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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?
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  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
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  with which it is entrusted. made the request.
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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).

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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

  10 July 2018
  Geneva, Switzerland Page 14

• Page 15 of 15

• 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

  10 July 2018
  Geneva, Switzerland Page 15