PRESS CONFERENCE BY controller on auditing of United Nations programmes

Auditing of United Nations agencies operating in the Democratic People’s Republic of Korea was an “urgent matter”, and the Secretary-General was determined to pursue questions relating to that country vigorously, Warren Sach, United Nations Assistant Secretary-General and Controller, said during a morning press conference at Headquarters.

Moreover, the Secretary-General would ensure that the process was carried out in a credible manner that satisfied the requirements of legitimacy and the interests of all Member States.  That meant working within financial regulations, which allowed the Board of Auditors to deal with questions requested by the Advisory Committee on Administrative and Budgetary Questions (ACABQ), he said.

The Secretary-General had sent a formal letter to the ACABQ Chairman asking him to put before that Committee the question of review by the Board of Auditors of operations, funds and programmes in the Democratic People’s Republic of Korea.

The Advisory Committee was not in session, he said, but would begin work on 6 February.  Given the urgency of the matter, however, the Committee Chairman was making plans to work by correspondence with Committee members on that issue.  It remained to be seen how they would proceed.

The scope of the work would focus on past and current compliance with financial regulations and accountability frameworks, among other directives, as well as ensure that money expended in the Democratic People’s Republic of Korea went to intended recipients.  He said specific areas to be reviewed would include foreign exchange transactions, staff hiring, access to reviewing local projects and their outputs; and direct payments for national execution projects.  The proposed period would cover 1998 to the present and within a proposed time frame of 90 days.

Taking questions on the Board’s composition and whether it would have access to the country’s Government records to determine whether funds had been used for illicit purposes, Mr. Sach said it remained to be seen what information would be available.  Host Governments were obligated to provide material that justified their records on national execution projects.  It was appropriate to expect access; however, the Board would have to see how matters evolved.

On a perceived discrepancy between statements made by the Secretary-General on 19 and 22 January regarding the scope of auditing, he said the Board was looking at all funds and programmes operating in the Democratic People’s Republic of Korea.

There had not been a change in scope since 19 January; rather, the Board was approaching the Democratic People’s Republic of Korea with a sense of urgency, he continued.  It was not possible to review all United Nations operations funds, specialized agencies and programmes worldwide within 90 days.  Noting it was important to address an urgent question in a focused manner, he said results would inform what would be required of other countries at a later date.

Regarding expanding the scope of auditing outside the Democratic People’s Republic of Korea, he said that matter was under consideration.

Asked whether the Board of Auditors was the same one that had excluded the issue of the Democratic People’s Republic of Korea from its public audit of the United Nations Development Programme (UNDP), he said only the Board could speak to what had been included in its reports.  Generally, there were questions over how much material could be compressed into an individual report.

Any perceived scaling back of the audit’s scope was an incorrect interpretation of the Secretary-General’s statements, he said.  Specific, immediate action regarding the country’s funds and activities for a certain time period in no way precluded other studies in other locations from being conducted.  It was important in looking at those matters to have early results on urgent problems.

Responding to another question, he said the Secretary-General was interested in undertaking similar reviews of like operations in countries with comparable risks.  Doing so would be determined, in part, by how the current audit proceeded.  On possible countries to be examined, he said that would depend on an analysis of standing audit reports for countries with similar problems.  One must bear in mind, however, that resources were limited and must focus on key issues, as risk-based auditing techniques were essential for ensuring payback for dollars spent.

As to when any auditing of other countries’ programmes could take place and whether there were political reasons for reviewing the UNDP programmes in the Democratic People’s Republic of Korea, he said he could not give a particular time frame.  There were 160 offices worldwide for funds and programmes, and data analysis was needed to hone in on areas of concern.  Information on the country was current, and it was important to make progress in that review.

An audit of the operations of the Democratic People’s Republic of Korea should not in any way be considered political, he continued.  General Assembly arrangements for governing an external audit process were deliberately structured to avoid any politicization.  The Secretary-General could not directly ask the Board of Auditors to undertake an audit; a request must go through a filtering process to be reviewed by the ACABQ to ensure legitimate reasons for an audit.  The workplan for the Board of Auditors was determined on the basis of risk analysis, not on political considerations.

On the time period covered by the audit, he said it would cover the period from 1998 until the present, as going back earlier than 1998 could present problems.

Addressing criticism in the Volker Commission report that the Board of Auditors failed to identify any fraud or corruption in the “oil-for-food” programme, he said issues currently before the Board concerned foreign currency transactions, staff hiring, access to local projects and national execution.  He did not see in those words “fraud and corruption”.  It was normal in fraud and corruption processes to first have a good audit report.  It was important to work in a measured way to ensure the audit system was in place.

He said the Volker Commission’s position had not become the position of the General Assembly.

Answering another question, he said the financial regulations of the United Nations provided for the opportunity to bring in outside expertise.  There was, therefore, a possibility to include another Auditor-General or auditors from the private sector.  The audit would not be restricted to the UNDP but also include any and all funds and programmes operating in the area, such as the United Nations Population Fund (UNFPA), World Food Programme (WFP) and the United Nations Children’s Fund (UNICEF).  If any other fund or agency was found to be operating in the country, it would be audited by the Board of Auditors.

Nothing in the request would preclude looking into actions of individuals, he said.  There was also no restriction on the source of funds that would be reviewed, including core contributions and trust funds.  It would be up to the governing body of each organization to determine whether internal audit reports would be made available.  The Assembly had determined that United Nations Secretariat reports, such as those issued by the Office of Internal Oversight Services (OIOS), would be available.

Asked when his office had become aware of some of the concerns, Mr. Sach said he had not been aware of it in the United Nations Secretariat.  The Administrator of the UNDP, like other executive heads of funds and programmes, had an absolute delegation in terms of all financial matters.  They were accountable to their own executive boards.  His office had become aware of the issue when it had been requested to look into it, very recently.

Asked whether he was satisfied that UNDP and other Funds and Programmes were engaging in sufficient oversight, he said, “Oversight is a difficult area in the sense that you are always going to find some things that have slipped through the sieve.”  That issue, however, was different from the question of whether the whole oversight framework was strong enough.  As the matter required some review, the Assembly had before it a proposal to establish an expert committee, the Independent Audit Advisory Committee, to ensure oversight of the auditors.

Asked whether the Security Council sanctions would be taken into account, he said sanctions were a matter for the Council, and auditing was a matter for the Assembly.  There was no connection between the two and the auditing process should go ahead “regardless of the political background”.

To his knowledge, 2001 was the most recent year an audit had been conducted by the Board of Auditors on the issue, he replied to another correspondent.  He had no information on whether the UNDP had done anything since 2001 in that area. As for the costs of the audit, he said the work would be conducted within 90 days.  Some of that work would be done in New York and other work in the Democratic People’s Republic of Korea.  Due to a rebalancing of priorities within the Board of Auditors, the audit could probably be absorbed within current resources.

Addressing another question, Mr. Sach confirmed that there had been a concern about the payment in euros by the UNDP, but that was something the audit report should give.  The scope of the report called for a review of current and past compliance with applicability rules, regulations and accountability frameworks and went on to include the currency issue.  He did not know if the Board of Auditors could comment on the way a country set exchange rates.  The United Nations maintained published operational rates of exchange, and the Board could make reports regarding compliance with those rates.  The privileges of sovereign countries to adjust their currency vis-à-vis foreign exchange was something that one wanted respected in the international community.

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