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[e-drug] Fraud plagues global health fund

E-DRUG: Fraud plagues global health fund
[Worrying press reports about the fraud in 4 countries receiving Global
Fund support. AP article about Washington Post write-up, and a Global
Fund press release.
The Inspector General's office website is at
http://www.theglobalfund.org/en/oig/   Copied as fair use. WB]

THE WASHINGTON POST : Fraud plagues global health fund


The Associated Press
Sunday, January 23, 2011; 4:54 PM 

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 misspent, 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. 
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." 

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. 
The fund's inspector general, John Parsons, 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 overreliance on
grant recipients to assess their own performance. 
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

Among the corruption uncovered by 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

-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. 

-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 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. 

People should focus on those results, said Homi Kharas, a senior fellow
at the Brookings Institution and formerly the World Bank's chief
economist for East Asia and the Pacific. 
"Without a spotlight, without investigations, and without some sort of
accountability, it's impossible to root out corruption," he said. "But
just simply withdrawing donations, I do believe, would condemn millions
of people who are not involved in the corruption to terrible fates."


Global Fund Press Release

24 January 2011
Global Fund statement on abuse of funds in some countries

Following a recent media report of misuse of Global Fund grants, the
Global Fund is issuing the following statement:

The Global Fund 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.

"Transparency is a guiding principle behind the work of the Global Fund
and we expect to be held to the highest standards of accountability,"
said Prof. Michel Kazatchkine, Executive Director of the Global Fund.

The news report that has caused concerns refers to well-known incidents
that have been reported by the Global Fund and acted on last year. There
are no new revelations in yesterday's media reports.

In its report last year, the Global Fund's Inspector General listed
grave misuse of funds in four of the 145 countries which receive grants
from the Global Fund. As a result immediate steps were taken in
Djibouti, Mali, Mauritania and Zambia, to recover misappropriated funds
and to prevent future misuse of grant money.

In total, the Global Fund is demanding the recovery of US $34 million
unaccounted for in these and other countries out of a total disbursement
of US $13 billion.

"The distinguishing feature of the Global Fund is that it is very open
when it uncovers corruption. That is its comparative advantage," said
John Parsons, Inspector General of the Global Fund.

The Global Fund is working with the relevant authorities to ensure that
those committing fraud are brought to justice. Criminal proceedings are
already underway in Mali, Mauritania and Zambia.

The Global Fund has suspended relevant grants in Mali and Zambia and
terminated another grant in Mali. Special safeguards have been imposed
on continuing grants in Djibouti, Mauritania and Mali, meaning that they
are subject to particularly close scrutiny and restrictions on cash
transfers. These safeguards are also in force in Cote d'Ivoire and Papua
New Guinea.

The Global Fund Secretariat and the Office of the Inspector General are
identifying areas of its portfolio that could be at greater risk of
misuse and are strengthening efforts to prevent fraud. Among other
measures, the Global Fund Secretariat is devoting additional specialist
staff to monitor higher risk countries and improve the capacity of Local
Fund Agents, who are responsible for grant oversight in countries, to
detect potential fraud.

At its most recent meeting in December, the Global Fund's Board of
Directors, representing donor nations, recipient countries, civil
society, UN and partner organizations, reviewed the progress made in
detecting and preventing corruption and supported the actions taken to
date by the Inspector General and the Secretariat.

The Global Fund will continue to closely monitor all the grants in its
portfolio and respond decisively and urgently to any instances of


The Global Fund is a unique global public/private partnership dedicated
to attracting and disbursing additional resources to prevent and treat
HIV/AIDS, tuberculosis and malaria. This partnership between
governments, civil society, the private sector and affected communities
represents a new approach to international health financing. The Global
Fund works in close collaboration with other bilateral and multilateral
organizations to supplement existing efforts dealing with the three

Since its creation in 2002, The Global Fund has become the dominant
financier of programs to fight AIDS, tuberculosis and malaria, with
approved funding of US$ 21.7 billion. To date, programs supported by The
Global Fund have saved 6.5 million lives through providing AIDS
treatment for 3 million people, anti-tuberculosis treatment for 7.7
million people and the distribution of 160 million insecticide-treated
nets for the prevention of malaria.


For more information, please contact:

Andrew Hurst - Communications
Office: + 41 58 791 16 72
Mobile: + 41 79 561 68 07
E-mail: andrew.hurst@theglobalfund.org

Information on the work of the Global Fund is available at

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