Robust Control Systems to Prevent Training and Travel-related Fraud

Design and implementation of robust systems of internal controls and enforcing segregation of duties and roles are key in preventing different fraud schemes. Read more on mitigating training and travel-related fraud.

Global Fund grants are implemented in different countries with varied maturity levels of public health systems including human resources for health. This requires the Global Fund to make substantial investments in capacity building of health workers and national program's supervision activities which contribute to building broader health systems at the country level.

However, these activities could be prone to different fraud schemes as seen in investigations in Bangladesh, Sierra Leone, Namibia and Nigeria by the Office of the Inspector General (OIG).

Fake Training Events to Cover Per Diem Fraud

Country	BANGLADESH
	Investigation Report ENGLISH or FRENCH

The Global Fund Secretariat initially alerted the OIG about potential misappropriation of grant funds following an annual external audit that identified financial discrepancies. Subsequently, the Local Fund Agent (LFA) corroborated these findings by identifying ineligible expenses linked to the procurement of training materials.

Our investigators discovered that employees of the recipient organization had fabricated supporting documentation and inventory records related to training materials. Furthermore, these training materials were acquired without adhering to national government public procurement regulations or the organization's standard operating procedures.

In addition to the falsification of documents, employees of the recipient engaged in fraudulent claims for per diem and honorarium payments for training events they had never actually attended. The lack of oversight by the recipient's senior management regarding training-related expenditures and violations of public procurement regulations enabled this fraud.

Several measures were implemented to safeguard Global Fund finances. These include a recovery of funds, a moratorium on training activities conducted by this recipient, proposed changes to the structure of fiscal management staff and reporting systems. Disciplinary action was taken against employees responsible for the fraud and the Global Fund Secretariat instituted additional assurance activities such as regular reviews, unannounced spot-checks, and compliance monitoring.

Overpricing Vocational Training

Country	SIERRA LEONE
	Investigation Report ENGLISH or FRENCH

In Sierra Leone fraud, collusion, and non-compliant procurement practices among staff at a grant Principal Recipient, sub-recipients, and suppliers resulted in substantial financial losses.

The Principal Recipient (PR) enlisted the services of four sub-recipients to execute program activities aimed at empowering female sex workers, including providing vocational training. These sub-recipients conspired with vocational institutes to artificially inflate tuition fees and material costs. This maneuver was carried out to align the total expenses with the funds allocated in the grant budget. The discussions regarding procurement took place in advance of the tender process, circumventing official national procurement rules and procedures.

Despite significant disparities in the nature, conditions, and capacities of the various vocational institutes involved, an alarming pattern emerged. All these institutes uniformly charged identical amounts for tuition and training materials, which raised suspicions. Upon investigation by the OIG, it was determined that a reasonable price for these vocational institutions to charge would have been a mere US$60 per student. However, the grant budget recorded charges of US$489 per student, leaving a substantial gap that demands scrutiny.

In response to the issues identified during the investigation, various measures have been taken, including the establishment of pre-approved suppliers and framework agreements, capacity-building efforts for procurement teams, enhanced physical verification of goods delivered, and the introduction of a fraud risk management specialist to the Fiscal Agent team in Sierra Leone.

Simulated Selection Process for Catering Services

Country	SIERRA LEONE
	Investigation Report ENGLISH

The OIG uncovered fraudulent activities involving the procurement staff of the Integrated Health Project Administration Unit (IHPAU) within Sierra Leone's Ministry of Health and Sanitation (MOHS). This wrongdoing extended to catering services for training programs on malaria and Health Management Information Systems (HMIS).

The staff simulated a competitive selection process among suppliers responding to the Request for Quotation (RFQ). Pre-selected bidders collaborated with other suppliers, providing the procurement staff with blank invoices. These invoices were later filled in with prices, ensuring a predetermined "winner" among the three bids per district.

To address similar risks, the Fiscal Agent now reviews and must approve all IHPAU procurements exceeding US$2,500 when using the RFQ method. Moreover, the use of caterers is restricted to exceptional circumstances and requires prior approval from the Global Fund Secretariat. Instead, participants receive allowances for lunch and refreshments through mobile money.

Misappropriation of daily subsistence allowances

Country	NAMIBIA
	Investigation Report ENGLISH or FRENCH

Staff at Namibia's Ministry of Health and Social Services (MOHSS), acting as the Principal Recipient for Global Fund grants, diverted funds from program bank accounts. This was accomplished by redirecting daily subsistence allowances meant for their intended recipients. The staff engaged in systematic fabrication of payment documentation, altering bank account details, and transferring funds to themselves and multiple accomplices. Due to inadequate control mechanisms at MOHSS, this fraudulent activity went unnoticed for 18 months.

Expense Fraud at a Sub-Recipient

Country	NIGERIA
	Investigation Report ENGLISH or FRENCH

An investigation conducted by the OIG into a sub-recipient involved in managing HIV/AIDS grants was initiated after a spot check by the Global Fund's Local Fund Agent (LFA). This inspection had raised concerns regarding fabricated and missing expense documents.

Upon delving deeper, the OIG inquiry substantiated the initial findings made by the LFA, uncovering additional evidence of manipulated supporting documents for expenses such as airline tickets, boarding passes, hotel invoices, vehicle fuel, and stationery receipts.

The investigators discovered concrete proof of collusion involving seven sub-recipient staff members and three external consultants. This collusion had allowed these individuals to steal funds in several ways. For instance, they inflated the headcount of participants in grant-funded meetings and training sessions, and their duration. In addition, they overstated the payments made to venues hosting these events and colluded with hotel staff and other event suppliers to receive kickbacks. The investigation also revealed that they had submitted falsified receipts related to daily subsistence allowances (per diem) and transportation expenses.

The OIG also concluded that the sub-recipient had failed to establish an effective internal control system to safeguard the grants funded by the Global Fund. Moreover, the PR, responsible for overseeing the grant, had not effectively monitored the sub-recipient's use of program funds. While the PR had conducted sporadic spot-checks on the sub-recipient's accounting and financial procedures, these oversight measures proved insufficient in detecting or preventing the fraud.

Mitigating Abuse and Theft of Funds

These cases serve as a stark reminder of the ongoing efforts to combat abuse and theft of funds within organizations entrusted with global health funding. The findings in these investigations resulted into the following steps:

• Design and implement a robust system of internal controls.
• Adherence to laid down procurement processes.
• Design and enforce segregation of key duties and roles.
• Triangulate payment requests with service delivery data.
• Conduct frequent surprise spot checks of field activities.
• Use centralized payments to program beneficiaries and suppliers.
• Encourage staff, beneficiaries and suppliers to speak out and report suspicious or inappropriate activities.

Identifying Abuse and Theft of Funds

To empower individuals and organizations with the knowledge and skills needed to detect the signs of abuse and theft of funds in similar contexts, we offer valuable resources.

Explore our e-lessons page, where you can access essential insights and guidance on identifying red flags.