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Monday, June 2, 2008 - Page updated at 05:17 PM

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UN program cleared of North Korea misdealing

Associated Press Writer

UNITED NATIONS —

A panel of auditors said Monday it found no evidence that a U.N. anti-poverty program in North Korea knew of any counterfeiting, money laundering or other improper financial dealings linked to U.N. money.

In response to the report, U.N. Development Program Administrator Kemal Dervis told reporters he would consider and possibly recommend to his agency's executive board that it return to working in the communist-led country, from which the agency withdrew its operations in March 2007.

The three-member audit panel said it could verify that more than three-quarters of nearly $24 million in agency spending between 1999 and 2007 had been properly spent.

The panel, chaired by former Hungarian prime minister Miklos Nemeth, also said there was no way that UNDP officials "had any way of knowing" about any misuses of its money by North Korea. That included $2.7 million moved out of the country to a bank that U.S. officials called a potential money launderer.

The panel, however, recommended tightening some financial procedures.

In January 2007, U.N. Secretary-General Ban Ki-moon called for the audit based on allegations by U.S. officials about irregularities in the UNDP program. Two months later, the agency's executive board withdrew its staff and operations after concluding that North Korean authorities were not going to cooperate with UNDP's recommended changes.

The panel criticized UNDP officials for not handing over to authorities $3,500 in counterfeit bills they came across and kept in a safe for more than a decade. But panel members dismissed a former UNDP staffer's claims of retaliation for blowing the whistle on alleged improprieties.

Members of the panel said their review was comprehensive and carefully weighed the evidence "with full objectivity and independence." Dervis - whose agency, rather than the panel itself, released the audit report on the UNDP's Web site - praised the panel's work. He said its findings essentially cleared his agency of wrongdoing, but added that it "was not right" that the "defaced, unusable" counterfeit bills had not been turned over to authorities sooner.

"It is clear that our complex organization can and should improve further," he told a news conference.

A U.S. Senate investigation said in January that UNDP had left itself open to exploitation, paying $50,000 to Zang Lok Trading Co. - a company that U.S. officials said had ties to North Korea weapons sales - on behalf of other U.N. agencies.

The report by the Senate Permanent Subcommittee on Investigations said UNDP paid salaries of local staff directly to the government without verifying how they were disbursed, even though the agency suspected the government was "skimming" money from the payments.

A previous U.N. audit last year also uncovered some problems, including payments by UNDP to North Korean staff and suppliers in hard currency without approval and hiring of government-approved staff in violation of U.N. procedures.

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On the Net:

UN audit report: http://www.undp.org/dprk/

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