30 August 2016
In this review, the OIG audited how the Global Fund reports on recovering funds that have been misused or not spent in compliance with grant agreements. The OIG found that the Global Fund Secretariat has significantly improved the recoveries process including recruiting a full-time recoveries officer and maintaining better recoveries data. In the period from 2009 to 2015, the OIG confirmed that the Secretariat recovered US$45.4 million of misused or non-compliant funds. The OIG found, however, variances between the amounts reported by the Secretariat and underlying supporting documentation, particularly regarding legacy cases, which point to weaknesses in the reporting process.
This OIG limited scope engagement reviewed a recoveries report submitted to the Global Fund Board for the period up to 31 December 2015. The Secretariat reported on non-compliant expenditure totaling US$138 million identified by the OIG in the course of its audit or investigation work since 2009. This figure was revised down to US$110 million by the Secretariat after additional factors were taken into account including retroactive approval for sums that could be justified because goods or services had been delivered. In addition, for the first time, the report included a non-OIG identified sum of US$16 million to be recovered from grant implementers. These are funds identified directly by the Secretariat, in the day-to-day work of grant management, as non-compliant with grant agreements.
In its review, the OIG identified variances between the amounts reported by the Secretariat to the Board and underlying supporting documentation relating to legacy cases. For example, the OIG noted a variance of 4% (US$2 million) between the recovered amounts reported to the Board and the underlying records. The Secretariat has defined processes for reporting OIG-identified recoveries. However, similar processes were yet to be implemented for identifying and reporting non-compliant expenditure arising from the normal course of grant management at the time of the audit. In the absence of a defined process and supporting documentation, the OIG was unable to verify if such amounts were complete.
Of the outstanding US$54 million to be recovered, the Secretariat has obtained commitments from grant implementers to repay US$15 million. However, the auditors noted that US$11 million out of the US$54 million has been outstanding without commitment from countries for over three years. Although these cases are still being actively pursued, their age could affect the recoverability of these amounts, given the constraints in pursuing long outstanding debt.
The Secretariat recoveries report only contains the proposed recoverable amounts rather than the total amounts identified as non-compliant in OIG investigation reports. As a result, US$34 million of non-compliant expenditure is not included in the report submitted to the Board. Although the Secretariat ultimately determined not to seek recovery of the full non-compliant amounts, their inclusion in the report would provide a more accurate and complete overview of the Secretariat’s recovery efforts.
The Secretariat is putting place corrective measures including training for the relevant operational teams, automation of the non-OIG identified recoveries process and faster follow-up of non-compliant amounts identified in OIG audits and investigations.
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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.
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