[Senate Prints 112-17]
[From the U.S. Government Publishing Office]
112th Congress
1st Session COMMITTEE PRINT S. Prt.
112-17
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FRAUD AND ABUSE OF GLOBAL FUND
INVESTMENTS AT RISK WITHOUT GREATER TRANSPARENCY
__________
A MINORITY STAFF REPORT
PREPARED FOR THE USE OF THE
COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE
One Hundred Twelfth Congress
First Session
April 5, 2011
U.S. GOVERNMENT PRINTING OFFICE
65-543 WASHINGTON : 2011
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COMMITTEE ON FOREIGN RELATIONS
JOHN F. KERRY, Massachusetts, Chairman
BARBARA BOXER, California RICHARD G. LUGAR, Indiana
ROBERT MENENDEZ, New Jersey BOB CORKER, Tennessee
BENJAMIN L. CARDIN, Maryland JAMES E. RISCH, Idaho
ROBERT P. CASEY, Jr., Pennsylvania MARCO RUBIO, Florida
JIM WEBB, Virginia JAMES M. INHOFE, Oklahoma
JEANNE SHAHEEN, New Hampshire JIM DeMINT, South Carolina
CHRISTOPHER A. COONS, Delaware JOHNNY ISAKSON, Georgia
RICHARD J. DURBIN, Illinois JOHN BARRASSO, Wyoming
TOM UDALL, New Mexico MIKE LEE, Utah
Frank G. Lowenstein, Staff Director
Kenneth A. Myers, Jr., Republican Staff Director
(ii)
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C O N T E N T S
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Page
Letter of Transmittal............................................ v
History and Background........................................... 1
The United States and the Creation of PEPFAR................. 1
Funding History of PEPFAR.................................... 2
The Role of International and Other Organizations............ 2
Establishment of the Global Fund to Fight AIDS, Tuberculosis and
Malaria........................................................ 2
Funding History.................................................. 2
Operation and Structure of the Global Fund....................... 3
Process for Providing Medicines and Services..................... 3
Accomplishments of the Global Fund............................... 3
Benchmarks and Transparency...................................... 4
Creation of the Office of Inspector General...................... 4
Current Response by the OIG...................................... 5
Secretariat Response............................................. 6
United States Recommendations on Reform...................... 7
Budget Implications.............................................. 7
United Nations Development Program........................... 8
Department for International Development......................... 9
Recipient Countries As Donors.................................... 9
Appendix
2004-2009 Statistical Data Provided by the UN, World Bank, WHO,
UNAIDS......................................................... 11
Staff Recommendations............................................ 12
(iii)
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LETTER OF TRANSMITTAL
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United States Senate,
Committee on Foreign Relations,
Washington, DC, April 5, 2011.
Dear Colleagues: Through the President's Emergency Plan for
AIDS Relief (PEPFAR), the United States is providing both
bilateral and multilateral assistance to disadvantaged
populations to prevent and treat people with HIV/AIDS,
tuberculosis and malaria. As of December 2010, U.S. investment
in these programs totaled more than $32 billion. The U.S.
provides its multilateral assistance through the Global Fund to
Fight AIDS, Tuberculosis and Malaria, an independent entity
which receives contributions from both countries and private
organizations and provides medication and health services
through nearly 600 grants in more than 140 countries. Although
the Global Fund has demonstrated significant accomplishments
and successes in saving lives through its antiretroviral drug
programs and its prevention work, it has recently come under
fire for mismanagement of grants in several countries.
Following the release of several critical reports, some donors
to the Fund have suspended their contributions until all
mismanagement practices and abuses of funds can be rectified.
Many of the new Members of the Senate who have no direct
experience with PEPFAR and the Global Fund have asked Committee
staff for a brief primer on these programs in anticipation of
having to make funding decisions relative to the these global
initiatives. I requested Senior Professional Staff Members
Shellie Bressler and Lori Rowley to produce this primer. Their
report examines the history and operation of PEPFAR and the
Global Fund, the problems and initial improvements made to it,
and the most recent challenges it faces. It also provides a
series of recommendations for implementation by both the U.S.
Government and the Global Fund for strengthening existing
systems for the distribution of supplies, medication and
services in order to prevent further mismanagement and to
ensure that the maximum number of people may benefit from the
health prevention and treatment efforts of the Global Fund.
v
These tough recommendations run the gamut from withholding
U.S. funds to the United Nations Development Fund (whose
Development Program is a large recipient of Global Fund grants)
until the organization's internal procedures allow for greater
access to their internal audit and investigation documents, to
a recommendation for the development of an additional layer of
protection and an early warning system in those nations where
instability and/or government corruption are a concern.
I hope you find this report useful and that we may work
together to reduce fraud, improve transparency and ensure
maximum value for the U.S. investment in these global health
programs.
Sincerely,
Richard G. Lugar,
Ranking Member.
FRAUD AND ABUSE OF GLOBAL FUND
INVESTMENTS AT RISK WITHOUT
GREATER TRANSPARENCY
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History and Background
The United States and the Creation of PEPFAR
The United States has been at the cutting edge of research
into the cause and treatment of HIV/AIDS among its citizens
since the early days of the detection of the disease. Its
interest in addressing the devastating consequences of HIV/AIDS
internationally began in earnest in early 2001 under the
leadership of President George W. Bush when he established a
cabinet-level task force to address HIV/AIDs globally. Co-
Chairs Secretaries Colin Powell (State) and Tommy Thompson
(Health and Human Services) led a diverse team from many
sectors of the executive branch to develop the initiative.
Despite the fact that the task force developed its proposal
as the nation coped with the aftermath of the September 11
attacks, it received strong focus from the President, driven
both by his own point of view and the encouragement of the
evangelical Christian movement, some members of which believed
that overcoming this devastating disease was a moral
obligation. President Bush unveiled a proposal, now referred to
as the President's Emergency Plan for AIDS Relief (PEPFAR), in
his 2003 State of the Union address. He requested Congress to
commit $15 billion over five years for the effort, primarily
for Africa and the Caribbean.
At this time, Members of the House and the Senate were also
developing their own legislation, including a bill Senators
Lugar and Kerry were drafting. Following the President's
proposal in January of 2003, the pace of the legislative effort
accelerated. Under bipartisan leadership of Chairman Henry Hyde
and Ranking Democrat Tom Lantos, the House acted first, passing
H.R. 1298--the United States Leadership Against HIV/AIDS,
Tuberculosis and Malaria Act of 2003--by a vote of 375-41 in
May of that year.
On May 7, 2003, Chairman of the Senate Foreign Relations
Committee Richard Lugar, along with Ranking Member Joseph
Biden, Senator John Kerry, and Democratic Leader Tom Daschle,
led the Senate effort as sponsors of S. 1009, The United States
Leadership Against HIV/AIDS, Tuberculosis and Malaria Act of
2003. Together with the backing of Senate Majority Leader Bill
Frist, the Senate approved the legislation, authorizing the
U.S. to participate in the Global Fund to fight AIDS,
Tuberculosis and Malaria. Following House adoption of the
Senate's amended version, President Bush signed the bill into
law on May 27, 2003 as Public Law 108-25.
On July 18, 2008, the Senate approved the reauthorization
of the legislation, the Tom Lantos and Henry J. Hyde United
States Global Leadership Against HIV/AIDS, Tuberculosis and
Malaria Reauthorization Act (P.L. 110-293), by a bi-partisan
vote of 80-16. The reauthorization increased funding; set
higher targets for prevention, treatment and care; and gave
country teams the flexibility to tailor their programs to meet
their countries' epidemics.
Funding History of PEPFAR
Since its creation in Public Law 108-25 in 2003, PEPFAR has
received annual appropriations from Congress totaling $32.367
billion through fiscal year 2010. (Final funding levels for
fiscal year 2011 remain unknown pending the outcome of the
continuing resolution). The largest portion of this funding
flows through appropriations to the State Department's Office
of the U.S. Global AIDS Coordinator, while other funds also are
dispensed to PEPFAR from the Departments of Health and Human
Services, Defense, Commerce, Labor, and the Peace Corps via
other appropriations bills. PEPFAR represents both the United
States' bilateral efforts to support the treatment of HIV/AIDS,
TB and Malaria and our international financial support of the
Global Fund. (See below).
The Role of International and Other Organizations
As the President and the Congress worked to set the
parameters for a U.S. program and its partnership participation
in a global effort against HIV/AIDS, other countries and the
United Nations also engaged in the effort. In remarks at the
African Leaders Summit in Abuja, Nigeria, in April of 2001,
Secretary-General Kofi Annan put forth a number of specific
actions for African nations themselves to stem the HIV/AIDS
epidemic on the African continent. He called for ``the creation
of a Global fund, dedicated to the battle against HIV/AIDS and
other infectious diseases.''
Establishment of the Global Fund to Fight AIDS, Tuberculosis and
Malaria
The United Nations General Assembly held a Special Session
on AIDS in June 2001 at which the organization agreed to
establish a fund to address the global AIDS pandemic.
Additionally, the G-8 endorsed the establishment of the fund at
its 2001 Summit in Genoa. The Global Fund to Fight AIDS,
Tuberculosis and Malaria was established in 2002, not as a
United Nations organization, but rather as an independent
financing entity that both receives contributions and disperses
these donations to countries for the treatment, prevention and
care of HIV/AIDS, tuberculosis and malaria.
Funding History
Since it began receiving contributions in 2001, the Global
Fund has received nearly $18 billion from more than 43
countries. Additionally, private donors and other contributors
have provided significant funding. An early donor, the Bill and
Melinda Gates Foundation, made its first contribution in 2004
and has contributed $650 million to date. Through a recent re-
focus on prevention of the disease, and noting the Global
Fund's focus on treatment, the Foundation has recently expanded
its commitment to the Fund to $500 million over a five year
period, thus bringing its contributions to over $1 billion by
2014. Private donors have contributed nearly $950 million and
together, with country donors, $18.9 billion has been donated
to the Fund since its inception through 2010. Additionally,
more than $2.5 billion has already been pledged for 2011 from
both countries and foundations. Of the $32.367 billion the U.S.
has provided to date for PEPFAR, more than $5 billion has been
transferred to the Global Fund through fiscal year 2010.
Operation and Structure of the Global Fund
The Fund's board is composed of 20 voting members
representing nations, both donor and developing countries, non-
governmental organizations and private sector representatives.
An additional six non-voting members serve on the board,
representing the World Health Organization, the Joint United
Nations Programme on AIDS (UNAIDS), the World Bank, a health
partner organization, the Executive Director of the Global Fund
and one Swiss citizen.
The Fund's overall operations are led by the Secretariat,
with more than 500 employees in its offices in Geneva,
Switzerland.
Process for Providing Medicines and Services
The Global Fund opens grant applications for services,
medications and supplies to competitive bids from entities that
work together in partnerships called County Coordinating
Mechanisms (CCMs). These entities are composed of
representatives of organizations including governments, either
multilateral or bilateral agencies, non-governmental
organizations, academic institutions, private businesses, and
people living with the diseases. CCMs select Principal
Recipients (PRs), which are usually national organizations to
carry out the work in each country or area. While the majority
of the Fund's grants are approved to CCMs, others may also
apply. In areas of severe internal conflict, it may be the case
that no CCMs apply. In these instances, the United Nations
Development Program (UNDP) may be called on to conduct the
work, or the UNDP may win a competitive contract among many
bidders.
Contracts are released through a series of funding rounds
that include several levels of review, first from the
Secretariat, which ensures the overall eligibility and
completeness of the application and next from the Technical
Review Panel (TRP). This panel is an independent panel of up to
40 experts in the health fields of the Fund's focus and may not
include any members of the Fund's Board. Following the
recommendation of the TRP, the full Board must approve each
grant.
Accomplishments of the Global Fund
According to statistics kept by the Global Fund, through
December 2010, the Global Fund committed $21.7 billion for 579
grants in 144 countries and had disbursed $ 9.3 billion to
grant recipients.
Global Fund-supported programs have saved an estimated 6.5
million lives through the delivery of significantly expanded
key services:
3 million people currently on antiretroviral treatment for
HIV
7.7 million people on effective TB treatment under the
internationally approved TB control strategy (DOTS)
160 million insecticide-treated bed nets distributed to
protect families from malaria
Additional results in treatment, prevention and care
include:
150 million people reached with HIV counseling and testing
142.4 million malaria drug treatments delivered
2.7 billion condoms distributed
5 million basic care and support services provided to
orphans and vulnerable children
160.4 million people reached with community outreach
services
12.3 million people trained to deliver services for
prevention and treatment of AIDS, TB or malaria
Benchmarks and Transparency
The Tom Lantos and Henry J. Hyde United States Global
Leadership Against HIV/AIDS, Tuberculosis and Malaria
Reauthorization Act (P.L. 110-293) included a series of
transparency and administrative benchmarks for the Global Fund
to Fight AIDS, Malaria and Tuberculosis. These benchmarks
include the requirements to strengthen the Office of the
Inspector General (OIG) and make available the OIG reports on
the Global Fund's website; the online publication of all Global
Fund Board reports, meeting decision points, and United States
positions taken on votes; the online publication of all grant
and sub-grant recipient funding and performance for grants; a
requirement to take steps to prevent the imposition of tariffs
and taxes by host countries on goods and services provided by
the Global Fund.
Creation of the Office of Inspector General
As initially set up in 2002, the Global Fund did not
include any independent, oversight mechanism to ensure
transparency and accountability. As early as September 2004,
about 18 months into the program, representatives from the Bush
Administration publicly raised concerns about the
administration of the Fund ranging from slowness in grant
distribution to inadequate staffing levels to review grants as
well as the distribution of grants to corrupt or repressive
states. In their ``Fiscal Year 2005 Report on the Global Fund
to Fight AIDS, Tuberculosis and Malaria'' document, the
President's Emergency Plan for AIDS Relief (PEPFAR) expressed
concerns about the understaffed Secretariat. Although the
Secretariat successfully monitored financial programs regarding
the number of grants issued and pushed to move quickly on new
grant negotiations, the understaffed Secretariat could not
properly analyze reports coming in from Local Fund Agents
(LFAs), which monitor programs on-the-ground at the country
level.
The United States representatives to the Board continued to
press for greater transparency. Recognizing the need to provide
better transparency, in July 2005 the Board of the Global Fund
to Fight AIDS, Tuberculosis and Malaria established an
independent Office of the Inspector General that sought to
ensure the integrity and effectiveness both of the programs of
the Global Fund and its internal operations. The Office of the
Inspector General (OIG) reports to the Board of the Global
Fund, with the Finance and Audit Committee as the primary point
of contact. The U.S. delegation was instrumental in developing
the policies of this new position to include best practices of
U.S. government inspector general offices and in consultation
with the U.S. government's Inspector General legal counsel.
Consequently, in an effort to increase transparency, it was
established that the Office of the Inspector General would
publicize its reports, whenever possible, while reserving the
right to redact portions of documents. These guidelines require
reports to be posted on the Global Fund's website within three
days of completion. In those instances where public disclosure
would not be prudent, the information could be made available
on an ``as needed'' basis, and recipients would be informed of
the circumstances under which the issuance of the report would
be harmful if publicly posted.
On February 5, 2007, the Boston Globe ran an article
entitled ``Disease-Fighting Fund's Expenses Hit'' alleging that
Global Fund Executive Director Richard Feacham used a little
known, private bank account to incur excessive and lavish
expenses on the Global Fund's tab. The claims were based on an
unpublished report by Inspector General Ibrahim Zeekeh who
resigned around that time for health reasons. The Inspector
General's report said that Feachem's spending habits created
``potential risks,'' including loss of donor confidence because
of ``inadequate internal controls over funds,'' and that
``senior management failed to convey and reinforce the need for
careful and prudent use of donor funds.''
Richard Feachem served as Executive Direction until March
31, 2007. Upon Dr. Feacham's departure, Dr. Michel Kazatchkine
became the Global Fund's new Executive Director. In December
2010, he was reappointed for a second term as Executive
Director, a term that extends until March 2014.\1\
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\1\ ``Professor Michel Kazatchkine Appointed a Second Term as
Executive Director of the Global Fund'' Press Release, Global Fund to
Fight Aids, Malaria, and Tuberculosis, January 11, 2011.
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Following Zeekah's resignation, the position of Inspector
General of the Global Fund remained vacant for nearly a year
until, in January 2008, John Parsons, a former Inspector
General at the United Nations Educational, Scientific and
Cultural Organization, joined the Global Fund as its new
Inspector General. At his first board meeting, John Parsons
made it clear to the U.S. delegation that his highest priority
would be accountability and effectiveness at the country level.
Current Response by the OIG
Under the leadership of IG John Parsons, the Office of the
Inspector General has aggressively performed individual country
and program audits and investigated allegations of fraud,
whether reported through one of the Fund's hotlines or as a
result of a scheduled audit. According to the Inspector
General's December 2010 report to the Board of the Global Fund,
the Secretariat was following up on 12 audits that contain 432
recommendations. Through its public reports, the Global Fund
has established records of finding, investigating and reporting
fraud. In the past, a number of these investigations, including
an extensive report on embezzlement and misappropriation of
funds in Uganda, have led to the repayment of funds and the
prosecutions of three individuals, including a 10-year sentence
for one individual. Additionally, Ugandan officials believe
that additional prosecutions are likely.
Recently, several audits and reports of the Office of the
Inspector General of the Global Fund have received widespread
media coverage. This media attention has revolved around
alleged widespread corruption and fraud in four of the 145
countries that receive Global Fund grants: Mali, Djibouti,
Mauritania and Zambia. The reports involve false and forged
receipts for travel, training and general overhead expenses,
and deficient record keeping. The Global Fund is demanding
repayment of more than $34 million from grants approved in
these four countries and is working with host governments on
full prosecution of the wrongdoers.
Specifically, in Mali, the Inspector General found that $4
million was misappropriated through forged per diem records and
falsified travel expense documents. To date, sixteen people
have been arrested, and the Minister of Health resigned days
before the report was released. Criminal proceedings have also
been launched in Mauritania and Zambia. Additional safeguards
have been implemented in these four countries regarding
existing grants, and the Global Fund Secretariat is placing
more attention on monitoring activities in other high risk
countries in order to improve the local capacity of the
implementing team and to detect potential fraudulent
activities.
Donors have begun to express concerns over the reports of
fraud. For example, Germany and Sweden have halted donations
(an estimated $85 million) until ongoing investigations are
complete. Additionally, the United States delegation has
stressed the need to enact measures and adopt procedures to
ensure that all necessary steps are taken to ``correct and
prevent the misuse of Fund resources.'' \2\
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\2\ United States Global Aids Coordinator Eric Goosby email to the
Board of the Global Fund, February 6, 2011
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Nevertheless, the underlying question remains as to why
fraud occurs in the first place. Over the past three years, a
number of routine country and program audits have unearthed
allegations of fraud and have led to full-fledged
investigations. Is there something endemic with the grant
issuances and partner selection? Do those entrusted with
monitoring and evaluating the programs, and thus ensuring that
funds are not finding their way into individual pockets,
understand how to pinpoint fraud and quickly remedy the
situation?
Secretariat Response
After much delay, the Board made two decisive moves: 1) it
increased the staffing and budgetary support for the Office of
the Inspector General from a 2009 budget level of $6.67 million
and 19 staff to 30 staff positions and a proposed budget of
$19.79 for 2011; and 2) it acknowledged that reforms would be
necessary in order to prevent additional donors from
terminating their support or freezing and conditioning their
contributions until the enactment of meaningful reforms by the
Board of the Global Fund.
At the December 2010 Board meeting, the Global Fund created
the Global Fund Comprehensive Reform Working Group that has
been tasked to produce a report with specific reforms to
address recent shortcomings in fiduciary responsibilities and
transparency. The Working Group consists of the Chair and Vice
Chair of the Board of the Global Fund, the Executive Director
of the Secretariat, three donor representative (the United
States, France, and one from the Norway/Denmark/Ireland/
Luxembourg/Netherlands/Sweden consortium), and three
representatives from the recipient countries community (Latin
America and Caribbean, Eastern Europe, and East Africa). On
March 16, 2011, the Global Fund Announced that former U.S.
Health and Human Services Secretary Michael Leavitt and former
President of Botswana, Festus Mogae, will lead this panel which
is expected to present its findings at the June 30, 2011 Global
Fund Board meeting.\3\
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\3\ ``Global Fund Names Former HHS Secretary Leavitt and Former
President of Botswana Mogae to Lead Independent Review,'' Global Fund
to Fight Aids, Malaria, and Tuberculosis press release, March 16, 2011
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United States Recommendations on Reform
The United States has outlined seven steps it believes
important to create the confidence that the Global Fund can
reduce the risk of fraud and abuse of resources. These steps
include the following:
1. Identify high risk grants
2. Conduct an immediate review of grants and activities
deemed as high risk
3. Develop an early warning system to identify and address
risk at the earliest possible stage
4. Create a rapid response system to crack down on
corruption as soon as it is realized
5. Apply lessons learned from Inspector General audits and
reports
6. Better train in-country entities (local fund agents and
country coordinating mechanisms) on spotting and addressing
fraud
7. Strengthen ties between the Secretariat, the Inspector
General and the in-country implementers.
Budget Implications
At last fall's replenishment conference, the Obama
Administration pledged $4 billion over three years to the
Global Fund--a 38 percent increase over the previous three
years. Much pressure was placed on the United States not only
from the Global Fund but also from the development assistance
advocates to make a multi-year pledge, with the hope that other
donor nations would follow suit with their own multi-year,
robust pledges. The Global Fund estimates that every dollar
contributed by the U.S. is leveraged with $2 from international
donors.
The President's fiscal year 2011 budget request included $1
billion for the Global Fund, and the Senate Appropriations
Committee approved this funding level in the 111th Congress.
However, on February 11, 2011, the House Appropriations
Committee released its outline of proposed reductions in
government spending for the remainder of fiscal year 2011 (from
March 4, 2011 through September 30, 2011). This Continuing
Resolution cuts the U.S. contribution to the Global Fund by
$450 million.
United Nations Development Program
Worldwide, the United Nations Development Program (UNDP) is
one of the largest administrators and overseers of Global Fund
programs. In recent years, the United States has contributed
$100 million annually to the UNDP through the State
Department's International Organizations Account. Additionally,
the United States has allocated between $150 million and $250
million annually to the UNDP for specific programs.
At this time, UNDP has a presence in 27 countries where it
manages nearly $1.1 billion in Global Fund grants, both as the
Principal Recipient and as a sub-grant implementer.\4\
Oftentimes, the UNDP is called upon to take over the role as
Principal Recipient--operating in a number of countries where
no other organization will go, or where there are citing
concerns about safety, lack of infrastructure to operate, or
extreme dysfunction and/or corruption of the host government.
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\4\ ``UNDP-Global Fund Partnership'' Fact Sheet--UNDP, February
2011.
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Over the years, the UNDP has lost credibility owing to
controversies ranging from the ``Oil for Food'' scandal to the
appointment of Iran to chair the UNDP 36-member executive board
in 2009.\5\ The UNDP is commonly referred to as the ``Principal
Recipient of Last Resort'' when the Global Fund has no other
option in a country. Often, a decision must be made either to
turn the responsibility over to the UNDP or to terminate the
country's program.
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\5\ ``Iran's Mini-Empire at The U.N.'' by Claudia Rosett,
Forbes.com July 23, 2010.
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The UNDP internal policy does not allow outside entities,
such as the Global Fund or World Bank, to examine the UNDP's
books--even when the UNDP is administering and overseeing a
grant. The UNDP offers summaries of audits to the Global Fund
OIG, but the Inspector General has stated that these summaries
are insufficient and that the UNDP auditing team has refused to
partner with the Global Fund auditors on joint investigations.
The UNDP claims ``special immunity'' that allows the UNDP to
restrict access to this information.\6\ As a United Nations
Member State, the United States has access to UNDP's Office of
Audits and Investigations reports, but only a limited group of
people can view them. All reviews are conducted at the UNDP
offices, with the reviewer only allowed to take notes, not to
make copies of the reports. Although overlap of UN Member
States and Global Fund Board Memberships exists, this limited
access to pertinent documents is not conducive to
theperformance of complete investigations.
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\6\ ``The Office of the Inspector General Progress Report for
March-October 2010 and 2011 Audit Plan and Budget,'' Office of the
Inspector General, the Global Fund to Fight Aids, Malaria, and
Tuberculosis, December 2010.
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Such UN bureaucratic roadblocks came to light when the
Office of the Inspector General at the Global Fund investigated
reports of fraud in Mauritania, where the UNDP was Principal
Recipient for two malaria grants and two tuberculosis grants.
The Inspector General analyzed the expenditure of some $3.5
million of the $9.9 million in disbursements and found that
approximately $2.7 million had been misappropriated. The
Inspector General was unable to examine the rest of the funding
in question (approximately 55 percent of the total grant)
because the UNDP refused to grant the Global Fund OIG access to
documents, staff, and witnesses.\7\
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\7\ ``The Office of the Inspector General Progress Report for
March-October 2010 and 2011 Audit Plan and Budget,'' Office of the
Inspector General, the Global Fund to Fight Aids, Malaria, and
Tuberculosis, December 2010.
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In the same report, the Global Fund Office of the Inspector
General raised additional problems with programs associated
with the United Nations Development Program. In Haiti, the
Global Fund revoked Principal Recipient responsibilities from
the UNDP due to lack of access to internal UNDP audits by the
Global Fund Inspector General after he found a $519,326.00
discrepancy between the records of the UNDP and records of the
sub-grant recipients.\8\ In Mali, the UNDP has instructed sub-
recipients not to provide the Global Fund investigators access
to any information, documents, or witnesses, even after fraud
and misappropriation of funds were detected in preliminary
investigations.\9\
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\8\ Ibid.
\9\ Ibid.
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On February 4, 2011, the UNDP announced plans to ``submit a
proposal to UNDP's Executive Board to allow the Global Fund to
access the UNDP audit reports of Global Fund projects, a
privilege currently restricted to UN Member States.'' \10\ The
UNDP staff has confirmed that this proposed change, which will
be presented to the UNDP Executive Board at their June 2011
meeting, would grant ``limited access'' to the Global Fund but
not full access to the audit and investigation materials.
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\10\ UNDP-Global Fund Partnership Fact Sheet--UNDP, February 2011.
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Department for International Development
On March 1, 2011, the Department for International
Development in Great Britain (DFID) issued a Multilateral
Review. This report evaluated the 43 international funds and
organizations to which the United Kingdom contributes with
respect to value for the money and each fund's and
organization's effectiveness in combating poverty, taking in
account transparency and accountability. British Secretary of
State for International Development Andrew Mitchell reported to
the House of Commons that nine organizations provided ``a very
good value for the British taxpayer.'' \11\ The organizations
given the highest recommendations in the findings include a
number of global health multilaterals: the GAVI Alliance,
UNICEF, and the Global Fund.
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\11\ Statement by the Secretary of State for International
Development: the Bilateral and Multilateral Aid Reviews to the House of
Commons, March 1, 2011.
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Recipient Countries as Donors
Currently, the Global Fund Board is considering changing
its prioritizing criteria for the funding of grants. One of the
main issues being discussed is lowering the funding priority
for grants to middle-income countries. (Income levels are
determined by the World Bank Income Indicator).
According to the Global Fund, in 2010, eleven countries
were considered both donors and recipients: China, India,
Malaysia, Namibia, Nigeria, Romania, Rwanda, Russia, South
Africa, Thailand, and Tunisia. On a whole, the contribution by
such countries is a token one; for the amount each country is
donating pales in comparison to the amount they are receiving
in grants. However, there is one exception: at the 2006 G8
Summit in St. Petersburg, Russia, Russian President Vladamir
Putin pledged to repay 80 percent of the $320 million Global
Fund grants it has previously received (approximately $270
million). \12\
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\12\ ``Global Fund Mulls Loans to Fight Aids'' by James Kilner,
Reuters News Service, May 4, 2008.
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In terms of countries that have historically received large
grants but have contributed a miniscule amount, China stands
out. Since 2002, the Global Fund has approved 14 grants in
China worth $1.87 billion, of which $832.5 million has been
committed. In contrast to the vast bilateral investment in non-
health related infrastructure, including soccer stadiums,
performing arts centers, and road projects, China has committed
very little to multilateral funds. In the latest replenishment
round, China has pledged $14 million to the Global Fund over
three years. In contrast, the Russian Federation has paid back
its previous grants and pledged $60 million over three years.
According to the World Bank, China is considered a lower
middle-income country with a per capita income of $3,650. The
Global Fund's policies include cost-sharing provisions, and
lower middle-income countries are expected to contribute as
much as 65 percent of program costs. The Chinese government,
according to the Global Fund, China is contributing 80-83
percent of total costs of its in-country program. As China
graduates to become an upper middle-income country (above
$3,945 per capita income), it should no longer apply for Global
Fund grants and thus should pick up the entire costs of the
programs.
Appendix
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2004-2009 Statistical data provided by the UN, World Bank, WHO, UNAIDS
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Disease Burden in China:
HIV/AIDS
People living with HIV................................... 700,000
Adult HIV prevalence (percent)........................... 0.1
AIDS-related deaths...................................... 39,000
Estimated number of people receiving ARV therapy......... 65,481
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Tuberculosis
TB case notifications.................................... 975,821
TB treatment success rate (percent)...................... 94
TB incidence, smear-positive (rate per 100,000 48
population).............................................
TB incidence, smear-positive (number).................... 640,000
TB prevalence, all forms (number)........................ 1,200,000
TB prevalence, all forms (rate per 100,000 population)... 88
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Malaria
Estimated malaria deaths................................. 24
Reported malaria cases................................... 16,650
Reported malaria deaths.................................. 23
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Disease Burden in South Africa
HIV/AIDS
Estimated number of people needing ARV therapy (WHO 2006 1,700,000
guidelines).............................................
Orphans due to AIDS...................................... 1,400,000
Estimated number of people receiving ARV therapy......... 971,556
AIDS-related deaths...................................... 350,000
Estimated number of people needing ARV therapy (WHO 2010 2,600,000
guidelines).............................................
Adult HIV prevalence (percent)........................... 18.1
People living with HIV................................... 5,700,000
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Tuberculosis
TB prevalence, all forms (number)........................ 300,000
TB treatment success rate (percent)...................... 74
TB incidence, smear-positive (rate per 100,000 410
population).............................................
TB case notifications.................................... 343,855
TB incidence, smear-positive (number).................... 200,000
TB prevalence, all forms (rate per 100,000 population)... 610
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Malaria
Reported malaria deaths.................................. 43
Reported malaria cases................................... 12,098
Estimated malaria deaths................................. 146
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Disease Burden in the Russian Federation
HIV/AIDS
AIDS-related deaths...................................... 40 000
People living with HIV................................... 940,000
Estimated number of people receiving ARV therapy......... 75,900
Adult HIV prevalence (percent)........................... 1.1
Tuberculosis
TB treatment success rate (percent)...................... 58
TB incidence, smear-positive (number).................... 46,000
TB prevalence, all forms (number)........................ 98,000
TB incidence, smear-positive (rate per 100,000 33
population).............................................
TB case notifications.................................... 128,263
TB prevalence, all forms (rate per 100,000 population)... 69
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Staff Recommendations
1. Future U.S. contributions to the Global Fund should be
contingent upon the Global Fund Boards' adoption of reforms laid out by
the United States Department of State. The Department of State would be
required to certify to Congress that the reforms were in place before
funds could be released.
2. Withhold ALL funding to the United Nations Development Fund
until it certifies that its internal rules and procedures have been
sufficiently modified to allow the Inspector General of the Global
Fund, the Inspector General of the World Bank, and any investigative
arm of any multilateral organization to which the United States
contributes funds FULL access to their audits, investigations, records
and personnel.
3. Withhold U.S. contributions from the Global Fund to the UNDP
until the U.S. receives confirmation of such certification.
4. Instruct the Government Accountability Office to conduct a
study regarding the coordination of the Office of Inspectors General
(or equivalent offices) of all U.S. Government entities and
multilateral organizations receiving U.S. taxpayer funds that oversee
the integrity of global health programs.
5. The United States Representative to the Global Fund should
reiterate in the strongest terms to the Board of the Global Fund that
the United States has no tolerance for fraud and abuse and that the
Office of the Inspector General needs to acquire adequate resources and
personnel to audit and investigate programs on the ground.
6. A high number of routine audits of Global Fund grants have
turned into full-fledged investigations. The Global Fund should take
any steps necessary to ensure that Local Fund Agents and CCMs are
capable of managing grants and are properly trained on how to spot and
mitigate suspected fraudulent activities.
7. The United States Government should conduct a top to bottom
analysis of U.S. investment and contributions to international
organizations and funds, similar to that conducted by Britain. On March
1, 2011, the United Kingdom Department for International Development
issued a Multilateral Review, which evaluated the 43 international
funds and organizations that the United Kingdom contributes with
respect to value for the money and each fund's and organization's
effectiveness in combating poverty, taking in account transparency and
accountability.
8. The U.S. government should work more closely with host
governments on establishing or increasing the country's commitment to
making its own investments in health programs. When possible, the
countries must demonstrate some commitment in moving towards
sustainability and cease complete reliance on the donor community for
the indefinite future.
9. The Global Fund should more clearly define its eligibility
criteria to ensure that countries which truly do not need grants, due
to high income or low disease burden, do not receive grants.
10. The Global Fund should develop a more precise ``early warning
system'' and possibly an extra layer of the protection for resources in
countries with a history or threat of government instability, and in
countries that exhibit high levels of government corruption.