press conference on preliminary audit of United Nations operations

in Democratic People’s Republic of Korea

 

While a newly released audit of United Nations activities in the Democratic People’s Republic of Korea highlighted areas in which United Nations Development Programme’s (UNDP) rules or procedures could be strengthened, it concluded that, contrary to allegations in the press, large-scale funding had not been systematically diverted to Government authorities in that country, a spokesman for the Programme said today.

“Overall, we believe that the audit report confirms what we have said all along, namely that UNDP had a relatively small programme in the DPRK -- certainly much smaller than the huge figures that have been circulating in the press,” UNDP Communications Director David Morrison said in a Headquarters briefing on the agency’s preliminary response to the report of the United Nations Board of Auditors concerning the activities of UNDP, the United Nations Children’s Fund (UNICEF) and the United Nations Population Fund (UNFPA) in the East Asian country.

He said that the report, which had earlier been given to Secretary-General Ban Ki-moon and the Advisory Committee on Administrative and Budgetary Questions (ACABQ), also confirmed that, while the Democratic People’s Republic of Korea was “a hard place to do business”, UNDP did have solid control mechanisms in place, including site visits that enabled it to track expenditures.  “This last point is particularly important as the report says in its opening pages that one of the central purposes of the audit process was ‘to ensure that money expended in DPRK went where it was intended’,” he said, stressing that the agency welcomed the report and would focus in particular on its useful suggestions regarding where rules and procedures could be strengthened.  That would be especially useful in clarifying the basis for UNDP’s operations in complex situations such as those inside the Democratic People’s Republic of Korea.

The Secretary-General ordered an audit of UNDP activities in that country following allegations that millions of dollars might have been diverted to benefit the Government.  The Programme was also accused of violating United Nations rules by hiring staff approved by Government officials to carry out its work, and of paying salaries in hard currency through the Government.  UNDP suspended operations in the country this past March after the Government failed to implement changes stipulated by UNDP’s Executive Board, including that the agency not pay in hard currency, and not hire local staff through Government ministries.

UNDP took very seriously the Secretary-General’s call earlier today to implement the findings of the audit report, Mr. Morrison said, urging correspondents to keep in mind that it had taken action nearly six months ago in the key areas of staffing and currency practices.  Having received the report only yesterday, the agency was continuing to review it and was following normal audit procedures in preparing its formal management response, which would address all the issues raised in more detail.

Recapping allegations that had surfaced some months ago of possible funding diversions, including to the country’s nuclear programme, he said it had been specifically alleged that UNDP was a major source of hard currency for the country and that it had little assurance that its funding was being used for legitimate development purposes.  “In that context, the report contains no suggestion of programme spending by UNDP beyond the $2-$3 million per year level that we have stated all along and nothing on the order of the hundreds of millions of dollars that have been reported in the press,” he said, stressing also that the report showed that UNDP international staff made regular visits to project sites to verify that funding was being used for legitimate development purposes.  “So the report not only confirms the relatively modest size of the UNDP programme, which by the way, over the past 10 years had been less than 2 per cent of all development assistance that has gone into DPRK and approximately 0.1 per cent of all foreign currency inflows, it also shows that, despite some challenging conditions in DPRK, UNDP was able to track its expenditures.”

On local staff hiring, he said the report contained a number of findings on the practice followed by UNDP -- and others -- of contracting personnel via a Government agency.  The status of local personnel in the Democratic People’s Republic of Korea had “always been of an exceptional nature” and, as far as the agency was concerned, the practice had existed for 27 years and the Executive Board had been well aware of it.  The practice was shared by all United Nations agencies, international non-governmental organizations and foreign diplomatic missions in the country, including many current and past members of the Executive Board.

Still, while the practice was not in keeping with how UNDP operated elsewhere around the world, he said no staff regulations had been violated, as the fundamental principle behind the arrangement was that the individuals concerned were not UNDP staff.  When Board members had raised concerns in December, UNDP had re-evaluated the practice and, wishing to uphold the same practices that it implemented elsewhere, informed the authorities that the 27-year-old hiring procedures would be discontinued as of 1 March.  “We informed the Government that as of 1 March all UNDP staff would have to be on UNDP contracts and, as I think you know, this was one of the stipulations that was not implemented by the Government […] and one of the things that led us to suspend our operations there.”

Turning to the foreign currency issue, he said international operations in the Democratic People’s Republic of Korea inevitably led to a flow of hard currency, stressing:  “There’s no way around this.”  United Nations agencies and other organizations, diplomats and even tourists, must either pay directly in hard currency or go to banking authorities and change their monies into local currency.  Either way, the same amount of currency was going to enter the country.

“So the fundamental point is that, while it’s possible to pay in local currency, you have to get it from somewhere, and the only place to do that is the DPRK bank, which means the currency enters the country in any event,” he said.  Regarding the reports’ finding that in specific instances UNDP could have first switched its currency at local banks before making certain payments, the agency’s financial rules and regulations did not restrict the kinds of currencies it could use.

Nonetheless, when Executive Board members had raised the issue last December, UNDP had immediately re-evaluated its policy and told Government authorities that it was changing its currency procedures, he said.  “It was, in fact, the Government’s reluctance to agree to and implement the new arrangements that contributed to our decision to suspend the programme on 2 March this year,” he continued, promising more detailed answers to those and other issues in UNDP’s official management response.

Responding to several questions about the fact that the audit team had not been allowed into the Democratic People’s Republic of Korea, and that much of the information had been provided by Government authorities, Mr. Morrison said UNDP had been able to provide the Board of Auditors with all of the documentation requested, and had made all relevant personnel available for interviews, including staff who had still been in the country at that time.

He added that the report was considered a preliminary one and that the auditors had suggested another phase might be necessary, including a possible visit to the Democratic People’s Republic of Korea, among other things.  At the same time, the authorities had made it clear that, while they had no problem cooperating with UNICEF, UNFPA or the United Nations Office for Project Services (UNOPS) regarding the audit, they did not whish to cooperate with UNDP.  Their rationale was that, if the agency had suspended its activities, the Government “did not see justification for cooperating with an audit”.  As for UNDP’s future in the Democratic People’s Republic of Korea, the fate of its 27-year-old programme there was in the hands of the Executive Board.

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For information media • not an official record