AMBASSADOR WALLACE MEETS WITH UNFPA EXECUTIVE

C O N F I D E N T I A L USUN NEW YORK 000125

SIPDIS

SIPDIS

FOR IO, T, EAP

E.O. 12958: DECL: 02/05/2017
TAGS: EAID KFPC KN KNNP KUNR PINR PREL UNDP UNFPA
SUBJECT: AMBASSADOR WALLACE MEETS WITH UNFPA EXECUTIVE
DIRECTOR THORAYA OBAID IN WAKE OF EXECUTIVE BOARD'S
DECISION ON THE DPRK.

Classified By: USUN Acting Permanent Representative Alejandro D. Wolff
per 1.4 (b) and (d)

1.(C) On January 25, Ambassador Wallace met with UNFPA
Executive Director Thoraya Obaid and a team of senior UNFPA
officials to discuss UNFPA's program activities in the DPRK.
UNFPA provided USUN with preliminary information on program
budgets, in-country expenditures paid directly to the DPRK
government, and UNFPA's audit policies. Ambassador Wallace
stated his intention to make a formal request for copies of
UNFPA's internal audits and also stated his hope that USUN
and UNFPA could work cooperatively in the future to address
U.S. concerns. ExDir Obaid, while noting U.S. concerns,
stated that as Chair of the High Level Committee on
Management (HLCM) she could not provide UNFPA internal audits
to Member States, citing the recommendation of the HLCM to
the UN System's Chief Executive Board for Coordination (CEB).
Obaid did however, state her willingness to provide
Ambassador Wallace with summaries of UNFPA's internal audits.
Ambassador Wallace was accompanied by PRM/PIM Director Nan
Kennelly and a USUN/MR officer. End Summary.

2.(C) Ambassador Wallace opened the meeting by providing an
overview of U.S. concerns with UN operations in the DPRK and
a summary of USUN/UNDP interactions leading up to the
deferral of the DPRK country program at the UNDP Executive
Board meeting. Ambassador Wallace focused on U.S. concerns
with transparency and accountability in all UN funds and
programs, particularly with Member States lack of access to
internal audits. He reiterated the U.S. position that
internal audits must be provided to Executive Board Members
in order to enable Members to make informed decisions on
program activities and also to ensure that their citizens'
tax money is not being diverted by the DPRK government for
other purposes.

3.(SBU) ExDir Obaid and her team acknowledged that as a
member of the same country-team as UNDP in the DPRK, UNFPA
engaged in many of the same practices as UNDP, i.e. employing
seconded staff from the DPRK government and making payments
in hard currency. Obaid distinguished UNFPA from UNDP
however, in the nature of services provided, the manner in
which services are delivered and the size of the UNFPA's
program in the DPRK vis-a-vis UNDP. Specifically, she stated
that the size of the UNFPA program in the DPRK was small in
comparison to that of UNDP and that all projects were
implemented via Direct Execution (DEX),as opposed to
National Execution (NEX),which allows UNFPA more project
oversight and to rely less on the host country government for
project implementation and procurement of services from
national vendors.

4.(SBU) Regarding U.S. concerns with lack of field/site
visits by UNDP officials to NEX projects in the DPRK, UNFPA
stated that it was their policy to require international
UNFPA staff to visit all UNFPA facilities and assistance
operations on the ground in the host country. UNFPA's DPRK
program is supervised by the Beijing office, and the UNFPA
China mission director Dr. Bernard Coquelin stated that
during his most recent visit to the DPRK, he personally
checked some of the 23 facilities, the equipment used on-site
(e.g. stethoscopes, scanners, medication and low-capacity
computers) and had private meetings with clients and doctors.
Obaid stated that UNFPA has a "no access, no assistance"
policy, meaning that UNFPA aid is contingent on host country
assurances of unlimited access for UNFPA officials to
projects and staff. She added that all equipment is provided
by UNFPA in accordance with the UN sanctions list, so the
risk of "dual-use" equipment is minimal.

5.(U) UNFPA officials provided the following information on
UNFPA program costs in the DPRK:
-1985-1989: $2.2 million
-1990-1997: $3.6 million
-1998-2003: $3.6 million
-2004-2006: $2.7 million
-2007-2009: $8.25 million

6.(SBU) UNFPA stated that approximately 13% of the program
budget is spent on expenditures paid directly to the DPRK
Government. This 13% amounts to approximately $150,000 in
currency transfers to the DPRK per annum. The office in the
DPRK consists of five local and one international staff
member. Regarding staff travel, UNFPA stated that checks from
UNFPA to staff for DSA's are made out directly to staff and
not to the DPRK government. Regarding procurement, since DEX
is UNFPA's preferred modality of execution, the majority of
procurements are made offshore (in large part through the
Beijing office) and not through national vendors as is the
case with UNDP. ExDir Obaid claims that local staff do not
have access to financial controls, e.g. checkbooks, as was
found to be the case with UNDP, and that while local staff
can access the ATLAS system (the internal system for
facilitating financial transactions),they do not possess the
signature authority needed to authorize payments for UNFPA;
that is handled from Beijing.

7.(C) UNFPA stated that the last internal audit of the
program in the DPRK was conducted in 2004 and was executed in
conjunction with a Big 4 independent audit firm. This audit
had a rating of "partially satisfactory", due to the auditors
concerns with inadequacies in staffing and IT security.
According to UNFPA, the auditors expressed no concerns with
financial controls, program monitoring or personnel. UNFPA
stated that while they could not provide USUN with the
internal audits, they could provide summaries upon request.

8.(C) At the conclusion of the meeting, Ambassador Wallace
reiterated the U.S. position that Executive Board Members
cannot fulfill their fiduciary responsibilities without
access to internal audits. In response, Ms. Obaid revealed
that she has been meeting with Kemal Dervis, Administrator of
UNDP and Ann Veneman, Executive Director of UNICEF, to
consider changes in the Executive Committee's policy on
sharing internal audits with Member States.

9.(SBU) USUN intends to send the following letter ExDir Obaid
in which Ambassador Wallace will reiterate U.S. concerns and
make a formal request for copies of UNFPA's internal audits
of the program in the DPRK. Begin letter text:

-Thank you for the meeting January 25th to discuss the United
States' concern with the UNFPA program in North Korea. As you
know, this is a matter of the utmost importance to my
Government.

-In order for the United States to exercise our
responsibilities as a Member of the Executive Board, it is
critical that we better understand the state of UNFPA's audit
activities. We thank you for the preliminary information
provided during our meeting as well as your offer to provide
us with summaries of UNFPA's internal audits. However, in
order to more effectively understand the audit and oversight
capacity of UNFPA, we request the following information:

Full internal and external UNFPA audits of the country office
in North Korea going back to the year 1998;
The date and scope of all general or special purpose,
internal and external, audits during the last five years of
each UNFPA headquarters, regional, country and local offices;
The priorities for future internal and external audits during
the next 12 months.

-We maintain that it is counter to sound fiduciary principles
that a Member of the UNDP/UNFPA Executive Board would be
precluded from access to important internal audit
reports-particularly when they review the workings of
programs in a country such as the DPRK.

-Thank you for your attention to this matter. End letter text.


WOLFF