oversight

Foreign Assistance: North Korean Constraints Limit Food Aid Monitoring

Published by the Government Accountability Office on 1999-10-27.

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

                          United States General Accounting Office

GAO                       Testimony
                          Before the Committee on International Relations, House of
                          Representatives




For Release on Delivery
Expected at
10:00 a.m., EDT
                          FOREIGN ASSISTANCE
Wednesday,
October 27, 1999

                          North Korean Constraints
                          Limit Food Aid Monitoring
                          Statement of Benjamin F. Nelson, Director, International
                          Relations and Trade Issues, National Security and
                          International Affairs Division




GAO/T-NSIAD-00-47
          Mr. Chairman and Members of the Committee:

          I am pleased to be here today to discuss our recently completed
          assessment of the World Food Program procedures to monitor and report
          on U.S. government-donated food aid to North Korea. The United States is
          one of the largest donors of emergency food to North Korea, with
          cumulative donations since 1996 valued at about $365 million. Most of this
          food aid is channeled through the United Nation’s World Food Program
          and, as of June 1999, U.S. donations 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, this
          food aid is being provided to address the widespread food shortage in
          North Korea. The Department of State also believes that these food
          donations may improve the climate of the bilateral relationship with North
          Korea on a host of issues, including negotiations regarding North Korea’s
          development of nuclear weapons and the maintenance of peace on the
          Korean peninsula. You had expressed concerns, Mr. Chairman, as to
          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. My statement today is
          based on our recent report for the Committee on this topic.1 Our objective
          was 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.

          I want to emphasize at the outset that we recognize that food aid
          distributed by the World Food Program has played an important role in
          helping to alleviate hunger and saving lives around the world, and, as noted
          in our report, the World Food Program is performing a difficult role in
          North Korea.



Summary   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.

          1
           Foreign Assistance: North Korea Restricts Food Aid Monitoring (GAO/NSIAD-00-35,
          Oct. 8, 1999).




          Page 1                                                             GAO/T-NSIAD-00-47
                           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 on where U.S. government-donated food aid is being distributed
                           in North Korea.

                           Mr. Chairman, I would like to now discuss the findings and
                           recommendations of our report in more detail and the responses we
                           received from the World Food Program, State, and the U.S. Agency for
                           International Development.



North Korea Limits         World Food Program (WFP) and State Department officials told us that
                           there is no evidence of significant diversions of food aid to the military or
Ability of WFP to          governing elite in North Korea and that they have confidence in WFP’s
Assure Accountability      ability to account for food aid in North Korea. However, while the WFP and
                           U.S. government agencies believe that the bulk of the food reaches the
                           needy, these organizations cannot 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 to all stages of the food distribution process. U.S. private
                           voluntary organizations, State, the U.S. Agency for International
                           Development (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               WFP donations generally become the property of the recipient government
Accountability Standards   once they arrive in-country and, in most countries in which it operates,
                           including North Korea, WFP is not directly responsible for food aid
                           distribution. Food distribution is the responsibility of the recipient
                           government. Nevertheless, 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—as in the case of
                           North Korea—and nongovernmental organizations that distribute its food
                           aid, and then monitoring and reporting on actual food use. WFP’s policy
                           manual provides standard language for agreements between WFP and


                           Page 2                                                      GAO/T-NSIAD-00-47
                           recipient governments that stipulates basic accountability, monitoring, and
                           reporting requirements to help achieve these accountability objectives.

                           Food aid monitoring, according to WFP’s policy manual, includes “frequent
                           visits to [distribution] centers to inspect records and actual stocks” and
                           “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 agreements with North Korea incorporate this standard WFP
                           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.


WFP Accountability for     WFP officials told us their operations in North Korea are essentially a
Food Aid Largely Depends   North Korean government program, in which WFP’s role is to help North
                           Korean authorities implement the program by providing advice,
on North Korean
                           establishing internal control systems, monitoring to see if systems work,
Government                 and training government officials in food management. One of the primary
                           accountability mechanisms WFP relies upon in North Korea is the extreme
                           degree of order imposed by the government on all facets of society. We
                           were also told that diversions of 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. This “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.




                           Page 3                                                     GAO/T-NSIAD-00-47
WFP’s Tracking System in    WFP and the North Korean government established a food tracking system
North Korea Does Not        in 1997 to collect information from the government about its distribution of
                            WFP food. WFP attempts to track food aid trucked from the ports to
Adequately Track Food
                            county warehouses using this system, which is administered by North
From Time of Arrival to     Korean authorities. WFP and North Korean government authorities
Distribution to Final       co-develop and co-sign food distribution plans and then use waybills to
Beneficiaries               verify that the distribution to warehouses took place as agreed.

                            However, we found several weaknesses in this food tracking system. For
                            example, 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.
                            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.

                            In addition, the tracking system does not track all the donations. 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.


North Korea Precludes       According to WFP officials, North Korea has not allowed WFP
Effective Food Monitoring   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 not given WFP monitors complete information about the numbers,
                              names, and location of institutions and the numbers of beneficiaries at
                              locations receiving its food; and
                            • have rarely allowed WFP monitors to select the institutions they wish to
                              visit.

                            WFP estimates that 90 percent of the 43,000 North Korean institutions
                            receiving food aid have not received monitoring visits, and WFP monitors


                            Page 4                                                     GAO/T-NSIAD-00-47
                           have rarely been allowed to observe the actual distribution of food to
                           beneficiaries. WFP officials told us that even with complete access, WFP
                           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. According to WFP officials in Rome, WFP has
                           determined that 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 it may have particular concerns.

                           Nevertheless, according to officials of the State Department, the U.S.
                           Agency for International Development, the U.S. Department of Agriculture,
                           and U.S. nonprofit organizations, WFP is doing a good job under difficult
                           circumstances and they believe the food is getting to the beneficiaries. As
                           evidence, WFP 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
                           improved.


Food Shipped to Counties   WFP’s agreements with North Korea stipulate that WFP shall have access
Later Closed to WFP        to monitor wherever WFP food is distributed. These agreements are
                           consistent with the frequently stated position of the Department of State—
Monitors by North Korean
                           that no U.S.-donated food shall be distributed that cannot be adequately
Military                   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 did not report food aid shipped to the subsequently closed counties as
                           lost or stolen.

                           As a result of these North Korean actions, WFP stated that in May 1998
                           WFP introduced a policy of “no access-no food.” WFP told us that 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.




                           Page 5                                                      GAO/T-NSIAD-00-47
WFP Subsidizes North       To promote North Korean compliance with the agreed-upon distribution
Korean Deliveries of its   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
Donations
                           $8 for every ton of food transported by truck, which WFP told us is
                           comparatively inexpensive. 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 reduces the total fuel subsidy by an amount
                           equal to the subsidy that would have been paid for 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            WFP guidelines require that it report to donors on food use upon the
                           completion of an emergency operation, and host governments are required
Reporting                  to provide an audit report at the end of each emergency operation. We
Requirements, and          found that North Korea has not provided any audit reports to WFP as
                           required by its agreements. This has affected WFP’s ability to accurately
Loss Rates May Not Be      report back to its donors. Given North Korean constraints on WFP
Accurate                   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 it has distributed reports to donors on North
                           Korea operations for 1995, 1996, and 1997 but that WFP’s project report for
                           1997, though distributed, is incomplete. Its report for 1998 is late in part
                           because North Korea has not provided food use information to WFP.

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



                           Page 6                                                     GAO/T-NSIAD-00-47
                        WFP policy further 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. In North Korea,
                        however, WFP cannot provide the independent check to ensure the
                        accuracy of government reporting. WFP officials told us that the issue of
                        North Korean reporting delays “has consistently been raised with the
                        government.”



WFP, State, and USAID   In our report, we made recommendations aimed at (1) improving
                        accountability over food distributions that are intended to help ensure that
Responses to Our        the food is reaching the intended beneficiaries and (2) improving reporting
Recommendations         by WFP on its work in North Korea. For example, we recommended that
                        the Secretary of State, acting through the U.S. Representative at the U.S.
                        Mission to the U.N. Agencies for Food and Agriculture in Rome, Italy,
                        emphasize to the North Korean representative the importance of meeting
                        North Korea’s commitments agreed to in its 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.

                        To improve WFP’s reporting, we recommended that the Secretary of
                        State—again, acting through the U.S. Representative at the U.S. Mission to
                        the U.N. Agencies for Food and Agriculture in Rome, Italy—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 these 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.

                        In their comments, the World Food Program generally agreed with our
                        report findings, detailed its efforts to improve monitoring, noted 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. Both State



                        Page 7                                                     GAO/T-NSIAD-00-47
and USAID stated that they will work with the World Food Program and the
North Koreans to implement our recommendations aimed at improving
accountability over U.S. donations through improvements in monitoring
and reporting.

State and USAID also made some additional observations. For example,
they believe the report relied on the most negative examples available and
was overly critical of the World Food Program’s ability to provide
accountability. In addition, USAID stated that famine conditions persist in
North Korea and were concerned that our report could leave the
impression that the food shortage in North Korea is over.

In our report, we pointed out that we were not overly critical of the World
Food Program’s ability to account for food aid in the difficult environment
of North Korea. Our assessment was based on information obtained from
World Food Program officials in Rome and North Korea and the published
reports of the U.S. government-funded consortium of private voluntary
groups that have used WFP procedures to assist WFP in its monitoring of
U.S. food aid in North Korea since 1997. WFP and the USAID- and
USDA-funded Consortium are the most authoritative sources on the
current conditions affecting WFP’s ability to account for U.S.
government-donated food aid to North Korea.

In response to USAID’s comment that our report could leave the
impression that the food shortage in North Korea is over, our report makes
it clear that we did not assess the impact of the food shortage or North
Korea’s food aid needs. As the report points out, our objective was 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. We did note, though, that there is not a consensus
on either of these issues, which we feel is part of the fundamental challenge
to accountability in North Korea. We have addressed these and other
comments by WFP, State, and USAID in our report.




Page 8                                                      GAO/T-NSIAD-00-47
                   Mr. Chairman, that completes my prepared statement. I will be pleased to
                   respond to any questions you may have.

                   Contact and Acknowledgments

                   For future contacts regarding this testimony, please call Benjamin F. Nelson
                   at (202) 512-4128. Key contributors to this testimony included Harold
                   Johnson, Phillip Thomas, Ned George, and Christian Hougen.




(711457)   Leter   Page 9                                                     GAO/T-NSIAD-00-47
Ordering Information

The first copy of each GAO report and testimony is free.
Additional copies are $2 each. Orders should be sent to the
following address, accompanied by a check or money order made
out to the Superintendent of Documents, when necessary, VISA and
MasterCard credit cards are accepted, also.

Orders for 100 or more copies to be mailed to a single address are
discounted 25 percent.

Orders by mail:

U.S. General Accounting Office
P.O. Box 37050
Washington, DC 20013

or visit:

Room 1100
700 4th St. NW (corner of 4th and G Sts. NW)
U.S. General Accounting Office
Washington, DC

Orders may also be placed by calling (202) 512-6000
or by using fax number (202) 512-6061, or TDD (202) 512-2537.

Each day, GAO issues a list of newly available reports and
testimony. To receive facsimile copies of the daily list or any list
from the past 30 days, please call (202) 512-6000 using a touchtone
phone. A recorded menu will provide information on how to obtain
these lists.

For information on how to access GAO reports on the INTERNET,
send an e-mail message with “info” in the body to:

info@www.gao.gov

or visit GAO’s World Wide Web Home Page at:

http://www.gao.gov
United States                       Bulk Mail
General Accounting Office      Postage & Fees Paid
Washington, D.C. 20548-0001           GAO
                                 Permit No. GI00
Official Business
Penalty for Private Use $300

Address Correction Requested