Did the United Nations Development Program, the U.N.’s multibillion-dollar development flagship, break its own rules in offering assistance to the dictatorship of Kim Jong Il?

The long awaited answer, offered up by the U.N.’s own Board of Auditors, is a clear "Yes" — though UNDP itself quickly spun the answer as a vindication.

The long-awaited and controversial audit of United Nations operations in North Korea has concluded that, in line with accusations first raised by a senior U.S. diplomat, the United Nations Development Program and other agencies contravened their own regulations in hiring local staff nominated by the dictatorial North Korean government, and in making unauthorized hard currency payments to the Kim Jong Il regime.

The auditors, who stressed that their work was only a preliminary investigation, also declared they were unable to determine the total amount of unorthodox payments that had made. They lacked access to documentation from the U.N.’s offices in North Korea, a frequent observation throughout their report, and even lacked access to the cashed checks involved in the transactions. The auditors also were refused access to North Korea by the Kim Jong Il regime, which refused to cooperate in the investigation.

Paradoxically, the results of the audit immediately were hailed as a vindication by the UNDP, the United Nations’ flagship development organization, which has been largely responsible for running U.N. operations in North Korea.

The UNDP claim was that the report did not specifically support all the charges originally raised last January by U.S. Ambassador to the U.N. Mark Wallace, citing unpublished previous U.N. audits, that tens of millions of dollars in UNDP spending might have been misappropriated by the Kim Jong Il government as a result of the UN’s unorthodox policies in North Korea. Among other things, Wallace declared that it was “impossible” for the U.N. aid agency to verify whether its funds “have actually been used for bona fide development purposes or if the DPRK [North Korea] has converted such funds for its own illicit purposes.”

According to UNDP spokesman David Morrison, the latest audit findings are still under review by the U.N. development organization, which plans to file a formal response. But Morrison declared that the latest audit findings explicitly ruled out the possibility that there had been any diversion of UN funds to North Korea’s nuclear weapons program, and, contrary to U.S. Ambassador Wallace’s January assertions, said that UNDP officials had in most cases been able to visit UN development projects in North Korea to determine that money had been properly spent. “the money went where it was intended,” he said.. Moreover, he claimed, the audit confirmed that there were only “modest” levels of funding involved.

In fact, the specific language of the audit did not necessarily support Morrison’s assertion, especially insofar as the auditors declared they had not even had access to the checks used to pay North Korean staffers or other bills. Morrison’s arguments about the “modest” size of UNDP payments were also immediately contested by a U.S. official, speaking on background, who pointed out that the report tallied more than $72 million in spending by various U.N. agencies in North Korea from 2002 to 2006, and the list of agencies was far from inclusive. (The latest audit specifies thaht UNDP processed payments on behalf of all the mentioned agencies.) During that period, UNDP and one of its subordinate agencies operated anywhere from 28 to 41 projects in North Korea.

The same official pointed out that the audit report said only that visits to projects “only occurred in a coordinated way with the authorization and supervision of DPRK authorities.” (Nor did the report specify whether locally hired UNDP staffers, who continued to work for the Kim Jong Il government, were the ones actually carrying out the visits.)

For his part, Secretary-General Ban Ki-Moon was more cautious in drawing conclusions about the audit findings. A statement issued by his official spokesman, Michelle Montas, noted that the report “does not indicate that large-scale UN funding has been systematically diverted, as has been alleged” -- an unsurprising conclusion, as the report specifically declared that it was unable to judge the amount of funds involved in hard currency payments, without access to documentation in North Korea. But the spokesman’s statement also declares that the auditors’ document “identifies practices not in keeping with how the UN operates elsewhere in the world.”

Ban’s spokeman said that the Secretary General would ask for a further continuation of the auditing process, including a visit by auditors to North Korea, without mentioning the fact that North Korea already has rejected any such cooperation.

In one sense, the entire debate over diversion of UNDP money in North Korea became moot two months ago. At that time, even while declaring it had done no wrong, UNDP revised its policies to prevent further North Korean selection and control of local staff, and banning any payments in hard currency in that country. North Korea refused to accept the new rules, and all UNDP staff have subsequently left the country. A variety of other U.N. agencies, however, including the World Food Program and UNICEF, continue to operate there.

Even while declaring that it lacked access to documents that would have revealed the full extent of hard currency payments to North Korea, the latest audit makes clear that North Korean input into UNDP operations in the country was extensive and pervasive. Of 31 UNDP staff in North Korea in February, 22 were described as local hires, meaning North Korean government nominees, who, the report notes. These included four of UNDP’s program officers, the Information Technology officer who managed local computer networks, and the finance officer.

According to the report, these local hires were “seconded” to the UN agencies from the North Korean government, meaning that they were still government employees, and in general considered to be immune to U.N. rules and regulations governing staff conduct.

The report also noted, as Ambassador Wallace had done in his original complaint, that the unorthodox hiring and foreign exchange practices of the UNDP in North Korea had been exposed in previous audits dating back to 2001.

In his original complaint, Wallace noted that audits had uncovered the practices dating back to 1994; his point was that nothing was done as a result. In a brief on-the-record comment after the latest audit report was released, Wallace declared that the document “vindicated certainly some of our concerns.”

The UNDP’s current argument, on the other hand, is that members of the 36-nation Executive Board supervising UNDP activity (which includes both the U.S.and North Korea) were aware of those practices through the previous audits, and tacitly accepted them. UNDP spokesman Morrison indicated his agency’s view that there were no restrictions, for example, on the type of currency to be used in local economies.

The audit report itself noted that the UN’s current chief representative in North Korea, known as the Resident Representative, viewed the paying of North Koreans in hard currency to be an “established practise” in place when he first arrived in July 2005.

The latest audit report, on the other hand, while noting a lack of basic documentation on payment practices in North Korea, specifically mentioned that hard currency payments were made in violation of specific sections of a basic operating agreement covering UNDP operations in North Korea.

The latest audit report added a further mystery of its own. It was signed not by the auditors who carried out the investigation, but by senior officials in the member countries who had provided the experts under U.N. auspices. UNDP spokesman Morrison was unable to say why the auditors themselves did not sign the document, but it is known that one member of the three-man team who carried out the work, Pierre Brodeur of France, abruptly resigned from the group before the audit was made public. Brodeur was contacted prior to the audit’s publication by FOX News, but refused to make any statements.

There has been widespread speculation that Brodeur resigned due to disagreements with the audit’s conclusions, or the lack of access to documents required for a more definitive report.