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AP: Fraud Plagues Global Health Fund

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GENEVA - A $21.7 billion development fund backed by celebrities and hailed as an alternative to the bureaucracy of the United Nations sees as much as two-thirds of some grants eaten up by corruption, The Associated Press has learned.

Much of the money is accounted for with forged documents or improper bookkeeping, indicating it was pocketed, investigators for the Global Fund to Fight AIDS, Tuberculosis and Malaria say. Donated prescription drugs wind up being sold on the black market.

The fund's newly reinforced Inspector General's Office, which uncovered the corruption, can't give an overall accounting because it has examined only a tiny fraction of the $10 billion that the fund has spent since its creation in 2002. But the levels of corruption in the grants they have audited so far are astonishing.

A full 67 percent of money spent on an anti-AIDS program in Mauritania was mis-spent, the investigators told the fund's board of directors. So did 36 percent of the money spent on a program in Mali to fight tuberculosis and malaria, and 30 percent of grants to Djibouti.

In Zambia, where $3.5 million in spending was undocumented and one accountant pilfered $104,130, the fund decided the nation's health ministry simply couldn't manage the grants and put the United Nations in charge of them. The fund is trying to recover $7 million in "unsupported and ineligible costs" from the ministry.

Though varying levels of "ineligible costs" were uncovered in several countries, the Inspector General said its findings in Djibouti, Mali, Mauritania, and Zambia were of "significant concern."

The fund is pulling or suspending grants from nations where corruption is found, and demanding recipients return millions of dollars of misspent money.

"The messenger is being shot to some extent," fund spokesman Jon Liden said. "We would contend that we do not have any corruption problems that are significantly different in scale or nature to any other international financing institution."

In a press statement issued Monday, the Global Fund said it has "zero tolerance for corruption and actively seeks to uncover any evidence of misuse of its funds. It deploys some of the most rigorous procedures to detect fraud and fight corruption of any organization financing development.

"The vast majority of funds disbursed by the Global Fund is untainted by corruption and is delivering dramatic results in the fight against the three diseases."

Global Fund Statement on Abuse
Global Fund OIG Statement

The Fund said news reports refer to "well-known incidents that have been reported by the Global Fund and acted on last year," and said there were no new revelations in yesterday's media reports.

It said immediate steps had been taken in the four countries in which misuse of funds had occurred - Djibouti, Mali, Mauritania and Zambia - in order to recover misappropriated funds amounting to $34 million, and to prevent future misuse of grants.

The Global Fund was set up as a response to complaints about the cumbersome U.N. bureaucracy, and is strictly a financing mechanism to get money quickly to health programs. In just eight years it claims to have saved 6.5 million lives by providing AIDS treatment for 3 million people, TB treatment for 7.7 million people and handing out 160 million insecticide-treated malaria bed nets.

To date, the United States, the European Union and other major donors have pledged $21.7 billion to the fund, the dominant financier of efforts to fight the three diseases. The fund has been a darling of the power set that will hold the World Economic Forum in the Swiss mountain village of Davos this week.

It was on the sidelines of Davos that rock star Bono launched a new global brand, (Product) Red, which donates a large share of profits to the Global Fund. Other prominent backers include former U.N. secretary-general Kofi Annan, French first lady Carla Bruni-Sarkozy and Microsoft founder Bill Gates, whose Bill and Melinda Gates Foundation gives $150 million a year.

Fund officials blame the misspending on the lack of financial controls among the grants' recipients, many of which are African health ministries whose budgets are heavily supported by the fund. Others are nations or international organizations without the resources to deal with pervasive corruption. The fund finances programs in 150 nations in all.

Among the corruption uncovered by Inspector General John Parsons' task force:

•  Last month, the fund announced it had halted grants to Mali worth $22.6 million, after the fund's investigative unit found that $4 million was misappropriated. Half of Mali's TB and malaria grant money went to supposed "training events," and signatures were forged on receipts for per diem payments, lodging and travel expense claims. The fund says Mali has arrested 15 people suspected of committing fraud, and its health minister resigned without explanation two days before the audit was made public.

•  Mauritania had "pervasive fraud," investigators say, with $4.1 million - 67 percent of an anti-HIV grant - lost to faked documents and other fraud. Similarly, 67 percent of $3.5 million in TB and malaria grant money that investigators examined was eaten up by faked invoices and other requests for payment.

•  Investigators reviewed more than four-fifths of Djibouti's $20 million in grants, and found about 30 percent of what they examined was lost, unaccounted for or misused. About three-fifths of the almost $5.3 million in misappropriated money went to buy cars, motorcycles and other items without receipts. Almost $750,000 was transferred out of the account with no explanation.

•  Investigators report that tens of millions of dollars worth of free malaria drugs sent to Africa each year by international donors including the Global Fund are stolen and resold on commercial markets.

•  In Haiti, after auditing roughly one-third of the Fund's $157 million worth of disbursements, the Inspector General identified $1.26 million in ineligible expenses, and found inadequate financial and managerial capacity.

•  The U.N. Development Program manages more than half of the fund's spending, but U.N. officials won't release internal audits of their programs to the fund's investigators. Parsons said that has blocked him from investigating programs in the more than two dozen nations, including some of the most corruption-prone.

UNDP spokesman Stephane Dujarric said Sunday that the program's policy bars it from sharing internal audit reports with the Global Fund, but that it is reassessing that policy.

"UNDP does, as a standing practice, inform the Global Fund about key audit findings and recommendations resulting from internal audits of Global Fund grants managed by UNDP," he said.

The fund's inspector general said donors should be reassured that the fund is serious about uncovering corruption: "It should be viewed as a comparative advantage to anyone who's thinking about putting funds in here."

But some donors are outraged at what the investigators are turning up. Sweden, the fund's 11th-biggest contributor, has suspended its $85 million annual donation until the fund's problems are fixed. It held talks with fund officials in Stockholm last week.

Swedish Foreign Ministry spokesman Peter Larsson said in a statement that his country is concerned about "extensive examples of irregularities and corruption that the fund has uncovered" in nations like Mali and Mauritania.

"For Sweden, the issues of greatest importance are risk management, combating corruption and ultimately ensuring that the funds managed by the Global Fund really do contribute to improved health," he said.

The investigative arm of the U.S. Congress also has issued reports criticizing the fund's ability to police itself and its over-reliance on grant recipients to assess their own performance.