 RESTRICTED  
  
WT/BFA/W/561  
 
28 June 2021  
(21-5192) Page: 1/22 
Committee on Budget, Finance and Administration  Original: French  
 
 
REPORT OF THE INDEPENDENT EXTERNAL AUDITOR S ON THE AUDIT OF THE  
FINANCIAL STATEMENTS OF THE WORLD TRADE ORGANIZATION (WTO)  
FOR THE YEAR ENDED 31 DECEMBER 2020  
The Report of the Independent External Auditor s on the Audit of the Financial Statements of the 
WTO for 2020  is attached . WT/BFA/W/561  
 
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   WT/BFA/W/561  
 
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EXTERNAL AUDIT OF  
THE WORLD TRADE 
ORGANISATION  
 
AUDIT REPORT  
 ON THE  FINANCIAL STATEMENTS OF THE 
WORLD TRADE ORGANISATION  
FOR THE YEAR ENDED 31 DECEMBER 2020 
(amended on 16/06/2021)  
 
 
 
 
 
 
 
 
 
 
 
 
 
Cour des Comptes Reference: OMC 2021 -2 WT/BFA/W/561  
 
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BLANK PAGE  
 
 
 
 
 
 
 
 
 
 
 
 WT/BFA/W/561  
 
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 TABLE OF  CONTENTS  
 
 
I. OB JECTIVES AND SCOPE OF THE AUDIT  ................................ ........................  4 
II. LIST OF RECOMMENDATIONS  ................................ ................................ .........  6 
III. OBSERVATIONS AND RECOMMENDATIONS  ................................ .................  8 
1. Presentation of the financial statements and compliance with accounting 
standards  ................................ ................................ ................................ ................  8 
2. Analytical review of financial statements for the financial year 2020  ..........  10 
3. Internal control  ................................ ................................ ................................ . 12 
3.1. The general internal control framework  ................................ ......................  12 
3.2. Management information systems  ................................ ...............................  13 
4. Audit Observations  ................................ ................................ ..........................  14 
4.1. Contributions receivable  ................................ ................................ ..............  14 
4.2. Provisions and contingent liabilities  ................................ ...........................  15 
4.3. Pension commitments, after -service health insurance and pension plan 
investments  ................................ ................................ ................................ ..........  16 
4.4. Cash flow and borrowing  ................................ ................................ .............  17 
4.5. Reimbursement of taxes paid by s taff subject to tax in the United States
 ................................ ................................ ................................ ..............................  18 
IV. ACKNOWLEDGEMENTS  ................................ ................................ ................  19 
APPENDIX: UNACCOUNTED AUDIT ADJUSTMENTS (IN THOUSANDS OF 
SWISS FRANCS)  ................................ ................................ ................................ .. 20 WT/BFA/W/561  
 
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I. OBJECTIVES AND SCOPE OF THE AUDIT  
 
1. In accordance with the conditions of our undertaking and our notification letter dated 12 
January 2021, a team of five auditors carried out the final audit mission of the financial 
statements of the World Trade Organisation from 26 April to 14 May 2021, for the financial 
year ended 31 December 20 20. 
2. The audit team had previously carried out an interim audit mission from 2 November to 
13 November 2020. This mission was mainly devoted to:  
- a review of the internal control, prior to the audit of the financial statements for the 
financial year 2020,  
- an analysis of the environment of the financial and accounting management 
information system,  
- a review of the overall balance for the period from 1 January to 30 September 2020.  
3. The audit of the financial statements took place in accordance with the provisions of the 
Organisation's financial regulation (Articles 44 to 46), International Standards on Auditing 
(ISA) and International Standards of Supreme Audit Institutions (ISSAI) on financial auditing.  
4. The purpose of the audit was to determine, wit h reasonable assurance, whether the 
financial statements reliably reflect, in all their significant aspects, the WTO’s financial situation 
as at 31 December 2020 and the results of transactions recorded during the financial year, in 
accordance with the fin ancial information repository available, in this case the international 
accounting standards of the public sector  (IPSAS).  
5. The financial statements for the year ended 31 December 2020 were sent to the external 
Auditor on 23 April 2021. In conclusion of the  audit mission, the Secretariat decided, with the 
agreement of the external Auditor, to make a substantial amendment to these financial 
statements (see 4.2. “Provisions and contingent liabilities”) and consequently produced 
amended financial statements dat ed 16 June 2021 which were subject to additional 
verification.  
6. Due to the health situation and travel and contact restrictions related to the Covid -19 
pandemic, interim and final audit work on the financial statements could not be carried out at 
the headq uarters of the World Trade Organisation and were therefore exclusively carried out 
remotely. Even though the WTO provided computer equipment to auditors to perform this 
remote work in accordance with the Organisation's security rules, these circumstances h ave 
nevertheless made it more difficult to access the resources (data and justifications) required 
to document the statements under review as well as contacts with the persons responsible for 
administrative and financial services. This difficulty had been increased insofar as it was the 
first year of the external auditor’s mandate. However, this did not significantly affect the 
efficiency and scope of the due diligence performed to the point of significantly questioning 
the scope of assurance given by our o pinion. Restoring the possibility of carrying out missions 
on site, carrying out physical checks and having contact in person with the auditees remain 
essential for the following audit campaigns.  
7. Each observation and recommendation were  discussed with the relevant managers. The 
Management received the provisional report from the external Auditor on 3 June 2021 and 
their comments (factual and/or formal) and written responses were, where applicable, fully 
taken into account in this report.WT/BFA/W/561  
 
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 8. In accordance with Article 46 of the Financial Regulation and the terms of our engagement 
letter, the follow -up of the recommendations made previously by the external Auditor is 
reported separately.   
9. The external Auditor issued an unqualified  opinion  on the financial statements for the 
financial year ended 31 December 2020.WT/BFA/W/561  
 
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 II. LIST OF RECOMMENDATIONS  
 
10. The recommendations made are assigned a priority level, decided by the external Auditor, 
which is an integral part of the recommendation.  
• Priority 1:  fundamental point requiring special attention of the governing bodies and 
the immediate action of the general management,  
 
• Priority 2:  point which must be implemented but the implementation may be delayed 
depending on the circumstances,  
 
• Priority 3:  point of improvement of controls, accountability  or management, brought to 
the attention of the general  management.  
 
11. Only priority 1 and 2 recommendations will be mentioned in the annual follow -up report 
submitted to the governing bodies. All recommendations are nevertheless subject to follow -
up during the review of the accounts for the following financial year.   
# Priority  Recommendations  
1 1 During the preparation of the accounts for the financial year 2021, the external 
Auditor recommends strictly applying the IPSAS 1 §21 standard by presenting a 
comparison of the budgeted and actual executed amounts in the financial 
statements submitted for audit, either in the form of a separate additional 
statement, or in the form of a “budget” column in the financial statements.  
2 1 During the preparation of the accounts for the financial year 2021, the external 
Auditor recommends strictly applying the policy provisions of paragraphs 127 and 
128 of the IPSAS 1 standard, in light of the practical recommendations of the 
IFRS,  by setting out in the notes the details useful for understanding the financial 
statements a nd the complete information of the governing bodies combining 
factual explanations and figures.  
3 1 During the preparation of the accounts for the financial year 2021, the external 
Auditor recommends including additional information in the financial state ments 
in the form of a detailed reconciliation of budgetary elements with the net cash 
flows generated by operating, investment and financing activities.  
4 1 Before the end of the current financial year 2021, the external Auditor 
recommends finalising the “WTO Secretariat Internal Control Framework”: (i) by 
supplementing it with operational elements to ensure its control and efficiency 
(identification of key process managers, their responsi bilities, their accountability 
conditions, etc.); (ii) by establishing an appropriate system for the annual 
evaluation to support the letter of representation relating to the internal control 
produced by the general management.  WT/BFA/W/561  
 
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12. In certain cases, subject to the terms and conditions of application to be defined or refined, 
the Secretariat has declared that it agrees, in substance, with the recommendations made.  
 
 
 5 2 The external Auditor recommends implementing a business continuity plan aimed 
at operational availability of the procedures and actions of the business divisions 
in the event of a crisis directly or indirectly affecting IT resources, and provide for 
regular formalised tests to ensure its validity and effectiveness over time.  
6 2 The external Auditor recommends establishing a formal segregation of duties 
matrix to ensure (i) that the profiles defined during the implementation of Oracle 
EBS integrated management software comply with the principles of segregation 
of duties; (ii) reviewing this matrix annually; (iii) conducting, on this basis, an 
exhaustive qualitative review of user accounts in order to ensure compliance with 
this matrix; (iv)  identifying non -compliant profiles and take the necessary 
corrective measures.  
7 2 The external Auditor recommends: (i) formalising the change management 
procedure on Oracle EBS integrated management software  and implementing a 
process to ensure that all  changes put into production have been tested and 
validated, (ii) restricting authorised access to the development and production 
environment in the new formalised policy, (iii) at least, in the event that this 
segregation of duties is found to be unachiev able for operational reasons, carrying 
out a hierarchical review of ex -post validation of changes at least on a quarterly 
basis.  
8 2 The external Auditor recommends implementing and documenting a 
comprehensive actuarial model for assessing the provisioni ng of future 
compensation costs for staff invalidity cases.  
9 2 The external Auditor recommends : (i) formalising the validation of data, 
assumptions used and methodology used by the actuary for the calculation of the 
pension plan and health insurance commitments, and (ii) conducting sensitivity 
analyses for all critical assumptions considered (discount rate, in particular).  
10 1 The external Auditor recommends capitalising the receivables claimed by the 
WTO due to the reimbursements it makes  to the staff subject to income tax in the 
United States.  WT/BFA/W/561  
 
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 III. OBSERVATIONS AND RECOMMENDATIONS  
1. Presentation of the financial statements and compliance with accounting 
standards  
13. Once the Organisation has officially adopted the IPSAS accounting specification, all the 
standards of this specification must be applied accurately and any deviation from any  of them 
must be set out in the notes to the financial statements (Article 32 of the Financial 
Regulations). In order to guarantee the accuracy and legibility of the financial statements, they 
must also justify the deviation adopted, in accordance with the  provisions of the Conceptual 
Framework of the IPSAS Specification relating to the qualitative characteristics of the financial 
reporting.  
14.  The IPSAS 1 standard prescribes the general method of presenting the financial 
statements. It is meant to ensure co mparability of the statements produced both with the 
entity’s financial statements for previous years and the financial statements of other similar 
public entities.  
15. Paragraph 21 of this standard provides in particular that when the entity makes its 
approv ed budget public, the complete set of financial statements must include a comparison 
of the budgeted amounts and actual amounts, either in the form of a separate additional 
financial statement, or in the form of a “budget” column in the financial statement s. The IPSAS 
24 §14(c) allows this information to be provided in a document produced at the same time as 
the financial statements provided that the notes to the financial statements clearly refer to this 
document.  
16. The external Auditor notes that this stand ard obligation is not respected in the financial 
statements that the WTO submits to its governing bodies. The information appears in the 
financial report presented by the Director General to the Committee on Budget, Finance and 
Administration (CBFA) in an aggregated form and sometimes only as narrative and the draft 
whereof has been sent to the external Auditor. But to the extent that this document, finalised 
after the closing of the accounts, is not formally and substantially attached to the financial 
statements due to a lack of reference in the notes appended as provided by the IPSAS 24 
standard, it escapes the external Auditor's due diligence and is therefore not covered by the 
opinion and the assurance that they issue on the accounts.  
 
Recommendation No. 1 (priority 1). During the preparation of the accounts for the 
financial year 2021, the external  Auditor recommends strictly applying the IPSAS 1 §21 
standard by presenting a comparison of the budgeted and actual executed amounts in 
the financial statements submitted for audit, either in the form of a separate additional 
statement inseparable from the financial statements, or in the form of a “budget” 
column in the financial statements . WT/BFA/W/561  
 
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 17. One of the basic principles of the IPSAS1 standard is that general purpose financial 
statements (GPFSs) must not only have intrinsic qualities that make them useful for their users 
to make decisions, but, above all, and for this purpose, they must be understandable and 
comprehensive. Pa ragraph 127 of this standard specifies in particular that the notes attached 
to the financial statements, which are an integral part thereof and are also subject to the audit, 
must provide additional information necessary and useful for understanding the d ata or all 
data presented in the set of financial statements submitted for approval of the governing 
bodies (statement of financial position, financial performance report, statement of changes in 
net assets/net position or cash flow statement, budget imple mentation report, compliance note 
for the IPSAS conceptual framework, etc.). Furthermore, by virtue of § 128 of the IPSAS 24 
standard, these notes must also, to the extent possible, be systematically organised in relation 
to each of the items of the financ ial statement.  
18. The external Auditor notes that the financial statements submitted do not provide details 
of the permanent or temporary staff costs, whereas this information was included in the 
financial statements of the previous year (note 19). Given the fact that these two types of 
expenses represent a very significant proportion of the Organisation's total operating 
expenses, they call for clear and complete information from the governing bodies.  
19. Furthermore, note 7 relating to tangible fixed a ssets only sets out the conditions of use of 
the William Rappard Centre and its annexes in narrative form, and does not provide any 
quantified details on the valuation of the Centre’s right to use or other facilities made available 
by the Canton of Geneva.  Conversely, note 8 relating to intangible fixed assets presents global 
quantified information but no explanatory elements thereof. However, there was a significant 
increase in this item in 2020, with intangible assets rising by CHF 0.6 million to reach CH F 2.1 
million as of 31 December 2020 due to the acquisition of new software relating to  payroll and 
human resources .  
20. The external Auditor considers that the presence of such information in the Financial 
Performance Report, in a variable degree of detail, is not sufficient to meet the requirement of 
the IPSAS1 standard if, again in this area, an explicit reference to this document is not included 
in the notes appended to the financial statements and if this document does not have the same 
publicity as the f inancial statements themselves. With regard to the level of detail of the 
information to be provided, the policies are set out in the IFRS standard “ Practice Statement 
(2) - Making materiality judgments ” which the Secretariat must apply, under its responsi bility 
and the control of the external Auditor, in consideration of the intended objective, which is to 
perfect the information of users of the financial statements.  
 
Recommendation No. 2 (priority 1). During the preparation of the accounts for the 
financial year 2021, the external  Auditor recommends strictly applying the main  
provisions of paragraphs 127 and 128 of the IPSAS 1 standard , in light of the practical 
recommendations of the IFRS standards,  by setting out details useful to the  
understandin g of the financial statements and the complete information of the 
governing bodies and users, combining factual explanations and figures  in the notes 
appended . WT/BFA/W/561  
 
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 21. The IPSAS 24 standard requires that the financial statements of entities, which are 
required or decide to make their approved budget(s) public and for which they are therefore 
held publicly liable, to include a comparison of the amounts recorded in the budget and the 
actual amounts resulting from its budget implementat ion. The standard also requires an 
explanation of the reasons for the significant differences between the amounts recorded in the 
budget and the actual amounts.  
22. Paragraph §47 of this standard provides that when the financial statements and budget 
are not p repared on a comparable basis, the actual amounts presented on a basis comparable 
to that of the budget must be reconciled with the actual amounts presented in the financial 
statements, by identifying separately all the differences relating to the basis, i n the choice of 
time and entity: if a method other than the accrual method is adopted with respect to the 
budget, the net cash flows generated by the operating, investment and financing activities. 
The reconciliation must be indicated in the statement of c omparison of the amounts recorded 
in the budget and the actual amounts or in the notes attached to the financial statements.  
23. Paragraph §51 of this standard specifies that for entities using the cash method (or a 
modified cash method or a modified accrual m ethod) for presenting the approved budget and 
the accrual method for their financial statements, the main totals presented in the statement 
of comparison of the amounts recorded in the budget and the actual amounts will be compared 
to the net cash flows ge nerated by the investment activities, and the net cash flows generated 
by the financing activities as presented in the cash flow table prepared in accordance with 
standard IPSAS 2 (“ Cash flow statement ”). 
24. Compliance with the provisions of this standard is fundamental in that it “ensures that 
public sector entities fulfil their accountability obligations and improve the transparency of their 
financial statements by demonstrating compliance with the approved budget(s) for which they 
are held publicly responsi ble and, when the budget(s) and financial statements are prepared 
on the same basis, by demonstrating their financial performance in achieving budgeted 
results”  (IPSAS 24 §1 “objectives”).  
25. The external Auditor notes that in note 19 to its financial stateme nts, the Organisation 
presents a detailed reconciliation of the budget surplus for the year with the financial result 
(IPSAS) but does not present the reconciliation with the net cash flows generated by the 
operating, investment and financing activities.  
 
Recommendation No. 3 (priority 1). During the preparation of the accounts for the 
financial year 2021, t he external Auditor recommends including  additional information 
in the financial statements in the form of a detailed reconciliation of budgetary elements 
with the net cash flows generated by operating, investment and financing activities . 
 
2. Analytical review of financial statements for the finan cial year 2020  
26. For the tenth consecutive year, the Organisation’s budget was established with a zero 
growth rate. Also, the contributions assessed on member countries remain unchanged at CHF 
195.5 million.WT/BFA/W/561  
 
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 27. The Organisation's total revenues are nevertheless down by CHF 4.7 million and amount 
to CHF 218 million. This decrease was mainly due to the CHF 6.1 million decrease in voluntary 
contributions to special apportionment funds amounting to CHF 15.8 million for t he financial 
year 2020.  
28. Other revenues amount to CHF 6 million and are relatively stable compared to the 
previous year (CHF +1.1 million). They consist of:  
- twice the previous  ITC (International Trade Centre) surpluses, amounting to CHF 0.9 
million for 2014 -2015 and CHF 0.9 million for 2016 -2017, i.e. a total of CHF 1.8 million. 
It should be noted that the financial surplus of this joint entity of the  United Nations 
Conference on Trade and Development (UNCTAD)1 and the WTO for financial years 
2014 -2015 and 2016 -2017 was thus collected three to five years after the end of the 
financial years concerned, without having been previously recorded in the receivables,  
- a recovery of CHF 1.9 million corresponding to the remaining contribution of CHF 2 
million made  in the previous year for the benefit of the  Appellate Body Operating Fund . 
This exceptional operation is the result of the removal of WTO’s body  from 2020 
onward,  
- cancellation of a provision for coverage of disability cases of up to CHF 1.5 million.  
29. There is a slight decrease of CHF 1.9 million in staff costs at  
CHF 130.1 million as a high number of positions remained vacant in 2020. At the same time, 
temporary support costs (CHF 24.2 million) also declined by CHF 1.4 million due in particular 
to the sav ings of CHF 0.9 million made on translation and interpreting activities following 
reduced activity of the Appellate Body  in 2020.  
30. There is a significant increase of CHF 10.5 million in pension fund and after service health 
insurance (ASHI2) expenses at CH F  
48.6 million for 2020. This increase results mainly from the adoption of new valuation 
assumptions (see paragraphs 61 and 62).   
31. Purchases of supplies and general expenses and operating partners’ expenses remain 
stable at CHF 16.0 million (CHF +0.6 mill ion) and CHF 3.7 million  
(CHF -0.2 million) respectively. There is a fall in travel and mission expenses from CHF 14.5 
million in 2019 to CHF 2.5 million in 2020 in clear correlation with the travel restrictions 
imposed for management of the health crisis . 
32. The Organisation's annual contribution to the International Trade Centre remains 
unchanged at CHF 18.2 million.  
33. The cost of depreciation of the fixed assets remains stable at CHF 5.3 million (CHF -0.2 
million compared to the previous year).  
34. The Organisation thus notes a deficit of CHF 37.1 million for the financial year 2020, up 
by CHF 5.38 million compared to the previous financial year (+ 16.7%). This deficit, associated 
with an actuarial loss of CHF 31.4 million on the pens ion fund and ASHI commitments, leads 
to an increase in net liabilities from CHF 767.6 million as at 31 December 2019 to CHF 836 
million as at31 December 2020 (+8.9%). 
 
1 United Nations Conference on Trade and Development.  
2 After Service Health Insurance.  WT/BFA/W/561  
 
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 35. The net liabilities of the Organisation largely results from the difference between the 
commitments of the Pension Fund and after -service health insurance, which amount to a total 
of CHF 1,674.7, and only the partial coverage of these commitments by the financial assets 
of the pension plan valued at CHF 664.5 million.  
36. The impact of the Organ isation's operating deficit on cash flow remains limited to  
CHF 1.2 million, since the expenses related to pensions and health insurance after cessation 
of service had no impact on cash flow, which finally amounts to CHF 145.9 million as at 31 
December 20 20. 
3. Internal control  
37. The external Auditor more specifically focused their attention on the general framework 
of the internal control of the Organisation and on the management information systems. 
Furthermore, a specific examination was conducted on the fra ud detection and prevention 
systems, as well as on the identification and monitoring of related parties, and it did not result 
in any findings.  
3.1. The general internal control framework  
38. The “WTO Secretariat’s Internal Control Framework” was the subject of initial reflection 
and provisional drafting in 2017 under the joint management of the Office of Internal Oversight 
(OIO) and the AGSD (Administration and General Service) division. Since  then, and while the 
OIO's annual report indicated in June 2018 that the document was being reviewed by the 
Director General, no final decision was made on the finalisation of the various elements 
contained by it or, a fortiori, on its approval by the mana gement and its subsequent 
implementation. The document produced in April 2019 remains in the draft state, and therefore 
no formal internal control framework exists at the WTO.  
39. Not only is a formal internal control framework missing, but it is noted that t he  
17 structuring principles of the COSO (Committee of Sponsoring Organisations) are not 
systematically implemented, even in practice, within the Organisation. The result is a weak 
formal structuring of the system: i) key process -owners are not clearly id entified, ii) the 
responsibilities of such managers “de facto” when they exist are not clearly established, iii) the 
directors within the Secretariat are not explicitly required to report on their control and actions 
in matters of internal control, iv) the  factors and performance criteria are not identified.  
40. The consistency of the ICS (Internal control system)/ERM (Enterprise risk management) 
eco-system is weakened. The external Auditor also notes that the annual report on risk 
management has not been produced since the end of 2018 and sees an echo therein to the 
uncertainties that affect the adoption of a formal framework since that date.  
41. Within the framework of the due diligence conducted and with the exception duly set out 
in this report, the external Auditor has not observed situations  where the weakness of the 
structuring and internal control processes has had an impact on the quality of the accounts 
produced and the nature of his opinion. This cannot be anticipated for the future. The set -up 
and implementation of an internal control f ramework as well as the conditions for its regular 
assessment by the internal audit structure should be one of the priorities of the new 
management team. In all organisations, regardless of their size and missions, an internal 
control framework is essentia l: a sustained tone at the highest level ( tone at the top ) and 
resolute decision -making in this area are the essential factors of quality and efficiency.WT/BFA/W/561  
 
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 Recommendation No. 4 (priority 1). Before the end of the current financial year 2021, 
the external Aud itor recommends finalising the “Internal control framework of the WTO 
Secretariat”: (i ) by supplementing it with operational provisions to ensure its control 
and efficiency (identification of key process managers, their responsibilities, the 
conditions of their liability, etc.), (ii) by establishing an appropriate system for the 
annual evaluation of its capacity to support the letter of affirmation relating to the 
internal control produced by the general management.  
 
3.2. Management information systems  
42. The external Auditor notes the efforts made by the Organisation to respond to the 
governance issues of the information system (IS), in particular concerning the IS control, 
transmission and knowledge maintenance systems. The most recent update of the IT ri sk 
analysis carried out by the Organisation dates back to 2018. As IT risks evolve rapidly, it is 
necessary to regularly reflect on these risks in order to implement preventive actions to reduce 
them.  
43. The external Auditor has more specifically concentrate d his due diligence on the 
accounting application developed on the basis of Oracle.  
44. Incident management, backup management and database and server management are 
delegated to the UNICC (United Nations International Computing Centre). If the ISAE 3402 
repor t (International Standard on Assurance Engagements No. 3402) for 2020 does not 
identify deficiencies, and if in particular a business recovery plan and a server restart 
procedure are in place to deal with emergency situations (disaster recovery plan), the external 
Auditor notes that these plans are not regularly tested.  
45. It is more alarming to note that no continuity plan is implemented beyond this technical 
plan: such a plan must allow, in conjunction with the “business line” managers, to define the 
action s to be taken, specific to each of these business lines, when their continuity is impacted 
by certain emergency situations, and to designate in the “business line” departments persons 
responsible for their implementation in conjunction with the IT services  department (ITSD). 
For the payroll process, for example, “business line” managers must help specify the minimum 
essential service level, the maximum acceptable downtime (delays in payment in degraded 
mode, management of wage provisions, etc.).  
Recommendat ion No. 5 (priority 2). The external Auditor recommends implementing a 
business continuity plan aimed at  ensuring  the operational availability of the 
procedures and actions of the business divisions in the event of a crisis directly or 
indirectly affecting  IT resources and providing for regular formalised tests to ensure its 
validity and effectiveness over time .  
46. The external Auditor notes that there is no qualitative review of user access to ensure that 
the rights granted to staff are consistent with their duties. Based on a segregation of duties 
matrix, such a review must ensure that no user profile presents risk s or incompatibilities.  
47. Insofar as the Organisation has not formalised the segregation of duties matrix, it is also 
not possible to ensure that when rights are exceptionally open to a predefined profile, they do 
not contravene the pri nciple of segregation of duties.WT/BFA/W/561  
 
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 48. Finally, if the Organisation regularly identifies inactive user accounts, the procedure does 
not, however, allow for reporting accounts that should be deactivated for functional reasons: 
the risk that these accounts are use d for purposes that do not comply with the responsibilities 
entrusted to the holders of such accounts, or even for purposes contrary to the interests of the 
Organisation, is not controlled. Even if the turnover rate of staff remains very low, a regular 
review must be carried out to ensure that the user accounts to be deactivated are actually 
deactivated.  
Recommendation No. 6 (priority 2).  The external Auditor recommends establishing a 
formal matrix of segregation of duties (i)  to ensure that the profiles de fined during the 
implementation of Oracle EBS integrated management software comply with the 
principles of segregation of duties , (ii) review  this matrix annually , (iii) conduct , on this 
basis, an exhaustive qualitative review of user accounts to ensure th e perfect 
application of this matrix , (iv) identify  non-compliant profiles and take the necessary 
corrective measures.  
49. Any change affecting an integrated financial and accounting management software, and 
its production launch, must be governed by a formal procedure specifying the authorisations 
to proceed with it, the steps and rules to follow. Although most of the changes  to the 3Oracle 
EBS integrated management software are primarily patches that do not require specific 
development, the permissions granted to access the system to make changes represent a 
high risk to the extent that inappropriate changes to the productio n environment could be 
implemented without control.  
50. The external Auditor notes that this risk is not actually controlled if the changes put into 
production are not subject to a systematic control of the rights opened to introduce them  
Recommendation No. 7  (priority 2). The external Auditor recommends : (i) formalising 
the change management procedure on Oracle EBS  integrated management software    
and implementing a process to ensure that all changes put into production have been 
tested and validated , (ii) re stricting  authorised access to the development and 
production environment in the new formalised framework , (iii) at least , in the event that 
this segregation of duties is found to be restricted due to organisational reasons, carry 
out a hierarchical review of ex-post  validation of changes at least on a quarterly basis.   
4. Audit Observations  
4.1. Contributions receivable  
51. Receivables from Member and Observer states amounted to CHF 29.4 million in net value 
as of 31 December 2020, a sharp increase of CHF 14.5 million compared to 31 December 
2019. In gross value, i.e. by reinstating the provision of CHF 12.6 m illion for depreciation, 
receivables in the member countries stood at CHF 41.2 million (up CHF 17.0 million) and 
receivables in the observer countries was stable at CHF 0.8 million.
 
3 Enterprise Resource Planning or ERP.  WT/BFA/W/561  
 
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 52. The provision for contributions in  arrears is depreciated to the amount of  CHF 12.6 million 
on the same date (CHF 12 million for receivables on the member states and CHF 0.6 million 
for receivables on observers). It is pointed out that follow -up actions are conducted several 
times a year for Member states in arrears and that the  administrative measures stipulated are 
effectively implemented, without the external Auditor having identified any anomalies in their 
application. Similarly, the rules for provisioning receivables (depreciation of 50% of the unpaid 
balance for balances of  over one year, 75% for balances of over two years and 100% for 
balances of over 3 years, no provision for balances of under one year) are correctly applied.  
53. The external Auditor pointed out that the receivables that are part of staggered payment 
plans should be presented as non -current receivables for the portion  whose payment is 
expected to be beyond twelve months.  
4.2. Provisions and contingent liabilities  
54. Provisions amounted to CHF 8 million as of 31 December 2020, down by CHF 1.6 million 
over the y ear.  
55. Essentially, they concern four declared disability cases for CHF 7.7 million, the financial 
consequences of which to be borne by the WTO are not covered by a specific insurance policy. 
The estimate of future costs incurred by the settlement of existi ng cases of disability has been 
made internally by the Organisation without using an actuarial valuation method, although 
these costs have the characteristics of long -term benefits within the meaning of the standard 
IPSAS 39 paragraph 5c4. The reliability  of the estimate of future economic flows remain 
questionable if the events reflected in the accounts justify the recognition of provisions. At 
least an assessment based on a better documented actuarial model would be necessary, as 
the external Auditor had  already recommended in his audit reports each year since 2018.  
56. A provision of CHF 1.5 million for coverage of potential risks associated with new cases 
of disability, expected but not yet reported was also recorded in the accounts prepared initially. 
This estimate “based on past experience” was based on the assumption that a certain number 
of employees currently absent for long periods due to illness could eventually fall into the 
Organisation’s disability plan.  
57. During the audit, the external Auditor empha sised that a provision may be recognised 
(IPSAS 19) only when: (a) an entity has a current obligation (legal or implied) resulting from a 
past event; (b) it is likely that an outflow of resources representing economic benefits will be 
necessary to settle t he obligation; and (c) the amount of the obligation may be reliably 
estimated. No provision shall be recognised, if these conditions are not met.  
58. In this case, the provision for coverage of hypothetical future disability cases did not  meet 
any of the criteria imposed by the accounting standard, because as long -term sick people had 
not been officially and legally recognised as disabled under the responsibility of the 
Organisation, the latter was unable to document the probability of occ urrence of a risk that 
was extrapolated only qualitatively. 
 
4 IPSAS 39 §5c: “ Employee Benefits include: [...] Other long -term employee benefits, such as the following: 
(i) Long -term paid absences such as long -service leave or sabbatical leave, (ii) Jubilee or other long -service 
benefits, and (iii) Long -term disability benefits.”  WT/BFA/W/561  
 
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16 
 59. Failing to comply with the accounting criteria, the amount in question, if it had been 
maintained in the accounts, would have been included in the unrecorded audit adjustment. 
Given its high, significant amount, the external Auditor would then have been fo rced to 
pronounce a qualification  in their opinion. The Secretariat has agreed to reverse  this 
transaction and the external Auditor has, for its part, agreed to review the financial statements 
amended accordingly, thereby eliminating any grounds for reserv ation.  
Recommendation No. 8 (priority 2). The external Auditor  recommends adopting a 
complete and documented actuarial model for assessing the provisioning of future 
compensation costs for staff invalidity cases .  
 
 
4.3. Pension commitments, after -service heal th insurance and pension plan 
investments   
60. Long -term employee benefits include relocation allowance, severance pay and post -
employment benefits. These are defined benefit plans that include the after -service health 
insurance plan (ASHI) and the pension plan. Employees who retire are eligible for ASHI 
coverage, if they continue to participate in the group health insurance plan after termination of 
service.  
61. The (non -current) staff benefits recorded as liabilities of the financial situation amount t o 
CHF 1,684 million as at 31 December 2020 (compared to CHF 1,573.50 million as at 31 
December 2019). The overall increase in commitments is primarily due to the actuarial 
valuation of staff benefits, as detailed in the following table:  
Table 1: Staff benefits (non -current) (in millions of Swiss francs)  
 Actuarial 
valuation  Internal 
assessment  2020  2019  
Pension Plan      1,379       1,379      1,287  
After -service health insurance         296          296      277      
Removal Indemnity     1               1         1     
Separation Grant    8                8          8    
TOTAL   1,675        9    1,684      1,573    
Source: Statement of financial position and note 13 of the financial statements  
62. The increase in pension plan commitments results from the combination of an actuarial 
loss of CHF 46.1 million, attributable to new financial and economic assumptions, mainly a 
discount rate of 1.68% (compared to 1.83% as at 31 December 2019), an increase in expected 
future remun eration, and a higher number of retirees and beneficiaries in 2020: 384 versus 
366 as at 31 December 2019.  
63. Similarly, the increase of CHF 18.4 million in health insurance commitments (ASHI) as at 
31 December 2020 is the direct consequence of the increase in the number of eligible active 
participants and beneficiaries in 2020 (750 and 602 respectively versus 737  and 590 as at  
31 December 2019), combined with a decrease in the discount rate (see above) and an 
actuarial gain of CHF 4.7 million, attributable, as in case of retirees, to the financial and 
economic assumptions of actuarial valuation.WT/BFA/W/561  
 
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17 
 64. The external Audi tor generally noted that the validation of the data used by the actuary, 
the methodology used by the latter as well as the underlying assumptions used were not 
formalised. They  recall that the pension plan's advisory actuary puts their expertise at the 
service of the Organisation but does not incur any liability in the choices and estimates 
adopted for the preparation of the financial statements, as the signatories of these statements 
remain entirely responsible for them in fine .  
Recommendation No. 9 (prio rity 2). The external Auditor recommends : (i) formalising 
the validation of data, assumptions used and methodology selected by the actuary in 
the context of its evaluation of the pension plan and health insurance commitments , 
and (ii) conducting sensitivity analyses for all critical assumptions considered 
(discount rate, in particular ). 
65. The external Auditor notes that the value of the pension fund's net assets (reported in the 
accounts of the Organisation under the IPSAS standard) is i ncorrect. The amount of CHF 
664.5 million that appears in the statement of the WTO's financial position assumes a value 
at the closing of the financial investment portfolio as established and sent to the actuary in 
February 2021. More specific work carried  out later led the pension plan managers to correct 
the valuation of certain financial assets as at 31 December 2020, with the corrected net assets 
of the pension fund  ultimately  amounting to CHF 665.7 million.  
66. Since this correction has not been reflected  in the Organisation's accounts, the WTO's 
financial investments are therefore undervalued by CHF 1.2 million in its accounts. This 
undervaluation represents only a small percentage in value of the total assets of the Plan, 
however, the amount remains in i tself, for the external Auditor, sufficiently  significant to 
constitute  an “unaccounted audit adjustment ”.    
4.4. Cash flow and borrowing  
67. Cash flow was at CHF 145.9 million as at 31 December 2020, down by CHF 1.5 million 
over the year. No anomaly was identified in the verification of the bank reconciliations of the 
Organisation’s three banks (UBS, Crédit Suisse and PostFinance), or on the balances of 
current accounts and deposit accounts at the time of direct confirmations carried out by the 
external A uditor with these institutions. Anomalies relating to the signatories authorised to 
operate the bank accounts were identified during the use of UBS and PostFinance’s bank 
confirmations; they were corrected in May 2021 during our intervention.  
68. A recommendat ion was made with respect to the bank authorisations during the 
certification of the 2019 financial statements. The Organisation was then invited to comply with 
its payment policy, ensuring that the new Director General does not have an individual 
signatur e on the UBS account but a joint signature. This recommendation has been 
implemented.  
69. The external Auditor notes that the exchange rates applied for the conversion of bank 
accounts in foreign currencies at closing are not the UNORE (U nited Nations Operational 
Rates of Exchange) rates as at 31 December but those of 1 December 2020. The Secretariat 
argues that the practice has been adopted for a long time to close the accounts on the basis 
of the rates as at 1 December and to adjust the accounts at the closing date only if the 
fluctuation of rates during the month of December exceeds 10%. WT/BFA/W/561  
 
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18 
 70. The valuation of assets of this nature is based on the fundamental principle of the best 
estimate. The application of this principle on the closing dat e to accounts denominated in US 
dollars would have led the Organisation to recognise an unrealised exchange loss of CHF 
331,000. This significant accounting difference therefore constitutes an unaccounted 
audit adjustment.  
71. The customary practice adopted fo r the valuation of assets denominated in foreign 
currencies should either be called into question or covered by an explicit decision of the 
governing bodies; it would still be appropriate when, deviating from the principles and 
requirements of the applicab le accounting standards, this deviation is duly justified.  
72. The Organisation's financial debt amounts to CHF 50.4 million as at 31 December 2020, 
down by CHF 1.2 million following the payment of the 2020 annuity for CHF 60 million loan 
taken out in 2012 at  zero rate from Swiss Authorities and depreciable over 50 years.  
4.5. Reimbursement of taxes paid by staff  subject to tax in the United States  
73. By virtue of their status and pursuant to international conventions, WTO staff are normally 
exempt from taxes in their country of origin, for the income they receive from the Organisation. 
Staff subject to income tax in the United States are nevertheless taxed on the salaries and 
emoluments paid to them by the WTO as well as on their other personal income.  
74. In view of the application of provision 106.11 of the Staff Regulations which provides tha t 
“the WTO reimburses officials for taxes paid, when salaries, compensation or bonuses paid 
by the WTO are subject to national income tax” , and in order for this cost to remain neutral for 
the Organisation's finances, the latter entered into a procedural a greement with the 
government of the United States (TRA – Tax reimbursement agreement) in 2000 under which 
the latter pays the WTO, for each staff concerned, an amount equivalent to the tax that this 
staff would have had to pay, if the emoluments paid by th e WTO were their only income.  
75. An old controversy affects this case: the amount of the sums that the U.S. government 
pays to the WTO as compensation for the taxes paid by the staff on the income they derive 
from the Organisation does not meet the same rule s for calculating compensation as that used 
by the WTO to repay its staff. 
76. Complying with case law adopted by the International Labour Organisation Administrative 
Tribunal (ILOAT) in several instances of the same case, the WTO adopted the principle of 
“last income” for calculating the reimbursement of taxes paid to the American tax authorities. 
When the taxpayer has multiple sources of income, this reimbursement affects the income 
drawn from the WTO at a marginal tax rate higher than if it was considered to  be the taxable 
“first income”. Since the ILOAT jurisdiction is recognised by the WTO, the staff of the 
Organisation who consider themselves to be harmed by another method of compensation 
could bring proceedings before this jurisdiction under provisions 11 4.9 (b) and (c) of the Staff 
Regulations,  
77. The method included in the TRA considers the income from the WTO as the taxable “first 
income”. Income from the WTO is therefore taxed by the U.S. tax authorities at a lower 
marginal rate than that used in the calculation made by the WTO to reimburse its staff. At the 
legal level, the American party sticks to the signed agreement, considering rightly that the 
ILOAT’s judgements do not apply to a Member state of an International Organisation even  
though the latter recognises the jurisdiction of this court. This position is founded in law but 
since it opposes irreconcilable legal standards, it blocks any possibility of settlement of the 
case.WT/BFA/W/561  
 
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19 
 78. Ultimately, the Organisation therefore reimburses an staff with several sources of taxable 
income in the United States a sum greater than that returned to it on the basis used by the 
U.S. tax administration for calculating his total tax as taxable. The resulting difference, 
recorded as an expense for the financ ial year, amounted to CHF 226,000 for 2020 (CHF 
302,000 in 2019). The difference between the sums reimbursed by the WTO to its staff since 
2015 and the sums returned to the Organisation by the US Treasury5 would amount to nearly 
3 CHF million.  
79. The controversy is well known to the governing bodies and has been the subject of 
observations and recommendations from external Auditors in the past. The external Auditor is 
not authorised to rule on a conflict of l egal standards between the Organisation and one of its 
Member States. This conflict must be purged either by arbitration to which both parties would 
consent with a view to the confirmation or modification of the TRA currently in force, or by an 
explicit de cision of the General Council finally approving that the Organisation must be 
charged the difference between the reimbursements made to the staff and the refunds from 
the US Government. The Organisation may usefully approach other international 
organisatio ns (particularly the UN system) facing the same calculation problem and who have 
mostly decided to take charge of the amounts not reimbursed by the American tax authorities.  
80. In any event and pending a sustainable solution, the Organisation must reflect in  its 
accounts the position it takes on this case, and in particular its legal interpretation of the 
articulation between the TRA and the case law of the ILOAT. Assured of offsetting a debt 
resulting from this transaction without direct consideration (IPSAS  23 standard), it must 
therefore be fully recognised in the assets of its financial statements.  
81. If the Organisation were to face a repeated refusal by the U.S. tax authorities to modify 
its calculation method, it would be advisable that it requests a form al decision from the Member 
states in order not to indefinitely defer the disputed claims, leaving the difference between the 
tax refunds granted to the staff and the amounts paid by the government of the United States 
in this respect.  
82. As the transactions in question are not significant, this is not likely to change the opinion 
of the external Auditor.  
Recommendation No. 10 (priority 1). The external Auditor recommends fully recording  
the receivables that the WTO  claims due to the reimbursements it makes to  the staff  
subject to income tax in the United States.  
 
IV. ACKNOWLEDGEMENTS  
83. The external Auditor sincerely thanks all the teams of the World Trade Organisation for 
their availability and the quality of information provided during the audit, given that the 
circumstances caused by the health crisis weighed heavily on the conduct of this mission.  
 
End of audit observations.  
 
Source: WTO.  WT/BFA/W/561  
 
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20 
 APPENDIX: Unaccounted audit adjustments (in thousands of Swiss francs)  
 
 
Adjustments  Impact on the statement of financial position  Impact on the 
statement of 
financial 
performance  Current 
assets  Non-
current 
assets  Current 
debts  Non-
current 
debts  Net 
position  
Exchange rate 
differences on cash 
accounts denominated 
in US dollars  (331)      (331)  
Adjustment of the 
current value of the 
pension fund assets   1,251     1,251  
TOTALS  (331)  1,251     920 
Source : Work of the external Auditor.  
 
 
 
__________  