FOLLOW-UP TO UNDP DEMARCHE:DPRK ABUSE OF THE UN

S E C R E T USUN NEW YORK 001665 SIPDIS SIPDIS DEPT. FOR ISN, IO, T, EAP E.O. 12958: DECL: 08/29/2016 TAGS: AORC EAID KN KNNP MNUC PARM SUBJECT: FOLLOW-UP TO UNDP DEMARCHE:DPRK ABUSE OF THE UN FINANCIAL SYSTEM REF: A.STATE 108151 B.USUN 01527 Classified By: Ambassador Alejandro D. Wolff, per 1.4 (b) and (d) ¶1. (S) As a follow up to the demarche Mission delivered on August 16th to Darshak Shah, Director and Comptroller of UNDP and Julie Anne Mejia, UNDP Treasurer, concerning currency transactions between United Nations agencies and the government of North Korea (DPRK) (ref B),Mission met with Mr. Shah to gather additional information and reiterate U.S. concerns regarding hard currency transactions in the DPRK (ref A). Mr. Shah noted that UNDP accounts are in euros, not U.S. dollars. ¶2. (S) Mr. Shah provided the following information about UNDP operations in the DPRK: -Program budget for 2004-4.8 million dollars. -Program budget for 2005-8.6 million dollars. -Program budget for 2006-8.5 million dollars. -Staff-4 international professional staff, 4 CTA's (project managers/technical assistance) and 15 national staff. UNDP does not release this annual resource allocation at once; resources are allocated to the executing agency in stages in the form of a program advance upon approval of the project, usually on a quarterly basis. In 2004, for example, total expenditure for programs in the DPRK was $2.11 million. The remaining $2.7 million was not allocated to projects within the DPRK. ¶3. (S) The UNDP budget for DPRK is slightly larger than the operational budget of UNICEF in the DPRK. However, Mr. Shah noted that while UNICEF uses most of its $7-8 million budget for off-shore procurement purposes and implements its own projects, (therefore avoiding constant interaction with the government),UNDP attempts to build national capacity through national execution. Whenever possible, projects are implemented by national authorities with the assistance of UNDP and the program country. ¶4. (S) Mr. Shah stated that UNDP and Country Office (CO) audits had not identified any weaknesses in funding management by DPRK. He added that national execution is the preferred modality of implementation for UNDP, including implementation of audit practices when possible. However, in the case of the DPRK, CO audits, in fact, are conducted by international audit firms, since the "Supreme Audit Institution" of the DPRK is not reliable. BOLTON