12 July 2012

Africa: Global Fund Releases Results of an Analysis of Misused Funds Identified By the OIG

The Global Fund says that 3.0% of the funding that has been audited or investigated by the Office of the Inspector General (OIG) between 2005 and 2012 was "misspent, fraudulently misappropriated or inadequately accounted for." The amount misappropriated through fraud alone was just 0.5%. These figures come from an analysis conducted by Cees Klumper, the Global Fund's Chief Risk Officer.

The full breakdown of the 3.0% was as follows:

  • Ineligible expenses not covered by the grant agreements - 1.1%
  • Expenses inadequately substantiated due to poor or missing documentation - 1.1%
  • Fraud - 0.5%
  • Failure to report funds as required - 0.3%

The last category - failure to report funds - includes (a) funding from sources other than the Global Fund that are used to support programmes to which the Global Fund has contributed and (b) income earned by the programmes, such as through bank interest or product sales.

The analysis includes the investigation in Bangladesh and the audits in Lao and Papua New Guinea, for which reports were just issued (see separate article in this issue).

According to the Global Fund, since the OIG was established in 2005, it has compiled 28 reports on audits and investigations carried out in 27 countries, involving total disbursements of $3.8 billion - about 23% of all disbursements that the Global Fund has made to date.

The Global Fund cautioned against assuming that the findings of this analysis apply to its entire portfolio. John Parsons, the Fund's Inspector General, said that audits and investigations tend to focus on high-risk areas and on grants where specific risks have been identified. "It is not possible to extrapolate to say that this reflects an accurate picture of misused funds," said Mr Parsons. "Our audits and investigations are not a representative sampling of all Global Fund grants."

The Global Fund said that its commitment to transparency and its policy of reporting all cases of misused funds could lead to misconceptions concerning the overall grant portfolio. In reality, most grants are well managed, it said.

Mr Klumper said that the Global Fund is strengthening measures to prevent misuse of funds. These measures include a redesign of the grant management model. The new design will incorporate an improved approach to risk management, which is built on findings from the OIG.

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