This paper provides an analysis of decisions regarding the governance of UN internal oversight structures focused on Public and Private Bureaucracies Transaction Cost Economics (PPBTCE) perspective (Williamson, 1999). We explore “probity” and “independence” transactions’ attributes through historical narrative case-based research to answer the question – Why did consecutive executive decisions to strengthen the governance of UN internal oversight structures not relieve “probity” hazards? Our analysis shows that at the UN increasing and strengthening the governance of oversight structures, i.e. incentives, did not relieve probity/ethics hazards as predicted in PPBTCE. Executive powers as well as overseers systematically trumpeted the UN Charter, breaching probity/ethics and disregarding the oversight independence prerogative, hence failing to contribute to the “common good” and to protect the UN mission. First application of PPBTCE to internal oversight transactions within an International Organization context testing probity and independence attributes. We find that “independence” outweighs “asset specificity” attribute whenever decisions on the governance of internal oversight arise. As far as sourcing decisions are concerned, the authority of the sovereign and the independence of judiciary as well as quasi-judiciary transactions are not transferable attributes, and thus cannot be transacted along with the actors’ ethics. PPBTCE should be modified to include, e.g. “virtues ethics” behavioral assumption as a transaction costs’ reduction device and explanatory framework for “probity” hazards, abandoning the opportunism behavioral assumption.

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Internal Oversight,Internal Audit,Public and Private Bureaucracies Transaction Cost Economics,Ethics,International Organizations,Public Sector