Financial Crime World

CPA Fraud in Mali: A Widespread Failure to Detect Warning Signs, OIG Report Reveals

The Office of the Inspector General (OIG) of the Global Fund has released a damning report on the mishandling of TB and malaria grants in Mali between 2004 and 2010. The report reveals that more than $4 million were stolen through criminal acts of fraud and misappropriation.

Grant Mishandling and Fraud in Mali (2004-2010)

Key players in the grant process, including PR representatives, auditors, local fund agents, the country coordinating mechanism, and staff at the Global Fund Secretariat, all experienced system failures that allowed the fraud to go undetected for six years.

The Five Fraud Prevention Checkpoints

  1. The Department of Administration and Finance (DAF) within the Ministry of Health
  2. External auditors
  3. Local fund agents (LFAs)
  4. The country coordinating mechanism (CCM)
  5. Staff at the Global Fund Secretariat

Each of these checkpoints was criticized for their inability to detect the fraud.

The Misappropriation of Funds

The first grant started in May 2004, and according to the OIG report, the misappropriation of funds began shortly thereafter. Let’s examine the role of the five checkpoints in this case.

The Department of Administration and Finance (DAF)

  • Staff failed to perform segregation of duties and accounting tasks, which increased the risk of fraud.
  • The accountant hired by DAF to oversee the grants had a past history of financial crimes.
  • Concerns about DAF’s weaknesses were reported, but the organization remained responsible for managing new grants.

The Local Fund Agents (LFAs)

  • Two different LFAs, which had the same finance professional handling the in-country work, failed to spot the pervasive fraudulent invoicing scheme and other irregularities.

The Global Fund Secretariat

  • Staff lacked the necessary means and capacity to detect fraud and misappropriation.
  • The emphasis was placed on the quantity of disbursements rather than their quality.
  • The CCM showed no indication that grant funds might not be used for intended purposes and did not possess the capacity to identify potential risks.

Methods of Fraud

The perpetrators used various methods to commit fraud, including:

  1. Misappropriation of grant funds
  2. Fabrication of false supporting documentation
  3. Overcharging and asset misappropriation
  4. Fraudulent procurement practices

Consequences and Recommendations

  • Two malaria grants were suspended and one TB grant was terminated in December 2010.
  • Several recommendations were made to strengthen grant agreements, eliminate cash expenditures unless necessary, and reconsider the emphasis on disbursement quantities instead of grant management quality.

Ongoing Investigations

  • The OIG continues to investigate fraud in HIV grants in Mali and has already suspended one of those grants.

Commendable Efforts and Determination

  • New Global Fund Board Chair Martin Dinham highlighted the separate actions of the fraudulent individuals and the commendable efforts of the majority of health workers in Mali.
  • Ongoing efforts are being made to replace the grant management team and bring those responsible for the fraud to justice.