Global Fund Investigation Report

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    Investigation Report by the Office of the Inspector General at the Global Fund into a malaria grant given to Population Services International.

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  • Investigation Report
    Global Fund grant in Papua
    New Guinea
    Non-compliant expenditures in malaria grant
    GF-OIG-18-011
    10 July 2018
    Geneva, Switzerland

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  • What is the Office of the Inspector General?
    The Office of the Inspector General (OIG) safeguards the assets, investments, reputation and
    sustainability of the Global Fund by ensuring that it takes the right action to end the epidemics of
    AIDS, tuberculosis and malaria. Through audits, investigations and advisory work, it promotes good
    practice, reduces risk and reports fully and transparently on abuse.

    Established in 2005, the OIG is an independent yet integral part of the Global Fund. It is accountable
    to the Board through its Audit and Finance Committee and serves the interests of all Global Fund
    stakeholders. Its work conforms to the International Standards for the Professional Practice of
    Internal Auditing and the Uniform Guidelines for Investigations of the Conference of International
    Investigators.

    Contact us
    The Global Fund believes that every dollar counts and has zero tolerance for fraud, corruption and
    waste that prevent resources from reaching the people who need them. If you suspect irregularities
    or wrongdoing in the programs financed by the Global Fund, you should report to the OIG using the
    contact details below. The following are some examples of wrongdoing that you should report:
    stealing money or medicine, using Global Fund money or other assets for personal use, fake
    invoicing, staging of fake training events, counterfeiting drugs, irregularities in tender processes,
    bribery and kickbacks, conflicts of interest, human rights violations…

    Online Form > Free Telephone Reporting Service:
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    Letter:
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    Global Fund +41 22 341 5258
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    Grand-Saconnex, Geneva, Switzerland Fax – Dedicated secure fax line:
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    Email
    ispeakoutnow@theglobalfund.org More information: www.theglobalfund.org/oig

    Audit Report Advisory Report Investigations Report
    OIG audits look at systems and processes, both OIG advisory reports aim to further the Global OIG investigations examine either allegations
    at the Global Fund and in country, to identify the Fund’s mission and objectives through value- received of actual wrongdoing or follow up on
    risks that could compromise the organization’s added engagements, using the professional skills intelligence of fraud or abuse that could
    mission to end the three epidemics. The OIG of the OIG’s auditors and investigators. The compromise the Global Fund’s mission to end
    generally audits three main areas: risk Global Fund Board, committees or Secretariat the three epidemics. The OIG conducts
    management, governance and oversight. may request a specific OIG advisory administrative, not criminal, investigations. Its
    Overall, the objective of the audit is to improve engagement at any time. The report can be findings are based on facts and related analysis,
    the effectiveness of the Global Fund to ensure published at the discretion of the Inspector which may include drawing reasonable
    that it has the greatest impact using the funds General in consultation with the stakeholder who inferences based upon established facts.
    with which it is entrusted. made the request.
    10 July 2018
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  • Table of Contents
    1. Executive Summary …………………………………………………………………………………………………… 4
    1.1. Summary paragraph ……………………………………………………………………………………………… 4
    1.2. Main OIG Findings ……………………………………………………………………………………………….. 4
    1.3. Actions Already Taken…………………………………………………………………………………………… 4
    1.4. Summary of Agreed Management Actions……………………………………………………………….. 4
    2. Context …………………………………………………………………………………………………………………….. 5
    2.1. Country Context …………………………………………………………………………………………………… 5
    2.2. Differentiation Category for Country Investigations …………………………………………………. 5
    2.3. Global Fund Grants in the Country …………………………………………………………………………. 5
    2.4. The Three Diseases ……………………………………………………………………………………………….. 6
    3. The Investigation at a Glance………………………………………………………………………………………. 7
    3.1. Genesis and Scope of the Investigation ……………………………………………………………………. 7
    3.2. Type of Wrongdoing Identified ………………………………………………………………………………. 7
    3.3. Non-Compliant Expenditure ………………………………………………………………………………….. 7
    3.4. Proposed Recoverable Amount ………………………………………………………………………………. 7
    3.5. Progress on Previously Identified Issues …………………………………………………………………. 8
    4. Findings …………………………………………………………………………………………………………………… 9
    4.1. Historical controls weaknesses in PSI PNG facilitated the fraud ………………………………… 9
    4.2. Process weaknesses reduced PSI’s ability to detect the fraud and continue to constrain its
    financial assurance of Global Fund grants ……………………………………………………………….. 9
    4.3. The OIG found further non-compliant expenditures totaling US$175,818 in the grant
    affected by the fraud …………………………………………………………………………………………….. 11
    5. Table of Agreed Actions ……………………………………………………………………………………………. 12
    Annex A: Methodology……………………………………………………………………………………………………….. 13
    Annex B: Summary of OIG identified non-compliant expenditures …………………………………………. 15

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  • 1. Executive Summary
    1.1. Summary paragraph
    A Principal Recipient in Papua New Guinea, Population Services International (PSI), identified
    fraudulent and non-compliant expenditures in a malaria grant totalling US$551,608. The fraud was
    facilitated by weak local financial controls, which PSI later strengthened. A subsequent OIG
    investigation found that weaknesses in PSI’s accounting processes had reduced PSI’s ability to detect
    the fraud and that the same weaknesses continue to constrain financial assurance of its grants. The
    investigation also found additional non-compliant expenditures in the same grant of US$175,818
    from previously unreviewed expenditures of US$4.2 million. PSI has since refunded the full amount
    identified by the OIG. The Secretariat is now working with PSI to enhance its financial oversight of
    all its Global Fund grants.

    1.2. Main OIG Findings
    In July 2015, PSI identified that its National Finance Manager in PNG had commited a fraud
    affecting its Round 8 malaria grant. PSI’s initial investigation in 2015 identified fraudulent
    expenditures totalling US$195,447. In 2016, PSI conducted an additional review of the same grant
    that identified a further US$356,161 of unsupported and non-compliant expenditures. Based on its
    findings, PSI did not charge these amounts to the Global Fund, which did not incur any direct losses
    because of the fraud.

    PSI identified that weak financial controls at its PNG office had facilitated the fraud, including a lack
    of segregation of duties and poor management. Following the issuing of a disclaimer of opinion by
    PSI’s external auditor in January 2017, the OIG reviewed a further US$ 4.2 million of expenditures
    charged by PSI to the Round 8 Malaria grant. PSI and the external auditor had not previously
    reviewed most of this amount.

    The investigation found that weaknesses in PSI’s accounting processes had prevented earlier
    identification of the fraud, and that they continue to constrain financial assurance across all PSI’s
    Global Fund grants. It also found further non-compliant expenditures totaling US$175,818 in the
    Round 8 grant that PSI has since refunded to the Global Fund.

    1.3. Actions Already Taken
    In addition to reimbursing the full non-compliant amount identified by the investigation and
    dismissing the Finance Officer, PSI implemented measures to improve internal controls in its PNG
    office. These included clearly defining roles and segregated responsibilities and enhancing oversight,
    monitoring and verification of grant expenditure.

    1.4. Summary of Agreed Management Actions
    Based on the investigation’s findings, the Secretariat is working with PSI to improve its financial
    assurance processes globally, on all Global Fund-financed portfolios. This includes implementing
    revised internal control procedures at PSI’s headquarters and country level, optimizing the flow of
    accounting data between its headquarter’s and country level systems, and agreeing how the revised
    control procedures will be harmonized across all Global Fund grants managed by PSI.

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  • 2. Context
    2.1. Country Context
    Papua New Guinea (PNG) is the largest Pacific Island nation. Its economy is highly reliant on
    commodity exports, which has driven rapid economic growth. Papua New Guinea’s wealth is
    enevenly distributed with the majority of the population practising subsistence-based agriculture.
    Faith based organisations play a critical role in PNG’s health system, delivering more than half of all
    services. Civil society and private sector groups are also critical to reaching more than 850 language
    groups, separated by rugged terrain and plagued by inter-tribal and gender based violence.

    PNG has reduced the number of malaria cases and deaths through wide scale bed net distribution
    campaigns. Its HIV burden is concentrated and while anti-retroviral coverage is high, prevention of
    mother to child transmission is low. HIV testing is also low among men who have sex with men and
    female sex workers. PNG ranks 2nd in the Western Pacific Region for estimated tuberculosis
    prevalence, incidence and mortality. Its TB burden has not improved since the early 1990s.

    2.2. Differentiation Category for Country Investigations
    The Global Fund has classified the countries in which it finances programs into three overall portfolio
    categories: focused, core and high impact. These categories are primarily defined by size of allocation
    amount, disease burden and impact on the Global Fund’s mission to end the three epidemics.
    Countries can also be classed into two cross-cutting categories: Challenging Operating Environments
    and those under the Additional Safeguard Policy. Challenging Operating Environments are countries
    or regions characterized by weak governance, poor access to health services, and manmade or natural
    crises. The Additional Safeguard Policy is a set of extra measures that the Global Fund can put in
    place to strengthen fiscal and oversight controls in a particularly risky environment.

    Papua New Guinea is:

    Focused: (Smaller portfolios, lower disease burden, lower mission risk)
    x Core: (Larger portfolios, higher disease burden, higher risk)
    High Impact: (Very large portfolio, mission critical disease burden)

    Challenging Operating Environment
    x Additional Safeguard Policy

    2.3. Global Fund Grants in the Country
    The Global Fund has two active grants in PNG with a total commitment of US$36.3 million, of which
    US$20.6 million has been disbursed. In total, the Global Fund has committed US$245.3 million to
    PNG, of which US$227.9 million has been disbursed. The malaria program grant concerned by this
    investigation (PNG-809-G05) ended on 31 March 2015 and is in financial closure. The Global Fund,
    however, continues to invest in and implement malaria programs in PNG through another
    implementer.

    The Global Fund is among the largest donors for prevention among key populations in HIV and the
    only donor for malaria case management and vector control. The Global Fund has helped to attract
    funding from Against Malaria Foundation, which will procure LLINs for PNG in 2018-2020. In
    addition, the Global Fund is closely coordinating its investments with other partners in PNG,
    including the World Bank, Gavi, DFAT and the Asia Development Bank.

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  • 2.4. The Three Diseases1

    HIV/AIDS: PNG is experiencing a ‘mixed’ HIV epidemic. 0.89% national average HIV
    Whilst prevalence is significantly higher amongst key prevalence
    populations, there are many people at risk who are not
    8.5-14.9% HIV prevalence
    members of these populations. HIV prevalence is also
    amongst key populations
    higher than the national average in a number of
    provinces, indicating a focal generalized epidemic. 24,000 people currently on
    Sexual transmission is by far the leading transmission antiretroviral therapy
    route. HIV mortality has reduced significantly in recent
    years, but remains high. Levels of resistance to a major
    class of anti-retroviral therapies (ARTs) are the highest
    globally.

    Malaria: PNG has one the highest burdens of malaria 816,414 Insecticide-treated nets
    outside of Africa. An estimated 94% of the country’s (LLINs) distributed in 2016
    population live in areas that are endemic for malaria,
    499,929 suspected malaria
    with women and children under five years of age at
    cases tested in 2016
    particular risk. The number of reported malaria cases
    and deaths has fallen significantly in all regions in PNG 349,139 confirmed cases treated
    since 2007, in some areas by more than 70%. The in 2016
    reduction is attributed to high coverage with Long
    Lasting Insecticide Nets (LLINs), improved access to
    early diagnosis using rapid diagnostic tests (RDTs) and
    highly effective treatment with artemisinin-based
    combination therapies (ACTs).

    Tuberculosis: TB remains a major public health threat 432 per 100,000 TB incidence
    in PNG with a very high incidence rate and a rapid rise rate
    of multi-drug and rifampicin resistant (MDR/RR-TB) TB.
    MDR prevalence 23%
    There is ongoing transmission of TB within communities
    as shown by the high occurrence of TB amongst children 13,900 new smear-positive TB
    (19-23% of total TB cases annually). DOTS expansion, cases detected and treated
    especially through Global Fund funding, has significantly
    increased case notification rates. However, the high rate
    of cases, which are not bacteriologically confirmed
    (69%), indicates that many TB patients have not been
    treated in line with national standards. Treatment
    success rates also remain low.

    1Information drawn from: Global Fund PNG grants external webpage; the Global Fund PNG Country Team; a CCM PNG HIV/TB Funding
    Request dated 15 December 2016; and a Secretariat Briefing Note for malaria grant program continuation into 2018-2020 (undated).

    10 July 2018
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  • 3. The Investigation at a Glance
    3.1. Genesis and Scope of the Investigation
    January 2014: Start of wrongdoing In July 2015, the Global Fund Secretariat reported to the
    OIG a fraud in a Papua New Guinea (PNG) Round 8
    July 2015: OIG initially alerted to malaria grant implemented by Population Services
    wrongdoing International (PSI). PSI PNG had found that its
    National Finance Manager had misappropriated grant
    Source of the alert: funds including duplicate supplier payments and
    unused travel advances.
    x Secretariat
    x Principal Recipient PSI’s Global Internal Audit (GIA) investigated the fraud
    in July-August 2015 and it initially identified fraudulent
    Sub-Recipient
    expenditures totalling US$195,447 in the Round 8
    Local Fund Agent grant. GIA conducted an additional review in early
    Anonymous whistle-blower 2016. GIA did not report the results of this review to the
    OIG at the time. It informed the OIG in April 2017 that
    Audit referral
    the review had identified further unsupported/non-
    Other compliant expenditures totaling US$356,161 in the
    Round 8 grant.

    In January 2017, the Secretariat provided to the OIG an external audit report of the PNG Round 8
    Malaria grant. It contained a Disclaimer of Opinion, as the auditor was unable to obtain sufficient
    evidence to provide a basis for an audit opinion for direct expenses of approximately US$4.3 million.

    Based on the external audit findings, in January 2017, the OIG opened its own investigation. Its scope
    comprised 4,098 transactions totalling US$4,187,987 charged to the Round 8 malaria grant between
    1 January 2014 and 31 March 2015. PSI and the external auditor had not reviewed the majority of
    these transactions. The purpose of the investigation was to establish if any of these transactions were
    also non-compliant, and if so, establish the root causes. The OIG conducted a mission to PNG in
    August 2017.

    3.2. Type of Wrongdoing Identified
    Coercion
    Collusion
    Corruption
    Fraud
    x Non-Compliance with Grant Agreement
    Product Issues

    3.3. Non-Compliant Expenditure
    OIG identified: US$175,818: The investigation found 457 unsupported, inadequately supported
    and other non-compliant expenditures totalling US$175,818 (refer to Finding 4.3).

    3.4. Proposed Recoverable Amount
    PSI has reimbursed the full amount identified by the investigation.

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  • 3.5. Progress on Previously Identified Issues
    In 2013 and 2014 the OIG published reports of investigations
    in PNG. Previous relevant OIG work

    The investigation of Rotarians Against Malaria (RAM) in 2013 GF-OIG-14-002 – Investigation
    found that RAM steered a contract to a HR company linked to of Global Fund Grants to Papua
    its senior executive. RAM’s decision to appoint a particular HR New Guinea – National
    service provider resulted in additional costs of US$359,543 to the Department of Health
    grant. The OIG recommended that the Secretariat seek
    recoveries, that the PR re-tender its HR service provider
    contract, and conduct an annual LFA review of HR fees. GF-OIG-13-022 – Investigation
    of Global Fund Grants to Papua
    The investigation of the National Department of Health (NDoH) New Guinea – Rotarians against
    found irregular procurement practices and improper Malaria
    management of cash advances by its employees. NDoH’s
    failure to follow procurement and cash advance requirements
    resulted in additional costs of US$1,352,696 to the grant.

    The OIG recommended that: the Secretariat seek recoveries; the PR procure all core health products
    through the Pooled Procurement Mechanism (PPM); and cash advances be subject to strict approval
    limits. The Secretariat implemented all the recommendations arising from the two investigations.

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  • 4. Findings
    4.1. Historical controls weaknesses in PSI PNG facilitated the fraud
    When PSI identified the fraud in 2015, its PNG office had weak financial controls. To rectify this, PSI
    implemented a number of measures to improve them. However, at the time of the OIG’s mission in
    August 2017, PSI PNG was still unable to monitor and track actual expenditures to budgeted
    expenditures. The controls weaknesses at PSI PNG that facilitated the fraud included:

    Weak financial and accounting management, limited internal controls and poor oversight of
    staff in positions of trust. This resulted in trust-based rather than controls-based procedures.

    The former Finance Manager used his personal bank account to facilitate control of program
    funds at PSI’s remote Vanimo office.

    The former Finance Manager had access to the ‘administrator’ password for PSI PNG’s
    ‘QuickBooks’ accounting system and payment processing system. This allowed him to create and
    initiate duplicate supplier payments to his personal bank account.

    The former Finance Manager was able to manipulate QuickBooks records due to the lack of
    segregation of duties and controls over access to PSI PNG’s financial accounting records.

    PSI identified 13 areas for improvements to PSI PNG’s control environment. These included:

    Introducing clear segregation of duties and creating and updating office guidelines, policies and
    procedures.

    Establishing a dedicated bank account for the Vanimo office and eliminating the use of personal
    bank accounts for business-related transactions.

    Replacing the former trust-based management with improved internal oversight and clear
    financial approvals process, to achieve greater accountability.

    Issuing all finance staff with their own secure access login for the financial and accounting
    systems and providing greater oversight of expenditures from PSI headquarters.

    The Global Fund country team regularly followed up with PSI on the implementation of remedial
    actions. This included sending a Performance Letter to PSI PNG making recommendations for
    additional controls improvements. By August 2017, PSI PNG had implemented 12 of the 13 identified
    action points. The remaining outstanding issue related to PSI’s inability to monitor and track actual
    expenditure to Global Fund budgeted expenditure, is described under Finding 4.2, below.

    4.2. Process weaknesses reduced PSI’s ability to detect the fraud and
    continue to constrain its financial assurance of Global Fund grants
    PSI’s current financial assurance processes reduced its ability to detect the fraud. This includes its
    practice of performing quarterly instead of monthly reconciliations, and cost category level rather
    than activity level monitoring of grant expenditure. PSI’s use of different accounting systems at
    headquarters and local country level also allowed the fraud in PNG to initially go undetected and
    continues to constrain PSI’s financial assurance of its Global Fund grants.

    Prior to identifying the fraud, PSI PNG reported a shortfall in its Round 8 malaria grant budget. The
    Secretariat asked PSI PNG to provide a full reconciliation, as the shortfall was inconsistent with its
    own analysis. When PSI PNG provided the reconciliation, the Secretariat queried further
    inconsistencies. The Secretariat attributed PSI’s difficulties in reconciling its Round 8 malaria grant

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  • budget to its practice of reconciling and reporting balances to the Global Fund on a quarterly basis,
    rather than performing monthly reconciliations.

    At the time of the fraud, PSI PNG did not conduct monitoring of actual expenditure against plan or
    budget, which reduced its ability to monitor the performance of its operations and to detect fraud.
    In November 2016, some 17 months after the fraud, the LFA found that PSI PNG had made no
    progress with implementing activity-level expenditure monitoring.

    During its mission in October 2017, the OIG found that PSI PNG was still not tracking expenditures
    at the activity level. The OIG also could not match supporting documents to budgeted expenditure,
    as PSI PNG does not record activity reference numbers on supporting documents. The PNG LFA said
    this also prevents it from effectively verifying whether grant expenditures incurred by PSI PNG are
    within budget.

    In response to these findings, PSI said that its grant agreement with the Global Fund only requires
    it to report expenditures at the cost category level, not the activity level. It said these limitations are
    therefore driven by PSI’s focus on the agreed reporting requirements. PSI said its headquarters is
    reviewing the use of tools to facilitate easier tracking of expenditures at the activity level.

    In response to the finding that PSI PNG did not monitor actual expenditures against plan or budget,
    PSI said it performed ‘activity status’ reviews of PSI PNG expenditures at headquarters level.
    However, PSI uses two accounting systems; ‘QuickBooks’ in its country offices and ‘Lawson’ at its
    headquarters level. PSI headquarters reviews grant expenditures after their transferral into Lawson.
    As a result, it was unable to identify the manipulation of records in PSI PNG’s QuickBooks system.
    PSI said this initially allowed the fraud to go undetected.

    Additionally, when PSI transfers records from QuickBooks to Lawson, it does not capture all the data
    from QuickBooks. This includes transaction number, journal voucher number and full transaction
    description. When the LFA undertakes assurance work on PSI grants, PSI provides data from
    Lawson. The PNG LFA told the OIG that it has experienced delays when verifying locally-incurred
    expenditures with data from Lawson. It said that this is due to the time consuming manual process
    of locating supporting documents without the local transaction references from QuickBooks.

    Based on the investigation’s findings, the Secretariat is working with PSI to enhance its internal
    financial control and assurance processes across all its Global Fund grants.

    Agreed Management Action 1

    To address the financial assurance weaknesses identified in this report, the Secretariat is working
    with PSI to:

    Implement revised internal control procedures at headquarters and country level, in form and
    substance acceptable to the Global Fund;

    Optimize the flow of accounting data between its headquarter and country level systems to
    facilitate timely assurance of grant expenditures; and

    Propose how the agreed revised internal control procedures will be harmonized across all Global
    Fund grants managed by PSI.

    The Secretariat will conduct sample testing of the revised internal control procedures by the AMA
    target date.

    Owner: Head of FISA

    Due date: 30 June 2020

    Category: Governance, Oversight and Management Risks

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  • 4.3. The OIG found further non-compliant expenditures totaling US$175,818
    in the grant affected by the fraud
    In addition to the amounts identified by PSI’s own investigations, the OIG found that PSI had
    charged further non-compliant expenditures totalling US$ 175,818 to the Round 8 malaria grant.
    PSI has since refunded the full amount. Due to the absence of supporting documents, the OIG was
    unable to determine if any of the transactions were fraudulent.

    Unsupported and non-compliant expenditures

    The investigation found 358 transactions totalling US$113,809 that PSI had charged to the Round 8
    Global Fund malaria grant, did not have any supporting documents (refer to Annex B). Due to the
    absence of supporting documents, the OIG was unable to determine if any of the transactions were
    fraudulent.

    PSI PNG offered two possible explanations for the missing supporting documents: firstly, due to the
    various historical reviews, audits and investigations of the Round 8 grant, PSI PNG may not have
    effectively managed documents following each of the reviews; secondly, the former Finance
    Manager, who committed the fraud, may have removed supporting documents from the office.

    The Code of Conduct for Recipients of Global Fund Resources requires implementers to maintain
    complete, well organized, and comprehensive records for a minimum of seven years after the date of
    last disbursement made under the Grant Agreement. With no supporting documents available for
    the 358 transactions, PSI PNG breached the terms of the Code of Conduct for Recipients.

    PSI PNG management also agreed that another 68 transactions totalling US$43,645 did not have a
    sufficient level of supporting documents. These included transactions with: missing receipts,
    unsigned vouchers, no bank checks, bank checks made to ‘cash’ with no supporting documents, self-
    completed or self-authorized forms, and pro-forma invoices only.

    PSI had charged a further 31 expenditures totalling US$18,364 to Round 8 Malaria grant which the
    OIG found to be non-compliant. 73% of these were amounts charged to the Global Fund that were
    applicable to other donors, or expenditures not related to malaria control. The remaining related to
    tax exemption issues.

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  • 5. Table of Agreed Actions

    Agreed Management Action 1 Target date Owner Category

    To address the financial assurance weaknesses 30 June 2020 Head of Governance,
    identified in this report, the Secretariat is working with FISA Oversight and
    PSI to: Management
    Risks
    Implement revised internal control procedures at
    headquarters and country level, in form and
    substance acceptable to the Global Fund;

    Optimize the flow of accounting data between its
    headquarter and country level systems to facilitate
    timely assurance of grant expenditures; and

    Propose how the agreed revised internal control
    procedures will be harmonized across all Global
    Fund grants managed by PSI.

    The Secretariat will conduct sample testing of the
    revised internal control procedures by the AMA target
    date.

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  • Annex A: Methodology
    Why we investigate: Wrongdoing, in all its forms, is a threat to the Global Fund’s mission to end
    the AIDS, tuberculosis and malaria epidemics. It corrodes public health systems and facilitates
    human rights abuses, ultimately stunting the quality and quantity of interventions needed to save
    lives. It diverts funds, medicines and other resources away from countries and communities in need,
    limits impact and reduces the trust, which is essential to the Global Fund’s multi-stakeholder
    partnership model.

    What we investigate: The OIG is mandated to investigate any use of Global Fund funds, whether
    by the Secretariat of the Global Fund, by recipients of grants funds, or their respective suppliers. OIG
    investigations identify instances of wrongdoing, such as fraud, corruption and other types of non-
    compliance with the grant agreements. The Global Fund Policy to Combat Fraud and Corruption 2
    generally outlines the prohibited practices, which will result in investigation findings.

    OIG investigations aim to:

    (i) identify the specific nature and extent of wrongdoing affecting Global Fund grants;
    (ii) identify the entities responsible for such wrongdoing;
    (iii) determine the amount of grant funds that may have been compromised by wrongdoing;
    and
    (iv) place the Global Fund in the best position to recover funds, and take remedial and
    preventative action, by identifying where and how the misused funds have been used.

    OIG conducts administrative, not criminal, investigations. It is the recipients’ responsibility to
    demonstrate their compliance with the grant agreement in their use of grant funds. Its findings are
    based on facts and related analysis, which may include drawing reasonable inferences. Findings are
    established by a preponderance of evidence. All available information, inculpatory or exculpatory, is
    considered by the OIG.3 As an administrative body, the OIG has no law enforcement powers. It
    cannot issue subpoenas or initiate criminal prosecutions. As a result, its ability to obtain information
    is limited to the access rights it has under the contracts the Global Fund and its recipients enter into,
    and on the willingness of witnesses and other interested parties to voluntarily provide information.

    The OIG bases its investigations on the contractual commitments undertaken by recipients and
    suppliers. Principal Recipients are contractually liable to the Global Fund for the use of all grant
    funds, including those disbursed to Sub-recipients and paid to suppliers. The Global Fund’s Code of
    Conduct for Suppliers4 and Code of Conduct for Recipients provide additional principles, which
    recipients and suppliers must respect. Global Fund Guidelines for Budgeting generally define how
    expenditures must be approved and evidenced to be recognized as compliant with the terms of the
    grant agreements.

    Who we investigate: Principal Recipients and Sub-recipients, Country Coordinating Mechanisms
    and Local Fund Agents, as well as suppliers and service providers. Secretariat activities linked to the

    2 (16.11.2017) Available at https://www.theglobalfund.org/media/6960/core_combatfraudcorruption_policy_en.pdf
    3 These principles comply with the Uniform Guidelines for Investigations, Conference of International Investigators, 06.2009; available
    at: http://www.conf-int-investigators.org/?page_id=13, accessed 1.12.2017.
    4 Global Fund Code of Conduct for Suppliers (15.12.2009), § 17-18, available at:

    https://www.theglobalfund.org/media/3275/corporate_codeofconductforsuppliers_policy_en.pdf, and the Code of Conduct for
    Recipients of Global Fund Resources (16.07.2012), §1.1 and 2.3, available at:
    https://www.theglobalfund.org/media/6011/corporate_codeofconductforrecipients_policy_en.pdf. Note: Grants are typically subject to
    either the Global Fund’s Standard Terms and Conditions of the Program Grant Agreement, or to the Grant Regulations (2014), which
    incorporate the Code of Conduct for Recipients and mandate use of the Code of Conduct for Suppliers. Terms may vary however in
    certain grant agreements.

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  • use of funds are also within the scope of work of the OIG.5 While the OIG does not typically have a
    direct relationship with the Secretariat’s or with recipient suppliers, its scope 6 encompasses their
    activities regarding the provision of goods and services. To fulfill its mandate, the OIG needs the full
    cooperation of these suppliers to access documents and officials.7

    Sanctions when prohibited practices are identified: When the investigation identifies
    prohibited practices, the Global Fund has the right to seek the refund of grant funds compromised
    by the related contractual breach. The OIG has a fact-finding role and does not determine how the
    Global Fund will enforce its rights, nor does it make judicial decisions or issue sanctions. 8 The
    Secretariat determines what management actions or contractual remedies to take, in response to the
    investigation findings.

    However, the investigation will quantify the extent of any non-compliant expenditures, including
    amounts the OIG proposes as recoverable. This proposed figure is based on:

    (i) amounts, for which there is no reasonable assurance about delivery of goods or services
    (unsupported expenses, fraudulent expenses, or otherwise irregular expenses without
    assurance of delivery);
    (ii) amounts which constitute over pricing between the price paid and comparable market
    price for such goods or services; or
    (iii) amounts incurred outside of the scope of the grant, for good and services not included in
    the approved work plans and budgets or expenditures over approved budgets.

    How the Global Fund prevents recurrence of fraud: Following an investigation, the OIG and
    Secretariat agree on management actions that will mitigate the risks of prohibited practices to the
    Global Fund and its recipients’ activities. The OIG may make referrals to national authorities for
    criminal prosecutions or other violations of national laws, and supports such authorities as necessary
    throughout the process, as appropriate.

    5 Charter of the Office of the Inspector General (19.03.2013), § 2, 9.5, 9.6, 9.7 and 9.9 available at:
    https://www.theglobalfund.org/media/3026/oig_officeofinspectorgeneral_charter_en.pdf
    6 Charter of the Office of the Inspector General § 2, and 17.

    7 Global Fund Code of Conduct for Suppliers, § 16-19

    8 Charter of the Office of the Inspector General § 8.1

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  • Annex B: Summary of OIG identified non-compliant
    expenditures
    Unsupported expenditures charged to Round 8 malaria grant

    Type of expenditure No. of Expenditures Value (US$)

    Per Diem Local Staff 153 55,659.38
    Local Transportation 51 23,428.81
    Program Related Training 89 20,077.82
    Housing Allowance 2 4,095.31
    Shipping & Handling 2 2,666.94
    Communication (tele, fax, internet) 2 2,025.72
    Rent-Office 2 1,888.84
    Bank Charges 10 1,076.34
    Supplies, Communications, Other 26 853.29
    Vehicle Costs 4 677.67
    Utilities 4 326.37
    Contract Services 1 322.77
    Postage & Delivery 2 251.10
    Other/Misc. 4 190.44
    Office Supplies 1 129.93
    Visa/Travel Fees/Baggage 2 94.74
    Computer Accessories 2 41.98
    Copying & Printing 1 1.71

    Sub-total 358 113,809.16

    Inadequately supported and non-compliant expenditures charged to the R8 grant
    (1 January 2014 to 31 March 2015)

    Type of non-compliance No. of Expenditures Value (US$)

    Inadequate supporting documents 68 43,644.60
    Incorrectly charged to the Global Fund 9 13,336.46
    Excise Duty charged to the Global Fund 1 2,590.09
    Goods and Services Tax charged to the Global Fund 19 2,300.14
    Cancelled expenditures but not reversed in accounts 2 137.13
    Sub-total 99 62,008.42
    Total 457 175,817.58

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