A/63/5/Add.3 United Nations United Nations Relief and Works Agency for Palestine Refugees in the Near East Financial report and audited financial statements for the biennium ended 31 December 2007 and Report of the Board of Auditors General Assembly Official Records Sixty-third Session Supplement No. 5C General Assembly Official Records Sixty-third Session Supplement No. 5C United Nations Relief and Works Agency for Palestine Refugees in the Near East Financial report and audited financial statements for the biennium ended 31 December 2007 and Report of the Board of Auditors United Nations • New York, 2008 A/63/5/Add.3 Note Symbols of United Nations documents are composed of capital letters combined with figures. Mention of such a symbol indicates a reference to a United Nations document. ISSN 1020-2439 [8 July 2008] Contents Chapter Page Letters of transmittal ............................................................ vi I. Financial report for the biennium ended 31 December 2007 ............................ 1 A. Introduction ............................................................... 1 B. Strategic goals of the United Nations Relief and Works Agency for Palestine Refugees in the Near East ........................................................... 1 C. Strategic planning framework ................................................ 2 D. Partnership with other agencies ............................................... 2 E. External factors ............................................................ 3 F. Social accounting, risk management, performance evaluation, disaster recovery plan and internal control ............................................................ 4 1. Social accounting ...................................................... 4 2. Risk management ...................................................... 5 3. Performance evaluation ................................................. 5 4. Disaster recovery plan .................................................. 6 5. Internal control ........................................................ 6 G. Financial results for the biennium ............................................. 6 Sources of funding ......................................................... 8 H. Agency-wide structure of accounts ............................................ 8 I. UNRWA activities .......................................................... 9 J. Education programme....................................................... 9 K. Results of the education programme ........................................... 10 L. Health programme.......................................................... 10 M. Results of the health programme .............................................. 11 N. Relief and social services programme .......................................... 12 O. Results of the relief and social services programme .............................. 13 P. Administrative support ...................................................... 15 Q. Common services .......................................................... 17 R. Results of the common services............................................... 18 iii S. Emergency appeal .......................................................... 18 T. Post-1999 Projects ......................................................... 19 U. Other projects ............................................................. 19 V. Microfinance and Microenterprise Department .................................. 19 W. Results of the Microfinance and Microenterprise Department ...................... 20 X. Area Staff Provident Fund ................................................... 21 II. Report of the Board of Auditors ................................................... 22 Summary ..................................................................... 22 A. Introduction ............................................................... 27 1. Mandate, scope and methodology ......................................... 27 2. Coordination with internal audit .......................................... 28 3. Main recommendations ................................................. 29 B. Detailed findings and recommendations ........................................ 30 1. Follow-up of previous recommendations ................................... 30 2. Overall financial overview............................................... 31 3. Statement of income and expenditure ...................................... 32 4. Statement of assets, liabilities, and reserves and fund balances ................. 34 5. Reserves and fund balances .............................................. 35 6. End-of-service liabilities and after-service health insurance.................... 35 7. Progress towards the implementation of IPSAS.............................. 36 8. Procurement and contract management .................................... 37 9. Asset management ..................................................... 39 10. Expendable property.................................................... 40 11. Human resources management ........................................... 40 12. Information technology ................................................. 43 13. Internal audit function .................................................. 46 14. Internal audit findings .................................................. 48 15. Programme and project management ...................................... 49 16. Write-offs and disposals................................................. 51 17. Ex gratia payments ..................................................... 51 18. Cases of fraud and presumptive fraud...................................... 52 iv C. Acknowledgement.......................................................... 52 Annex Status of implementation of the Board’s recommendations for the biennium ended 31 December 2005.............................................................. 53 III. Audit opinion .................................................................. 55 IV. Certification of the financial statements ............................................ 56 V. Financial statements for the biennium ended 31 December 2007 ........................ 57 A. Financial statements of the United Nations Relief and Works Agency for Palestine Refugees in the Near East for the biennium ended 31 December 2007 ............... 57 UNRWA 2006-2007 accounts................................................. 58 Statement 1. Statement of income, expenditure and changes in working capital and fund balances ................................................. 59 Statement 2. Assets and liabilities statement as at 31 December 2007 .............. 61 Statement 3. Cash flow statement............................................ 62 Statement 4. Budget and expenditure......................................... 63 Statement 5. Statement of working capital, fund balances and reserves ............. 64 Statement 6. Non-regular fund projects statement of income, expenditure and changes in fund balances .............................................. 65 Statement 7. Non-regular fund projects assets and liabilities statement ............. 66 B. Appendices, annex and notes to the financial statements of the United Nations Relief and Works Agency for Palestine Refugees in the Near East ........................ 67 Appendix 1. Regular budget expenditure ..................................... 67 Appendix 2. Expenditure breakdown......................................... 70 Appendix 3. Statement of income, expenditure and fund balances by project ........ 71 Appendix 4. Donor contributions and outstanding confirmed pledges .............. 108 Annex General fund production units and canteen revenues .................................. 118 Notes to the financial statements for the biennium ended 31 December 2007 .............. 119 v Letters of transmittal 27 March 2008 Pursuant to financial regulations 11.4 and 12.1, I have the honour to submit the consolidated financial statements of the United Nations Relief and Works Agency for Palestine Refugees in the Near East (including the Microfinance and Microenterprise Department) for the year ended 31 December 2007, which I hereby approve. The financial statements have been prepared and certified as correct by the Comptroller. (Signed) Karen Koning AbuZayd Commissioner-General The Chairman of the United Nations Board of Auditors United Nations New York vi 30 June 2008 I have the honour to transmit to you the report of the Board of Auditors on the financial statements of the United Nations Relief and Works Agency for Palestine Refugees in the Near East for the biennium ended 31 December 2007. (Signed) Philippe Séguin First President of the Court of Accounts of France (Chairman, United Nations Board of Auditors) The President of the General Assembly of the United Nations New York vii A/63/5/Add.3 Chapter I Financial report for the biennium ended 31 December 2007 A. Introduction 1. The United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA) was established by the General Assembly in its resolution 302 (IV) of 8 December 1949 as a separate entity within the United Nations system and it began operations on 1 May 1950. The mandate of UNRWA has been renewed repeatedly, most recently in Assembly resolution 59/117 of 10 December 2004, when it was extended until 30 June 2008. 2. UNRWA reports directly to the General Assembly, to which the Commissioner- General submits an annual report. A general review of UNRWA programmes and activities