Office of the Inspector General

Audit of the Global Fund’s Internal Controls

04 March 2016

In this follow up audit, the Office of the Inspector General (OIG) examined key internal operational, financial and procurement controls at the Global Fund. The auditors found that the organization has reformed significantly since 2012 and that internal controls have improved, particularly around financial management. However, progress has been ad hoc and fragmented, leaving gaps and exposing the Global Fund to potential misuse of funds. These gaps have been flagged in previous OIG audit and investigation reports. The Global Fund is taking steps to strengthen internal controls notably in procurement.

As recommended by the Global Fund Board and its Audit and Ethics Committee, the Secretariat is putting in place an international framework for risk management and internal controls developed by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The framework is designed to improve organizational performance, governance and to reduce the extent of fraud in organizations.

Following a 2015 OIG audit of Internal Financial Controls (GF-OIG-15-005), significant efforts have been made by the Secretariat to address control deficiencies over grant processes. The OIG concluded that controls over new processes such as cash and liquidity management, financial forecasting and budgeting are adequate and effective although they require time to become fully embedded and operationally effective. The OIG also noted some corrective actions and control enhancements remain outstanding.

Similarly, the Secretariat has made a number of improvements around corporate procurement processes in response to the OIG's 2015 Procurement and Supply Chain Management Audit (GF-OIG-15-008). Recent OIG work confirmed that the design of the controls was adequate and testing performed on a sample basis did not identify any significant exceptions. However, the number of non-competitive procurements identified by the OIG remains high, as identified in its 2015 audit. As well as ensuring that non-competitive procurements are exceptional, further time is required for the processes and controls to be fully embedded within the organization before they can be considered operationally effective.

Concerning the Pooled Procurement Mechanism, a system that allows the Global Fund to order bulk health commodities at favorable prices, the OIG found that the controls for the delivery of orders are inadequate. There are currently no control measures in place to ensure that orders and payments made to procurement service agents are accurate and that deliveries to grant recipients are complete. Reconciliations of procurement deliveries to orders need to be performed on a regular basis. Given the size of the Pooled Procurement Mechanism orders (more than US$1 billion annually) as well as their critical nature for the achievement of the Global Fund mission, the Secretariat has committed to correcting this by putting in place additional assurance mechanisms.

For more information:

Thomas Fitzsimons
Email:
Mobile: + 41 (0)79 412 14 61

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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.