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North Korea: Witness to Transformation

The World Food Program Audit

by | May 6th, 2014 | 07:00 am
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The World Food Program’s Office of Internal Audit recently released an examination of the organization’s operations in the country from January 2012 through mid-2013; the report can be found here in .pdf. Fox News jumped on the audit in a lengthy story arguing that the WFP inflated its oversight. John Bolton is quoted as saying that there is “no evidence” the organization “can avoid being exploited,” implying that large amounts of aid were diverted by the regime. These are serious charges, as the organization expended $96.5 million on the country during the audit period, about 2 percent of its total expenditure.

Are they true? The report’s conclusions are somewhat more moderate, and must be seen against the operating environment as well as management practice. The overall audit conclusion is “partially satisfactory,” indicating that “internal controls, governance and risk management practices are generally established and functioning, but that several issues might put the standard of ‘reasonable assurance’ at risk.”

The one “high risk” finding was revealing of the constraints under which the entire program was functioning, but also the strong humanitarian norms that the WFP is obligated to follow. The auditor found that the North Korean country team had not adequately prioritized the most vulnerable recipients during so-called “pipeline breaks”: periods when failures of the WFP appeals resulted in shortfalls in support of the program. However, given the unpopularity of support for the DPRK, these “pipeline breaks” covered virtually the entire period of the program: severe funding shortfalls were in evidence for the entire first year of the “protracted relief and recovery operation” launched in July 2012 and again from September 2012. The failure to prioritize is measured by how shortfalls are allocated during reductions in availability of food. For example, orphanages–a high-priority target given lack of alternative sources–experienced larger reductions in supplies than schools, a less high-priority group. The Northeast, an important geographic target of the program, was not adequately prioritized during shortfalls either. However, the report does not shed light on why these failures occurred, and whether they involved concessions to North Korean priorities or more mundane operational failures.

The “medium risk” findings are interesting as well, but several also point to operating constraints that result from weak funding of the program. For example, access restrictions on national staff seconded from the Government combined with international staff shortfalls might have led to accounting errors. Lack of staff limited contingency planning.

Two further issues caught our attention, however. First is how to handle the problem that any local service will be overcharged. The WFP ran its main non-food procurement function under a support unit in Beijing, basically working with more competitive vendors on certain (unspecified) goods and services. The report suggests these arrangements were not only a matter of efficiency—getting good value for the money–but of the constraints associated with paying in-country vendors as a result of the Foreign Trade Bank sanctions. Nonetheless, the report suggests that payment for “superintendent fees” and fuel subsidies were possibly exploited by the relevant North Korean units to earn some foreign exchange rents.

Second, the Fox report wrongly suggests that monitoring was lax. In fact the report concludes that:

  • the geographical coverage of the Country Office’s monitoring activities was “commendable”;
  • the WFP was authorized to recruit international Korean-speaking staff, a constraint in the early WFP programs; and
  • the WFP was given access to all WFP food commodity sites “including ports, 
warehouses, public distribution centres and beneficiaries’ households” following application for access.

However, the report did note that access was sometimes denied. In the absence of “documented analyses and evaluations,” the WFP was in no position to know whether the DPRK was complying with its obligations or hiding malfeasance, raising the question of whether it should have reached more firm “no access, no food” conclusions.

That North Korea still needs to draw on sustained support from the WFP should be the real story here; as we noted in a post last week, lean season stories are once again filtering out of the country. The reason we have an international food safety net in the form of the WFP is precisely because of the plethora of risks that leave people hungry. And as North Korea shows, those risks are not limited to natural causes, but stem more and more frequently from government failures. Nonetheless, it is important to assure donors that agreements reached are being followed; the ongoing difficulties of humanitarian programming in North Korea are undoubtedly one of the main reasons why contributions have fallen.

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