Tarnished aid fund says others in worse shape

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By JOHN HEILPRIN
Associated Press

GENEVA (AP) - A $21.7 billion health fund championed by the rich and famous has come under harsh scrutiny amid revelations it's bleeding money to corruption. But fund officials and outside experts in the field have a stark message for global development: other aid agencies are in much worse shape.

"The others should follow our lead," the fund's inspector general, John Parsons, told a press conference Monday organized by the fund's top officials to discuss an Associated Press story about $34 million in losses in several African nations.

Investigations led by Robert Appleton, a veteran former U.S. federal prosecutor whom Parsons hired last fall to root out corruption, are showing that up to two-thirds of some grants provided by the Global Fund to Fight AIDS, Tuberculosis and Malaria are lost to graft, with much of the money accounted for by forged documents or improper bookkeeping.

The fund rocketed to prominence with the backing of celebrity campaigners like Bono, who see it as an alternative to the bureaucracy of the United Nations.

On Monday, the organization defended its record. Only a tiny fraction of grants have been examined so far, but fund officials say the vast majority of the money is going to where it should, based on the results they are seeing in terms of saved lives.

Fund officials and several outside anti-corruption experts said that while the Global Fund's new investigative unit is aggressively tackling corruption, many of the world's biggest development agencies, including the United Nations, don't even look for major corruption in their midst for fear that would turn away donors.

An AP investigation last year found the United Nations cut back severely on investigations into corruption and fraud within its ranks, shelving cases involving the possible theft or misuse of millions of dollars. That happened after the U.N. dismantled its anti-corruption Procurement Task Force at the end of 2008.

It's been much the same story at many of the major heavyweight organizations and others that were expected to hand out some $130 billion in aid globally in 2010, according to Transparency International, the Berlin-based anti-corruption advocacy group.

Though many began taking corruption more seriously in the mid-1990s, Transparency International said in a recent report that "accountability in development aid has been low" at many aid agencies, non-governmental organizations, the World Bank, the U.N. and other development banks and international bodies.

"All aid agencies need to practice greater transparency," said Robin Hodess, TI's director of policy and research.

"There's the need in the developing aid agencies to be accountable," she told AP. "Sometimes there hasn't been enough attention to preventing corruption."

The Government Accountability Project, a Washington-based nonprofit law firm, says its defense of whistleblowers at the World Bank, the Inter-American Development Bank and the United Nations shows those institutions are failing to take on corruption.

"The investigative function at these institutions has broken down," said Bea Edwards, the firm's international program director. "There's very little accountability at these institutions because the departments that should enforce it are comprised themselves."

In 2009, an independent unit within the World Bank faulted another arm of the bank, the International Development Agency, with failing to protect some $10 billion in loans to poor nations from theft and other fraud. That agency had handed out almost $200 billion in loans since 1960.

Research largely funded by the Bill and Melinda Gates Foundation also has revealed some U.N. health programs have been useless or riddled with corruption.

When officials studied the effectiveness of a major U.N. child health strategy used in more than 100 countries, they found no difference between the health of kids who were included in the strategy and those who weren't.

A similar study found that a $27 million UNICEF program designed to save children in West Africa also failed, as children who weren't included actually had a better chance of survival than those enrolled in U.N. programs.

And in 2008, Gates-funded research showed dozens of countries exaggerated figures on how many children were vaccinated against deadly diseases, which allowed them to get more money from U.N.-sponsored programs. After the research was published, the agency involved and its donors scrambled to cut off all payments until countries could explain what happened.

Bill Gates, a staunch supporter of the Global Fund, criticized the AP story reporting losses to corruption, saying it gave an incomplete picture and would breed reluctance to give to good causes.

"People will reduce their generosity and that causes deaths," Gates told the AP in a telephone interview.

The Global Fund has $21.7 million in pledges, and gives out $3 billion annually. Fund officials provided new figures Monday that it has dispersed $13 billion since the fund was created in 2002, with the U.N. Development Program responsible for managing $3.88 billion of that - $369 million this year - in dozens of the most strife-torn and difficult nations.

Parsons said that money - roughly a fifth of the fund's portfolio - is effectively off-limits to investigators because UNDP won't share their internal audit reports. As a result, the fund's investigators can't look more closely at some of the fund's biggest multimillion-dollar losses.

In Mauritania, where UNDP manages the grant money, for example, the fund's investigators say as much as 67 percent of an anti-HIV grant was lost due to faked documents and other fraud. They say 67 percent of the TB and malaria grant money they examined in that country was eaten up by faked invoices and other requests for payment.

UNDP, the U.N.'s main anti-poverty program, told AP it is reviewing its policy of keeping those audit reports to itself but "takes its responsibility towards our donors and the beneficiaries very seriously."

The Global Fund's choice of Appleton as its investigations director points to a contrast with the U.N. approach to corruption: From 2006 to 2008 he chaired the U.N.'s former Procurement Task Force. And unlike the U.N.'s secrecy with its investigative reports, the fraud that Appleton's team is finding can be found on reports on its website along with the efforts the fund has made to recoup some of the losses.

The fund's board of directors also have authorized a big budget increase for Parsons' office because investigators can't keep up with the volume of grant programs it needs to monitor. Appleton already has more than 100 cases, including 63 yet to be assigned because there are not enough people to pursue them.

"We are vigilantly seeking to protect funds that are earmarked to save lives," Appleton told AP. "The Global Fund should be lauded, not criticized, for promoting transparency, having a strong inspector general and publicly identifying the issues and trying to get the fund's money back."

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AP Medical Writer Maria Cheng contributed to this report from London.

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