A preliminary audit report on U.N. aid activities in North Korea does not indicate large-scale funding diversion as alleged, but has found some practices not in keeping with operations elsewhere in the world, a U.N. spokesperson said Friday.

The U.N. Board of Auditors submitted the report in what is expected to be the first in a series of follow-ups looking into claims first lodged in January that the U.N. Development Program (UNDP) ended up funneling massive amounts of cash to Pyongyang by paying cash to locally hired employees and North Korean contractors.

U.N. Secretary-General Ban Ki-moon immediately asked for an across-the-board audit of North Korea operations by U.N. agencies, including the UNDP, the U.N. Children's Fund and the U.N. Population Fund.

In the meantime, the UNDP suspended its 2007-2009 program in North Korea pending the results of the inquiry and said it would stop paying cash to local workers from March 1.

The U.S. mission had charged that the UNDP violated rules by dispensing hard currency and accused the aid agency of lax monitoring in ensuring that the assistance was reaching the targeted population. Some press reports said the diversion amounted to hundreds of millions of dollars.

"It should be noted that the report does not indicate that large-scale U.N. funding has been systematically diverted, as has been alleged," U.N. spokesperson Michele Montas said in a statement.

But the report does identify practices "not in keeping with how the U.N. operates elsewhere in the world" in terms of independence of staff hiring, foreign currency transactions and access to local projects, she said.

The secretary-general "does expect the agencies to act upon the findings in the audit as quickly and transparently as possible," the spokesperson said.

More follow-ups would be required, she said, and Ban will write to relevant committees to request the auditors to continue their work, including a visit to North Korea.

The UNDP issued a separate statement saying it was encouraged by the report's findings, which said the agency's operation in North Korea involved US$2 million to $3 million rather than hundreds of millions as suggested, and that the agency staff did regularly visit project sites.

"The report highlights areas in which UNDP rules or procedures could be strengthened," it said. "UNDP is committed to addressing these areas."

NEW YORK, June 1 (Yonhap News)