Information about the diminishing authority and capabilities of the Office of the Inspector General (OIG) at the Global Fund continues to surface. Indications are that the Board of the Global Fund, through its Audit and Ethics Committee, is responsible for the reduced scope of OIG work and authority. It was the Board that sacked John Parsons as the head of the OIG in November 2012, and since then, GAP has received documents that show:
- The number of country audits completed dropped to zero in the first six months of 2013;
- OIG now assigns top priority to risk management assessments rather than to on-site, in-country work, where major risks are typically found;
- Contracts for long-term, competent, productive investigative consultants are being terminated;
- OIG staff and consultants have filed an increasing number of complaints with the Staff Council, the Ombudsman and the Department of Human Resources about current OIG management;
- The OIG has lost the authority to investigate matters involving the Secretariat staff of the Global Fund.
- The OIG has lost the authority to calculate losses and recoverable resources.
According to sources in the OIG of the Global Fund, the work-plan for this year contemplates only threecountry audits, selected from a grant portfolio that encompasses some 150 countries. Thus, only two percent of grantee countries will be covered, assuming that the work-plan goals are met. Moreover, not a single country audit has been completed during the first six months of 2013. Preliminary indications are that grants for Pakistan and South Africa and one multi-country grant program will be audited, but no final determination has been made. Further, the interim IG has told auditors that future country audits will take no longer than two weeks, and will focus only on finance issues. Heretofore, OIG sources say, four-to-six weeks was the amount of time required by a team auditing a detailed country grant program. In addition to finance, the audit teams also examined procurement and supply management, where fraudulent practices are most common, but this focus has now been curtailed.
The OIG Progress Report (December 2012 – May 2013) explains that a shift in priorities has occurred:
The [work] plan ensures that the OIG’s assurance function concentrates its work on those critical activities that are likely to have the greatest impact on the internal controls of the Global Fund. To achieve this, the plan is focused largely on reviewing internal Secretariat processes and the work of other assurance providers, and to a lesser extent on reviewing the risk and control environment at country level (para. 38).
For the coming years, it appears that the OIG will focus its attention more on Secretariat business processes than on in-country, on-site reviews. The shift is important: it represents the difference, for example, between auditing a grant by looking at the invoices sent by a vendor for bed nets, and looking at the quality of the bed nets themselves (which sources tell us has been identified as a problem area in the past).
The Multi-Year Audit Plan for 2013-15 makes clear that not only is the reduction in the number of in-depth country audits long-term, but it will also reduce costs in the OIG:
The cost per audit report released in 2013 is estimated at less than USD 125,000, down from over USD 300,000 in 2012. This is achieved by changing the balance between contractors and in-house staff and by undertaking more focused, briefer country engagements using the diagnostic review methodology applied to themes relating to Secretariat business processes that support the organization’s strategic objectives (emphasis added; Appendix 6, p. 29).
The meaning of the phrase in bold is obscure and not apparent to anyone unschooled in bureaucratic expressionism. It seems, however, that Secretariat business processes will be the center of attention at OIG. In other words, the OIG will be deliberately looking away from the likely site of major risk, while focusing on the Secretariat where the Fund’s own investment is minimal. Insiders fear that the OIG auditors will now be assigned to account for computers and file cabinets at headquarters in Geneva.
The Multi-Year Plan also shows that audits will be conducted on a thematic basis and that countries selected for full audits will be chosen randomly, which means that fewer, if any, will be initiated based on informed disclosures about where the problems really are.
For example, below is the audit plan for the current year:
· Eight to nine internal Secretariat process audits annually (ten in 2013 due to the transformation);
· Three to four thematic audits annually (four in 2013), each of which will focus on a single criticalbusiness process in six to eight countries. This will include an assessment of the extent to which key risks at the country/regional level are effectively and efficiently controlled through Secretariat processes. Over the three-year period, this will cover:
o all 20 high-impact countries at least once, and
o an additional ±45 very high- and high-risk countries.
In 2013, this will include brief missions to approx. 28 countries;
· Two to three reviews of the quality of (potential) assurance providers annually (one in 2013; this will include missions to eight countries in 2013); and
· Two to three full country audits annually in medium- or low-risk countries on a geographically stratified random sample basis to ensure all regional teams in the Global Fund are covered and to test our risk model (three in 2013) (p. 13; emphasis added).
Moreover, GAP has learned that during the first half of 2013, an exodus of experienced investigators from the OIG has occurred. Four senior officers (that we know about) have left or been forced out during the past six months, and at least four others are reportedly looking to leave.
Also, indications are that a new Inspector General will be operating on a short leash, and word about this is out in international auditing circles, a small world of specialized professionals from which the candidates come. One likely candidate for the position of IG, in fact, contacted us at GAP to ask about the wisdom of accepting the position.
In general, there is increasing demoralization in the OIG at the Global Fund. This is reflected in the growing number of complaints to Human Resources and the Ombudsman’s Office coming from OIG staff and consultants, who have requested that the Staff Council represent them in disputes with the current management of the OIG.
Further, in the wake of Parsons’ departure, the OIG lost its responsibility for investigating issues involving the Secretariat staff. Given that the OIG has broad transparency mandates, the transfer of this responsibility to another internal office allows the Board and management to conceal the results of investigations involving staff members.
Finally, the OIG has lost the authority to quantify the losses associated with findings of corruption and fraud and determine the amount to be recovered. Quantification of recoverable loss will be the responsibility of the “recoveries committee.”
Assessing whether recoveries will be sought for losses or all expenses incurred in breach of the agreement is what the recoveries committee must advise on. Additionally, Legal must make a determination on whether any identified amount is recoverable. OIG should not get involved in this aspect of the recoveries process (emphasis added; link to “Ineligible expenses outline)
Under the new charter of the OIG, which was changed in March 2013, the OIG is no longer responsible for quantifying the financial losses due to corrupt practices. Now the Legal Department is responsible for determining what losses (if any) the Global Fund is entitled to recover. The Legal Department, of course, is not independent and operates, for the most part, at the direction of management.
This particular truncation in the reach of the OIG is disturbing because it shows so clearly that management and the Board are more concerned with maintaining the appearance of rectitude than with whether it is a reality at the Global Fund. Removing this authority from the OIG allows management to control the figure released representing funds the organization may recover. The larger this figure is, of course, the more Global Fund grants appear to be affected by corruption.
The issue has a detailed history in the conflict that developed between Parsons as IG and the Board. In 2011, John Heilprin of AP published a story that described the parameters of the conflict. At the time, the Board agreed to release detailed information about both losses and recoveries. The Board would not, however, release enough detail to show what losses were attributable to corruption and fraud and what were simply a result of poor accounting. The issue was very sensitive because after AP reported in January 2011 that tens of millions of dollars in losses had accumulated at the Global Fund, Germany, the European Commission and Denmark withheld €315 million in contributions until the adequacy of internal controls could be verified.
So, overall, since November 2012, the Inspector General has been dismissed, targeted country audits are reduced, the scope of work for the OIG has been narrowed to exclude the investigation of Secretariat staff, as well as the determination of losses due to corruption, and the primary focus of OIG work has changed to risk management and Secretariat business practices.
In order for the United States to make its next disbursement to the Global Fund, the State Department must certify to the Congress that the OIG is operating without interference. Yet all of the changes identified here seem designed to constrain the effective functioning of the OIG. Under the circumstances, it is difficult to imagine how the State Department can thus certify that the OIG is operating independently.
Bea Edwards is Executive & International Director for the Government Accountability Project, the nation’s leading whistleblower protection and advocacy organization.