Original Source: http://www.un.int/usa/press_releases/20070910_199.html Date: September 10, 2007 USUN PRESS RELEASE # 199                                                         September 10, 2007 As Delivered Statement by Mark D. Wallace, U.S. Representative for UN Management and Reform, at the UNDP Executive Board Meeting, September 10, 2007 Mr. Chairman, At the outset I apologize for the length of this statement. This is an important time of challenge and change for the UN system and UNDP.  UNDP has gradually increased its role at the center of UN operational activities for development.  As head of the UN development group, and as the agency responsible for UN resident coordinators in developing countries, UNDP is in a key position to influence the workings of the United Nations, and the pace of development.  As the UN system evolves, UNDP may become even more central and more powerful.  Certainly the reforms suggested by the Secretary General’s high-level panel on system wide coherence envision a central and growing role for UNDP. While UNDP has produced an improved draft for this Board session, we recognize that it is a living document and that we expect further changes and improvements in the subsequent iterations of the Plan and during its implementation.  In this regard, we would like to offer the following suggestions: First, human rights and fundamental freedoms.  We appreciate that the draft Plan adopts the six values enumerated in the Millennium Declaration.  One value, respect for human rights and fundamental freedoms to which world leaders rededicated themselves in the Declaration seven years ago, should remain central to UNDP’s work. Second, tracking and reporting program performance and results.  We are pleased to see that UNDP has been working with the Board to improve Annex One, the results matrix, until the eve of this Board meeting.  We appreciate this effort, and believe the results matrix is a significant step forward.  It, however, still needs indicators to measure program outcomes in addition to those that are already there to measure outputs.  This is a critical upgrade with which Annex One could form the basis of a workable results framework.  The reporting of results and evaluations are important components of such a framework.  Most of us agree that the reporting of results has been a significant weakness of the last plan, known as the MYFF (Multi-year Funding Framework).  We expect the new Plan to correct this serious shortcoming.  To do so, management should require headquarters and field offices to report individual project results as well as aggregate results at country and global levels, and make these reports available to the Board.  It should continue to improve monitoring and evaluation systems to ensure quality and accuracy of the reporting.  Third, accountability framework.  We are encouraged to see that UNDP recognizes that accountability is a management priority, and has taken steps to create a framework.  Although the elements presented in the draft Plan are a positive development, they are insufficient.  In our view, a sound framework should contain, at a minimum, these key components: an independent internal audit office with sufficient resources; an independent Audit Advisory Committee accountable to the Board, public financial disclosure and above all, greater transparency in all aspects of management and programmatic practices.  Transparency is the foundation of accountability and any such accountability framework must also include recognition by UNDP of the jurisdiction of the UN Ethics office for all UNDP personnel. Fourth, UNDP’s role in “system-wide coherence.”  We understand and support the need for a full discussion of the “one UN” or “deliver as one” approach to improve coherence among UN agencies.  In order to do so, we will need more information and further consultations on UNDP’s management of the Resident Coordinator (RC) system in several areas, including: 1) the specific steps to address conflict of interest and transparency and accountability concerns regarding the proposed RC system, including analysis of the advisability and feasibility of the option of UNDP returning to its traditional role as the UN’s coordinator and steps to ensure that other funds, programmes and specialized agencies are consulted on and, where they have relevant capabilities, are included in project implementation.  2) the prospective activities outlined in paragraphs 39 and 41 of the current draft, including, for example, the creation of a RC knowledge sharing system.  3) the evaluation plans for the “one-UN” pilots from UNDP and UN Evaluation Group, and the involvement of relevant stakeholders, including the Regional Commissions, in the evaluations. UNDP’s role in helping Africa to achieve the Millennium Development Goals According to most estimates, including a recent UN report, if the current trends continue, sub-Sahara Africa will be the only region in the world that will not be able to achieve many of the MDG targets.  This tells us that sub-Sahara African countries and their citizens need particular attention and assistance, and we believe UNDP can and should step up to this challenge as the UN’s MDG champion. We suggest that UNDP formulate a MDG strategy for sub-Sahara African countries.  The purpose of the strategy should be to focus UNDP activities and resources to assist sub-Sahara African countries to overcome obstacles and to create enabling environments for sustained growth.  In order to do so, UNDP should consider re-prioritizing its programs and resource allocations.  UNDP allocated $526 million in 2006 to Africa as a whole, and $1.3 billion to Latin America.  Although these figures include both core and non-core funds, they convey a sense of priority and balance in UNDP’s programmatic focus.  We suggest that UNDP consider as a priority to increase core resource allocations to sub-Sahara African countries to signal a renewed commitment to helping them achieve the MDGs.  The programming arrangements discussions at this Board including possibly allowing further flexibility for internal allocation between Trac 1 and Trac 2 could serve as a platform for us to move in this direction.  In this regard, we would appreciate receiving resource allocation information such as core and non-core resource allocations, and the programs and projects these resources have supported in all sub-Sahara African countries in recent years. Transparency and Accountability At the Board meeting in June of this year, we stated the need for UNDP to adopt a transparency and accountability framework that is expected of public institutions, and we outlined several areas where we intend to work with UNDP to improve its practices. UNDP has made some progress in this area.  I note here the progress made in providing public access to information related to projects and project budgets.  Just recently, UNDP informed us that the Associate Administrator has issued a directive requesting all country offices to place such information on their websites by the end of this year.  We look forward to seeing this information online.  In this connection, I would like to emphasize that public access to UNDP’s procurement information is a critical part of any effort to increase transparency.  In addition to the system-wide procurement information from the Inter-Agency Procurement Services Office (IAPSO), more detailed procurement information specific to UNDP should also be available to the public online.  This information should include an annual report on all contracting activity, including detailed information on all consulting contracts. But all of the foregoing poses a serious question for all of us: Is the organization up to the challenge?  We see disturbing signs that it is not.  I want to mention just two factors that seem to point to declining trust in the organization by important stakeholders.  As the Administrator noted, donors (not significantly the United States but others) have massively reduced the proportion of their UNDP funding going to core resources.  Indeed, we hear some countries complaining about this trend frequently.  Why would countries shift their contributions from unrestricted core contributions to earmarked funds and programs?  I would suggest that it is, at least in part, because they have lost faith in UNDP’s judgment regarding the allocation of core resources and are thus choosing methods of contribution that provide more donor control. Second, we see and hear high levels of concern from major specialized agencies at the prospect of UNDP garnering more authority in connection with the high-level panel report.  Could some of this concern stem just from a fear that the agencies might lose some influence or privilege themselves?  Perhaps.  But we are talking about agencies with long established track records of success.  We are talking about agencies that enjoy high levels of respect.  We are talking about agencies like UNICEF, and the World Health Organization.  When we hear concerns from these agencies, we cannot afford to simply dismiss them.  We would be foolish to do so. In its relations with the United States UNDP has acted in ways in recent years and months that have greatly heightened our concern.  It used to be that a call to UNDP officials at any level with any kind of concern would result in a quick but thorough investigation by the Secretariat of the matter and quick action to resolve the concerns.  Contrast that with the months that it took to get any response concerning the problems with the program in the DPRK, problems that were serious enough eventually to require a shutdown in that program.  Problems that were denied by UNDP management, then confirmed by the Board of Auditors, and then made light of by Deputy Administrator Melkert, in his presentation to this Board last June.   More recently, UNDP asked us for more information about the specifics of information we had about some financial transactions in connection with the UNDP program in the DPRK.  We provided the information, information in which we have high confidence, only to find UNDP not investigating the information but instead issuing denials about it, not to us, but to the press, and even threatening retaliation against my country. Even today, the Administrator told us that the BOA found that monitoring systems were in place in the DPRK country programme. Mr. Dervis' characterized the auditor's report in a way that gives the inaccurate impression that UNDP had been given a clean bill of health and that no problems were found.   Yet the BOA report reached conclusions directly to the contrary.  In each of the areas examined, the BOA found that UNDP had acted in violation of its own rules. The BOA found that UNDP made payments in hard foreign currency and impermissibly used DPRK government seconded staff.  Let me read from certain relevant portions of the report directly as to project site visits -- a key and integral part of real project monitoring. The Board noted that adequate access to the projects they funded is entrenched in the entity's agreements with the host countries and is a critical control and monitoring mechanism. (Para. 79). [T]he Board was informed that access to projects could only be conducted under the supervision and with the approval and escort of the representatives of the Government of the DPRK. (Para. 87). The Board noted that the control over the project access exercised by the DPRK authorities, was not in line with Article X of the Standard basic Agreement entered into between UNDP and the Government of DPRK... (Para 88). The Board noted a previous audit finding that in three out of five projects selected, there were no field visit reports from 1994-1998. This was not in adherence to the requirement of at least one project visit per year (Para 90). The Board further noted that during the years 2002 to 2006, there was no indication that field visits were undertaken by internal auditors of all entities. (Para 96). We note that even in UNDP's management response that UNDP itself acknowledges that only 20% of all projects on a yearly basis had site visits and some number of these visits were only performed by locally seconded staff. (UNDP Management Response). Today Administrator Dervis stated that: “In terms of overall use of resources, UNDP or any other organization carrying out specific projects can only be responsible for making sure that funds authorized are actually used for the purposes intended.”  Statement of Kemal Dervis on the Occasion of the Second Regular Session of the UNDP/UNFPA Executive Board, 10 September, 2007. But what do the BOA findings mean? Large disbursements in cash of foreign currency, hiring and payment of staff through the North Korean government, and severely restricted, at best, access to projects.  Accordingly given UNDP's deviation from Rules and Procedures that were designed to ensure accountability and the unusual reliance on the local government executing authority, UNDP cannot reasonably assert that it can have any confidence that its development assistance actually was utilized for its intended purposes. UNDP's assertion to the contrary is discouraging and its glossy review of the BOA audit, mentioning none of these negative findings, is disappointing. As to the matter of whistleblower retaliation: UNDP has dismissed and then personally vilified a former staff member who revealed serious problems with UNDP activities in the DPRK which were then confirmed by the BOA.  The former staff member requested protection from the new UN Ethics Office from retaliation from UNDP for having revealed the information.  After an extensive inquiry that took more than two months, the UN Ethics office chief concluded: “When I undertook my review of this case, it was done so within the parameters of ST/SGB/2005/21, I must advise that had the jurisdiction of the protection from retaliation bulletin applied, the information received by the Ethics Office would have supported a determination that a prima facie case [of whistleblower retaliation] had been established in this case.”  Memo from Robert Benson to Kemal Dervis 17, August, 2007 However, UNDP seeks to prevent the newly established UN Ethics Office from dealing with the matter, rejecting its authority and in direct contradiction of the Outcome of the World Summit of 2005.  Harmonization of policies on whistleblower protection among the funds, programmes and specialized agencies is welcome, but it must include immediately accepting the jurisdiction of the UN Ethics Office.   UNDP cannot credibly refuse to accept the jurisdiction of the UN Ethics Office. UNDP has eagerly taken the lead in the One U.N. Initiative, which is intended to increase UN coordination, harmonize the various roles of UN entities and to eliminate unnecessary duplication in the UN.  Apparently and unfortunately, UNDP sees no need for “One UN” when it comes to UN Ethics.  Instead of “one” set of Ethics to serve all UN staff, UNDP conveniently in this case has chosen to promote a fragmented and uncoordinated system that neither serves the needs of the UN as a whole, nor protects the rights of UN staff members world-wide. Rejecting the role of the Ethics Office is particularly troublesome given the Ethics Office conclusions on this matter to date. Various UN Staff Unions including UNDP’s own staff union have clearly expressed their own concern.  UNDP should listen to those concerns carefully.  All of this gives the impression of an organization that has something to hide.  Yet, there is a simple way to resolve this matter.  Hopefully, a truly independent, full and complete investigation of this matter that reviews all financial documents and interviews all personnel will determine the facts of the UNDP DPRK program once and for all.  We had hoped UNDP management would welcome such an investigation.  Sadly, this is not the impression that they have given.  And there is the obvious fact that if they had wanted to put this matter to rest a year ago, all they had to do was investigate, reveal the results of that investigation openly, and fix any problems.  That they have chosen a different path is disturbing.  Perhaps UNDP has so much power within the UN system now that they think they do not need to be accountable to member states in the same way as the rest of the UN secretariat?   We the Executive Board have responsibilities as well.  This Board has not done an effective job at ensuring real transparency and accountability.  We lack the time, the means in terms of documentation and access, and sometimes it seems, the inclination.    UNDP does not now operate at the level of transparency and accountability appropriate for such a premier UN body.  We welcome the Administrator's willingness to make internal audits available to members -- both prospective audits and those already completed.  We look forward to the implementation of this policy as this Executive Board still does not receive such audits and other reports. Top UNDP managers still refuse to make financial disclosure -- inconsistent with the actions of SYG Ban.   We need to make UNDP transparent and accountable, by obtaining access to audits and reports.  We need UNDP to accept the jurisdiction of the UN ethics office.  How can it not do so?  We need it to ensure real whistleblower protections.  We need financial disclosure by UNDP managers.  We need operational independence of oversight bodies, adoption of IPSAS accounting standards, and a real understanding and limitation on agency overhead expenditures.  We need action now, and the US has proposed a UN Transparency and Accountability Initiative that includes such measures.  I urge member states to join in this endeavor.  There is nothing to fear for those operating in an open and ethical way in conformity with the rules.  There is everything to gain in trust and confidence -- secure and even additional funding, and our ability to concentrate on those important development goals that are central to UNDP’s work.  But all such work starts with accepting ethical oversight through the jurisdiction of the UN Ethics Office and with truly operating in a transparent and accountable manner.                                                                                                                                          Thank you.