Five Reasons Why the Inspector General Was Fired, and Another One Why He Should Have Been
21 Nov 2012

The Global Fund Board did the right thing on 14 November when it fired John Parsons, head of the Office of the Inspector General (OIG).

Ironically, the Board took its action without most of its members knowing about what to me is the most shocking of all the recent developments regarding the OIG – namely, that the Fund has had to completely reverse its position regarding a PR in the Philippines that had all five of its grants terminated in 2009 based on OIG findings. (See separate article here.)

Over the past two years, GFO has reported on multiple problems with the OIG as they became apparent. (See, for instance, here, here, here, here and here.)

Instead of dying down, the problems – or at least the Board’s awareness of the problems – reached a critical mass by the time the Board met in Executive Session on the evening of 14 November to review Mr Parsons’ work. Mr Parsons was invited to speak to the Board during an early part of the session; he then left the room while his fate was discussed.

There are five factors that I believe caused the Board to decide that John Parsons’ work was “unsatisfactory” and that he had to be fired.

First, the Board concluded that there had been insufficient improvement in Mr Parsons’ work since a year ago, when he had, in effect, been put on probation. One board member stated in open session that parts of Mr Parsons’ latest six-monthly report to the board was “unprofessional.” Another complained that although Mr Parsons’ progress reports to the board go into great detail about how hard the OIG is working, they draw almost no broad conclusions from that work, which was what the Board most needed.

Second, when the OIG’s work was reviewed on behalf of the Board by the Australian Institute of Internal Auditors, the Institute concluded that the OIG’s work only “partially conforms” with international auditing standards.

Third, the Chair of the Board’s Audit and Ethics Committee (AEC), to which the OIG reports, delivered a verbal report to the Board on behalf of the AEC that was, according to one source, “devastating” in the severity of its criticisms of Mr Parsons. (The AEC has three members from existing board delegations, and five members who are completely independent of the Global Fund and of its Board delegations. One of the independent members serves as committee chair.)

Fourth, even though Mr Parsons apparently has a reasonable ability to get on with people who work for him, he seems to have almost no ability to get on with people and agencies who have to work with him. He certainly had tormented relationships with UNDP, the Global Fund’s largest PR, and with Michel Kazatchkine, the Fund’s former Executive Director. Multiple Secretariat staff complained of his not dealing with them in a straightforward manner. Multiple PRs complained of being insulted and intimidated during OIG audits. There had been modest improvement over the past year; but the Board concluded that it was not enough.

And fifth, Mr Parsons showed a remarkable ability to upset and even infuriate members of his own Board. In my view, if someone who reports to a board succeeds in making one board member very unhappy, that person has a serious problem. If there are two unhappy board members, that person has an emergency. And if there are three unhappy board members, that person should simply ask “When would you like me to resign?” This was not Mr Parsons’ approach. When he started to defend his record to the Board at the evening session on 14 November, he still had a few allies on the board. By the time he had finished speaking, he had none, and no Board members voted against the termination. Not only had Mr Parsons lost any chance of saving his job, he had lost any chance of quietly retiring with a gold watch.

There has inevitably been some speculation by people not close to the Fund that Mr Parsons was fired because he exposed fraud that the Fund wanted kept hidden. I’ve not heard a single hint of this among Board members. Indeed, one could argue that the Board would also have been justified in criticising him, even if not firing him, because he did not find enough fraud. The Global Fund reported in July that the percentage of funding that had been audited or investigated by the OIG and that was found to have been diverted through fraud was only 0.5%. I’d love to believe that that is the actual level of fraud; but it would be no surprise if the real number is two or three times that – as indeed, the Board was told, is the case for at least one other major funder on the board. Mr Parsons would have had a better chance of finding more fraud if he hadn’t wasted his time reviewing all sorts of programmatic aspects of the work of implementers, and making hundreds upon hundreds of recommendations regarding the work of implementers that had nothing to do with his core mandate of identifying key areas of risk and key aspects of misuse of Global Fund money.

For my own part, the thing that finally made me conclude that Mr Parsons had to go was something I learned just before the Board meeting, and that to the best of my knowledge the full Board still has not been told about. This is that the Fund has been forced to reverse a requirement imposed by the OIG three years ago that Tropical Disease Foundation (TDF), a former principal recipient in the Philippines, repay the Fund $1.7 million of grant money that constituted “unauthorised expenditure.” TDF now does not have to repay anything, and despite having had all five of its grant agreements terminated, has now been welcomed back as a potential implementer of Global Fund grants.

What does this say about the accuracy of the OIG’s work? Might the Global Fund have to reverse findings in some of the OIG’s other reports? (The Secretariat told GFO, “The newly-established Recoveries Committee looks at every case on an individual basis to come to sound conclusions on the facts and circumstances presented in each OIG report, as it did with TDF.”)

The OIG’s primary role is to identify where the Fund faces greatest risk, and to address that risk. Imagine what might have happened if TDF had sued the Fund for reputational damages. The faulty OIG findings on the Philippines did not identify risk for the Global Fund, they created risk.

The Global Fund has not had a great success with its Inspectors General. The first one resigned abruptly in 2007 for unspecified health reasons. The second one was fired this month. The Fund says it will take six months to recruit the third one. All those who believe in the Fund, and in its commitment to forceful but accurate audit, can only hope it gets this one right.

Bernard Rivers (email) founded Aidspan in 2002 and ran it until September 2012. He now serves as Aidspan’s first Senior Fellow. John Parsons did not respond to a request for comment.

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Terminating the Contract of the Inspector General

The incisive comment on the Inspector General's termination leads several questions unanswered: (i) was the lack of professionalism of the OIG known before; and (ii) if yes, who was responsible for the Board's not acting earlier. A number of persons within the Secretariat and on the Board stated that fraud was not a serious problem for the Global Fund's overall portfolio in 2010 and 2011 as a former Global fund chief financial officer and I argue in a commentary that will be published by the International Journal of Health Planning and Management in early 2013. The Fund's Board, in particular the Board Chair and Vice Chair and the head of the Finance and Auditing Committee (FAC), chose to ignore these facts as well as the statements by private sector members of the Board that the OIG's "messaging" was endangering the Fund's operations. The Board and the FAC were also aware of statements by the OIG, as early as February 2009 in a speech in the United Kingdom, that he had a dual mandate - (i) to improve health outcomes; and (ii) eliminate fraud. It is my contention that the lack of experience and professional expertise of the Board and FAC leadership allowed the OIG to do whatever he wanted; the fact that the cancellation of a round of funding ensued, resulting in higher levels of death and illness, is more than unfortunate. The lesson learned, as the improved performance of the audit committee now that it has professional membership, is that leadership of the Fund Board and committees cannot be a simple matter of whose turn it is to assume leadership positions but the result of a more professional selection process. It is now probably too late for the Fund to maintain its more lean and unbureaucratic structure as it has bcome more intrusive in its projection selection and supervision policies, more akin to the World Bank, but without the Bank's extensive staff and substantial country presence. This should be remembered when the Fund is next evaluated. Jonathan Brown, Acting Country Programs Director - May 2010 to May 2011