BOARD OF AUDITORS (BOA) DECIDES NOT TO COMPLETE

UNCLAS USUN NEW YORK 000878

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E.O. 12958: N/A
TAGS: AORC KUNR UNDP UNFPA UNGA UNICEF
SUBJECT: BOARD OF AUDITORS (BOA) DECIDES NOT TO COMPLETE
SPECIAL AUDIT OF UN ACTIVITIES IN THE DPRK:UNDP COMMENCES
INDEPENDENT REVIEW.

1.(U) In a letter dated September 26, 2007 from BOA Chairman
Philippe Seguin, to the ACABQ Chairman Rajat Saha, the
Chairman Seguin explained that the BOA will not complete its
audit of UN activities in the DPRK as mandated by the UNDP
Executive Board and requested by the ACABQ in its letter to
the BOA of June 22, 2007. In his letter to Chairman Saha,
Chairman Seguin states that the decision of the BOA to not
complete the audit is based on the inability of the BOA to
obtain agreement from the DPRK government for visas for the
audit team. See para 3 for text of letter. The BOA decision
means there will be no on-site validation of results of the
BOA's preliminary audit as requested by Member States and the
Secretary-General. An on-site validation of audit results and

SIPDIS
an examination of any additional documents located in the
DPRK is now dependent on the so-called "Independent
Investigative Review of UNDP Activities in the DPRK," which
will begin shortly. See paras 3 and 4.

2.(U) Letter from the Chairman of the BOA, Philippe Seguin,
to Chairman of the ACABQ, Rajat Saha, dated September 26,

2007. Comment: The two attachments listed in Chairman
Seguin's letter were not provided to the ACABQ. End Comment.
Begin letter text:

Dear Mr. Saha,

I write to inform you of the status of the ACABQ's request to
the Board to undertake a special audit of United Nations
activities in the Democratic People's Republic of Korea
(DPRK).

In my letter of 29 June 2007, I indicated that the Board
accepted the assignment but highlighted that such additional
procedures were not likely to effect conclusions already
reached. The Board also set out conditions necessary to
enable it to undertake the additional procedures. The
Administration confirmed to the Board its agreement to these
conditions in a letter dated 13 August 2007 (annex 1).

The Administration has, however, been unable to obtain
agreement from the DPRK government that visas could be
granted to the audit team. In this regard, the Board has
received from the Administration a copy of the letter from
the DPRK government dated 28 August 2007 (annex 2) indicating
that "...the Government of the Democratic People's Republic
of Korea (DPRK) is not able to accept your proposed visit to
the DPRK by the auditors..."

In view of the foregoing, the Board wishes to report back to
the ACABQ that it is unable to commence the audit requested.
The Board has decided to redeploy the identified audit staff
to its regular work.

Please accept, Sir, assurances of my highest consideration.
End letter text.

3.(U) On September 25, 2007 UNDP published the Terms of
Reference (ToR) for the independent review of UNDP activities
that it has established. See para 5. USUN has been informally
advised that contracts have been issued to the three
individuals chosen by UNDP to lead the independent review:
Miklos Nemeth (Hungary),Chander Mohan Vasudev (India) and
Mary Ann Wyrsch (U.S.).

4.(U) USUN intends to cooperate fully with the investigative
review. USUN will work closely with the Department and other
concerned USG agencies in order to provide information to the
review team that will facilitate its work. USUN will await
the results of the independent review to assess how
successful it will be in clarifying concerns regarding the
effectiveness and credibility of UNDP's programs in the DPRK.
USUN notes that despite U.S. objections, the ToR still
provides for a consideration of the issue of Ethics Office
jurisdiction in the case of a whistleblower who was
retaliated against by UNDP, while also allowing for a
subsequent Ethics Office Role in this case once the review is
completed.

5.(U) The ToR for the Independent Investigative Review of
UNDP Operations in DPRK as posted on UNDP's website are as
follows:

The Independent Investigative Review shall consist of a
comprehensive and detailed investigative review of the UNDP
Democratic People,s Republic of Korea (DPRK) country office
operations during the period 1 January 1999 to 1 March 2007,
and shall result in the submission of a report to the
Administrator and the UNDP Executive Board. The report shall
determine what funds were paid arising out of and/or relating
in any way to the UNDP DPRK country programme. It shall also
include payments made by UNDP on behalf of other UN entities,



other entities and/or other countries. The report shall make
every effort to determine whether such funds were used for
their authorized or intended purposes, or were diverted for
other purposes. If there is evidence that any such funds may
have been diverted, the report shall indicate the manner of
such diversion or possible diversion.

The report shall specifically:

1). Identify all payments made by UNDP for itself and by UNDP
on behalf of other UN entities, other entities and/or other
countries to suppliers of goods and services, including
payments made through intermediaries, and determine to the
extent possible whether such payments were received by the
ultimate beneficiaries. The Report shall identify the bank
accounts utilized by or for the benefit of the UNDP
Administered activities, including the persons that had
signature authority in regard to such accounts.

2). Determine if the projects implemented under the country
programme were managed and implemented in accordance with
UNDP regulations, rules, guidelines and practices, and with
UNDP,s Standard Basic Assistance Agreement with the DPRK
Government, including whether such projects were effectively
monitored and evaluated regularly in accordance with such
regulations, rules, guidelines and practices. The report
shall identify, enumerate and confirm all project site
visits, whether more visits should have been made in
accordance with UNDP policies and procedures and whether UNDP
international personnel participated in such visits.

3). Identify all equipment that may qualify as having "dual
use" procured by or for UNDP projects or procured by UNDP for
other UN entities, other entities and/or other countries, and
make every effort to determine whether, within the parameters
of the rules and regulations that existed at the time,
including legal interpretation of such rules and regulations,
such equipment was exported by the concerned vendors in
compliance with applicable international export licensing
requirements, the nature of the equipment, the names of the
vendors who supplied such equipment, and the current
disposition and location of such equipment.

4). Identify the facts relating to any counterfeit or
suspected counterfeit currency that came into the custody of
the UNDP Administered country office or of which the country
office became aware, including any applicable UNDP policies
regarding the reporting of such counterfeit currency to the
relevant issuing country and the actions taken by UNDP in
regard to such currency.

5). A complaint has been lodged that UNDP retaliated against
an individual for "blowing the whistle" on irregularities in
its operations in DPRK. In this respect, review the
complainant's allegations related to these operations and the
alleged retaliation, make every effort to establish the
facts, including about the specific events in DPRK and
regarding application of relevant protection policies. After
completing the review, the Independent Review Team shall
share its findings on this aspect of the Independent
Investigative Review with the Director, UN Ethics Office. The
Director, UN Ethics Office, could then provide an opinion and
formulate recommendations, as may be appropriate, on the
retaliation allegations in light of these findings. If the UN
Ethics Office requires further investigation of this specific
issue, after having reviewed the findings of the
investigative review, it can arrange for such follow-up
before providing its recommendations, with the full
cooperation of UNDP.

6). The Independent Investigative Review may make any
recommendations as its sees fit based on conclusions drawn
from this Independent Investigative Review, including
regarding UNDP,s protection policies and any lessons-learned.

In performing its work, the Independent Review Team shall:

A). Take into account the work already carried out and to be
carried out by the UN Board of Auditors, and not impair the
work of the UN Board of Auditors.

B). Have complete and unrestricted access in New York or
wherever they are available and accessible for review to all
records in whatever form or media wherever located as is
necessary to complete its review and report including but not
limited to: UNDP,s complete manual checkbook, records of all
electronic funds transfers, all other related bank account
documents, contracts, receipts, MOUs, all documents related
to project site visits and monitoring, all documents related
to "dual use" equipment including applications, grants or
denials of export licenses, and other relevant documents that



are made available to the Independent Review Team from
sources other than UNDP, including private individuals or
governmental entities. UNDP shall make all records in its
custody or subject to its authority available to the
Independent Review Team.

C). Endeavor to interview in New York or wherever available
and accessible all parties with knowledge of UNDP operations
in the DPRK as the Independent Review Team deems necessary.
The Team shall have complete and unrestricted access to all
current and former UNDP employees, contractors, and UN
Volunteers (collectively "UNDP Personnel") that worked in
UNDP, including the DPRK country office, or in relation to
the DPRK country program during the relevant time period.
UNDP shall use best efforts to make such persons available to
the Independent Review Team. Neither UNDP management nor
their representatives may be present during any interviews
conducted by the Independent Review Team of current or former
UNDP Personnel, unless otherwise requested by the Independent
Review Team. The statements made in such interviews shall be
kept confidential by the Independent Review Team except to
the extent such information is cited in the final report. In
the case of the final report submitted, the names and
identities of such individuals shall be appropriately
protected. All information and documents obtained by the
Independent Review Team in the course of performing their
work shall be treated with utmost confidentiality and shall
be used solely for the purposes of the Investigative Review.

D). The Independent Investigative Review will not seek nor
accept supervision or guidance from the Administrator, the
Associate Administrator or any other officials or staff of
UNDP or of the UN in the conduct of the Independent
Investigative Review, or from members of the UNDP Executive
Board or from any other Government, and will at all times
avoid any conflict of interest or appearance of conflict with
UNDP or its officials or personnel. Nothing in this paragraph
shall preclude any person from providing relevant information
in any form to the Independent Review Team.

E). The Independent Review Team shall be remunerated in
accordance with standard UNDP remuneration rates, including
travel. The Independent Review Team shall determine its own
support staff/Secretariat (logistical support) arrangements,
taking into account the need for confidentiality. Where
support services are contracted, the services shall be on the
basis of standard UNDP remuneration rates and contract terms,
in accordance with UNDP procurement rules. Where services of
experts and outside consultants (firms/individuals) are
required, the Team shall apply UNDP procurement rules,
ensuring competency, best value for money, and taking into
account any real or perceived conflict of interest.

F). The work of the Independent Review Team shall commence as
soon as feasible and the final report should submitted if at
all possible before the end of 2007.

G). The working papers of the Independent Review Team will be
packaged and sealed and provided to the Secretary-General for
safe-keeping for a period of seven (7) years, consistent with
UNDP,s document retention policy. Access to the working
papers shall be limited to such circumstances as may be
agreed by the Secretary-General.
KHALILZAD