UNDP and corruption

Cash for Kim, Revisited

June 3, 2008, The Wall Street Journal

You have to read to page 347 of yesterday’s report on the United Nations Development Program’s antics in North Korea before reaching the recommendation that is likely to cause a panic in Turtle Bay: Give member states access to the internal audits, now secret, of UNDP programs.

That simple principle – let the funders see how their money is spent – is anathema in the international aid community and was at the heart of the U.S. exposé last year of the UNDP’s slipshod operations in North Korea. If the U.S. hadn’t blown the whistle, it would be business as usual. This latest report – by three experts appointed by the UNDP – is a wake-up call for more accountability throughout the U.N.

The UNDP’s transgressions in North Korea include personnel practices that gave Pyongyang officials access to sensitive information; limited oversight; poor tracking of funds, including money that was diverted to the North’s purposes; and transfer of dual-use technology. It adds up to a picture of how Pyongyang manipulated the UNDP for its own financial ends – while the U.N. agency let it happen. In March 2007 the executive board took the unprecedented step of suspending operations in North Korea, and two investigations – by the U.N.’s own Board of Auditors and the U.S. Congress – have confirmed the U.S. allegations.

In yesterday’s report, the auditors write that they „are unable to confirm the total size“ of the UNDP program in North Korea between 1997 and 2007 – an amazing indictment of UNDP financial practices. They calculate total expenditures between $57.1 million and $72.3 million, which roughly accords with what the U.S. had estimated and far exceeds the UNDP’s guess.

Where did all this money go? The auditors conclude that 38% of disbursements were to „government agencies.“ Its review of „selected“ projects finds that the documentation for 77 projects – or 74% – was so poor that they could not determine „whether the ultimate beneficiary is consistent with the payee name indicated in the financial system.“ That is, nobody knows where the money went – except perhaps Kim Jong Il.

Also notable is the report’s findings on dual-use technology. Of the 151 pieces of equipment reviewed by the auditors, 95 were on the U.S. Commerce Department’s control list and required an export license. Many were „controlled by the U.S. for national security and anti-terrorism reasons . . . and were of heightened concern.“ The UNDP hadn’t obtained the required licenses. The auditors add that when the UNDP pulled out of North Korea in March 2007, it left this equipment behind. The UNDP failed to obtain the required „retransfer authorization,“ the report dryly notes. Translation: Retrieval was impossible because the North already had the stuff.

Each time we use „fraud“ or „corruption“ to describe what happened in North Korea, the UNDP objects. So let us be precise. The corruption is on the part of North Korea, which abused U.N. rules and siphoned off U.N. money for its own nefarious purposes while UNDP looked the other way. There is no evidence of personal corruption on the part of UNDP officials.

Rather, as this and other investigations prove, UNDP head Kemal Dervis, Associate Administrator Ad Melkert and their colleagues are guilty of gross negligence, if not willful indifference. At best it is an extreme case of clientitis, with a nasty side-effect that causes the patient to spin and weasel his way out of every legitimate accusation.

The bomb that went off yesterday at the Danish Embassy in Islamabad killed a UNDP employee, whose office was located next door. It’s a sad reminder that U.N. workers often take risks to do their jobs world-wide. The best way to honor their work is through better governance that leads to more effective help for the people the U.N. purports to serve.