Fund Reverses Demand that Former Philippines PR Repay $1.77 Million

1. NEWS
21 Nov 2012
Tropical Disease Foundation had five grants terminated in 2009
TDF may implement grants in future

The Global Fund has reversed a demand that it imposed three years ago that the Tropical Disease Foundation (TDF), a principal recipient (PR) in the Philippines, repay the Fund $1.77 million of grant money. When the Fund imposed that original demand, it terminated all five of the PR’s grants; the Fund said at the time that the money had to be repaid because it constituted “unauthorized expenditure” by the PR. The PR now does not have to repay anything, and has been welcomed back as a potential implementer of Global Fund grants.

Until a few months ago, the Fund had ignored multiple protests by TDF that the terminations and the required repayments were unjustified.

The sequence of events was as follows:

On 24 September 2009, the Fund issued a press release saying it had suspended all five of its grants to TDF, the main PR in the Philippines. (The suspensions later turned into terminations.)

The press release said that the grants were suspended because the OIG had found evidence that TDF had incurred about $1 million (an estimate later increased to $2.02 million) in “unauthorized expenditure” (also described as “activities beyond the terms of the grant agreement”). The Fund demanded repayment of this money.

TDF responded to the suspension with a press release complaining, in effect, that after the Fund and TDF signed a grant agreement and the TDF incurred some expenditures that were within the terms of that grant agreement and were audited, the Fund introduced new policies which caused these already-made expenditures to become “unauthorized.”

TDF was barred from implementing Global Fund grants. In December 2009, other PRs took its place for all five grants. It was only at this point that TDF was shown anything in writing to describe or substantiate the OIG’s claims; prior requests for such documentation had been rejected.

TDF rapidly repaid $0.25 million of the claimed money, but refused to repay the remaining $1.77 million because it disputed that it had misused that part of the money.

The OIG provided further details regarding its complaints regarding TDF in an audit report that it published in February 2010.

In April 2010, TDF sent the Secretariat and the Global Fund Chair a full position paper describing its objections to the OIG’s findings. The Fund did not respond for six months, at which point the Deputy Executive Director responded that the Fund stood by the OIG report.

TDF commissioned an independent audit of the expenditures that had been criticised by the OIG. According to a TDF board member, the independent audit found that many of the OIG’s claims were based on “carelessness and mathematical errors” by the OIG.

In November 2010, a TDF board member wrote a lengthy memo about the case to a Global Fund board member, who shortly thereafter wrote an email to the author of this article saying that “it seems that the OIG fills all the roles of investigator, prosecutor, judge, jury and executioner with no oversight, no checks and balances and no legitimate appeals process.”

Despite all the above, the OIG and the Secretariat did essentially nothing about the case until eighteen months later, May 2012, when Gabriel Jaramillo, the Fund’s General Manager, agreed to a request by the Minister of Health of the Philippines that the Fund look into the case.

Missions to the Philippines by the Secretariat, the OIG and independent experts then took place. Old documentation was examined again. These missions, and the Fund’s evaluation of their findings, lasted until just before this month’s Global Fund Board meeting in Geneva.

The Global Fund finally concluded that it could not make a clear case that any of the $1.77 million it was claiming from TDF actually did involve unauthorised expenditure. The Fund therefore determined that TDF did not have to pay the Fund anything. (As mentioned above, a further $0.25 million claimed by the Fund had already been repaid by TDF three years ago.)

On 20 November 2012, the Global Fund posted a statement at its website saying that the Fund and TDF “have reached an amicable resolution of a dispute stemming from an audit by the Global Fund’s Office of the Inspector General in 2009. The Foundation will be welcomed back as an implementer of Global Fund-supported health programs in the Philippines.” TDF added “We are happy that our efforts all these years have borne fruit.” No mention was made of most of the background, or of the fact that TDF no longer has to repay anything to the Fund.

Editor’s Note: The TDF affair is discussed in a Commentary here.

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2 Comments
  1. anon
    Nov 22, 2012

    Thanks AIDSPAN for this incisive article and commentary. While I am not a big fan of TDF (several colleagues in Manila have expressed concerns about the way they were dealing with NGOs, sub-PRs and CSO groups when they were the PR) I do appreciate that they have been cleared and the order to repay most of the money has been rescinded. I wonder what happens now to other accusations of fraud particularly in Cambodia. On the other hand, there may be a link between the rise in HIV in the Philippines (starting 2009, and in particular the sudden explosion in IDU HIV seropositivity rates in Cebu, at that time) which seems to have coincided with the problems faced by TDF. When they were suspended and terminated, there may have been a delay in services and provision of NSPs ( I gather that there were small, limited efforts to provide clean needles then in Cebu). This of course was a consequence of having to "hold implementation" while new PR and SRs were being selected...Wonder if the rise was an accident waiting to happen, and that unfortunately, the timing of the grant suspension was just coincidental ??

  1. anon
    Nov 26, 2012

    The decision in favor of TDF is the first time that OIG's intimidating behavior has been successfully challenged. And it calls into question almost every single OIG investigation, because the essence of the TDF case was "unauthorised expenditure." Outside investigators found the OIG audit unprofessional, and not meeting international standards.

    Many countries (more than 50%?) have been accused of "ineligible spending" or "unauthorised expenditure", which then is widely and popularly misconstrued as "corruption" or "fraud." How many others have complained in vain that they were falsely accused of not following rules that did not exist at the time of the expenditure? When more than half of all grantees are not in compliance, this is a problem with the Fund and its staff, not the grantees.

    As someone involved with GFATM since Round 1 (10 years and running), I know that GF/Geneva has only in recent years become compliant with good management practices, such as documentation of policies, procedures and decisions. The lack of documentation together with the constant turnover of staff at GF/Geneva has meant that the grant regulation landscape has been littered with frequently changing edicts, often contradictory and inconsistent.

    GFATM was an agency that began with haste in an emergency atmosphere of saving lives. Ten yrs on, GFATM has settled into the more bureaucratic, regulatory mode of a "compliance regime" instead of "development agency."

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Comments Block 2

Author:
Comment:

The decision in favor of TDF is the first time that OIG's intimidating behavior has been successfully challenged. And it calls into question almost every single OIG investigation, because the essence of the TDF case was "unauthorised expenditure." Outside investigators found the OIG audit unprofessional, and not meeting international standards.

Many countries (more than 50%?) have been accused of "ineligible spending" or "unauthorised expenditure", which then is widely and popularly misconstrued as "corruption" or "fraud." How many others have complained in vain that they were falsely accused of not following rules that did not exist at the time of the expenditure? When more than half of all grantees are not in compliance, this is a problem with the Fund and its staff, not the grantees.

As someone involved with GFATM since Round 1 (10 years and running), I know that GF/Geneva has only in recent years become compliant with good management practices, such as documentation of policies, procedures and decisions. The lack of documentation together with the constant turnover of staff at GF/Geneva has meant that the grant regulation landscape has been littered with frequently changing edicts, often contradictory and inconsistent.

GFATM was an agency that began with haste in an emergency atmosphere of saving lives. Ten yrs on, GFATM has settled into the more bureaucratic, regulatory mode of a "compliance regime" instead of "development agency."

Post date: Monday, November 26, 2012 - 11:54
Author:
Comment:

Thanks AIDSPAN for this incisive article and commentary. While I am not a big fan of TDF (several colleagues in Manila have expressed concerns about the way they were dealing with NGOs, sub-PRs and CSO groups when they were the PR) I do appreciate that they have been cleared and the order to repay most of the money has been rescinded. I wonder what happens now to other accusations of fraud particularly in Cambodia. On the other hand, there may be a link between the rise in HIV in the Philippines (starting 2009, and in particular the sudden explosion in IDU HIV seropositivity rates in Cebu, at that time) which seems to have coincided with the problems faced by TDF. When they were suspended and terminated, there may have been a delay in services and provision of NSPs ( I gather that there were small, limited efforts to provide clean needles then in Cebu). This of course was a consequence of having to "hold implementation" while new PR and SRs were being selected...Wonder if the rise was an accident waiting to happen, and that unfortunately, the timing of the grant suspension was just coincidental ??

Post date: Thursday, November 22, 2012 - 08:24