in the annual report of the Executive Director of UNOPS (DP/OPS/2021/4). Delivery and partnerships 9. As an operational resource for Member States and the Secretary -General, UNOPS partners with Governments, the United Nations system and other entities, including international financial institutions, multilateral institutions, foundations, non-governmental organizations and the private sector. 10. UNOPS delivery amounted to more than $2.2 billion in 2020, closely matching last year’s total of $2.3 billion. This can be attributed primarily to high government demand for UNOPS services. 11. Direct support to Governments accounted for the largest category of delivery value, amounting to $757 million, compared with $943 million in 2019. The largest partnership with a host Government during 2020 was with Argentina, followed by Guatemala, Peru, Honduras and Myanmar. Direct support to host Governments decreased in 2020 to 20 per cent of delivery, whereas the rate for donor Governments remained the same, at 14 per cent. The largest donor Government to which UNOPS delivery could be directly attributed was that of the United States of America, followed by the United Kingdom of Great Britain and Northern Ireland, Japan, Norway and Canada. 12. In 2020, 25 per cent of UNOPS delivery was on behalf of the United Nations system, remaining stable in comparison with the 26 per cent recorded in 2019. In real terms, that delivery represented approximately $567 million, compared with $592 million in 2019. The largest United Nations partner was again the Secretariat, and the largest segment was the Department of Peace Operations. Delivery on behalf of the Office of the United Nations High Commissioner for Refugees grew for the eighth consecutive year, and other strong partnerships included t he World Health Organization and the United Nations Environment Programme. 13. The largest countries or territories of delivery were Myanmar, Argentina, Yemen, Somalia and the State of Palestine, in that order. In 2019, they were Myanmar, Peru, the State of Palestine, Guatemala and Yemen. A full account is provided in the annual report of the Executive Director of UNOPS. Financial performance and results 14. The financial performance of UNOPS in 2020 can be summarized in the following headline figures: (a) UNOPS decreased slightly the value of the net services it delivered to $2,247.9 million. The amount comprised $1,052.0 million in respect of projects 56/129 21-06983 A/76/5/Add.11 delivered on behalf of UNOPS and $1,195.8 million in respect of projects delivered on behalf of other organizations; (b) The net surplus for the year was $39.5 million, which includes surplus from operations of $28.5 million and $11.0 million from net finance income; (c) The net assets at year-end stood at $286.5 million, exceeding the minimum threshold established by the Executive Board. This figure takes into account the impact of actuarial loss on post-employment benefits and fair value gain on financial instruments held as available for sale, amounting to $7.2 million and $1.9 million, respectively, recognized in the statement of changes in net assets. Net assets are further described later in the present report. 15. The present report was written during the COVID-19 pandemic in the first half of 2021. At the time of writing, it was still too early to estimate the long-term impact of the pandemic’s economic consequences and, subsequently, any impact on UNOPS net assets. The solid financial position of UNOPS allows it to face the unpredictable operating environment from a position of strength and to su pport its partners in making the best possible decisions at this challenging time. Financial statements prepared in accordance with the International Public Sector Accounting Standards 16. In accordance with the International Public Sector Accounting Standards (IPSAS), a complete set of financial statements has been prepared, as follows: (a) Statement of financial position . This statement shows the financial status of UNOPS as at 31 December 2020 by reporting the overall value of its assets and liabilities. It provides information about the extent to which resources are available for UNOPS to continue delivering partner services in the future; (b) Statement of financial performance . This statement measures the net surplus or deficit as the difference between revenues and the corresponding expenses incurred. The net surplus or deficit is a useful measure of the overall financial performance of UNOPS and indicates whether the organization achieved its self - financing objective for the period; (c) Statement of changes in net assets . This statement reports all changes in the value of assets and liabilities, including those excluded from the statement of financial performance, for example, actuarial adjustments to employee liabilities and fair value adjustment on available-for-sale financial instruments; (d) Statement of cash flows . This statement reflects the changes in the cash position of UNOPS by reporting the net movement of cash, classified by operating and investing activities. The ability of UNOPS to generate cash liquidity is an important aspect in assessing its financial resilience. For a more complete picture of the organization’s ability to draw upon its cash balances, investments also need to be taken into account; (e) Statement of comparison of budget and actual amounts . This statement compares the actual operational result with the main budget previously approved by the Executive Board. 17. The financial statements are supported by notes that assist users in understanding and comparing UNOPS with other entities. The notes include UNOPS accounting policies and other additional information and explanations. 18. In 2020, the net delivery of UNOPS services amounted to $2.2 billion, consisting of services delivered on behalf of UNOPS and services delivered on behalf of its partners. This reflects the total volume of resources handled by UNOPS during 21-06983 57/129 A/76/5/Add.11 the period and remained constant compared with 2019, in which delivery of $2.2 billion was recorded. 19. In 2020, total revenue as reported in the statement of financial performance, which represents the actual income attributable to UNOPS, amounted to $1.16 billion, a decrease of 3.5 per cent compared with 2019 ($1.21 billion). The decrease is attributable mainly to a change in the composition of delivery volume on principal project expenditures. 20. IPSAS distinguishes between contracts where UNOPS acts as a principal and contracts where it acts as an agent. In other words, where UNOPS delivered services while retaining the significant risk of ownership, that is, by acting as a principal, the revenue is recognized in full on the statement of financial performance. Where UNOPS delivered services on behalf of its partners, bearing the insignificant risk of ownership, that is, by acting as an agent, only the net revenue is reported on the statement. 21. The difference between gross delivery and IPSAS revenue figures consists of $1,195.8 million in agency transactions. Table III.1 provides a summary of revenue and expenses against the five core services of UNOPS: infrastructure, procurement, project management, human resources and financial management. The figures are derived from the financial statements that report the same IPSAS figures against the five principal activities (see note 17). 22. After deducting annual expenses and long-term employee liabilities charges, the net surplus for 2020 was $39.5 million, compared with the net surplus for 2019 of $47.1 million. Table III.1 Revenue and expenses (Millions of United States dollars) IPSAS revenue Add agency transactions Total gross delivery Revenue Construction contracts (infrastructure) 320.2 0.2 320.4 Procurement 82.2 526.0 608.2 Financial management 194.0 427.6 621.6 Human resources administration 21.2 211.3 232.5 Other project management 543.0 30.7 573.7 Miscellaneous revenue 2.9 – 2.9 Non-exchange revenue 5.7 – 5.7 Total revenue 1 169.2 1 195.8 2 365.0 IPSAS expenses Add agency transactions Total gross delivery Expenses Construction contracts (infrastructure) (304.9) (0.2) (305.1) Procurement (55.3) (526.0) (581.3) Financial management (167.0) (427.6) (594.6) Human resources administration (13.3) (211.3) (224.6) Other project management (511.0) (30.7) (541.7) Total project expenses (1 051.5) (1 195.8) (2 247.3) 58/129 21-06983 A/76/5/Add.11 IPSAS revenue Add agency transactions Total gross delivery Less : UNOPS administrative costs (89.2) – (89.2) Total expenses (1 140.7) (1 195.8) (2 336.5) Surplus from services 28.5 – 28.5 Add : net financial income 11.0 – 11.0 UNOPS 2020 surplus 39.5 – 39.5 Assets and liabilities 23. The statement of financial position is a comprehensive summary of UNOPS assets and liabilities. All UNOPS liabilities and assets are included. Financial position at the end of 2020 24. As at 31 December 2020, the liability to fund after-service health care and end- of-service benefits for qualifying staff members stood at $105.2 million. This liability was independently estimated by an actuarial firm. The details of the calculations are contained in note 15. While this amount represents the best estimate of the liability of UNOPS, it remains subject to a degree of uncertainty, which is reported in the sensitivity analysis. In recognition of this uncertainty, the actuarial assumptions will be kept under review and the estimate of the liability will be updated on an annual basis. 25. As at 31 December 2020, UNOPS had assets of $3,909.6 million, which more than covered liabilities of $ 3,623.1 million, leaving net assets of $286.5 million. 26. The most significant assets were short-term investments, which amounted to $2,100.7 million at the end of 2020, compared with $1,089.3 million at the end of 2019. 27. About 85 per cent of UNOPS cash and investments reflect contributions that have been received in advance from partners towards the cost of the implementation of the projects. The strong cash position of UNOPS demonstrates that it can continue to fund a similar portfolio of future programmes of work with its partners. Net assets 28. As at 31 December 2020, after an allowance had been made for all known liabilities, the net assets held by UNOPS stood at $286.5 million. Significantly, a $7.2 million actuarial loss pertaining to the valuation of employee benefits at year - end as well as a $1.9 million fair value gain on available-for-sale financial instruments were recognized and have increased the total reserves. 29. On the basis of the minimum operational reserve requirement calculation approved by the Executive Board in September 2013 (see DP/OPS/2013/CRP.1), UNOPS was required to maintain, at a minimum, $22.0 million in operational reserve as at 31 December 2020. This is based on the requirement to maintain four months of the average actual management expenses of the previous three years. 30. In 2019, a growth and innovation reserve was established. The purpose of the reserve is to invest in the future revenue-generating ability of UNOPS. To date, the growth and innovation reserve has funded Sustainable Infrastructure Impact Investments (S3I) activities, which contribute to accelerating the achievement of the Sustainable Development Goals through projects with significant potential to deliver social and environmental impact, alongside a financial return. The value of this 21-06983 59/129 A/76/5/Add.11 reserve was set at 50 per cent of the excess operational reserves. At the end of 2020, this stood at $124.3 million, compared with $104.9 million in 2019. Liquidity 31. The statement of cash flows shows that cash and cash equivalents held by UNOPS increased by $324.6 million during 2020. UNOPS continues to retain a strong working capital position. Budget outcome 32. IPSAS requires the preparation of a statement of comparison of budget and actual amounts. The statement reports actual revenue and expenses against the Executive Board-approved management budget covering UNOPS administrative costs for the biennium 2020–2021. 33. For 2020, the overall budgetary outcome was positive, with UNOPS achieving a net revenue of $24.4 million on a budget basis from its delivery of services. The UNOPS revenue from management fees, reimbursable services and advisory income totalled $107.4 million in 2020, compared with ($97.7 million in 2019, 17 per cent above the budget of $91.9 million. C. People excellence 34. UNOPS has a highly skilled and engaged workforce. At the end of 2020, the number of individuals on UNOPS contracts stood at 12,536 up slightly from 12,528 in 2019. Of those individuals, 823 were staff and 11,713 had individual contractor agreements. UNOPS administers personnel contracts on behalf of a range of partners. In 2020, 7,498 of the total number of individual contractors were partner personnel. This is illustrated in the table below. Table III.2 Number of personnel, by category, as at 31 December 2020 Contract modality Staff Contractors Total UNOPS personnel 823 a 4 215 5 028 Partner personnel – 7 498 7 498 Combined personnel 823 11 713 12 536 a Includes partner staff and staff in organizations where UNOPS is providing hosted initiative secretariat services, who are subject to the same policies and procedures as UNOPS staff. Status and deployment of individuals on UNOPS contracts 35. A survey of UNOPS personnel revealed engagement levels that continue to exceed internationally recognized benchmarks for high-performing organizations. Out of more than 3,250 responses (reflecting a response rate of 75 per cent), 83 per cent were favourable (at the same level as the previous survey), indicating high levels of engagement and intent to stay in the organization. UNOPS has yet to determine the date for the next full-scale survey, but the aim is for such surveys to be conducted on a periodic basis. In 2020, focus was placed on action planning at the team, country and corporate levels. Local action planning has been challenged by the pandemic. Given the pandemic context, no direct follow-ups were carried out, but leaders have used the survey results for decision-making and actions, where relevant. Very good progress has been made towards responding to corporate action planning themes. 60/129 21-06983 A/76/5/Add.11 Among these, there is strengthened consistency in the communications of senior leadership, including town hall meetings, newsletters and regular communications on the pandemic. Furthermore, the more people-centric focus in UNOPS strategic decisions and communications is recognized and appreciated. 36. In 2020, UNOPS continued its efforts towards achieving gender parity. Temporary special measures (introduced globally in 2019) continued, ensuring considerable progress towards parity. The measures were focused on increasing leadership accountability towards gender parity, encouraging gender-responsive and inclusive working practices and providing access to leadership development opportunities, as well as strengthening recruitment practices and talent outreach strategies. The gender advisory panel, composed of senior managers representing all regions, continued to provide recommendations to the Senior Leadership Team twice a year and will continue to do so in 2021. It is noteworthy that UNOPS introduced a junior talent programme to support efforts towards gender parity while investing in the development of national capacity. The programme has been recognized as a good practice by the United Nations Entity for Gender Equality and the Empowerment of Women (UN-Women). Lastly, the ambitious and bold efforts of UNOPS in diversity and inclusion are starting to take effect: by December 2020, UNOPS had reached 46 per cent employed women. In 2021, the upward trend continues and is moving within the boundaries of gender parity. 37. In countries where the organization maintains physical offices, 91 members of UNOPS senior management were nationals of the country, representing 15 per cent of the total number of 597. In 2019, 90 senior managers out of a total of 573 were nationals of the duty station country, representing 16 per cent of the total number (senior management is defined as staff employed at grade ICS -11 and above). At the end of 2020, over 2,500 UNOPS personnel were based at hardship duty stations (locations rated B to E on the International Civil Service Commission hardship scale). 38. In 2020, nearly 5,200 UNOPS colleagues benefited from UNOPS learning opportunities. In all, 90 per cent of participants in learning programmes rated the relevance of the learning opportunities provided as “very relevant” or “relevant”. In addition, 91 per cent indicated that they would recommend a given course to a colleague. Participants were 91 per cent field-based, with 9 per cent from headquarters; 46 per cent of participants were women and 54 per cent were men. 39. The UNOPS leadership mindset continues to provide a compass for leadership behaviour expected from its leaders. Special emphasis has been placed on ensuring that UNOPS leaders are well equipped to lead during a pandemic, in particular when it comes to performance management and remote working. Moreover, the organization has been, and continues to be, active in the area of prevention of sexual harassment, as well as in prevention of sexual exploitation and abuse, by joining United Nations system initiatives and defining and implementing UNOPS strategies that help to ensure that UNOPS beneficiaries and personnel enjoy the highest standards regarding the safeguarding of their rights. Additional focus has been placed on creating awareness and accountability in these areas. Global leaders have been introduced to allyship, and discussions on enforced standards of conduct were held in 2020. 40. In 2020, UNOPS leadership development programmes, like all areas, were directly affected by COVID-19. Over the year, the face-to-face components of UNOPS programmes were progressively adapted into fully virtual formats, with a focus on finding innovative ways to maintain participant collaboration and experiential learning. Virtual leadership simulations were piloted in partnership with external specialist vendors, and new methods for group coaching and experiential sharing were tested. In 2020, the Leading People programme had 40 p articipants, 21-06983 61/129 A/76/5/Add.11 including the first fully virtual cohort. In addition, two cohorts of the Leadership Foundations programme were launched, one in September and the other in November, with a total of 66 participants. The core of these programmes remains such th emes as inclusive leadership, diversity and gender equality to strengthen UNOPS commitment to people excellence based on competencies, values and principles. Gender balance (50 per cent women and 50 per cent men) and geographical representation have been ensured in all leadership development programmes offered. 41. Throughout the year, the COVID-19 pandemic required the organization and its personnel to demonstrate agility and resilience. UNOPS already had remote working policies and information and communications technology tools in place, which enabled business continuity, including the transition to remote working, virtual meetings and collaboration platforms. Furthermore, UNOPS provided effective tools and guidance to management, which assisted supervisors in managing remotely, as well as strengthening regular communications from senior management. Throughout the pandemic, UNOPS has increased well-being resources and support for offices and colleagues to ensure that access to necessary resources and serv ices is available. D. Accountability and transparency as a core value of the United Nations Office for Project Services 42. Achievements during 2020 included: (a) Following its establishment in 2019, the UNOPS Client Board convened for the first time in February 2020. The purpose of the Client Board is to serve as an advisory body to the UNOPS Executive Director and to support the ambition of UNOPS to engage more strategically with partners by establishing a regular interface for the exchange of advice; (b) UNOPS was assessed by the International Organization for Standardization (ISO) and maintained its global ISO 9001 (quality management) certification. UNOPS maintained its ISO 14001-certified environmental management system. This forms the basis for UNOPS compliance with CEB/2013/HLCM/5 on the development and implementation of environmental sustainability management systems in each United Nations organization; (c) UNOPS maintained its certification of the ISO 45001 standard for occupational health and safety management systems (formerly called Occupational Health and Safety Assessment Services 18001). This forms the basis for UNOPS compliance with the adoption of occupational safety and health systems in all United Nations organizations (CEB/2015/HLCM/7/Rev.2) and with the Secretary-General’s bulletin on the introduction of an occupational safety and health management system (ST/SGB/2018/5); (d) Several major implementations were carried out to reduce risk and increase organizational maturity. UNOPS implemented a treasury management system that has enhanced the transparency of financial planning and transactions, increased accountability, reduced errors and mitigated against potential fraud. In addition, a new tool called oneUNOPS Collect, which enables offline data collection in challenging field locations, has been developed and delivered to enhance operational agility, enable informed decision-making and reduce overall operational risk. Lastly, UNOPS has begun its migration of business applications to Google Cloud Platform, providing a modern and proven infrastructure and the needed availability, compliance and security standards going forward; (e) By the end of 2020, the implementation rate of internal audit recommendations stood at 96 per cent, the same as in 2019, continuing to demonstrate 62/129 21-06983 A/76/5/Add.11 high management responsiveness. Twelve recommendations, five of which were closed in early 2021, remained open for more than 18 months. Details of UNOPS audit and investigations findings in 2020 are available in a dedicated report (DP/OPS/2021/2). E. System of internal controls and its effectiveness 43. The Executive Director is accountable to the Executive Board for establishing and maintaining a system of internal controls that conforms to and complies with the financial regulations and rules of UNOPS. Main elements of the system of internal controls 44. The main elements of UNOPS internal controls comprise the policies, procedures, standards and activities designed to ensure that all operations are conducted in an economical, efficient and effective manner. They include adherence to United Nations policies established by the Genera l Assembly, the Economic and Social Council, the Executive Board and the Secretary -General; the documentation of processes, instructions and guidance promulgated by the Executive Director through UNOPS operational directives; the delegation of authority th rough written instruction; the system of personnel performance management; key controls throughout the UNOPS value chain to address any risks to core activities; and the monitoring and communication of results by both management and the Executive Board. 45. Following the successful implementation of the UNOPS governance risk and compliance framework, in 2019, UNOPS focused on further strengthening the internal controls system in 2020. This has led to: (a) Revision of the UNOPS organizational directive on internal controls, with improved clarity regarding roles and responsibilities; (b) Definition of five core UNOPS processes that are in scope for assessment; (c) The introduction of the senior and regional leadership self-assessment on the effectiveness of the internal controls principles contained in the organizational directive. 46. Based on the principles of the above-mentioned governance, risk and compliance framework, and as an integral part of risk and internal control s management, UNOPS enterprise risk management is a holistic approach for managing key risks across various organizational levels. Enterprise risk management is implemented through standard rules (promulgated organizational directive and operational instruction), integrated processes (process quality management system guidance), common tools (oneUNOPS Projects), and taxonomies (risk categories, risk evaluation scale, etc.). More specifically, enterprise risk management comprises three interconnected levels: (a) Operational risk management, which relates to managing risks online across the lifespan of UNOPS projects and engagements in order to facilitate the successful delivery of UNOPS operations; (b) Organizational risk management, which relates to managing risks at the geographical entity level, such as those affecting the entity’s reputation, financial viability and overall objectives; (c) Corporate risk management, which relates to managing risks for UNOPS as a global entity, such as those affecting the reputation and financial via bility of UNOPS. 21-06983 63/129 A/76/5/Add.11 Effectiveness of the system of internal controls 47. The UNOPS system of internal controls is a continuous process designed to monitor, manage and improve UNOPS core activities. As a result, the system can only provide reasonable, and not absolute, assurance that UNOPS will achieve its expected results and objectives. Internal controls help to reduce UNOPS risk exposure to an acceptable level through the implementation of control and oversight activities across UNOPS operational processes. The Executive Director has established governance and reporting structures which have enabled her to evaluate the effectiveness of the internal controls system throughout the year. The Executive Director held regular meetings with the major elements of the UNOPS governance structure, including the Executive Board, the Audit Advisory Committee, the Director of the Internal Audit and Investigations Group, the Ethics and Compliance Officer and the Board of Auditors. Internal controls and risk management processes are reinforced during these sessions with mitigation plans for risks which are at an unacceptable level. She also took into account feedback from the Senior Leadership Team and senior managers on the operational effectiveness of the internal contro ls system. On the basis of these activities, she provided a reasonable, but not absolute, assurance of the effectiveness of the internal controls system and confirmed that she was not aware of any significant issues. 48. UNOPS adopts the Committee of Sponsoring Organizations of the Treadway Commission framework in establishing the internal control s framework. The framework provides reasonable assurance that UNOPS will achieve the following objectives: (a) efficiency and effectiveness of operations; (b) reli ability and accuracy of reporting; and (c) compliance with UNOPS and United Nations rules and regulations. In 2020, UNOPS continued to operationalize the internal control s framework across its five core processes. The methodology adopted includes detailed analysis and mapping of the process, an assessment of the risks and an evaluation of the controls implemented to mitigate those risks. UNOPS policy owners are involved in the process, which enables visibility and ownership of the risks. UNOPS internal controls risk assessments have been aligned with the enterprise risk management framework to improve synergies and provide a holistic view of the UNOPS risk landscape. F. Looking ahead Strategic plan for 2018–2021 49. The Executive Board endorsed the UNOPS strategic plan for 2018–2021 at its second regular session, in September 2017. The plan builds on the UNOPS midterm review and was developed after extensive consultation with UNOPS stakeholders. In its decision 2017/26, the Board recognized the plan’s solid foundation in Member State decisions, policy guidance and international agreements and the needs of people and countries, including in the most fragile situations. 50. In its decision, the Board expressed support for the strategic goal s of UNOPS and appreciation for its intent to engage more strategically with Governments and other partners. It urged entities of the United Nations system to recognize the comparative advantages and technical expertise of UNOPS and engage in collaborative strategic partnerships for efficiency and effectiveness, including at the country level; and encouraged UNOPS in its continued pursuit of organizational excellence and attention to ensuring investment to build organizational capabilities and protect its unique business model for the future. 64/129 21-06983 A/76/5/Add.11 51. In September 2020, the midterm review of the UNOPS strategic plan for 2018–2021 was presented to the Executive Board. In its decision on the review (decision 2020/20), the Board: (a) underlined the continued relevance of the strategic framework and the non-programmatic, business-to-business value proposition; and (b) recognized the UNOPS ability to safeguard the viability of its unique demand - driven and self-financing business model. The Board took note of the advanc ements made in the area of Sustainable Infrastructure Impact Investments. Lastly, it took note of increasing demand for support to expand implementation capacity in the most fragile situations, as well as in direct support of countries, and noted the poten tial for added value through support and capacity for quality infrastructure and public procurement. The UNOPS strategic plan for 2022–2025 will be developed on the basis of the Board’s decision. It will be presented to the Board in September 2021. UNOPS financial viability 52. UNOPS has assessed its capability and resilience to continue operating at its current level of activity throughout 2020 and beyond despite the impacts of the pandemic. Accordingly, the 2020 financial statements have been prep ared on a going- concern basis. 53. In line with Executive Board decision 2020/08, UNOPS is proactively managing any residual organizational risks by undertaking a study of its operational reserve requirements. UNOPS plans to present the outcome to the Advi sory Committee on Administrative and Budgetary Questions and the Executive Board through UNOPS budget estimates for 2022–2023, on the provisional agenda for the second regular session of 2021. 21-06983 65/129 A/76/5/Add.11 Chapter IV Financial statements for the period ended 31 December 2020 United Nations Office for Project Services I. Statement of financial position as at 31 December 2020 (Thousands of United States dollars) Reference 31 December 2020 31 December 2019 Assets Non-current assets Intangible assets Note 7 3 879 2 041 Property, plant and equipment Note 6 18 368 18 750 Long-term investments Note 10 760 584 584 033 Other financial assets Note 11 38 890 40 993 Non-current accounts receivable Note 13 881 530 Total non-current assets 822 602 646 347 Current assets Inventories Note 8 12 214 14 723 Other assets Note 12 5 365 53 Accounts receivable Note 13 Project accounts receivable 41 045 33 218 Prepayments 16 246 8 982 Other accounts receivable 27 533 15 121 Short-term investments Note 10 2 100 667 1 089 323 Cash and cash equivalents Note 14 883 975 559 444 Total current assets 3 087 045 1 720 864 Total assets 3 909 647 2 367 211 Liabilities Non-current liabilities Employee benefits, long-term Note 15 104 770 89 647 Provisions Note 18 4 195 – Total non-current liabilities 108 965 89 647 Current liabilities Employee benefits, short-term Note 15 38 460 27 731 Accounts payable Note 16 290 861 216 980 Project cash advances received Note 17 Deferred revenue 1 818 835 1 043 123 Cash held on agency projects 1 359 045 729 609 Other liabilities Note 18 3 273 – Provisions Note 23 3 662 8 077 Total current liabilities 3 514 136 2 025 520 Total liabilities 3 623 101 2 115 167 Net assets 286 546 252 044 66/129 21-06983 A/76/5/Add.11 Reference 31 December 2020 31 December 2019 Net assets/equity Actuarial gains/losses Note 19 4 783 11 987 Fair value of available-for-sale financial assets Note 19 11 141 9 222 Minimum operational reserve Note 19 21 988 21 025 Growth and innovation reserve Note 19 124 317 104 905 Accumulated surpluses Note 19 124 317 104 905 Total net assets/equity 286 546 252 044 Total liabilities and net assets/equity 3 909 647 2 367 211 The accompanying notes are an integral part of the financial statements. 21-06983 67/129 A/76/5/Add.11 United Nations Office for Project Services II. Statement of financial performance for the period ended 31 December 2020 (Thousands of United States dollars) Reference 31 December 2020 31 December 2019 Revenue Revenue from project activities Note 20 1 160 603 1 207 306 Miscellaneous revenue 2 897 4 270 a Non-exchange revenue Note 20 5 694 191 Total revenue 1 169 194 1 211 767 Expenses Contractual services Note 20 392 534 428 447 Other personnel costs – other personnel Note 21 300 938 270 489 Salaries and employee benefits – staff Note 21 149 255 131 959 Operational costs Note 20 96 065 111 081 Supplies and consumables 129 454 149 011 Travel 44 419 83 067 Other expenses Note 20 22 526 11 230 Depreciation of property, plant and equipment Note 6 4 507 4 216 Amortization of intangible assets Note 7 1 027 761 Total expenses 1 140 725 1 190 261 Surplus from operations 28 469 21 506 Finance income Note 22 24 464 24 264 Exchange rate gain/(loss) Note 22 (13 433) 1 367 Net finance income/(expense) 11 031 25 631 Surplus for the period 39 500 47 137 a To improve presentation, $0.2 million was reclassified from miscellaneous revenue to non-exchange revenue. This includes an additional $0.1 million of 2019 miscellaneous revenue that was omitted from the narrative disclosure for non-exchange revenue in the 2019 corporate financial statements. This reclassification does not change total revenue for 2019. The accompanying notes are an integral part of the financial statements. 68/129 21-06983 A/76/5/Add.11 United Nations Office for Project Services III. Statement of changes in net assets for the period ended 31 December 2020 (Thousands of United States dollars) Reference Opening balance as at 1 January 2019 Note 19 192 915 Actuarial gains/(losses) for the period (269) Change in fair value of available-for-sale financial assets 12 261 Surplus for the period 47 137 Opening balance as at 1 January 2020 Note 19 252 044 Adjustments to prior period recorded in year a 287 Restated opening balance as at 1 January 2020 252 331 Actuarial gains/(losses) for the period (7 204) Change in fair value of available-for-sale financial assets 1 919 Surplus for the period 39 500 Closing balance on 31 December 2020 Note 19 286 546 a A prior period error of $0.3 million has been made as an in-year adjustment to opening net assets/equity. For more details on the error, see note 7 to the accounts. The accompanying notes are an integral part of the financial statements. 21-06983 69/129 A/76/5/Add.11 United Nations Office for Project Services IV. Statement of cash flows for the period ended 31 December 2020 (Thousands of United States dollars) Reference 31 December 2020 31 December 2019 Cash flows from operating activities Surplus for the financial period 39 500 47 137 Non-cash movements: Amortization Note 7 1 027 761 Depreciation Note 6 4 507 4 216 Impairments Note 6 1 – Non-exchange revenue (donated assets) Note 20 (101) – Finance income Note 22 (24 464) (24 264) Foreign exchange gains/losses Note 22 13 433 (1 367) Net surplus before changes in working capital 33 903 26 483 Changes in working capital Increase/(decrease) in provision for doubtful debts Note 13 18 224 3 481 (Increase)/decrease in inventories Note 8 2 509 (3 451) (Increase)/decrease in accounts receivable (10 902) 2 352 (Increase)/decrease in prepayments Note 13 (7 264) 18 176 Increase/(decrease) in employee benefits (net of actuarial gains) Note 15 18 648 7 817 Increase/(decrease) in accounts payable and accruals 11 989 2 224 Increase/(decrease) in project cash advances received Note 17 1 405 148 (24 091) Increase/(decrease) in provisions Note 23 (220) 4 405 Cash flow impact on changes in working capital 1 438 132 10 913 Finance income received on UNOPS bank balances Note 22 394 506 Net cash flows from operating activities 1 472 429 37 902 70/129 21-06983 A/76/5/Add.11 United Nations Office for Project Services IV. Statement of cash flows for the period ended 31 December 2020 (continued) (Thousands of United States dollars) Reference 31 December 2020 31 December 2019 Cash flows from investing activities Acquisitions of intangible assets (2 526) (636) Proceeds from sale of intangible assets – – Acquisitions of property, plant and equipment (4 945) (11 451) Proceeds from sale of property, plant and equipment 920 424 Purchase of investments (6 511 052) (4 947 522) Proceeds from maturity of investments 5 382 105 4 962 118 Interest income received on investments 35 491 40 969 Interest income received on other financial assets – 880 Finance income/cost allocated to projects Note 22 (12 340) (32 503) Purchase of other financial assets Note 11 (20 000) (30 000) Proceeds from disposal of other financial assets Note 11 – – Net cash flows from investing activities (1 132 347) (17 721) Effect of exchange rate changes (net of derivatives) Note 22 (15 525) 1 367 Net increase/(decrease) in cash and cash equivalents 324 557 21 548 Cash and cash equivalents at the beginning of the period ɑ 559 444 537 888 Adjustment for fair value of cash equivalents (26) 8 Cash and cash equivalents at the end of the period b 883 975 559 444 a There is no difference between cash and cash equivalents on the statement of cash flows and the statement of financial position. b The components of cash and cash equivalents as at 31 December 2020 are disclosed in note 14. The accompanying notes are an integral part of the financial statements. 21-06983 71/129 A/76/5/Add.11 United Nations Office for Project Services V. Statement of comparison of budget and actual amounts for the period ended 31 December 2020 (Thousands of United States dollars) Biennial 2020–2021 2020 2020 2020 management management management actual Difference budgeta budget budget amounts between final budget Reference Original Original Final Actuals and actuals Total revenue for the period Note 26 181 001 90 501 91 865 107 389 15 524 Management resources Posts 27 135 13 567 11 743 12 145 402 Common staff costs 20 382 10 191 8 859 9 056 197 Travel 8 703 4 352 3 373 676 (2 697) Consultants 66 420 33 210 32 643 31 051 (1 592) Operating expenses 12 851 6 426 5 576 3 899 (1 677) Furniture and equipment 967 483 444 1 242 798 Reimbursements 2 042 1 021 1 368 1 327 (41) Total use of management resources 138 500 69 250 64 006 59 396 (4 610) Write-offs, provisions and contingency surplus 22 501 11 251 – 22 103 22 103 Strategic investment from surplus 20 000 10 000 6 000 1 516 (4 484) Total use of resources 181 001 90 501 70 006 83 015 13 009 Net revenue on budget basis – – 21 859 24 374 2 515 a DP/OPS/2019/5. The accompanying notes are an integral part of the financial statements. 72/129 21-06983 A/76/5/Add.11 United Nations Office for Project Services Notes to the 2020 financial statements Note 1 Reporting entity 1. The mission of UNOPS is to help people build better lives and to help countries achieve peace and sustainable development. UNOPS is a self-financing organization, without any voluntary or assessed contributions from Member States, and relies on the revenue that it earns from project implementation and other services. UNOPS was established as an independent entity on 1 January 1995; its headquarters is located in Copenhagen. 2. UNOPS activities and its management budget are set by its Ex ecutive Board. UNOPS is mandated to help its partners to expand implementation capacity across peace and security, humanitarian and development efforts, including through capacity - development activities. Through its project services, it supports Government s, the United Nations system and other partners in achieving the global goals of Member States and local objectives for people and countries. UNOPS is an operational resource for Member States and the Secretary-General, supporting their broad vision for “the future we want”. 3 3. Pursuant to General Assembly resolution 65/176 and subsequent Executive Board decisions, 4 UNOPS has been mandated to act as a service provider for various actors in the development, humanitarian and peacekeeping arenas, including the United Nations, the agencies, funds and programmes of the United Nations system, donor and recipient Governments, intergovernmental organizations, international and regional financial institutions, non-governmental organizations, foundations and the private sector. 4. UNOPS has a role as a central resource for the United Nations system in procurement and contract management, as well as in civil works and physical infrastructure development, including the relevant capacity development activities. UNOPS can make value-added contributions by providing efficient, cost-effective services to partners, in the areas of project management, human resources, financial management and common/shared services. 5. UNOPS follows a results-oriented approach to the services that it provides. It launches and implements new project operations quickly, transparently and in a fully accountable manner. UNOPS customizes its services to individual partners’ needs, offering everything from stand-alone solutions to long-term project management. Core service lines include: (a) Project management: UNOPS is responsible for the delivery of one or more outcomes of projects, where it coordinates all aspects of implementation of the project as principal; (b) Infrastructure: UNOPS uses its expertise and experience to construct emergency and permanent infrastructure. It remains responsible for the construction works and therefore accounts for these projects as principal; (c) Procurement: UNOPS uses its procurement network to purchase equipment and supplies on behalf of and on the basis of the specifications of its customers. It does not take ownership of the procured items, as they are delivered directly to the end customer; __________________ 3 See DP/OPS/2017/5 and General Assembly resolution 66/288, annex. 4 Executive Board decisions 2009/25, 2010/21, 2013/23, 2015/12, 2016/12, 2016/19 and 2017/16. 21-06983 73/129 United Nations Office for Project Services A/76/5/Add.11 Notes to the 2020 financial statements (continued) (d) Other services: human resources management services include recruitment, appointment and administration of personnel contracts undertaken by UNOPS on behalf of its partners. The appointed individuals do not work under the direction of UNOPS. Another service offered is financial management or administration, whereby UNOPS acts as an agent pursuant to a mandate set by the partner. 6. The accounting for agent and principal transactions is further described in the accounting policy on project accounting. Note 2 Basis for preparation 7. UNOPS financial regulation 23.01 requires the preparation of annual financial statements on an accrual accounting basis in accordance with IPSAS, using the historical cost convention. Where IPSAS does not address a particular issue, the appropriate International Financial Reporting Standard is adopted. The accounting policies have been applied consistently in the preparation and presentation of these financial statements. 8. These financial statements are prepared on the basis that UNOPS is a going concern and will continue in operation and meet its mandate for the foreseeable future. 9. These financial statements are prepared on an accrual basis and cover the period from 1 January to 31 December 2020. Note 3 Summary of significant accounting policies 10. The principal accounting policies applied in the preparation of these financial statements are set out below. Project accounting 11. IPSAS 9: Revenue from exchange transactions distinguishes between a contract where UNOPS acts as a principal and a contract where UNOPS acts as an agent. Therefore, revenue from a project in which UNOPS acts as a principal is recognized in full on the statement of financial performance, while in the case of projects in which UNOPS operates as an agent on behalf of its partners, only the net revenue is reported on the statement of financial performance. Additional information on these agency transactions is provided in note 20. Regardless of the status of UNOPS as principal or agent, all project-related receivables and payables are recognized in the statement of financial position at period-end and reflected in the statement of cash flows. In particular, where UNOPS receives amounts in advance from partners, the excess of cash received over costs and expenses incurred is treated as project cash advances received and reported as a liability; for projects in which the costs incurred exceed the cash received from the client, the balance is reported as a receivable. Functional and presentation currency 12. The United States dollar is the functional currency of UNOPS and is the currency of these financial statements. The amounts in the financial statements, schedules and notes are rounded to the nearest thousand United States dollars. Transactions, including non-monetary items, in currencies other than United States dollars are translated into dollars at the United Nations operational rate of exchange on the date of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and unrealized exchange differences (gains and losses) 74/129 21-06983 United Nations Office for Project Services Notes to the 2020 financial statements (continued) A/76/5/Add.11 from the translation at period-end are recognized in the statement of financial performance. Financial instruments Investments 13. UNOPS holds its investments as “available-for-sale” financial assets. Initial recognition of assets is measured at fair value plus transaction costs that are directly attributable to their acquisition. An increase or decrease to the principal on Treasury inflation-protected securities is recognized through surplus or defi cit in the statement of financial performance. For other available-for-sale instruments, their fair value is used for subsequent measurement based on quoted market prices obtained from knowledgeable third parties, until the financial asset is derecognized, at which time the cumulative gain or loss previously recognized in net assets/equity shall be recognized in surplus or deficit. UNOPS holds its investments in four different portfolios, and the types of securities held in them vary, as shown below: (a) Working capital (relates to contributions received against projects): government securities, government agency, other official entity and multilateral organization securities (limited to 50 per cent of the investment account assets), exchange-traded futures, covered bonds (limited to 20 per cent of the investment account assets); (b) Reserves (relates to UNOPS operational reserves): Treasury inflation - protected securities, United States dollar investment-grade corporate bonds, euro investment-grade corporate bonds, United States dollar-denominated emerging market debt, high-yield bonds, developed equities; (c) After-service health insurance (relates to post-employment benefits): Treasury inflation-protected securities, United States dollar investment-grade corporate bonds, euro investment-grade corporate bonds, United States dollar- denominated emerging market debt, high-yield bonds, developed equities; (d) Growth and innovation reserve: government securities, government agency, other official entity and multilateral organization securities (limited to 50 per cent of the investment account assets), exchange-traded futures, covered bonds (limited to 20 per cent of the investment account assets). 14. The interest income earned on investments is recognized in the statement of financial performance during the period earned. 15. UNOPS investments are classified as current assets if the investments mature or management intends to dispose of them within 12 months of the end of the reporting period. Other financial assets 16. Other financial assets relate to UNOPS Sustainable Infrastructure Impact Investments and are classified as loans and receivables under IPSAS 29. Loans and receivables are non-derivative financial assets with fixed or determinable payments, which are not quoted in an active market. 17. Other financial assets are initially recognized at fair value, including directly attributable transaction costs, and are measured subsequently at amortized cost using the effective interest method. The effective interest rate is the rate that discounts exactly estimated future cash receipts through the expected life of the financial asset. 21-06983 75/129 United Nations Office for Project Services A/76/5/Add.11 Notes to the 2020 financial statements (continued) Other assets and other liabilities 18. UNOPS holds foreign exchange forward contracts and futures in order to manage foreign exchange risk. 19. UNOPS does not apply hedge accounting to its derivative instruments. If they are not closed out at the reporting date, derivatives with a positive fair value are reported as other assets (current), while derivatives with a negative fair value are reported as other liabilities (current) in the statement of financial position. Gains and losses from changes in the fair value of derivatives are recognized in net finance income in the statement of financial performance. Cash and cash equivalents 20. Cash and cash equivalents comprise cash on hand, cash at banks, time deposits and money market instruments held with financial institutions where the initial term was less than three months. They are held at nominal value less an all owance for any anticipated losses. Accounts receivable 21. Receivables are initially measured at fair value and subsequently at amortized cost using the effective interest method less an allowance for uncollectable amounts. This calculation includes amounts relating to retentions for work performed but not yet paid for by the client. 22. Receivables are included in current assets, except for those with maturities greater than 12 months after the end of the reporting period. Such loans and receivables are classified as non-current assets. Accounts payable 23. Payables are initially measured at fair value, that is, the amount expected to be paid to discharge the liability, and subsequently at amortized cost using the effective interest method. Impairment of financial assets 24. At the end of each reporting period, UNOPS assesses whether there is objective evidence that a financial asset or a group of financial assets is impaired. 25. A financial asset or a group of financial assets is impaired and impairment loss is incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a “loss event”) and if that loss event has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. 26. For financial assets carried at amortized cost, the amount of the loss is measured as the difference between the carrying amount of the asset and the estimated recoverable amount. The carrying amount of the asset is reduced and the amount of the loss is recognized in the statement of financial performance. 27. For investments classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is evidence that investments may need to be impaired. If any such evidence exists for these assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value less any impairment loss on that financial asset previously recognized in profit or loss – is removed from accumulated surplus (deficit) and recognized in the statement of financial performance. 76/129 21-06983 United Nations Office for Project Services Notes to the 2020 financial statements (continued) A/76/5/Add.11 Property, plant and equipment 28. UNOPS recognizes property, plant and equipment at their historical cost less depreciation and impairment losses in line with IPSAS 17: Property, plant and equipment. For any item of property, plant and equipment received as a contribution in kind, the fair value at the date of acquisition is deemed to be its cost, in line with IPSAS 23: Revenue from non-exchange transactions. 29. UNOPS depreciates its property, plant and equipment on a straight -line basis over their estimated useful life with the exception of land and assets under construction, which are not depreciated. Property, plant and equipment are also subject to a systematic annual review to confirm the remaining useful life and to identify any impairment. 30. Individual items of property, plant and equipment are capitalized when their original acquisition value is equal to or greater than the threshold of $2, 500 for asset classes except for leasehold improvements, where the applicable threshold is $10,000. 31. The estimated useful life ranges and capitalization thresholds for the various classes of property, plant and equipment are as follows: Table IV.1 Depreciation of property, plant and equipment Estimated useful Capitalization threshold Property, plant and equipment class life (years) (United States dollars) Land and buildings 10–40 2 500 Vehicles 5–20 2 500 Leasehold improvements 10 10 000 Plant and equipment 3–10 2 500 Communications and information technology equipment 3–10 2 500 32. Property, plant and equipment are reviewed for impairment at each reporting date, taking into consideration various impairment indicators. Any impairment loss is recognized in other expenses within the statement of financial performance when the carrying amount of an asset exceeds its recoverable service amount. Intangible assets 33. UNOPS intangible assets comprise purchased software packages, internally developed software and intangible assets under construction. Intangible assets are recognized at cost less accumulated amortization and impairment losses in line with IPSAS 31: Intangible assets. Annual software licences are expensed and adjusted as necessary for any element of prepayment. 34. Assets under construction are not amortized. Amortization of other intangible assets is calculated over the estimated useful life of the asset using the straight -line method. The estimated useful life for intangible asset classes is as follows: 21-06983 77/129 United Nations Office for Project Services A/76/5/Add.11 Notes to the 2020 financial statements (continued) Table IV.2 Amortization of intangible assets Estimated useful Capitalization threshold Intangible asset class life (years) (United States dollars) Internally developed software 6 100 000 Software acquired 3 2 500 35. Intangible assets are subject to an annual review to confirm the remaining useful life and to identify any impairment. Inventories 36. Bulk raw materials purchased in advance for the implementation of projects and supplies on hand at the end of the financial period are recorded as inventories. The inventories are valued at the lower of cost and net realizable value. Cost is estimated using the “first in, first out” method. 37. The cost of inventory includes costs incurred in acquiring the inventory an d other costs incurred in bringing it to its existing location and condition (e.g. freight costs). Leases 38. UNOPS has reviewed the property and equipment that it leases, and in no instance does it have a significant portion of the risks and rewards of ownership. Accordingly, all leases are recognized as operating leases. 39. Payments made under operating leases are charged to the statement of financial performance on a straight-line basis over the period of the lease. A provision is established to cover the cost of making good dilapidations on leasehold properties where required to do so under the terms of the lease. Employee benefits 40. UNOPS recognizes the following categories of employee benefits: (a) Short-term employee benefits due to be settled within 12 months after the end of the accounting period in which employees render the related service; (b) Post-employment benefits; (c) Other long-term employee benefits; (d) Termination indemnity. Short-term employee benefits 41. Short-term employee benefits comprise salaries, the current portion of home leave, annual leave and those elements of other employee benefits (including assignment grant, education grant and rental subsidy) payable within one year of period-end and measured at their nominal values. Post-employment benefits 42. UNOPS is a member organization participating in the United Nations Joint Staff Pension Fund, which was established by the General Assembly to provide retirement, death, disability and related benefits to employees. The Pension Fund is a funded, multi-employer defined benefit plan. As specified in article 3 (b) of the Regulations 78/129 21-06983 United Nations Office for Project Services Notes to the 2020 financial statements (continued) A/76/5/Add.11 of the Fund, membership in the Fund shall be open to the specialized agencies and to any other international, intergovernmental organization which participates in the common system of salaries, allowances and other conditions of service of the United Nations and the specialized agencies. 43. The plan exposes participating organizations to actuarial risks associated with the current and former employees of other organizations participating in the Pension Fund, with the result that there is no consistent and reliable basis for allocating the obligation, plan assets and costs to individual organizations participating in the plan. UNOPS and the Pension Fund, in line with the other organizations participating in the Fund, are not in a position to identify the proportionate share of UNOPS of the defined benefit obligation, the plan assets and the costs associated with the plan with sufficient reliability for accounting purposes. Hence, UNOPS has treated this plan as if it were a defined contribution plan in line with the requirements of IPSAS 39: Employee benefits. The actuarial valuations are carried out using the projected unit credit method. UNOPS recognizes actuarial gains and losses in the period in which they occur directly in net assets/equity. 44. UNOPS contributions to the plan during the financial period are recognized as expenses in the statement of financial performance. Other long-term employee benefits 45. Long-term employee benefits comprise the non-current portion of home leave entitlements. Termination benefits 46. Termination benefits are recognized as an expense only when UNOPS is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan either to terminate the employment of a staff member before the normal retirement date or to provide termination benefits as a result of an offer made in order to encourage voluntary redundancy. Termination benefits settled withi n 12 months are reported at the amount expected to be paid. Where termination benefits fall due more than 12 months after the reporting date, they are discounted. Provisions and contingencies 47. Provisions are made for future liabilities and charges where UNOPS has a present legal or constructive obligation as a result of past events and it is probable that UNOPS will be required to settle the obligation. This, for example, includes those cases where the anticipated cost of completing a construction project is likely to exceed the recoverable amount. 48. A contingent liability is a possible obligation that arises as a result of past events whose existence will be confirmed only by the occurrence or non -occurrence of one or more uncertain future events that are not wholly within the control of UNOPS. Contingent liabilities are disclosed in the notes to the financial statements unless the possibility that they will be realized is remote. Revenue 49. UNOPS recognizes revenue under exchange transactions, including but not limited to construction projects, implementation projects and service projects, and non-exchange transactions. 50. Where the outcome of a project can be reliably measured, revenue from construction projects (IPSAS 11: Construction contracts) and other exchange transactions (IPSAS 9: Revenue from exchange transactions) is recognized by 21-06983 79/129 United Nations Office for Project Services A/76/5/Add.11 Notes to the 2020 financial statements (continued) reference to the stage of completion of the project at period -end, as measured by the proportion of costs incurred for work to date to the estimated total project costs. Where the outcome of the project cannot be estimated reliably, revenue is recognized to the extent that it is probable for the incurred costs to be recovered. 51. Although UNOPS does not receive any voluntary or assessed contributions from Member States, occasional non-exchange revenue arises, most often in relation to donations and services in kind (IPSAS 23: Revenue from non-exchange transactions). Non-exchange revenue (donations) is measured at fair value and is included within miscellaneous revenue in the statement of financial performance. UNOPS has elected not to recognize services in kind in the statement of financial performance but to disclose the most significant in-kind services in the notes to these financial statements. Expenses 52. UNOPS expenses are accounted for on an accrual basis. Expenses are recognized on the basis of the delivery principle, that is, the fulfilment of a contractual obligation by the supplier when the goods are received or when a service is rendered, or when there is an increase in a liability or decrease in an asset. The recognition of the expense is therefore not linked to when cash or its equivalent is paid. Taxation 53. UNOPS enjoys privileged tax exemption, and its assets, income and other property are exempt from all direct taxation. Accordingly, no provision is made for any tax liability. Net assets/equity 54. “Net assets/equity” is the standard term used in IPSAS to refer to the residual financial position (assets less liabilities) at period -end, comprising contributed capital, accumulated surpluses and deficits, and reserves. Net assets/equity may be positive or negative. 55. In the absence of any capital contributions, UNOPS net assets comprise the accumulated surplus, the actuarial gains or losses in respect of post-employment benefits, and fair value movements in respect of investments, as well as the UNOPS minimum operational reserve and the growth and innova tion reserve, as detailed in note 19. Segment reporting 56. A segment is a distinguishable activity or group of activities for which it is appropriate to report financial information separately. At UNOPS, segment information is based on the principal activities relating to its separate operational centres and its headquarters. This is also the manner in which UNOPS measures its activities and how its financial information is reported to the Executive Director. Budget comparison 57. The Executive Board approves the biennial budget estimates and, in particular, the net revenue target calculated on an accrual basis. Budgets may be subsequently amended by the Board or through the exercise of delegated authority by the Executive Director to redeploy funds within the approved biennial administrative budget, as well as to increase or reduce funds, provided that the net revenue target for the biennium as established by the Board remains unchanged. 80/129 21-06983 United Nations Office for Project Services Notes to the 2020 financial statements (continued) A/76/5/Add.11 58. The budget of UNOPS is prepared on a modified accrual basis, whereas the financial statements of UNOPS are prepared on an accrual basis. In the statement of financial performance, expenses are classified according to their nature. In the approved management budget, expenses are classified by cost components or the source of funding against which the expenses will be charged. As required under IPSAS 24: Presentation of budget information in financial statements, the totals presented in the statement of budget and actual comparison are reconciled with net cash flows from operating activities, net cash flows from investing activities, and net cash flows from financing activities as presented in the cash flow statement. Critical accounting estimates and judgments 59. The preparation of financial statements in accordance with IPSAS necessarily includes the use of accounting estimates, management assumptions and judgment. The areas where estimates, assumptions or judgment are significant to UNOPS financial statements include, but are not limited to, post-employment benefit obligations; provisions; and revenue recognition. Actual results could differ from the amounts estimated in these financial statements. 60. Estimates, assumptions and judgments are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. They are subject to continual review. Post-employment benefits and other long-term employee benefits 61. The present value of the employee benefit obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. Actuarial assumptions are established to anticipate future events and are used in calculating post-employment benefits and other long-term employee benefits. Note 15 records the assumptions made during the calculation and a sensitivity analysis of the assumptions. Provisions 62. Significant judgment is required in the estimation of present obligations that arise from past events, including legal claims and onerous contracts. These judgments are based on prior UNOPS experience with such issues and are the best current estimate of the liability. Management believes that the total provisions for legal matters are adequate, on the basis of currently available information. Additional information is disclosed in notes 23 and 24. Allowances for doubtful accounts receivable 63. UNOPS has provisions for doubtful receivables, which are detailed in note 13. Such estimates are based on analysis of ageing of customer balances, specific credit circumstances, and historical trends and UNOPS experience, also taking into account economic conditions. Management believes that the impairment allowances for these doubtful debts are adequate, on the basis of currently available information. As these doubtful debt allowances are based on management estimates, they may be subject to change as better information becomes available. Revenue recognition 64. Revenue from exchange transactions is measured according to the stage of completion of the contract. The measurement requires an estimate of costs incurred but not yet paid for, and total project costs. The estimates are prepared by technically qualified staff and advisers, which reduces, but does not elimina te, uncertainty. 21-06983 81/129 United Nations Office for Project Services A/76/5/Add.11 Notes to the 2020 financial statements (continued) IPSAS standards issued but not yet effective 65. IPSAS 3: Accounting policies, changes in accounting estimates and errors requires disclosure of new IPSAS standards that have been issued but not yet effective. The following standards have been issued by the IPSAS Board: IPSAS 41: Financial instruments 66. In August 2018, the IPSAS Board published IPSAS 41: Financial instruments to replace IPSAS 29: Financial instruments: recognition and measurement, and to substantially improve the relevance of information for financial assets and financial liabilities. The new standard establishes new requirements for classifying, recognizing and measuring financial instruments to replace those in IPSAS 29. It will do so by introducing: (a) simplified classification and measurement requirements for financial assets; (b) a forward-looking impairment model; and (c) a flexible hedge accounting model. Although the effective date for the new standard has been amended by a year owing to COVID-19, UNOPS will adopt the new standard, as required, by the new effective date of 1 January 2023. UNOPS is assessing the impact of this new standard on its financial statements prior to the implementation date and will be ready for its implementation by the time it becomes effective. Exposure draft 70: Revenue with performance obligations 67. In February 2020, the IPSAS Board approved exposure draft 70: Revenue with performance obligations and agreed on an exposure period of six months from the date of publication. Exposure draft 70 is based on International Financial Reporting Standard 15: Revenue from contracts with customers and has been expanded to apply to binding arrangements that are not necessarily contractual. Exposure draft 70 updates IPSAS 9: Revenue from exchange transactions and IPSAS 11: Construction contracts and has a broadened scope with a greater emphasis on the transfer of goods or services to third-party beneficiaries. Exposure draft 71: Revenue without performance obligations 68. Exposure draft 71: Revenue without performance obligations was also approved and updates IPSAS 23: Revenue from non-exchange transactions (taxes and transfers). It addresses revenue that arises from binding arrangements with present obligations that are not performance obligations and revenue not related to binding arrangements. Exposure draft 72: Transfer expenses 69. Exposure draft 72: Transfer expenses was also approved and relates to transactions where an entity transfers resources to another party without directly receiving anything in return. The accounting for transfer expenses with performance obligations mirrors the accounting for revenue with performance obligations in exposure draft 70. 70. The three exposure drafts above have been issued, and public consultations were held in 2020. Implementation dates for these exposure drafts have yet to be specified, and it is currently unknown whether the projects will be finalized by the IPSAS Board before the end of 2021. UNOPS assesses the earliest implementation date for the exposure drafts to be 2023. Exposure draft 75: Leases 71. In January 2021, the IPSAS Board issued exposure draft 75: Leases to replace and align with IPSAS 13: Leases with International Financial Reporting Standard 16: 82/129 21-06983 United Nations Office for Project Services Notes to the 2020 financial statements (continued) A/76/5/Add.11 Leases. Consultation responses are to be submitted during 2021. Exposure draft 75: Leases brings additional guidance to lease accounting models for both lessees and lessors and deals with public sector-specific issues such as concessionary leases, access rights and other lease-like arrangements in the public sector. Note 4 Capital management 72. UNOPS defines the capital it manages as the aggregate of its net assets, which consist of accumulated surplus and reserves. Reserves mainly comprise its minimum operational reserve and the growth and innovation reserve. 73. The minimum operational reserve was established in 2013 by the Executive Board of UNOPS (see DP/OPS/2013/CRP.1) 5 to guarantee the financial viability and integrity of UNOPS as a going concern. In 2019, the UNOPS Executive Director established a growth and innovation reserve on the basi s of her authority under the financial regulations and rules of UNOPS. The purpose of the growth and innovation reserve is to invest in the future revenue-generating ability of UNOPS. To date, the reserve has funded Sustainable Infrastructure Impact Invest ments activities to catalyse investments in socially inclusive large-scale infrastructure projects that will contribute to the achievement of the Sustainable Development Goals. 74. The objectives of UNOPS in managing capital are to: (a) Support the long-term operations of UNOPS in order to guarantee the financial viability and integrity of UNOPS as a going concern; (b) Fulfil its mission and objectives, as established in its strategic plan; (c) Provide security in adverse circumstances and liquidity to m eet its operating cash requirements; (d) Preserve capital. 75. To meet its objectives in managing capital, UNOPS has a four-year strategic plan that is proposed by the Executive Director and endorsed by the Executive Board. In addition, its biennial management budgets are proposed by UNOPS together with the Advisory Committee on Administrative and Budgetary Questions and approved by the Executive Board. The strategic plan and budget set out the workplan of the organization. In accordance with regulation 13.01 of the UNOPS financial regulations and rules, the Executive Director is responsible and accountable for planning the use of resources administered by UNOPS and issuing allocations and allotments effectively and efficiently in furtherance of the policie s, aims and activities of UNOPS. 76. In addition, to effectively manage its assets and financial resources, UNOPS has formulated a statement of investment principles that is reviewed regularly by the Investment Advisory Committee in collaboration with the Executive Director and the Chief Financial Officer and Director of Administration. 77. UNOPS is not subject to externally imposed capital requirements, but the strategic plan and budgets are reviewed and approved by the Executive Board. Note 5 Financial risk management 78. UNOPS has instituted prudent risk management policies and procedures in accordance with its financial regulations and rules. UNOPS is exposed to a variety of __________________ 5 Available at www.undp.org/executive-board/documents-for-sessions/adv2013-second. 21-06983 83/129 United Nations Office for Project Services A/76/5/Add.11 Notes to the 2020 financial statements (continued) market risks, including, but not limited to, currency risk, credit risk an d interest rate risk. The UNOPS approach to risk management is summarized in the section on internal controls of the Executive Director’s statement accompanying these financial statements. 79. UNOPS has outsourced both investment management and custodianship to professional entities selected through its procurement process. Some of the investments with the custodian are internally managed by the UNOPS treasury. Investments in marketable securities are registered in the name of UNOPS and investments in any pooled funds are in the name of the fund manager. In both scenarios, the marketable securities and the units in pooled funds are held by the custodian appointed by UNOPS. 80. The principal objectives of the investment guidelines are: (a) Working capital: preserve the nominal value of project-related funds to ensure the funding of UNOPS projects; (b) Reserves: provide security and liquidity in adverse circumstances and support the long-term operations of UNOPS; (c) Health care: provide for the after-service health-care benefits of the employees of UNOPS by managing assets in relation to relevant liabilities. 81. The allocation of UNOPS portfolios between asset classes, currencies or geographies shall comply with the following guiding principles: (a) Preservation of capital in nominal terms is the primary objective of the UNOPS working capital portfolio, capital preservation in real terms is the primary objective of the UNOPS reserves portfolio and generating a return sufficient to meet future mutations in the net obligation of after-service health insurance liabilities is the primary objective of the after-service health insurance portfolio; (b) Liquidity is a key consideration in the management of the UNOPS portfolios and a requirement of the financial regulations and rules, more specifically rules 22.02 and 22.06. Liquidity is less important than returns for the after-service health insurance portfolio owing to the longer-term investment horizon of the portfolio; (c) The return obtained in the portfolios is less important than capital preservation and liquidity considerations, with the exception of the UNOPS after - service health insurance investment portfolio, which has a primary focus on generating returns; (d) Diversification (across asset classes, strategies, geographies, currencies, financial instruments) reduces risk; (e) Risks should only be taken when there is an expected return, i.e. unrewarded risks are to be avoided; (f) Fixed income is a core asset class for UNOPS, given the mission and objectives of the portfolios for which it is responsible. The UNOPS after -service health insurance portfolio holds an allocation to equities, as does the UNOPS operational reserve portfolio, but to a lesser extent. 82. The UNOPS Investment Advisory Committee is the independent investment advisory body assisting the UNOPS Executive Director in its management and oversight of UNOPS assets, including in the selection and review of asset managers and custodians. 84/129 21-06983 United Nations Office for Project Services Notes to the 2020 financial statements (continued) A/76/5/Add.11 Currency risk 83. UNOPS receives contributions from funding sources and clients in currencies other than the United States dollar and is therefore exposed to foreign currency exchange risk arising from fluctuations in currency exchange rates. UNOPS also makes payments in currencies other than the United States dollar. 84. The currency risk is closely monitored by management, for example through the close monitoring of the level of cash balance in local currency bank accounts and the maintenance of bank balances in the same currency as that of the paym ents to be made to vendors. 85. Management’s upper estimate of possible movements in the exchange rates against the United States dollar is 10 per cent. The table below shows the potential impact of monetary revaluation of major currencies as at the report ing date and the increase or decrease in net assets and surplus by the amounts shown. Table IV.3 Currency risk sensitivity analysis (Thousands of United States dollars) EUR UAH ARS GBP DKK ETB ILS KES XAF UYU + 10 per cent 1 290 239 181 119 58 33 30 24 24 23 - 10 per cent (1 290) (239) (181) (119) (58) (33) (30) (24) (24) (23) Abbreviations : ARS, Argentine peso; DKK, Danish krone; ETB, Ethiopian birr; EUR, euro; GBP, British pound; ILS, new Israeli shekel; KES, Kenyan shilling; UAH, Ukraine hryvnia; UYU, Uruguay peso; XAF, CFA franc. 86. The foregoing sensitivities are calculated with reference to a single moment in time and are subject to change owing to a number of factors, including fluctuating trade receivable and trade payable balances and fluctuating cash balances. 87. As the sensitivities are limited to period-end financial instrument balances, they do not take account of sales and operating costs, which are highly sensitive to changes in commodity prices and exchange rates. In addition, each of the sensitivities is calculated in isolation, while in reality, commodity prices, interest rates and foreign currencies do not move independently. 88. The following assumptions are made in calculating the sensitivity: all income statement sensitivities also affect equity; and the sensitivity analysis disclosure relates to monetary items (as defined by IPSAS 4: The effects of changes in foreign exchange rates) at year-end. Credit risk 89. UNOPS has considerable cash reserves, as project funding is received in advance of project execution. The resulting cash reserves are invested in an investment portfolio, which is essentially composed of high-quality government, supranational and agency-issued bonds and highly rated bank obligations. The majority of the UNOPS investment portfolio is outsourced to external investment managers. 90. UNOPS investment guidelines limit the amount of credit exposure to any one counterparty and include minimum credit quality requirements. The credit risk mitigation strategies stated in the guidelines include conservative minimum credit criteria of investment grade for all issuers with maturity and counterparty limits by credit rating. The investment guidelines require continuing monitoring of issuer and 21-06983 85/129 United Nations Office for Project Services A/76/5/Add.11 Notes to the 2020 financial statements (continued) counterparty credit ratings. Permissible investments are limited to fixed-income instruments of sovereign, supranational, governmental or federal agencies and banks. 91. UNOPS implements projects worldwide and in post-conflict and rural areas. Considering the conditions and areas in which these projects are impl emented, some banks are not rated by reference to external credit ratings. Interest rate risk 92. UNOPS is exposed to interest rate risk on its interest-bearing assets. The UNOPS Investment Advisory Committee regularly monitors the rate of return on t he investment portfolio compared with the benchmarks specified in the investment guidelines. 93. From time to time, UNOPS uses derivatives to hedge the interest rate risk, utilizing bond futures or interest rate futures. Liquidity risk 94. Investments are made with due consideration to UNOPS cash requirements for operating purposes based on cash flow forecasting. The investment approach includes a consideration for investment maturity structuring that takes into account the timing of future funding needs of the organization. UNOPS maintains an adequate portion of its investments in cash equivalents and short-term investments sufficient to cover its commitments as and when they fall due. Note 6 Property, plant and equipment 95. As at 31 December 2020, the net book value of UNOPS property, plant and equipment was $18.4 million ($18.8 million in 2019). UNOPS also held $24.5 million ($35.0 million in 2019) worth of assets as a custodian under service concession arrangements. 96. The table below summarizes property, plant and equipment held by UNOPS as at 31 December 2020 under each of the classes mentioned in note 3. Table IV.4 Property, plant and equipment by class (Thousands of United States dollars) Administrative budget Project Total Vehicles 1 235 9 432 10 667 Land and buildings 4 065 559 4 624 Plant and equipment 578 1 149 1 727 Communication and information technology equipment 184 294 478 Leasehold improvements 401 471 872 Net carrying amounts as at 31 December 2020 6 463 11 905 18 368 86/129 21-06983 United Nations Office for Project Services Notes to the 2020 financial statements (continued) A/76/5/Add.11 Table IV.5 Property, plant and equipment by class – 2019 comparatives (Thousands of United States dollars) Administrative budget Project Total Vehicles 1 718 8 446 10 164 Land and buildings 3 817 1 306 5 123 Plant and equipment 673 1 266 1 939 Communication and information technology equipment 249 273 522 Leasehold improvements 470 532 1 002 Net carrying amounts as at 31 December 2019 6 927 11 823 18 750 97. The table below shows the movement in property, plant and equipment held by UNOPS during the period. Table IV.6 Movement in property, plant and equipment (Thousands of United States dollars) Communication Land and information Plant and and technology Leasehold Vehicles equipment buildings equipment improvements Total Gross carrying amount as at 1 January 2020 23 722 3 950 8 838 5 885 1 539 43 934 Adjustments to prior-period gross carrying amount recorded in year – (4) (9) 13 – – Revised gross carrying amount as at 1 January 2020 23 722 3 946 8 829 5 898 1 539 43 934 Additions 3 786 319 569 343 30 5 047 Disposals (1 606) (416) (814) (188) – (3 024) Gross carrying amount as at 31 December 2020 25 902 3 849 8 584 6 053 1 569 45 957 Accumulated depreciation and impairment as at 1 January 2020 (13 558) (2 011) (3 715) (5 363) (537) (25 184) Adjustments to prior-period accumulated depreciation and impairment recorded in year – 4 7 (11) – – Revised accumulated depreciation as at 1 January 2020 (13 558) (2 007) (3 708) (5 374) (537) (25 184) Depreciation (3 091) (355) (514) (387) (160) (4 507) Impairment – (1) – – – (1) Less: removal of accumulated depreciation on asset disposal 1 414 241 262 186 – 2 103 Accumulated depreciation and impairment as at 31 December 2020 (15 235) (2 122) (3 960) (5 575) (697) (27 589) Net carrying amount as at 31 December 2020 10 667 1 727 4 624 478 872 18 368 21-06983 87/129 United Nations Office for Project Services A/76/5/Add.11 Notes to the 2020 financial statements (continued) Table IV.7 Movement in property, plant and equipment – 2019 comparatives (Thousands of United States dollars) Communication and information Plant and Land and technology Leasehold Vehicles equipment buildings equipment improvements Total Gross carrying amount as at 1 January 2019 19 005 3 363 6 047 5 721 1 076 35 212 Additions 7 041 747 2 909 291 463 11 451 Disposals (2 324) (160) (118) (127) – (2 729) Gross carrying amount as at 31 December 2019 23 722 3 950 8 838 5 885 1 539 43 934 Accumulated depreciation and impairment as at 1 January 2019 (12 982) (1 750) (3 105) (5 040) (396) (23 273) Depreciation (2 619) (353) (655) (448) (141) (4 216) Impairment – – – – – – Less : removal of accumulated depreciation on asset disposal 2 043 92 45 125 – 2 305 Accumulated depreciation and impairment as at 31 December 2019 (13 558) (2 011) (3 715) (5 363) (537) (25 184) Net carrying amount as at 31 December 2019 10 164 1 939 5 123 522 1 002 18 750 98. The amount of $0.01 million of communication and information technology equipment was incorrectly classified in 2019. IPSAS 3: Accounting policies, changes in accounting estimates and errors requires that material prior-period errors be corrected by restating the comparative amounts for prior periods presented in which the error occurred or by restating the opening balances of assets, liabilities and net assets for the earliest prior period presented. UNOPS does not consider this error in 2019 to be material to the financial statements. An in-year adjustment has been made to the opening gross carrying amount and accumulated depreciation to reflect the correction, rather than a restatement. Note 7 Intangible assets 99. The net carrying value of intangible assets amounted to $3.9 million as at 31 December 2020 ($2.0 million as at 31 December 2019), which includes internally developed software and other computer software (acquired). Table IV.8 Intangible assets (Thousands of United States dollars) Internally generated Other Intangible computer computer assets under software software construction Total Gross carrying amount as at 1 January 2020 4 477 254 – 4 731 Adjustments to prior–period gross carrying amount recorded in year – – 287 287 Revised gross carrying amount as at 1 January 2020 4 477 254 287 5 018 88/129 21-06983 United Nations Office for Project Services Notes to the 2020 financial statements (continued) A/76/5/Add.11 Internally generated Other Intangible computer computer assets under software software construction Total Additions 1 031 26 1 521 2 578 Reclassifications 1 572 – (1 572) – Disposals – – – – Gross carrying amount as at 31 December 2020 7 080 280 236 7 596 Accumulated amortization and impairment as at 1 January 2020 (2 448) (242) – (2 690) Amortization (1 009) (18) – (1 027) Impairment – – – – Less : removal of amortization on assets disposal – – – – Accumulated amortization and impairment as at 31 December 2020 (3 457) (260) – (3 717) Net carrying amount as at 31 December 2020 3 623 20 236 3 879 Table IV.9 Intangible assets – 2019 comparatives (Thousands of United States dollars) Internally generated Other Intangible computer computer assets under software software construction Total Gross carrying amount as at 1 January 2019 3 844 258 – 4 102 Additions 633 3 – 636 Disposals – (7) – (7) Gross carrying amount as at 31 December 2019 4 477 254 – 4 731 Accumulated amortization and impairment as at 1 January 2019 (1 705) (231) – (1 936) Amortization (743) (18) – (761) Impairment – – – – Less: removal of amortization on assets disposal – 7 – 7 Accumulated amortization and impairment as at 31 December 2019 (2 448) (242) – (2 690) Net carrying amount as at 31 December 2019 2 029 12 – 2 041 100. In 2019, UNOPS began the development of a treasury management system, through which all remittances can be run, banks are interfaced and payments are therefore made through the system. The development costs for the system were classified as assets under construction during the development phase. A total of $1.6 million in development costs was reclassified to internally generated software during 2020, when the system went live, at which time the asset began to be amortized. 101. The development costs incurred by UNOPS during 2019 ($0.3 million) were not capitalized in line with IPSAS 31: Intangible assets and therefore represent an error in the 2019 financial statements. UNOPS does not consider this error in 2019 to be 21-06983 89/129 United Nations Office for Project Services A/76/5/Add.11 Notes to the 2020 financial statements (continued) material to the financial statements and has therefore opted not to restate the comparative amounts. An in-year adjustment has been made to the opening gross cost of assets under construction to reflect the correction, rather than a restatement. 102. The remainder of internally developed software relates to the development costs of the UNOPS management workspace, which creates a unified reporting platform for all business areas (including finance, human resources, procurement, project management, and results and performance management). Note 8 Inventories 103. Inventories consist mainly of bulk raw materials purchased in advance in relation to projects and supplies on hand. The table below shows the total value of inventories, as presented in the statement of financial position. The c arrying amount of inventories is shown by UNOPS operations centre. Table IV.10 Inventories (Thousands of United States dollars) 31 December 2020 31 December 2019 Inventories 12 214 14 723 Table IV.11 UNOPS offices holding inventories (Thousands of United States dollars) 31 December 2020 31 December 2019 Central African Republic – 3 Democratic Republic of the Congo 17 26 Haiti 1 536 1 206 Myanmar 7 8 Peace and Security Cluster 9 435 10 947 Philippines – 24 Senegal – 566 South Sudan 14 135 Sri Lanka 16 – Tunisia 660 660 Ukraine 14 83 Yemen 449 1 065 Zimbabwe 66 – Total 12 214 14 723 104. A total of $7.6 million of inventory was recognized as an expense during 2020 ($5.1 million in 2019), and $0.2 million of inventory was written down during 2020 (nil in 2019). 90/129 21-06983 United Nations Office for Project Services Notes to the 2020 financial statements (continued) A/76/5/Add.11 Note 9 Financial instruments Table IV.12 Assets according to the statement of financial position 31 December 2020 31 December 2019 Financial Financial assets at assets at fair value fair value Cash and Available- through Cash and Available- through cash Loans and for-sale surplus or cash Loans and for-sale surplus or equivalents receivables investments deficit Total equivalents receivables investments deficit Total Investments (note 10) – – 2 861 251 – 2 861 251 – – 1 673 356 – 1 673 356 Other financial assets (note 11) – 38 890 – – 38 890 – 40 993 – – 40 993 Other assets (note 12) – – – 5 365 5 365 – – – 53 53 Accounts receivable excluding prepayments (note 13) – 69 459 – – 69 459 – 48 869 – – 48 869 Cash and cash equivalents (note 14) 883 975 – – – 883 975 559 444 – – – 559 444 Total 883 975 108 349 2 861 251 5 365 3 858 940 559 444 89 862 1 673 356 53 2 322 715 Table IV.13 Liabilities according to the statement of financial position (Thousands of United States dollars) 31 December 2020 31 December 2019 Financial Financial liabilities at liabilities at fair value fair value Financial through Financial through liabilities at surplus or liabilities at surplus or amortized cost deficit Total amortized cost deficit Total Accounts payable and accruals (note 16) 290 861 – 290 861 216 980 – 216 980 Cash held by UNOPS as agent (note 17) 1 359 045 – 1 359 045 729 609 – 729 609 Other liabilities (note 18) – 3 273 3 273 – – – Total 1 649 906 3 273 1 653 179 946 589 – 946 589 Note 10 Investments 105. The majority of the UNOPS investment portfolio is outsourced to external investment managers and is measured at fair value. The working capital portfolio ($2,660.4 million) is managed by the World Bank ($205.9 million) and Allianz Global Investors ($2,454.5 million); $156.9 million is managed by Legal & General Investment Management, London, for the UNOPS operational reserve portfolio. The growth and innovation reserve, which has $44.5 million, is managed by Allianz Global Investors. BNP Paribas Asset Management manages $94.7 million for the after-service health insurance portfolio; $632.9 million (18 per cent) of the investment portfolio is managed internally by the UNOPS treasury as part of the working capital portfolio. 21-06983 91/129 United Nations Office for Project Services A/76/5/Add.11 Notes to the 2020 financial statements (continued) 106. The portfolio is composed as follows: Table IV.14 Investment portfolio (Thousands of United States dollars) 31 December 2020 31 December 2019 Long-term investments 760 584 584 033 Short-term investments 2 100 667 1 089 323 Cash equivalents 728 142 418 077 Total 3 589 393 2 091 433 107. Despite the recent financial performance of the markets owing to COVID -19, the principal of the UNOPS working capital portfolio remains safe, in line with its investment policy on working capital, given that it holds high -quality assets aimed at preserving principal over the investment horizon. Adverse impacts on the global bond markets were the main driver of the decrease in investment revenue. 108. UNOPS investment income has declined overall, with an investment income of $33.6 million in 2020 ($41.0 million in 2019). The steep decline is a result of lower interest rates in 2020 owing in part to the economic situation brought about by the pandemic. 109. There have been no impairments of investment assets held during this period in any of the pooled cash resources invested. The UNOPS working capital portfolio asset allocation is to highly rated sovereigns, supranational and agency debt and highly rated bank obligations, in line with the principal investment objective of preservation of capital over the investment horizon. 110. As would be expected, credit rating agencies put a number of banks on negative outlook watch and downgraded some owing to the more difficult operating and economic conditions, the low interest rate environment and likely deteriorating loan asset quality concerns. UNOPS actively monitors all ratings for the investment holdings and investment counterparties and actively divests any marketable securities that fall below its minimum rating requirements. There were no material downgrades of UNOPS banking partners in 2020. 111. The operational reserve portfolio and the after-service health insurance portfolio include allocations to developed and emerging market equity and also to developed market and emerging market fixed income. Equity markets experienced significant volatility during 2020; however, the equity market rebounded strongly into year-end, recovering most of the losses experienced throughout the year. Table IV.15 Fair value levels (Thousands of United States dollars) Level 1 Level 2 Level 3 Total Available-for-sale financial assets 9 324 2 851 927 – 2 861 251 Determination: level 1– quoted market price; level 2 – observable inputs; level 3 – with significant unobservable inputs. 92/129 21-06983 United Nations Office for Project Services Notes to the 2020 financial statements (continued) A/76/5/Add.11 112. The money market funds and time deposits are classified under cash equivalents, of which $115.0 million is managed by the UNOPS treasury and $613.1 million by external investment managers. Table IV.16 Movements in investments (Thousands of United States dollars) 31 December 2020 31 December 2019 Opening balance as at 1 January 1 673 356 1 663 480 Additions (purchases of investments) 6 572 945 4 947 522 Disposals (proceeds from maturity of investments) (5 385 135) (4 962 118) Recognition of amortized costs (1 861) 12 219 Fair value adjustment 1 946 12 253 Closing balance as at 31 December 2 861 251 1 673 356 Current portion (short-term investments) 2 100 667 1 089 323 113. Both long- and short-term investments are available-for-sale instruments. 114. Accrued interest receivable of $6.9 million ($8.1 million in 2019) has been included in the statement of financial position within “other accounts receivable” (see note 13). Short-term investments 115. Short-term investments are those investments with final maturities at purchase of between 3 and 12 months. They consist of corporate bonds, unit trust bonds, time deposits and unit trust equity maturing within one year of the reporting date. Table IV.17 Short-term investments (Thousands of United States dollars) 31 December 2020 31 December 2019 Time deposits 130 000 174 000 Equity – – Bonds 1 970 667 915 323 Total short-term investments 2 100 667 1 089 323 Long-term investments 116. Long-term investments comprise bonds that mature beyond one year. Table IV.18 Long-term investments (Thousands of United States dollars) 31 December 2020 31 December 2019 Bonds and equity instruments 760 584 584 033 21-06983 93/129 United Nations Office for Project Services A/76/5/Add.11 Notes to the 2020 financial statements (continued) 117. The investment portfolio of UNOPS consists of high-quality debt and equity instruments (unit trust equity, unit trust bonds, corporate bonds and index -linked government bonds). In the table below, the entire portfolio is presented following its credit rating distribution. Table IV.19 Credit rating distribution of investments (Thousands of United States dollars) 31 December 2020 31 December 2019 AAA 2 384 487 1 085 193 AA+ 101 163 85 108 AA 117 792 184 152 AA- 41 450 26 649 A+ 91 016 202 350 A 10 002 11 005 A- 23 050 22 001 Unrated ɑ 92 291 56 898 Total 2 861 251 1 673 356 a Pertains to the pooled equity and debt vehicles (unit trust funds), which, by their nature, are unrated. Note 11 Other financial assets 118. UNOPS launched the Sustainable Infrastructure Impact Investments initiative (S3I) during 2018 in order to drive progress towards the achievement of the Sustainable Development Goals. Other financial assets comprise UNOPS investments in relation to the initiative. 119. UNOPS invested $20.0 million in a new social housing project in 2020 ($30.0 million in 2019) while disinvesting from the Monterrey Wind pow er plant and sustainable energy projects. 120. All ongoing Sustainable Infrastructure Impact Investments initiative (S3I) projects have been assessed individually for impairment indicators, such as credit risk. While repayment schedules have been amended and hence reflected in the carrying values as at 31 December 2020, no impairments have been recognized in relation to the remaining initiative projects. 121. The carrying value of UNOPS investment in the initiative as at 31 December 2020 is detailed below. 94/129 21-06983 United Nations Office for Project Services Notes to the 2020 financial statements (continued) A/76/5/Add.11 Table IV.20 Other financial assets (Thousands of United States dollars) 31 December 2020 31 December 2019 Monterrey Wind – 8 800 Social housing – Caribbean 2 892 2 682 Social housing – Ghana 5 773 5 365 Social housing – India 2 887 2 683 Social housing – Kenya 5 776 5 366 Social housing – Pakistan 21 562 – Sustainable energy – 16 097 Total 38 890 40 993 122. Interest on UNOPS other financial assets is detailed in note 22. Note 12 Other assets 123. Other assets comprise forward exchange contracts and futures contracts in gain at year-end. Table IV.21 Other assets (Thousands of United States dollars) 31 December 2020 31 December 2019 Derivative assets 5 365 53 Note 13 Accounts receivable 124. The accounts receivable of UNOPS are divided into the following categories: (a) Project accounts receivable: a project receivable is recognized in connection with projects that have incurred expenditure and are awaiting further funding from partners; (b) Prepayments: payments made in advance of the receipt of goods or services from vendors; (c) Other accounts receivable: this category includes staff receivables, accrued interest income on investments and other miscellaneous receivables. 125. An overview of these categories can be found in the table below. 21-06983 95/129 United Nations Office for Project Services A/76/5/Add.11 Notes to the 2020 financial statements (continued) Table IV.22 Accounts receivable (Thousands of United States dollars) 31 December 2020 31 December 2019 Project accounts receivable (gross) 43 145 39 282 Less: bad debt allowance (2 100) (6 064) Project account receivable (net) 41 045 33 218 Other accounts receivable (gross) 50 687 15 736 Less: bad debt allowance (22 273) (85) Other accounts receivable (net) 28 414 15 651 Total accounts receivable (net) excluding prepayments 69 459 48 869 Prepayments 16 246 8 982 Total accounts receivable (net) including prepayments 85 705 57 851 Of which: Current portion of other accounts receivable 27 533 15 121 Non-current portion of other accounts receivable 881 530 126. As the fair value of the current receivables approximates their carrying amount and the impact of discounting is not significant, no fair value disclosure has been added. 127. As at 31 December 2020, receivables of $24.4 million ($6.1 million in 2019) were impaired and provisions were made against them (see table IV.28 for details). A total of $22.2 million of the provisions relates to the disinvestments of Sustainable Infrastructure Impact Investments (S3I) projects, as detailed in note 11. 128. As at 31 December 2020, receivables of $12.4 million ($10.7 million in 2019) were past due but not impaired, as there is no recent history of default regarding those receivables. The ageing of those receivables exceeds three months. Table IV.23 Ageing of receivables (Thousands of United States dollars) Current Overdue Overdue Over 0–3 months 3–6 months 6–12 months 12 months Total Accounts receivable 57 025 5 764 3 923 2 747 69 459 Project accounts receivable 129. The project accounts receivable are reflected in the table below. 96/129 21-06983 United Nations Office for Project Services Notes to the 2020 financial statements (continued) A/76/5/Add.11 Table IV.24 Project accounts receivable (Thousands of United States dollars) 31 December 2020 31 December 2019 Project implementation-related receivables 39 955 19 496 Account receivables – United Nations Development Programme – 12 654 Accounts receivable – other United Nations agencies 1 090 1 068 Total project accounts receivable 41 045 33 218 130. Project implementation-related receivables arise in connection with projects that have incurred expenditure and are awaiting further funding from partners. Also included in project-related receivables are amounts receivable from the United Nations Office on Drugs and Crime, the Office of the United Nations High Commissioner for Refugees, the United States Agency for International Development, the Department of Field Support of the United Nations Secretariat and the European Union. The nature of those agreements typically requires UNOPS to perform services prior to invoicing the client and receiving cash/payment. 131. Of the balance of project receivables of $41.0 million ($33.2 million in 2019), $2.1 million ($3.2 million in 2019) relates to cash advances due from customers for construction contracts for the period ended 31 December 2020, as detailed in note 20. 132. The accounts receivable from other United Nations entities include amounts due from the United Nations Secretariat. The amounts relate mainly to project expenditure incurred by UNOPS when implementing projects on behalf of the agency, as well as in connection with staff on secondment. 133. Accounts receivable from the United Nations Development Programme (UNDP) arise mainly in connection with advances made for payments that will be made on behalf of UNOPS. Table IV.25 Accounts receivable – UNDP (Thousands of United States dollars) 31 December 2020 31 December 2019 Receivable from UNDP Cumulative project expenses and fees due to UNOPS (1 722) 14 337 Bad debt allowance (1 110) (2 097) Net receivable/(project advances) from UNDP (2 832) 12 240 Cumulative advances/(payables) to UNDP to disburse payments on behalf of UNOPS (749) 414 Total balance with UNDP (3 581) 12 654 Of which: Receivable from UNDP – 12 654 Payable to UNDP (749) – Project cash in advance (2 832) – 21-06983 97/129 United Nations Office for Project Services A/76/5/Add.11 Notes to the 2020 financial statements (continued) 134. As at 31 December 2020, UNOPS held $2.8 million of project cash advances from UNDP. This included the project cash advances detailed in note 17, while a net payable of $0.7 million to UNDP is included within accounts payable in note 16. Other accounts receivable 135. The other accounts receivable are composed of: Table IV.26 Other accounts receivable (Thousands of United States dollars) 31 December 2020 31 December 2019 Staff receivables 1 714 2 021 Accrued interest receivable on investments 6 874 8 064 Accrued interest receivable on other financial assets 880 220 Miscellaneous receivables 18 946 5 346 Total other accounts receivable 28 414 15 651 136. The staff receivables relate to salary advances, education grants, rental subsidies and other entitlements. 137. To improve presentation, $0.2 million was reclassified in the comparatives from accrued interest receivable on investments to accrued interest receivable on other financial assets. The 2019 balance for derivative assets has also been reclassified to other assets (see note 12). There were no other changes in 2019 total other accounts receivable. The statement of financial position has been adjusted accordingly to reflect this reclassification of comparative figures. Prepayments Table IV.27 Prepayments (Thousands of United States dollars) 31 December 2020 31 December 2019 Prepayments 16 246 8 982 138. Prepayments relate to payments made in advance of the receipt of goods or services from a vendor. Bad debt allowance 139. The movement in bad debt allowance is as follows: 98/129 21-06983 United Nations Office for Project Services Notes to the 2020 financial statements (continued) A/76/5/Add.11 Table IV.28 Movement in bad debt allowance (Thousands of United States dollars) 31 December 2020 31 December 2019 Opening balance as at 1 January Project-related 6 064 2 582 Other accounts receivable 85 86 Opening balance 6 149 2 668 Net increase/(decrease) in provision for receivables impairment Increase 22 863 4 729 Receivables written off during the year as uncollectible (1 598) (951) Unused amounts reversed or reclassified (3 041) (297) Net increase/(decrease) 18 224 3 481 Closing balance Project-related 2 100 6 064 Other accounts receivable 22 273 85 Closing balance as at 31 December 24 373 6 149 140. The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. Note 14 Cash and cash equivalents 141. As at 31 December 2020, UNOPS held $884.0 million of cash and cash equivalents. Table IV.29 Cash and cash equivalents (Thousands of United States dollars) 31 December 2020 31 December 2019 Cash at banks 155 833 141 367 Cash equivalents 728 142 418 077 Total cash and cash equivalents 883 975 559 444 142. Cash at banks includes project funds received from clients for the implementation of project activities. Cash advances received from clients for project activities and other UNOPS cash balances are co-mingled and are not held in separate bank accounts. 143. The cash on hand is the cash held in field offices for the purpose of meeting financial needs at field locations. 21-06983 99/129 United Nations Office for Project Services A/76/5/Add.11 Notes to the 2020 financial statements (continued) 144. Cash and cash equivalents include money market funds, time deposits and other bonds and deposits with an original maturity of 90 days or less. 145. Cash at banks (excluding cash on hand) is denominated in the following currencies: Table IV.30 Cash at banks (Thousands of United States dollars) 31 December 2020 31 December 2019 United States dollar 103 565 54 140 Euro 11 583 41 525 Ukrainian hryvnia 10 010 21 267 Japanese yen 3 412 2 702 British pound 2 508 3 079 Israeli shekel 2 100 2 195 Other currencies 22 433 16 272 Total 155 611 141 180 Cash on hand 222 187 Total 155 833 141 367 146. The credit quality of the cash at banks (excluding cash on hand), by reference to external credit ratings, is summarized below. Table IV.31 Credit rating distribution of cash at banks (Thousands of United States dollars) 31 December 2020 31 December 2019 AA- 44 15 A+ 53 684 1 756 A 59 189 5 832 A- 6 431 4 465 BBB+ – 56 696 BB 517 942 BB- 8 734 2 616 B 5 840 5 079 B- 12 129 21 023 Unrated 9 043 42 756 Total cash at banks 155 611 141 180 Cash on hand 222 187 Total 155 833 141 367 100/129 21-06983 United Nations Office for Project Services Notes to the 2020 financial statements (continued) A/76/5/Add.11 147. UNOPS implements projects worldwide and in post-conflict and rural areas. Considering the conditions and areas in which these projects are implemented, some banks are not rated by reference to external credit ratings. 148. The credit quality of cash equivalents was as follows: Table IV.32 Credit rating distribution of cash equivalents (Thousands of United States dollars) 31 December 2020 31 December 2019 AAA – 74 668 AA 21 000 – A+ 613 142 181 409 A 55 000 128 000 A- 14 000 10 000 BBB+ 25 000 22 000 BB+ – 2 000 Total 728 142 418 077 Note 15 Employee benefits 149. The employee benefits liabilities of UNOPS are composed of: (a) Short-term employee benefits: accrued annual leave, current portion of home leave; (b) Long-term employee benefits: non-current portion of home leave; (c) Post-employment benefits: all benefits relating to after-service health insurance and repatriation grant; (d) Termination benefits: benefits related to termination of contract. Table IV.33 Employee benefits liabilities (Thousands of United States dollars) 31 December 2020 31 December 2019 Short-term employee benefits 36 243 25 394 Long-term employee benefits 1 791 1 274 Post-employment benefits 105 196 90 710 Agreed separation entitlements – – Total employee benefits liabilities 143 230 117 378 Current portion 38 460 27 731 Non-current portion 104 770 89 647 Short-term benefits liabilities 150. Short-term employee benefits are composed of: 21-06983 101/129 United Nations Office for Project Services A/76/5/Add.11 Notes to the 2020 financial statements (continued) Table IV.34 Short-term employee benefits (Thousands of United States dollars) 31 December 2020 31 December 2019 Annual leave entitlements 33 744 23 371 Home leave entitlements (current portion) 2 430 1 962 Assignment grant on first appointment or reassignment 69 61 Total short-term employee benefits liabilities 36 243 25 394 151. Home leave allows eligible internationally recruited staff members to visit their home country periodically to renew and strengthen cultural and family ties. 152. Short-term employee benefits increased, from $25.4 million in 2019 to $36.2 million in 2020. The increase was attributable mainly to a $10.4 million increase in liabilities relating to annual leave entitlements that were not utilized owing to worldwide pandemic-related restrictions on travel in 2020. Long-term benefits liabilities 153. Long-term employee benefits consist of the non-current portion of the home leave entitlement. Rights vested which can be used in the next 12 months are presented as short-term employee benefits, while rights to be used beyond the 12-month period are presented as long-term employee benefits. Post-employment benefits 154. The post-employment benefits liabilities are composed of: Table IV.35 Post-employment benefits liabilities (Thousands of United States dollars) 31 December 2020 31 December 2019 After-service health insurance Current portion 989 897 Non-current portion 83 075 71 057 Subtotal 84 064 71 954 Repatriation grant Current portion 1 198 1 409 Non-current portion 19 512 16 931 Subtotal 20 710 18 340 Death benefit Current portion 30 31 Non-current portion 392 385 Subtotal 422 416 Total post-employment benefits 105 196 90 710 102/129 21-06983 United Nations Office for Project Services Notes to the 2020 financial statements (continued) A/76/5/Add.11 31 December 2020 31 December 2019 Of which: Current 2 217 2 337 Non-current 102 979 88 373 155. Post-employment benefits consist of after-service health insurance, repatriation grants, death benefit and pension plans. After-service health insurance is a plan that allows eligible retirees and their eligible family members to participate in the full medical insurance plan. A repatriation grant is an entitlement payable to Professional staff on separation, together with related costs in travel and shipment of household effects. The actuarial valuation of liabilities regarding after-service health insurance, repatriation grant and death benefit was undertaken by independent professional actuaries. At the end of 2020, total post-employee benefits liabilities amounted to $105.2 million ($90.7 million in 2019). They are established in accordance with the Staff Regulations of the United Nations and Staff Rules for staff members in the Professional and General Service categories. After-service health insurance 156. The year-end liabilities for after-service health insurance are derived from the actuarial valuation conducted at year-end 2020. The net present value of the UNOPS accrued liability as at 31 December 2020, net of contributions from plan participants, was estimated by actuaries at $84.1 million ($72.0 million in 2019). 157. Upon end of service, staff members and their dependants may elect to participate in a defined benefit health insurance plan of the United Nations, provided they have met certain eligibility requirements. These requirements include 10 years of participation in a United Nations health plan, for those who were recruited after 1 July 2007, and 5 years of participation, for those who were recruited prior to that date. Repatriation grant 158. Upon end of service, staff members who meet certain eligibility requirements, including residency outside their country of nationality at the time of separation, are entitled to a repatriation grant based on length of service, and travel and removal expenses. These benefits are collectively referred to as repatriation benefits. 159. The net present value of the UNOPS accrued liability as at 31 December 2020 was estimated by actuaries at $20.7 million ($18.3 million in 2019). Death benefit 160. Death benefit is a post-employment defined benefit plan, for which payment is made upon the death of an eligible employee who leaves behind a surviving spouse or dependent child. 161. The net present value of the UNOPS accrued liability as at 31 December 2020 was estimated by actuaries at $0.4 million ($0.4 million in 2019). Accounting for post-employment benefits 162. Defined benefit obligations are measured using an actuarial valuation method. The movement in the present value of the defined benefit obligations over the year is as follows: 21-06983 103/129 United Nations Office for Project Services A/76/5/Add.11 Notes to the 2020 financial statements (continued) Table IV.36 Post-employment benefits liabilities (Thousands of United States dollars) After-service Repatriation Death health insurance grant benefit Total 2020 Total 2019 Liability as at 1 January 71 954 18 340 416 90 710 85 146 Current service cost 4 673 1 592 13 6 278 3 797 Interest cost 2 598 548 10 3 156 3 771 Benefits paid (1 039) (1 117) (9) (2 165) (2 270) Actuarial losses/(gains) 5 871 1 342 (9) 7 204 266 Liability as at 31 December 84 057 20 705 421 105 183 90 710 Table IV.37 Post-employment benefits liabilities: active and retired staff (Thousands of United States dollars) After-service Repatriation Death health insurance grant benefit Total 2020 Total 2019 Current retirees 33 857 – – 33 857 28 982 Active employees – fully eligible 13 335 4 470 209 18 014 15 581 Active employees – not yet fully eligible 36 865 16 235 212 53 312 46 147 Liability as at 31 December 84 057 20 705 421 105 183 90 710 163. The amounts recognized in the statement of financial performance are as follows: Table IV.38 Impact of post-employment benefits on financial performance (Thousands of United States dollars) After-service Repatriation Death health insurance grant benefit Total 2020 Total 2019 Current service cost 4 673 1 592 13 6 278 3 797 Interest cost 2 598 548 10 3 156 3 771 Expense as at 31 December 2020 7 271 2 140 23 9 434 7 568 164. The total expense has been included under “salaries and employee benefits” in the statement of financial performance. Actuarial gains/(losses) 165. Actuarial gains/(losses) are recognized directly in net assets and reflect changes in financial and demographic assumptions and experience adjustments. 104/129 21-06983 United Nations Office for Project Services Notes to the 2020 financial statements (continued) A/76/5/Add.11 Table IV.39 Actuarial gains/(losses) (Thousands of United States dollars) After-service Repatriation Death health insurance grant benefit Total 2020 Total 2019 Changes in financial assumptions (5 762) (1 678) (14) (7 454) 8 093 Changes in demographic assumptions – – – – (13 343) Experience adjustments (109) 336 23 250 4 984 Total actuarial gains/(losses) (5 871) (1 342) 9 (7 204) (266) Actuarial assumptions 166. The key actuarial assumption used by the actuary to determine defined benefit liabilities is the discount rate. For the after-service health insurance liability, this also includes the health-care cost trend rate. 167. The principal actuarial assumptions for 2020 were as follows: Table IV.40 Principal actuarial assumptions (Thousands of United States dollars) After-service health insurance Repatriation grant Death benefit Discount rate as at 1 January 2020 3.63 per cent 3.11 per cent 2.40 per cent Discount rate as at 31 December 2020 3.16 per cent 2.29 per cent 2.03 per cent Future salary increases United Nations salary United Nations salary United Nations salary (on top of inflation) scale scale scale Mortality rate United Nations scales United Nations scales United Nations scales Turnover rate Pension Fund scales Pension Fund scales Pension Fund scales Sensitivity analysis 168. Sensitivity analysis outlines the potential impact of changes in certain key assumptions used in measuring post-employment benefits. If the assumptions about the discount rate and the health-care cost trends were to change, that would have an impact on the measurement of the post-employment benefits, as shown below. Table IV.41 Potential impact of changes in discount rates on post-employment benefits (Thousands of United States dollars) After-service health insurance Repatriation grant Death benefit Increase of 0.5 per cent (8 986) (895) (15) Decrease of 0.5 per cent 10 499 964 17 21-06983 105/129 United Nations Office for Project Services A/76/5/Add.11 Notes to the 2020 financial statements (continued) Table IV.42 Potential impact of changes in health-care cost trend rates on after-service health insurance liabilities (Thousands of United States dollars) After-service health insurance obligation Service cost and interest cost Increase of 0.5 per cent 10 148 1 318 Decrease of 0.5 per cent (8 787) (1 115) United Nations Joint Staff Pension Fund 169. UNOPS is a member organization participating in the United Nations Joint Staff Pension Fund, which was established by the General Assembly to provide retirement, death, disability and related benefits to employees. The Fund is a funded, multi-employer defined benefit plan. As specified in article 3(b) of the Regul ations of the Fund, membership in the Fund shall be open to the specialized agencies and to any other international, intergovernmental organization that participates in the common system of salaries, allowances and other conditions of service of the United Nations and the specialized agencies. 170. The Fund exposes participating organizations to actuarial risks associated with the current and former employees of other organizations participating in the Fund, with the result that there is no consistent and reliable basis for allocating the obligation, plan assets and costs to individual organizations participating in the Fund. UNOPS and the Fund, in line with the other organizations participating in the Fund, are not in a position to identify the UNOPS propor tionate share of the defined benefit obligation, the plan assets and the costs associated with the plan with sufficient reliability for accounting purposes. Hence, UNOPS has treated this plan as if it were a defined contribution plan in line with the requirements of IPSAS 39: Employee benefits. UNOPS contributions to the Fund during the financial period are recognized as expenses in the statement of financial performance. 171. The Fund’s Regulations state that the Pension Board shall have an actuarial valuation made of the Fund at least once every three years by the consulting actuary. The practice of the Pension Board has been to carry out an actuarial valuation every two years using the open group aggregate method. The primary purpose of the actuarial valuation is to determine whether the current and estimated future assets of the Fund will be sufficient to meet its liabilities. 172. The financial obligation of UNOPS to the Fund consists of its mandated contribution, at the rate established by the General Assembly (currently at 7.9 per cent for participants and 15.8 per cent for member organizations) together with any share of any actuarial deficiency payments under article 26 of the Regulations of the Pension Fund. Such deficiency payments are only payable if and when the Assembly has invoked the provision of article 26, following a determination that there is a requirement for deficiency payments based on an assessment of the actuarial sufficiency of the Fund as at the valuation date. Each member organizati on shall contribute to this deficiency an amount proportionate to the total contributions that each paid during the three years preceding the valuation date. 173. The latest actuarial valuation for the Fund was completed as at 31 December 2019, and a roll-forward of the participation data as at 31 December 2019 to 31 December 2020 will be used by the Fund for its 2020 financial statements. 106/129 21-06983 United Nations Office for Project Services Notes to the 2020 financial statements (continued) A/76/5/Add.11 174. The actuarial valuation as at 31 December 2019 resulted in a funded ratio of actuarial assets to actuarial liabilities, assuming no future pension adjustments, of 144.2 per cent (139.2 per cent in the 2017 valuation). The funded ratio was 107.1 per cent (102.7 per cent in the 2017 valuation) when the current system of pension adjustments was taken into account. 175. After assessing the actuarial sufficiency of the Fund, the consulting actuary concluded that there was no requirement, as at 31 December 2019, for deficiency payments under article 26 of the Regulations of the Fund because the actuarial value of assets exceeded the actuarial value of all accrued liabilities under the plan. In addition, the market value of assets also exceeded the actuarial value of all accrued liabilities as at the valuation date. At the time of writing the present report, the General Assembly had not invoked the provisions of article 26. 176. Should article 26 be invoked as a result of an actuarial deficiency, either during the ongoing operation or owing to the termination of the Fund, deficiency payments required from each member organization would be based upon the proportion of that member organization’s contributions to the total contributions paid to the Fund during the three years preceding the valuation date. Total contributions paid to the Fund during the preceding three years (2017, 2018 and 2019) amounted to $7,546.92 million, of which $48.6 million (0.6 per cent) was contributed by UNOPS. 177. During 2020, contributions paid to the Fund by UNOPS amounted to $17.5 million ($15.6 million in 2019). There is no material change to the expected contributions in 2021. 178. Membership in the Fund may be terminated by decision of the General Assembly upon the affirmative recommendation of the Pension Board. A proportionate share of the total assets of the Fund on the date of termination shall be paid to the former member organization for the exclusive benefit of its staff who were participants in the Fund at that date, pursuant to an arrangement mutually agreed between the organization and the Fund. The amount is determined by the Pension Board on the basis of an actuarial valuation of the assets and liabilities of the Fund on the date of termination; no part of the assets that are in excess of the liabilities is included in the amount. 179. The Board of Auditors carries out an annual audit of the Fund and reports to the Pension Board and to the General Assembly on the audit every year. The Fund publishes quarterly reports on its investments, and these can be viewed by visiting the Fund’s website at www.unjspf.org. Termination benefits 180. As at 31 December 2020, UNOPS had no termination entitlement liabilities (nil as at 31 December 2019). Note 16 Accounts payable Table IV.43 Accounts payable and accruals (Thousands of United States dollars) 31 December 2020 31 December 2019 Accounts payable 168 471 103 092 Accruals 122 390 113 888 Total 290 861 216 980 21-06983 107/129 United Nations Office for Project Services A/76/5/Add.11 Notes to the 2020 financial statements (continued) Accounts payable 181. Balances of accounts payable as at 31 December 2020 are shown below. Table IV.44 Accounts payable (Thousands of United States dollars) 31 December 2020 31 December 2019 Accounts payable – UNDP 749 – Accounts payable – other United Nations agencies 1 773 839 Accounts payable – other 165 949 102 253 Total accounts payable 168 471 103 092 182. Accounts payable relate to transactions in which invoices from vendors were received and approved for payment but not yet paid. Accruals 183. The accrued charges amounting to $122.4 million ($113.9 million in 2019) are financial liabilities in respect of goods or services that were received or provided to UNOPS during the reporting period but not yet invoiced. Note 17 Project cash advances received 184. The project cash advances received represent deferred revenue, which is the excess of cash received over the total of project revenue recognized on projects, and of cash held by UNOPS for projects in which UNOPS serves as a disbursement authority. Table IV.45 Project cash advances received (Thousands of United States dollars) 31 December 2020 31 December 2019 Deferred revenue 1 818 835 1 043 123 Cash held by UNOPS as agent 1 359 045 729 609 Total 3 177 880 1 772 732 185. Of the balance in deferred revenue of $1,818.8 million ($1,043.1 million in 2019), $715.8 million relates to cash advances on construction contracts for the period ended 31 December 2020, as detailed in note 20. Note 18 Other liabilities 186. Other liabilities comprise forward exchange contracts and futures contracts in loss at year-end. 108/129 21-06983 United Nations Office for Project Services Notes to the 2020 financial statements (continued) A/76/5/Add.11 Table IV.46 Other liabilities (Thousands of United States dollars) 31 December 2020 31 December 2019 Derivative liabilities 3 273 – Note 19 Net assets/equity 187. UNOPS net assets/equity are as follows: Table IV.47 Net assets/equity (Thousands of United States dollars) Actuarial Fair value of Minimum Growth and gains/ available-for-sale operational innovation Accumulated (losses) financial assets reserves reserve surpluses Total Balance as at 1 January 2019 12 256 (3 039) 21 725 – 161 973 192 915 Surplus for the period – – – – 47 137 47 137 Actuarial gain/(loss) (269) – – – – (269) Change in fair value of available-for-sale financial assets – 12 261 – – – 12 261 Transfers to/from other reserves – – (700) 104 905 (104 205) – Opening balance as at 1 January 2020 11 987 9 222 21 025 104 905 104 905 252 044 Adjustments to prior period recorded in year – – – – 287 287 Restated opening balance as at 1 January 2020 11 987 9 222 21 025 104 905 105 192 252 331 Surplus for the period – – – – 39 500 39 500 Actuarial gain/(loss) (7 204) – – – – (7 204) Change in fair value of available-for-sale financial assets – 1 919 – – – 1 919 Transfers to/from other reserves – – 963 19 412 (20 375) – Balance as at 31 December 2020 4 783 11 141 21 988 124 317 124 317 286 546 Actuarial gains/losses 188. Actuarial gains or losses relate to the defined benefit pension plan as required by IPSAS 39. See note 3 on accounting policies on employee benefits liabilities. Fair value of available-for-sale financial assets 189. Fair value movements on available-for-sale financial assets are recorded directly in net assets, in line with IPSAS 29. When a revalued available -for-sale financial asset is sold, the portion of net assets that relates to that financial asset is effectively realized and is recognized in the statement of financial performance. Minimum operational reserve 190. The minimum operational reserve was established in 2013 by the Executive Board of UNOPS (see DP/OPS/2013/CRP.1) to guarantee the financial viability and 21-06983 109/129 United Nations Office for Project Services A/76/5/Add.11 Notes to the 2020 financial statements (continued) integrity of UNOPS as a going concern. In accordance with financial regulation 22.02, the operational reserve shall be fully funded and limited to: (a) Downward fluctuations or shortfalls in revenue; (b) Uneven cash flows; (c) Increases in actual costs above planning estimates or fluctuations in project costs; and (d) Other contingencies that result in a loss of resources for which UNOPS has made commitments. 191. The minimum operational reserves, as approved by the Executive Board, should be equivalent to four months of the average of the administrative expenditure for the past three years of operation. On the basis of this formula, for the period ended 31 December 2020, the minimum operational reserves requirement was $22.0 million, an increase of $1.0 million compared with 2019. Growth and innovation reserve 192. In 2019, the UNOPS Executive Director established a growth and innovation reserve on the basis of her authority under the financial regulations and rules of UNOPS. The purpose of the growth and innovation reserve is to invest in the future revenue-generating ability of UNOPS. To date, the reserve has funded Sustainable Infrastructure Impact Investments (S3I) activities to catalyse investments in socially inclusive large-scale infrastructure projects that will contribute to the achievement of the Sustainable Development Goals. The value of this reserve was set at 50 per cent of the excess operational reserves. At the end of 2020, this stood at $124.3 million, of which $58.8 million has been paid by UNOPS into Sustainable Infrastructure Impact Investments projects. Accumulated surpluses 193. Accumulated surpluses represent the accumulated surpluses and deficits from UNOPS operations over the years, net of those transferred to other reserves, as detailed above. Note 20 Revenue and expenses Non-exchange revenue 194. During 2020, UNOPS received $5.7 million of non-exchange revenue, compared with $0.2 million of non-exchange revenue in 2019. A total of $5.4 million of UNOPS non-exchange revenue relates to a grant from the Ministry of Foreign Affairs of Finland, to be used towards Sustainable Infrastructure Impact Investments (S3I) activities as part of an annual grant programme until 2023. The remainder of UNOPS non-exchange revenue relates mainly to assets gifted by donors upon completion of projects. 195. Services in kind for the period amounted to $4.2 million ($4.5 million in 2019), $3.3 million of which is attributed to the estimated market rental value o f office space provided by the Government of Denmark to accommodate the UNOPS headquarters, in Copenhagen. Exchange revenue 196. The exchange revenue of UNOPS comprised $1,160.6 million ($1,207.3 million in 2019) in revenue from project activities and $2.9 million ($4.3 million in 2019) 110/129 21-06983 United Nations Office for Project Services Notes to the 2020 financial statements (continued) A/76/5/Add.11 from miscellaneous revenue. The revenue and expenses from UNOPS project activities were as follows: Table IV.48 Revenue and expenses from project activities (Thousands of United States dollars) 31 December 2020 31 December 2019 Construction contracts (infrastructure) 320 201 315 671 Procurement 82 243 99 619 Financial management 193 971 179 108 Human resources administration 21 191 26 049 Other project management 542 997 586 859 Total project-related revenue 1 160 603 1 207 306 Less : project expenses Construction contracts 304 920 301 545 Procurement 55 272 78 339 Financial management 167 071 157 855 Human resources 13 291 13 933 Other project management 511 003 556 387 Total project-related expenses 1 051 557 1 108 059 Net revenue from project activities 109 046 99 247 197. During the period, UNOPS revenue was reported using the categories in the table above. For operational reasons and as described in the annual report, UNOPS analyses its revenue according to the following three core service categories: project management, infrastructure and procurement. These categories are deta iled in note 1. Construction contracts 198. The amount of revenue and expenses relating to the construction contracts recognized in the statement of financial performance was as follows: Table IV.49 Construction contracts – revenue and expenses (Thousands of United States dollars) Cumulative Recognized in prior years Recognized in current year Revenue 1 357 370 1 037 169 320 201 Expense (1 262 890) (957 970) (304 920) Surplus 94 480 79 199 15 281 199. Amounts due to and from customers for construction contract works were as follows: 21-06983 111/129 United Nations Office for Project Services A/76/5/Add.11 Notes to the 2020 financial statements (continued) Table IV.50 Construction contracts – amounts due to/from customers (Thousands of United States dollars) Projects with net Projects with net deferred revenue balance project balance receivable Total Cash advances received, including accrued interest (1 942 665) (44 031) (1 986 696) Revenue recognized over the life of the contract 1 226 816 46 104 1 272 920 Amount due (to)/from customers included in deferred revenue and project receivables, respectively (715 849) 2 073 (713 776) Retentions 14 900 200. Cash advances received comprise cash received over the life of both construction contracts and contracts that contain construction and an agency service element (such as procurement services) where the cash advances were not specifically designated for use on the agency service. Operational costs and other expenses 201. Operational costs of $96.1 million ($111.1 million in 2019) relate to expenses incurred by UNOPS for a range of activities, which included payments for: (a) Rental of office space and leases: $18.8 million; (b) Maintenance of buildings and equipment: $19.5 million; (c) Utilities: $7.1 million. 202. Other expenses comprise: (a) Movements in provisions: $21.1 million; (b) Other expenses: $1.4 million. 203. Contractual services of $392.5 million ($428.4 million in 2019) relate to expenses incurred for a range of UNOPS activities, some of which included payments to: (a) Subcontractors for implementation and construction projects; (b) Consultants for training and education costs; (c) Vendors for security charges. 112/129 21-06983 United Nations Office for Project Services Notes to the 2020 financial statements (continued) A/76/5/Add.11 Note 21 Employee benefits expenses Table IV.51 Employee benefits expenses (Thousands of United States dollars) 31 December 2020 31 December 2019 Salaries 87 136 77 193 After-service health insurance 7 271 5 224 Annual leave 4 046 1 294 Home leave 1 139 1 097 Defined contribution plan 19 258 17 464 Repatriation grant 2 223 2 364 Other short-term employee benefits expenses 28 182 27 323 Expenses related to staff 149 255 131 959 Other personnel expenses 300 938 270 489 Total employee benefits expenses 450 193 402 448 204. Other personnel expenses relate to the remuneration paid to UNOPS individual contractors for salaries, provident fund and accrued annual leave. 205. In October 2014, UNOPS implemented a provident fund scheme for all UNOPS local individual contractors. The provident fund is a defined contribution plan. The employer contributions of 15 per cent of local individual contractors agreement fees are fixed and are recognized as an expense. The contractors contribute 7.5 per cent of their fee on a monthly basis. The UNOPS responsibility is to establish arrangements to provide a provident fund facility and to monitor and cover administrative costs related to these arrangements. The balance of funds held for the benefit of UNOPS local individual contractors by the provident fund as at 31 December 2020 was $85.4 million ($67.7 million in 2019). Further details on the provident fund are disclosed in the annex to the present financial statements. 206. In accordance with the contract with UNOPS, the provident fund is administered and held by Zurich International on behalf of the local individual contractors. Note 22 Finance income Table IV.52 Finance income (Thousands of United States dollars) 31 December 2020 31 December 2019 Total finance income on investments 33 641 40 969 Interest on other financial assets 4 630 3 073 Recognition of amortized cost (note 10) (1 861) 12 219 Total finance income on investments and other financial assets 36 410 56 261 21-06983 113/129 United Nations Office for Project Services A/76/5/Add.11 Notes to the 2020 financial statements (continued) 31 December 2020 31 December 2019 Less : finance income/cost allocated to projects (12 340) (32 503) Net finance income retained by UNOPS 24 070 23 758 Finance income on UNOPS bank balances 394 506 Total finance income 24 464 24 264 207. Total finance income on investments includes realized gains of $8.5 million on externally managed investments. Table IV.53 Net exchange rate gain/loss (Thousands of United States dollars) 31 December 2020 31 December 2019 Net foreign exchange gain/(loss) (13 433) 1 367 208. The exchange losses are due to the revaluation of non-United States dollar bank balances, assets and liabilities at the end of the period. 209. Net unrealized gains on $2.1 million of derivative instruments are included within the UNOPS net foreign exchange gain/(loss). Note 23 Provisions Table IV.54 Provisions (Thousands of United States dollars) Additional Unused amounts 31 December 1 January 2020 provisions reversed Utilized 2020 Claims 248 221 – (292) 177 Leasehold restoration provisions 215 18 (4) – 229 Other provisions 7 614 855 (585) (433) 7 451 Total 8 077 1 094 (589) (725) 7 857 Of which: Current portion 3 662 Non-current portion 4 195 210. Leasehold restoration provisions reflect an estimate of requirements to return leased properties to the lessors at the end of the lease term in a specified condition. They concern various lease agreements in which UNOPS has the obligation to remove installed assets. Claims refer to legal cases where outflow of resources is probable and can be reliably estimated. Other provisions relate mostly to the estimated cost of remedial work required on projects currently being implemented by UNOPS. 114/129 21-06983 United Nations Office for Project Services Notes to the 2020 financial statements (continued) A/76/5/Add.11 Note 24 Contingent liabilities 211. UNOPS is subject to claims in the ordinary course of operations, categorized as project-related or staff-related claims. The UNOPS assessment of the financial effect of claims that remain open at year-end is reflected in the table below. The outcome of the open claims is inherently unpredictable and therefore the timing of any outflow is difficult to ascertain. Table IV.55 Contingent liabilities (Thousands of United States dollars) 31 December 2020 31 December 2019 Project-related claims from clients 10 812 3 410 Staff-related claims – – Total contingent liabilities 10 812 3 410 212. Of the $10.8 million of contingent liabilities as at 31 December 2020, UNOPS estimates that there may be a possibility of reimbursement of up to $7.7 million. Contingent assets 213. UNOPS had no contingent assets as at 31 December 2020 (nil as at 31 December 2019). Note 25 Commitments 214. UNOPS leases office premises in field locations under non-cancellable and cancellable operating lease agreements. When cancellable, UNOPS is required to give a 1- to 12-month notice of termination of the lease agreements. The lease terms are between a few months and 23 years. Some of these operating lease agreements contain renewal clauses that enable UNOPS to extend the terms of the leases at the end of the original lease terms and escalation clauses that may increase annual rent payments on the basis of increases in the relevant market price indexes in the respective countries where the field offices are located. 215. The operating expenses include lease payments for an amount of $6.7 million ($7.8 million in 2019) recognized as operating lease expenses during the year in the statement of financial performance under “operational costs”. 216. The future minimum lease payments include the amounts that would need to be paid up to the earliest possible termination dates under the respective agreements. The total of future minimum lease payments under non-cancellable operating leases is as follows: 21-06983 115/129 United Nations Office for Project Services A/76/5/Add.11 Notes to the 2020 financial statements (continued) Table IV.56 Lease commitments (Thousands of United States dollars) 31 December 2020 31 December 2019 Within one year 9 075 8 112 Later than one year and not later than five years 9 956 11 313 Later than five years 6 446 2 662 Total operating lease commitments 25 477 22 087 217. UNOPS subleases office premises under cancellable operating lease agreements, generally to other United Nations entities. In most cases, the lessee is required to give 30 days’ notice for the termination of the sublease agreement. 218. As at 31 December 2020, the total future minimum lease payments under sublease agreements that UNOPS expects to receive on such agreements that cannot be cancelled was $0.6 million ($0.3 million in 2019), owing mainly to significant sublease agreements that were extended during 2020. Open commitments 219. UNOPS commitments included purchase orders and service contracts contracted but not delivered as at year-end. The table below shows the total UNOPS open commitments at 31 December 2020: Table IV.57 Open commitments (Thousands of United States dollars) 31 December 2020 31 December 2019 Management budget 3 348 3 080 Project-related commitments 559 673 479 181 Total open commitments 563 021 482 261 Of which: Commitments for property, plant and equipment 475 2 837 Commitments for intangible assets – – 116/129 21-06983 United Nations Office for Project Services 21-06983 Notes to the 2020 financial statements (continued) Note 26 Reconciliation of the statement of comparison of budget and actual amounts Table IV.58 Statement of comparison of original and final budget amounts (Thousands of United States dollars) Biennial 2020/21 2020 2020 Variance between management management management original and final budget (original) budget (original) budget (revised) 2020 budget Percentage Explanation Total revenue for the period 181 001 90 501 91 865 1 364 2 Management resources Posts 27 135 13 567 11 743 (1 824) (13) Common staff costs 20 382 10 191 8 859 (1 332) (13) Travel 8 703 4 352 3 373 (979) (22) Reduced travel activity owing to COVID-19 Consultants 66 420 33 210 32 643 (567) (2) Operating expenses 12 851 6 426 5 576 (850) (13) Furniture and equipment 967 483 444 (39) (8) Reimbursements 2 042 1 021 1 368 347 34 Increase owing to COVID-19 response Total use of management resources 138 500 69 250 64 006 (5 244) (8) Write-offs, provisions and contingency surplus 22 501 11 251 – (11 251) (100) UNOPS does not budget internally for write-offs, provisions or contingency surplus Strategic investment from surplus 20 000 10 000 6 000 (4 000) (40) Lower budget need for internal investments than originally estimated Total use of resources 181 001 90 501 70 006 (20 495) (23) A/76/5/Add.11 117/129 A/76/5/Add.11 118/129 Table IV.59 Statement of comparison of budget and actual amounts (Thousands of United States dollars) Biennial 2020/21 2020 2020 Difference management management management 2020 actual between final budget (original) budget (original) budget (final) amounts (actuals) budget and actuals Percentage Explanation Total revenue for the period 181 001 90 501 91 865 107 389 15 524 17 Management resources Posts 27 135 13 567 11 743 12 145 402 3 Common staff costs 20 382 10 191 8 859 9 056 197 2 Travel 8 703 4 352 3 373 676 (2 697) (80) Reduced travel activity owing to COVID-19 Consultants 66 420 33 210 32 643 31 051 (1 592) (5) Operating expenses 12 851 6 426 5 576 3 899 (1 677) (30) Increased efficiency of UNOPS operations Furniture and equipment 967 483 444 1 242 798 180 More furniture and equipment required than planned, including additional intangible asset development requirements Reimbursements 2 042 1 021 1 368 1 327 (41) (3) Total use of management resources 138 500 69 250 64 006 59 396 (4 610) (7) Write-offs, provisions and 22 501 11 251 – 22 103 22 103 100 UNOPS does not budget internally for contingency surplus write-offs, provisions or contingency Notes to the 2020 financial statements (continued) surplus. The actual amount is within the original budget estimate. United Nations Office for Project Services Strategic investment from surplus 20 000 10 000 6 000 1 516 (4 484) (75) Less-than-anticipated internal investment opportunities identified Total use of resources 181 001 90 501 70 006 83 015 13 009 19 Net revenue on budget basis – – 21 859 24 374 2 515 12 21-06983 United Nations Office for Project Services Notes to the 2020 financial statements (continued) A/76/5/Add.11 220. The UNOPS budget and accounting bases are different. The statement of financial performance (statement II) is prepared on an accrual basis, whereas the statement of comparison of budget and actual amounts (statement V) is restricted to the management budget, including the net surplus earned on projects. It does not include the revenue and expenses incurred on projects, nor does it include finance income or exchange gains/losses. 221. The cost classifications presented in statement V reflect those that are approved by the Executive Board of UNOPS. The differences between expenditure in statement II and statement V are as follows: Table IV.60 Differences between statement II and statement V Treatment in statement V Acquisition of property, plant and equipment Cash basis Acquisition of intangible assets Cash basis Depreciation and impairment of property, plant and equipment Excluded from UNOPS budget Amortization and impairment of intangible assets Excluded from UNOPS budget Non-exchange revenue Excluded from UNOPS budget Finance income Excluded from UNOPS budget Exchange rate gains/losses Excluded from UNOPS budget 222. The approved budget covers the biennium 2020–21. The annual budget for 2020 was included in statement V. 223. The UNOPS financial regulations and rules specify that the Executive Director has the authority to redeploy resources within the approved managem ent budget and to increase or reduce the total approved management budget allotment, provided that the net revenue target established by the Executive Board for the budget period remains unchanged. As a result, there are some line item differences between the original and final budgets. Reconciliation of actual amounts from budgetary basis to financial statement basis 224. As required under IPSAS 24, actual amounts from statement V must be reconciled to net cash flows from operating activities, investing activities and financing activities (as presented in statement IV, the statement of cash flows), separately identifying basis, timing and entity differences. 225. Basis differences occur when the approved budget is prepared on a basis other than the accrual basis, as is the case for UNOPS. 226. Timing differences occur when the budget period differs from the reporting period reflected in the financial statements. There are no timing differences for UNOPS for purposes of comparison of budget and actual a mounts. 227. Entity differences occur when the budget omits programmes or entities that are part of the entity for which the financial statements are prepared. 21-06983 119/129 United Nations Office for Project Services A/76/5/Add.11 Notes to the 2020 financial statements (continued) Table IV.61 Reconciliation with the statement of cash flows (Thousands of United States dollars) Operating Investing Financing Total Actual amount on comparable basis as presented in the budget and actual comparative statement 25 631 (1 257) – 24 374 Basis differences (acquisition and disposal of intangibles and property, plant and equipment) – (5 294) – (5 294) Entity differences 8 669 – – 8 669 Changes in working capital 1 438 129 – – 1 438 129 Movement in investments – (1 128 947) – (1 128 947) Movement in other financial assets – (20 000) – (20 000) Movement in interest received – 23 151 – 23 151 Subtotal 1 472 429 (1 132 347) – 340 082 Net foreign exchange gains/losses – – – (15 525) Actual amount in the statement of cash flows 1 472 429 (1 132 347) – 324 557 Note 27 Segment reporting 228. Management has determined its reporting segments geographically, which is the basis as in the statements of budget reporting provided to the UNOPS Executive Director. 229. The UNOPS structure consists of six regions and headqu arters, located in Denmark. Headquarters as a segment is made up of five units: Corporate, Office of the Chief Finance Officer and Administration, Implementation Practices and Standards, Office of the General Counsel, and Regional Portfolios. 230. Segment revenue and expenses are those that are directly attributable to the segment or can reasonably be allocated to the segment. 231. Segment assets and liabilities are those that can reasonably be allocated to the segments. Any others are included under unallocable, in line with IPSAS 18: Segment reporting. 232. UNOPS revenues, expenses, assets and liabilities are segmented as follows: 120/129 21-06983 Notes to the 2020 financial statements (continued) United Nations Office for Project Services 21-06983 Table IV.62 Segment revenue and expenses (Thousands of United States dollars) Europe and Central Latin America and New York service Africa region Asia region Asia region Headquarters Caribbean region Middle East region cluster Total Revenue Revenue from project activities 172 543 192 651 102 559 31 981 224 111 154 042 282 716 1 160 603 Miscellaneous revenue 399 1 661 67 543 37 191 (1) 2 897 Non-exchange revenue – – – 5 694 – – – 5 694 Total revenue 172 942 194 312 102 626 38 218 224 148 154 233 282 715 1 169 194 Expenses Contractual services 62 525 34 755 7 920 1 897 94 594 75 847 114 996 392 534 Other personnel costs 55 684 74 795 34 155 34 884 32 836 16 804 51 780 300 938 Salaries and employee benefits 5 817 5 264 37 108 16 723 3 460 8 082 72 801 149 255 Operational costs 19 560 17 386 3 973 14 607 9 401 17 155 13 983 96 065 Supplies and consumables 9 783 15 643 3 586 2 246 64 337 22 633 11 226 129 454 Travel 3 834 33 190 717 422 1 811 723 3 722 44 419 Other expenses 275 123 134 21 860 (82) 26 190 22 526 Total expenses 157 478 181 156 87 593 92 639 206 357 141 270 268 698 1 135 191 Finance income – – – 24 464 – – – 24 464 Exchange rate gain/loss – – – (13 433) – – – (13 433) Net finance income/(expense) – – – 11 031 – – – 11 031 Surplus before unallocated expenses 15 464 13 156 15 033 (43 390) 17 791 12 963 14 017 45 034 Unallocated segment expenses Depreciation of property, plant and equipment – – – – – – – 4 507 Amortization of intangible assets – – – – – – – 1 027 A/76/5/Add.11 Surplus for the period 15 464 13 156 15 033 (43 390) 17 791 12 963 14 017 39 500 121/129 A/76/5/Add.11 122/129 Table IV.63 Segment revenue and expenses – 2019 comparatives (Thousands of United States dollars) Europe and Central Latin America and New York service Africa region Asia region Asia region Headquarters Caribbean region Middle East region cluster Total Revenue Revenue from project activities 165 738 176 559 86 593 29 560 302 354 144 481 302 021 1 207 306 Miscellaneous revenue 297 1 882 – 1 847 2 241 1 4 270 Non-exchange revenue – – – 191 – – – 191 Total revenue 166 035 178 441 86 593 31 598 302 356 144 722 302 022 1 211 767 Expenses Contractual services 57 053 32 818 3 713 2 902 124 092 69 796 138 073 428 447 Other personnel costs 47 467 66 864 31 134 32 642 30 711 14 615 47 056 270 489 Salaries and employee benefits 5 013 4 909 28 899 14 908 3 249 7 373 67 608 131 959 Operational costs 15 565 18 636 4 107 15 141 26 314 19 752 11 566 111 081 Supplies and consumables 13 384 9 599 3 469 2 295 89 436 19 258 11 570 149 011 Travel 12 880 34 319 3 582 3 299 16 483 1 375 11 129 83 067 Other expenses 4 588 4 696 4 626 969 231 116 11 230 Total expenses 155 950 171 841 74 908 71 813 291 254 132 400 287 118 1 185 284 Finance income – – – 24 264 – – – 24 264 Notes to the 2020 financial statements (continued) Exchange rate gain/loss – – – 1 367 – – – 1 367 Net finance income/(expense) – – – 25 631 – – – 25 631 United Nations Office for Project Services Surplus before unallocated expenses 10 085 6 600 11 685 (14 584) 11 102 12 322 14 904 52 114 Unallocated segment expenses Depreciation of property, plant and equipment – – – – – – – 4 216 Amortization of intangible assets – – – – – – – 761 Surplus for the period 10 085 6 600 11 685 (14 584) 11 102 12 322 14 904 47 137 21-06983 Notes to the 2020 financial statements (continued) United Nations Office for Project Services 21-06983 Table IV.64 Segment assets and liabilities (Thousands of United States dollars) Europe and Latin America Total for Central Asia and Caribbean Middle East New York allocated assets Africa region Asia region region Headquarters region region service cluster and liabilities Unallocable Grand total Assets Non-current assets Intangible assets – – – – – – – – 3 879 3 879 Property, plant and equipment – – – – – – – – 18 368 18 368 Long-term investments – – – 760 584 – – – 760 584 – 760 584 Other financial assets – – – 38 890 – – – 38 890 – 38 890 Non-current accounts receivable – – – – – – – – 881 881 Total non-current assets – – – 799 474 – – – 799 474 23 128 822 602 Current assets Inventories 757 24 14 – 1 536 449 9 434 12 214 – 12 214 Other assets – – – 5 365 – – – 5 365 – 5 365 Accounts receivable Project accounts receivable – – – – – – – – 41 045 41 045 Prepayments 1 802 6 432 242 738 5 389 1 454 189 16 246 – 16 246 Other accounts receivable – – – – – – – – 27 533 27 533 Short-term investments – – – 2 100 667 – – – 2 100 667 – 2 100 667 Cash and cash equivalents – – – – – – – – 883 975 883 975 Total current assets 2 559 6 456 256 2 106 770 6 925 1 903 9 623 2 134 492 952 553 3 087 045 Total assets 2 559 6 456 256 2 906 244 6 925 1 903 9 623 2 933 966 975 681 3 909 647 Liabilities Non-current liabilities Employee benefits, long-term – – – – – – – – 104 770 104 770 Provisions 2 001 2 021 – 173 – – – 4 195 – 4 195 A/76/5/Add.11 Total non-current liabilities 2 001 2 021 – 173 – – – 4 195 104 770 108 965 123/129 A/76/5/Add.11 124/129 Table IV.64 Segment assets and liabilities (continued) (Thousands of United States dollars) Europe and Latin America Total for Central Asia and Caribbean Middle East New York allocated assets Africa region Asia region region Headquarters region region service cluster and liabilities Unallocable Grand total Current liabilities Employee benefits, short-term – – – – – – – – 38 460 38 460 Accounts payable – – – – – – – – 290 861 290 861 Project cash advances received Deferred revenue 224 671 178 981 85 467 28 844 988 201 167 190 (198 731) 1 474 623 344 212 1 818 835 Cash held on agency projects 188 858 232 694 255 422 7 512 615 962 46 319 12 279 1 359 046 (1) 1 359 045 Other liabilities – – – 3 273 – – – 3 273 – 3 273 Provisions 617 2 661 86 206 90 – – 3 660 2 3 662 Total current liabilities 414 146 414 336 340 975 39 835 1 604 253 213 509 (186 452) 2 840 602 673 534 3 514 136 Total liabilities 416 147 416 357 340 975 40 008 1 604 253 213 509 (186 452) 2 844 797 778 304 3 623 101 Notes to the 2020 financial statements (continued) United Nations Office for Project Services 21-06983 Notes to the 2020 financial statements (continued) United Nations Office for Project Services 21-06983 Table IV.65 Segment assets and liabilities – 2019 comparatives (Thousands of United States dollars) Europe and Latin America Total for Central Asia and Caribbean Middle East New York allocated assets Africa region Asia region region Headquarters region region service cluster and liabilities Unallocable Grand total Assets Non-current assets Intangible assets – – – – – – – – 2 041 2 041 Property, plant and equipment – – – – – – – – 18 750 18 750 Long-term investments – – – 584 033 – – – 584 033 – 584 033 Other financial assets – – – 40 993 – – – 40 993 – 40 993 Non-current accounts receivable – – – – – – – – 530 530 Total non-current assets – – – 625 026 – – – 625 026 21 321 646 347 Current assets Inventories 1 389 33 83 – 1 206 1 065 10 947 14 723 – 14 723 Other assets – – – 53 – – – 53 – 53 Accounts receivable Project accounts receivable – – – – – – – – 33 218 33 218 Prepayments 510 1 500 91 759 4 891 1 016 215 8 982 – 8 982 Other accounts receivable – – – – – – – – 15 121 15 121 Short-term investments – – – 1 089 323 – – – 1 089 323 – 1 089 323 Cash and cash equivalents – – – – – – – – 559 444 559 444 Total current assets 1 899 1 533 174 1 090 135 6 097 2 081 11 162 1 113 081 607 783 1 720 864 Total assets 1 899 1 533 174 1 715 161 6 097 2 081 11 162 1 738 107 629 104 2 367 211 Liabilities Non-current liabilities Employee benefits, long-term – – – – – – – – 89 647 89 647 Provisions – – – – – – – – – – A/76/5/Add.11 Total non-current liabilities – – – – – – – – 89 647 89 647 125/129 A/76/5/Add.11 126/129 Table IV.65 Segment assets and liabilities – 2019 comparatives (continued) (Thousands of United States dollars) Europe and Latin America Total for Central Asia and Caribbean Middle East New York allocated assets Africa region Asia region region Headquarters region region service cluster and liabilities Unallocable Grand total Current liabilities Employee benefits, short-term – – – – – – – – 27 731 27 731 Accounts payable – – – – – – – – 216 980 216 980 Project cash advances received Deferred revenue 183 521 138 988 109 184 25 430 323 571 170 332 92 097 1 043 123 – 1 043 123 Cash held on agency projects 122 966 161 503 217 443 4 086 130 579 70 330 22 702 729 609 – 729 609 Other liabilities – – – – – – – – – – Provisions 2 574 5 085 – 215 203 – – 8 077 – 8 077 Total current liabilities 309 061 305 576 326 627 29 731 454 353 240 662 114 799 1 780 809 244 711 2 025 520 Total liabilities 309 061 305 576 326 627 29 731 454 353 240 662 114 799 1 780 809 334 358 2 115 167 Notes to the 2020 financial statements (continued) United Nations Office for Project Services 21-06983 United Nations Office for Project Services Notes to the 2020 financial statements (continued) A/76/5/Add.11 Note 28 Related parties 233. UNOPS is governed by an Executive Board, mandated by the General Assembly, which is responsible for overseeing the work of UNOPS, UNDP and the United Nations Population Fund (UNFPA). The Executive Board is a related party, since it exercises significant influence over UNOPS as governing body. 234. UNOPS maintains a working relationship with the Executive Board and reimburses part of the travel costs, subsistence allowances and office expenses incurred by members of the Board in discharging their official duties, as well as a share of the cost of the Secretariat. The cost of this amounted to approximately $0.02 million during 2020 ($0.2 million during 2019). Members of the Board are elected each year by the Economic and Social Council in accordance with the rules of procedure on membership. Executive Board members are not considered key management personnel of UNOPS as defined under IPSAS. 235. UNOPS considers UNDP and UNFPA to be related parties, given that all three organizations are subject to common control by the Executive Board. UNOPS has a range of working relationships with UNDP and UNFPA. All of the transactions between UNOPS and the other two organizations are conducted at arm’s length. The inter-agency transactions were consistent with normal operating relationships between the organizations and were undertaken on terms and conditions that are normal for such transactions. Key management personnel 236. The table below provides information on the aggregate remuneration of the executive management personnel. Table IV.66 Key management personnel (Thousands of United States dollars) 31 December 2020 31 December 2019 Number of individuals 1 2 Aggregate remuneration: Base compensation and post adjustment 242 435 Other entitlements 75 87 Post-employment benefits 80 147 Total remuneration 397 669 Outstanding advances against entitlements – – Outstanding loans – – After-service health insurance, repatriation grant and leave liability a 416 265 a The after-service health insurance, repatriation grant and death benefit liability disclosed here include values for both the Executive Director and the former Deputy Executive Director. 237. For the purpose of this disclosure, the Executive Director is considered key management personnel, as she has the overall authority and responsibility to plan, lead, direct and control the activities of the organization. 21-06983 127/129 United Nations Office for Project Services A/76/5/Add.11 Notes to the 2020 financial statements (continued) 238. The aggregate remuneration of the executive management personnel is based on a full-time equivalent basis and includes net salaries, post adjustment, entitlements such as representation allowance, rental subsidy, relocation grant and the costs of pension, after-service health insurance and repatriation grant in accordance with the Staff Regulations of the United Nations and Staff Rules. 239. These financial statements disclose key management personnel remuneration as well as post-employment liabilities directly attributable to the individuals. 240. In 2020, there were no known instances of executive management personnel facing conflicts of interest that could potentially influence decision -making, either stemming from the ordinary course of business or with regard to business relationships with family members, other related individuals or vendors. 241. The UNOPS Deputy Executive Director position has been vacant since the appointment of the incumbent to the position of Assistant Secretary-General and Chief Executive of the UNOPS Sustainable Infrastructure Impact Investments (S3I) initiative with effect from March 2020. Note 29 Events after reporting date 242. The financial statements were approved for issue on the date on which the Board of Auditors signed the audit opinion. None other than UNOPS has the authority to amend these financial statements. 243. UNOPS financial statements were finalized while the COVID -19 pandemic was still prevalent. The pandemic had a limited financial impact on UNOPS operations during 2020. At the time of writing, it was still too early to estimate the exact magnitude of the long-term economic consequences and, subsequently, any impact on UNOPS net assets/equity. 244. As at the date of signature of the UNOPS financial statements and related notes for the period ended 31 December 2020, there have been no other material events, favourable or unfavourable, that have occurred between the balance sheet date and the date on which the financial statements were authorized for issue that would have affected the statements. 128/129 21-06983 A/76/5/Add.11 Annex United Nations Office for Project Services individual contractors provident fund summary for the period ended 31 December 2020 (Thousands of United States dollars) 2020 2019 Opening balance as at 1 January 67 655 48 836 ɑ Adjustment to the opening balance – 27 Contribution/premium 24 177 21 872 Payouts (11 365) (9 039) Funds not earmarked for the fund 782 1 017 Earnings/loss 4 105 4 942 Closing balance as at 31 December 85 354 67 655 ɑ Adjustment to the opening balance for 2019 resulted from review of previous reporting on the non-earmarked contributions and an adjustment done by Zurich International with the previous report. Non-earmarked contributions of the UNOPS provident fund consist of UNOPS/project contributions and related positive/negative interest that the member has not been able to withdraw upon separation owing to vesting rules set forth in the UNOPS provident fund policy. The non-earmarked contributions are fully directed into the default fund of the UNOPS provident fund, but, like all financial assets of the UNOPS provident fund, are kept separate from the other financial assets of UNOPS. In line with the UNOPS provident fund principles, UNOPS may charge justified administrative or similar costs to non-earmarked contributions of the UNOPS provident fund. The table below provides details on the non-earmarked contributions for the period 2014–2020. (Thousands of United States dollars) 2020 2019 Opening balance of the non-earmarked contributions 5 870 4 944 Change in non-earmarked contributions within the period 1 103 1 463 Total expenses against non-earmarked contributions, following provident fund principles: Payment attributed to UNOPS personnel (51) (46) Payment attributed to provident fund administrator or investment adviser (304) (425) Payment attributed to services benefiting all members (59) (66) Total expenses against non-earmarked contributions (414) (537) Closing balance as at 31 December 6 559 5 870 21-06983 (E) 300721 *2106983* 21-06983 129/129