Chicago Tribune: Improve aid plan's methods, UN told

By Bay Fang Washington Bureau
January 25, 2008

WASHINGTON - A Senate panel warned the UN Development Program on Thursday that Congress could reconsider funding if the program does not change its practices, which opened it up to exploitation by North Korea.

North Korea used its bank account with the program to channel at least $2.7 million out of the country after being labeled by President Bush part of an "axis of evil," according to a bipartisan Senate report released Thursday.

The probe by the Senate Permanent Subcommittee on Investigations began after allegations by the United States of wrongdoing by the UN program in North Korea emerged early last year. The program was terminated in March.

In its report, the subcommittee blamed the UN program, known as UNDP, for inadequate financial controls, which rendered it "vulnerable to manipulation" by the North Korean government. It found that UNDP operations in North Korea did not adhere to standard UN policies and were "undermined by management and operational deficiencies," said Sen. Carl Levin (D-Mich.), the panel's chairman.

Investigators questioned UNDP's practice of hiring staff vetted by Pyongyang and paying their salaries in hard currency directly to the North Korean government. But they stopped short of confirming U.S. allegations that millions of dollars had been systematically transferred through the program to the government, saying they did not have access to the requisite financial records.

The UNDP said in a statement that it was gratified that none of the major allegations of financial wrongdoing had been substantiated by the report.

At the Senate hearing where the report was presented, Washington's UN ambassador, Zalmay Khalilzad, testified that the UNDP, for all its problems, is worth supporting.

"But for them to do what they need to do," he added, "there has to be appropriate oversight and there has to be care-taking that the monies go to the purposes for which they have been dedicated."

Some senators were skeptical.

"If UN agencies like the UNDP can be manipulated by belligerent regimes, Congress must re-examine the terms under which it funds the UN efforts," said Sen. Norm Coleman (R-Minn.), ranking minority member on the subcommittee. "The evidence uncovered by the subcommittee's investigation brings this obligation sharply into focus."

In a surprise development, North Korean officials from their UN mission cooperated with the subcommittee's investigators. In an interview with the investigators, they said that the $2.72 million came from accounts controlled by the Ministry of Foreign Affairs and that the money transfer to various North Korean missions around the world through UNDP accounts was part of an attempt to "move as much money out of North Korea as possible prior to the imposition of sanctions that it believed were imminent following the 2002 State of the Union address," the report said. In that speech Bush identified North Korea as part of an "axis of evil."

The UNDP said it had no knowledge of these transfers and that no UNDP funds were involved.

The U.S. contributed $247 million to the UNDP in 2005, according to the report.