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What Can We Learn from the Global Fund’s “Massive Fraud”?
January 25, 2011
News about the Global Fund, fuelled in part by a recent FP article by Roger Bate, set off a flurry of tweets and blogs yesterday—so much so that I had to tune out of Twitter to write this. The alleged large scale fraud as described by the FP article doesn’t provide the whole picture (see the Global Fund’s comment, “A Half Truth On Drug Theft,” in response to Robert Bate’s commentary and my colleague Bill Savedoff’s post on how it is not really possible to assess the scale of corruption with the information we have). What worries me is that this type of sensationalist news distorts a few facts that can prompt drastic decisions that ultimately affect people who have nothing to do with the corruption in question. It also distracts attention away from the many development practice problems at hand. But, given this current level of attention, what can we learn from this news that will help the development community address the knotty issues about development and corruption?
Is the Global Fund the Only Offender?
The Global Fund is being singled out as the only offender. Any aid modality that provides large amounts of money to push relatively expensive commodities such as ARVs and combination anti-malarial drugs rapidly through the public sector is going to provide the opportunity for leakages and theft. Let’s examine PEPFAR as a direct comparison—the program has lots of money, but employs different aid mechanism for AIDS prevention, treatment, and care (see the HIV/AIDS Monitor paper Following the Funding for more details). After digging around on the web a bit, here’s what I found:
Not much.
I couldn’t find public information except for one report that came up from the USAID Office of the Inspector General, dated March 2010. In this Worldwide Audit of the PEPFAR-funded Activities and Commodities for the Prevention of Mother to Child Transmission of HIV, I noticed that no recommendations were provided to address identified problems, explaining that these were delivered to specific country missions. This non-transparent sharing of information does not allow us to understand how the U.S. Government is taking action against fraud that occurs in its reputed airtight oversight procedures. On pages 7-9, the auditors describe examples of commodity management problems at four selected missions: Ethiopia, Kenya, Nigeria, and Tanzania. Poor inventory records were found at all four sites—incomplete stock cards, mislabeling of commodities, lack of regular inventory counts, and poor record keeping. For example:
“In Tanzania, auditors found that 5 of 14 service providers sampled lacked inventory records for commodities, while even those that had inventory records were not always updating them when the commodities were received and dispensed. Without adequate inventory records, the providers’ pharmacy staffs could not determine the current level of commodities on hand, resulting in significant variances between physical counts and inventory records. Consequently, the providers could not determine whether any commodities had been lost or stolen or whether more needed to be ordered.”
All missing and unsupported inventory at the four sites totaled $40,000, out of $39 million (or about 0.1%) in fiscal year 2008 for all PMTCT activities. In comparison, one calculation by Tom Paulson pokes fun at the proportion (0.3% of all grants) of Global Fund corruption that the AP is so troubled by.
Corruption doesn’t only happen with the Global Fund’s monies. Many developing countries are plagued with the same problems—poor management capacity and oversight capacity, and corruption—whether the Global Fund, PEPFAR, or the UN system supports them. The difference is that the Global Fund actually reports findings from its Office of the Inspector General (OIG) and calls out countries for fraud, while other donors are reported to be highly secretive about any corruption investigation that might affect them, if they conduct them at all. See for example this information from an IOG report to the Global Fund Board from its Finance and Audit Committee (FAC) about a key principal recipient of the Global Fund—the UNDP:
“The Global Fund has been seeking access to internal UNDP audits on Global Fund grants where UNDP serves as PR, but has not been successful. The UNDP’s Office of Audit and Investigation has agreed to provide summaries of its audit findings, but the FAC said that, so far, “these summaries have been inadequate.” While the OIG has been able to conduct audits “around” the UNDP (e.g., by auditing sub-recipients), “this does not give a sufficient insight into the grant operations and management by UNDP.”
When was the last time you heard about a PEPFAR, UN, or World Bank corruption scandal shared with the press by these agencies? In short, the Global Fund deserves some credit for seeking out perpetrators and holding them accountable publicly. Other donors need to be more upfront about corruption in their programs and how they address it.
What Happened to Country Ownership?
The Global Fund, and more recently, the U.S. Government, believe that countries must be in the driver’s seat for sustained impact. If donors are serious about this principle, the appetite to take—and learn from—risks is necessary as countries develop their own systems and processes to achieve results.
Through our research under the HIV/AIDS Monitor we learned that PEPFAR minimizes leakages in commodity procurement because it manages this step of the supply chain closely, providing product and technical assistance, rather than cash for countries to buy drugs. In contrast, the Global Fund finances countries to develop procurement capacity—fiscal and operational management and technical assistance. Of course, this hands-off approach contributes to a greater risk of losing both cash and commodities. But, the OIG is actively identifying cases of fraud and taking action, with the objective of slowly but surely changing the way donors and recipients do business.
The Global Fund should be commended for its approach to handling fraud rather than penalized. How long are we going to continue to provide aid that stifles development because donor policies don’t enable countries to manage money and produce results against these investments? That’s why I like my colleagues, Nancy Birdsall and Bill Savedoff’s COD Aid proposal—practical, hands-off financing for verifiable results that can build country ownership. Granted it’s impossible to ensure that no corruption will occur, but funders can take a calculated risk to minimize this by placing more weight on results and rewarding this achievement rather than hyperventilating about corruption and how money is spent. Presumably, countries will spend their existing resources more responsibly in order to get more aid. No results, no money. It’s hard to tell whether COD Aid will work, but the concept is appealing and we will only know if we try. Rather than locking down on an aid mechanism that is trying to build country ownership, this news should be an incentive for donors to strengthen these models and try new ways of making country ownership more than just donor speak.
What’s the Way Forward for the Global Fund? And for Other Donors?
It is important for taxpayers and beneficiaries to get accurate information about donor funds and how they are spent, relative to the impact of these funds. This is the core of aid effectiveness debates, and what should drive the allocation of scarce resources. When the media distorts numbers and facts to sensationalize a problem I have to ask, “Why now?” As Congress debates the budget with increasing signs that U.S. foreign aid spending is at risk, there seems to be more (read: politics) at play here than actual facts and evidence about the Global Fund’s funding model and oversight capacity.
Nothing I saw in the recent news discusses the five year Global Fund evaluation and how learning from that endeavor and other sources influenced donors decisions at the Global Fund replenishment meeting last fall. The U.S. Government and the Global Fund agreed to specific benchmarks for the Global Fund to strengthen its oversight mechanisms, articulated in this Call to Action from the U.S. Government. In response, the Global Fund described specific steps that it has taken and continues to take in a document that, to my knowledge, isn’t yet publicly available.
While much damage has been done, the Global Fund and its supporters need to lay out smart and honest messages about its reform measures, and share these widely—perhaps, through an AP story! And most of all, other donors who have perfected a culture of disbursement that feeds a culture of corruption in recipient countries need to come forward with information about how they handle fraud. Outing the perpetrators—whether they receive money from the Global Fund or other donors—is one essential way to make sure that our taxpayer money is being used effectively.
Possibly Related Posts
- MASSIVE CORRUPTION! (…in Small Global Health Grants?)
- What’s Not Being Said about the U.S. Government’s Role in the Global Fund Replenishment
21 Responses to “What Can We Learn from the Global Fund’s “Massive Fraud”?”
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January 25th, 2011 at 6:59 pm
There’s fraud and corruption in the US health system too! Just today, HHS announced that $4 billion was recovered by cracking down on fraud. This was accomplished by a “Health Care Fraud Prevention & Enforcement Action Team (HEAT), created in 2009 to prevent waste, fraud and abuse in the Medicare and Medicaid programs and to crack down on the fraud perpetrators who are abusing the system and costing American taxpayers billions of dollars.” http://www.hhs.gov/news/press/.....0124a.html
January 25th, 2011 at 11:48 pm
I’m working on a paper on HIV/AIDS interventions and corruption in Africa and managed to miss the Twitterverse frenzy that you blog about here, so am grateful for this post.
I’ve been having a hard time finding evidence of corruption like that reported here on the Global Fund, but there is one bit of non-Global Fund corruption evidence that you don’t mention that I thought I would bring to your attention: KHADREP funded by the World Bank. From the paper I’m writing:
In March 2008, the Wall Street Journal leaked a confidential document from the World Bank’s internal anti-corruption unit that reviewed four World Bank projects operating in Kenya, two of which were HIV/AIDS interventions. The anti-corruption unit reviewed 21 contracts totaling $7.2 million for the Kenya Decentralized Reproductive Health and HIV/AIDS Project (DARE) and found “irregularity indicators” in 13 contracts worth $5.2 million (Department of Institutional Integrity, 2007, 31). The report alleges ministry officials provided price estimates to bidders in exchange for future kickbacks and solicited bribes throughout the implementation process. An earlier external audit of DARE identified a “preponderance of fraud and corruption related indicators as well as shortcomings in the governance and control environment” (Department of Institutional Integrity, 2007, 29). The other HIV/AIDS project reviewed in the same report, the Kenya HIV/AIDS Disaster Response Project (KHADREP), was found to have irregularity indicators in 72% of reviewed grant activities (Department of Institutional Integrity, 2007, 21). During the implementation of KHADREP, a report by the Kenyan Government Efficiency Monitoring Unit uncovered a wide range of accounting and management irregularities and in 2006, a review of KHADREP concluded the National AIDS Control Council internal procurement had indicators of collusive practices, biased bid evaluation, and fraud.
I have yet to locate the original document on the World Bank’s web site (despite the July 1, 2010 release of previously confidential reports), but here is a link to the PDF leaked to the Wall Street Journal:
http://online.wsj.com/public/r.....1kenya.pdf
January 26th, 2011 at 1:59 pm
I’m not surprised! Corruption, corruption everywhere…for sure. So, the questions that come to mind 1)Did this make big news? Probably not; 2)Is the HHS coming under any heat (Ha!) for identifying fraud in their system via their Swat Team-HEAT. Again–probably not because that is what they are supposed to do. This is what I don’t get about the reactions to the Global Fund. There are many deficiencies in the GLobal Fund model but the reaction to the GF’s fraud investigation and action seems terribly misguided by irresponsible news reporting from the AP. What’s really behind this? And like I said in my post, Why Now?
January 26th, 2011 at 3:52 pm
Excellent points, Nandini, as always!
Bill Savedoff’s earlier post in reaction to the AP story was great as well.
As a journalist, I wince when I read a critical media report that lacks perspective and balancing context. The AP story was such a report. But I’ve made the same mistake myself when delving into matters I don’t fully understand. It happens to all of us. I can only hope this episode doesn’t do any lasting damage to this necessary global health initiative — and that, perhaps, it encourages more reporting on these issues and more transparency.
best
Tom
January 26th, 2011 at 8:41 pm
Nandini, thanks for a thought-provoking blog post. To your question about “the last time you heard about a PEPFAR, UN, or World Bank corruption scandal shared with the press by these agencies?” – please note that the World Bank has made public the results of its anti-corruption investigations since 1999, including the names of firms the Bank has debarred and the wrongdoing committed. In fiscal year 2010, we had 117 investigations, with 45 debarments of firms and individuals for engaging in wrongdoing.
The World Bank has doubled its team that investigates fraud and corruption, and helped lead the creation of an international corruption hunters alliance, bringing together 286 senior enforcement and anti-corruption officials from 134 countries to accelerate global anti-corruption efforts. We’re continually trying to do better. You can read more about this, as well as see redacted investigative reports at http://www.worldbank.org/integrity and there’s a fact sheet at http://bit.ly/World_Bank_Integrity.
January 27th, 2011 at 2:21 pm
I totally agree, Nandini. 0.3% of grants ain’t bad, and 0% corruption is clearly an unrealistic goal. There are significant costs in time and money associated with putting in place strict oversight mechanisms to prevent fraud, and while these are clearly needed and worthwhile, it’s not clear to me that the Global Fund is totally lacking adequate mechanisms. What if it costs 0.2% of grant costs to decrease corruption by an additional 0.1% of grants? Then you’re actually diverting more money away from beneficiaries with a tighter system than you would under the current one. What the Bate articles seems to be suggesting, which is that the Global Fund control the purchase and distribution of drugs all the way down the chain, would certainly cost more than it saves in diverted funds. That the Global Fund took action to suspend grants or change funding recipients in the problematic countries Bate mentions is testament to the fact that the current system does work to some extent. Better early warning systems and quicker responses are probably what is needed, not a complete overhaul of the way the Global Fund distributes funding for the purchasing of drugs.
January 27th, 2011 at 3:22 pm
Nandini,
Some excellent points in both Bill’s and your posts. A few further thoughts to add to the discussions:
1. Why Now? – I would agree that this has to be a central question and would go further to ask whether the Foreign Policy journal is on a roll to question the efficiency and effectiveness of US contributions to global health spending? This month it’s the Global Fund, last month it was WHO (see the article by Jack C. Chow ‘Is the WHO becoming irrelevant? Why the world’s premier public health organization must change or die’). Any member of Congress looking for “evidence” to limit and reduce US spending on global health must be very happy with the editor’s choice of exposés. And channelling more money directly through its own US agencies, recruiting and protecting US jobs would play well with the redistribution of tax-payers money back into the US economy.
2. GFATM statements: Perhaps the Press Office has been a little too quick to issue two statements qualifying that this is “only” 0.3%, when less than one-quarter of grants have been audited. Whilst there are caveats to qualify the estimates of fraud are based on the situation “at present”, the statements may yet come back to haunt the Chief Executive and his Board if the media interest continues.
3. Thirdly, is there not an overlooked lesson here on aid-effectiveness and efficiency that all agencies should take note of, especially the Global Fund and PEPFAR? (your 2010 ‘Zeroing in’ report and its recommendation 2 on in-service training apply). Any agency that supports models of workforce strengthening that are reliant on “hotel-training”, outside of nationally-defined training priorities and with little impact on addressing competencies and the ability to apply knowledge, skills and behaviour on return, are already inefficient. The fact that such programmes are also the source of fraudulent accounting should prompt agencies to review and issue new guidance on when and how in-service training should be incorporated into programming. Given the amount of money spent on in-service training episodes (and part of PEPFAR’s earlier congressional reporting was to hit high numbers rather than measure outcomes) it is an area in dire need of critical review. The UNSG has called for ‘more health for the money’. A reform of in-service training approaches would be an early candidate where efficiencies could be generated.
Jim
January 28th, 2011 at 10:41 am
Inspired in part by the useful discussion here and in Bill Savedoff’s blog, I’ve written an analysis of the whole issue of corruption by implementers of Global Fund grants. It’s available at http://www.aidspan.org/index.p.....;article=1.
In the course of that article, I estimate, based on analysing the limited available data, that the total percentage of money that has been mis-used across the entire Global Fund portfolio, including what its Inspector General has presumably missed, is something approaching 1%.
January 28th, 2011 at 11:28 am
Related to the research paper I am writing, I have two questions, for commenters:
for Dina ElNaggar: In following the link above (and then clicking on “more” under Investigation Reports), I can access 10 redacted investigation reports. Is that to say there have only been 10 investigations, only 10 writeups, or that there’s a more thorough list or archive somewhere else?
for Bernard Rivers: I read your excellent piece and I wondered if you had reviewed LFAs from the GF. I had contacted someone there and they said that LFAs were confidential. But, in your piece, it seems that you have more knowledge on their content (rather than my just knowing that they exist).
January 28th, 2011 at 6:51 pm
Thank you Kim for your question. I am gald to offer some clarification regarding redacted reports. During the past fiscal year ending on June 30 2010, the World Bank has sanctioned 45 companies and individuals based on its own investigations. Once debarred, a company is prohibited from doing business with the World Bank Group for the period of the sanction. Redacted reports relating to the investigations underlying the cases for which 45 entities were debarred have either already been prepared and posted on the World Bank Integrity Vice Presidency (INT) website(www.worldbank.org/integrity) or are in the preparation or review process that is required prior to posting. Once ready for disclosure, they will be posted on the INT’s webpage: http://www.worldbank.org/integrity. Since December 2010 the World bank has also cross-debarred 12 companies that have been sanctioned by the Asian Development Bank; bringing to effect the multilateral cross-debarment agreement that was signed between the World Bank and 4 other multilateral development banks. What this means is that these 12 companies cannot do business with the World Bank for the time period that the Asian Development Bank has sanctioned them for. For companies interested in getting involved in development projects, enforcing accountability through such mechanisms is driving a new standard for corporate compliance.
January 31st, 2011 at 11:19 am
In response to one of Kim’s earlier comments referring to a World Bank report relating to the review of Bank-financed health projects in Kenya, I would like to clarify that the report was the result of a World Bank-conducted Detailed Implementation Review, or what we refer to as a DIR. DIRs are not investigations, instead DIRs conduct forensic reviews of procurement data for indicators of wrongdoing.
On the basis of DIR findings, the Bank can take follow-up action, including investigations, if warranted, or improvements to project design and implementation. The two health projects that were reviewed in the 2007 DIR — KHADREP and DARE — closed in 2005 and 2006 respectively.
Follow up projects have taken note of the anti-fraud and anti-corruption recommendations in the DIRs in their design.
As for public disclosure, you noted that this document was unfortunately leaked to the media. The Kenya DIR was conducted prior to a review of the Bank’s Integrity unit (INT) led by former Fed Chairman Paul Volcker, which resulted in a process for public release of redacted reports. Prior to that review, DIR reports were considered deliberative and not covered by the Bank’s disclosure policy.
I would also like to add that the Integrity Vice Presidency (INT) houses a team of risk-prevention specialists, who give advice to project teams on early detection of red flags and strengthening control mechanisms on the ground. INT’s preventive function complements its investigative mandate and was first recommended by the Independant Volcker review.
On its broader anticorruption efforts, INT has made some noteworthy strides over the past two years, including:
? 117 investigations in FY10, with 45 debarments of firms and individuals for engaging in wrongdoing
? A cross-debarment agreement among the Multilateral Development Banks, so that companies debarred by the Bank Group can no longer seek business from other multilateral development banks (MDBs), closing a loophole in multilateral development programs
? High-profile debarments in the past two years, including UK publisher Macmillan Limited and Siemens AG. As part of its settlement, Siemens agreed to pay $100 million to support global anti-corruption efforts.
? An International Corruption Hunters Alliance bringing together 286 senior enforcement and anticorruption officials from 134 countries, to inject momentum into global anti-corruption efforts.
February 1st, 2011 at 5:15 pm
Nandini,
Thanks, again, for attending yesterday’s session at the IFC Auditorium.
On the AP article, it was disappointing to read various comments which deflected criticism from the GF towards fraud and corruption elsewhere. Do you suppose that patients deprived of their medications in Mauritania, Mali, and elsewhere care that there is corruption in the U. S. Medicare system, or that Wall Street would be envious to have only 0.3% fraud in its operations?
Why not focus on the problem with Principal Recipients and Local Fund Agents that were charged with oversight of Fund disbursements, yet failed to report what the Inspector General found in fraud and corruption? Ireland has since joined with Germany and Sweden in withholding/suspending fiscal commitments for 2011-2013. Before it esclates further, the Fund itself has to fix this problem.
Best,
jerry norris
February 1st, 2011 at 6:08 pm
Thanks for all these great comments. This is exactly the kind of open exchange we hope to inspire through our blog posts! A few reactions:
Jim–excellent points, particularly about in-service “hotel” training. In need of immediate review and action to cut down wasteful spending and minimize fraud.
Kim-thanks for sharing information about your project on HIV/AIDS and corruption—keep us posted! And for digging in to the World Bank integrity website.
Dina—thanks for sharing information about the World Bank’s integrity website and for explaining to our readers what is posted there. Like Kim, I went to the website and wanted more information to make sense of what is posted here. For example, it’s difficult to get a sense of the extent of fraud that the World Bank is able to detect in all of its lending. If a 117 investigations were conducted in 2010, it tells me nothing about what this number represents in terms of a portfolio i.e. 1%, 5% , 10% or greater? Or the amount of money that was involved…for that matter. How were these projects selected and why?
While I think the Bank deserves credit for all the work it is doing to investigate fraud, hold perpetrators accountable and share some information, my question is still about how the World Bank AND other donors are held accountable for the fraud that occurs under their watch. In the current situation that has unfolded since I posted the blog, some major donors (for example, Germany & Sweden) to the Global Fund are temporarily withholding their contributions to the Global Fund for conducting investigations and sharing the information publicly! As I’ve said in my blog post, these decisions seem largely political and it’s becoming clear that the Global Fund is being penalized for having an investigation system that is working, and is perhaps emerging as a scapegoat for donors who are looking for ways to reduce their aid budgets and/or to divert their funds through bilateral efforts. With a rapid increase in global health funding channeled through a proliferation of global health players in the last decade, donors may be looking for a way to consolidate their funding for global health, but relying on an inflammatory news article shouldn’t be the basis for these decisions.
Jerry—point taken about patients not caring about whether it is only 0.3% of the Global Fund’s operations. The issue at stake is that they get their medications—whether from PEPFAR, Global Fund or any other donor. The point I am making is that corruption exists in all donor supported programs, so patients supported by all donors are potentially affected by fraud, not just those that are linked to the Global Fund! So, why is the Global Fund being singled out and why now? This does not take away from your (and Steve R.’s) point that the Global Fund has to tighten up its oversight mechanisms (LFAs and PRs) to prevent fraud rather than to uncover it after the fact. But then again, this applies to ALL who disburse funds!
Still no word from PEPFAR about how they investigate and handle fraud….
February 1st, 2011 at 8:58 pm
Dear Nandini,
I am not aware “that corruption exist in all donor supported programs”. What is especially relevant is that it has been found in the GF–which supposedly had so many expensive safeguards against it, e.g., the Principal Recipients & the Local Fund Agents. When you say “why has the Fund been singled out and why now”, you seem to be saying that you knew or suspected that this fraud existed before it was revealed by the AP.I hope this isn’t the case.
Let’s focus on the problem with the Fund and fix it before it is fixed by more donors like Ireland, Germany and Sweden. Obviously, they didn’t like to hear excuses or the deflection of blame to others.
Best,
jerry norris
February 1st, 2011 at 11:05 pm
Jerry – if you think that some fraud does not exist in at least some of the programs of donors who distribute billions of dollars a year, you’re kidding yourself. The question is about how much and whether appropriate action is taken when it is uncovered. Those who suspect that some fraud exists are just being realistic.
Your post seems to be suggesting that any amount of fraud is a problem in need of being fixed. This is simply not the case. To reiterate a point I made above, zero corruption is not a realistic nor in most cases a worthwhile goal given that cracking down on corruption has a cost. Insofar as the marginal cost of increased oversight is greater than the marginal savings associated with reduced fraud, you are doing beneficiaries a disservice by increasing oversight. Not to mention the fact that certain longer-range goals, such as building local capacity, might be undermined by a single-minded focus on corruption.
If the Global Fund can further reduce fraud at no cost with more efficient oversight processes, or if increased oversight costs less than it saves in recovered funds, then fine. But with only the information we have currently, there is no way of making the determination as to whether this is in fact possible.
The Global Fund stands out not so much because fraud has been found as because it has been widely reported, largely thanks to the Fund’s relatively admirable transparency. Penalizing the Fund for this transparency is hypocritical and sets a bad precedent that will discourage other large donors from being transparent about corruption problems in the future.
February 2nd, 2011 at 10:30 am
Steve, thanks–all good and well-reasoned points. I’ve worked long enough in development assistance to understand that fraud and corruption exist, as they do in all forms of human endeavor. Yet, when I attempt to raise funds for international projects, I never say to a potential donor: look, some of your donated money will end up in fraud and corruption activities and I can’t prevent that from happening.
Yes, I am saying that any amount of fraud needs to be fixed. But more importantly, I am saying: let’s not deflect what is found in any one program, such as the GF, to other programs, like US Medicare. That’s a poor excuse. I don’t believe new or potential donors to the Fund will accept that as a rationale for their contributions.
To mangle Shakespeare a bit: ‘the fault, dear supporters of the Fund, is not in the our stars, but in ourselves’.
So, let’s forget fraud and corruption elsewhere and communicate to our Fund supporters that a problem which has been identified is being fixed.
Best,
jerry norris
February 2nd, 2011 at 7:07 pm
In case anyone missed this story about a PEPFAR implementer from the Seattle Times http://seattletimes.nwsource.c.....cation=rss
Interesting take-aways from news report:
1) Financial investigation was triggered by a “tipster” and not by a routine USG audit. In fact HAI was about to get $100 M from USAID before the tipster raised a red flag. Did USAID release information about this after the investigation?
2) The ED of HAI, Gloyd, describes this financial misconduct: “Whether there was fraud or not, we don’t know,” he said. “Preliminary results suggest some of the organizations have serious problems and weak controls.”
Uh oh–that sounds like some of the same problems that the Global Fund had.
3)Reason for financial misconduct copied from article:
One reason HAI ran into trouble may be that it started handling work that Gloyd says “wasn’t our strong suit,” such as construction.
HAI was working with contractors to build health clinics and hiring small nongovernmental organizations for home-based care. It has since decided to stop those projects. It now employs fewer than 100 people in Mozambique. Most of the nurses and technical staff whose work it was funding will be supported by other organizations, Gloyd said.
“Grants typically go up and down,” he said. But when an organization expands so quickly, “we all need to be pretty careful of the kind of management systems we put in place.”
Enough said!
February 3rd, 2011 at 2:46 pm
All –
I’ve just written another Commentary about corruption by Global Fund grant implementers, and the very political scene right now as donors, Fox News, and others wade in. It’s in Global Fund Observer (Issue 140) at http://www.aidspan.org/index.p.....;article=1.
Moving on: Steve Rosenzweig wrote, in Comment 15 above, “Insofar as the marginal cost of increased oversight is greater than the marginal savings associated with reduced fraud, you are doing beneficiaries a disservice by increasing oversight.”
Technically, that’s true. But you have to look not just at direct costs and benefits, but also at indirect ones.
What are the direct and indirect costs that arise as a result of a grant-making institution seeking to prevent, detect and punish fraud? Let’s examine this in the context of the Global Fund, but the same points can be made in the context of any other large grant-making institution. The costs are:
(a) The cost of conventional oversight by whoever is charged with that.
(b) The cost of the Office of Inspector General (OIG) carrying out audits and investigations to check that the people involved in (a) have not missed things.
(c) The cost of the enormous amounts of staff time that has to be put in by the grant implementers, and by the program officers back at the GF Secretariat, in responding to oversight and audits carried out under (a) and (b)
(d) The costs of the GF receiving possibly reduced support from its donors as a result of the donors being terrified by the fact that the GF discovered fraud and made those discoveries public.
And what are the direct and indirect benefits that arise from the same activities?
(e) The money that the identified guilty parties are forced to return.
(f) The money that is saved as a result of identified fraud schemes being exposed and ended.
(g) The money that is saved as a result of corrupt or potentially corrupt people in other parts of the world getting the fear of God put into them and concluding that it’s not worth engaging in fraud because of the risk of being discovered.
Clearly, most of these are extremely hard – probably impossible – to measure. Indeed, it seems to me that talking of comparing marginal costs and benefits become pretty meaningless when we get into areas such as the above.
To me, item (g) is the key. If the OIG identifies fraud, and people go to jail, the chilling consequences of that as others hear about it could end up preventing large amounts of further potential fraud from ever taking place.
Regards to all,
Bernard
—–
Bernard Rivers, Executive Director (bernard.rivers@aidspan.org)
Aidspan – an independent watchdog of the Global Fund, and publisher of Global Fund Observer
Nairobi, Kenya
http://www.aidspan.org
February 4th, 2011 at 1:06 pm
Hello, I work for the Global Fund and I’d like to respond to some of Mr. Jerry Norris’ comments.
First, Mr. Norris says: “you seem to be saying that you knew or suspected that this fraud existed before it was revealed by the AP”.
This is because AP only “learnt” about the issue of misuse of funds… It wasn’t AP or any other organization that “discovered” the fraud, it was the Global Fund itself through its systems. AP found out through the Global Fund website where all reports are publicly available. The Global Fund has been posting information about misuse of funds and has been transparent about it by issuing press releases whenever a problem like this occurred. So yes, people who know the Global Fund knew about these issues before AP reported on them.
Regarding the issue of donors and that“they didn’t like to hear excuses or the deflection of blame to others” – I urge you to read Sarah Boseley’s article: http://www.guardian.co.uk/soci.....usdiseases
Mr. Norris mentions that when he “attempts to raise funds for international projects, I never say to a potential donor: look, some of your donated money will end up in fraud and corruption activities and I can’t prevent that from happening”.
The Global Fund Board and Global Fund donors do understand that financing live-saving interventions in the poorest countries does involve risks. And they also know that in the cases where there has been corruption the Global Fund has acted upon it immediately by stopping disbursements and asking for money back.
Last but not least, Mr. Norris asks to “[…] communicate to our Fund supporters that a problem which has been identified is being fixed.” Done.
Thanks to all for the constructive comments.
February 5th, 2011 at 10:25 am
I’ve been a staunch supporter of the GF from the beginning, overlooking the many criticisms I’ve heard over the years (some valid, most silly), and tolerating the higher risks that I knew this new model must involve. But this growing number of stories, and the GF’s defensive, circle-the-wagons, blame-shifting attitude have for the first time made me suspect that something larger may be amiss with the Fund. Yesterday’s story in the Financial Times has now pushed me over the edge. See http://www.ft.com/cms/s/0/bd2d.....z1D5iHRgLQ.
It’s true that the initial AP story was overblown, and muh of the later coverage is of suspect origin (like Fox News). Most of these simply extrapolate irresponsibly from a very small sample. But the latest story by the FT is something new and different. It takes a more sober and balanced look and reveals much more disturbing information. The most important revelation is that the Fund’s five-year evaluation, which the GF and its many supporters portrayed as a glowing review, in fact included some quite damning findings. Most important of these were: (1) that GF accountability practices in some cases do not even meet minimal levels of commonly accepted international standards; and (2) there is no persuasive evidence that GF grants have had any measurable impact on HIV prevention.
Since the evaluation is several hundred pages long, when it came out I took the GF’s own summary on faith and limited myself to reading the summary, which itself was quite long. I imagine most other GF supporters did the same thing, since we have always felt we could trust their word. But the FT story led me to delve into the fine print of the evaluation, and I must say that after several hours of digging, I now feel deceived. Buried deep in the report (perhaps deliberately?) is the sort of language that, if used to refer to a U.S. federal agency, would have triggered bipartisan investigations. And now the FT’s own review has found that even two years later, the Fund has done essentially nothing about these findings. This is not the transparent and responsible organization I was led to believe I was supporting. I have also been disturbed at some of the GF’s response to the story. One of its first statements said, in essence, that they’re no worse than any other global agency. When an organization responds to allegations by pointing fingers at its competition, that’s a sure sign there’s something larger going on.
I have no idea how widespread the actual losses are thus far. That’s up to the new investigation to determine, and I’ll be watching with interest for its report. But no matter what it finds, it’s clear from the FT story that we can no longer trust the GF to play straight with us. Now that we see it’s no different from any other bloated bureaucracy, I hope more reporters will drop the gentle treatment they’ve given it over the years and really start to dig.
February 5th, 2011 at 8:04 pm
MarcelaR
I did read Sahara’s article and appreciate your mentioning it.
My only point in this discussion is: GF grant funds intended for AIDS, TB and malaria patients in four countries were denied to them via fraud and corruption. While “the marginal cost of increased oversight is greater than the marginal savings associated with reduced fraud” is correct in economic terms, this is of small comfort, and little understanding, to the patients that now must suffer through bouts of these diseases.
I am pleased to see that the GF is fixing this problem, because as you most probably understand, if it doesn’t, then donors will fit it. We have to stem the tide with Germany, Sweden and Ireland by a forthright response, such as you have stated. Whether fraud and corruption exist elsewhre isn’t material to a resolution of this problem.
Jerry Norris