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Panel on UNDP work in DPR Korea finds no evidence of consistent misuse of funds

Panel on UNDP work in DPR Korea finds no evidence of consistent misuse of funds

Kermal Dervis, UNDP Administrator
An independent review of allegations that United Nations Development Programme (UNDP) resources in the Democratic People's Republic of Korea (DPRK) were diverted to illicit purposes by the Government has found no evidence they were consistently misused or that agency officials knew of such practices.

The external audit, led by the former Hungarian prime minister Miklos Németh and released today on the UNDP website, also said it could verify that most of the funds spent by UNDP in the DPRK in recent years had been used appropriately for its anti-poverty activities.

UNDP Administrator Kemal Dervis told reporters today in New York that his office had received the 353-page report yesterday and would now study its findings carefully to determine what follow-up action needs to be taken by the agency.

“We finally have some closure on the allegations made against UNDP,” he said, describing the review as thorough and exhaustive.

The panel found that UNDP officials were not aware that Pyongyang had made payments from accounts it used in connection with UNDP activities to such entities as the International Finance Trade Joint Co., a Macau-based company to which Pyongyang apparently transferred nearly $3 million.

“UNDP had no means by which to control the extent to which the DPRK commingled other funds from its own resources in its accounts for purposes of making payments beyond the scope of the development programme,” the report noted.

Examining allegations that UNDP paid local staff in cash, which may then have been diverted, the three-member audit panel said the agency had not made direct payments, but instead issued cash-cheques that could be exchanged at a bank for cash because most DPRK nationals did not have bank accounts.

The amount of hard currency payments to national coordinating committees (NCCs) totalled less than $400,000 for the entire review period (1999-2007), the audit said, compared to allegations or estimates of more than $7 million.

The majority of the 106 projects run by UNDP over the eight years under review, “and more importantly the larger, more complex, or higher-risk projects, were managed, monitored and evaluated substantially in accordance with UNDP requirements.”

Some deficiencies in the management of projects were found, but the agency has started improved the areas identified and there was no evidence of specific implementation weaknesses, according to the report.

A sample of the many projects indicated “there is no evidence to substantiate the allegations that projects' resources were consistently mismanaged or diverted for other purposes, or generally unaccounted for.

“It is fair to conclude from the review that the programme resources as a whole were generally managed and accounted for substantially in accordance with UNDP requirements and used for the purposes of the projects.”

But the panel criticized the “clear lack of attentiveness” at UNDP that led to $3,500 in counterfeit United States dollars remaining in its safe in the DPRK from 1996 to 2007.

“At a minimum, warning signs existed that required a more timely and effective response. [However] there is no evidence that anyone acted in bad faith or in a fraudulent or deceptive manner.”

Instead, UNDP officials failed to take follow-up action, despite concerns raised by the UN and the US, that might have resolved the issue.

The panel also found that the claim of Artjon Shkurtaj, a former consultant, that UNDP had retaliated against him for “whistle-blowing” on irregularities in the agency's operations to have no merit, calling Mr. Shkurtaj “an evasive witness” with serious credibility issues.

Apart from Mr. Németh, the panel comprised Chander Mohan Vasudev, a former senior official in the Indian Ministry of Finance, and Mary Ann Wyrsch, a former UN Deputy High Commissioner for Refugees and acting commissioner of the United States Immigration and Naturalization Service.

It was set up last September after an earlier review by the UN's external Board of Auditors failed to end the controversy and new allegations subsequently emerged.

UNDP's Executive Board will discuss the report with the panellists at its meeting in Geneva later this month, while the panel – which interviewed over 70 people and reviewed a large number of documents – issued a press statement saying it has now completed its work.