A report by a Senate subcommittee says North Korea was able to channel money to its overseas posts through the United Nations Development Program (UNDP). The report said the U.N. agency suffered from management deficiencies, making it vulnerable to manipulation. VOA's Dan Robinson reports, agency appeared at a hearing on Capitol Hill.

The investigations subcommittee says North Korean officials were able to transfer at least $2.7 million through a bank account used by the U.N. Development Program to Pyongyang's overseas missions.

The report says there were wire transfers from a U.N.-affiliated account at Pyongyang's Foreign Trade Bank to Banco Delta Asia, a Macau bank that the United States accused of money laundering for the North Korean government.

The United States first expressed concern last year, with U.S. officials saying at first that the money belonged to the United Nations.

Committee chairman Carl Levin sought to clarify that in the opening minutes of the hearing, saying the committee determined that the funds were North Korean, something underscored later by UNDP witnesses.

Mark Wallace, U.S. ambassador for United Nations Management and Reform, said it is clear the UNDP operated in the absence of adequate financial controls, and that the North Korean government used the program for questionable purposes.

He added it is still impossible to state with certainty who the money belonged to.

"We have documents in front of us that you all have seen that indicate the transfers were made in some way with the imprimatur of the U.N. - saying it was U.N. money, if you will," said Mark Wallace. "So, if you have two entities, one that didn't follow its rules, and one that admittedly was engaging in abuses of the U.N. system, and if you have documents that suggest the money was U.N. money, I think it would be somewhat inappropriate to give a free pass and say that wasn't U.N. money, particularly since cash is fungible."

Wallace adds that the United States has never alleged that UNDP officials profited from any fund diversions.

Frederick Tipson, who heads the UNDP liaison office in New York, says a number of allegations have not been substantiated by the subcommittee report.

"This report does not substantiate any of the following claims: UNDP did not transfer hundreds of millions of dollars to the North Korean government over the last 10 years; U.N. funds did not go for North Korean purchases of real estate, nuclear technology or missile programs and UNDP did not use cash in North Korea, which could otherwise have been diverted or embezzled in circumvention of financial controls," said Frederick Tipson.

U.S. Ambassador to the United Nations Zalmay Khalilzad had this exchange with Senator Levin:

LEVIN: "Do you believe that UNDP operations in North Korea were corrupt or tainted by widespread corruption?"

KHALILZAD: "I have seen no evidence, and the people, including Mark [Wallace], who work with me, who have looked at this - none of them have brought to me evidence that the management headquarters was involved in corruption or corrupt practices, or profited from their supervision of the program in North Korea."

Khalilzad says the United States remains committed to U.N. reform, and agreed with senators that the United States should have access to classified audits regarding UNDP operations.

An exasperated Senate Republican, Tom Coburn, posed this question:

"If what we are doing is humanitarian in our goal, and supposedly ethical in how we accomplish it, why wouldn't we want sunshine to be on it, " asked Tom Coburn.

The UNDP shut down its operations in North Korea last year amid criticism from the U.S. and Japan about the hiring of government-vetted employees and salaries paid directly in hard currency to the Pyongyang government.