Office of Internal Audit and Investigations

Audit Report of
UNICEF’S SUPPORT TO THE STRENGTHENING OF NATIONAL
GOVERNMENTSs SUPPLY SYSTEMS AND MANAGEMENT OF
UNICEF’S KEY SUPPLY CHAIN AREAS

NOVEMBER 2022

Report 2022/17
CONTENTS

Executive Summary ...................................................................................................... 3

Overall Conclusion
Summary of Observations and Suggested Actions

Audit Objectives and Scope ......................................................................................... 7

Context ........................................................................................................................... 8
Observations and Management Action Plan ............................................................ 10
1. Assessment national supply systems
2. Integrating nutrition supplies in national supply systems
3. Management of key supply chain areas
4. Monitoring UNICEF supply chains areas
5. Staffing the supply function

Appendix………………………………………………………………………………………19

2
EXECUTIVE SUMMARY
The Office of Internal Audit and Investigations (OIAI) conducted an audit of UNICEF’s support to
the strengthening of national governments’ supply systems and management of UNICEF’s own
key supply chain areas. The objective of the audit was to identify opportunities for improving the
governance, risk management and control processes in the provision of programme supplies. The
audit covered the period 1 January 2020 to October 2021 and was conducted between 1 July
2021 and 30 November 2021. Owing to travel restrictions resulting from the COVID-19 pandemic
the audit was conducted remotely.

UNICEF procures programme supplies that are distributed by its country and regional offices to
government partners or other implementing partners for onward distribution to beneficiaries.
These include procurement of essential commodities on behalf of governments and partners.
UNICEF provides other procurement related services such as construction, freight, in-country
logistics and warehousing services, technical staff etc. It also supports Governments in their
efforts to set up and manage their own supply chains. In 2020, UNICEF procured supplies worth
US$4.5 billion and provided procurement services worth about US$1.8 billion. The audit sought
to evaluate the following risks linked to supply chains:

 The risk that efforts to strengthen national governments’ supply systems are not coordinated
and/or monitored globally, thereby rendering the actions taken ineffective and less impactful.
In this respect, the audit assessed UNICEF’s efforts, in coordination with donors and key
partners, to strengthen national Governments’ supply chain systems through country, regional
and headquarter offices.

 The risk that UNICEF supply planning, warehousing and distribution as well as monitoring and
evaluation are not effective in supporting the achievement of programme results.

Overall Conclusion
Based on the audit work performed, OIAI
concluded that the assessed governance, risk Satisfactory
management, or control processes were Partially Satisfactory,
Partially Satisfactory, Improvement Needed, Improvement Needed
meaning that the weaknesses or deficiencies Partially Satisfactory, Significant
identified were unlikely to have a materially Improvement Needed
negative impact on the audited entity, area,
Unsatisfactory
activity or process. (See the Appendix for
definitions of the conclusion ratings.) Management has agreed to take actions, of which one is a
high priority, to manage the residual risks identified.

Summary of Observations and Actions Agreed

OIAI noted several areas where supply-related controls were adequate and functioned well:
Funding for vaccine supply chains: As part of a strategy to strengthen vaccine supply chains
and achieve better immunization equity and coverage, in 2015 UNICEF, Gavi and other partners
launched the Cold Chain Equipment Optimization Platform. This was a US$400 million, five-year
project to upgrade existing cold chain equipment in 56 countries. In addition, UNICEF manages
the Vaccine Independence Initiative that helps countries bridge short-term funding gaps for
vaccines. Funding for the initiative grew from US$8.9 million in 2015 to US$35 million at the end
of 2019.

Practical tools for measuring supply chain maturity: Through its Supply and Programme
Divisions, UNICEF had developed a supply chain maturity scorecard and tool that are used in
identifying strengths and weaknesses in Governments’ supply systems, the appropriate
measures that Governments can be advised to take, and the technical contributions of UNICEF
to these systems.

Guidelines and resources on strengthening supply chains: UNICEF has developed and
issued 45 technical guidelines on national supply chain strengthening. These are meant to be
used by UNICEF country offices and the national Governments that they support. They cover
areas such as data analytics, stock management, workforce development, network optimization,
vaccine forecasting and procurement and end-user monitoring of certain commodities.

Integration of Government supply chain strengthening activities in UNICEF programmes:

All 26 country offices surveyed for this review, as well as country offices that OIAI audited in 2021,
had implemented some activities related to national supply chain strengthening. These included
working with other United Nations specialized agencies and multilateral organizations in supply
chain strengthening activities for host Governments.

Also, with support from the Supply Division, country offices have increasingly been using local
suppliers for some nutritional items. For example, the number of local suppliers of Ready-to-Use
Therapeutic Food (RUTF) increased from one in 2007 to 22 as of May 2020. Of these, 18 were
in countries with high concentrations of malnutrition. This meant that offices could procure and
distribute RUTF to beneficiaries relatively quickly.

The audit also made a number of observations related to the management of the key risks
evaluated. In particular, OIAI noted several actions the office could take to better manage risks,
none of which were classified as high priority: (1) There was a low uptake of the supply maturity
tool which is only being used by 29 country offices; (2) UNICEF has established a matching fund
for nutrition supplies but funding is limited and responsibilities and accountabilities for
communication with the National Governments on its objectives and operationalization have not
been clearly defined; (3) Supply planning, delivery, storage and distribution had gaps that risked
untimely delivery of planned programme results, as well as fraud, waste and other concerns.;(4)
Country and Regional offices did not have appropriate staff capacity and structures to effectively
manage and oversee critical aspects of supply chain system strengthening.

The table below summarizes the actions management has agreed to take to address the residual
risks identified and the ratings of these risks and observations regarding the assessed
governance, risk management and control processes. (See the Appendix for the definitions of the
observation ratings in the Appendix.)

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OBSERVATION RATING
Category of
Area or Operation and Agreed/Recommended Action Rating
Process
Assessment of the national supply systems (Observation 1): The
Supply Division agrees to create a compendium and repository of tools
and guidance that can be used by regional and country offices for
Medium
engaging with Government-led supply chain mechanisms and
coordinating assessments, with partners, of national supply systems
that are relevant to procurement and distribution of supplies.
Integrating supplies in national supply systems. (Observation 2): The
Risk management Programme Division agrees to develop and implement a partnership
and resource mobilization strategy and plan for essential nutrition
programmes and supplies, including RUTF, with support from Public
Partnerships Division, Private Fundraising and Partnerships Division. It High
will also clarify and monitor responsibilities and accountabilities for
communications with national governments in order for them to allocate
appropriate levels of funds in their budgets for the procurement of
essential nutrition commodities, including RUTF.
Management of key supply chain areas (Observation 3): Regional
offices should implement appropriate monitoring, oversight and
reporting mechanisms to ensure that those country offices that are
Medium
responsible for procuring and distributing programme significant
quantities and values supplies and are associated with significant
supply-related risks consistently develop reliable supply plans and
Controls deliver supplies to implementing partners in a timely manner.
processes
Monitoring UNICEF supply chain areas (Observation 4): Regional
offices should implement appropriate monitoring, reporting and
oversight systems to obtain reliable assurance that programme supplies
reach the last mile. They also agree to encourage and support country Medium
offices that are accountable for national supply system strengthening to
consistently get involved in and support Government-led evaluations
and reviews of the supply systems.
Governance Staffing the supply function (Observations 5): The Supply Division
agrees to work with regional offices and other relevant headquarters
offices as needed, to carry out a supply and logistics typology analysis.
This should focus on country and regional offices to identify staffing Medium
gaps and develop standards and guidance that could be used by
country and regional offices to assess their staff requirements and
create staff positions.
Governance Staffing the supply function (Observations 5): Regional offices should
identify and implement appropriate measures to strengthen their supply
functions as well as the supply functions of country offices that routinely Medium
procure and distribute significant quantities and values of programme
supplies.

5
Management is responsible for establishing and maintaining appropriate governance, risk
management and control processes, and implementing the actions agreed following this audit.
The role of the OIAI is to provide an independent assessment of those governance, risk
management and control processes.

6
AUDIT OBJECTIVES AND SCOPE
The Office of Internal Audit and Investigations (OIAI) conducted a thematic audit of UNICEF’s
support in strengthening Governments’ supply chains and management of key supply chain areas
at regional and country office levels. The objective of the review was to identify opportunities for
improving the governance, risk management and control processes in the provision of programme
supplies.

The audit covered a selection of key risks, set out in the following table:

RISK AREA DESCRIPTION KEY RISKS

National Governments The risk that the efforts to strengthen national governments’ supply
Supply chains strengthening systems are not coordinated and/or monitored thereby rendering the
actions taken ineffective and less impactful.
UNICEF supply function Key UNICEF supply chain areas (planning, procurement, distribution,
monitoring and evaluation) are not sufficiently robust to effectively and
efficiently support the achievement of supply-related programme
results.

The audit was conducted remotely between 1 July 2021 and 30 November 2021 in accordance
with the International Standards for the Professional Practice of Internal Auditing. For the purpose
of audit testing, the audit covered the period from 1 January 2020 to October 2021. It involved a
combination of methods, tools and techniques, including interviews, data analytics, document
review, surveys and review of audit observations included in audit reports issued by OIAI

The audit assessed UNICEF’s efforts, in coordination with donors and key partners, to strengthen
national Governments’ supply chain systems through country, regional and headquarter offices.
It also reviewed the effectiveness of UNICEF’s internal supply chains areas for planning, delivery,
warehousing and distribution to end users, as well as monitoring and evaluation in country offices.

OIAI reviewed supply related activities in over 30 country offices and obtained inputs from the
Supply Division, as well as selected Regional Offices and the Programme Division. Audit
observations were shared with all seven regional offices. Their suggestions and comments were
considered in finalizing the report. The audit work excluded a review of procurement and delivery
of COVID-19 vaccines but assessed the impact of the COVID-19 pandemic on the operations of
the supply chains.
CONTEXT
UNICEF supply activities
UNICEF procures essential supplies and services for children, which are then distributed by its
country and regional offices and implementing partners. In 2020, UNICEF procured supplies and
services worth US$4.5 billion, which represents an increase of approximately US$700 million to
the US$3.8 billion in supplies and services procured in 2019. The increase was mainly due to a
surge in purchases of medical supplies, including COVID-19 non-immunization supplies (such as
personal protective equipment,
diagnostic kits, etc.). The top eight FIGURE 1: TOP COMMODITIES PROCURED IN 2020
types of commodities procured by (US$ MILLIONS)
UNICEF in 2020 are shown in
Vaccines, Bed nets,
figure 1.
1400, 48% 36, 1% WASH,
183, 6%
UNICEF procured supplies locally,
through its country offices, as well Nutrition,
as from offshore suppliers. 172, 6%
Offshore procurements are
primarily made through the Cold chain,
UNICEF Supply Division, based in Education, 104, 4%
Copenhagen, Denmark where 43, 1%
UNICEF has a large humanitarian
supply warehouse. Other UNICEF Pharmaceuticals, Medical,
warehouse hubs are located in 144, 5% 831, 29%
Dubai, China, Ghana, Italy and
Panama.

UNICEF procurement services

In addition to procuring supplies for its own programmes, UNICEF procures supplies such as
vaccines on behalf of national governments and other partners. Such procurement enables them
to purchase essential supplies and supply-related services and to leverage UNICEF’s global
knowledge, purchasing capacity and logistics experience. Supply-related services include
construction, freight services, in-country logistics and warehousing services, technical staff etc.
In 2020, UNICEF procurement services provided to Governments, as well as other United Nations
agencies and civil society organizations, were valued at approximately US$1.8 billion. These
services were financed by multilateral agencies and partners and through domestic financing from
governments.

Strengthening national supply chains

Strong national supply chains are critical cornerstones of well-functioning public welfare systems.
The UNICEF 2022-2025 strategic plan recognizes that building the capacity of countries to
operate effective supply chains is critical. In this regard, UNICEF works to support Governments’
own efforts to set up and manage agile, cost-effective and sustainable end-to-end supply chains,
from suppliers to recipients and beneficiaries. UNICEF does so to ensure that all children benefit
from unrestricted access to quality, safe, equitable and affordable health care and other essential
services.

Specifically, UNICEF strives to support Governments’ efforts to strengthen and optimize key
supply chains that are parts of broader health, nutrition, WASH (water, sanitation and hygiene)
and education systems. This includes efforts to reduce costs, prevent stock-outs and/or wastage
and to improve the performance and sustainability of national supply chains. At the global level,
UNICEF provides guidance, tools, and high-level leadership and advocacy to leverage human
and financial resources to strengthen Government supply chains. UNICEF regional offices lead
monitoring activities and identify mechanisms to meet the technical capacity needs of both
UNICEF offices and in-country partners. Country offices convene partners, Governments and the
private sector around supply chain strengthening activities, linking upstream initiatives with
country-level strategies and connecting policy, research and best practice to actions on the
ground.

Governments’ supply chain maturity can be measured by a number of tools1. The main tools used
by UNICEF are the Effective Vaccine Management Tool (EVM) and the UNICEF Supply Chain
Maturity Model, which assesses the supply maturity of commodities other than vaccines. These
tools provide UNICEF a foundation by which it can offer strategic advice to Governments, develop
a monitoring and evaluation framework and provide a sound mechanism for reporting on
progress.

1The tools are detailed in the joint UNICEF and World Health Organization publication, Technical Review
of Public Health Supply Chain Assessment Tools, An analysis of major tools and approaches, 2019.
Available at https://www.unicef.org/supply/documents/technical-review-public-health-supply-chain-
assessment-tools.

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OBSERVATIONS AND MANAGEMENT ACTION PLAN

The key areas where actions are needed are summarized below.

1. Maturity of UNICEF-supported national supply systems Medium

Inadequate information on the maturity of National Government supply systems creates a risk
that supply chains operated by Governments might remain weak, even as UNICEF and partners
invest in and rely on them to deliver supplies to beneficiaries.

The Supply Division had developed a Supply Chain Maturity Model – this is a participatory,
qualitative and Government-led supply chain assessment tool that Governments and
organizations can use to measure the performance of key supply chain functions. The model can
be used to:

 Assess and quantify the strengths, gaps and priorities for improvement across all areas
of the public supply chain.
 Inform and coordinate partners’ technical cooperation efforts in support of objectives
identified by Governments.
 Assess the efficiency and impact of strengthening interventions in order to measure
progress along the maturity continuum.

Data from VISION showed that in 2021 and 2022, 91

UNICEF country offices procured more than US$ 5 million
Country offices were not worth of supplies each and channeled these through
knowledgeable on the Government systems. However, the Supply Chain Maturity
availability of the supply Model was used by only 29 country offices. This low
chain maturity tool and/or utilization rate indicates that there remains a risk that
lacked skills to promote its UNICEF and its partners may fail to identify and take
use. appropriate measures to help strengthen national supply
systems. There was also the risk of inefficiencies and that
lifesaving supplies might not promptly reach the most
vulnerable population due to the continuing use of these weak national systems. The audit found
that Government supply chains had significant weaknesses in a number of areas including staff
capacity, financing, infrastructure and equipment, policies and procedures. The severity of the
issues varied by country.

OIAI noted that the Model had not been widely used because some country offices were either
not aware it existed, not interested in using it, or lacked the wherewithal to effectively promote its
use by national authorities.

In their role as trusted advisors of national authorities, promoting this tool was the responsibility
of country offices. Their role also included mediating and leading assessments of national supply
chains, if requested by the Governments. OIAI is of the view that the Supply Division, as the
developer and owner of the Maturity Model, ought to know why it had been underutilized and
should work with regional and country offices to increase its use and maximize the returns on this
investment. The Supply Division’s support to regional and country offices to increase the use of
the Model can include creating awareness of available alternatives, as the Model is not intended
to provide a full analysis of the entire supply system in a country, and its adoption is not suitable
for all country contexts and is not compulsory.
 AGREED ACTION
The Supply Division agrees to create a compendium and repository of tools and guidance, both
internal and external to UNICEF, that would be used by regional and country offices for the
engagement of Government-led supply chain mechanisms and coordination of the assessment,
with partners, of the strengths and weaknesses of national supply systems that are relevant to
the procurement and distribution of supplies meant to improve the health and wellbeing of
children.

Responsible staff members: Supply Chain Manager

Date by which action will be taken: July 2023

2. Integrating nutrition supplies in national supply systems High

The integration of the procurement of essential supplies into national systems can lead to
improvements in Government planning, investment and allocation of budgetary resources to key
areas of their supply chains. When essential supplies are not integrated into national systems,
there is a risk that national Governments may not prioritize, plan and invest domestic and donor
resources in supply chains.

According to the Supply Division’s 2021 RUTF Market Outlook 2, UNICEF procures an estimated
75 to 80 percent of the global demand for RUTF; however, this level of procurement has only
been able to meet the needs of 25 percent of the estimated number of children suffering from
severe wasting globally. The RUTF procured by governments, non-governmental organizations,
and other United Nations entities meet the needs of an additional 5 to 10 per cent of children
suffering from severe wasting globally. Thus, about 65 to 70 per cent of children globally suffering
from severe wasting do not have access to the RUTF they need.

National governments’ obligations for the

procurement of RUTF: To help address the global The Nutrition Strategy 2020-2030
demand for RUTF, UNICEF developed its Nutrition appropriately recognizes domestic
Strategy 2020-2030 and the 2021 publication 3 . funding as the key measure of the
According to the publication, the measure of the availability of RUTF; however,
availability and sustainability of RUTF by 2023 was set UNICEF had not delineated
at the allocation of at least US$20 million in the accountabilities of relevant offices
national budgets of at least 15 countries every year. for engagement with national
The measure of the availability and sustainability of governments to increase domestic
RUTF by 2025 was set at the allocation of at least for the procurement of RUTF.
US$30 million in the national budgets of at least 25
countries every year.

At the time of the audit, UNICEF was unable to confirm whether the targeted national authorities
had allocated the necessary amounts in their budgets for the procurement of RUTF. OIAI did not

2 The report is available at https://www.unicef.org/supply/reports/ready-use-therapeutic-food-rutf-market-

outlook.
3 The proposal to end child wasting is set out in the 2021 UNICEF publication No time to waste: Improving

diets, services and practices for the prevention, early detection and treatment of wasting in early
childhood. Available at https://www.unicef.org/media/103536/file/No-Time-to-Waste.pdf.

11
find sufficient evidence to demonstrate that national authorities were fully aware of the UNICEF
Nutrition Strategy 2020-2030. The responsibilities and accountabilities of relevant UNICEF offices
for monitoring and engaging with national governments in respect of the need for them to allocate
appropriate levels of funds in their budgets for the procurement of essential nutrition commodities,
including RUTF had not been delineated.

Nutrition Match Fund: To incentivize national authorities and promote greater ownership by
authorities for the procurement of RUTF, UNICEF – that is the Programme Group with support of
the Public Partnership Division and EMOPs – with support from two donors, established a
Nutrition Match Fund in 2020. UNICEF is committed to mobilizing resources for the Match Fund
through existing structures such as the Public Partnership Division and Private Fundraising and
Partnerships Division and contributing a dollar to a government for every dollar allocated in the
government’s budget for the procurement of RUTF.

OIAI noted an uptake in demand for matching

While UNICEF had not promised funds. In 2021, five countries applied and
national governments unlimited received the US$3.7 million that had been raised
matching for RUTF, its establishment by the Match Fund. In 2022, six countries
of the Matching Fund means that it applied and received the US$5.5 million that had
must effectively manage the potential been raised by the Match Fund. This trend
reputation risks of being unable to shows that with the right strategy and incentives
address an increase in demand for in place national authorities can increase
RUTF matching fund. domestic funding for nutritional supplies.

However, at the time of the audit there was no

concrete strategy and plan of action with
assigned accountabilities for relevant headquarters divisions to mobilize resources to expand for
the Match Fund. Some relevant headquarter divisions that were expected to be involved in
mobilizing resources for the Match Fund informed OIAI that they were not aware of the Match
Fund. UNICEF was unable to confirm how it managed the potential reputational risks of being
unable to address increasing demands for matching funds. While UNICEF had not promised
unlimited matching for RUTF but only committed to matching funds within resource availability in
the Fund, the establishment of the Match Fund creates expectations that can only be met if the
Organization mobilizes resources to replenish the Fund.

AGREED ACTION
Programme Division agrees to – with support from Public Partnerships Division, Private
Fundraising and Partnerships Division and other relevant headquarter divisions, as necessary
– develop and implement a partnership and resource mobilization strategy and plan with clearly
defined accountabilities of relevant offices and key performance indicators to mobilize funding
for essential nutrition programmes and supplies including RUTF through the Child Nutrition
Fund. It also agrees to clarify and monitor responsibilities and accountabilities for
communication with national governments in respect of the need for the governments to
allocate appropriate levels of funds in their budgets for the procurement of essential nutrition
commodities, including RUTF.

Responsible staff members: Director, Nutrition Section Programme Division

Date by which action will be taken: December 2023

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 3. Management of key supply chain areas

Gaps in supply planning, delivery, distribution and storage risked delaying programme
implementation and/or loss of resources through unnecessary procurement, obsolescence, fraud
and waste.

Programme supplies, together with cash transfers and staff costs, are the three most valuable
programme inputs. Appropriate procedures and controls should be implemented to ensure
procurement of the right products in the right quantity at the right time and price. These procedures
and controls should also ensure efficient and economical use of available resources and strive to
minimize losses that could result from impairment, fraud and waste.

During its recent audits of UNICEF country offices, OIAI had made a number of observations
related to supply planning, delivery, storage, and distribution of supplies. These observations
suggest that the risks of inefficient and uneconomical use of available funds, untimely delivery of
planned programme results, fraud, waste and abuse were not always properly managed. The
observations included poor planning, procurement of supplies that were not needed, delayed
receipt of supplies from vendors, delayed distribution of supplies to end-users, and physical
impairment of supplies available in warehouses. These issues are further discussed below.

Country office supply planning: Country offices prepare annual supply plans as part of the
annual work planning process to determine the material programme inputs that will be needed
and to determine what specific
inputs are not currently available Figure 2: Programme Suppy Inventory
in stock and should be procured
to achieve desired outcomes. 400 375.4
OIAI’s audits of country offices in 350 313.6
2021 noted that the annual supply 300
US$ Milllions

plans of these offices did not 250 213.1 223.5

consider available supplies in 192.4
200 191.5
implementing partners’ 174.6
150
warehouses. This happened
100 57.2 99.6
because the relevant data was
not always available when the 50
0
annual plans were being 0
prepared. For the 25 offices 2019 2020 2021 (Oct)
reviewed, periodic programme Supply Division Country Offices Goods in transit
reviews did not systematically
cover the status and performance
of supply chain areas.

Delivery of supplies: The audit found that there were delays in the delivery of supplies
particularly from the warehouses of UNICEF country offices. According to data in VISION-SAP,
from January 2020 to October, 2021 the value of supplies delivered by suppliers to country office
warehouses and directly to implementing partners was approximately US$ 2.2 billion. Of these,
84 percent (about US$ 1.8 billion) were delivered on or before their planned delivery; the
remaining 16 percent (about US$ 348 million) were delivered past their expected delivery dates.
During the same period, supplies delivered to implementing partners from UNICEF country
offices’ warehouses totaled US$ 1.1 billion, of which 76 percent (about US$ 863 million) were
delivered past their expected delivery dates, as shown in the chart below.

13
These delayed supply deliveries
negatively impacted on timely FIGURE 3: DELIVERY TO IMPLEMENTING
programme implementation, with PARTNERS (US$ MILLIONS)
potential negative consequences for Over 90 days Delivered
after on time,
children. Fifty-five per cent of country planned 275.2, 24%
offices surveyed for this audit delivery…
confirmed that they had experienced
significant delays in programme 31-90 Days
implementation due to delays in after 1-30 Days
delivery of supplies to partners. planned after
delivery… planned
Late delivery happened because of date, 481.2,
various reasons including unrealistic 42%
planned/targeted delivery dates in
procurement documents as well as
inadequate coordination between
programme and supply sections in preparing supply plans.

Storage and distribution: Except for emergency supplies, country offices and implementing
partners are expected to distribute programme supplies to end users in a timely manner. VISION-
SAP showed that as of October 2021, the value of supplies in the warehouses of country offices
had increased by 100 percent in 2020 and 87 percent in 2021, compared to the value of supplies
stored at the end of 2019. This significant increase indicates that supplies were not being
distributed in a timely manner. The value of goods in transit increased from US$99.6 million in
2019 to US$174.6 million in October 2021 (by about 75 per cent). Ultimately, such an increase in
goods in transit will negatively impact storage and distribution challenges in an environment of a
large volume of undistributed supplies. Between 1 January 2020 and 6 October 2021, VISION-
SAP showed that the value of impaired supplies in UNICEF warehouses was US$12.3 million
compared to US$2.8 million at the end of 2019, an increase of over 300 per cent in supplies that
could not be used.

The increase in undistributed supplies can be attributed in part to the challenges resulting from
the COVID-19 pandemic. The Supply Division published a report in September 2021 that
documented negative impacts that COVID-19 had on global logistics and supplies. The
challenges mentioned included offshore shipping, delays in-country logistics, and delays in the
ability of implementing partners to receive supplies. Notwithstanding the effects of the pandemic,
the audit noted country offices had not established adequate supply plans with optimal levels of
supplies required for programming purposes. Other causes for the increase were the lack of
logistical capacity and lack of financial resources among implementing partners to distribute
supplies in a timely manner. About 55 per cent of the 26 country offices surveyed indicated that
they had not explored the possibility of host Governments allocating national resources to the
clearance and distribution of supplies. This meant that UNICEF generally assumed the logistics
costs of moving supplies from ports and warehouses to implementing partners4. An increase of
supply volumes without enhanced capacity within country and regional offices meant that supply
chain weaknesses could only be exacerbated by the impacts of the pandemic.

4 Supplies procured on behalf of governments are consigned to them and their pay for the associated
clearance and distribution costs.

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 RECOMMENDED ACTION
Regional offices should implement appropriate monitoring, oversight and reporting mechanisms
over supplies. The aim is to ensure that country offices which are responsible for procuring and
distributing programme supplies of significant quantities and values and which are associated
with significant supply-related risks (such as risks to efficient and effective distribution):

i. Consistently develop reliable supply plans that are based on, among other factors:
verifiable input and feedback from stakeholders (e.g., implementing civil society
partners, Government partners and beneficiaries), verifiable inventory levels and which
take into account the distribution capacities of the country offices and their implementing
partners.

ii. Consistently deliver supplies to implementing partners in a timely manner, in accordance

with duly approved distribution plans. Implementing partners of the country offices should
consistently deliver supplies to intended beneficiaries in a timely manner and in
accordance with agreed workplans.

iii. Develop and implement strategies to manage the large volume of supplies in the supply
chain resulting from increases in procurement and challenges arising from the COVID-
19 pandemic.

4. Monitoring UNICEF supply chain areas Medium

Gaps in end-use monitoring and evaluation risked the procurement and distribution of programme
supplies that were not necessary to achieve required results.

As part of its 2018-2021 Office Management Plan, the Supply Division developed a supply
monitoring strategy with the aim of facilitating the end-to-end flow of data through all supply chain
segments to enable the generation of evidence and measurement of performance. This would
allow UNICEF and partners to make more informed decisions and quickly identify and correct
issues, promoting continuous improvement. The intent of the strategy was that by 2021 the supply
chains at UNICEF and partner levels would be effectively monitored.

This vision may not be realised. On the basis of country office audits and documentation shared
by country offices, the audit found gaps in end-use monitoring and in the evaluation of supply
chains. These gaps pose the risk that correct data might not be generated from monitoring and
evaluation activities and thus the flow of information needed to prioritize action and improve the
function of supply chains might not advance appropriately.

End-use monitoring (EUM): The audit team noted that field monitoring reports prepared by
country office staff did not include information such as the quantities of supplies stored by
implementing partners, the condition in which supplies were stored, or the quality of supply
distribution records maintained by partners. The reports also did not have information regarding
whether beneficiaries had received supplies. Where monitoring activities resulted in key
recommendations, there was not systematic follow-up on the implementation of corrective
actions. This creates a risk that gaps noted during monitoring activities will not be adequately
managed. The audit concluded that due to gaps in EUM, there are risks that country offices could

15
procure and distribute programme supplies that are not necessary, not useful for achieving
required results, are not received in time or are lost.

These gaps in field monitoring occurred because the supply monitoring framework was not
sufficiently robust. Unlike the framework for the Harmonized Approach to Cash Transfer (HACT)
framework, which offices are required to implement, the question of whether to use supply
technical guides has generally been left to the discretion of individual country office teams, which
determine the scope of work and reporting processes. As a result, there has been inconsistency
in the substance and quality of monitoring activities.

Assessing appropriateness and effectiveness of supply inputs: The audit found that 36 per
cent of country offices surveyed did not regularly assess the appropriateness and effectiveness
of programme supplies as a component of their field visits. While the remaining 64 per cent of
offices indicated that they assessed the appropriateness of supplies as part of their field visits,
reports shared with the audit team did not support this assertion.

The audit also noted that the usefulness of supplies was not systematically evaluated. Of the 27
country offices surveyed, 50 per cent said that they had not conducted evaluations focusing on
supply management. Furthermore, a review of 10 situation analyses 5 completed by country
offices found that they did not explore in detail the status of supply chains and their impacts on
planned programme results when developing country programmes. Periodic evaluations and
considerations of supply issues when developing situation analyses were opportunities for country
offices to engage and strategize, together with regional offices, national Governments and
partners, on strengthening supply chain segments.

The Supply Division informed OIAI that together with the Division of Data, Analytics, Planning and
Monitoring, and the Information and Communication Technology Division it was participating in a
cross-divisional project. The goal of the project was to enable the visibility of supplies in the
possession of and delivered by implementing partners. This project was to be completed in the
third quarter of 2022. As the project had not yet been completed and implemented, it was not
considered by this audit.

RECOMMENDED ACTION
Regional offices should:
i. Implement appropriate monitoring, reporting and oversight systems, in line with current
organizational initiatives, to obtain reliable assurances that programme supplies reach
the last mile in respect of country offices that routinely procure and distribute significant
quantities and values of programme supplies and are associated with significance
supplies-related risks.

ii. Encourage and support country offices that are accountable for national supply system
strengthening to get involved in Government-led evaluations and reviews of the supply
systems.

5The situation analysis is an assessment and analysis of critical issues affecting the exercise of children's
and women's rights in the country. It offers important inputs to national development strategies and
serves as a resource to inform UNICEF country programme documents.

16
 5. Staffing the supply function Medium

The lack of adequate numbers of staff with the relevant skills poses the risk that actions
undertaken by UNICEF to strengthen national supply chains may not be effective and sustainable.

The audit found that country offices and regional offices did not have appropriate staff capacity
and structures to effectively manage and oversee critical
aspects of supply chain system strengthening, including
Staff focused their efforts
activities aimed at strengthening Government supply chains.
on internal UNICEF supply
There was thus a risk that UNICEF actions to strengthen
chain functions not on
national supply chains would not be effective and sustainable
National Governments
due to the lack of staff capacity to support such areas as
system strengthening
planning and forecasting, storage distribution and monitoring.

According to the Supply Division, about 1,000 staff work in

the supply function across 97 countries and 173 offices. They make up about 6 per cent of total
UNICEF staff. Of this number, 472 are based in the Supply Division office in Copenhagen; the
rest are based across 172 offices worldwide. One regional office indicated that it had only one
staff member dedicated to supply systems strengthening while another informed OIAI that its two
supply posts were inadequate to cover a vast region with weak national Government systems to
manage supplies.

Strengthening supply chains is an accountability of the supply function within UNICEF country
offices. However, country and regional offices informed OIAI that because their supply functions
were understaffed, the relevant staff members were mostly dedicated to the day-to-day
management of supplies with little time for systems strengthening work. Furthermore, supply staff
were hired using generic job descriptions that focused on internal UNICEF supply functions rather
than on strategic national supply systems strengthening work. Staff at regional and country offices
further indicated that UNICEF should designate the supply function as a core function and support
allocation of dedicated staff resources accordingly.

The Supply Division has recruited staff to advocate, train and transfer technical skills to support
development work at country and regional office levels. However, allocation of staff has normally
been linked to the availability of funding (often from the Procurement Services). This meant that
staff resources may not be available to support supply chain strengthening across programme
areas or in countries served by a region.

In its capacity as corporate leader for supply system strengthening, the Supply Division could
create standards and/or guidance that could be used by regional and country offices in
determining workforce requirements, including skills and the number of positions needed to focus
on supply. Once these standards and guidance are developed, country and regional offices can
use them during their regular processes such as office management planning and country
programme management planning, technical reviews and programme budget reviews to assess
their requirements and create necessary staff positions. This supply workforce would then receive
training from the Supply Division and hence increase the likelihood that UNICF will have a
meaningful impact on the supply systems of the countries where it operates.

While acknowledging that discussions about supply and logistics standards occurred during the
most recent programme review, the Supply Division stated that it was not responsible for
developing standards and guidance for the determination of skills and number of staff that a

17
country and regional office should have. Instead, the Supply Division suggested that regional
offices, in consultation with the Supply Division and other headquarters divisions as needed, carry
out a supply and logistics analysis in respect of their country offices to identify gaps and ensure
equitable allocation of resources, including posts.

AGREED ACTION
The Supply Division agrees to work with regional offices and other relevant headquarter offices
so that regional offices can carry out a typology analysis, focusing on country offices, to identify
supply and logistics staffing gaps and ensure equitable allocation of resources, as needed for
the regular planning and budgeting processes of country and regional offices.

Responsible staff members: Chief of Strategic Planning and Knowledge Management Center,
Supply Division
Date by which action will be taken: December 2023

RECOMMENDED ACTION
Regional offices should identify and implement appropriate measures to strengthen their supply
functions as well as the supply functions of country offices that routinely procure and distribute
significant quantities and values of programme supplies. Such measures may include, amongst
others, establishing core supply staff positions based on the country and/or regional context.

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APPENDIX
Definitions of Audit Observation Ratings

To assist management in prioritizing the actions arising from the audit, OIAI ascribes a rating to
each audit observation based on the potential consequence or residual risks to the audited entity,
area, activity or process, or to UNICEF as a whole. Individual observations are rated as follows:

The observation concerns a potential opportunity for improvement in

the assessed governance, risk management or control processes.
Low Low-priority observations are reported to management during the
audit but are not included in the audit report. Action in response to
the observation is desirable.
The observation relates to a weakness or deficiency in the assessed
governance, risk management or control processes that requires
Medium
resolution within a reasonable period of time to avoid adverse
consequences for the audited entity, area, activity or process.
The observation concerns a fundamental weakness or deficiency in
the assessed governance, risk management or control processes
High that requires prompt/immediate resolution to avoid severe/major
adverse consequences for the audited entity, area, activity or
process, or for UNICEF as a whole.

Definitions of Overall Audit Conclusions

The above ratings of audit observations are then used to support an overall audit conclusion for
the area under review, as follows:

The assessed governance, risk management or control processes

Satisfactory
were adequate and functioning well.
The assessed governance, risk management or control processes
Partially
were generally adequate and functioning but needed
Satisfactory,
improvement. The weaknesses or deficiencies identified were
Improvement
unlikely to have a materially negative impact on the performance
Needed
of the audited entity, area, activity or process.
Partially
The assessed governance, risk management or control processes
Satisfactory,
needed major improvement. The weaknesses or deficiencies
Major
identified could have a materially negative impact on the
Improvement
performance of the audited entity, area, activity or process.
Needed
The assessed governance, risk management or control processes
were not adequately established or not functioning well. The
Unsatisfactory weaknesses or deficiencies identified could have a severely
negative impact on the performance of the audited entity, area,
activity or process.
Office of Internal Audit and Investigations

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New York, NY 10017
www.unicef.org/auditandinvestigation