Hearing of the Senate Homeland Security and Governmental Affairs Committee's Investigations Subcommittee: United Nations Development Program (Panel III)

Interview

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SEN. TOM COBURN (R-OK): Thank you.

Just -- I caught some of this on the TV, but I just want to kind of review and see if I got your testimony. You basically deny all the findings in the report that this committee has issued; your statement also that all programs in North Korea, including USAID, operate with the same weaknesses that we've seen in UNDP; i.e., payment of cash and hard currency instead of local currency.

If that's the case --

MR. TIPSON: That's not the case, Senator.

SEN. COBURN: All right. Well, then, correct what my assumption was, based on what I heard from my office just a minute ago.

MR. TIPSON: I think there's a confusion here between hard currency and cash. We don't deal in cash. We did not deal in cash in North Korea; hard currency being convertible currency.

SEN. COBURN: Right.

MR. TIPSON: And the requirement by the North Korean government is that all entities pay in convertible currency.

SEN. COBURN: But that's exactly opposite of the rules under which UNDP operates everywhere else, correct?

MR. TIPSON: We didn't have a rule on that subject. And, in fact, it's intended to be flexible enough so that the discretion of the local office can determine what the right approach may be in a case of that kind.

But the challenge of it's the other way around, Senator. If you're required to pay in only local currency, in the case of North Korea, the only place to get local currency is from the North Korean bank. And if the concern is that they will skim off a piece of that hard currency for other purposes and only give you -- you know, they can set the exchange rate in the case of North Korea.

SEN. COBURN: So it's --

(Cross talk.)

SEN. COBURN: -- when we pay directly to the government anyhow for the salaries of the people that were employed that were North Koreans. In other words, we didn't directly pay the North Korean employees, did we?

MR. TIPSON: No, we went through the government agency. That's right.

SEN. COBURN: Yeah. So we don't know how much they skimmed that way.

MR. TIPSON: We don't.

SEN. COBURN: So we have no idea. And that is not standard practice everywhere else, is it?

MR. TIPSON: In my testimony I mentioned that China and Vietnam and North Korea all had that policy. Vietnam and China have since abandoned that policy. North Korea is the only country that --

SEN. COBURN: So three stellar human rights organizations have had that policy.

MR. TIPSON: When I worked in China for AT&T, as the private sector we had to hire people through a government agency. That's the way China required it to be done.

SEN. COBURN: Okay. Answer me this. Why should U.S. taxpayers support an organization that provides legitimacy to illegitimate transactions? In other words, based on some of the things that we've seen going on, that went on with UNDP operations in North Korea in terms of some of the transactions, like the $50,000, why should Americans support UNDP's effort there?

In other words, you know, we have $100 million in direct, then we have all these other agencies that put another $140-some million into UNDP. Nothing wrong with your goals, again, but why should we do that?

And the second part of my question is, if we don't have -- if somebody's afraid of transparency, absolute transparency, then we've got to really worry about whether we ought to be supporting that agency at all in the first place. So, you know, it's not a matter of trust. I don't trust federal government agencies. That's why I want them transparent. They need to be able to show the American people that they're effective in what they're doing and how they're doing it, and there ought to be some metrics.

So explain to me why you would take a position that says that that's on the basis that we don't trust? I don't trust. I readily admit it. And that's why -- and that's what keeps governments open and responsive is that they are transparent. So why would we take a position that we wouldn't want transparency?

MR. TIPSON: You shouldn't, and we don't. I think the discussion is how do we get to a point where you feel you have sufficient transparency to have confidence in the information that we're providing to you? We're not there, clearly. And there are a number of steps that the staff has suggested that would help the process. And as Senator Coleman has indicated, we really need to have a conversation around these issues to get to a point where you have that level of --

SEN. COBURN: You may have answered this already, and forgive me if I'm asking, all right. So you have this audit and you have this governing body, and yet they can't have a copy of the audit? Explain to me -- I'm just from Oklahoma; I don't understand that -- why the people at your governing board can't have a hard copy of the audit of what you're doing?

MR. TIPSON: In the case of North Korea, which, of course, we're talking about, last -- in 2006 there was a request for the audits. And on an extraordinary basis, the administrator did make audit access available to the U.S. government so that they could confirm the content of the audit.

SEN. COBURN: Okay, but that's not the point. The point is, why would that be an extraordinary basis that we get to see how the money's spent? Why is that extraordinary?

MR. TIPSON: Well, one reason that we're advocating that that policy be changed is obviously unless you feel you have access to them, you're not satisfied that it's sufficiently transparent.

SEN. COBURN: We shouldn't, and nobody should.

MR. TIPSON: I think when you were out of the room, David Morrison was trying to explain the original rationale for why internal audits can be considered to contain the kinds of sensitive information that are best left confidential. Under the current circumstances, to change that policy, we have to get the executive board of our organization to agree to go along. We're well on the way to doing that, but it's a matter of our leadership persuading the governing board of our organization that that's a policy we should adopt.

SEN. COBURN: Well, you know --

MR. TIPSON: Not just policy with respect to other --

SEN. COBURN: I would hope that the realization is present among you today that there is a group of us in the U.S. Senate that if, in fact, that doesn't become the policy, it's going to become our policy, number one. Number two, that there is a U.S. federal law right now called the Accountability and Transparency Act that is publishing today how all the money this federal government is spending. And if you're not compliant with that, then you're not in compliance with the law, which will put at jeopardy funds from the American government to UNDP.

So I would think it would be in your best interest to become as transparent as you can. Nobody wants to know somebody's Social Security number, and nobody wants to know the details under a certain contract. But, you know, a lot -- the U.N. routinely -- not UNDP, but the U.N. routinely does not share contracting when it doesn't have anything to do with private actions or significant proprietary information on contracting, and they still refuse to do it.

So I'm not going to allow UNDP or U.N. to hide behind the idea that there is so much proprietary stuff that we can't know how our money's spent. And my suggestion is that you all move in that direction because as long as I'm going to be a senator, I'm going to keep attaching that thing, and eventually the American people are going to see that they're not happy with the way we spend the money domestically, and I guarantee you there's less support for how we spend it internationally. And it would be in -- to do what you want to accomplish, which is to truly impact and help people who need help, the best way to do that is do that in the light, open, and taking the criticism, and that builds understanding. The lack of transparency implies -- and the lack of desire for transparency implies there's something to hide. And that may not be a great basis under which to have a relationship, but the fact is is that's the basis that we have now because of things like North Korea and the fact that a U.N. agency was hoodwinked and was utilized to accomplish things other than what they intended to.

MR. TIPSON: Senator, we take the point. I hope, however, we can also get to a relationship where once you do have that level of access and confidence we can deal in a much more open way and you'll have confidence in the rest of the information that we share with you.

SEN. COBURN: I'll give you a great example of how to do it: USAID, malaria in Africa. Totally closed, not transparent -- most of the money went for bureaucracies, not for treatment and care for black African pregnant women or their children. This is just the opposite: They have a transparent website. We get to see how much money they're spending. We get to see their contracts. We get to see what they're doing now. So we went from total lack of transparency to transparency with me saying, "Atta boy, keep going. If I can get you more money, I will."

So if in fact you become transparent and what you're doing is accomplishing something that really moves, then you won't have any problem. But --

MR. TIPSON: Can I address that point, sir?

SEN. COBURN: Sure.

MR. TIPSON: -- because that's -- that gets to the point of other things than internal audit access to create this level of transparency. We are actually implementing country by country the requirement that our country offices put on websites a whole range of information relating to contracts and procurements and so on, for exactly the purpose that you say -- so people can see the details of what's going on in that country and have some level of confidence that it's going for the right purpose.

We're also, for example, piloting a possible way of allowing access to information where major countries -- donor countries like the United States could actually get into our system, look at our financial systems, and have direct access to understand the kinds of information that they can rely on as to what's happening with the money. That's not obviously an easy thing for security reasons to implement, but that's one of the things that we're working on implementing. So we are trying to move in that direction.

SEN. COBURN: Thank you.

My last comment, Mr. Chairman, is I think that Senator Coleman raises a great point on whistleblowers. If you do not have the capability to raise the issue and then be protected, we will never have transparency. And that has to get fixed.

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