A grant of $51m (sh137b) to support the distribution of mosquito nets in Uganda has been mismanaged, according to the Global Fund.

The Geneva-based Fund to fight AIDS, malaria and tuberculosis had provided the funds for the procurement and distribution of over seven million insecticide-treated nets to pregnant women and mothers with children under the age of five.

The organisation, in a statement, said it instructed the Ministry of Finance, the principal recipient, to discontinue the transfer of funds meant for the programme to personal bank accounts.

The organisation has also warned Uganda that "it will seek a refund of all improper payments" related to the $51m (sh132b) grant and will insist on appropriate disciplinary action against anyone found involved.

The director of Criminal Intelligence and Investigations Department, Grace Akullo, on Monday confirmed that investigations were ongoing.

"We have started investigations on the mismanagement of the malaria funds and other Global Fund programmes," she said

The statement follows a review of malaria funding by PriceWaterhouseCoopers Limited Uganda commissioned by the Global Fund.

As a result, the Global Fund and Uganda's Ministry of Health are implementing a plan to safeguard fund disbursements in the country according to the Global Fund Observer newsletter.

The Fund said options to strengthen financial oversight and management to mitigate the risk of fraud were also being discussed.

As a result of the audit findings, the Global Fund has asked the Government to immediately follow up accountabilities of funds amounting to about $500,000(sh1.4b). The Global Fund has also asked PriceWaterhouseCoopers to further expand its review.

The health ministry permanent secretary, Dr. Asuman Lukwago, could not be reached for comment yesterday.

This is the second time the Global Fund is raising a red flag on Uganda.

In 2005, the organisation suspended all its five grants to Uganda amounting to $213m after it learnt of "serious mismanagement of the grants" by the health ministry's Project Implementation Unit.

Subsequently, a judicial commission of inquiry, chaired by Justice James Ogoola concluded that at least $1.6m (sh4.1b) had been misappropriated.

The report called for the investigation and prosecution of 373 suspects, including the then Minister of Health, Brig. Jim Muhwezi and junior ministers Mike Mukula and Alex Kamugisha. About $1.16m of the missing money has been recovered.

However, only four people, including former director of economic monitoring in the Internal Security Organisation Teddy Ssezi Cheeye have been convicted of fraud. Cheeye was sentenced to 10 years in prison for stealing $56,000 of the Global Fund money and producing forged documentation.