GAP Calls for Strengthened Whistleblower Protection
(Washington, D.C.) – Today, the Government Accountability Project (GAP) is drawing attention to a recent PriceWaterhouseCoopers (PWC) audit of the Asian Development Bank’s work in Afghanistan, which indicates mismanagement, incompetence, deception of donors, and fraud. News of this audit comes at a time when the Bank is appealing to donors for additional contributions of $12 billion for projects and loans.
Specifically, the Audit Report shows that:
- Reports to donors exaggerated, and in some cases, fabricated project achievements;
- Technical Assistance activities were politicized in favor of a select constituency;
- Urgent poverty reduction initiatives were not funded while the ADB rented lavish, unneeded project offices in the capital.
Evidence to support allegations of fraud was submitted to the ADB in 2006 by an external management consultant, who wishes to remain anonymous. He was demoted, terminated without cause, and subsequently ‘blacklisted’ in the ADB’s Database on Consultants.
Documents he provided to the ADB Country Director for Afghanistan in September 2006 show that the UK’s Department for International Development (DFID) funds, earmarked for renewable energy, healthcare, and livestock development with the Agha Khan Foundation and other NGOs were never disbursed. An affadavit obtained by the whistleblower shows that a mobile health clinic the ADB claims to have financed in Northern Afghanistan, where maternal mortality rates are among the highest in the world, never received funding, leaving an extensive district without access to basic health services.
False claims about project progress were made on the ADB’s Web site, and the whistleblower documented this fraud in his own 12-page report.
The first PWC/A.F. Ferguson & Co. Audit Report on the troubled Afghanistan projects was not completed until November, 2007. In preparing that audit, PWC did not interview the whistleblower and was not given the evidence the whistleblower had supplied to the ADB’s Integrity Division. Nor were the auditors told that nearly two years had elapsed between the time the disclosures were made and the time they conducted their audit. As a result, the PWC audit claimed that 14 of the whistleblower’s 26 allegations were false, without ever seeing his original allegations. At that point, the ADB published the audit on its Web site, and identified the whistleblower by name.
A protest by the whistleblower, supported by GAP and DFID, obliged the ADB to revise the audit, and the Bank posted a second version on its Web site in March 2008. The new audit found that 21 of the 26 allegations were true, and the remaining five could not be assessed due to lack of documentation from the Bank.
As GAP investigated evidence obtained during the original audit, e-mails came to light showing that PWC auditors had relied heavily on information provided by an allegedly corrupt ADB official. Nonetheless, the Board Information Paper, circulated to the media and donors by the Auditor General, claimed that the “total independence of the audit can be affirmed” and “the audit team found no evidence of fraud and corruption or of any commingling of funds.” The Director of the PriceWaterhouseCoopers audit team, however, Kalim Ghauri, says the Auditor General’s conclusion was not supported by PWC’s findings.
Since the posting of the revised audit, the ADB has engaged in a semantic debate with GAP and the donors about the meaning of ‘fraud.’ What the ADB calls ‘mismanagement’ and project ‘shortcomings,’ GAP identifies as fraudulent practice. For one project, the audit found that 60 percent of total equipment expenses could not be documented, citing a lack of invoices, competitive price quotations, purchase orders or receipts. The amount of money in question was $455,400, more than five times the amount contemplated for the infant and maternal health program in Badakshan that was dropped from the project.
As the Bank’s senior management heads to the Annual Meeting in Madrid, it has posted “Anti-Corruption and Integrity” on its agenda. The Anti-Corruption Policy, according to the Web site “requires that all ADB staff, and all parties carrying out activities financed by ADB, adhere to the highest financial and ethical standards.” Further, the Web site introduces the Office of the Auditor General as “the initial point of contact for allegations of, and to screen and investigate, fraud or corruption.” The Integrity Division is described as the ADB’s “independent investigative unit.”
“Claiming that money has been given to an NGO for a mobile clinic, when it was actually diverted for an unauthorized purpose, is not simply mismanagement – it’s fraud,” said Bea Edwards, International Program Director at GAP. “Until the Bank replenishes the funds that were diverted from the projects and makes restitution to the affected communities, and the whistleblower, it remains responsible.”
In short, the Bank has exonerated and protected the confidentiality of senior staff in the ADB responsible for fraud and mismanagement, yet it published the name of the whistleblower, wrongfully terminated his contract and blocked him from obtaining further work.
Mishka Zaman, Manager of the Asia Program at the Bank Information Center (BIC) in Washington, D.C., stated: “BIC has tracked many problematic ADB projects, and it is shocking the Integrity Division is going to such lengths to silence the whistleblower.”
Over the course of GAP’s communications with the ADB, management has said that these sums are small compared the $200 million in aid that ADB is providing to Afghanistan, and that the whistleblower’s performance record in ADB’s database is now recorded as “satisfactory.”
While the Afghanistan projects were pilot exercises funded by the UK’s Poverty Reduction Cooperation Fund and DANIDA, the Danish aid agency, the projects’ success was to be a prelude to much larger contributions for scaled-up activities from other donors. As GAP argued in making the case for strong whistleblower protection policies at the ADB, the Bank’s lack of accountability hurts aid effectiveness and readily translates into gross waste, abuse and fraud.