oversight

Foreign Assistance: North Korea Restricts Food Aid Monitoring

Published by the Government Accountability Office on 1999-10-08.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                  United States General Accounting Office

GAO               Report to the Chairman, Committee on
                  International Relations, House of
                  Representatives


October 1999
                  FOREIGN
                  ASSISTANCE

                  North Korea Restricts
                  Food Aid Monitoring




GAO/NSIAD-00-35
Contents



Letter                                                                                 3


Appendixes   Appendix I:   Comments From the Department of State and U.S.
               Agency for International Development                                   24
             Appendix II:   Comments From the World Food Program                      33


Figures      Figure 1: Tons of Food Contributed to North Korea Through WFP
               From the United States and Other Donors, January 1998 - June 1999       6
             Figure 2: U.S. Contributions to North Korea Through WFP,
               1996 - July 1999                                                        7




             Abbreviations

             EU        European Union
             MSF       Medecins Sans Frontieres
             USAID     U.S. Agency for International Development
             USDA      U.S. Department of Agriculture
             WFP       The World Food Program




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United States General Accounting Office                                                        National Security and
Washington, D.C. 20548                                                                  International Affairs Division



                                    B-283605                                                                                Leter




                                    October 8, 1999

                                    The Honorable Benjamin A. Gilman
                                    Chairman, Committee on International Relations
                                    House of Representatives

                                    Dear Mr. Chairman:

                                    The United States is one of the largest donors of emergency food to North
                                    Korea, with cumulative donations since 1995 valued at about $365 million.
                                    Most U.S. food aid is channeled through the United Nation’s World Food
                                    Program and as of June 1999 accounted for approximately 88 percent of the
                                    World Food Program’s distributions to North Korea. According to the
                                    Department of State and the World Food Program, food aid is being
                                    provided for humanitarian purposes and is intended to be distributed
                                    primarily to children, women, and the elderly at schools, hospitals, and
                                    other institutions. The Department of State also believes that food
                                    donations may improve the climate of the bilateral relationship with North
                                    Korea on a host of issues, including concerns about North Korea’s
                                    development of nuclear weapons and the maintenance of peace on the
                                    Korean peninsula. Concerned about whether the World Food Program can
                                    adequately account for U.S. government-donated food aid to North Korea
                                    and prevent possible diversions of food aid to the military and ruling elite,
                                    you asked us to examine the procedures the World Food Program has
                                    established and implemented to monitor and report on U.S. government-
                                    donated food aid provided to North Korea. 1

                                    In carrying out this work, North Korea did not allow us to conduct an in-
                                    country review of the World Food Program’s procedures to monitor U.S.
                                    food aid. However, we collected and analyzed information from the U.S.
                                    Departments of Agriculture and State and the U.S. Agency for International
                                    Development and a consortium of U.S. private voluntary organizations that
                                    have used World Food Program monitoring systems in North Korea. We
                                    also performed interviews at and analyzed information from World Food

                                    1
                                      A second GAO review, Nuclear Nonproliferation: Status of Heavy Fuel Oil Delivered to
                                    North Korea Under the Agreed Framework (GAO/RCED-99-276, Sept. 30, 1999), addresses
                                    your concerns over deliveries of heavy fuel oil to North Korea under the Agreed Framework
                                    between the United States of America and the Democratic People’s Republic of Korea
                                    (North Korea).




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                   Program headquarters in Rome, Italy; met in Washington, D.C., with the
                   World Food Program’s country director for North Korea; and obtained
                   written responses to our questions on control procedures from the World
                   Food Program’s country office in North Korea.

                   The World Food Program is the largest provider of donated food in the
                   world, and its emergency operation in North Korea is one of its largest. The
                   World Food Program negotiates implementation agreements with host
                   governments and nongovernmental organizations that distribute the food.
                   The World Food Program’s policy manual, Food Aid in Emergencies,
                   prescribes standard language for these agreements, requiring—as in the
                   case of North Korea—that (1) distributions of World Food Program food
                   aid be monitored by the host country or nongovernmental recipient, and
                   (2) food use and program audit reports be provided to the World Food
                   Program. Once food relief projects have begun, the World Food Program is
                   responsible for monitoring the distribution of the food to ensure that host
                   governments and nongovernmental recipients use it in accordance with the
                   agreements. The U.S. Agency for International Development and the U.S.
                   Department of Agriculture coordinate U.S. donations to the World Food
                   Program, while the Department of State is responsible for setting broad
                   U.S. policy toward the World Food Program and North Korea.



Results in Brief   U.S. policy is that no food aid will be provided to North Korea if it cannot
                   be adequately monitored. The World Food Program has established
                   procedures to track and monitor food aid deliveries in North Korea.
                   However, the North Korean government has not allowed the World Food
                   Program to fully implement its procedures, and as a result, it cannot be
                   sure that the food aid is being shipped, stored, or used as planned.
                   Specifically, the North Korean government, which controls food
                   distribution, has denied the World Food Program full access to the food
                   distribution chain and has not provided required reports on food use.
                   Consequently, the World Food Program cannot be sure it is accurately
                   reporting where U.S. government-donated food aid is being distributed in
                   North Korea.

                   This report contains recommendations for improving accountability over
                   food aid by using diplomatic means to encourage North Korea to allow
                   greater oversight over food distribution and encourages the World Food
                   Program to provide more comprehensive and timely reporting on food aid
                   distributions within North Korea.




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Background   Established by the United Nations in 1961, the World Food Program (WFP)
             is supported by voluntary contributions from donor countries and in 1998
             received more than $875 million worth of contributions from the United
             States, which is by far WFP’s largest donor. In 1998, WFP distributed nearly
             70 percent of all global food aid, feeding an estimated 75 million people that
             year. WFP operates in some of the most difficult environments in the world.
             These include food operations in East Timor, Kosovo, and numerous other
             countries that present political and security challenges for the delivery and
             monitoring of food aid.

             Although WFP donations generally become the property of the recipient
             government once they arrive at port on a ship or cross the border on a
             train, WFP has a responsibility to its donors to ensure that donations are
             responsibly managed and reach targeted beneficiaries. WFP carries out its
             responsibility for accountability in part by negotiating implementation
             agreements with recipient governments and nongovernmental
             organizations that distribute its food aid. In most countries in which it
             operates, including North Korea, WFP is not directly responsible for food
             aid distribution, which is the responsibility of the recipient government.

             In 1998 the United States provided more than four-fifths of all WFP food aid
             to North Korea2 (see fig. 1 and 2). WFP donations are intended to help feed
             over 6.5 million people—primarily children, mothers, and the elderly—out
             of a population of approximately 23.5 million.3 The World Food Program
             plans to deliver more food to North Korea in 1999—primarily anticipated
             donations from the United States—than it plans to provide to any other
             country in the world.




             2
              The volume and composition of bilateral food transfers, either donations or subsidized
             commercial purchases, between China and North Korea is unknown. WFP, however,
             estimates that China has provided North Korea over 2 million metric tons of food, including
             maize, maizemeal, rice, wheat, and wheat flour, since 1995. WFP’s country director in North
             Korea reported that Syria is also thought to have provided 42,000 metric tons of bilateral
             food aid in 1998.
             3
             U.S. government-donated food has included cornmeal, blended corn-soya, bulgur wheat,
             maize, rice, wheat, wheat flour, and vegetable oil.




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Figure 1: Tons of Food Contributed to North Korea Through WFP From the United
States and Other Donors, January 1998 − June 1999




Source: WFP.




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Figure 2: U.S. Contributions to North Korea Through WFP, 1996 − July 1999




Source: WFP.


WFP reported in 1998 that approximately 66 percent of food aid donated to
North Korea was distributed to institutions such as nurseries, schools, and
hospitals and that approximately 34 percent was distributed to unemployed
laborers through food-for-work projects. (In food-for-work projects, food
rations are used to compensate laborers and their families working on
agricultural rehabilitation projects.)

U.S. policy is that food aid will not be provided to North Korea if it cannot
be adequately monitored. To assist WFP in its monitoring, the U.S. Agency
for International Development (USAID), beginning in 1997, and the U.S.
Department of Agriculture (USDA), beginning in 1998, have given
approximately $4.5 million to allow a consortium of U.S. private voluntary
organizations—known as the Consortium—to monitor portions of U.S.
donations provided through WFP to North Korea. 4 The Consortium also


4
 The composition of the Consortium changes from time to time, but the core member
nongovernmental organizations include Amigos Internacionales, CARE, Catholic Relief
Services, Mercy Corps, and World Vision.




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manages food-for-work projects with U.S. donations provided through
WFP. The Consortium operates in close coordination with WFP’s country
office in North Korea, uses WFP tracking and monitoring procedures, and
reports to WFP’s country director for North Korea. State, USAID, and
USDA officials have also participated in donor missions to observe WFP
operations in North Korea.

WFP began food relief operations in North Korea in 1995 with three WFP
staff (of which one was a full-time food monitor5) operating out of a single
office in Pyongyang, the capital city. In that first year, North Korean
authorities distributed 20,000 metric tons of WFP food aid to a few of North
Korea’s 211 counties. By 1999, WFP had begun its fifth consecutive relief
operation, and its 46 staff (of which about 19 are full-time food monitors)
were responsible for monitoring the distribution within 162 counties of
hundreds of thousands of tons of food aid from their Pyongyang
headquarters and five regional suboffices.

State, USDA, and USAID officials told us that international food aid has
helped improve food availability in North Korea. Rather than widespread
famine, which killed an undetermined number of people, there is now
localized starvation and general nutritional deprivation. However, the
actual scale of humanitarian suffering in North Korea remains unknown
and widely debated. Although WFP performed a baseline nutritional survey
in September 1998, WFP said that, despite repeated requests, North Korea
has not permitted follow-up nutritional assessments. Officials from many
relief organizations, including WFP, say that—because of North Korean
constraints on access—the national level of need cannot be accurately
determined.

According to nongovernmental organizations operating in North Korea,
European Union reports, WFP, and other U.N. officials, successive floods
and droughts since the mid-1990s have exacerbated food shortages.
However, natural disasters are not the principal cause of continuing hunger
in North Korea. A lack of arable land (18 to 20 percent of this mountainous
country is arable) and fertilizers, poor agricultural and economic policies,
subsequent economic collapse and an inability to afford commercial food

5
 A food monitor’s responsibilities, according to WFP’s policy manual, Food Aid in
Emergencies, include (1) analyzing reports received from ports, regional and local
warehouses, and distributing agencies; (2) conducting visits to distribution centers to
inspect records of actual stocks; and (3) spot-checking actual distributions and observing
distribution procedures.




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                           imports to replace subsidized imports from former Soviet states, and a
                           reluctance to institute economic and agricultural reforms are widely
                           considered to have transformed North Korea’s normal state of food import
                           dependence into a chronic, life-threatening food shortage. The agricultural
                           and food situation in North Korea, therefore, cannot be separated from the
                           overall political system and economic condition of the country.



North Korea Limits         The World Food Program and State officials told us that there is no
                           evidence of significant diversions of food aid to the military or governing
Ability of WFP to          elite in North Korea and that they have confidence in WFP’s ability to
Ensure Accountability      account for food aid in North Korea. However, neither organization can
                           provide assurance that food aid is being managed according to plan and is
                           reaching the intended beneficiaries because North Korea controls
                           distribution of the food aid and restricts WFP’s ability to monitor how the
                           food is used. The North Korean government has imposed constraints on
                           WFP monitors, who do not have random access at all stages of the food
                           distribution process. U.S. private voluntary organizations, State, USAID,
                           and others have reported that North Korea has prevented effective
                           monitoring of a significant portion of food donations, making it impossible
                           to verify whether food has reached the target beneficiaries.


WFP Food Aid               According to WFP’s policy manual, Food Aid in Emergencies (Book A,
Accountability Standards   Policies and Principles, 1991), (1) WFP is responsible for assuring donors
                           that their donations are properly used and (2) recipient governments are
                           responsible for facilitating WFP’s oversight of their use of WFP food. WFP’s
                           policy manual provides standard language for agreements between WFP
                           and recipient governments that stipulate basic accountability, monitoring,
                           and reporting requirements to help achieve these accountability objectives.
                           For example, WFP’s standard agreement language specifies that a recipient
                           government (1) “is responsible for ensuring that the commodities…are
                           properly received, handled, distributed to the specified target beneficiaries,
                           and accounted for”; (2) “will take measures to prevent unauthorized
                           utilization of the commodities and ensure that the commodities are
                           exclusively distributed to the beneficiaries”; and (3) within a specified
                           period after the date the food aid program is completed, “the government
                           will furnish WFP…a final report with final accounts which have been
                           audited and certified by the auditor appointed or authorized by the [North
                           Korean] Government.” These audit reports should, as described in the
                           policy manual, provide WFP information on (1) the number of
                           beneficiaries; (2) the quantities of food received; (3) where food was



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distributed; (4) losses incurred, including the causes and measures taken to
reduce losses; (5) the use of subsidies provided; (6) the impact on the
beneficiaries’ nutritional condition as a result of WFP food donations; and
(7) lessons learned.

According to WFP’s policy manual, monitoring includes (1) a careful
analysis of reports received from “all operational units, including ports,
regional and local-level warehouses, and distributing agencies”;
(2) “frequent visits to [distribution centers] to inspect records and actual
stocks”; and (3) “spot-checking actual [distributions] and observing
distribution procedures.” WFP’s standard agreement language on
monitoring further specifies that the recipient government “will facilitate
travel within the country of WFP officers and consultants and their access
to all ports, stores, transshipment and distribution points where WFP-
supplied commodities are received, stored, handled and distributed, in
order to observe the handling, distribution and use of the commodities and
any other inputs provided by WFP, and to observe operations at all stages.”

WFP has completed four food relief operations and is conducting its fifth in
North Korea. Each operation, typically about a year in duration, is
governed by an agreement between WFP and the North Korean
government. The agreements incorporate WFP’s standard language on
monitoring and reporting. For example, North Korea agreed to facilitate
WFP’s access to all distribution points and to allow WFP to observe the use
of their food donations.

According to WFP’s policy, the Executive Director can withdraw assistance
or ask for restitution of donated food if a country has not met its obligation
under its agreements with WFP. WFP’s policy states that the Executive
Director is charged with correcting (in consultation with the recipient
government) any inadequacies in project operations if it is determined that
recipient governments have not abided by their agreements with WFP. It
also states that the Executive Director may withdraw assistance in the
event that essential corrections are not made. WFP’s agreement with North
Korea states that in the event of a failure by one party to fulfill any of its
obligations under the agreement, the other party may suspend or terminate
the agreement.

Senior WFP officials told us that they have invested heavily in a
comparatively large country presence, including 46 WFP staff (of which
about 19 are dedicated monitors) that in recent months conducted more
than 300 monitoring visits per month from WFP’s six offices. According to



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                           WFP officials, monitors typically develop weekly monitoring plans and
                           share these plans with North Korean government officials to get their
                           approval on which counties they can visit. Once in the county, they select
                           warehouses and conduct a paper check based on the food tracking system
                           in place. After this, WFP monitors request that they be taken to a specific
                           type of institution, such as a kindergarten or a hospital, where WFP food
                           was sent. WFP officials said that county officials then determine which
                           hospital or school the monitors can visit. Once at the institution, the
                           monitors check the records, food stocks, and facilities.


WFP Accountability for     WFP is responsible to its donors to ensure food is used as intended. WFP’s
Food Aid Largely Depends   officials told us one of the primary mechanisms they rely on in North Korea
                           is the extreme degree of order imposed by the government, a communist
on North Korean            dictatorship, on all facets of society. We were also told that diversions of
Government                 food were unlikely because (1) the Army and party elite have preferential
                           access to national agricultural production (which is mainly rice and more
                           desirable than WFP’s wheat donations), (2) China and other countries
                           provide food aid that can be used by the military and elite, (3) the Army has
                           its own agricultural production, (4) there is a culture of respect for state
                           authority, and (5) intense regimentation of all sectors of society precludes
                           theft. The “cultural element,” we were told, is a natural safeguard in WFP’s
                           operations in North Korea because it minimizes the risk of diversions due
                           to larceny and petty corruption. WFP further describes its operations in
                           North Korea as essentially a North Korean government program, in which
                           WFP’s role is to help North Korean authorities implement the program by
                           providing advice, establishing internal control systems, monitoring to see if
                           systems work, and training government officials in food management.



WFP’s Tracking System in   The internal transport of WFP food in North Korea is the responsibility of
North Korea Does Not       the North Korean government. WFP and the North Korean government
                           established a food tracking system in 1997 to collect information from the
Adequately Track Food      government about its distribution of WFP food. WFP attempts to track food
From Time of Arrival to    aid trucked from the ports to county warehouses using this system, called
Distribution to Final      the “consignment note system,” which is administered by North Korean
Beneficiaries              authorities. The tracking system uses multiple, color-coded waybills
                           written in English and Korean. (A waybill is a document prepared by the
                           carrier of a shipment of goods that identifies the contents of the shipment
                           and the location where the food will be delivered.) Waybills are prepared
                           by North Korean authorities when a truck leaves a port or rail siding. Food
                           aid is generally not transported directly from the port to its ultimate



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consumers. Rather, WFP told us, the food is trucked to a warehouse, where
food aid is often stored prior to distribution to recipient kindergartens,
schools, hospitals, and other institutions. North Korean authorities compile
the waybills used in the distribution of a particular shipment of food and
provide them to WFP, which enters the information into a computer
database. WFP and North Korean government authorities co-develop and
co-sign food distribution plans and then use the waybills to verify that the
distribution to warehouses took place as agreed.

However, North Korean control of the tracking system and the access
constraints they impose on WFP prevent WFP from independently
verifying at each step of the process that the North Korean authorities have
in fact delivered the food to agreed-upon warehouses. North Korean
authorities transport and store the food, complete the paperwork, manage
the warehouses, and do not allow WFP to conduct unrestricted spot checks
along the transportation route or storage sites. Without the ability to
conduct random spot checks, WFP cannot independently verify the
accuracy of the North Korean paperwork. A WFP official told us, however,
that in North Korea no one, including most North Koreans, is granted
freedom of movement. He also told us that WFP believes county
warehouse managers, who receive copies of the distribution plans, would
complain if they did not receive their designated allotment of food. U.S.
nongovernmental relief organizations (the Consortium), supported by
USAID and USDA and working collaboratively to monitor U.S. donations to
North Korea through WFP, use this same tracking system. The Consortium
reported to USAID in 1997 and 1998 and told us in August 1999 that because
of North Korean restrictions on access, there was no way anyone could
independently verify that food was distributed as planned.

According to WFP officials in Rome and North Korea, the tracking system
in North Korea was designed primarily to track food aid transported by
trucks from the seaport to county warehouses. The system does not track
the transportation of some food while it is on trains or barges before it is
transferred to trucks for delivery to warehouses. Nor does the system track
food during the period when it is transported from the warehouse to the
estimated 43,000 institutions where the food is actually distributed to
individual beneficiaries. The warehouse manager records shipments from
the warehouses to the institutions, and WFP monitors, we were told, can
sometimes access and compare these records to those at the recipient
institutions. According to WFP, food aid transported by rail may take 7 days
to arrive at its destination, and these shipments are not covered by the
tracking system during this time. A Consortium member told us that, to be



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                            effective, any food tracking system should provide for independent spot
                            checks and random sampling along the entire distribution system,
                            including the final distribution of food to beneficiaries.


North Korea Precludes       According to senior WFP officials in Rome and responses to our questions
Effective Food Monitoring   from the North Korea country office, North Korea has not allowed WFP
                            independent, unrestricted access to monitor the food distribution process.
                            WFP officials told us that North Korean authorities

                            • do not allow WFP monitors to act independently and conduct random
                              monitoring visits;
                            • have given WFP monitors incomplete information about the numbers,
                              names, and location of institutions and the numbers of beneficiaries at
                              locations receiving its food;
                            • have rarely allowed WFP monitors to select the institutions they wish to
                              visit; and
                            • prevent independent monitoring of the distribution of food aid to the
                              vast majority of beneficiary institutions.

                            WFP estimates that 90 percent of the North Korean institutions receiving
                            food aid have not received monitoring visits, and WFP monitors have rarely
                            been allowed to observe the actual distribution of food to beneficiaries.
                            WFP officials told us that even with complete access, it would not attempt
                            to monitor 100 percent of the institutions receiving its food but would
                            instead monitor a smaller, randomly selected set of representative
                            institutions. WFP has determined that in North Korea a 10-percent
                            sampling rate for monitoring is adequate. However, WFP said that because
                            of North Korean restrictions it is unable to randomly select the institutions
                            it monitors. As a result, WFP (1) cannot generalize its findings from those
                            institutions to which it has been granted access by the government and
                            (2) cannot randomly visit institutions about which, based on previous
                            visits, it may have particular concerns.

                            According to WFP senior officials in Rome, statements by the WFP
                            Executive Director in August 1999, and WFP’s August 13, 1999, weekly
                            report (“WFP Emergency Report”), food is getting to the beneficiaries. As
                            evidence, they referred to the observations of WFP monitors and the
                            Executive Director, based on her August review of WFP operations in
                            North Korea, that (1) attendance at institutions receiving food aid—such as
                            kindergartens and schools—has increased and (2) the condition of the
                            children to whom the bulk of WFP food is supposed to go to has apparently



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                                   improved. Consortium reports have also noted that they believed that food
                                   was getting to the target population. While noting progress in reaching the
                                   needy, the Executive Director also pointed out areas where WFP needs
                                   greater cooperation from North Korea. According to the September 1999
                                   report of her visit, the Executive Director emphasized to North Korea’s
                                   Minister of foreign affairs the need for North Korea to provide WFP
                                   monitors greater access and a list of institutions receiving its food.

                                   The North Korean government does not allow WFP to independently visit
                                   beneficiary institutions to confirm the amounts of food they receive.
                                   Furthermore, a Consortium member told us in August 1999 that North
                                   Korean government restrictions made it impossible to ensure that food was
                                   getting to the intended beneficiaries because there was no way to
                                   independently document where all the food was going. These North Korean
                                   government-imposed access limitations and WFP’s resulting inability to
                                   conduct unrestricted, random spot checks seriously hamper WFP’s ability
                                   to achieve food aid accountability.

Other Organizations Report         The Consortium and others have expressed concern over North Korean
Similar Concerns About North       restrictions on both WFP’s and their own ability to adequately account for
Korean Restrictions on Providing   food and other assistance. The Consortium has monitored distributions of
Accountability                     U.S. donations through WFP in North Korea since 1997, and WFP officials
                                   told us that the Consortium uses WFP accountability, monitoring, and
                                   reporting procedures. The Consortium reported to USAID in 1997 and 1998
                                   and told us in 1999 that, while they feel that most food reaches the intended
                                   beneficiaries, the North Korean authorities prevented their effective
                                   monitoring of significant amounts of the food distributed. As a result,
                                   Consortium monitors reported they could not verify how much food was
                                   received by the beneficiaries.

                                   In 1997, the Consortium team reported to USAID concerns about the effect
                                   of North Korean constraints on WFP food aid monitoring. The team
                                   reported that (1) some areas of the country that had received food aid had
                                   never been visited by monitors; (2) donors, such as WFP, had only marginal
                                   control over the distribution; (3) monitoring for all donors was restricted to
                                   prearranged visits to a limited number of sites and could not be conducted
                                   independently; and (4) government-assigned translators—whose first
                                   priority was reportedly to protect the image of their government—“covered
                                   up” things that they felt the Consortium team did not need to see or
                                   understand and worked to restrict the movement of the team. The team
                                   concluded: “We saw food, people, warehouses, and officials, but cannot
                                   fully verify where the food goes, how it gets there, and whether the



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assistance reaches the entire target group.” In 1998, the Consortium team
reported to USAID concerns about the ability of any organization to
maintain adequate control over food donations in North Korea. The team
reported that accountability for food aid was inadequate because (1) the
Consortium had no control over when or what project site to visit; (2) the
number of workers participating in the food-for-work projects appeared
inflated by authorities and therefore food may have been distributed to
people outside the targeted group; and (3) they remained uncertain of how
much food was actually provided to laborers.”

USAID, the European Union (EU), and other international relief
organizations have expressed concerns about the impact of North Korean
restrictions and their inability to adequately account for donations in North
Korea

• In 1997, officials of USAID who participated in a donor review of WFP
  operations in North Korea wrote in their trip report that (1) food
  distributions seemed “staged,” with only a limited number of the
  enrolled recipients turning out to receive food, and (2) there was less
  food than they expected, given the agreed-upon distribution plan, in
  county depots and distribution sites.
• EU, a major donor in the past, had problems monitoring food aid in
  North Korea, according to a May 1998 report.6 After conducting a review
  of WFP operations in North Korea, EU representatives wrote that WFP’s
  monitoring of food aid could be “more rigorously pursued.” In a separate
  report in March 1999,7 European Commission officials wrote that (1) it
  was seldom possible for EU monitors to follow a distribution of EU food
  through the North Korean distribution system, (2) the actual number of
  children per kindergarten or nursery appeared inflated by 25 to 30
  percent, (3) the number of patients declared by hospitals where food
  was provided was likewise largely overestimated, and (4) the EU
  monitors had doubts as to whether food received by the hospitals was
  distributed to needy patients.



6
 “Technical Mission to the Democratic People’s Republic of Korea, 9 - 16 May 1998,” and
cover letter, by representatives of Austria, Belgium, Denmark, Finland, France, Germany,
Ireland, Italy, Netherlands, Sweden, United Kingdom, and the European Commission.
7
 Report on the European Commission’s food aid and agricultural rehabilitation program in
North Korea during 1998, as prepared for presentation to European Union member states’
representatives of the Food Security Management Committee in March 1999.




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                                 • In September 1998, the international humanitarian organization
                                   Medecins Sans Frontieres (MSF, Doctors Without Borders) ended its
                                   nutritional programs and withdrew from North Korea after 1 year
                                   because, according to a report by the MSF Head of Mission in North
                                   Korea,8 (1) North Korean authorities prevented it from evaluating the
                                   impact of its assistance, (2) many hospitals inflated their registers with
                                   “fake malnourished” children, and (3) the central government attempted
                                   to cover up or deny the existence of the most malnourished children and
                                   denied MSF access to them. MSF officials told us that it left North Korea
                                   because it was suspicious about the lack of access by final beneficiaries
                                   to their medical assistance and that they remain convinced—though
                                   they lack evidence either way—that a large portion of international food
                                   aid is not reaching the needy.
                                 • In May 1999, WFP, dozens of U.S. and international nongovernmental
                                   organizations, and United Nations agencies with programs in North
                                   Korea held an international conference on humanitarian assistance to
                                   North Korea in Beijing, China.9 These organizations concluded that
                                   North Korea (1) has not accepted international standards to ensure that
                                   assistance has reached those in need, (2) has not allowed adequate
                                   access to vulnerable groups, and (3) requires prearranged monitoring
                                   visits.

                                 Despite concerns about North Korean constraints on WFP’s ability to verify
                                 the use of food aid, officials of the State Department, USAID, USDA, and
                                 Consortium members told us that WFP is doing a good job under difficult
                                 circumstances and that they believe that the vast majority of U.S.
                                 government-donated food is reaching its intended beneficiaries.

Food Shipped to Counties Later   North Korea is comprised of 211 counties. For reasons of national security
Closed to WFP Monitors by        or, according to WFP and U.S. nongovernmental groups working in North
North Korean Military            Korea, in order to prevent foreigners from observing the regions most
                                 severely affected by the food shortage, North Korea routinely forbids
                                 foreigners entry into many counties. According to WFP officials in North
                                 Korea, the number of closed counties—counties where North Korean


                                 8
                                 “Identification of an At-Risk Group: Socially Deprived Children,” released by MSF head of
                                 mission (Pyongyang, North Korea: Medecins sans Frontieres, Sept. 11, 1998).
                                 9
                                  “International NGO [Nongovernmental Organization] Conference on Humanitarian
                                 Assistance to the DPR (Democratic People’s Republic] Korea: Past, Present and Future, May
                                 3−5, 1999” (Beijing, China). This conference was sponsored by a nongovernmental umbrella
                                 organization, InterAction, headquartered in Washington, D.C.




                                 Page 16                                              GAO/NSIAD-00-35 Foreign Assistance
                              B-283605




                              authorities forbid WFP monitoring of its donations—has declined from 174
                              in 1996 to 49 in 1999, as the North Koreans have developed greater trust in
                              WFP. Currently, WFP has controlled access to 162 of North Korea’s 211
                              counties.

                              WFP’s agreements with North Korea stipulate that WFP shall have access
                              to monitor wherever WFP food is distributed. These agreements are
                              consistent with the frequently stated position of the Department of State—
                              that no U.S.-donated food shall be distributed that cannot be adequately
                              monitored. WFP told us, however, that in 1998 North Korean authorities
                              distributed at least 14,738 metric tons of WFP food to counties that they
                              had previously agreed would be open to WFP monitors but that after
                              distribution, the North Korean military blocked WFP from monitoring how
                              the food was used. The ultimate disposition of the food remains unknown.
                              WFP said that in one incident in May 1998, North Korean authorities
                              trucked food aid to 18 counties previously designated as open and then
                              denied access to WFP monitors. WFP reported that in a second incident in
                              October 1998, North Korean authorities trucked WFP food aid to 26
                              counties previously designated as open and then again denied access. WFP
                              did not report food aid shipped to the subsequently closed counties as lost
                              or stolen.

                              As a result of these North Korean actions, WFP, in commenting on a draft of
                              this report, stated that it took the following corrective measures. In May
                              1998, WFP introduced a policy of “no access-no food.” As a result, the
                              delivery of food to counties where WFP had no access was stopped, and
                              the corresponding amount of food aid was deducted from the totals
                              planned for the overall operation. In August 1999, when WFP could not get
                              access to nine counties, WFP decided to reallocate the food originally
                              intended for these counties to provide increased rations for pregnant and
                              lactating women in accessible counties.

WFP Subsidizes North Korean   To promote North Korea’s compliance with the agreed-upon distribution
Deliveries of its Donations   plans, and because WFP relies on the fuel-poor government to transport its
                              food, WFP pays a fuel subsidy to the North Korean government of
                              $8 dollars for every ton of food transported by truck. WFP reported that as
                              of August 1999 it had paid North Korea over $5 million in fuel subsidies to
                              help pay for transportation services and that it is due to pay $2.6 million
                              more for food transported earlier in the year. If WFP learns, through its
                              waybill system, that North Korean authorities have transported food to
                              counties where monitoring is forbidden, WFP can reduce the total fuel
                              subsidy by an amount equal to the subsidy that would have been paid for



                              Page 17                                     GAO/NSIAD-00-35 Foreign Assistance
                            B-283605




                            transporting that food. For example, as a result of the 14,738 metric tons of
                            food shipped to closed counties in 1998, WFP told us that in late 1998 it
                            withheld $117,901 in fuel subsidies.


WFP Not Meeting Reporting   WFP guidelines require that the program report to donors on food use upon
Requirements, and Loss      the completion of an emergency operation, and host governments are
                            required to provide an audit report at the end of each emergency operation.
Rates May Not Be Accurate   We found that North Korea has not provided any audit reports to WFP as
                            required by its agreements. This has impacted WFP’s ability to accurately
                            report back to its donors. We also found that, partly as a consequence, WFP
                            has not provided the latest report to donors. Given North Korean
                            constraints on WFP accountability procedures, WFP cannot be sure of the
                            accuracy of its reports to donors on food use because it cannot
                            independently verify where food aid has been provided.

                            WFP policy requires it, upon the completion of an emergency operation, to
                            provide reports to donors on the use of food, including losses. WFP
                            officials in Rome told us that WFP has distributed reports to donors on
                            North Korea operations for 1995, 1996, and 1997, but it has not yet met its
                            requirement to provide reports on operations in 1998. WFP officials told us
                            that they are routinely late—frequently over a year—in providing reports to
                            donors, in part because recipient governments are late in providing
                            information to WFP. WFP’s project report for 1997, though distributed, is
                            incomplete, and its report for 1998 is late in part because North Korea has
                            not provided food use information to WFP.

                            WFP agreements with North Korea specify that North Korea must provide
                            an audit report upon the completion of an operation. These audit reports
                            are intended to provide WFP information about the beneficiaries, the
                            quantity and condition of the food received, where it was distributed, any
                            losses, the government’s use of WFP subsidies, the nutritional impact of
                            WFP food donations on beneficiaries, and lessons learned. North Korea has
                            not provided any of the audit reports that are due to WFP for programs it
                            has already completed.

                            WFP policy requires WFP monitors to observe distribution of food aid to
                            verify government reports on food use, which together provide the basis
                            for the Executive Director’s reports to donors. Because North Korea does
                            not allow WFP to fully monitor food distribution as its policies require,
                            WFP cannot provide the independent check to ensure the accuracy of
                            government reporting. WFP officials told us that the issue of North Korean



                            Page 18                                      GAO/NSIAD-00-35 Foreign Assistance
                  B-283605




                  reporting delays “has consistently been raised with the government.” They
                  also told us that WFP’s Executive Director had discussed the importance of
                  timely reporting to donors with senior North Korean officials. WFP officials
                  could not tell us, however, whether any agreement emerged from this
                  discussion.



Conclusions       The World Food Program is responsible to its donors to provide reasonable
                  assurance that donations are appropriately managed and reach targeted
                  beneficiaries and to provide donors timely and accurate reports on food
                  use in North Korea. Without this information, donors will be unable to
                  make informed decisions to either emphasize to North Korean authorities,
                  through diplomatic means, the importance of better accountability or to
                  decrease their contributions to the World Food Program’s operations in
                  North Korea. The World Food Program agrees that because of the North
                  Korean constraints, it is unable to randomly monitor food aid in North
                  Korea. As a result, the World Food Program is unable to provide
                  independent assurance that food aid distributed by North Korean
                  authorities is reaching targeted beneficiaries. North Korean constraints on
                  the World Food Program may also put it in the position of inadvertently
                  paying fuel subsidies to transport food outside the agreed-upon distribution
                  plans. The World Food Program, State, USAID, and USDA officials have
                  emphasized that there is no evidence of significant diversions to the
                  military or governing elite. However, neither is there evidence that the
                  proper amount of food is reaching the intended beneficiaries. Because of
                  North Korean restrictions on monitoring, there is insufficient evidence
                  either way.



Recommendations   In order to comply with State Department policy that no food aid be
                  provided to North Korea that cannot be adequately monitored, we
                  recommend that the Secretary of State direct the U.S. Representative at the
                  U.S. Mission to the U.N. Agencies for Food and Agriculture in Rome, Italy,
                  to

                  • emphasize to the North Korean representative to the U.N. Agencies for
                    Food and Agriculture the importance of meeting its commitments
                    agreed to in agreements with the World Food Program, including
                    granting World Food Program staff improved access to track and
                    monitor World Food Program food donations and providing required
                    audit reports in a timely fashion, and



                  Page 19                                     GAO/NSIAD-00-35 Foreign Assistance
                  B-283605




                  • request that the World Food Program’s Executive Director provide the
                    U.S. government comprehensive and timely reports on the use of U.S.-
                    donated food in North Korea, including information on (1) North Korea’s
                    monitoring restrictions; (2) the impact of monitoring restrictions on the
                    World Food Program’s ability to provide independent, accurate reports
                    on food use; (3) the World Food Program’s efforts to persuade North
                    Korean authorities to allow the World Food Program to perform
                    independent monitoring; (4) North Korean responses to the World Food
                    Program’s suggested improvements; and (5) the use by the World Food
                    Program’s Executive Director of her authority to withhold food aid and
                    fuel subsidies as one method of responding to North Korean-imposed
                    constraints to effective accountability.

                  Should North Korea’s cooperation in working to achieve commonly
                  accepted food aid accountability standards—with emphasis on access and
                  independent verification—be unsatisfactory, we recommend that the
                  Secretary of State consider whether a change in U.S. policy on food aid
                  operations in North Korea may be appropriate.



Agency Comments   We requested comments on a draft of this report from the World Food
                  Program, the Departments of Agriculture and State, and USAID. The World
                  Food Program generally agreed with our report findings, detailed its efforts
                  to improve monitoring, noted the strong congressional and administration
                  support for the program, and stated that despite the difficulties of
                  operating in North Korea the humanitarian needs in North Korea were the
                  primary consideration of the program. The Department of Agriculture
                  provided comments orally and was in general agreement with the findings
                  and recommendations in this report. The Department of State and USAID
                  provided written comments. Their comments and our evaluation of them
                  are in appendix I. The World Food Program’s written comments are in
                  appendix II. State and USAID stated that they believed the draft (1) relied
                  on the most negative examples available and was overly critical of the
                  World Food Program’s ability to provide accountability over U.S.
                  donations, (2) noted a linkage between U.S. food donations and overall
                  national security goals that did not exist, and (3) mischaracterized U.S.
                  policy on monitoring food donations. In addition, USAID stated that famine
                  conditions persist in North Korea, and ample evidence exists that the
                  proper amount of U.S. donations reaches the target population. However,
                  both State and USAID stated that they will work with the World Food
                  Program and the North Koreans to implement our recommendations aimed




                  Page 20                                     GAO/NSIAD-00-35 Foreign Assistance
              B-283605




              at improving accountability over U.S. donations through improvements in
              monitoring and reporting.

              We do not agree with State and USAID on a number of their comments. We
              believe that we were not overly critical of the World Food Program’s ability
              to provide adequate accountability over U.S. food donations. Our
              assessment was based on information we obtained from the World Food
              Program and the Consortium, and officials from these organizations told us
              that because of North Korean restrictions effective monitoring was not
              possible. We did not mischaracterize U.S. policy on monitoring U.S. food
              donations to North Korea. U.S. policy is to insist on adequate monitoring to
              ensure food is distributed to targeted populations. For example, in October
              1998, State said that “no U.S. food aid is distributed if it cannot be
              monitored.” USAID stated that our report could leave the impression that
              the famine in North Korea was over; however, our report is clear that we
              did not assess the impact of the famine or food aid needs, although we
              noted that there is not a consensus on either of these issues. We disagree
              with USAID that there is ample evidence that the proper amount of food is
              reaching the beneficiaries. We found that because of North Korean
              restrictions there is no definitive evidence on how much food aid is needed
              or that food is reaching the beneficiaries in the proper amounts.
              Furthermore, because North Korea has refused to allow the World Food
              Program to conduct follow-on nutritional surveys, the World Food Program
              cannot use this method to determine whether food aid is being used as
              intended. Finally, we have revised the report, based on State and USAID
              comments, to explicitly state the official U.S. position that there is no
              linkage between food donations and overall national security goals in
              North Korea.

              State, USAID, and the World Food Program also provided technical
              comments, which we incorporated into the report where appropriate.



Scope and     To determine whether the World Food Program had established and
              implemented controls for monitoring and reporting on U.S. government-
Methodology   donated food aid to North Korea, we interviewed senior World Food
              Program officials at WFP headquarters in Rome, Italy, and the World Food
              Program’s country director for North Korea in Washington, D.C. We also
              collected written responses to our questions from the World Food
              Program’s country office in North Korea. We solicited additional input from
              spokesmen of the U.S. private voluntary organization Consortium and
              other members of nongovernmental organizations active in North Korea,



              Page 21                                     GAO/NSIAD-00-35 Foreign Assistance
B-283605




and we reviewed and assessed World Food Program and Consortium
reports to the U.S. government, European Union reports, and
nongovernmental conference proceedings. We collected and analyzed
information from the Departments of State and Agriculture and the U.S.
Agency for International Development. North Korea did not allow us to
conduct an in-country review of the World Food Program’s procedures and
controls in place to prevent diversions.

As an agency of the U.S. government, we do not have audit authority over
the World Food Program. Nonetheless, the organization was generally
helpful and cooperative in our study.

We performed our review from June 1999 through September 1999 in
accordance with generally accepted government auditing standards.


As agreed with your staff, unless you publicly announce its contents earlier,
we plan no further distribution of this report until 30 days from its issuance
date. At that time, we will provide copies of this report to other interested
committees; the Honorable Madeleine K. Albright, the Secretary of State;
the Honorable J. Brady Anderson, Administrator, Agency for International
Development; the Honorable Dan Glickman, the Secretary of Agriculture;
and Ms. Catherine Bertini, Executive Director of the World Food Program.

If you have any questions about this report, please contact me or Phillip
Thomas at (202) 512-4128. Key contributors to this assignment were Ned
George and Christian Hougen.

Sincerely yours,




Harold J. Johnson, Associate Director
International Relations and Trade Issues




Page 22                                       GAO/NSIAD-00-35 Foreign Assistance
Page 23   GAO/NSIAD-00-35 Foreign Assistance
Appendix I

Comments From the Department of State and
U.S. Agency for International Development                                  Appendx
                                                                                 Ii




Note: GAO comments
supplementing those in the
report text appear at the end
of this appendix.




                                Page 24   GAO/NSIAD-00-35 Foreign Assistance
                           Appendix I
                           Comments From the Department of State and
                           U.S. Agency for International Development




See comment 1.




Now on p. 1.
See comment 2.




Now on pp. 4, 7, and 19.
See comment 3.




                           Page 25                                     GAO/NSIAD-00-35 Foreign Assistance
Appendix I
Comments From the Department of State and
U.S. Agency for International Development




Page 26                                     GAO/NSIAD-00-35 Foreign Assistance
                 Appendix I
                 Comments From the Department of State and
                 U.S. Agency for International Development




See comment 1.




                 Page 27                                     GAO/NSIAD-00-35 Foreign Assistance
                            Appendix I
                            Comments From the Department of State and
                            U.S. Agency for International Development




Now on p. 1.
See comment 2.




Now on p. 8.
See comment 4.




Now on p. 12, 14, and 16.
See comment 5.




                            Page 28                                     GAO/NSIAD-00-35 Foreign Assistance
                 Appendix I
                 Comments From the Department of State and
                 U.S. Agency for International Development




Now on p. 14.
See comment 6.




Now on p. 19.
See comment 7.




                 Page 29                                     GAO/NSIAD-00-35 Foreign Assistance
Appendix I
Comments From the Department of State and
U.S. Agency for International Development




Page 30                                     GAO/NSIAD-00-35 Foreign Assistance
              Appendix I
              Comments From the Department of State and
              U.S. Agency for International Development




              The following are GAO’s comments on the Department of State’s and the
              U.S. Agency for International Development’s letters, dated September 27
              and September 29, 1999, respectively.



GAO Commets   1. Our draft report did not present an unbalanced view of WFP’s ability to
              monitor food aid or rely on the most negative examples available. We used
              information from the most knowledgeable sources available: WFP and
              representatives of the private voluntary organizations active in North
              Korea. Both organizations have tried to monitor food aid in North Korea for
              years, and both acknowledge that North Korean restrictions impair their
              ability to provide the independent, random monitoring needed to verify
              that food is reaching the intended beneficiaries. WFP also told us that
              because of these limitations, it has not been able to visit 90 percent of the
              institutions where food is supposed to be distributed. USAID has paid the
              Consortium $4.5 million, in part to report on their ability to monitor food
              aid. Their reports to USAID, covering 1997 through 1999, document a
              persistent inability to independently monitor food donations. These
              limitations were further confirmed by (1) USAID’s 1997 assessment of the
              World Food Program’s program in North Korea; (2) the European
              Commission; and (3) the 1999 Beijing Conference, attended by WFP, other
              U.N. organizations, dozens of private voluntary organizations, and a State
              Department representative. In all these cases, they concluded that because
              of North Korean restrictions it was impossible to conduct adequate
              monitoring to determine if food was reaching the intended recipients.

              2. State and USAID stated that food aid is provided to North Korea on
              purely humanitarian grounds and that there is no explicit link to U.S.
              efforts to promote nuclear deterrence and promote peace on the Korean
              peninsula. We have modified our report as suggested.

              3. We did not mischaracterize U.S. policy on monitoring U.S. food
              donations to North Korea. U.S. policy is to insist on adequate monitoring to
              ensure food is distributed to targeted populations. For example, in October
              1998, State said that “no U.S. food aid is distributed if it cannot be
              monitored,” and in March 1999, the U.S. Department of Agriculture stated
              that “no food aid to (North Korea) is distributed without WFP monitoring.”

              4. USAID agreed that the level of food needed in North Korea cannot be
              accurately determined but expressed concern that our observation could
              leave the impression that the famine is not real. While there is a consensus
              that there have been food shortages, we did not attempt to verify the full



              Page 31                                      GAO/NSIAD-00-35 Foreign Assistance
Appendix I
Comments From the Department of State and
U.S. Agency for International Development




impact of the famine on North Korea or estimate the level of food needs.
However, we did note, during the course of the review, that there was not a
consensus on the precise impact of the famine or the food needs. In
commenting on our draft, WFP agreed that the food needs of North Korea
could not be precisely determined because of North Korean resistance to
conducting a nationwide nutritional survey.

5. We agree with USAID that the Consortium member was not officially a
Consortium spokesman and have modified the report accordingly.

6. We disagree with USAID that there is sufficient evidence, as documented
by WFP’s monitoring systems and the observations of independent
observers, to demonstrate that the proper amount of food is reaching the
beneficiaries. As we state in the report, we believe that there is insufficient
evidence to make this determination. WFP agreed that it has not been able
to make random, independent spot checks on any part of the distribution
system, and it has not been allowed to visited 90 percent of the institutions
where food is supposed to be distributed. Moreover, WFP and Consortium
officials told us that, because of North Korean restrictions placed on WFP
monitoring, there is simply no evidence that diversions are or are not
occurring. We also note that North Korea has not agreed to WFP’s plans to
conduct a follow-on nutritional survey to determine the impact of food aid.
Finally, we found no independent observers who have been given
unrestricted access to determine the impact of food aid on the overall
target population. This includes the WFP Executive Director and
representatives from USAID and State.

7. We disagree with USAID that since there is no evidence of any
significant diversions of food, we should delete any reference to the
possibility that the fuel subsidies could be paid to help transport diverted
food aid. As we noted in the report, given the North Korean constraints
imposed on WFP, there is also no evidence that diversions are not
occurring. Therefore, references to the payment of fuel subsidies remain in
the report.




Page 32                                       GAO/NSIAD-00-35 Foreign Assistance
Appendix II

Comments From the World Food Program                         Appendx
                                                                   Ii




              Page 33       GAO/NSIAD-00-35 Foreign Assistance
Appendix II
Comments From the World Food Program




Page 34                                GAO/NSIAD-00-35 Foreign Assistance
Appendix II
Comments From the World Food Program




Page 35                                GAO/NSIAD-00-35 Foreign Assistance
Appendix II
Comments From the World Food Program




Page 36                                GAO/NSIAD-00-35 Foreign Assistance
Appendix II
Comments From the World Food Program




Page 37                                GAO/NSIAD-00-35 Foreign Assistance
                   Appendix II
                   Comments From the World Food Program




(711429)   Leter   Page 38                                GAO/NSIAD-00-35 Foreign Assistance
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