VZCZCXYZ0000
OO RUEHWEB

DE RUCNDT #0055/01 0241806
ZNR UUUUU ZZH
O 241806Z JAN 07
FM USMISSION USUN NEW YORK
TO RUEHC/SECSTATE WASHDC IMMEDIATE 1186
INFO RUEHUL/AMEMBASSY SEOUL IMMEDIATE 0777
RHEHNSC/NSC WASHDC IMMEDIATE

UNCLAS USUN NEW YORK 000055 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EAID KFPC KN KNNP KUNC PINR PREL UNDP
SUBJECT: ACTION REQUEST:USUN PROPOSED COMMENTS TO UNDP ON 
THE DPRK PROGRAM 
 
REF: A. 00050 
     ¶B. 00051 
 
¶1.  Per reftels, UNDP has delivered correspondence to USUN 
and made public statements on the UNDP DPRK country program. 
USUN proposes to respond with the letter below from 
Ambassador Mark Wallace to UNDP Associate Administrator Ad 
Melkert at opening of business on January 25, prior to the 
UNDP Executive Board discussion of the DPRK country program. 
USUN seeks Department concurrence with this action request. 
 
¶2. Text of proposed letter from Ambassador Qk Wallace to 
UNDP Associate Administrator Ad Melkert: 
 
Begin Text: Dear Mr. Melkert, 
 
Thank you for your letter of January 21, 2007.  Ambassadors 
Wolff, Miller and I also appreciate the opportunity to 
discuss with you and Administrator Dervis the necessity of a 
serious, transparent, and reasoned approach resulting from 
the UNDP Executive Board's consideration of the DPRK country 
program to deal with the serious revelations about the 
conduct of that program. 
 
While the issue of whether or not the UNDP continues its 
country program in the DPRK is ultimately a matter for UNDP 
member states to decide through the Executive Board, it 
remains UNDP's responsibility to ensure that UNDP country 
programs are implemented under the terms of UNDP rules. 
 
The concern expressed by UNDP Executive Board members about 
the management of DPRK country program stem in part from 
their lack of information regarding potential weaknesses of 
the program.  We are not aware, of any effort by UNDP to 
bring concerns regarding the DPRK country program to the 
Executive Board's attention.  Importantly, you indicate that 
the UN's Board of Auditors annual report would reflect any 
and all country concerns in the DPRK to member states.  We 
are not aware of any case in which the Board of Auditors 
annual report referred to any such concerns identified in 
your internal audits about the DPRK, and would certainly 
welcome your reference to any Executive Board meeting(s) 
wherein UNDP raised concerns regarding UNDP's violation of 
its rules in implementing the DPRK country program. 
 
We welcome UNDP's decision to enforce its rules to no longer 
make hard "currency payment to the (DPRK) government, 
national partners, local staff and local vendors, " and to no 
longer sub-contract the recruitment of local national staff 
to the DPRK government. 
 
We also welcome the "practical arrangements" that you advise 
have been made that now preclude local DPRK government staff 
from performing financial and core functions.  We look 
forward to learning more about these arrangements and how 
they will help ensure adequate controls on the functions of 
local DPRK government staff. 
 
The claim in your letter that "UNDP in DPRK does not pay 
government suppliers in cash by cheque or bank transfer" is 
inconsistent with both your audit reports and your previous 
statements (and your decision to stop making cash payments 
effective March 1, 2007).  Under existing rules, UNDP should 
not be making direct cash payments (cash, check or wire) or 
"advance payments" to the DPRK government for any (including 
NEX) programs, because as all parties agree the potential for 
abuse is too great.  Therefore, we welcome your decision to 
cease making advance payments directly to the DPRK government 
as of January of this year. 
 
Your letter notes that the Country office maintains on record 
the Evaluation of Audit of NEX annual letters.  This 
presupposes that DPRK government audits are reliable or 
credible in the absence of any international role in the 
auditing of these projects. 
 
Nonetheless, we would welcome reviewing the DPRK government 
audits that you and OAPR maintain provide reasonable 
assurance of the efficacy of DPRK NEX projects. 
 
As you know, previous UNDP audits and your staff have 
indicated that the DPRK limited or precluded site visits to 
UNDP DPRK projects.  Therefore, while it may be inconsistent 
with this previous information, we do welcome your assurances 
that recent site visits to projects have been allowed.  We 
remain concerned, however, by your recent statement that UNDP 
failed to maintain required records of the site visits and 
urge you to ensure that adequate record keeping is taken in 
accordance with UNDP rules. 
 
As you also know, we have previously received information 
 
 
from your staff that UNDP pays rent to the DPRK for at least 
some of its country office expenses.  We remain concerned 
about this practice, and seek more information regarding the 
DPRK's GLOC contributions, which you state amount to only 45% 
of its obligation - another apparent violation of UNDP rules. 
 
Finally given the limited scope of the 1999, 2001, and 2004 
audits, we greatly appreciate your decision to support a full 
independent and external audit of DPRK country going back to 
¶1998.  You indicate that the UN Board of Auditors annual 
reports were intended to flag your concerns with the DPRK 
country program to member states.  Yet, no annual report of 
the Board since 1998 reflects such concerns, nor do they 
contain any reference to the UNDP DPRK country program. 
 
For that reason, we believe it important that a fresh set of 
eyes in the form of outside independent private sector 
auditors be directly involved in conducting a real and 
comprehensive investigative audit of UNDP's DPRK country 
program.  The examination should cover compliance with 
applicable rules, and regulations, management systems, 
operations, internal controls, and the effectiveness of 
accountability mechanisms.  It should include a complete 
review of the decision-making processes that translate 
policies and rules into operational activities in the field. 
Accordingly, the external auditor should have expertise in 
these areas.  Such an audit will provide a basis for 
addressing the weaknesses in the DPRK country program about 
which we all have a shared concern. 
 
I appreciate all of your help and thank you for your 
attention to this matter. END TEXT. 
WOLFF