The issue is with the placement of return 0.

Here is a procedure against sample database to reproduce the issue:
(Please excuse the spacing... )

CREATE PROCEDURE USERID.STAFF_UPDATE ( )
 SPECIFIC USERID.STAFF_UPDATE
 LANGUAGE SQL
 NOT DETERMINISTIC
 CALLED ON NULL INPUT
 MODIFIES SQL DATA
 INHERIT SPECIAL REGISTERS
 us: BEGIN

    DECLARE sqlstate CHAR(5) DEFAULT '00000';
    DECLARE sqlcode int default 0;
    DECLARE a char;
    DECLARE b char;
    DECLARE sqltype char;

    DECLARE c_query CURSOR WITH HOLD FOR
    select p.PROJNO, p.PROJNAME
           from PROJECT p, staff s
           where s.id = cast(p.respemp as int)
           order by s.dept;

    DECLARE CONTINUE HANDLER FOR NOT FOUND

    BEGIN

        IF (sqltype = 'U') THEN
            return 0;
                                END IF;
    COMMIT;
    END;

    OPEN c_query;
    FETCH FROM c_query INTO a, b;

    While (sqlstate = '00000')
    do
                     sqltype = 'U';
         IF (a = 'MA2113')  THEN
             Insert into applog (Description) values ('Project identified
');
         else
             Insert into applog (Description) values ('valid projno = '||
char(a));
         end if;

                     FETCH FROM c_query INTO a, b;

    END WHILE;
END;