The Global Fund Secretariat estimates it will be able to recover a total of $103 million in grant funds lost to theft, undocumented or ineligible spending, or unreported income in 41 countries since the inception of the Fund in 2002. The losses represent less than 0.4% of the total $25 billion in grants made in 152 countries.
In a report to the Board for its 31st meeting, held 6-7 March in Jakarta, the Secretariat’s risk management office said that working with the Office of the Inspector General (OIG), a new risk management strategy would be implemented to mitigate future losses and reduce the time between identifying loss and recovering it.
Some 47 incidents in 41 countries – six countries have two separate incidents – over the 12 years since the Fund’s initiation have resulted in losses that combined equal some $103 million. The Secretariat has recovered nearly $26 million in that time, and has extracted commitments from grant recipients to repay another $9.08 million, leaving some $67 million unrecovered in total. It is anticipated that the recovery of the remaining $67 million will be completed by the end of 2015.
Management adjustments, the result of consensus among various teams within the Secretariat, mean that the amount owed through recovery as reported by the OIG is adjusted downward based on new evidence or documentation. There have also been instances of upwards adjustments following their identification by the OIG as a loss.
The default position, once money is recovered, is for it to be paid back into the program that it was initially supporting, provided the activities that the funds were intended for can still be implemented. Should the grant have closed in the interim, Aidspan understands from the Secretariat, the funds are returned to the Secretariat and reprogrammed elsewhere.
Going forward, there will be preconditions built into grant agreements signed with countries that have outstanding losses identified through investigations or audits. Those funds must be recovered or repaid, not deducted from the next disbursement, because it would penalize the programs twice: the first time when the money was misappropriated and the second time when it was deducted. It is only a recovery, Aidspan understands, if the recipient in question agrees to put the money back and the money is spent as originally intended.
The recoveries strategy is only one element in the risk management and assurance strategy working to address weaknesses in the Fund’s management and oversight capabilities. Combined assurance work has been identified by the Secretariat as one of its main priorities over the next 12 months, beginning with a review of the way risks are identified, addressed and mitigated.
Over the next year, a team bringing together representatives from the Finance, Grant Management, Legal and Risk departments will oversee analysis in nine countries that are early and interim applicants under the new funding model (NFM) and 15 ongoing grants in other countries into risk identification in five key areas:
Fraud and corruption
Theft, diversion and counterfeit of drugs
Quality of health services
The case studies will involve country teams including fund portfolio managers and assess what work is done pre-emptively to analyze risk against what happens in practice.
The work is expected to last through mid-year 2014. There is no indication at this time whether the results of the assessment will be made public.