Index

Foreign Assistance: North Korea Restricts Food Aid Monitoring (Letter
Report, 10/08/1999, GAO/NSIAD-00-35).

Pursuant to a congressional request, GAO reviewed the procedures the
World Food Program (WFP) has established and implemented to monitor and
report on U.S. government-donated food aid provided to North Korea.

GAO noted that: (1) U.S. policy is that no food aid will be provided to
North Korea if it cannot be adequately monitored; (2) WFP has
established procedures to track and monitor food aid deliveries to North
Korea; (3) however, the North Korean government has not allowed WFP 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; (4)
specifically, the North Korean government, which controls food
distribution, has denied WFP full access to the food distribution chain
and has not provided required reports on food use; and (5) consequently,
WFP cannot be sure it is accurately reporting where U.S.
government-donated food aid is being distributed in North Korea.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  NSIAD-00-35
     TITLE:  Foreign Assistance: North Korea Restricts Food Aid
	     Monitoring
      DATE:  10/08/1999
   SUBJECT:  International food programs
	     Accountability
	     Internal controls
	     International agreements
	     Foreign governments
	     Program evaluation
	     Reporting requirements
	     International relations
IDENTIFIER:  UN World Food Program
	     North Korea

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

October 1999

FOREIGN ASSISTANCE 

North Korea Restricts Food Aid Monitoring
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GAO/NSIAD-00-35

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

Figure 1:  Tons of Food Contributed to North Korea Through WFP
From the United States and Other Donors, January 1998 - June 19996

Figure 2:  U.S. Contributions to North Korea Through WFP,
1996 - July 1999                                 7

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

                                                      National Security and
                                             International Affairs Division

B-283605

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./Footnote1/

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 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.

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 Korea/Footnote2/ (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./Footnote3/ 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.

Figure****Helvetica:x11****1:    Tons of Food Contributed to North Korea
                                 Through WFP From the United States and
                                 Other Donors, January 1998 - June 1999

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Source: WFP.

Figure****Helvetica:x11****2:    U.S. Contributions to North Korea Through
                                 WFP, 1996 - July 1999 

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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./Footnote4/ The Consortium
also 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 monitor/Footnote5/) 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 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 Ability of WFP to Ensure Accountability

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 elite in North Korea and that they have confidence in WFP's
ability to 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 Accountability Standards
-------------------------------------

According to WFP's policy manual, Food Aid in Emergencies (Book A,
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****Symbol:xbc****are properly received, handled, distributed
to the specified target beneficiaries, and accounted for(c); (2) (r)will
take measures to prevent unauthorized utilization of the commodities and
ensure that the commodities are exclusively distributed to the
beneficiaries(c); and (3) within a specified period after the date the
food aid program is completed, (r)the government will furnish
WFP****Symbol:xbc****a final report with final accounts which have been
audited and certified by the auditor appointed or authorized by the [North
Korean] Government.(c) 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 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 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 Food Aid Largely Depends on North Korean Government
--------------------------------------------------------------------------

WFP is responsible to its donors to ensure food is used as intended. WFP's
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 dictatorship, 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. 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 North Korea Does Not Adequately Track Food From
Time of Arrival to Distribution to Final Beneficiaries
---------------------------------------------------------------------------

The internal transport of WFP food in North Korea is the responsibility of
the North Korean government. WFP and the North Korean government
established a food tracking system 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 county warehouses using this system, called
the "consignment note system," which is administered by North Korean
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 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 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 Effective Food Monitoring
-----------------------------------------------

According to senior WFP officials in Rome and responses to our questions
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 

o   do not allow WFP monitors to act independently and conduct random
  monitoring visits; 

o   have given WFP monitors incomplete information about the numbers,
  names, and location of institutions and the numbers of beneficiaries at
  locations receiving its food; 

o   have rarely allowed WFP monitors to select the institutions they wish
  to visit; and

o   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
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 Similar Concerns About North Korean
Restrictions on Providing Accountability

The Consortium and others have expressed concern over North Korean
restrictions on both WFP's and their own ability to adequately account for
food and other assistance. The Consortium has monitored distributions of
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 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

o   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.

o   EU, a major donor in the past, had problems monitoring food aid in
  North Korea, according to a May 1998 report./Footnote6/ 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,/Footnote7/
  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.

o   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,/Footnote8/ (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.

o   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./Footnote9/ 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 Closed to WFP Monitors by North Korean
Military

North Korea is comprised of 211 counties. For reasons of national security
or, according to WFP and U.S. nongovernmental groups working in North
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
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 Deliveries of its Donations

To promote North Korea's compliance with the agreed-upon distribution
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 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 Requirements, and Loss Rates May Not Be Accurate
--------------------------------------------------------------------------

WFP guidelines require that the program report to donors on food use upon
the completion of an emergency operation, and host governments are
required to provide an audit report at the end of each emergency
operation. 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
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 

o   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 

o   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 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 Methodology
---------------------

To determine whether the World Food Program had established and
implemented controls for monitoring and reporting on U.S. government-
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, 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,

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

--------------------------------------
/Footnote1/-^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).
/Footnote2/-^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.
/Footnote3/-^U.S. government-donated food has included cornmeal, blended
  corn-soya, bulgur wheat, maize, rice, wheat, wheat flour, and vegetable
  oil.
/Footnote4/-^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.
/Footnote5/-^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.
/Footnote6/-^"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.
/Footnote7/-^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.
/Footnote8/-^"Identification of an At-Risk Group: Socially Deprived
  Children," released by MSF head of mission (Pyongyang, North Korea:
  Medecins sans Frontieres, Sept. 11, 1998).
/Footnote9/-^"International NGO [Nongovernmental Organization] Conference
  on Humanitarian Assistance to the DPR (Democratic People's Republic]
  Korea: Past, Present and Future, May 3-5, 1999(c) (Beijing, China). This
  conference was sponsored by a nongovernmental umbrella organization,
  InterAction, headquartered in Washington, D.C.

COMMENTS FROM THE DEPARTMENT OF STATE AND U.S. AGENCY FOR INTERNATIONAL
DEVELOPMENT
===========================================================================

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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 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.

COMMENTS FROM THE WORLD FOOD PROGRAM
====================================

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