OIG Audit of the Global Fund’s Internal Financial Controls
09 March 2015
The OIG concluded that internal controls over financial statements are generally effective but the current design and effectiveness of financial controls over disbursed funds need to be further improved. The Secretariat has already taken steps to address these issues.
In assessing the internal controls over the financial statements, the OIG audit focused mainly on the grant process from the creation of the grant to subsequent disbursements. The auditors found that internal controls over the financial statements are generally effective and many new controls have been put in place recently thanks to the Finance Step Up Project, a project launched by the Global Fund in 2014 to overhaul its financial systems and processes.
However, concerning the disbursement of funds, the OIG considers that the current design of controls does not allow the Global Fund to monitor thoroughly if funds are being spent according to grant objectives. For example, the Global Fund has limited oversight over sub-recipient expenditures. From 2011-2013, sub-recipient expenditure represented approximately USD 1.3 billion, corresponding to 32% of all grant expenditures. For some countries, the Local Fund Agent can check some of this spending on a sample basis but coverage is low.
The OIG also noted that the financial capacity of Principal Recipients is not formally reviewed during the lifecycle of the grant. As a consequence, the recipient is not always able to absorb funds, to oversee expenditures, cash or sub-recipient financial transactions, and to report accurately to the Global Fund.
Other findings included: material deviations from Global Fund regulations that are not referred up to the next level of authority; large amounts of cash are held at the Principal and sub-recipient level giving rise to financial risks; and the role of the Global Fund’s Finance Officers is not clearly articulated and therefore not applied consistently.
Following the OIG audit, the Global Fund Secretariat has agreed to put in place a number of actions to strengthen internal financial controls including the following: a system of “disbursing as needed” tailored to every Principal Recipient, new financial controls to increase assurance over disbursements and clearer guidelines regarding the role of the Finance Officer.
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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.
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