More Smoke than Fire

Some may recall the so-called “Cash for Kim” scandal trumpeted by the op-ed page of the Wall Street Journal in which the Journal alledged that “hundreds of millions of dollars” had been systematically diverted from the United Nations Development Program to the coffers of Kim Jong Il. A preliminary audit of UN agencies in North Korea that was released over the weekend, finds no large scale diversions of cash to the North Korean government.

The audit confirmed that annual UNDP expenditures in North Korea have been roughly only $3 million a year for the past four years, about 2% of all development assistance coming into North Korea. To be sure, some of this money does, infact, end up with the government. To do business in North Korea, UN agencies must sometimes hire local staff, rent office, space, and otherwise spend money in the country. They must either use foreign currency, or use a state bank to convert foreign currency into the North Korean won.

Either way, some foreign currency falls into local hands. But this has been a standard business practice for aid agencies–including the UNDP. In fact, the Executive Board knew of UNDP’s staffing practices in North Korea, which date back 27 years. On its website, the UNDP points out that the even some former and current members of its own executive board use similar practices in their diplomatic missions in North Korea.

The Journal tried to stoke a new scandal to tar the United Nations. It found none. But don’t expect an apology. On its opinion page today, the Journal tries to spin the findings to make the report seem more damning than it actually is.

UNDP is trumpeting the auditors’ finding that it spent only an average of $2.6 million a year during 2002-2006. But if it was making disbursements on behalf of other entities, the actual sums under its control–which presumably were subject to the same shoddy financial controls criticized by the auditors–could be far higher. (emphasis mine)

In fact, according to the actual report, UNDP was indeed acting as something of a “money manager” for one other UN agency in North Korea: the United Nations Office of Project Services (UNOPS). Still, the report shows that UNOPS expenditures were modest, only about $1-2 million per year for the past four years–not exactly “far higher.”

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