28 January 2015
This investigation report is part of a backlog of cases relating to investigations started before 2012 (so-called ‘legacy cases’) that the Office of the Inspector General is now able to finalize and publish thanks to increased staff headcount.
An investigation by the Office of the Inspector General has identified a number of bid-rigging schemes which took place between 2005 and 2012 in Kazakhstan. As a result, the OIG has called for the Global Fund to recover US$ 5.43 million corresponding to overpricing in contracts awarded to local vendors by Principal Recipients of Global Fund grants.
The investigators found 57 contracts awarded by the Republican Center for Prophylactics and Control (RCAIDS) totaling US$ 10.57 million, and 19 contracts awarded by the National Center of Tuberculosis Problems (NTCP) totaling US$ 5.9 million, which were non-compliant with Global Fund grant agreements. Although the investigators found no evidence to suggest that the goods had not been delivered, they discovered systematic overpricing for printing, office equipment, health products and food parcels amounting to US$ 5.43 million.
The OIG concluded that a significant number of the contracts were part of one widespread scheme which involved four individuals who submitted fake bids from smokescreen companies and colluded with each other to create the impression of fair competition. The investigators also found that a number of previous and current RCAIDS and NCTP management staff were aware of the scheme and failed to disclose it to the Global Fund.
As soon as the procurement irregularities became known, the Global Fund took immediate steps to prevent further misuse of funds by removing procurement decisions from the Principal Recipients, selecting an international procurement agent for major purchases and using pooled procurement to secure the most competitive prices.
The Global Fund has taken action to ensure that the Principal Recipient employees implicated in the report no longer manage grant funds and will address the suppliers’ misconduct in accordance with its policies and sanctions procedure. The Global Fund is also drawing up guiding principles for recipients to vet suppliers thoroughly before awarding contracts.
Evidence collected by the OIG on the misuse of funds and the individuals involved has been referred to the Kazakh authorities, who are currently conducting a criminal investigation.
This report follows a prior investigation report by the OIG, published in December 2013, into the misuse of Global Fund grants amounting to US$ 105,227 in a similar case of procurement collusion involving RCAIDS. The recipient reimbursed the full amount in April 2014.
To date, the Global Fund has disbursed US$ 128 million to Kazakhstan. There are 3,600 people currently on antiretroviral treatment and 27,100 new smear-positive tuberculosis cases have been detected and treated.
The Office of the Inspector General works to ensure that the Global Fund invests the world’s money in the most effective way possible in the fight against AIDS, tuberculosis and malaria. Through audits, investigations, oversight and consultancy work, it makes objective and transparent recommendations to promote good practice, reduce risk and condemn abuse.
Established in 2005, the Office of the Inspector General is an independent yet integral part of the Global Fund. It is accountable to the Board through its Audit and Ethics 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.
The Office of the Inspector General believes that every dollar counts and has zero tolerance for fraud, corruption and waste. Through its whistle-blowing channels, the Office of the Inspector General encourages all to come forward to point out any irregularities that prevent Global Fund resources from reaching those who need them.