DPR KOREA: BAN KI-MOON SAYS AUDIT FINDS NO LARGE-SCALE DIVERSION OF FUNDS

DPR KOREA: BAN KI-MOON SAYS AUDIT FINDS NO LARGE-SCALE DIVERSION OF FUNDS
New York, Jun 4 2007 9:00AM
An external audit of the United Nations' activities in the Democratic People's Republic of Korea (DPRK) has found there has been no large-scale or systematic diversion of UN funds provided by the world body's agencies to help in humanitarian relief efforts, Secretary-General Ban Ki-moon said today.

In a <"http://www.un.org/News/Press/docs//2007/sgsm11021.doc.htm">statement released by his spokesperson, Mr. Ban said the report by the independent UN Board of Auditors "does point to some of the difficulties" that UN agencies have had in operating in the DPRK.

"On independence of staff hiring, foreign currency transactions and access to local projects, the report identifies practices not in keeping with how the UN operates elsewhere in the world," the statement said, adding however that the allegations of large-scale diversion of funds by the Pyongyang Government were not confirmed.

The Board's report has been sent to Mr. Ban – who requested such a review after allegations of wrongdoing emerged in January – and to the Advisory Committee on Administrative and Budgetary Questions (ACABQ), a UN budget watchdog.

The statement from Mr. Ban's spokesperson stressed that the Secretary-General expects the agencies involved – the UN Development Programme (UNDP), the UN Children's Fund (UNICEF), the UN Population Fund (UNFPA) and the UN Office for Projects Services (UNOPS) – "to act upon the findings in the audit as quickly and as transparently as possible."

He also believed several areas require follow-up in a subsequent audit phase, and he plans to write to the Chairman of the ACABQ to ask that the committee consider requesting the Board of Auditors continue its work, including by visiting the DPRK.

This audit was triggered by press reports alleging that UNDP's own internal audits raised concerns about payments being channelled improperly to the Government of the DPRK, including to its nuclear programme.

After the issue came to light, Mr. Ban promised an external, system-wide probe of UN activities in the field, calling first for a review of all UN activities, ranging from staff hiring to hard currency, in the DPRK from 1998 to the present.

"Today's report represents the first results of this ongoing effort" to systematically probe the world body's activities in the field, the spokesperson's statement said.

Also responding today, UNDP said that in spite of the challenging conditions posed by the DPRK, the agency did not violate its own rules or regulations.

"Overall, we believe that the audit report confirms what we have said all along, namely that UNDP had a relatively small programme in DPRK and certainly much smaller than the huge figures that have been circulating," with a budget of only $2 million to $3 million annually as opposed to the hundreds of millions that have been reported, the agency's Director of Communications, David Morrison, told journalists in New York.

He said that over the past decade, UNDP funds have added up to less than 2 per cent of all development assistance that has gone into DPRK and only approximately 0.1 per cent of foreign currency inflows into the country.

Mr. Morrison also stressed that any international operation in the DPRK involves payment either in hard currency or in local currency. UN agencies, international non-governmental organizations (NGOs), foreign diplomatic missions and tourists must pay in either hard currency or the DPRK won, in which case hard currency must be converted at a bank in the country, with currency entering the country either way.

Although the audit report contained findings suggesting that UDNP had made certain payments directly in hard currency instead of converting it at the local bank and using DPRK currency, Mr. Morrison pointed out that there are no restrictions on utilization of foreign money in the agency's financial rules and regulations.

Another topic in the Board's purview was the hiring of Pyongyang Government employees on secondment from national ministries as local staff, which, in the DPRK, has "always been of an exceptional nature" and not in strict adherence with its policies in other countries, Mr. Morrison said.

But these hiring practices have been in use for the almost three decades the UNDP has been operational in the DPRK and thus the agency's board was well aware of it. Other UN agencies, international NGOs and foreign diplomatic missions in the DPRK employed the same hiring procedures.

Mr. Morrison also underscored how UNDP proactively undertook to reform their hiring and currency practices prior to today's audit report. In January, the agency's Executive Board adopted conditions to be implemented, including ending all hard currency payments and discontinuing the sub-contracting of national staff via Government recruitment as of 1 March.

When the DPRK, which has been subject to Security Council sanctions since October following its proclaimed nuclear test, failed to meet these conditions, UNDP suspended its operations in the country on 2 March.

"We are continuing to review the report and we'll focus in particular on the useful suggestions for where our rules and procedures could be strengthened," Mr. Morrison said, pledging UNDP's continued cooperation with the Board. "This will be especially useful in clarifying the basis for our operations in complex situations like in DPRK."
2007-06-01 00:00:00.000

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