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