09 October 2015
An Office of the Inspector General (OIG) investigation in Timor-Leste found evidence of non-competitive tenders and improper procurement practices totalling US$ 152,626, of which US$ 39,782 is attributed to fraud, overpricing and non-delivery of items. Investigators examined the procurement of non-health products between 2012 and 2014 by Fundasaun Timor Hari’i (FTH), a sub-recipient of the national HIV program run by the Ministry of Health, the Principal Recipient. The Global Fund has asked the Ministry of Health to reduce disbursements to FTH and is seeking to recover the misused sums.
The OIG investigation confirmed that FTH ran non-competitive tenders and predetermined that contracts would be awarded to a vendor called Williah. The non-competitive tenders were conducted by FTH’s Executive Director and a regional manager who bought items including motorbikes and computers in Indonesia for significantly less than the price charged to the Global Fund. The goods were shipped to Timor Leste and documents were fabricated to create the impression of a competitive tender process won by Williah. Prices were inflated by 22% to 400% more than the original purchase price in Indonesia.
The non-competitive tender scheme run by FTH was facilitated by a conflict of interest between FTH and Williah. Williah is owned by three FTH senior managers who each have a 20% stake and FTH who own the remaining 40%. The relationship between FTH and Williah contravenes the conflict of interest policies of the Global Fund, the Ministry of Health and FTH itself. Williah supplied US$ 74,359 of goods to FTH. There was no evidence that FTH or the Williah owners disclosed this conflict of interest to FTH, the Ministry of Health or the Global Fund, as required.
The OIG also found evidence of other irregularities in procurements conducted by FTH, which included non-compliance with internal procurement procedures and falsified documents. The investigation identified several factors that contributed to the non-compliant expenditures, including inadequate financial controls at FTH and a lack of oversight of the sub-recipient operations by the Ministry of Health. The Global Fund Secretariat had limited oversight over the sub-recipients because the portfolio was classified as ‘medium risk’ and as a result, there were no Local Fund Agent reviews conducted at the sub-recipient level.
To avoid the risk of reoccurrence the Global Fund has asked the Ministry of Health to formulate a risk mitigation plan, to take appropriate action towards the individuals identified in the report, and appoint an external Fiscal Agent to ensure appropriate fiscal oversight and control to the grant-funded portfolio.
The Global Fund has invested US$ 44,389,526 in Timor-Leste with 170 people currently on antiretroviral therapy for HIV/AIDS, 11,300 new smear-positive tuberculosis cases detected and treated, and 949,000 insecticide-treated nets distributed to prevent malaria.
The Office of the Inspector General safeguards the assets, investments, reputation and sustainability of the Global Fund by ensuring that it takes the right action to defeat AIDS, tuberculosis and malaria. Through audits, investigations and consultancy work, it promotes good practice, reduces risk and reports fully and transparently on 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 Global Fund 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 speak out to report fraud, abuse and human rights violations that prevent Global Fund resources from reaching those who need them.