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IN EARLY JULY, the Australian Office of the Inspector General (OIG) released the final report of an audit on six grants in Papua New Guinea from Rounds 3, 6 and 8, administered by three principal recipients.

They are the PNG National Department of Health (NDOH), Rotary Against Malaria (RAM), and Population Services International (PSI).

The audit was conducted in October 2010. The time period covered by the audit was 2004-2010. The value of all six grants was $107 million, of which $66 million (52%) had been disbursed at the time of the audit.

The OIG said that although the programs supported by the Global Fund had achieved some notable successes, and some best practices were observed, there were significant weaknesses in the internal control environment….

The OIG did not detect any grant funds that had been misappropriated. However, the OIG identified $3.1 million in what it deemed ineligible and unsupported expenditures that should be reimbursed.

The OIG defines "ineligible expenditures" as costs not in line with the budget and work plan approved by the Global Fund. It defines "unsupported expenditures" as those lacking adequate supporting documents to provide evidence that the activity took place and that the expenditure was in line with program activities.

The $3.1 million in ineligible and unsupported expenditures represented about 4.7% of the funds that had been disbursed to the principal recipients as of the start of the audit.

The OIG identified what it called significant financial management weaknesses among all three principal recipients, including non-compliance with grant agreements, inadequate policies and procedures, weak controls and poor budget monitoring. It also said that, overall, the principal recipients had failed to comply with standard procurement practices.

National Department of Health

Of the $3.1 million in ineligible and unsupported expenditures that the OIG said should be repaid, $2.8 million involved NDOH.

Of the $669,098 in ineligible expenditures at NDOH, more than half ($384,000) were for 80,000 bed nets that were stolen from a provincial storage depot. The OIG said that under the grant agreement, the PR is solely liable for any theft of items purchased with Global Fund money.

Of the $218,525 in ineligible expenditures at the National Catholic AIDS Office (NCAO), an SR, $177,837 was for a budget overrun in salaries.

Of the $1,729,405 in unsupported expenditures at NDOH, $480,052 involved advance payments made to vendors for which no proof of delivery of goods or services was provided. An additional $448,124 was for advances to vendors for which documentation was "not available for audit inspection." Another $166,642 involved expenditures where payment to vendors was made after the goods or services were alleged to have been delivered, but for which documentation was inadequate.

Rotary Against Malaria

Of the $3.1 million in ineligible and unsupported expenditures that the OIG said should be repaid, $0.3 million involved RAM. Most of this amount ($270,947) was for overhead fees for which the OIG said there was inadequate justification.

The audit report advanced 40 recommendations to address the weaknesses noted in the audit. Many of these recommendations had been made earlier, at the debriefings held in-country at the conclusion of the field visits, and when the draft audit report was prepared.


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